Good morning, everyone, and welcome to the Marcus Corporation Third Quarter Earnings Conference Call. My name is Mark, 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, Executive Vice President, Chief Financial Officer and Treasurer 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.

Well, thanks very much. And welcome everybody to our fiscal 2018 third quarter conference call. As usual, you know, I need to begin by stating that we planning making a number of forward-looking statements on our call today. Our forward-looking statements could include, but not be limited to statements about our future revenues and earnings expectations, our future RevPAR occupancy rates and room rate expectations for our hotels and resorts division, our expectations about the quality, quantity and audience appeal of film 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. Expectations and plans regarding growth and numbers 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 could be obtained from the SEC or the company. We'll also post all Regulation G disclosures when applicable on our website at www.marcuscorp.com. So with that, let's talk about our record fiscal 2018 third quarter and first three quarters. It's great to lead with our hotels and resorts division this quarter as the third quarter is typically one of our strongest periods and they not only didn't disappoint, they posted some great record results this quarter. Our theater division reported record revenues once again, and had yet another very profitable quarter. Thus operating income was impacted by several one-time costs and a film mix that contributed to higher film costs this quarter. I'm…

Thanks, Doug. I'll begin my remarks today with our theater division. It was an interesting, and I would even say unusual quarter for this division. On the one hand, we reported another record quarter for revenues, and we saw a nice recovery in July and August box office performance versus last year. Of course, we also knew we will be going up against the very unusual September last year, thanks to the breakout blockbuster again. And, as expected, this year's box office in September couldn't match that. Doug shared with you that we slightly underperformed this quarter, which is the U.S. box office. So that was certainly unusual as well. There were a number of factors that we believe contributed to our small overall industry under performance this quarter, despite the fact that, once again, our markets [indiscernible] figures outperformed the industry at times by a pretty wide margin. To begin with, we believe that the film mix during the third quarter of fiscal 2018 compared to the third quarter of fiscal 2017 likely had a negative impact on our comparative performance versus the overall industry numbers, particularly during August and September. One of the top films during those two months, Crazy Rich Asians, performed extremely well on the East and West Coast, but generally underperformed in our Midwestern markets. Conversely, our theaters do very well with the horror genre, and we definitely outperformed last year on it, making the September comparison even more difficult for us. And then, finally, the fact that the Major League Baseball Season three of our key markets Milwaukee, Chicago and St. Louis, were competing for the play offs during the final months of their season, September 2018, likely had a negative impact on our attendance compared to industry as a whole. All those sound…

Thank you. [Operator Instructions] And we'll go first to Jim Goss of Barrington Research. Your line is now open.

I was wondering in the absence of M&A deals that you might be able to close, is there any new build potential in any of your existing markets where you might extend your franchise? Or is it conceivable to start a new market from the scratch maybe one that somewhat contiguous that might offer some opportunity? Is that even an option? Is this?

Jim, look, it's Doug. Yes. The answer to your question is yes. But it's not a huge number. I mean, the world is -- does not need a ton of new movie screens, I think, we know that. The -- but that even brought me to say that it doesn't have necessarily be in a contiguous market. That's a great thing. But frankly we look at opportunities throughout the country. We believe this -- we've operated businesses for many years throughout the country. And at one time, when we had, they not -- we were in 28 states. So we're comfortable with operating at a distance. And we -- I know this, we look at other opportunities. But I think it's not a -- it's an opportunity, but it maybe with a small or giant at all.

Okay. And to the extent that the, now, Marcus Wehrenberg properties are pretty much up to speed. I'm wondering if you are detecting any differences. And between those properties in St. Louis, somewhat bigger market versus some of the other markets that aside from maybe Milwaukee and Chicago, don't quite match those characteristics in terms of reception to films or any other of those areas you've talked about is differentiating factors?

No. Actually, we think this is actually performed pretty much sort of -- it's performing like a Midwestern market. It performs -- the film we tend to see tend to perform relatively similarly. I suspect if there was a Cardinals documentary might perform better there if it does here. But …

Perhaps.

But beyond that, no, it's -- again, similar decisions, same impact, baseball impacted similarly. One advantage that we have in St. Louis is -- unfortunately for St. Louis, there is no football there anymore. And so that's something we always thought appear with [indiscernible] But the St. Louis doesn't have that. So we saw that as one of the benefits actually we went to the deal.

Okay. And is -- to the extent that you are in some of the markets that might be competitive with, say AMC, perhaps in Chicago or wherever else, that are introducing these loyalty programs. Are you seeing any competitive impact against those loyalty programs, or the subscription programs, I should say?

We have not seen that yet. But -- and our feeling on this just to -- for anyone that has that question to submit that, is that subscription is an interesting phenomenon. It is a phenomenon in the country. And we as it true as always we're always looking forward. And the question is really what will subscription look like? I don't know necessarily if AMC knows what it's ultimately going to look like. This is where they came out of the box, but they even admittedly said, well, we don’t -- this is our initial -- our opening AMC. But we watch those markets very closely. We're not really seeing much impact. But I would tell you that it probably also -- as it relates to that, it's probably more impactful on the coasts; because the price of the ticket is so much higher, and that was the same thing that seems to happen that movie pass. On the coasts, we think that there was a much larger impact than in our markets. But all that being said, we are looking forward and saying what is subscription going to look like. And we're talking to our studio partners and saying, we need to experiment and trying to figure what that model does look like. And I could sit here for an hour and give you 19 different variations of what a subscription model might look like, maybe not as across the board broad is all you can need any movie you want to see anytime, but you could imagine lots of different flavors of that. And we want to be upfront of that and be thinking about what will be the successful model. I'm not sure that is yet. I don't think anybody is proven it out yet.

