The Marcus Corporation (MCS) Q3 2017 Earnings Report, Transcript and Summary

Good morning, everyone, and welcome to The Marcus Corporation Third Quarter Earnings Conference Call. My name is Victor 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, Victor, and welcome everybody to our Fiscal 2017 Third Quarter Conference Call. As usual, I will begin by stating that we plan on making a number of forward-looking statements on our call today and those 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 product expected to be made available to us in the future; expectations about the future trends in the business group and leisure travel industry and in our markets; expectations and plans regarding growth in the number and type of our properties and facilities; expectations regarding various 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 and they 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. And 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 third quarter and first three quarters. Probably the worse tax week in the world was at the third quarter. It was a challenging quarter for movies and it certainly was not different for us. However, despite what has been a past couple of seven quarters in a row, thanks to an outstanding first quarter, we’re sitting at third quarter’s mark of fiscal 2017 with consolidated revenues up 14.7%, consolidated operating income up 7.2% and consolidated net earnings up a nearly 5%, with a very promising looking fourth quarter ahead of us. As is our usual practice, I'm going to take you through some of the detail behind the numbers both on a consolidated basis for each division and then turn the call over the Greg for his comments. Now before I begin these traditions, let's spend a few minutes on a couple of the line items below operating income, starting with interest expense. Talked about this before, so I'll go through it quickly, but the majority of increase in interest expense this quarter and for the first three quarters is due to the fact that we assume several capital leases in conjunction with the Wehrenberg acquisition last December. So the majority of the increase is the interest expense portion of those rent payments that we make and those assume leases. We also did have increased borrowings compared to last year due to our capital expenditure program that has also contributed to the slightly increased interest expense. But I will tell you that our overall average interest rate decreased compared to last year and that’s due primarily to a change in the mix of our debt portfolio, offsetting some of the impact of the increased debt. You will also note that we reported the loss of disposition of property and equipment this quarter. It’s really a small loss compared to a gain last year and that’s due to the fact that we continue to write off some theater equipment as we continue to -- our extensive renovation program at several of our theatres. Last year, we had smaller gains. We sold a parcel of land during the quarter. And while there wasn’t a significant change in our earnings and losses -- earnings losses in joint ventures during the third quarter, I did want to highlight a couple of transactions that will impact that line item in the future. During the second quarter, we reported a hotel that we managed and held the minority interest and the Seven Madison was sold generating a small gain. I addition, earlier our current fourth quarter in October here, another hotel that we managed and held the minority interest in, The Westin Atlanta Perimeter North was also sold and in this case generated a significant gain for us that will recognize in the fourth quarter. The final accounting of the transactions is not quite finished as it just happened, but we expect to report a gain over $4.5 million. Future management fee revenues and earnings from joint ventures will be slightly impacted by the sale of these two properties, but we are obviously very pleased with the results of these transactions. Our first three quarters effective income tax rate adjusted for losses to non-controlling interest was 37.8%, slightly lower than last year’s first three quarter effective rate of 38.5%, and we would expect our effective rate for the remaining quarter of fiscal ‘17 to be close to our past historical 38% to 40% range. Shifting gears away from the earnings statement just for a second, our total capital expenditures in the first three quarters of fiscal 2017 now total approximately $87 million compared to approximately $58 million last year at this time. Over $69 million of our total spend during the fiscal ’17 first three quarters was incurred in our theater division, approximately one-third of which related to the two new theaters that were referenced in our press