The Marcus Corporation (MCS) Q1 2018 Earnings Report, Transcript and Summary

Good morning, everyone and welcome to The Marcus Corporation First 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'd like to turn the program over to Mr. Neis for his opening remarks. Please go ahead, sir.

Thank you very much and welcome to our fiscal 2018 first quarter conference call. As usual, I'm going to begin by stating that we plan on making a number of forward-looking statements on our call today. Our forward-looking statements conclude 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 & 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 our Regulation G disclosures when applicable on our website at www.marcuscorp.com. So with that behind us, let's talk about our fiscal 2018 first quarter. We once again reported record revenues with contributions from both divisions and record earnings as well, thanks to the lower income taxes. Our Theatre division did not quite match last year's record operating income but it again outperformed the industry, and in fact reported it's second highest quarterly operating income ever, even beating last year's Star Wars led fourth quarter. Our Hotels & Resorts division also reported small improvements in revenues and it's typical winter operating loss during the quarter as well, recognizing that our first quarter will always be our most challenging quarter during the seasonal nature of our primarily Midwestern hotels. I'm going to take you through some of the detail behind the numbers, both on a consolidated basis and for each division, and then turn the call over to Greg for his comments. Now there are a number of changes to our financial statements due to new accounting guidance so I'm going to need to spend off a little extra time today explaining those as well. Before I dig in these division, let's spend a few minutes on a couple of the line items below operating income starting with interest expense. Interest expense was approximately $400,000 higher than last year due primarily to an overall higher average interest rate during the quarter. Rising short-term interest rates in our revolver borrowings and our decision to execute two interest rate swaps during the first quarter converting $50 million of variable rate borrowings to a fixed rate accounted for the increase in overall interest cost this quarter compared to last year. Now offsetting this increase in interest expense in the first quarter was a corresponding decrease and losses in disposition of property equipment and other assets. There can and will be variations in this line item each quarter depending upon our real estate activity and the amount of write-offs that we may have related to newly renovated properties, particularly in our few division. Now the next line item, our earnings statement. Other expense is a new line item this year as we require to adapt a new accounting standard for pension costs this quarter. This new standard requires us to break our pension expense into two components; normal service costs related to pension participants will remain above the line in operating income. Non-service costs reflecting interest costs and amortization of prior service cost and actuarial losses will now appear on this new line item below operating income. Now you can find an annual breakdown of these costs in our footnotes through our financial statements in our recent Form 10-K filing. In conjunction with adopting this standard we're required to restate the prior year results as well to match the new method of presentation. So you will see that comparable number in the 2017 column. Year-over-year this was -- there was not a material change in this line item but obviously moving these costs below the line did have the impact of increasing operating income in both years. Of course, as we cleared the effect of net earnings was zero here, all we did was move some costs that previously were above the line in operating income, down below the line; so this is really just about geography and the earning statement. Now the most significant change in our line items below operating income was of course the income taxes due to the new tax law enacted in December 2017. Our first quarter effective income tax rate adjusted for losses from non-controlling interest was 25.8%, right in the middle of that 25% to 27% range that we previously projected. And of course significantly lower than last year's 37.7% first quarter effective income tax rate. Now shifting gears just for a moment away from the earning statement; our total capital expenditures during the first quarter of fiscal 2018 totaled approximately $16 million compared to approximately $22 million last year. Now nearly $14 million of this total spend during the fiscal 2018 first quarter was incurred in our Theater division, the majority of which related to our continuing DreamLounger seating projects, Premium large format conversions and new food and beverage outlets that we've been discussing for some time now. The $2 million of capital expenditures in our Hotels & Resorts division was primarily related to various normal maintenance projects. At this early stage of our fiscal year I have no reason to make any major adjustments to our previous estimate of CapEx for 2018 to be an amount in the $65 million to $80 million range recognizing that as we've pointed out in our recent 10-K filing, the timing of several of our planned expenditures are still just estimates at this point. We're still finalizing the scope and timing of many of the various requested projects by