Okay. One last one on net. Does the internet intercontinental relationship lapse or do you terminate that relationship in order to move on to the next variation?

We would end of the contract.

Thank you. [Operator Instructions] Our next question comes from the line of Brian Rafn with Morgan Dempsey Capital Management. Your line is now open.

Hey, when you coming up -- you talked a little bit about the movie slate for the holidays. When you have Dr. Seuss' The Grinch; and The Nutcracker and the Four Realms, and I'm thinking in the past that L for The Polar Express, do those China movies in the holiday season -- are they maybe not blockbusters like a Star Wars, but does that help the movie slate?

Oh, absolutely. And look, those are typical November pictures. If you get go back over the years and look at the slate that seems to be the time period that they like to release kind of pictures you're describing. And I think, their thought process, I mean I can’t give their answers that they’re getting people ready for the season. And I think they’re hoping that they have some good legs as well that takes them beyond Thanksgiving and into the holiday season. And so those typically perform well. I mean they still got deliver the goods, right, when we still have the good. But those types of films typically do well.

Okay. Now if you guys -- you’re kind of developing your second BistroPlex at Brookfield Square. Is that a concept guys be it geography demographic, psychographic or whatever, that can be rollout across your circuit? Or their unique characteristics in your whole market Milwaukee that might prevent that?

Brian, the concept of the enhanced food and beverage is really one that's proliferating throughout the industry. Now I will tell you that we are among the leaders in that, and it’s been really interesting to see that. But so the idea of dine-in theater, those exists around the country. That is not just unique to our markets. So the answer to your question is yes, that’s got application throughout the country. But I will tell you that if you think about what’s been going on in our theaters, just what we call a traditional theater. With our enhanced food and beverage, the line between a dine-in theater and a traditional theater is blowing at least in our circuit. And we’re testing lots of new ways to deliver the food, blowing that line even further. Because we believe that in order to have that competitive advantage over, we believe our true complication, which is somebody's couch. We have to give people a reason to get off the couch. And our team has been great at that. Rondo and that team has done a phenomenal job of getting people to move off the couch, but that’s from making investments in recliners and PLS, and enhanced food and beverage. So BistroPlex is an extension of that, but it’s not midterm market.

Yes. I don’t know, I think your food is still the best in the country. But I debate this front that. Let me ask you from the standpoint, with the Brookfield Square One, I think, it was deal serious property, I think, General Woods, at the end of the second world, he ended up buying all the real estate under a lot of his serious thought. Were you guys able to acquire that real estate? Or is that part of the larger Brookfield Square ownership?

In this particular transaction, we will be leasing the real estate.

Got you. Okay. You mentioned two, a lot of times with movies like having more children’s pictures or more adult pictures of better food and beverage. With Incredibles 3 the Transylvania picture, do you see any little pickup in candy and consensus and that type of thing for, especially the summer part more younger children’s pictures then versus the loss on the food and beverage?

So you’re right. I mean that, and historically, if we go in our time machine and go back five years, that’s what we’ve been talking about. We’ve been talking about the fact that pictures like Incredibles 2 and these family pictures, was helpful for our concession business. And then that still is the case. But now that the enhanced food and beverages sites a large, obviously, higher prices in general, and higher average ticket for some of the enhanced food and beverage. So that’s a larger part of our mix. That’s why we’re now highlighting that. It’s an interesting dynamic where we kind of -- they’re actually kind of competitive competition with each other where when the film mix goes more towards adult's type stuff. We see probably a quicker or higher increase on our average concessions per person; I use the word concessions broadly. Because of that enhanced food and beverage, and just the opposite when we now have the kids and family pictures, we see a nice increase, we do well at the concession stand, but we just don't do as well at the -- having not a lot of kids are at the bar.

They actually define ways for anybody -- because a win-win for that right. Now it's historically, it's great to get into the higher -- to get the higher margin concession that aims the kids, historically, it was. But now, we're actually -- but when it's not a kid movie to sell higher margin beverages. And so we see a little bit of trade off, obviously, with depending on the movie mix.

Yes, I got you. Another, one more kind of a strategic more of a macro questions, with Jim talked about maybe new builds contiguous. If you looked at all of the technology in a new multiplex that you have today, the ultra screens, the dream loungers, the stadium seating, all of your vast array of real sizzle and pay five lounges, what kind of - if you went backstage 15 years, 20 years ago versus say today, how much is the incremental construction cost up? And I know you don't have a hard figure but. Might it be 30% more expensive today to build a 12 auditorium multiplex than maybe it was 20 years ago, and you take out, certainly inflation for materials in that, but just with the tremendous technology that you have today?

I look at, obviously, construction costs are higher today than they were then, but there's -- and there is certainly been tradeoffs that we've made. We don't build as many screens as we used to build. So the complexes are as large as they were 20 years ago, we are building much larger complexes. But we also, and we don't need to build as high as stadiums that actually advantageous to have a lower stadium build in a -- with recliners just because of the screen angle -- because of the angle. So I don't have those numbers up.

Yes, I know, I just kind of kick. And now just ask one more. With the St. Louis market Wehrenberg, is there a possibility of doing a flagship down there like majestic or do they have something similar that? Or is that flagship construction that you have that would be another one on Sun Prairie? Is that kind of episodic theater mix?

We actually -- we have one Ronnies, which is in St. Louis.

Okay.

Is a -- is what we consider in this flagship there.

Okay. Thanks guys.

[Indiscernible]

Okay. Thank you.

Thanks, Brian.

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.

Well, thanks everybody for joining us. I really appreciate it. We look forward to talking to you once again in February when we release our fiscal 2018 fourth quarter and year-end results. Until then, thank you and have a great day.

That concludes today's call. You may now disconnect at any time.