release, with the remaining portion related to the continuing Dream Lounger seating projects, premium large format conversions and new food and beverage outlooks that we’ve been discussing for some time now. The over $17 million of CapEx in our Hotels and Resorts division during the first three quarters of the year were primarily related to the new SafeHouse Chicago, the new villas at the Grand Geneva and [indiscernible] renovations and maintenance capital at our own hotels. With only one quarter to go in our fiscal year, we were estimating that our total capital expenditure for fiscal ’17 will be in the $105 million to $115 million range, very consistent with what we’ve been saying in the past, recognizing that the timing of several of our planned expenditures and natural cash payments are still just estimates at this time. As for timing the various projects currently underway, our proposal certainly impact our final capital expenditure number as well as any currently unidentified projects or acquisitions that could develop during the remainder of fiscal year. Now I would like to provide some financial comments some financial comments in our operations for the third quarter and first three quarters, beginning theatres. Starting with theaters, our box office revenues increased 7.2% and our concession revenues increased 10% during the third quarter and have increased 21% and 23%, respectively, year-to-date. But obviously those numbers include the Marcus Wehrenberg theaters and the new theater in Country Club Hills Illinois both of which were added on fiscal 2016 in the fourth quarter as well as the new theaters that we opened in Shackappy Minnesota and Green Hill Wisconsin earlier in our fiscal 2017 second and third quarters. So if you exclude those new theaters, box office receipts actually decreased 15.6% and concession revenues decreased 13.1% for comparable theaters during the fiscal 2017 third quarter compared to last year. For the first three quarters of the year, comparable theaters had reported a 3.6% decrease in box office revenues and a 0.3% decrease in concession revenues. Now those comparable theatre results are the numbers that we can then compare to the rest of the industry. According to the data we received from red track, a natural box office reporting service from the theatre industry and compiled by us to evaluate our fiscal 2017 third quarter and first three quarters, United States box office receipts decreased 13.4% during our fiscal 2017 third quarter after adjusting for new builds for the top 10 theatre center, indicating that our box office receipts at comparable theaters for the third quarter of fiscal 2017 slightly underperformed the industry by 2.2 percentage points. By performing that same calculation for our fiscal 2017 first three quarters, we find that US box office receipts have decreased 4% during our comparable 39 weeks, meaning that we’ve outperformed the industry by 0.4 percentage points on a year-to-date basis. Now we believe that there were some unusual circumstances that contributed to our underperformance this quarter and I’m going to let Greg speak to those numbers in his comments. I will point out that we once again had screens out of service during the long portions of fiscal 2017 third quarter and the first three quarters due to renovations underway at multiple theaters. And despite these unusual circumstances, the fact is that we still now have outperformed - we still have outperformed the industry average during 13 of the last 15 quarters. Now the third quarter comparable theatres decrease in our box office revenues was attributable to a decrease in attendance at our comparable theaters of 17.4%, partially offset by an increase in our average admission price of 3.1%. For the three quarters of the year, comparable theatre attendance has decreased 4.4% and our average ticket price has increased 1.2% compared to last year. Now modest price increase was taken last November and an increased number of premium large formats screens with a corresponding price premium and a favorable change in film product mix, thanks to the fact that our top film this quarter was the R-rated movie IT, contributed to our increased average admission price during the quarter. I will point out that during our third and first three quarters of fiscal '17, the percentage of our box office receipts attributable to 3D films decreased significantly compared to last year's films. So that dynamic contributed to a lesser increase in our average admission price during the fiscal 2017 period that might otherwise we expected. In addition, we are pleased to report very healthy increases in our average concessions in food and beverage revenues per person of 6.7% for the third quarter and 4.3% for the first three quarters