The Marcus Corporation (MCS) Q4 2017 Earnings Report, Transcript and Summary

Good morning everyone and welcome to The Marcus Corporation Fourth Quarter Earnings Conference Call. My name is Bruce and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. [Operator Instructions] As a reminder, this conference is being recorded. Joining us today are Greg Marcus, President and Chief Executive Officer, and Doug Neis, Chief Financial Officer of the Marcus Corporation. At this time, I'd like to turn the program over to Mr. Neis for his opening remarks. Please go ahead, sir.

Thank you very much. Welcome everybody to our fiscal 2017 fourth quarter and year-end conference call. As usual, you know 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; expectations about the quality, quantity and audience appeal of film products expected to be made available to us in the future; our expectations about the future trends in the business group 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 Regulation G disclosures, when applicable, on our Web-site at www.marcuscorp.com. So with that behind us, let's talk about our fiscal 2017 fourth quarter and our completed fiscal year. As our press release noted, we are reporting record revenues, record operating income and record net earnings for the quarter and the fiscal year, thanks to a record performance from our Theatres division in both periods, once again outperforming industry, and a nice gain on the sale of one of our hotel [indiscernible]. You add to that of course that we also had a significant tax adjustment due to the new tax law. So the results from our Hotels and Resorts division were down slightly for the year but for the fourth quarter we reported increased operating income versus last year and we also outperformed our competitive sets in this division during both the quarter and the full-year. Now following our usual format for these calls, I'm going to take you through some of the detail behind the numbers first, both on a consolidated basis and for each division, then I'm going to turn the call over to Greg for his comments. Now look, the logical place to start would be the income tax adjustment since it's so significant. First off, I want to reiterate what Greg said in the press release. This was a record fourth quarter and fiscal year even before the tax adjustment. Obviously the reduction in deferred income taxes of over $21 million made the quarter and the year only that much better. Now the math behind this one-time tax adjustment is really pretty simple. Prior to that adjustment, our deferred income taxes on our balance sheet were approximately $59 million at year-end with the largest portion of that balance related to accelerated depreciation on our significant capital investments that we've made over the years. This includes the benefit of 100% bonus appreciation on our significant personal property additions that we made during the fiscal 2017 fourth quarter, thanks to the new tax law. Now these deferred taxes were recorded over time assuming an effective income tax rate that historically has been in the 38% to 40% range for our Company. Now that the federal income tax rate has been reduced from 35% to 21%, you will be seeing that the tax deferred is a tax saved has really become a reality for us. We now expect our future effective income tax rate will be in the 25% to 27% range and we reduced our deferred income taxes by $21.2 million in order to reflect this new expected tax rate. And while the reduction in deferred taxes is a one-time thing, our future reported results will benefit significantly from the new lower effective income tax rate. So that out of the way, let's quickly I'll comment on a few line items below operating income. As I shared with you on prior calls, the majority of the increase in interest expense this quarter and for the fiscal year is due to the fact that we assumed several capital leases in conjunction with the Wehrenberg acquisition last December. Now we also did have increased borrowings compared to last year through our capital expenditure program that 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 some of the impact of the increased debt. Looking ahead, based upon an expected decrease in our capital expenditures during fiscal 2018, unless of course an acquisition comes along, we think our total borrowings may not change very much or might even decrease in 2018. Conversely, anticipated increases in short-term interest rates may offset some of the impact of any reduced borrowings that we may have for our interest expense during the year. Now of course changes in our borrowing levels due to variations in our operating results, capital expenditures, share repurchases, and asset sale proceeds, among many other items, may impact either favorably or unfavorably our actual reported interest expense in future periods, that may changes in short-term interest rates or the mix of our long-term and short-term debt in our portfolio. Now another line item I'd like to highlight is the gains on disposition of property, equipment and other assets. Our fourth quarter results were favorably impacted by two significant gains. We recorded a gain of over $600,000 this quarter from the sale of our small ownership interest in MovieTickets.com which was purchased by Fandango. We also reported gain of approximately $4.9 million from the sale of the Westin Atlanta hotel in which we had 11% minority ownership interest. Now partially offsetting these gains in both the quarter and the fiscal year was the continued write-off of disposed theatre personal property as we continued our extensive renovation program at multiple theatres. The other line items below operating income, investment income and equity earnings from joint ventures, did not change significantly during the reported periods. Now before I dig into each division, I do want to briefly shift away from the earnings statement for a moment and tell you about our total capital expenditures during fiscal 2017 and tell you that they came in right near the top of our projected range, totaling approximately $114 million compared to approximately $84 million during fiscal 2016 to exclude the Wehrenberg acquisition. Now approximately $93 million of that total spend during fiscal 2017 was incurred in our Theatres division, the majority of which related to the two new theatres that we opened during the year and the completion of a significant number of DreamLounger seating projects, UltraScreen and SuperScreen DLX screens, and new food and beverage outlets detailed in our press release. We spent approximately $20 million in our Hotels and Resorts division this year, including costs associated with the 29 new villas that we opened up at the Grand Geneva and the new Safehouse restaurant and bar that we opened in Chicago during 2017. As we look towards capital expenditures for fiscal 2018, we are currently estimating that our fiscal 2018 capital expenditures may be in the $65 million to $80 million range, with approximately $50 million to $60 million estimated for our Theatres division including about $20 million in carryover from projects already approved and in some cases started in fiscal 2017. Another $15 million to $20 million is currently estimated for our Hotels and Resorts division, including a scheduled renovation at the Hilton Madison hotel and preliminary work on our recently announced plans to convert the InterContinental hotel into an independent arts hotel by mid-2019. As well some additional maintenance capital dollars set aside for possible growth or ROI opportunities that could be evaluated during the year. As is always the case at this point in the year, the range of potential capital spending is fairly large at this time because either the timing on several of our planned projects is not finalized yet or because some of the dollars are for several growth opportunities that may or may not come to fruition. As a result, our actual fiscal 2018 capital expenditures certainly could vary from this preliminary estimate. In addition, if another acquisition opportunity would arise, particularly in our Theatres business, that would obviously impact our capital expenditures as well. Now let me