The Marcus Corporation (MCS) Q4 2020 Earnings Report, Transcript and Summary

Good morning, everyone, and welcome to The Marcus Corporation Fourth Quarter Earnings Conference Call. My name is Liz, and I will be your operator for today. At this time, all participants are in 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.

Thanks, Liz, and good morning, everybody. Welcome to our fiscal 2020 fourth quarter and year-end conference call. Please bear with me as, once again, as usual, I need to begin by stating that we plan on making a number of forward-looking statements on our call today, all of which we intend to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act. Our forward-looking statements may generally be identified by our use of words such as we believe, anticipate, expect, or words of similar import. Our forward-looking statements are subject to certain risks and uncertainties, which may cause our actual results to differ materially from those expected, including, but not limited, to the adverse effects of the COVID-19 pandemic on our theatres and hotels and resorts businesses, results of operations, liquidity, cash flows, financial condition and access to credit markets and ability to service our existing and future indebtedness, and the duration of the COVID-19 pandemic and related government restrictions, social distancing requirements and the level of customer demand following the relaxation of such requirements. Our forward-looking statements are based upon our assumptions, which are based only upon currently available information, including assumptions about our ability to manage difficulties associated with or related to the COVID-19 pandemic. The assumption that our theatre closures, hotel closures and restaurant closures are not expected to be permanent or to reoccur, and our assumption about the release of new movies and the temporary and long-term effects of the COVID-19 pandemic on our business. Listeners are cautioned not to place undue reliance on our forward-looking statements. And additional factors, risks and uncertainties, which could impact our ability to achieve our expectations are identified in our forward-looking statements are included under the heading Forward-Looking Statements in the press release that we issued this morning, announcing our fiscal 2020 fourth quarter results and in the Risk Factors section of our Form 10-K, which we're filing today which you can access on -- or we're actually going to file it, I believe on tomorrow, so I apologize. We'll be filing our 10-K tomorrow, which we can access on the SEC's website. We'll also post all Regulation G disclosures when applicable on our website at www.marcuscorp.com. With that behind us, let's begin. Our call will follow our usual format. Well, I'll start by spending a few minutes briefly sharing a few numbers from our quarter and year with you, and then I'll discuss our balance sheet and liquidity. I'll then turn the call over to Greg, who will focus his prepared remarks on where our businesses are today and what we're seeing for the near-term and longer future. We'll then open the call up for questions. So you've seen the numbers. Excluding some non-recurring items that I will address, our fourth quarter was pretty much as expected. Our theatre results improved compared to the third quarter, but were impacted by the limited number of new films, additional restrictions imposed in some of our markets in November and December, along with strategic decisions regarding openings and closings in our part. As a result, by the end of December, we only had 52% of our theatres open. Now as we noted in our release, with restrictions being lifted and improved operating assessments, we're back up to nearly 70% of our theatres open and operating now. Also, as expected, results from our Hotels & Resorts segment were softer than our third quarter as the weather turned in our primary Midwestern markets and leisure travel declined from summer levels. All 8 of our company-owned hotels are now open as well as all, but -- and at the end of the year, all but one of our managed properties was opened as well. As the press release notes, we did once again have several non-recurring items this quarter directly related to the impact of the COVID-19 pandemic. We incurred additional property closure and subsequent reopening expenses, with the majority of the expenses in our theatre division. We also incurred impairment charges this quarter related to several theatre properties and our trade name intangible asset. Conversely, we had several non-recurring items this quarter that favorably impacted our reported results and our liquidity. We were awarded multiple state government grants totaling approximately $7 million during the fourth quarter. We also received net insurance proceeds related to COVID-related insurance claims. And just to find all these numbers, we did include a non-GAAP reconciliation of our adjusted net loss and adjusted EBITDA and with our press release in order to show you the impact these non-recurring items had on our reported results. Now there also were a couple of items worth noting in our numbers below operating income. As you'd expect, our interest expense increased during both our fourth quarter and fiscal year due to increased borrowings and a higher average interest rate. It's very important to note, however, that $1.5 million during the fourth quarter and $2.2 million for the full year of our reported interest expense represented non-cash amortization of debt issuance costs and debt discount on our convertible notes. I also want to point out that beginning in fiscal 2021, the accounting for our convertible notes does change. Beginning January 1, we'll show the entire $100 million -- $100.1 million of convertible notes as debt. There will not