The Marcus Corporation (MCS) Q1 2019 Earnings Report, Transcript and Summary

Good morning everyone, and welcome to The Marcus Corporation First Quarter Earnings Conference Call. My name is Skyler, and I'll 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.

Thank you, and welcome everybody to our fiscal 2019 first quarter conference call. As you know, as usual I do 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; expectations about the future trends in the business group and leisure travel industry and in our markets; expectations and plans regarding growth in the number and type of our properties and facilities; expectations regarding various non-operating line items on our earnings statement; and our expectations regarding future capital expenditures. Of course, our actual results could differ materially from those projected or suggested by our forward-looking statements. Factors, risks and uncertainties which could impact our ability to achieve our expectations are included in the Risk Factors section of our 10-K and 10-Q filings, which can be obtained from the SEC or the Company. We'll also post all Regulation G disclosures when applicable on our website at www.marcuscorp.com. So with that, once again, behind us, let's talk about our fiscal 2019 first quarter. It's no secret that the period the industry was facing a challenging comp this quarter and with all of the non-recurring items we had going on during the period, I suspect it didn't come as a surprise to anyone that our reported results were down this quarter compared to last year. Thanks to the Movie Tavern acquisition, we once again reported record revenues for both our theatre division and the company as a whole, but that's generally where the good news ended at least on the macro level. There were in fact some very good things that happened during our fiscal 2019 first quarter on a micro level, and Greg will address some of those during his comments. Before we get to Greg's comments in the quarter though, I'm going to take you through some of the detail behind the numbers both on a consolidated basis and for each division. There's actually is not much to say about the line items below operating income, investment income was up over last year because of increases in the value of marketable securities held by the company, and interest expense decreased compared to last year due to our reduced borrowing levels compared to the first quarter of fiscal 2018, partially offset by a slightly higher average interest rate during the quarter. None of the other remaining other income and loss items really changed very much. Income taxes declined for two reasons. First off, and the most obvious, is that we had less pretax income this quarter compared to last year. Secondly, we also benefited this quarter from excess tax benefits on share-based compensation and non-recurring adjustments specific to the quarter, and since our tax expense dollar amount was small to begin with, these items specific to the quarter had the impact of reducing our first quarter effective income tax rate, adjusted for losses, from non-controlling interests to a very low 0.7%, significantly lower than last year's 25.8% first quarter effective income tax rate. Now overall, we continue to anticipate that our effective income tax rate for the remaining quarters of fiscal 2019 will be in that 24%, 26% range, depending upon the amount of excess tax benefits and share-based compensation once again that we recognize in any given quarter. Shifting gears away from the earnings statement, just for a moment. Our total cash capital expenditures during the first quarter of fiscal 2019 totaled approximately $44 million compared to approximately $16 million last year. Now approximately $36 million of that total spend in the first quarter was incurred in our theatre division, with approximately $30 million of that consisting of the cash component of the Movie Tavern purchase price. The remaining approximately $6 million related to our continuing DreamLounger seating project and premium large format conversions that we did reference in our press release. The approximately $8 million of capital expenditures in our Hotels & Resorts division were primarily related to the two major renovation projects currently under way at the Saint Kate and the Hilton Madison, plus various normal maintenance projects. At this very early stage of our fiscal year, I had no reason to make any major adjustments to our previous estimate for capital expenditures in fiscal 2019. We gave an amount of approximately $105 million to $125 million, including the Movie Tavern cash component that I just talked about, recognizing that as we pointed out in our recent 10-K filing, the timing of several of our planned expenditures are still just estimates at this time. We're still finalizing the scope and timing of many of these projects for our two divisions, and we anticipate proceeding with many of the projects as the year unfolds, but the actual timing of the various projects currently under way or proposed certainly will impact our final capital expenditures number, as well as any currently unidentified projects or acquisitions that could develop during our fiscal year. Historically, the last few years, the dollar amount has ultimately ended up being a little less than what we've been projecting just because of the timing issues. And staying at the consolidated level for one more minute, let me remind you that we adopted another major new accounting standard during the fiscal 2019 first quarter, this time related to lease accounting. Now I'm happy to tell you this new standard did not have a material impact at all on our consolidated statement of net earnings or cash flow. However, as you take a close look at our balance sheet, you'll see that we did added significant new asset and liability. You’ll now see new operating lease right-of-use assets, a line item of over $220 million on our balance sheet, along with a corresponding operating lease obligation liability for a fairly similar amount. Now those of you who have been following us