provide some financial comments on our operations for the fourth quarter and fiscal year beginning with the movie theatre division. Looking at the Theatres segment revenues and operating income, the first thing we should do is probably address the fact that this year's results include a full year of our Marcus Wehrenberg theatres compared to two weeks of operations of these theatres last year. We also opened two new theatres during fiscal 2017 and another one during the fourth quarter of fiscal 2016. So that's going to impact comparisons as well. So let's dig into the revenues just a little bit here. While the segment total show that Theatres revenues increased 19% during the fourth quarter and 22.3% year-to-date, if you take out the revenues from the new theatres, we find that our revenues for comparable theatres increased 0.5% during fiscal 2017 in the fourth quarter and actually decreased 0.5% for comparable theatres during fiscal 2017. And while I know this is going to get all confusing, I think even those numbers need to be explained, so please bear with me for a second. If you've been following this for a while, you will remember that last year during our fourth quarter, our total revenues benefited from the $3.3 million one-time incentive payment from our preshow advertising provider Screenvision. That obviously also impacts our comparisons the last year. So now, if you take out that payment from last year's revenues as well, you'll find that our comparable theatre revenues increased 4.6% during the fourth quarter and 0.2% during the full-year fiscal 2017. Now when you consider where business was after a difficult summer movie season, I think you'd agree that ending the year with comparable revenues slightly ahead of last year is really pretty good. Let's get even a little more granular and take a look specifically at box office receipts because that's the number we can compare to the rest of the industry. If you exclude the new theatres that I just referenced as well as two theatres that are no longer comparable to last year because their pricing policies were changed pretty significantly as a result of the new theatres that we opened nearby, fiscal 2017 fourth quarter box office receipts increased 6.9% for comparable theatres and decreased 1% for those same comparable theatres for the full fiscal 2017, which then allows us to do a comparison to our results to the U.S. box office. Based upon U.S. box office numbers compiled by us using data from Rentrak, a national box office reporting service for the theatre industry, we find that the national box office increase is 1.7% during our fourth quarter in those 13 weeks and decreased 2.6% during our fiscal 2017. Using the numbers that I shared with you that calculate our box office increases for comparable theatres, this means we outperformed the industry by a significant 5.2 percentage points during the fourth quarter and 1.6 percentage points during fiscal 2017. And this is still not counting the Marcus Wehrenberg theatres where we expect to outperform in the future. This means we've now outperformed the industry during the 14 of the last 16 quarters, essentially four straight years now, something we're very proud of. Now the fourth-quarter comparable theatre increase in our box office revenues of 6.9% was partially attributable to an increase in attendance at our comparable theatres of 0.8%.. Our comparable theatre attendance decreased by 3.1% during fiscal 2017. Offsetting that however was that excluding the Marcus Wehrenberg theatres, our average admission price increased by 6.9% during the fourth quarter and 2.6% for the full fiscal year. Modest price increases that we took in November of 2016 and October of 2017 as well as an increased number of premium large format screens, which I'll tell you was particularly important with the Star Wars film, and a favorable change in film product mix contributed to our increased average admission price during the reported periods. In addition, we're pleased to report very healthy increases in our average concession in food and beverage revenues per person of 5.5% for the fourth quarter and 5.1% for fiscal 2017. These numbers again exclude the Marcus Wehrenberg theatres. Our investments in non-traditional food and beverage outlets continue to contribute to higher per capita spending. Shifting to operating income for just a minute, our Theatres division operating income increased during fiscal 2017 compared to fiscal 2016 due primarily to the operating income from the acquired Marcus Wehrenberg theatres, decreased attendance at comparable theatres, all coming during the second and third quarters, and preopening expenses of approximately $800,000 related to the opening of two new theatres negatively impacted our operating income during fiscal 2017. In addition, our Theatres division revenues and operating income during 2017 were also negatively impacted by the fact that we had anywhere from 14 to 40 screens out of service from March through mid-November during fiscal 2017 due to renovations underway at multiple theatres. In addition, comparisons to operating income during fiscal 2016 were of course negatively impacted by the fact that both fiscal 2016 operating results included that significant one-time incentive payment from our preshow advertising provider that I mentioned earlier, which dropped straight to the bottom line, partially offset by the fact that fiscal 2016 operating income was negatively impacted by one-time transaction costs related to the Wehrenberg transaction. Let's move over to Hotels and Resorts division real quickly here. If you do the math, you'll see that our overall hotel revenues were up 4.9% for the fourth quarter and 2.6% year-to-date. We've increased food and beverage revenues from our new Safehouse Chicago restaurants certainly contributing to those increases. Increased room revenues from the new villas we opened at the Grand Geneva and increased RevPAR at comparable owned hotels also contributed to our increased revenues. Our total RevPAR for our eight comparable properties increased 2.7% during the fiscal 2017 fourth quarter and 0.9% for the full fiscal year compared to the same period last year. And as we noted in the past, our RevPAR performance did vary by market and type of property. According to data received from Smith Travel Research and compiled by us in order to compare our fiscal quarter results, comparable upper upscale hotels throughout the United States experienced a decrease in RevPAR of 0.2% during our fiscal 2017 fourth quarter, but competitive hotels in our collective markets actually saw an increase in RevPAR of 1.4% for the fourth quarter. For the full fiscal year 2017, Smith Travel Research data shows that upper upscale hotels experienced an increase in RevPAR of 0.6% and competitive hotels in our collective markets experienced actually a decrease in RevPAR of 3%. Thus if you compare that to our numbers, you're going to see that in fact for the full year we outperformed our competitive hotels by nearly 4 percentage points. Breaking up the numbers little more specifically, our fiscal 2017 fourth quarter RevPAR increase was due to a 1.4% increase in our average daily rate and a 0.9 percentage point increase in our overall occupancy rate. For fiscal 2017, our occupancy rate increased 0.5% points and our average daily rate increased 0.3%. Hotels and Resorts division operating income and operating margin increased during the fourth quarter of fiscal 2017 compared to last year. For the full year, division operating income and operating margin decreased by 12.7% and 1 percentage points in the margin during fiscal 2017 compared to 2016, really due entirely to preopening expenses and some startup operating losses related to the new Safehouse, Chicago and a reduction in profits from our management business due in part to a small one-time favorable adjustment made last year. If you exclude those two items, operating income for our Hotels and Resorts division during fiscal 2017 actually exceeded operating income during fiscal 2016 by about $200,000 or 1.7%. Excluding the same items, our operating margin during both years was 5.3%. With that, I'll now turn the call over to Greg.