be a portion allocated to equity. As such, our reported interest expense in future quarters will not have any non-cash debt discount. Now in the fourth quarter, approximately $1 million of that total $1.5 million non-cash interest expense that I just talked about was related to the debt discount on convertible notes. And that will go away in future quarters. Also during the fourth quarter, our expense -- other expense was partially offset by other income of approximately $1.4 million related to the receipt of Movie Tavern acquisition escrow funds that will return to us in conjunction with a negotiated early release of remaining escrow funds to the seller. And finally, you'll note that we reported net gains on disposition of assets during the fourth quarter. This net gain was due primarily to the sale of 2 surplus land parcels and one theatre during the period. Now our effective income tax rate was 33.8% during the quarter and 36.2% for the year, and both periods benefited from previously described adjustments resulting from several accounting method changes and NOL carryback provisions arising out of the CARES Act. Excluding adjustments -- favorable adjustments to income tax benefit, our effective income tax rate during fiscal 2020 was 26%. Now we anticipate that our effective income tax rate for 2021 be in that 24% to 26% range once again. Of course, our actual fiscal 2021 effective income tax rate may be different depending on actual facts and circumstances. Shifting gears away from the earnings statement just for a moment, our total cash capital expenditures during fiscal 2020 totaled approximately $21 million compared to original pre-COVID projected expenditures for the year of $65 million to $85 million and approximately $94 million last year, which included the cash component of the Movie Tavern acquisition. Most of this year's dollars were spent in our theatre division on several projects we started during the first quarter. We only spent $2.7 million during the fourth quarter. As we look towards capital expenditures for fiscal 2021, we're currently estimating that our fiscal '21 capital expenditures may be in the $15 million to $25 million range. Many of our projected expenditures are back-loaded to the second half of the year, other than a recliner seating and renovation project that's currently underway at one of our theatres that we originally started prior to the pandemic and the lobby renovation with selected guestroom improvements at our Grand Geneva Resort & Spa. Let me now provide some brief financial comments on our operations for the fourth quarter and fiscal year, beginning with theatres. Total attendance was down 90% compared to the prior year fourth quarter, reflecting the large number of theatres that were closed for all our portions of the quarter and the fact that our open theatres are currently fact that our open theatres are currently only operating on Tuesdays and weekends. When you narrow that math down to just comparable attendance for theatres that were open in any given week compared to last year, comparable attendance was down approximately 87% for the quarter. Our average admission price at our comparable theatres during the weeks that we were open, decreased 13.7% during the fourth quarter but only 0.4% during fiscal 2020 compared to the prior year. Our average admission price was unfavorably impacted by the fact that we continue to only charge $5 for older library film product, and we only apply our regular pricing to new films. We're very pleased to report an increase in our average concession and food and beverage revenues per person at our comparable theatres of 10.2% for the fourth quarter and 6.8% for fiscal 2020. Our investments in non-traditional food and beverage outlets, shorter lines of the concession stand and the emphasis we're placing on encouraging guests to purchase their concessions and food and beverage ahead of time, either online or using our mobile app, is contributing to our increased per capita revenues. Shifting to our Hotels & Resorts division, our total RevPAR, revenue per available room, for our 7 comparable owned hotels decreased 70.3% during the fourth quarter and 54.1% during fiscal 2020 compared to last year's same periods. The Saint Kate was not open for the entire fourth quarter and was closed for nearly half the year last year and thus was not included in those results. Now according to data from Smith Travel Research and compiled by us in order to compare our results, our hotels were on a par with comparable upper upscale hotels throughout the United States during the fourth quarter and outperform those same-style hotels by nearly 8 percentage points for the full year. The data also indicates that our hotels outperformed competitive hotels in our markets by nearly 6 points during the fourth quarter and nearly 16 points during fiscal 2020. Now breaking out the numbers for all 7 comparable hotels more specifically, our fiscal 2020 fourth quarter overall RevPAR decrease was due to an overall occupancy rate decrease of 44.7 percentage points and a 16% decrease in our average daily rate, or ADR. Our fiscal 2020 full year RevPAR decrease was due to an overall occupancy rate decrease of 35.4 percentage points and an 11.6% decrease in our ADR. Our fourth quarter occupancy rate for the 7 comparable owned hotels was 24.4% compared to a third quarter occupancy rate for the 7 -- those same 7 hotels for the weeks that they were open of 36.6%, reflecting the reduction in leisure travel as schools reopen and colder weather arrives. Now finally, before I turn the call over to Greg, let me also briefly comment on our balance sheet and liquidity position. You may recall that we reported cash and revolving credit availability of over $218 million at the end of the third quarter. Thanks to the