our two divisions and we anticipate proceeding with many of these projects as the year unfolds. The actual timing of the various projects currently underway or proposed will certainly impact our final capital expenditure number, as will any internally unidentified projects or acquisitions for that matter that could develop during our fiscal year. So now I would like to provide some financial comments on our operations for the first quarter and as part of those comments I'm going to highlight some of the other accounting changes in our fiscal 2018 financial statements that are important to note as you compare some of the line items of last year. It's important to point out however that while some of the changes will result in the noticeable variation in specific line items, none of these changes had a material impact on overall operating income or net earnings. So let's begin with Theatres; as most of you know, we completed our acquisition of the Marcus Wehrenberg theatres in December of 2016; so beginning here in the first quarter of 2018 the results of these acquired theatres are now in both of the reported period results which certainly will make our comparisons of last year more meaningful. With that in mind, our reported box office revenues decreased to 1.3% and our concession revenues increased 1.3% during the first quarter. Now fiscal '18 numbers did include two new theatres that we opened during the second and third quarters last year, as well as an accounting change that negatively impacted box office revenues as well. So let's talk about that first accounting change that I need to highlight. Through the first quarter of fiscal 2018 we like everybody else needed to adopt a new accounting standard related to revenue recognition; I assume most of you have probably heard about that. We discussed the impact of this new standard in our recently filed Form 10-K noting that it would primarily impact our accounting for our loyalty programs and our internet ticket fee revenues. Now in accordance with the new guidance a portion of theatre admission and concession revenues attributable to loyalty points that are earned by customers will now be deferred as a reduction of these revenues until the reward redemption occurs. Prior to adopting this new standard, we've recorded the estimated incremental cost of redeeming loyalty points at the time they were earned in advertising and marketing expense. Thus through the first quarter of 2018 was a net effect of these changes and accounting for our fee loyalty program was essentially a net zero on our operating income; it did result in a decrease in theatre admission revenues, a small increase in theatre concession revenues and a decrease in advertising and marketing expense. Now what does become important is when we attempt to compare our theatre results for the rest of the industry. The data we received from Rentrak, a national box office reporting service for the theatre industry, represents gross box office receipts reported to it and by definition would be before any such deferral of revenues for accounting purposes that we or any other exhibitor might record. Thus, we need to add back the impact of this revenue recognition accounting change to our reported admission revenues in order to get numbers that we can then compare to the rest of the industry. So according to data received from Rentrak and compiled by us in order to evaluate our fiscal 2018 first quarter results, U.S. box office receipts decreased 0.6% during the fiscal 2018 first quarter. After adjusting for the deferred revenue from our loyalty program, our first quarter box office receipts decreased 0.4% compared to last year. So as a result, we believe our box office receipts during the first quarter of fiscal 2018 outperformed the industry by 0.2 percentage points. Now I want to point out that we outperformed the industry despite the fact that we once again had a number of screens out of service, approximately 2% of our screens were out of service during the long portions of the fiscal 2018 first quarter due to renovations underway at multiple theatres. We've now outperformed the industry average during '15 in the last 17 quarters and I will point out that Greg's going to dissect our first quarter performance versus the industry in a little greater detail during his prepared remarks as film mix did have an unfavorable impact on our performance versus the national numbers this quarter. The first quarter theatre decrease in our box office revenues was attributable to a decrease in attendance at our theatre's offset by an increase in our average admission price of 3.6%. A modest price increase taken in October and an increased number of premium large format screens with a corresponding price premium contributed to our increased average price this quarter. Our average admission price also likely benefitted from the change in our film mix compared to last year. Our top two films during the fiscal 2017 period were the PG rated family movies Beauty and the Beast and the Lego [ph] Batman movie which by definition likely resulted in a higher percentage of lower priced children's ticket sold. Compared to our top two films during the first quarter of 2018 which included the PG 13 rated films, Black Panther and Jumanji. Now we are pleased to report increase in our average concession in food and beverage revenues per person of 6.4% for the first quarter. Our investments in non-traditional food and beverage outlets continue to contribute to higher per capita spending. And I'll also point out that our theatre