Thanks Doug. I'll begin my remarks today with our Theatres division. I think we can all agree that it was quite the rollercoaster year. On the heels of a record fiscal 2016, fiscal 2017 started off with a record first quarter and everyone was feeling great about our business. Of course as we now know, everything was about the change and all that momentum came to a halt with a challenging second and third quarter where the film product just didn't perform. That naturally led to all the inevitable articles about the future of the movie theatre business. Yet here we sit today reporting another record quarter and year for Marcus theatres, once again outperforming the industry, and yes, we had Star Wars in December. But we also are comparing our results to a quarter with a significant Screenvision one time incentive payment. So this accomplishment should not be minimized. The honest truth is that fiscal 2017 was a very good year, but not quite the year we had hoped for. It's hard to make up for underperforming films during our peak summer movie season. But as you've heard me say many times before, 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. It is our job to continue to execute on our operating and investment strategies so that we'll be prepared to capitalize on the movies that are there for us, just like we did during our recently completed fourth quarter. Thus, I want to start my remarks by congratulating Rolando Rodriguez, our management team and the entire theatre operational organization for their performance during the fourth quarter, and for that matter, the entire year. Our press release went through a fair amount of detail and now Doug has provided even more information about our Theatres division's fourth quarter and fiscal year. Other than adding that, not surprisingly the strength of the fourth quarter film slate were the November and December films. I thought it was actually a little soft. I'm not going to use my time to talk further about what just happened. Rather I'm going to focus my remarks today on two topics, the progress we made in our capital program during fiscal 2017 particularly with the Marcus Wehrenberg theatres, and our plans for fiscal 2018. If you have additional questions about our reported results, I'll be happy to try and answer them during the Q&A portion of this call. Doug told me that we incurred over $90 million in capital expenditures in our Theatres division during fiscal 2017, the most we've ever spent in a year excluding acquisitions. In addition to two new theatres that we've discussed previously, our press release highlights where the dollars went; 15 more DreamLounger recliner seating locations; five new UltraScreen DLX screens, two of which were newly built; 18 new SuperScreen auditoriums; five new Take Five Lounges, four new Zaffiro's Express outlets, and two new Reel Sizzle outlets. Needless to say it was a busy year for our Theatres team and they deserve additional credit for getting so much done during the year and managing through a lot of disruption to our operations. All of our theatres were open for business every single day. I will note that we achieved the results we are reporting today despite the reality that our Theatres division revenues and operating income during fiscal 2017 were also negatively impacted by the fact that we had anywhere from 14 to 40 screens out of service from March through mid-November due to the various renovations underway at these theatres. I think you might find it interesting where all these investments put us at the end of 2017. As of December 28, 2017, we offered all-DreamLounger recliner seating in 39 theatres, representing approximately 61% of our company-owned first-run theatres including the Marcus Wehrenberg theatres. Including our premium large format or PLF auditoriums with recliner seating as of December 28, 2017, we offered our DreamLounger recliner seating in approximately 65% of our company-owned first-run screens including the Marcus Wehrenberg screens, a percentage we believe to be the highest among the largest theatre chains in the nation. Currently, seven Marcus Wehrenberg theatres offer recliner seating in all of their auditoriums. Meanwhile, we currently offer at least one PLF screen in approximately 69% of our first-run company-owned theatres including the Marcus Wehrenberg theatres, once again a percentage we believe to be the highest among the largest theatre chains in the nation. And one more number for you, after the investments we made this year we now offer one or more in-lobby dining concepts in 36 theatres, representing approximately 56% of our company-owned first-run theatres, again including the Marcus Wehrenberg theatres. The fact that I kept using the phrase 'including the Marcus Wehrenberg theatres' is really the other big takeaway from all these numbers I've just thrown at you. You will recall that one of the most attractive aspects of our Wehrenberg acquisition in December 2016 was the fact that we saw an opportunity to add our successful amenities to these theatres. A reminder, only one of the acquired theatres had recliner seating when we purchased it and there were a limited number of PLF screens and FMB options. We have previously talked about the fact that we faced some unexpected headwinds in 2017, getting started up adding these amenities to the Marcus Wehrenberg theatres, due in part to governmental delays and prolonged lease negotiations. Thus, the reality is that it wasn't really until December of 2017 that we began to see the real upside that we expect from these acquired locations. I'll also remind you, the outperformance versus the nation that we've talked about for our fourth quarter and fiscal 2017 was excluding the Marcus Wehrenberg theatres. In 2018 we'll start reporting our performance versus the nation including these theatres. I will tell you this. Using historical numbers provided by the seller for these theatres, we believe we outperformed the nation in these theatres in November and December and that has carried over so far to the first quarter of fiscal 2018. So now we move on to fiscal 2018. On paper, the film slate looks very good, by the way it always does, with a large number of titles from well-known series leading the way. An initial look at the film line might suggest that the quarters may play out exactly the opposite of last year with the second and third quarters leading the way and the most difficult comparisons being in the first and fourth quarters. But as history tells us, you never really know how the films will perform. Everyone pretty down on the fiscal 2018 first quarter, but after a stronger-than-expected January and the record-breaking performance of Black Panther this past week, maybe the comparisons to last year which included the tremendous performance of the March film Beauty and the Beast, will be better than originally thought. But as you've heard us say before, our goal is to continue to outperform regardless of what the movies in any particular quarter look like. Our path to meeting our goals in 2018 starts with many of the same strategies you've been hearing about. It involves continued development of proven marketing programs like our Magical Movie Rewards loyalty program as well as continuing to make investments to further enhance the movie-going experience and amenities in new and existing theatres. Doug shared with you that we may spend as much as $50 million to $65 million in this division during fiscal 2018 and we would do that in a number of ways. We have previously announced plans for our second BistroPlex and construction is expected to begin on this new location in Brookfield, Wisconsin in 2018. We also are looking for sites for other new theatres and we may spend some dollars towards that end in 2018. We're currently