receipt of income tax refunds, a portion of the state government grants referenced earlier and continued strong cost controls at every level of our organization, our cash and revolving credit availability actually increased to approximately $227 million at the end of December. And fast forwarding to today, I'm pleased to tell you that 2 plus months into the new year, I'm projecting that we're going to end this week at nearly the same amount of liquidity as we had at year-end, thanks in part to the expected receipt this week of the remaining income tax refund from last year, the sale of another asset, the receipt of the remaining state grants awarded last year, and an additional state grant that was awarded in 2021 as well as improved operating metrics in both of our divisions. As we've previously reported, we anticipate an additional income tax refund of approximately $21 million later in the year after we file our 2020 tax return, with tax loss carryforwards also available to be used in future years. As you know, we also own the underlying real estate for 7 of the hotels in majority of our theatres, thereby reducing our monthly fixed lease payments. This is a significant advantage for our company relative to our peers as it keeps our monthly fixed lease payments relatively low and provide significant underlying credit support for our balance sheet. So you can do the math. Over the last 3 quarters, we've established a fairly tight range of adjusted EBITDA, reflecting being fully closed to operating under significantly reduced revenue levels. Even when you add cash interest expense to that number, after taking into consideration our expected income tax refunds in 2021, you can see why we believe we're positioned to continue to sustain our operations throughout 2021 and into fiscal 2022, even in the unlikely scenario where our properties continue to generate significantly reduced revenues throughout 2021. And of course, that liquidity position only gets exponentially stronger assuming revenues in both of our businesses continue to improve, particularly during the second half of the year as currently expected. As we'll continue to pursue additional opportunities to reinforce our liquidity in the future, which would include sales of surplus real estate and other non-core real estate. As reported in our press release, we received approximately $3 million of proceeds from the sale of real estate during the fourth quarter, and early in our fiscal 2021 first quarter, we sold another asset, further contributing to our liquidity. We also have over $4 million of carrying value in additional assets currently under contract or letter of intent to sell later in 2021. In fact, we believe we may receive total sale proceeds from real estate sales during the next 12 to 18 months, totaling approximately $10 million to $40 million, depending upon demand for the real estate in question. Finally, even after the worst year in our 85-year history, our debt-to-capitalization ratio at the end of fiscal '20 was a remarkably low at 37%, giving us a lot of flexibility in the future. With that, I'll now turn the call over to Greg.

Thanks, Doug. Before I comment on our businesses, I'm going to begin my remarks where Doug left off, discussing our balance sheet. Those of you who've been with us for a while know that in the same 85-year history Doug just referenced, a hallmark of this company has been the prudent management of our balance sheet. As such, we entered this crisis from a position of strength of the debt-to-capitalization ratio of 26%. Nearly a year later, that ratio has only increased to 37%, which is our press release notes is equal to or lower than the same ratio during 7 of our last 10 fiscal year ends. I find that remarkable. That conservative approach to our balance sheet has proved to be particularly important during this current environment. You can be confident that we will continue to prudently manage our balance sheet in the future, in order that not only will we successfully come out of this current environment, but that we will be in a position to grow and thrive once more in the years ahead. With that, I'll turn my attention to our operating businesses. We recognize that there still may be some bumpy weeks and/or months ahead of us, but we are very encouraged by a number of green shoots that are springing forth in both of our businesses. Of course, the most encouraging news of all since we last talked is the approval of an initial rollout of 3 vaccines for COVID-19, including the approval last week of the J&J vaccine. As an operator, movie theatres, hotels and resorts, restaurants and bars, each of which are based on public gathering, our businesses are significantly impacted by protective actions that federal, state and local governments have taken to control the spread of the pandemic and our customers' reactions or responses to such actions. As you might imagine, I've closely followed the COVID numbers in our markets and throughout the country as well as the really miraculous development of highly effective vaccines to curb and ultimately end this pandemic. And while I think we would all agree that our country got off to a slow start, COVID numbers have been coming down significantly in our markets, the pace in which states are getting shots and arms is increasing rapidly, and the supply of vaccines is expected to increase significantly in the coming weeks and months. We know there is still work to do in order to get back to normal. And if we've learned anything from this pandemic, it is that no one can really forecast exactly how the future months will unfold. But there certainly is a lot to be encouraged by. I said each of the last quarters, but it is worth repeating in this rapidly changing, truly unprecedented environment. There is one