for some time know that we always have considered leases to be just another form of debt. It's just that the accounting rules have finally caught up with us. So we're okay with that. As others started reporting same way, we think it will once again point out that our balance sheet is the strongest in the industry, something we place a great deal of value on. Now, I'd like to provide some financial comments on our operations for the first quarter, beginning with Theatres. As you know, we completed the acquisition of the Movie Tavern theatres on February 1. Thus, throughout this year, in order to make some of our comparisons to last year more meaningful, we will try to distinguish how our comparable legacy theatres performed versus the prior year in conjunction with our overall results. So with that in mind, while our reported admission revenues decreased 6.4% and our concession revenues increased 13.9% during the first quarter compared to last year. When you exclude Movie Tavern from the numbers, you'll find that our comparable admission and concession revenues decreased 17.8% for admission, and 12.2%, respectively for the concession revenues, due to a much weaker film slate compared to the prior year. Now according to data received from Rentrak and compiled by us to evaluate our fiscal 2019 first quarter results, the United States box office receipts decreased 16.5% during the fiscal 2019 first quarter, after you adjust for newbuilds for the top 10 circuits. As a result, we believe our admission revenues for comparable theatres during the first quarter of fiscal 2019 slightly underperformed the industry average. Greg will dissect our first quarter performance versus the industry in greater detail during his prepared remarks, as weather and film mix likely did have an unfavorable impact on our performance versus the national numbers this particular quarter. Now the first quarter theatre decrease in our admission revenues at our comparable theatres was attributable to a decrease in attendance at our theatres, as well as a decrease in our average admission price at our comparable theatres of 1.4%. Our average admission price likely was negatively impacted from a change in the film mix compared to last year. Last year's top film Black Panther performed extremely well in the premium large format screens, with a corresponding price premium favorably impacting our average ticket price during the first quarter of fiscal 2018. Conversely, two of our top five films this year, How to Train Your Dragon, and The Lego Movie 2 were animated films that generally appeal to a younger audience, resulting in a higher percentage of lower-priced children's tickets sold, negatively impacting our average ticket price during the first quarter of fiscal 2019 compared to the prior year, which, by the way, last year, none of our top five films were animated films. Conversely, we're pleased to report an increase in our average concession and food and beverage revenues per person at our comparable theatres of 5.4% for the first quarter, and our investments in the non-traditional food and beverage outlets continue to contribute to those higher per capita spending. And if you want to add Movie Tavern to the numbers, I'll tell you that our average concession in food and beverage revenues per person increased by over 22% this quarter. Now theatre, other revenues this quarter increased by about $500,000 compared to last year, and the increase was entirely due to Internet surcharge ticketing fees and pre-show advertising from our new Movie Tavern locations. Our theatre division operating margin also declined in the first quarter of fiscal 2019 compared to the first quarter of 2018, due in part to the inclusion of two months of Movie Tavern results. As we've shared with you, the Movie Tavern theatres will have a lower operating margin than our legacy theatres due to the fact that all 22 acquired theatres are leased rather than owned and rent expenses are generally significantly higher than depreciation expense. In addition, the fact that a larger portion of Movie Tavern revenues are derived from the sale of in-theatre food and beverage will also contribute to lower operating margins, as food and labor costs are generally higher for those items compared to traditional concession items. Of course, as you've heard us say before, we take dollars to the banks, not percentages. Lastly, our press release and attached table that reconciles net earnings to adjusted net earnings, highlight to you the significant impact of non-recurring acquisition and pre-opening expenses relating to Movie Tavern had on our reported results, approximately $1.8 million or $0.04 per share in fact. And while the dollars net aren't – well some other dollars aren't in that same range, I will also note that we believe the unusually colder and snowier weather in the Midwest during the first quarter of fiscal 2019 added approximately $250,000 of incremental snow removal and heating costs to our reported results, certainly not helpful during the time when the film slate was challenged. Shifting to our Hotels & Resorts division, just like our theatre division, will have a comparability problem during at least the first two quarters of fiscal 2019 due to the fact that we closed the InterContinental Milwaukee hotel after the first week of January in order to begin the major renovation that will transform the hotel into Saint Kate-The Arts Hotel. And we also began a major renovation of the Hilton Madison hotel around the same time. On its face, we reported reduced hotel revenues and increased operating loss during the first quarter of 2019 compared to last year. But when you exclude the temporarily closed former InterContinental hotel from our results, just take that hotel out, you'll find that our comparable hotel revenues actually increased 4.5% and our operating loss declined by approximately $700,000 or 32% compared to the prior year. As the table in our press release highlights, non-recurring and pre-operating expenses at this closed hotel negatively impacted our reported results by approximately $1.2 million or about $0.03 per share. We're likely to report an equal or possibly slightly greater amount of non-recurring and pre-opening expenses during the second quarter as well. The biggest contributors to our same-store increases in revenues were increased food and beverage revenues and increased management fees. Our total revenue per available room, the RevPAR, for our seven opened and owned hotels was down 1.9% during the first quarter compared to last year. But that number is pretty deceptive because, as I mentioned, we also had one hotel, the Hilton Madison, significantly impacted during the quarter due to a major renovation currently under way. When you strip that hotel out, our true comparable hotels actually reported an increase in RevPAR of 2.6% this quarter. Not bad during what is historically our weakest period in hotelier. As we've noted in the past, our RevPAR performance did vary by market and type of property. Breaking out the numbers for the seven that were open, more specifically, our fiscal 2019 first quarter overall RevPAR decrease was entirely due to an overall occupancy rate decrease of 1.3 percentage points, partially offset by 0.1% increase in our average daily rates or ADR. Now 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 U.S. experienced increase in RevPAR of 1.2% during the fiscal 2019 first quarter. So our numbers without the Hilton Madison actually compare quite favorably to that number. 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, our industry expectations for 2019 as a whole have generally been pretty positive. Expectations specifically for this first quarter and 2019 were pretty low. And then, fortunately, those expectations were well-founded. We all knew we were going up against the number one movie of 2018, Black Panther, but you're always hopeful that a few movies will break through and lessen the impact. We had a couple of movies like that in March, and Captain Marvel and Us, but clearly it was not enough to dig us out of the hole January and February put us in. February attendance declines were expected because of Black Panther last year, and in January, we just didn't have the stronghold over films from the 2018 holiday season, like we did last year, with films such as Star Wars, Jumanji, and The Greatest Showman. As Doug mentioned, during the first quarter of fiscal 2019, colder and snowier weather in the Midwest likely negatively impacted the performance of our comparable theatres compared to the U.S. averages, and with the majority of our renovations now completed for our legacy circuit, our relative performance in any given quarter will likely be partially dependent upon film mix, weather, the competitive landscape in our markets, and the impact of local sporting events. As for film mix, we believe it likely worked against us in January and March, when we outperformed on the most popular films last year, and maybe slightly for us in February, when we slightly underperformed on the big film last year. As we look ahead, the film mix for the remaining three quarters of the fiscal year, we certainly are hopeful that we'll have our share of films that our legacy circuit has the potential to perform quite well with, particularly with the strong upcoming family and animated film line up. Of course, now that we've added Movie Tavern to our circuit, we also look forward to potentially benefiting from being in nine new states, different regions in the country with a more diverse demographic attendance. For example, I will tell you that the top five films for our Movie Tavern theatres during the first quarter will be different from the top five films we reported overall in our press release. The challenge we face from the comparable film slate is weaker is one we've discussed before on these calls, something we referred to as negative leverage. Due to the significant investments, we and others in this business have made in our theatres over the last five years, we have higher fixed costs such as rent, depreciation and amortization, and a certain percentage of labor expenses, due in part to our increased number of new food and beverage outlets in our theatres. As a result, it's more difficult to remove costs when attendance declines like it did in the first quarter of fiscal 2019, and operating margins are more likely to decline when that happens. Of course, conversely, during periods with a strong film slate, operating margins potentially increased as that same leverage benefits our theatre division. Our ongoing challenge is to find the best ways to address slower periods like this. This requires a disciplined approach to managing the costs that are variable such as certain percentages of labor. I know Rolando and his team are looking for ways to refine our cost model in order to maximize our operating efficiency. We all know this is a business that over a long period of time is remarkably consistent. But the short stretches can have a great deal of variability. It's our job to take maximum advantage of the really busy times at the box office and minimize to the best of our ability the impact of the slower times. Using a well-known sports analogy, I'm a big believer that you need to be able to play both offense and defense to win a championship. Fortunately, we've got a great team in our theatre division, I'm confident that they are up to the challenge. And so while I will always share with you the challenges we face in both our businesses, I also want to make sure you're aware of the really good things that happened during the past quarter as well. The logical place to start is with Movie Tavern. We are pleased with the Movie Tavern performance to date and the integration is progressing on schedule. We immediately introduced our popular $5 Tuesday movie program at these locations, as well as other promotional and marketing initiatives. Although the Movie Tavern theatres were affected by the weaker film slate during the fiscal 2019 first quarter, as were our other locations, data available to us for our prior year performance of the Movie Tavern theatres indicates