completing the addition of our DreamLounger premium seatings at three more locations, including two Marcus Wehrenberg theatres, and we are evaluating opportunities to add these recliner seats to five to seven additional theatres during the second half of fiscal 2018, including two more Marcus Wehrenberg theatres. As a result, by the end of fiscal 2018, our percentage of total company-owned first-run screens with DreamLounger recliner seats may be more than 75%. We also plan to continue expanding our proprietary large format concepts with several additional screen conversion additions under consideration for 2018. Our capital budget also includes selected opportunities to further expand our signature food and beverage concepts as well. So, needless to say, while our capital dollars are expected to decrease from the record numbers spent this past year, our team will continue to be busy. And given how many amenities we added at the end of 2017, we'll also have our hands full as we focus on maximizing the return on the investments we made during fiscal 2017. And I would be remiss if I didn't note that we still have an extremely strong balance sheet. So we remain very interested in further expanding our circuit with selective acquisitions when the right opportunities arise. 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. Fiscal 2017 ended on a strong note, and in fact when you peel away the unusual items that Doug shared with you, our eight company-owned hotels performed slightly better in fiscal 2017 than they did last year. There definitely were some headwinds this year primarily in group business, but the fact that we ended up outperforming our competitive set of hotels by nearly 4 percentage points during fiscal 2017 is something our team is very proud of. As interim leader of this division, I want to publicly thank our outstanding executive management team in hotel operations and the sales team on a really solid year under some challenging circumstances. As we discussed in the past, our portfolio of hotels is particularly well with group business, especially some of our largest properties. So, our quarterly results are often determined by the strength of group business during the period. When it is soft, it hits us harder than some others, and when it is strong, we do well. Group business also tends to have an impact on our food and beverage revenues as well. Those groups are more likely to use our banquet and catering services during their stay. The fourth quarter was a good quarter for groups, and not surprisingly, our reported results reflected that. Our team is also continuing its unwavering commitment to exceptional guest service and our press release pointed out some of the recent awards our properties have received. Looking ahead, while it is not easy to read the crystal ball for the hotel industry, and our hotels in particular, there certainly seems to be some level of optimism about our business in the near future. Many published reports by those who closely follow the hotel industry suggest that the United States lodging industry will continue to achieve modest steady growth in RevPAR in calendar 2018. There appears to be some recent improvement in sentiment regarding the possible positive impact that the recent regulatory and tax reforms may have on our business customers, which we would hope might bring an increased business travel in the future. Whether the relatively positive trends in the lodging industry over the last several years will continue depends in large part on the economic environment as hotel revenues have historically tracked very closely with traditional macro economic statistics such as the gross domestic product. We also continue to monitor hotel supply in our markets as increased supply without a corresponding increase in demand may have a negative impact on our results. We generally expect the track will exceed the overall industry trends, particularly in our respective markets. We are encouraged by the fact that our group room revenue bookings for future periods in fiscal 2018, something candidly referred to in the hotels and resorts industry as group pace, are modestly ahead of our group room revenue bookings for future periods as of the same date last year. The Safehouse, Chicago is completing its first year of operations. So we won't have the preopening expenses [indiscernible] this year and we expect to report improvement in that restaurant's operating results during fiscal 2018. We also expect to see continued benefit in future periods from the new villas at The Grand Geneva Resort & Spa. We lost two management contracts during fiscal 2017, the Sheraton Madison and the Westin Atlanta, but we have added three new ones, the Omaha Marriott, the Sheraton Chapel Hill, and the recently announced Murieta Inn and Spa in Rancho Murieta, California. And while we talked about it briefly in our last conference call, I don't want the sizable gains from the sale of the Westin Atlanta that we reported during our fourth quarter to be overlooked just because it is not in our operating income or EBITDA. That entire transaction is emblematic of what we are trying to do with a portion of our growth. We acquired a minority interest in a hotel where we could add value, we earned management fees for five years, and then we sold it for a substantial gain, recognizing a portion of the value we helped create. We also look to create value in our existing assets when opportunities arise. The new villas at the Grand Geneva are an example of that. So was our recent announcement to convert the InterContinental Milwaukee hotel into an independent arts hotel. We feel the timing is right to reinvent this 221 room hotel with a goal of lending impeccable hospitality with curated exhibits, contemporary installations, and engrossing live performances. With this project we saw a very special opportunity to push the envelope and then create and entirely new concept that celebrates the arts. Ultimately, our hope is that a visit or a stay at this hotel will inspire our guest to explore more of what's possible and experience our community in a way that is more personal. As mentioned earlier, most of the capital dollars in this project will be spent in fiscal 2019, but we are already working on getting ready for this conversion and our team is excited about the possibilities that lie ahead. So that ends another fiscal year. It was another record year and we believe we have a lot to look forward to in 2018. Our balance sheet is in great shape with a debt capitalization ratio of only 40% and I want to highlight that we hit a major milestone at the end of the year. Our total assets now exceed $1 billion. I don't think my grandfather would have ever believed we would one day reach that incredible milestone. We're also poised to benefit in future periods by the recently enacted tax reform legislation, freeing up cash to invest in our businesses, our associates, our shareholders and our community. I've already talked about our investments in our businesses and they will continue in the future. We also recently increased our matching contributions to our 401(k) plan and are actively reviewing additional opportunities to invest in our associates. In addition, during fiscal 2017 we made a significant increase to our contribution to our Marcus foundation as the needs of the community are increasing as well. And I'm pleased to note that our Board expressed confidence in our future yesterday by raising our quarterly dividend by 20%, our fourth dividend increase in the last three years and the largest increase yet. We believe we are well-positioned for future and look forward to continuing our momentum in the year ahead. With that, at this time Doug and I would be happy to open the call up for any questions you may have.