other revenues this quarter increased by approximately $1.4 million compared to last year. Now while as a small portion of this increase is due to increased preshow ancillary revenues, the vast majority of the increase is related to another accounting change related to the internet ticketing fees that I referenced earlier. Prior to the new revenue recognition standard, we've recorded these fees net of third-party commission or service fees. Under the new guidance that we adopted in the first quarter, we're recognizing ticket fee revenues gross based on a gross transaction price. Now this change had the effect of increasing other revenues and increasing other operating expense by an equal amount but had no impact on operating income or net earnings. Lastly, as you've been noted that the weather in the Midwest during the first quarter fiscal 2018 was harsher than it was last year. As a result, our reported fiscal 2018 theatre division operating income and margins for that matter were negatively impacted by approximately $400,000 of increased snow removal and heating cost compared to the fiscal 2017 first quarter. If you calculate our operating margin in the theatre division without these added costs and without the impact of the accounting changes because by definition while the revenues came down the actual operating income didn't change. You will find that there was very little change in margin this quarter compared to the same quarter last year. Shifting over to our Hotels & Resorts division; I want to start by briefly discussing a change in how we reported hotel revenues. As you know, we managed multiple properties for other owners. In conjunction with those management agreements, we incur various costs, the largest of which is payroll that are reimbursed by the respective hotel owners. These costs are generally reimbursed dollar for dollar and we've historically netted the reimbursement against the cost in our earnings statement as the amounts were determined to be immaterial to our financial statements and the net effective of this reimbursement activity by definition is zero. Beginning with the first quarter of 2018, we've elected to make -- set an immaterial restatement and report these reimbursed costs on a gross basis. Now while we do have two very small management contracts in our theatre division, the vast majority of the dollars that are now appearing on our earning statement is both a revenue item and an expense item, equal amounts related to our hotel division and are now included in our hotel revenue segment data. We've restated the prior year to conform to the current year presentation. Given that these amounts have zero impact in an operating income or net earnings, we've chosen to show us our subtotal of revenues before cost reimbursements in order to aid in comparability to prior years. And we have included cost reimbursement amounts in a footnote to our segment data as well, so help you with comparisons of prior year reporting as well. Excluding these cost reimbursements, our hotel -- overall hotel revenues were up 3.1% for this first quarter, I think it's primarily to a 5.1% increase in food and beverage revenues and the 29 new villas of the Grand Geneva Resort & Spa. The largest portion of the increase in food and beverage revenues is due to the opening of the new SafeHouse in Chicago in March of last year. Conversely, our total revenue per available RevPAR was down 2.4% during the first quarter compared to last year. As we've noted in the past, our RevPAR performance did vary by market and type of property. Breaking out our numbers more specifically, our fiscal 2018 first quarter overall RevPAR decrease was entirely due to an overall occupancy rate decrease of 2.5 percentage points, partially offset by a 1.2% increase in our average daily rate or ADR. Four of our eight company owned hotels reported increased ADR and RevPAR during the first quarter compared to the first quarter of fiscal 2017. Now according to data received from Smith Travel Research and compiled by us in order to compare our first quarter results, comparable upper upscale hotels throughout the United States experienced an increase in RevPAR of 1% during the fiscal 2018 first quarter, but that does not actively reflect our predominantly Midwestern presence. According to Smith Travel, competitive hotels in our collective markets experienced a decrease in RevPAR of 3.2% during our fiscal 2018 first quarter. Thus as you can see, we outperformed in this division as well this quarter. Finally, I'm pleased to tell you that as a result of these increased revenues and the fact that last year's results included preopening expenses from the new SafeHouse from Chicago, operating losses attributable specifically to our eight owned Hotels & Resorts decreased during the first quarter of fiscal 2018 compared to the first quarter of fiscal 2017. Now before I turn the call over to Greg, let me briefly address the increase in our corporate segment operating loss this quarter as well compared to last year. As our stock price has increased over the past few years so has the value of our long-term compensation. We also had increased legal expenses this quarter and that's a line item that will always have some variations from quarter-to-quarter depending on what's going on at that time. Finally, we have also increased our contributions to our various pension and 401(k) plans, as well as our charitable giving in 2018, both in response to the reduced income taxes we're now experiencing. With that, I'll now turn the call over to Greg.