that these theatres outperformed the national box office, on a relative basis during March, an indication that our programs are already having an impact on their performance. Building on that, we plan to launch our Magical Movie Rewards loyalty program at all Movie Tavern locations in the second quarter. As our press release notes, we also are making capital investments in these theatres. We finished the addition of DreamLounger recliner sitting in three Movie Tavern theatres that the previous owner had begun and we also have converted 10 Movie Tavern auditoriums into our proprietary SuperScreen DLX premium large format concept, just in time for the next Avengers film. We have identified additional screens that are candidates for conversion during the remainder of the year. As we look ahead, although April started off slowly in part due to Easter being late this year, the summer season starts in earnest tonight with the opening shows of Avengers: End Game. Based upon presale numbers, this movie will be huge, and we're hopeful that with a long list of great titles ahead of us, many of which we highlighted in our press release, we have a lot to look forward to during the rest of 2019. In anticipation of a busy summer season, I will share with you that at the beginning of our second quarter, we implemented selected ticket price increases at certain locations in order to reflect the competitive market in which these theatres operate. In addition, we enacted a modest price increase for our proprietary PLF screens and converted our admission ticket pricing to a sales tax additive, or tax-on-top model, consistent with the majority of our competitors. These modest ticket price increases will likely have a favorable impact on our average ticket price in future periods. With that let's move on to our other division Hotels & Resorts. You've seen 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 months and the first quarter of fiscal 2019 was no exception. But as Doug shared with you, after taking out the expected negative impact of our closed hotel, we successfully increased revenues and substantially reduced our operating loss during the quarter compared to the prior year. It was another very good effort by our top-notch sales and management teams in both our corporate offices and at each of our owned and managed hotels. Group business decreased slightly overall, but two of our three largest properties experienced meaningful increases in group business during the fiscal 2019 first quarter compared to the prior-year period, contributing to our increased RevPAR performance for our six most comparable company-owned hotels. The increase in group business at these two properties, plus a significant increase in group business at one of the condominium hotels that we manage, where all of the food and beverage revenues are retained by us, also accounted for the majority of the increase in food and beverage revenues that Doug referenced to earlier in his remarks. As increased group business often leads to increased banquet and catering revenues. Looking to future periods, our company-owned hotels experienced an increase in group bookings during the first quarter of fiscal 2019 compared to the same period last year. At this point in time, our group room revenue bookings for future periods in fiscal 2019, commonly referred to in the hotels and resorts industry as group pace, is running ahead of our group room revenue bookings for future periods last year at this time. Banquet and catering revenue pace for fiscal 2019 is also currently ahead of where we were last year at the same time. Meanwhile, progress on the Saint Kate renovation and the conversion continues. At this point, it appears we are on schedule to open on or about June 1. The plans for this unique immersive Arts Hotel are really coming together, and we're excited to get open and see how our guests respond. This is not only a first for Milwaukee, but we believe a first of its kind, period, as we bring together not only the visual arts, but also the performing arts and the location ideally suited for this special combination. And speaking of Milwaukee, we obviously are thrilled with the news that Democratic National Committee has chosen our hometown as the site for their 2020 convention. The decision highlights that we have long known, that Milwaukee is an amazing place to live, visit and work. From our perspective, this news has the potential to not just have a positive impact on next year's results. More importantly, it puts Milwaukee in the national spotlight with the potential to have a long-lasting impact on future groups’ view of Milwaukee, as a top-tier destination for their events as well. From a growth perspective, 2019 is off to a good start with the addition of another new management contract as described in our press release. We're very pleased to add Hyatt to our list of brands we manage. We'll 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. And finally, reinvesting in our existing hotels will always be an important part of our success as well. The majority of our reinvestment in our Hilton Madison hotel will be completed during the second quarter, and the property is looking fabulous. Before we open the call for questions, usually Doug has to share all the numbers, but there's one more special number I want to share with you. With the addition of Movie Tavern and the Hyatt Regency Schaumburg, The Marcus Corporation now has over 10,000 dedicated associates, who take to heart each and every day my grandfather's motto of people pleasing people, 10,000, wow. I don't think my grandfather could have ever imagined reaching that milestone over 83 years ago when he opened that first movie theatre in Ripon, Wisconsin. The best advice my father has given me was to get in front of a good brain. Well, it truly is an honor and privilege to be associated with each and every one of our 10,000 associates. And I want to publicly thank them for all they do each and every day. With that, at this time, Doug and I would be happy to open the call for any questions you may have.