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

Few questions, I guess one, obviously you had great outperformance in the Theatres division in Q4 relative to the industry. If you drill down for what data you do have to your theatre level or maybe a smaller regional level, can you talk about the outperformance you see, maybe not specifically but anything you can read from the outperformance trends of one theatre, one region versus another in terms of maybe what some theatres offer their consumers in terms of amenities and whatnot versus others did not and how that will be addressed? And then anything that underperformed noticeably that you can point to?

I guess I could just say, generally, Eric, in sort of highlights that we talked about on our prepared remarks is that where we are making these investments we are seeing our outperformance. We are seeing – and what we saw we'd call the legacy circuit. As we made the investments in the amenities, in the recliner during the DreamLoungers, those investments are paying off and I can't really point to anything specifically. Does everything work as planned? Actually I wish I could tell you everything worked better than planned, but overall we're very pleased with the performance and we can see it, it is highlighted.

Eric, maybe what I would add to that is, and you've been with us through this whole journey here, at one point in time I don't think I was throwing around numbers saying that we thought we were going to get to 65% penetration with the DreamLoungers for example, when we met couple of years ago where we might have been. We are up to that number and we are going farther because one of the reasons is that it's proven to continue to work even as we started getting into some markets where there was no market share to steal from anybody. I mean this past year we've done a few markets where we're the only game in town and there are smaller markets and we've seen some results that have been very pleasing. And again, as Greg said, not every single one of them is going to be a homerun but we've had some encouraging results in some markets that probably weren't initially in our radar. And so that's probably allowed us to continue to move this along.

I think what we are seeing there, I'll build on it a little bit, Doug, and that is, first of all, even in our smaller markets we tend to have pretty good facilities. We don't [indiscernible] on the small markets. So then when we go do this, we really get a state of the art theatre in those markets. And then what I think we're seeing, and I have not – I haven't seen the data yet, so any of the people who are listening they know they are going to get here this question, but we think what we're seeing, and we can see it because we can see it through our markets rewards data, I think we're going to just find that people are driving farther in those other markets to come to our theatres.

That's helpful. And then just on the capital structure, you lowered your appetite obviously for additional acquisitions. Maybe remind me where you are now into the leverage and what would be the high end of your comfort level?

From the traditional kind of balance sheet debt capitalization ratio, we're at 40% right now. And if you look at our debt-to-EBITDA, I mean we are in the 2s, right, and then somewhere in that range to announce something with that. So, we have got a lot of room, Eric. We've got certainly plenty of availability on our existing bank agreements. We certainly have access to additional capital beyond that. We have historically said that 50% debt cap is kind of a number where we – if you just look historically, I don't think we've really ever been much above that. Our credit agreements allow us to go farther than that. But again, we play for the long-term, and so if there were some reasons to go farther, we could always fix that after the fact, but I got to be honest with you. Right now we spend $80 million next year in CapEx that I talked about on the high-end of that range. Given the cash flow we are generating from our business, that 40% might even go down. So, we certainly have room, Eric.

And we have desire, but our strategies, we need to be able to add value. And our value added is what we think one of our team's skill set, relying on the team. Their skill set is, going and taking something and fixing it up, investing capital in something and making more out of it. That's really the kind of things we look for and I guess – I think you said appetite, I think the guy I can think of is Austin Powers in Get In My Belly. We're certainly not like the use of a movie quotes. We're not at [indiscernible].

We throw a lot of movie quotes around here, Eric, just so you know.

I can imagine. Last question, switching to the hotel side, so it's been year-over-year since the Wehrenberg acquisition, at that time I know the acquisition was not done anticipating a 1031 as a part of the approval process but you thought there was an opportunity possibly for a reverse 1031 to take advantage of that. Nothing has happened, obviously we don't know the timeframe of a reverse 1031 versus a normal, which is the normal six months, but nothing has happened. So I guess what should we read into that? Has there been interest in the hotel that you indicated for sale with no prices you want to see, has there not been interest, and I guess how does that impact your ability to kind of use hotel monetization in 1031 exchanges as kind of an additional growth strategy going forward?

I'll start and then I'll see if Doug wants to add anything. Our first choice is to do that, but the pricing has to be right. I think what you saw in the hotel market, which was pretty well known, is that it did get pretty – the transaction market got relatively quiet last year, the REITs were out of the game. We are starting to hear, we're starting to see some more some activity picking up as people – because people are wondering where you are in the cycle, but they are starting to see there's been this discussion where all those cycles in prolonged, reinvigorated. But again, it comes back to we're going to make the best decision that we can make. We were not trying to sell something just to sell, but if the price is right and the opportunity is there and it lines up, we look at all the factors and then make a decision. Now the tax law changing is going to impact that as well.

I mean I guess speaking specifically to those types of issues, Eric, I mean, look, as you correctly noted, it's a little less clear how much time you have on the reverse 1031 versus a 1031. So, certainly that window is still open for us, but all of the facts have to be correct. And so it really will depend on things. So again, just like when we bought Wehrenberg without calling anything, we're not sitting here today making these sort of decisions based on assuming that something like that will happen. And then to Greg's point, obviously since the tax impact is one of the key components for us in making decisions about what assets could be sold and for how much, the fact that the effective tax rate on gains is going to go down certainly does change the math. Whether that makes a difference or not, it's going to be on an asset by asset basis, but that certainly will change the math a little bit.

And by the way, it wasn't like there was no activity to see this year. Madison was sold, the Westin Atlanta was sold, and we participated in those.

That's fair. Thank you, guys.

Our next question comes from the line of Jim Goss with Barrington Research. Your line is now open.

Staying on the hotel theme for the moment, you do seem to be having some success in getting some management contracts, which is always a challenge if you're not going to own the property, and I'm wondering how valuable all the awards you point to in terms of the qualities of your hotels and the industry's reception, how valuable those are in terms of securing some of the contracts you've been able to get? And also, are you getting, are you still looking at sliver equity in some of the new properties?

I'll tell you this much, I don't think the awards hurt. It's good. Look, I think they just emphasize what I think the sophisticated investors who are investing in these properties do understand, and that is they look at what we – we aren't an unknown quantity, we're not a new entity doing the hotel business, 56 years now since 1962 when my dead grandfather bought the Pfister in Milwaukee. So, I think it just chose our consistency and the fact that we were able to continue to perform at a high level And yes, we look for sliver equity. We have in some of the projects we have some sliver equity as well. So we will continue to do that.

So, how active and methodical is this process of trying to generate these new management contracts? Are there a certain number of people dedicated as a staff to scouring the country for these sort of opportunities or is it just as they happen to, if you become aware of them?

No, we've been deliberate about it. A management contract is like a product. That's not to say it's like toothpaste. We're out there selling it. So, we have people who are devoted to finding these opportunities for us.