of 2017. Our investments in nontraditional food and beverage outlets continue to contribute to this higher per capita spending. I also want to share with you that we implemented modest admission and concession price increases I October 2017 that are expected to favorably impact our average admission concession revenues per person in future periods. Lastly, I point out that the approximately $1.5 million increase in consolidated other revenue this quarter and $7 million increase in our other revenues for the first three quarters of fiscal 2017 was primarily from our theater admission. Pretty much all of the third quarter increase and over $1.5 million of the year-to-date increase in our other revenues is attributable to the Marcus Wehrenberg theaters, including pre-show advertising income, internet surcharge ticketing fees and rental income from the retail center that we acquired in the transaction. The remaining year-to-date increases in other revenues relates to comparable theaters and was due primarily to again an increase in pre-show advertising income and in a surcharge ticketing fees and breakage on pre-sold discounted tickets. Finally, as we talked about last quarter, onetime pre-opening cost has impacted our first three quarter results in theater admission. If not for approximately $800,000 of preopening costs incurred this year we alluded to our two new theaters, our year-to-date reported results would have been even better. Shifting to our Hotels and Resorts division, our overall hotel revenues were up 2% for both the third quarter and first three quarters of the year with increased food and beverage revenues due to the opening of our new SafeHouse in Chicago in March contributing to those increases. Increased room revenue from the new villas that we opened at the Grand Geneva as well as increased ancillary revenues from SafeHouse concept, our brilliant creative web design business, and our in-house laundry business have also contributed toour increased revenues. RevPAR at comparable owned hotels decreased 0.4% during the third quarter and has increased 0.5% during the first three quarters of 2017. 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 a small drop in group business during the quarter. Breaking up the numbers a little more specifically, our fiscal '17 third quarter overall RevPAR decrease was due to an overall occupancy rate decrease of 0.1 percentage points and a 0.4% decrease in our AVR during the quarter. Year-to-date, our overall 0.5% increase in RevPAR is attributable entirely to a 0.4 percentage point increase in our occupancy rate with our overall average theater rate essentially flat during the period. Now once again, despite the challenges we faced, we continued to significantly outperform 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 third quarter and first three quarter results, competitive hotels in our collective markets experienced a decrease in RevPAR of 4.8% during the fiscal 2017 third quarter and a decrease of 4.2% during our fiscal 2017 first three quarters. Our decreased operating income during the third quarter certainly reflects the impact of the reduced RevPAR from our own hotels as well as the continued startup operating losses related to our new SafeHouse Chicago, which are not necessarily unexpected when you open up a new restaurant concept in new market. In addition, comparison to the last year’s first three quarter’s results were also negatively impacted by a one-time favorable adjustment last year, impacting our management company profits; and also there as well pre-opening spend this year from the new SafeHouse. In fact, if you exclude those two items, operating income for our hotels and resorts division during the first three quarters of fiscal 2017 was essentially equal to operating income during the first three quarters of fiscal 2016. Finally, a brief comment on our corporate segment, which include amounts not eligible to our two business segments: Operating losses from our corporate items were unchanged during the third quarter but increased during the first three quarters of fiscal 2017 compared to last year due in part to increase Board of Directors costs, including one-time cost associated with the acceleration of certain long-term incentive compensation related to the retirement of two directors from our Board of Directors during the second quarter of fiscal 2017 and the unfortunate passing of another director during the third quarter. Increased long term incentive compensation expenses resulting from our improved financial performance and stock performance over the last several years have also contributed to increase operating losses from corporate items during the fiscal 2017 year-to-date. With that, I’ll now turn the call over to Greg.