Thanks, Doug. I'll begin my remarks today with our theatre division. As you know, expectations for this first quarter in 2018 were pretty low as we were going up against the number two movie of 2017, Beauty and the Beast. As well as an all-time record for Marcus Theatres. And so, while our operating results did fall slightly short of last year, the surprising performance of 2017 holdover films that included Star Wars, Jumanji and The Greatest Showman, plus the breakout performance of Black Panther put us in a position to report our second best quarterly performance of all-time, regardless of time [ph]. Given what most prognosticators were suggesting about the first quarter compared to the strong first quarter last year, our industry has proven to be very difficult to predict once again. In the end, attendance was still down versus last year but our management team and operation staff led by Rolando Rodriguez, worked extraordinarily hard each and every day to maximize the results with a product that was available. As Doug shared with you, we once again outperformed the industry this quarter, albeit with a smaller differential than some of our previous quarters. I can say with some confidence, however the film mix this quarter compared to last year likely had a negative impact on our comparative performance versus the overall industry numbers. As I just mentioned, last year the tope film during the quarter was Beauty and the Beast. Our Midwestern circuit performed very well with this film, in fact overall we believe we outperformed our normal share of the total box office with this movie. This year the top film was Black Panther; although the movie did very, very strong business in our theatres, and an analysis of the Top 100 markets in the U.S. shows that this year the Midwest trailed the Eastern Seaboard [ph] in the south on this film. As a result, it is not a surprise to us that while we still outperform the nation overall during the first quarter, the differential was much smaller than in prior quarters. Given the film mix headwinds this quarter that I just described, the reason we still outperform the industry was clearly because of the improvements we are experiencing at our markets we're [indiscernible]. For competitive reasons, I'm not going to share the specific numbers but it would be fair to assume that these theatres significantly outperform the industry during our first quarter and frankly, that outperformance has only increased during the early weeks of the second quarter. We told you that we acquired the Wehrenberg theatres, it was our goal to take our unique package of marketing, pricing and operational strategies and combine it with a significant investment to add amenities such as DreamLounger recliner seats, proprietary premium large format screens, and our signature food and beverage concepts -- our secret sauce, if you will; and applied them to these theatres. I believe we are beginning to see the positive results of these efforts and I want to once again congratulate Rolando and the team on the tremendous amount of time and effort they have put in over the last year on these theatres. I truly believe they will be a bright spot for us in 2018. As we look ahead, we're excited to continue to invest in both new and existing theatres during fiscal 2018 as we further expand the successful concepts and amenities that have contributed to our industry outperformance. As our press release notes, we have several more theatre renovations currently underway and we also look forward to beginning construction in our second Bistroplex all in-theatre dining location at Brookfield Square in Wisconsin in the near future. Our second quarter started off pretty well; even though we did have to deal with some record-breaking April snow that impacted several of our markets and we are once again outperforming the industry by a meaningful margin during these first weeks of the quarter. Our press release highlighted some of the films scheduled for release during the second quarter. On paper, they looked very good. So at this point, we certainly expect a strong quarter compared to last year, and with strong pre-sales of Avengers taking off tonight, it looks like we will get off to a running start. But coming back to how I started my remarks, it is difficult to predict the box office. We hope the next two quarters of 2018 will turn out to be a strong at the box office that some are suggesting. And if it does, we'll be prepared to capitalize like we have in the past. But if one or more films disappoint, we'll be prepared for that as well. We're looking at this business like we always do, the long-term perspective. And with that same long term