And then what I would add to that, Jim, is that then there is the money side of things, and so we have one effort, and it kind of works hand in hand, but one effort is out there looking for these deals, looking for these transactions, looking for the management contracts. But as we have talked about in the past, on the sliver equity side, on the potential fund side, which is also I think we believe is an opportunity as we go forward to potentially have a little more say in the process by identifying properties and having money ready to go where we can acquire properties off balance sheet but with partners, that's a whole different effort that's also been very active and going on as well.

Okay. And when you bought Wehrenberg, and perhaps even before, you were talking about getting to a stage where you have executed on the theatre receivings and enhancements and that you were beginning to need additional properties in order to renovate, and now it seems like you're getting close to a very late stage in that process even including Wehrenberg. How likely is additional M&A at this stage? How wide in that geographically are you searching? And could you talk about without being precise but just talk in general of where you think the industry stands and your role in the industry right now in that regard?

They are very unpredictable, as you know, Jim. We don't know when someone is going to have that desire. The transaction markets definitely don't like them, the robust transaction market in the lodging industry. Depending on what you want to participate there, it is robust. And we continue to be out there and I think we are viewed as a leader in the industry. I know we are viewed as a leader in the industry. And people know of our interest. And so I think that we're active in the discussions that go on and we will remain disciplined and look for opportunities, and I wish I could tell you something specifically, but we're active, and as Doug said, we have the capacity to do it and we will do it.

And Jim, you've heard me say this before, so I'll just say this kind of for the larger group as well. I mean certainly we do believe that doing nothing in the theatre industry is not an option. We think that obviously it's evidenced by all the investments we've made. So, there are people out there who've got to make some decisions. Some of them are making these investments and others are trying to figure out are they going to come up with the capital to make these investments or not, do they have access to the capital, do they really want to double down the family net worth, whatever it might be. So, certainly I do think that there will continue to be that pressure in the industry to be able to make these investments. Food and beverage is not easy, it's difficult, we're really good at it. So for all those reasons, I think if you look, come back to our balance sheet, our balance sheet is in great shape, we're certainly a logical player if someone wants to take that next step. It's just, obviously again, it's very hard to predict. I mean I wish I could go putting a percentage on it, Jim, but it's just too hard.

All right. Just one last thing, Greg, I liked your comment that fiscal 2018 looks good, but it always does by the way, and that's very true. So I'm wondering, do you always try to guess internally? How has it worked out so far relative to your expectations and what do you think now?

I never guess. I mean maybe in my head I have a few thoughts, but having been around this long enough, it is impossible to guess. I mean I could tell you right now some of the smartest people in my Company, and our Company here could never have guessed the Black Panther was go this weekend. It just didn't hit at all that this business is a business about the original thing in Hollywood that every movie is R&D except the sequel. And so, I find guessing relatively futile. Our job is to maximize every potential revenue dollar that we can get in the place, and then based on the cards that were dealt, and then to make sure that we bring as much to the bottom line as we can. Those are our key responsibilities. We cannot predict the film for the most part.

What I will add to that, Jim, is that I think we're really, really good at, and I'm really talking about our whole team and some of them listening this call right now, we're really good at then being very reactive and quick and moving very quickly when we see what actually happens, right. Everyone tries to guess. I mean, Black Panther, everyone tried to guess what was going to happen, and then when what actually happened, happened, I think that one of the places where we had value is we move very quickly and adjust accordingly and obviously with being all digital, that certainly gives us – and everyone else is all-digital as well, but I think we're just really good in reacting and adding screens and show times and doing and changing and adapting from a labor model perspective, et cetera, et cetera. And so, I think that's been one of the places where we've been quite successful and I think this past weekend was a prime example of that.

All right, good answers. Thank you both.

Our next question comes from the line of Mike Hickey from The Benchmark. Your line is now open.

Congrats on one of the great quarters here. So, just curious I guess on Wehrenberg, you sort of highlighted that, Greg, and sounds like it's really starting to get some traction into your fiscal Q1. Maybe it's obvious since it's the recliners and the amenities that you are putting in there, but I'm just sort of wondering if you could perhaps give us little bit more insight there. Obviously that network is about 20% I think of your total, and a fair amount to trade, now it looks like it's going to be obviously within your comparable performance for all of 2018, and wondering if that's sort of the key here to your upside if you have it, which we expect obviously in Q1 in 2018 on the theatre side.

I do want to just add one thing before I answer your question directly, Mike. I think it's important that we pointed it out in the call that a huge thing is physically fixing up the assets, but it's not just that. It is the marketing programs that we bring along with us, the $5 Tuesday, Student Day, all those specials that we do, the MMR, our Magical Movie Rewards program really is and we're up to about 2.6 million members, and there is some opportunity in those markets to grow as well. That is a very powerful tool, I've talked about it before, I will continue to talk about it. It is so important for us to own our customers and we're very disciplined about making sure that happens and maximizing and building a relationship with our customers. For the first time, we can actually build the relationship with our customers, which I think is going to continue to pay dividends for many years. Now, taking that question of the upside, so the upside continues to be in expanding those marketing programs, yes. With the Wehrenberg, we're seeing those trends. The Wehrenberg set of assets is probably where the bulk of the opportunity is, but throughout the system we know we continue to see opportunities in food and beverage to maximize that potential as well.

From a number perspective, Mike, I mean you correctly noted, so the Wehrenberg represents 20-some-percent of our overall business. So if they start outperforming by some sizable number in 2018, when you roll that into our overall results, I mean you've got to factor that into it, that they are only 20-some-percent of our overall results. When you look at our core market circuit, look, for the year we outperformed by 1.6%. Yet you saw what happened in the fourth quarter, it was over 500 basis points just because of – that's going to happen occasionally where we're going to have certain quarters where the way those pictures play and everything else, but obviously we're maturing from the Marcus perspective. Everyone else would agree there is competition that is catching up. And so, while we have never once tried to project any sort of out performance numbers, and I'm not going to start doing that today, it's reasonable to expect that the Marcus piece, our goal is to outperform, but we're not going out there and saying we're going to consistently outperform the core Marcus piece by over 5 point, but I certainly think the Wehrenberg piece is going to continue to outperform and you're going to see some of that higher number and can factor that in.