thing that has not changed and will not change, our priority as it has been throughout our history, is the safety and well-being of our associates, customers and communities. This has guided to everything we've done so far and will guide us in the weeks and months ahead as well. So let's start with the hotel division. Doug shared some of the numbers with you, including the fact that the data suggests we outperformed both the industry and our competitive sets this year. I'd like to expand on that point for a moment. Another way of looking at our outperformance is to examine market share, which in the hotel business is general -- is usually expressed as an index. For example, a RevPAR index value of 100 would indicate that a given hotel is getting its exact fair market share of revenues per available room compared to competitive hotels in this particular market. During the previous 4 fiscal years, our average combined company-owned hotel RevPAR index ranged between 108 and 112. Meaning that, on average, our hotels were getting 8% to 12% more market share than you would expect if everyone got their proportionate share of business. Fast forward to fiscal 2020, certainly an unusual year, where our hotels and others in our markets may have been closed for portions of the year. I'm pleased to report that our average RevPAR index for these same company-owned hotels increased to 136. Our hotels had RevPAR 36% higher than you would expect if everyone got their fair share. Now as demand increases and all hotels are fully operating, we might expect that number to decrease some. But I think it speaks to a flight to quality that should be beneficial in the future and our ability to consistently outperform in our markets. The vast majority of our customers during the fourth quarter and continuing today come from the drive to leisure market. It wasn't that we didn't have any transient business and group business, we continue to have weddings in some small group business. And just like in the summer, when we had Major League Baseball teams staying with us, we've had success booking basketball teams this winter. But there are also some green shoots in individual business travel, and we believe the continued progress with the vaccine rollout will further spark growth in both of these business travel segments. But as I said, the majority of our customers have been transient leisure customers who are looking to get away and change their scenery after months of staying home. As a result, not surprisingly, weekend business was the strongest at all our hotels. Properties like the Grand Geneva Resort & Spa and Timber Ridge Lodge performed the best among our hotels as they are well suited for families looking to get away. During our last call, I shared with you that our golf revenues at the Grand Geneva were actually higher than they were in the previous year. Well, now I'm happy to tell you that we're having a record ski season at that property. We've been at or near sellouts on multiple winter Saturdays at this resort. As you know, with our company-owned hotels, primarily in the Midwest, we're still working our way through our traditionally slow season. And overall, 24% occupancy rate is nothing to get too excited about compared to what we would normally expect during our fourth quarter. But it certainly justified our decision to reopen our hotels. As we shared with you last quarter, in many ways, reopening our hotels was a mathematical exercise. We made the bet that we would better off open than closed and it proved to be a good bet. Despite the expected reduction in occupancy in the fourth quarter as kids went back-to-school and winter weather arrived, we believe our hotels collectively significantly outperformed what they would have done if they had been closed. And that is attributed to Michael Evans, our Hotel Division President and his entire team. They've done a fantastic job of streamlining our operations, reducing both variable costs and costs that might have previously deemed fixed in order to keep our hotels open and operating. And that is paying off an increased market share. Looking to future periods, the hotel division's called action in 2021 is aptly named, Rebuilding Together. We know that we have along the road ahead of us as we work to get our hotel business back to pre-COVID levels. It will almost certainly take beyond 2021. Overall occupancy in the U.S. bottomed out last spring, slowly increased during the summer and early fall and leveled off in the fourth quarter. Higher rent hotels like the ones we generally operate have been impacted more than lower end hotels. Most current demand continues to come from the drive to leisure market. Most organizations implement the travel ban at the onset of the pandemic and while there are some signs that some of these bans are beginning to loosen slightly, business travel will still likely be limited in the near term. On the other hand, we have very high hopes for leisure travel and believe there remains a lot of pent-up demand to go somewhere. Assuming the vaccine rollout continues to progress and overall COVID numbers in our markets continue to improve, that may bode well as the weather improves and summer arrives. It is encouraging that many cultural institutions and sports teams in our markets are transitioning their operations to allow more in-person guests and spectators. That may help drive further future demand as well. We're already seeing some of those green shoots besides the comparatively strong winter season we are experiencing at the Grand Geneva, we had a second hotel experience a near sell-out this past weekend as well. Performance at restaurants like the Mason Street Grill, while still only open for dinner has exceeded our expectations. But we'll also have challenges. As you would expect, our