perspective in mind, I would be amiss if I didn't know that we continue to be very interested in expanding our circuit with selective acquisitions if appropriate opportunities arise. We'll always take discipline in our approach, but we also believe that we are demonstrating currently how we can add value to theatres and we'll welcome the right chance to bring our special sauce to more theatres in the future. With that, let's move on to other division, Hotel and Resorts. You're seeing the segment numbers and Doug gave you some additional detail. Given that most of our company-owned hotels are located in the Midwest, we typically lose money in this division during the winter month and the first quarter of fiscal 2018 was no exception. But as Doug shared with you, thanks to a good effort by our topnotch sales and management team in both our corporate offices and at each of our owned and managed hotels, we outperformed our competitive hotels in our respective markets and reduced our operating losses in this division. As Doug shared with you, RevPAR was down 2.4% for the quarter, but that was probably a mathematical issue as the addition of the new villas at the Grand Geneva contributed to increased dollar revenues to this property, but are reduced occupancy percentage due to having more rooms available during this lower time of the year. You will note that total room revenues were only down 1.3%. Overall, total revenues increased this quarter due to both increased food and beverage revenues, thanks in large prior to the SafeHouse Chicago and increased other revenues, thanks in part to increased ski revenues to Grand Geneva. So I guess there's a good side to the additional snow we got this year. Then we're getting significant variations in our various customer segments during this traditionally snowy time of the year for us. Business was up slightly overall, but the Milwaukee markets saw a decrease due to the fact that last year, the city had two major basketball tournaments in town in March -- a men's NCAA first and second round bracket and the women's Big East Tournament. Overall as Doug shared with you, four of our hotels reported increased RevPAR this quarter and four hotels reported decreased RevPAR. Now surprisingly, then the result was a quarter that was just slightly better than last year. Looking to future periods, our group room revenue bookings for future periods of fiscal 2018, something commonly referred to in the Hotels and Resorts industry as group pace are running just slightly ahead of the group room revenue bookings for future periods last year at this time. From a growth perspective, 2018 is off to a good start with the addition of three new management contracts as described in our press release. We continue to actively review opportunities to add to our portfolio of managed hotels in the coming year. We also continue to seek opportunities where we might invest equity in new hotel opportunities as well. Conversely, we are open to reviewing opportunity to sell one or more owned hotels depending upon the number of factors that we've described in the past. There's no secret, the hotel transaction market has not been particularly robust in the next couple of years, so we'll continue to show patience as we review such opportunities. And finally, reinvesting in our existing motels will always be an important part of our success as well. We are getting ready to begin a significant reinvestment in our Hilton Madison hotel 2018 and we are also actively preparing for our 2019 conversion of the InterContinental Milwaukee into an exciting new independent arts-focused hotel. Before we open the call for questions, I want to conclude my remarks by once again highlighting the final summary section of today's press release. During the first quarter, we showed once again the willingness and ability to return capital to shareholders while still pursuing an active growth strategy. For the fourth time in three years, we increased our quarterly dividend, this time by 20%. That margin to normal increase combined with investments we are making and we'll continue to make in the future in our associates and our community are all a direct response to the recently enacted tax reform legislation. And despite the continued act of CapEx plan, our debt to capitalization ratio remains at a remarkably well 40% giving us a great deal of flexibility to push for future opportunities wherever they may arise. Speaking of our associates, I want to thank all the people that worked so hard every single day, making ordinary days extraordinary days for our guests. With that, 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 Jim Goss from Barrington. You may begin.