[Operator Instructions] Our first question comes from Jim Goss with Barrington Research. Your line is now open.

Thank you. Good morning.

Good morning, Jim.

Good morning. I was wondering about the impact of the DreamLounger upgrades in Movie Tavern, expected or achieved already, and you know versus the traditional footprint, are in Wehrenberg. Is this a different sort of thing or is it consistent with the other experience?

We're too new to tell you right this second Jim. Just because, frankly they're just finishing up, we're seeing some good results though, in the...

As a reminder Jim, when we bought it, I believe, I hope I got my numbers correct here. I believe 12 of the 22 theatres already had the recliners. We just finished up three, and literally just finished them up. I mean, I think couple of them finished up in early April, and there's a couple more potential to do. So we're just really just now trying to evaluate how if it reacts any differently in theatres like this versus other type theatres.

Okay. I'm curious too of the motivation for the implications of introducing the Movie Tavern brand into Milwaukee?

The implications, you know, I mean, look.

Yes. Are you thinking of expanding it into the existing markets or are you just – I'm just sort of wondering exactly how broadly like – will it be treated as a separate brand within the Marcus development?

Well, it's clearly a separate brand. I mean that's for sure, we want to maintain its brand identity because there's brand equity. We call it Movie Tavern by Marcus. So we modified it a little bit. I guess this is what I'd say luck is when opportunity meets preparation. We just happen to be doing this. We were good. We were – because the movement is the Movie Tavern is – our acquisition of Movie Tavern is the actualization of what's been going on in our business of this movement of food and beverage. And so we were already planning a theatre here. As you know in Brookfield to do this, and so when – as it just happened the timing worked out. And we said what, let's – there should be a Movie Tavern. Let's use the brand that we have.

Okay. And on the hotel side, the Hyatt in Schaumburg, are you getting an equity? Are you contributing an equity sliver in that property, and are there any things you can talk about in terms of financial terms? And also are there pricing adjustments for Saint Kate and for the Madison Hilton with those renovations?