Thanks, Doug. I’ll begin by remarks today with our theater division. Doug did a good job recapping some of the key third quarter numbers and I’ll give you a little more color. But as you could imagine our focus is on what lies ahead of us, not on the months that are now in our rear view mirror. The stories of third quarter is real pretty simple. Film product was just not as good as last year, and when that occurs in July and August, two prime summer months, the negative impact on operating income is not particularly surprising. In fact, given the amount of fixed cost inherent in our business, our theater management team led by Orlando Rodriguez deserve a lot of credit for effectively managing our variable cost as well as they did and driving additional business to our feeders with the tools that are disposal that we can control in order to lessen the impact at the reduced box office. Of course, a bad July and August coming on the heels of a weaker than expected second quarter led to the inevitable articles written about the future of the movie theater business. Until of course a scary com movie was released in September and turned it around once again, customers returned to the theaters and drove during the month that is typically the weakest month of the film year, proving once again that when Hollywood releases good movies, good things happen at the box office. And we can easily get lost in the shuttle is the fact that we had a record first quarter this year contributing to a 13.5% increase in year-to-date operating income from this division. You heard us say this before, it's very hard to predict in advance which quarters will be up and which quarters will be down in any given year, so when you step back and look at the results from 30,000 feet, the business looks significantly less volatile. With a highly anticipated fourth quarter slated film get to come it is not crazy to suggest that calendar 2016 like settle up meeting or beating last year’s record results, and even if it does for short, the year will likely end up much better than some might have predicted in august. But that’s what makes us interesting and keep us focused on the long term. I would tell you that film products was not our only obstacle this quarter, as Doug noted. We once again had a significant number of screens out of service. As we can see progressively add our proven successful amenities to more existing theaters. And our markets were in both theaters. We have intentionally chosen to take more screens out of service at one time than we have typically done in our other renovations. As we believe, we have more gain in the long run by getting as many of renovations done prior to upcoming November and December films that are expected to do well at the box office. You have heard us previously report that we have had as much as 5% of our Marcus’ legacy screen that as service during the significant portion of 2017. Well, during this past quarter, our percentage of Marcus Wehrenberg screens at its service were portions of the quarter for renovations was three times that amount, nearly 15%. So that definitely impacted our results this quarter. I would also, if you have missed, if I didn’t comment on our small underperformance of our theaters versus the national numbers this quarter. Yes, we had market’s legacy screens out of service during the quarter again that impacted us. But the real story occurred in July. Our reasons for variations and performance in any given month are never certain. We believe the particular mix of films during July 2017 was not as favorable to [indiscernible] as compared to the films released during July 2016. For example, the top film during July 2016 was the secret life of pets, and this family oriented film performed particularly well in our theaters as they normally do compared to rest of the nation, contributing to our comparative on the performance to the industry in July 2017 versus July 2016. In addition, historically in our Midwestern markets rained and weekends are very warm weather often has a favorable impact on theater attendance. During July 2017, weekend weather in the markets in which we operate was an average not quite as one at July 2016 noted it has as many weekend days with rain was good last year. Our past experience has been the people in Midwest tend to enjoy outdoor activities once dry in the weekend and not overly hot. What leads us to believe that our July underperformance was an anomaly is the fact that in August our results were more in line with the industry and then in September our review in national numbers indicates that we outperformed the industry by over 9 percentage points. Unfortunately, since July box office revenues represent approximately 50% of our third quarter total box office revenues, that month had a disproportionate impact on our overall third quarter results. But we’re not [indiscernible] of excuses around. Our goal remain to continue to outperform in the industry each quarter and I'm pleased to tell you that we did that in September and we continue to outperform in October so far. Clearly the investments we are making in our theaters are continuing to make a difference. And when you combine those investments with our innovative marketing and pricing initiatives along with our loyalty program that is now to over 2.4 million members, good results should follow. And speaking of investments, as evidenced by the capital expenditure numbers Doug shared with you, we have been and continue to be very busy rolling out our successful amenities to new theaters with a particular focus right now on our Marcus Wehrenberg theaters. We get asked this question a lot, let me do brief run down of what has happened this past quarter and what we are working on now? During the first three quarters of fiscal 2017, we completed the additional DreamLoungers recliner seating to nine more existing theaters, including two theaters, one of which was a Marcus Wehrenberg Theater, completed late in our fiscal 2017 third quarter, increasing our industry leading percentage of first-run auditoriums with recliner seating to 66% for legacy Marcus leaders and 56% overall, including the theaters we acquired in the Wehrenberg acquisition. This month, we are completing the addition of DreamLoungers recliner seating to four more adjusting theaters, including three Marcus Wehrenberg theaters, and we are currently in the process of converting two additional Marcus Wehrenberg theaters to all DreamLoungers recliner seating, with expected completion late in the fourth quarter of fiscal 2017 or early in the first quarter of fiscal 2018. In addition, we opened one Zaffiro’s Express outlet during the third quarter of fiscal 2017 and expect to open two Zaffiro’s Express outlets, three [indiscernible] outlets and two - during the fourth quarter of fiscal 2017. We also converted one existing traditional UltraScreen DLX Auditorium and three existing screens to SuperScreen DLX Auditorium during the third quarter of fiscal 2017 and converted one additional existing traditional UltraScreen to an UltraScreen DLX Auditorium and 2 existing