Okay, good morning, guys. As I was wondering since you've come back from the CinemaCon, I wondered if you might talk about any takeaways you had, any issues and competitive responses that you might be thinking about? And it could be you hop-on [ph] issues, some slates to you or exhibitor relations, or any new services that struck you.

Well, let's go right to the bright side. I think the film slate, I try to never prognosticate, but it's hard to not get excited about what looks like to be a year that film was a really great product -- certainly this summer should be much better than last summer. We hope and again, you never know, that's why we play the game, but again, we're off to a great start tonight. I think everybody is pretty excited about what was going on. Just certainly no shortage of things to talk about, but I don't think that anything was particularly surprising.

Okay, so nothing in particular that sort of bubble to the surface that you think would cause you to make any movements or anything of that sort?

I don't think so, Jim. An overused term that we use all the time in terms of our long term focus, but look, we don't have our eye just on next week but over next years. You move the plan accordingly as you need to, but I don't think there's anything bubbled up in the last three days we know is out there and that we're dealing with and again, I think there were some very positive feeling that will come out of it overall. I'll tell you. There are certainly no shortage of the guy selling seats out there. Which actually for us is a great validation in a way of strategy. We really move quickly and talks to the benefit of owning our own real estate because we weren't the first one with the recliners, but we saw it early in the cycle, we were able -- because we own our real estate -- accelerate that deployment on a relative basis from the pack of the major operators for that. You see all these people selling seats, those are probably a pretty good idea. Well, actually one of them actually had a massage unit. I like that, I'm hoping we put that up.

We remain on-pace with the projects that we've got going on as we speak. Can we complete it in the next couple of quarters, we remain at pace to be probably in the 75% range in terms of the penetration in our screens with the DreamLounger recliner seats. And again, as of the piece of the whole puzzle was we've talked about in the past, it's not just the seats, it's the -- we think we're the best in the business in the food and beverage, I think that was validated as well at CinemaCon [ph] when you see all the focus on food and beverage that was -- that we heard about in the Sun on the tradeshow; we've identified that earlier and we think we're the best at it. So I think that our penetration is higher than anybody else and as you already know our large format screen penetration, I think we've got 80 of them today with 69 theatres and I don't think anyone has got that level of penetration as well.

Okay. And to the point about the seats, given that there are a variety of seats, does this enable you to potentially use something less extreme in some smaller markets and receipt more than 75% ultimately? By now it's spending quite as much money per seat than some of the new initiatives.

I don't think -- I'm sure that there are out -- that those exist and we're seeing -- I think you're going to bump into two dynamics. We're seeing in some of these markets that when we do the re-seating, when you do it right you really can -- you can drive some of that but you will extend your radius and your trade area because people will drive for good experience and I think about -- I go back to -- I think to pull out the -- pull the grandfather card out but I go back now three generations to reading about what my grandfather said about the first theatre which we still have to this day at Ripon, Wisconsin; the campus theatre in talking about how it was really important to really do it right and to spend the money and create something that was special, even in a small town in the middle of Wisconsin. And that strategy -- we worked through it and we'll continue to. So I think that thing you will see Jim as we move forward is that as we -- as we simply go through the natural cycle of refreshing theatres and we've always talked about how we're -- we're very disciplined about trying to make sure that we reinvest in our properties. Most likely we're going to be -- at some point you put new seats in and why wouldn't be putting the new recliners into the question, I'd be -- ask me because that's the theatre of tomorrow.

Okay, fair enough. And just one small -- or one thing on the hotel side; are any -- are the changes in mix with some of the new relationships you're developing, creating a potential impact to reduce any seasonality from the original Midwest focus?

So much of our cash flow comes from the owned hotels, I mean that after mammical [ph] proportion compared to what we get from our management contract, that really -- it does not…

Exactly. I mean the dollar range on these management contracts given the size that -- because we get a percentage of the revenues, [indiscernible] is not going to notice that so much; so as long as we have the current mix of our owned hotels, that seasonality we're going to have to live with.

But from a management perspective, the very good news from a supervisory perspective is if I need to go somewhere work -- it's actually more outlet [ph].

Exactly, there we go. Thanks very much. I appreciate it.

[Operator Instructions] Our next question comes from the line of Mike Hickey from The Benchmark Company. You may begin.

Obviously Q2 looks great on paper, huge franchise, I think it's pretty easily this sort of big number; I'm sort of curious -- I guess your view on spacing of films in the quarter and we sort of see that as an opportunity lost I guess when we think about the second half of the year and maybe just sort of the -- how you think about the pressure I guess on the consumer and [indiscernible] film sort of crawl over each other? I have a follow-up.