So your first question Jim, it's a pure management contract in this case here. So there's no equity involvement in the Hyatt Regency Schaumburg. So if you read the release, it's a fairly large property right, 460 some rooms, I believe. And so from that perspective, certainly the management fees, it's a larger property, so it will be a little on the higher-end of overall management fees, but as you know, those doesn't – even on the higher-end those dollars aren't huge. It's just nice incremental dollars that you add to that. Theoretically, if you don't have to add too much to your infrastructure, it can be a nice way to leverage the infrastructure that you have. So that's the answer to the Hyatt question. I will have Greg address Saint Kate, I guess you said.

It's Madison Hilton.

Saint Kate and Madison Hilton, since you are renovating both?

On the Hyatt thing, I will say that for us to, we want to be thoughtful about how we invest our intellectual property, which is really what we're doing when we take on a management contract like this. But for us, perfect fit. It really is – it's close to home. So supervision is relatively easier. And it sits right in the markets that we know very well and so we think we can add value in a real special way to the property. So for us it makes lot of sense. Back to your question about the Saint Kate and Madison Hilton, yes, let me just finish it there. But first of all, Madison Hilton is a more straightforward renovation that is one where, we knew it was time and the market is – it reflects the way to raising pricing there and we expect to take advantage of that. On the Saint Kate, this is going to be a completely new product. Its different product from what was it, what the InterCon was. And we expect to get compensated for that and we think it's going to be special enough to drive a higher rate. The challenge for that hotel we'll be just establishing itself because we're coming out of the box as an independent, but there's no other market I'd rather do that in other than Milwaukee because it's our home base again leveraging our strength. We know this market extremely well. So I see that as a very good opportunity for us.

Okay. Thanks very much.

[Operator Instructions] Our next question comes from Mike Hickey with The Benchmark Company. Your line is now open.

Hey, Greg. Hey, Doug. Hopefully, you guys are good. Thanks for taking my questions. I've got three. I guess the first one. Just curious on subscription, obviously sort of the trend continues. One of your peers is getting pretty considerable traction in terms of drawing moviegoers to a subscription plan that also looks to be profitable. But just sort of curious, your thoughts – your updated thoughts, I guess Greg on how you see maybe the medium to long-term potentially subscription plans? And also I guess more specifically where AMC has perhaps close to one of your theatres if you're seeing any sort of share impact on your attendance, if you're losing the attendance to AMC because of their subscription plan. I've two follow-ups. Thanks.

We are looking at that extremely closely Mike. As you can imagine, I think, the advantage to – the first question is, what is subscription going to look like or what are our thoughts on it? I mean we are looking at multiple different versions of the model to try and figure out where it's going to go and how it's going to work. I will tell you what we're seeing with AMC is in our markets. We are seeing big share shifts that we can see. They're certainly not a trend. Individual theatres you can see some share shift one way or the other, but it works in both directions. So there's not a big noticeable trend. Now that being said, I think it's a much more compelling product on the coast where the pricing is a lot higher. And so maybe for us, it's insulating us. So we may not be a good proxy to see how AMC is doing. And since they don't – they're not coming over and sharing all their internal numbers with me. I can't tell you for sure how it's going. I can only say what we're seeing here with our theatres and so, but that being said it's an important thing for us to look at and we will of course figure out the best way to actualize on some sort of program.

Okay. Thanks, Greg. It's helpful.

By the way, the one thing we always say, Mike is, as you look at we have a subscription program it's called Tuesday and you get free popcorn. So it's a pretty good price.

Yes, okay. I guess the second one thinking about Disney, Fox combo and thinking about sort of the rise of all these new streaming services, including Disney's. Just curious how you think that could impact your windows, your film windows moving forward. There's sort of a feeling I think coming out of cinema kind of perhaps there will be a little bit more flex from the traditional 90-day window as these others sort of look to add content to grab there – to sort of grow the sub base on the streaming service. So your thoughts there would be really helpful. Thanks.