screens to SuperScreen DLX auditoriums earlier in the fourth quarter of fiscal 2017. We expect to convert one existing Wehrenberg branded PLX and UltraScreen DLX and at the six edition of existing screens the SuperScreen DLX auditoriums during the fourth quarter of fiscal 2017 as well. So yes, the team has been busy. Obviously, our plan is to have as many screens as possible converted before many of the highly anticipated pictures in November and December that we lifted at in our press release start hitting our screens, which brings me back to my remarks. It is difficult to predict the box office over the short term, but over the long term steady growth has proven to be very predictable. We continued to execute in our operating and investment strategies so that we’ll be prepared to capitalize like we did in the first quarter and the two fiscal year before that. And if the quarter disappoints, we’ll be prepared for that as well. One thing in this business like we always do, the long term perspective. Let us move on to other divisions, hotels and resorts. You see the segment numbers and Doug gave you some additional details. It was a challenging quarter for our hotels in pretty good August sandwiched by a weaker than hope for July and September. Once again the drop in group business was the main story but also once again we outperformed our competitive sets during the quarter by a pretty significant 4 percentage points. As we’ve shared with you in the past, our collection of hotels and particularly our largest hotels will have a great deal on group businesses overall customer mix. I will tell you that some of the decrease in group business was unexpected and we hope a result of the non-recurring issue. I’m not sure if I referred to the term group sales productivity in the past, but it was a particular challenge during the third quarter. Productivity relates to the percentage of group rooms actually sold which is the group rooms originally booked. During the fiscal 2017 third quarter, we had unusually high number of groups contribute less actual rooms sold than we originally booked. For example, for a particular city-wide convention in Milwaukee this quarter, we were asked to book a 1,000 room nights and unfortunately the actual number of rooms sold were significantly less. It’s not that it doesn’t ever happen, but I raise it because it was larger issue for some reason in our fiscal third quarter. I have no reason to think this represents a trend. We think it was just specific to this particular batch of group bookings. In fact if anything, we’re encouraged by the fact that our group room revenue booking for the remaining quarter of 2017 and for fiscal 2018 so far, something commonly referred to group pace in the industry, allowing ahead of group room revenue bookings for future periods last year at this time. Banquette and catering revenue pays for the remainder of fiscal 2017 has also increased compared to last year at this time. If productivity returns to more normal levels, then that would bode well for future periods in this division. Now you’ve heard me say before, when group room revenues are down, we need to work very hard to replace that business with non-group business. As evidenced by our performance versus our competitive set, we were able to do that better than So I want to once again congratulations our outstanding management team on that out performance. And as often the case, we did have to give up a little bit of average daily rate -- occupancy and that showed up in the numbers Doug shared with you earlier. Our hotels and resorts division operating results should continue to benefit in future periods from the new rules of the Grand Geneva. We are really happy with how that turned out. In addition, the Omaha Marriott Downtown at the capital district in Omaha, Nebraska, a new hotel that we manage in which we hold the minority interest opened on August 27 and initial guest response this hotel is the very favorable. We were also pleased to announce our assumption of the management of the Sheraton Chapel Hill Hotel in Chapel Hill, North Carolina in September. These two new management contracts will help to offset the loss of management fees from the two hotels that we sold in the last few months. We will also continue to actively review opportunities to add to our portfolio of managed hotels in the future and we hope that one or more of those come with the vision in the coming months. I want to close my remark by commenting on our announcement today that the Westin Atlanta was recently sold for a substantial gain. You have heard us talk about our growth strategy of adding management contract, often with a small minority equity component in the past. Well, I would suggest to you that the Westin Atlanta is a perfect representative for what we would like to continue to do in the future. Five years ago this month, with strong partners we identified a hotel that needed a renovation and a better operating strategy, but had a lot of things going forward including the strong location. Together we bought it at a fair price and at the right time and then Marcus Hotels and Resorts proceeded to oversee a significant renovation and manage the hotel with great results. For five years, our operating results benefited and the management fee generated from this hotel. Not surprisingly with significant value created our partners decided it was time to sell we [indiscernible] After a successful execution, the sale closed this month. And with our 11% equity interest is an opportunity for promoted interest built into our deal, we will now be recognizing a gain of over $4.5 million in this transaction. I know our analyst friends and our loyal investor are often to value our company based on the multiple of EBITDA and the result again of this type can easily be overlooked. But I’d if remised if I didn’t once again point out that given the value that is often inherent in the strong asset base, it makes up the Marcus Corporation. These assets in the strong conservative balance sheet that back them up is one of the real strengths of your company. And finally, before we open up the call for questions, I want to conclude my remarks by saying thanks you to all the hardworking associates of the Marcus Corporation. I don’t want to ever take for granted with each and every one of them does to contribute the success of both our businesses. I also want to share with you the news that we certify with Joe Khairallah, who recently submitting his resignation as division president and Chief Operating Officer of Marcus Hotels and Resorts to pursue global opportunities. I would like to thank Hoe for his service and contributions in these past four years. For the time being, I have assumed day-to-day operational oversight of Hotel division along with the support of our outstanding senior leadership team in that division. I'm confident that we will - beat as we continue to serve people, create memories and deliver exceptional experience in our hotels and resorts. With that, at this time Doug and I will be happy to open the call up for any questions you may have.