That is always a concern but you know, we've got a great picture in the first quarter in Black Panther; I mean it is a mix but again, we've got to see how these all turn out. I mean we're all -- I hope we're all right but let's see how everything plays out.

Okay, fair enough. I guess just thinking about maybe your medium term type growth opportunity; you know, your hotel business does sort to like steady state here, obviously low incremental upside with management contracts. Your theatre business has certainly been exceptionable but now it seems like you're kind of achieving a scale in terms of your amenity rollout. So just sort of wondering how you see your -- where you see I guess your medium opportunity for growth?

The first thing that would come to mind for me in the near-term is going to just be what we expect -- what we hope to see from our Marcus Wehrenberg theatres, Mike. When you think about those theatres, in 2017 job #1 was to absorb them operationally; we put our $5 Tuesday program in running [ph] way, few months later we put the loyalty program in, we introduced a lot of our operational policies and procedures but the capital really didn't go into the near the end of the year rather than latter half of the year and so I think that there is still -- I mean, if you're talking near-term, I think that's -- I think that 2018 is going to be the year -- not kind of what here that we really see some of the real benefits and what we try to do and how we try to add value to that existing change. So I certainly think that we still have some nice runway with those properties that we have a number of efforts on throughout the rest of the circuit as well in terms of things such as -- we've got a major focus, we've talked a lot about it in some of our meetings at Cinema [ph] this week. A very major focus on our sales effort, Rolando likes to use the word that we're hunters, that we don't just sit back and wait for the customers to come to us that we go out there and we're hunting customers rather seeking customers and taking some ownership of our business and one of the -- there is a lot of examples of that, lot of different things we do, I'll just touch on one of them which is our group sales effort; we have people who every morning -- wake up in the morning looking for groups, looking for opportunities to be able to bring people into our theaters and so -- I mean there is a -- so there is a number of efforts like that; those are things where we still think we have the ability to move the needle in the short-term, just on the existing stuff, never mind the capital.

If there is -- we always have other levers to pull. If there is -- we'll consistently -- as my remarks said, we're looking for opportunities, if anybody has anything ought to find me, I was joking with [indiscernible]. I was just talking, I never know that you've got something for sale, we don't know, but we're open to that. But it's not -- you know, we have other ways of -- we will look for other opportunities and if there are not opportunities then we'll return the capital to shareholders. It's a nice product to have as we talked about them.

Fair enough. I guess last one on opportunities to grow attendance. How you see the solid e-sports market potentially taking shape or form within the theatrical space by offering the space, I guess. It seems like at CinemaCon this year there were some pretty clever examples of how sort of combined e-Sports and theatre market together and drive attendance and excitement; maybe even the demographic perhaps that is not as strong and the theatre is -- maybe the degeneration [ph] -- I'm just sort of curious, you guys have always been pretty innovative and forward, you've experimented with the idea and if you do see it as a potential way to grow in the interim?

You know, I don't even know enough to answer the question, Mike. We have been looking at it because yes, you are right, we keep an eye on that stuff, we do keep an eye on it. My hope is that there is enough throughput or at off times that we can -- to make it make sense. It is interesting, anything -- anytime you could take something to throw it up on the big screen like that, it really does have -- it really has some great impact. And I checked outside -- few years ago I checked out the legal logins [ph] and -- so there is something there but we don't what it is yet.

Okay, thanks. Best of luck for the second quarter.

Thanks, Mike.

Thank you. And 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.

We'd like to thank all of you once again for joining us today. Maybe we'll see some of you in less than two weeks at our upcoming annual meeting on Tuesday, May 8 at our new Bistroplex Cinema in Greendale, Wisconsin; and for those of you who can't attend we certainly will be webcasting the meeting once again, as well. Rest, we look forward to talking to you once again in July when we've released our fiscal 2018 second quarter results. And till then, thank you and have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.