company-owned hotels have experienced a significant decrease in group bookings for fiscal 2021 compared to where we were last year at the same time. Of course, last year, we were still anticipating Milwaukee hosting the Democratic National Convention in July of 2020. We were pleased to see the Ryder Cup rescheduled for September 2021 and is contributing to our 2021 group pace. Looking further out, the Wisconsin District approved financing during the fourth quarter for the expansion of its convention center. The expansion is currently expected to be completed in late 2023 or early 2024 and should help all of our Milwaukee hotels. Banquet and catering revenue pace for fiscal 2021 is also running behind where we were last year at this time for fiscal 2020, but not quite as much as group room revenues, due in part to increases in wedding bookings. Many of our canceled group bookings due to COVID-19 are rebooking for future dates, excluding one-time events that could not rebook for future dates, such as those connected to the DNC. However, some group bookings for the first half of fiscal 2021 have subsequently canceled or postponed their event, and we cannot predict to what extent any of our hotel bookings will be canceled or rescheduled due to COVID-19 or otherwise. Forecasting what future RevPAR growth or decline will be during the next 18, 20 to 24 months, is very difficult at this time. The non-group booking window is very short, with most bookings occurring within 3 days of arrival, making even short-term forecast of future RevPAR growth very difficult. Hotel revenues have historically tracked very closely with traditional macroeconomic statistics such as the gross domestic product. So we will be monitoring the economic environment very closely. After past shocks of systems such as 9/11 and the 2008 financial crisis, hotel demand took longer to recover than other components of the economy. Conversely, we now anticipate that hotel supply growth will be limited for the foreseeable future, which can be beneficial for our existing hotels, which we believe are uniquely positioned to capture increased demand. In the near term, we believe it will be very important to have our marketing message focused on the health and safety of our associates and guests. We are focused on reaching the drive to leisure market through aggressive campaigns promoting creative packages for our guests. Overall, we generally expect our revenue trends to track or exceed the overall industry trends for our segment of the industry, particularly in our respective markets. Finally, let me end my remarks about hotels by allowing myself to talk about growth for a second. First off, let me preface my comments about growth in both of our divisions by reiterating the priorities 1, 2 and 3 as we emerge from this pandemic will continue to be our balance sheet. Every decision we make will always have our balance sheet in mind. On the hotel side, there are clear strategic -- on the hotel side, there are clear strategies for growth that can be balance sheet-friendly. Besides continuing to selectively seek management contracts that we believe are a good fit for us, there may be opportunities to acquire hotels via strategic partnerships or possibly by the creation of a fund, all of which would allow growth without significant outlays of capital. No one really knows yet what the hotel transactional market might look like and whether there may be many opportunities to acquire hotels that might be experiencing distress. In addition, with the entire industry needing capital, many properties are going without much needed capital investment. We think there may be an opportunity to acquire properties in this position as well as to provide significant value add. If opportunities arise, we want to be prepared on the other side of this. Bottom-line, there may be bumps along the way, but as spring slowly arrives here in the Midwest after a long winter, our hotel team is prepared and energized to manage our award-winning hotels, resorts and restaurant and rebuild our hotel business together. So let's shift to our Theatre division. Doug went over the numbers with you. While I don't intend to spend a lot of my time looking backwards, let me make a couple of comments. First off, Rolando Rodriguez and his team once again did a very good job managing through a very challenging quarter. With very few new films and renewed restrictions implemented in several very important markets for us in November and December, including Illinois, Minnesota, Ohio, Missouri and Pennsylvania, the team still managed to improve adjusted EBITDA from this division by over $3 million compared to last quarter. And once again, managed costs in such a way that it was clearly better for our theatres to be open than closed. Our field personnel also continues to do a terrific job executing on all the new operating protocols we implemented in response to the pandemic. Our customer experience scores are some of the highest levels we've ever seen, and I think it speaks directly to the efforts we put in to offer a safe and comfortable experience at our theatres. Once again, a big thanks goes out to all of our associates in this division. Face with a limited amount of new film product and the pandemic that was further limiting customer willingness to go to public places, our team had to get creative. We had to come up with innovative promotions and programs that would encourage the return of movie going to an audience who we believe wanted to come back but was reticent to do so. Out of that came, what was probably the most important accomplishment of the fourth quarter, which was the development of Marcus Private Cinema, or as referred to it internally, MPC for short. Developed and introduced in the second half of the fourth quarter, this