[Operator Instructions] And our first question comes from Eric Wold from B. Riley and Co. You may begin sir.

A couple of questions. You mentioned that 50 of the screens were out of service during the quarter due to the renovations. I'm assuming a much lower percentage will be out there in Q4 given the slate give a sense of what that could be or what we should assume in 2018.

Well in October, which is the beginning of Q4, we’re still in that same general range as it related to the Marcus Wehrenberg theaters. As we mentioned in the call, Eric, where our goal is that we accelerated our whole plan of the Marcus Wehrenberg theaters in order to try to be ready for a bunch of the pictures are coming out in November. So we still have what really is the equivalent of couple of - we got four or five auditoriums per locations or more in some situations and you add them all up, we’ve got the equivalent of two full theaters basically still down in October at Wehrenberg. But you’re right, once we hit November, we’ll still have, as Greg mentioned in his comments, we will have a couple of theaters that will continue on until the end of the year, but it will certainly will start to decline once we get November.

But to be clear just to make sure Marcus correct, the 15% only applies to the Marcus Wehrenberg status screen. That’s not the overall percentage.

Correct.

Okay. And then on the hotel side, congrats on the news on the Atlanta sale. I guess Atlanta of first think about your own strategy to sell your own hotels. Obviously that was not opportunity cost of Wehrenberg transaction to do a diverse -- that has not occurred. You maybe talk about just see the environment out there, buyers versus sellers in terms of where we get something done that we’re still also looking for opportunities for minority interest ownership and hotels along with management contracts, just trying to understand that the valuations and the industry given on the buyer side having integral time on the seller side so much.

Sure, let me take it backwards. First your last question about, are you still looking for minority interest where we make acquisitions and that’s absolutely in that -- as you can see that, that strategy worked. So that is one that we continue to focus on. As it relates to hotels for sale, we continue to be out in the market, we’ll watch in the market. The market is - it is still a disconnect that we haven’t seen the pricing that we want to see yet, and -- but we continue to look forward and we’ll take advantage of it when we can.

Okay. And then lastly, it’s general question, obviously a lot of press out there on movie path and subscription programs, what is your view on subscription program in general that’s something you will consider implementing markets on its own or should - over the third-party with revenue share deals with concessions or omissions or even something you consider?

Well it’s hard to make a comment on movie path because I don’t have access to their numbers and what are they doing and know how it works. In terms of I mentioned a model, we can I think read in the press. You know look that we have to watch all the pricing models and I think that the comments that they made originally when you talk about the certain price point the customers are going to do the math and we end up with a very soft customers and we can bear out because as you know we are a pretty forward fixing company and we tested our own subscription services in some certain markets probably four years ago, maybe five years ago, and it’ll be soft very differently we were at about $30 to $35 a month, was that we were able to raise start selecting group and we weren’t winning that bet, which is highly didn’t extending. Now the lower price point, I'm not sure with that model go. It's up for us to watch it. But you bring up a very important point which is -- would you like to do it yourself or with the movie path and frankly I go back to its one of the benefits of our loyalty program. For the first time, in 82 years, it was really once now there was a [indiscernible] for few years, but for almost 80 years we didn’t who was walking in the door. We now know and we believe that that knowledge is power and we think it's very important to make sure that preserve and manage and own that relationship with our customer. And I can't tell you the number of people who would like to get in the middle of that, movie passed clearly is one of them. So I think it's up to us as a company and up towards the industry to be thoughtful and very careful about how we manage that relationship because I think its very important to us and will be important to us in the future.

[Operator Instructions] Our next question comes from the line of Jim Goss from Barrington Research. You may begin sir.

IMAX just had a call on which they talked about the strong performance they had in September, especially relative to and the latest quarter out over the industry. I'm wondering if you can pick out just how well your own PLS screens paired relative to the rest of your stabled screens, then both of you mentioned it, of course. Is there any way to look at that performance through set of your overall performance?