Okay. Thank you, guys. Another tough question, I guess real quick to your concession gross margin, it looked like, if I did my math right, target to the pretty big dip and…

Yes, I'll tell you, Mike. What I would strongly suggest to do is focusing on the year-to-date numbers. As always, some quarterly stuff that goes on and the last year there was in that particular line there was some adjustment, and this year there was a little bit of a swing between operations, the theatre operations line and the food and beverage or the concessions line. Enough to maybe mess with those percentages a little bit but not enough to be material overall. And so, I would certainly suggest that you zoom in on those where our year-to-date percentages are. That's probably more reflective of overall what you're seeing. As we continue to add these food and beverage outlets, that by definition are going to have a little higher cost of sales than our traditional popcorn sort of business.

So if I heard you right, Doug, a little margin pressure maybe in 2018 is just a function of sort of mix there, is that your expectation I guess?

Specifically in the fourth quarter there was just some stuff going on within those line items both this year and last year that I'm just saying that I wouldn't zoom in on that. I mean, I don't know, I did my own math on it too and I think it shows up with like 32% of the concession revenues. That's not a normal percentage and last year was lower because of stuff going on. So, I would really focus in – we've been pretty consistent when you look at what that line item is as a percentage of the concession revenues, and if you look at it from a year-to-date perspective, I think that's really representative of kind of the pace that we generally have in that part of our business, if that makes sense.

Yes, thank you. I guess just maybe back to the first question a touch, obviously Black Panther has been outlier performance here, curious how your circuit is tracking relative to market on that film. And I think you've said Wehrenberg is outperforming in Q1 versus the market, curious how your entire circuit including Wehrenberg is currently performing quarter to date and Black Panther specifically?

I'll let Greg answer the first part. The second part of it, I will just tell you that, yes, I mean look, quarter to date we are outperforming. I mean, again, we're just not going to provide numbers because things can change but we are outperforming.

And the first question specifically about Black Panther, and ditto, I mean we're outperforming on Black Panther. I'll tell you it was very interesting to do the testament to our team. I think that we were sort of just tracking a hair behind, I'm not sure we were close, because we look at the numbers literally every day. So, on Friday the team moved – Friday night the place was a beehive, they made changes, they added screens, and we actually started to outperform. And so, it was really cool to see that. And it was a little surprising that film we thought might play better in the coastal markets where we don't have as much of a presence, but a Playball for us too. It played well everywhere. It's been great, really it's been nice to see.

Good. Last question from me, I'm not sure how much we've talked about on MoviePass, but obviously they have grown their subscriber base, and it looks like they are sort of using that as a leverage against some operators in terms of desiring a share or subsidy. I guess just your thoughts here on that sort of what they are up to and how maybe it could impact your business or is impacting it?

I guess what I will want to say is that we're watching what they are doing. They've obviously tapped into something, but I'm not sure what that ultimately means. But what they are doing it's interesting, and I think I'm going to leave it at that.

Okay. Thanks guys. Good luck.

Our next question comes from the line of [Brian] [ph] with [indiscernible]. Your line is now open.

Just a point of clarification, the Wehrenberg circuit, are you guys about finished with renovations there, because I'm assuming they are kind of you're not changing a couple of light bulbs, that's a floor to ceiling turnkey type renovation?

Yes, it really is, Brian. I mean when we go into these theatres, pretty much all the time. Sometimes there's economics that comes into play in terms of how extensive we do the other stuff, but in general we go in, we are really updating these theatres. I mean the customer ultimately is seeing a brand-new theatre, I mean they really are. And so, we're not just going in and just adding seats, recliner seats into the auditoriums. I mean we are really making these things, improving the movie-going experience from beginning to end, and so it's pretty extensive.

Yes. Now were they digital before you bought them?

They were.

They were, okay. Is there anything from the standpoint when you look at, and I'm going back to looking at some of your market's layout where you might've taken out maybe a birthday room or you might have taken out a video arcade and you put in a Take Five Lounge or Reel Sizzle, how spacious or space constrained are there either for you to be able to do that?

Spacious, they have a lot of room. They were not [indiscernible] on their lobbies.

Okay, all right. That's good. From the standpoint of, is there anything, maybe Greg, you can answer this, is there anything that you might have learned from them, was there anything they might have had, maybe not in food and beverage, any novelties, anything that you might adopt for the overall market gain or is it primarily just you bringing your marketing that powers them?

We do try to go in, but we don't have the market cornered on good ideas. So, actually they had some arcades we have at Ronnie's, which is where the flagship down there, there is an arcade there that we made current and it really is, it's pretty cool. We've been watching how they are doing some of their pricing and watching what they're doing. So, yes, we're looking at them for ideas. I can't tell you there is a huge idea that we got from them, but yes, we're always in a lookout for good ideas, and they were good operators.

Okay. And then how much progress on your $5 Tuesday, what is your $5 College and Thursday or whatever, how much progress in either food and beverage ticket or theatre concession?

Are you just talking about Wehrenberg still or you're talking about just overall?

No, I'm talking about the overall chain, not Wehrenberg. As you had $5, I mean that's a…

Yes, we're making some progress in that, Brian. I mean obviously, by definition Tuesday is a value day and so we try to in turn offer some value opportunities on the food and beverage side as well in order to try to make that really a special day for our customer, and I think we've made some progress. It still has by that very definition the fact that we're giving away free small popcorn to all our loyalty members, it's going to have us a lower per capita than our normal days. But we've made some progress there.

But I think there will continue to be opportunity. To an earlier question, what are the opportunities, there is opportunity there.

Yes, okay. If you guys look at, I know the Greendale Southridge BistroPlex kind of just opened, are you seeing any divergences or maybe a bigger food and beverage ticket or a Queen's BistroPlex standalone versus the old Big Screen Bistro that might be an auditorium within a larger venue?

I think we're seeing pretty much what we expected in terms of average tickets and spend.

And then when you guys had the Black Panther tick-up, you talked about 'we reacted pretty quickly'. When you do a pivot, can you change theatre screens on the same day or is that really something you'll respond to the next day?

There are instances where we will do it on the same day. Obviously the team is looking to not displace customers. It happens occasionally and then it's up to us to do our best to recover from that and take care of the people who we displace. But yes, we can move same day if we have to.