program has since proven to be a key component of our comeback in 2021. Initially introduced to customers via communications on our website and via our loyalty program e-mails as a way for up to 20 friends and family to buy out an entire auditorium for a fixed fee, we subsequently enhanced our technology. And in 2021, we became one of the first theatre operators to offer customers the opportunity to purchase their private cinema experience directly from our website or our app, eliminating the need to call our sales staff. And as a result, the program really took off for us in these first months of 2021. The program today has 3 pricing tiers. In most cases, we charge $175 for the first 2 weeks of a new film and then subsequently reduce the price to $149. Films are tending to play on our screens for longer periods of time than our pre-COVID environment. So at the appropriate time, we further reduce the price to $99. We're still showing Croods 2 on our screens, and MPC has given a longer legs than we ever might have significantly -- originally thought. We also charge $99 for all older library films and have experienced some very nice success with that product as well, which is particularly interesting when you consider that customers could choose to see that same product for free at home. Just to throw a few numbers at you, in the last 7 weeks alone, with just under 70% of our theatres opened, we've averaged over 1,500 Marcus Private Cinema shows per week across our circuit, contributing over 25% of our admissions revenue during this time. And in large part, because of this program, we've seen our overall market share of U.S. admissions revenues increased by approximately 50% during the first 2 months of 2021. Our market share on some individual films has more than doubled compared to our historical averages. Nearly 90% of the shows during this time period were booked directly by the customer online or on our app. We estimate that we are averaging approximately 13 people per showing. And every Monday morning, our team meets and reviews the film scheduled to be shown in the upcoming weekend in order to determine how many auditoriums to dedicate to MPC that week. And one last comment on MPC. It has brought people back to the theatres and allowed some who might have been reticent to return to see and experience the protocols we have in place. And while I can't put a number on it, we anecdotally have heard that it has encouraged many to come back for a regular show as well. Discussing this innovative program is a nice segue to our Theatre division's call to action in 2021, with a twist on the classic 3 hours we all remember growing up. Our goal for 2021 is to redefine, refocus and rebuild our business. Marcus Private Cinema is a great example of redefining our business and our goal is to take some of our learnings from this past year and make them part of the theatre experience in the future. Even after our business returns to normal, and studios begin to once again release new films on a weekly basis, we believe there will be a place for MPC, particularly as a way to enhance traditionally slower periods of any given film week. Another example of redefining comes out of our expansion of the use of technology. Given our focus on food and beverage, we were one of the first theatre chains to offer the ordering of concessions, food and beverage on our website and mobile app. We had already developed this technology pre-COVID, and we're in the midst of rolling it out at several theatres, beginning with our new Movie Tavern that we'd opened in October 2019. When the pandemic hit, we accelerated our plan, and we now offer this technology in all of our theatres. Not only is it a great customer convenience that will reduce our labor requirements, we believe it is contributing to our already highest among the major theatre chains average concession revenues per person and will likely only get better over time. The coming weeks and months as we emerged from the most challenging time in our theatres' history, we also need to refocus and rebuild our business. That will include reintroducing moviegoing to a public who's been stuck inside without many out-of-home entertainment options for far too long. And while we know there are still challenges ahead, once again, there are plenty of green shoots to point to, which we find very encouraging. Vaccines in reducing COVID numbers not only play a critical role in getting customers comfortable with returning to movie theatres in larger numbers, but these external factors are also critical as studios make decisions on the release of new blockbuster films. As you know, the vast majority of new films have been delayed over the past year, which is clearly an indication of the importance of the theatrical release to the profitability of the studios. And while no one was happy to see films delayed, the result has been a tremendous backlog of exciting films that are waiting for moviegoers as we all emerge from our houses. Several new films have been released recently to improving box office results, and in our press release, we've listed a number of films out of an even longer list that are scheduled for release in the coming weeks and months. Another extremely encouraging piece of recent news was the announcement that theatres in New York City would begin reopening with restrictions starting tomorrow, with counties in California reopening in San Francisco and LA rumored to be not far behind. That bodes well for the studio's willingness to hold to their current release plans in the spring and summer. And while some have wondered whether customers would return to the theatres after this was over, all you have to do is take a look at what has happened in China and Japan. Both of these countries have experienced record-breaking