Jim, we don’t not have numbers that - not on my are fingertips so I can through at you, but there is no question that performed very well on our large format screen. As you heard, we reported a national increase in our average ticket price this quarter and certainly September had a big part of that because of two fold. In my prepares I mentioned the fact that okay, you had some mix of pictures and so you had a out rated picture being a number one film and so certainly by definition your ticket mix is going to skew towards to higher price. But then -- and I didn’t mention but you have actually -- I think you have [indiscernible] the fact that large format screens were key element of our success certainly contributed to that as well. And we absolutely benefited from that picture playing on the large format screens and you heard. I mean we had -- for some time now we have had a pretty significant focus on expanding our number of large format screens. There is no exact statistics out there in the industry but I haven’t found anybody that has a higher percentage of large format screens than we do in our circle in terms of complex has been at least one large format screen. So we think that’s very key going forward, if at you at these next two months, and then look we have had a strong push to try to even get more open and more converted because when you get these big pictures coming up the way we do in November December, that’s where the customer loves to see the picture. And so it’s a pretty big focus for us no question about it.

In terms of financial results covering out those, do you try to analyze those screens relative to the rest of your?

Oh, we do. We don’t share that publicly, but obviously IMAX sets their business and so we see if we can get those direct numbers from them, but so we certainly do our own internal analysis but I’m not prepared to share any numbers with your today.

Okay. And in terms of competitive situation, AMC just announced it was going to build an auditorium or a set of auditoriums in Orland Park not very far from you’re a pretty significant property of yours, and not to just talk about that situation, but how have these competitive situations been working out for you specially as the receiving initiatives have become more important?

Jim, that’s a great point that you’re bringing up in the end. Yes, we noticed that announcement. For us and what we’ve been very good about, and yes, we’re going to see competition in our market. There is not doubt about it, but the team has been very focused on it and we had a strategy from day one has looked at let’s make sure that we keep our fingers as competitive as possible and to just to makes sure that we minimize that there is this kind of disruption, and I would tell you that these that that’s what we’ve done and that’s why our asset base is as strong as it is and where we’ve gone up against them, we win. And so it’s going to be, it will be a battle and then we’ll win the battle. But it is something that we have got our eye on and we’re focused on intently.

All right. So the last thing I would raise is dynamic pricing, ticket pricing, regal raised in conjunction with Adam Tickets earlier this week. Have you been looking at that aspect and is that something you would to experiment with as well?

Well, as you know we are a forward-thinking company. We’re always trying to think about where the industry is going and you could take the position that variable pricing is something that we’ve been involved in now for a while, especially if you think about our $5 Tuesday program in a variable pricing can take many forms. It can be pricing based on the day, it can be pricing based on the film. Now we obviously haven’t been doing a based in the film but we are doing it based in the day that we think we’ve had success. I think what that points to and I think that’s Regal things points to as -- why has our $5 Tuesday program worked? And I talked about this before, the reason it has worked because we’re not cannibalizing really much business out of our weekend business because there is a certain group of customers that had left the theater because you now people forget. And I think Hollywood sometimes forget that the laws which supply and demand do apply to our business, and the more supply you pump into the ancillary markets at a very low price which is what happens. Netflix, I don’t know what the cost per view on a streaming service is? But its slow as you pump supply into the low-price downstream you will ultimately impact upstream what’s happening and I think that it would be naïve for anyone who is thinking about how the model should look like to think the moves they make will only have a isolated impact on what they are doing. They impact the entire chain. And so $5 Tuesday was in an essence of rear action to what has been going on over a number of years. And so what Regal is doing is continues to show that there is going to be reactions to what is going down in our industry, we don’t exist in isolation. Now the good news is that our variable pricing model by day the week has been very successful. And so we watch it and we resumed very intently and we assume were things done.

[Operator Instructions] And 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.

Well, thank you, everybody, for joining us once again. We look forward to talking to you again this time in February, when we release our fiscal 2017 fourth quarter and year end results. Until then, thank you. Have a good day and go see a movie.

Ladies and gentlemen, that conclude today’s call. You may disconnect your line at any time. Everyone have a good day.