And then relative to the Wehrenberg, your Marcus Magical Rewards program, what's been kind of the early penetration? I think you said you had about 2.6 million participants or whatever. Is that just being rolled out, how is that then early adopter at Wehrenberg?

So, Brian, we mentioned and disclosed previously that they had about 200,000 in their loyalty program, but I will tell you, what we quickly learned is that that wasn't necessarily 200,000 active members. So, we have seen growth in there. I think that when Greg talked about being an opportunity, I think that's one of the areas of opportunity that we continue to – we're still relatively new down there, and so I think as we're continuing to kind of build out this Marcus Wehrenberg brand, I think that's one of our opportunities is to further grow that loyalty program down in those markets. But we have in this past year certainly increased and now have accounts that's active versus maybe what was there before.

And just another one relative to what used to be kind of a first quarter post Christmas graveyard of movies, with the Black Panther and one of the Chris Kyle movie, but are you seeing Hollywood kind of get the sense that maybe there is a moviegoer there between January-March?

Seeing to begin lately, I mean as you know that's been something that we as an industry have been preaching for quite a few years now. And so, yes, it's very encouraging to see that when a picture like this does really well in February, or last year Beauty and the Beast doing really well in March, we think the studios are taking notice of that, and we hope to see more of that.

The dynamic could be that as the performance of movies condenses into shorter periods, having like a President's weekend, that allows you to really maximize and take advantage of it, and I think the studios are seeing that.

Yes, awesome. And then just congratulations to you guys, you and your dad, Greg. I grew up in your [Rip and Tampus] [ph] theatre. Your grandpa would be really proud of you guys.

Thank you very much, Brian.

Thank you, Brian. Appreciate it.

Our last question comes from the line of [indiscernible] from Stifel. Your line is now open.

I've got a couple of quick questions here. How much has the Disney restricted your take on Black Panther, and I know they put some restrictions on you but this movie is doing so well I guess you really can't complain, but have you given up something here?

We can complain. We pretty much complain with every studio and every movie, but we don't talk about individuals. It's set to scale, and so as the film performs, we pay more.

Okay. I mean they restricted you on how many showings in a theatre or whatever but I'm sure you don't mind putting in as many theatres as you can at this point and this movie should have legs hopefully for the next three or four weeks. What do you see looking out beyond Black Panther? I know you don't like to do this but what are your best bets as you look out over the next two or three months?

So, once you get past the Black Panther, I mean in March we mentioned a couple of movies in our press release. There's Red Sparrow with Jennifer Lawrence, I think A Wrinkle in Time, Disney's picture coming out on March 9. You've got a couple of other pictures coming out in mid-March including Tomb Raider and Pacific Rim Uprising. The next big wave of pictures, there's actually a picture opening up at the end of March called Ready Player One, a Steven Spielberg picture, that we hope it does a little bit of business. And then the real, as is always the case every year, then May kind of really becomes the start of the summer. It used to be June, our Memorial Day, but now it's really May. And so on May 4, you got this Avengers Infinity War picture, which maybe not surprisingly, watch their ads right now for this thing, their focus over the Black Panther is a key focus of their advertising now on that. So that's the next big picture that we'll be looking at beginning in May. And they've got another Deadpool, now you've got the Deadpool picture coming out in May, in mid-May. And you've got the Star Wars, kind of the Han Solo special movie coming out right at Memorial Day weekend. And so, as Greg noted, on paper I mean there is some pretty good stuff, so we'll see.

Has the Omaha Marriott hurt the Cornhusker at all, is that a concern? It's about 50 miles away.

No, in fact we think probably ultimately it will be better to have two Marriott projects that we are running and can maximize performance on, because it just gives us so – with the louder voice throughout the market more, we think it will be good.

Have the advanced bookings been pretty good for the Omaha Marriott or is it too soon to tell?

We're pleased.

Okay. Any change in your dividend policy versus your buyback? The fact that you had a good increase in the dividend, is there any comments you can make about this?

We really view those – I mean, look, they are all part of the puzzle that we are always looking at, [Herb] [ph], in terms of our capital expenditures, our use of the cash, I mean our capital expenditures, our buying back, share repurchases, we certainly have pulled that lever in the past. More recently we've been a little more focused on the dividend policy and obviously yesterday's announcement was the largest increase yet. But we talk about all of those options internally all the time, we talk about what the Board here recorded. And so, we always have the option of pivoting from one to the other or utilizing both, but certainly more this past year the focus has been on the dividend side.

So, with the lower tax rate, it's not necessarily going to increase the buyback significantly?

Again, we tend to be very – we have an existing authorization out there right now in the buybacks. We tend to be very opportunistic when it comes to that. We're not a company that just kind of puts their head down because like we said, buybacks are really just buying no matter what. We tend to be very opportunistic in that service very well. So I'm not closing the door to saying we wouldn't do buybacks in the future. It's just that we – and we don't generally telegraph which direction we tend to go either, but we tend to just be very opportunistic as it relates to our uses of cash.

How much do you have left on existing buyback?

About 2.9 million shares.

2.9 million shares, all right. The last thing, you haven't said much about your real estate development project in suburban Milwaukee, but what's going on there, is there any opportunities to monetize that or is it just going along okay?

Herb, I think you're talking about the The Corners in Brookfield, that project we've undertaken, and that project actually is really not our project anymore. A couple of years ago we took on a partner who became the managing member of the LLC that's developed it. That project has opened up, The Corners in Brookfield.

We continue to have a financial interest in it.

We still have a financial interest in this entity, but we don't talk about it and you haven't seen much about it because it's not on our balance sheet, it's not something that rises the level from a materiality standpoint for our public company. But we still have a significant financial interest in it as a minority investor.

Is there a chance that you'd want to monetize this, since it's not really in your normal business? I mean it's obviously not exactly on the radar.

Herb, again, it's not a Marcus Corporation – it's not on our balance sheet, so it's really not appropriate for me to talk about what our future plans might be for that project.

Okay, all right. Keep up the good work. Thanks a lot.

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

Thank you everybody for joining us today. We look forward to talking to you once again in late April, just a couple of months from now, when we release our fiscal 2018 first quarter results. Till then, thanks and have a great day.

Ladies and gentlemen, thanks for your participation in today's conference. You may all disconnect. Have a great day.