We don't comment on specific windows other than to say that. I would say, look at it's a window is extremely important to what we believe to maintain the value that that exclusivity, the windows exclusivity, and that is extremely important to maintaining the theatre business. And as we all know, last year it was nearly a $12 billion North American business. And I think the studios have to – and want to begin have to be very careful with and I know their goal is to maximize the profitability of their content across a vast spectrum of outlets, but they don't want to – but they have to – so they want to maintain the profitability of the theatrical experience and for us as we all know it's a high fixed cost business, so those lost customers are very profitable for us and for them. So we have to remain vigilant in our belief that the window is important and we continue to work with the studios with that as a foundation.

Thanks, Greg. Last question from me, for Doug. When you look at on the theatre side, your admission and concession gross margins, for last two years they've been pretty steady, admission around 22%, concession around 72%, that's come in a bit, I think as you expanded your menu. So when you think about the Movie Tavern contribution, obviously you've noted the overall margin is a bit lower than what you have in your legacy circuit. But just if circuit, but just if you can give us any sort of view on how impactful you think it would be on those two segments in terms of so that your longer-term margins moving forward?

No, absolutely. So, on those two particular ones, which are – where the bulk of the costs are, talking about maybe the easy ones, first which is the kind of the food and beverage, the concessions line in that margin, and you're right. Historically, that has been running, if you view it from a margin perspective, that line and then using the concession revenues above, it's been running what you said, maybe 70%, 72% give or take, and that was a mix obviously, as we probably had a higher percentage of that probably, we have a higher percentage of those kind of non-traditional food and beverage outlets than probably any other theatre chain out there. So that was probably already higher than most or lower margin than most if you want to say it that way. I think if it in the inverse with the cost of sales. By adding Movie Tavern, the kind of the numbers you're now seeing in this quarter and of course we only had it for two of the three months, I do think somewhat are starting to reflect what you're going to see in a going forward basis, in that that will be that margin in those terms will be in the 60s, because of the mix of the business, right? Now, as I shared with you, our average concession per capita is on an inclusive basis, we're not disclosing what individually is for Movie Tavern versus our – of course our legacy theatres, but that number increased 22%. So obviously, the dollars increased and it kind of gets matched because of the quarter was so weak from an attendance perspective. But that's a pretty significant increase in our overall per capita number, by adding Movie Tavern. So it's again, we're working right. This will bring more dollars to the bottom line at a little less margin. On the theatre side, on the theatre operations side, what you're looking at here is this is what Greg was talking about, I mean that number has historically, there's been some consistency from quarter-to-quarter with the inconsistency, the variability is typically being the – how busy we are, right? Because, as Greg indicated, this goes to that whole leverage issue and this quarter was pretty weak from that perspective, right? We had a pretty high cost of sales or pretty low margin on that particular kind of combination of admission revenues and theatre operation expenses. And so that's really what Greg was addressing in his comments is that, can we do better? Yes, we think we can do better with that. Is it going to always be higher in – higher cost of sales, lower margin in a period like this when box office is down 16% 17%? Yes, because there's a higher fixed component of those costs. The biggest change with Movie Tavern will relate to that food and beverage and concessions line, not so much in the theatre operations line.

Okay. And then, I guess do you have the contribution in the quarter from Movie Tavern?

Not. Yes, I mean that's not a number that we're going to disclose at this point in time, it could be that when we have a larger sample size, we'll address that. But for two months, we're not going to provide any specific numbers at this time, Mike.

Okay, all right. Thanks, guys. Best of luck. Have a good weekend. It should be strong.

It should be.

Yes.

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

Well, thank you everybody for joining us once again today. As we just kind of concluded those last question section, we're looking forward to what should be an outstanding weekend as I think you have probably read or if you haven't read, advance sales for Avengers: Endgame are breaking all records, it's broken all the records we have for any pre-sales for anything. So we're looking at what should be a really good weekend and a start for the summer season for us. Maybe we'll see some of you in less than two weeks at our upcoming Annual Meeting on Tuesday, May 7, that will be held at the Majestic Cinema in Brookfield, Wisconsin. For those of you can't attend, we certainly will be webcasting the meeting once again as well. We also look forward to talking to you once again in July, when we release our fiscal 2019 second quarter results. Until then, thanks and have a really great day.

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