box office performance on several films, which we find very encouraging, and we hope is a harbinger of things to come here in the U.S. as we get the pandemic under control, which brings me to yet another green shoot. This past weekend, we saw the release of Tom and Jerry. As you might have seen, its performance greatly exceeded expectations. In fact, I'm thrilled to tell you that this past Saturday was our best day in our theatres since COVID. In fact, this past weekend, with really only one new movie, our attendance was over 40% of our attendance last year during the same weekend at these same theatres. That is a new high watermark that has really energized our teams. And when you consider that this particular film was also available to subscribers of HBO Max under Warner Bros 2021 COVID release strategy, I think it becomes even more significant. It speaks to the pent-up demand that we believe exists for returning to the theatres. Part of our optimism for the summer season also stems from the fact that it is likely that consumers will have less entertainment options to choose from. Live concerts and festivals will still be limited due to their need to plan a long time in advance and the fact that with only one show capacity restrictions limit their ability to make the math work. We, on the other hand, can effectively navigate through any remaining capacity restrictions because of our flexibility to offer virtually an unlimited number of shows. Another significant advantage, I believe we have, as we look ahead, is that we've already completed the majority of our theatre renovations, and we offer what we believe is the highest percentage of recliner seating, proprietary large-format screens and food and beverage options in the industry, certainly among the largest chains. Our theatres are truly state-of-the-art, and our future capital needs are greatly reduced because of that. Now like my comments about the Hotel division, please don't interpret my optimism about what lies ahead to suggest we may not still face challenges in the near term. There certainly is the possibility that there may be further changes in the release schedule, and there have been a lot of discussions about what the theatrical window will look like in the future. We know there are uncertainties in the weeks ahead. But my larger point is that we have demonstrated that we've met every challenge we face so far. And I believe we are prepared to navigate through any further challenges as we redefine, refocus and rebuild our industry-leading theatre business. And finally, while clearly, right now, our focus needs to be on the near term and my same comments regarding the balance sheet still apply, our long-term goal is not only to survive but to thrive. So I'm looking forward to the day when we can once again refocus on growth as well. In closing. In this continually changing environment, you can be sure that we are constantly reviewing the situation in both our businesses and making changes to our plans as warranted. And while we still have a lot of work to do, I need to take a moment to do something important and show gratitude. These are not easy times and so many people are working so very hard. First, I want to express our appreciation for the confidence and support of our lenders in the investment community during this past year. It has meant a lot to us. I also continue to be thankful for our associates in the field, who have also worked extremely hard into very difficult circumstances in order to continue to provide an outstanding experience for our guests. I'm thankful for these associates in the corporate office, and I'm thankful for those associates in the corporate office that support the field as well. I'm also grateful for our dedicated leadership team, leaders like Doug Neis and Tom Kissinger, continue to work tirelessly, developing and executing strategies focused on getting us through this crisis, while also putting us in a strong position for continued growth over the long-term. Our Board has been invaluable, and special recognition goes to our Chairman, my dad, Steve. One of the benefits of our family orientation is the years of experience and insights that he has, and we remain beneficiaries of. I can promise you. He is fully engaged. Trust me on that one. Being in the movie business, we tend to quote lines for movies around the office. In this case, I'm reminded of a line from Apollo 13. One of the characters that just recited all the things that could go wrong and noted that this might be the worst disaster NASA has ever experienced. Like a true leader, the actor playing Gene Kranz at Mission Control responded by saying, "With all due respect, sir, I believe this will be our finest hour". And that's how I feel about how our people have responded to this situation. I could not be prouder of each and every one of our associates. I thank you for indulging me on that. With that, at this time, Doug and I will be happy to open up the call for any questions you may have.

[Operator Instructions]. We'll first go to Jim Goss with Barrington Research.

This is Pat on for Jim. I was -- just had a couple of questions. With the recovery of leisure travel, I guess, how -- do you think that strength in leisure travel, particularly with -- both leisure travel and bookings like weddings, do you think that can remain at a particularly elevated or stronger level for a long enough time for the -- some of the group business to return? And I guess, as you wear in additional costs as well as find ways to operate more efficiently, I guess, how should we think about profitability of that segment over the longer-term -- over, I guess, as you have some recovery? And I guess, the profitability of that segment as you get closer to pre-pandemic revenue trends?

I'll start with talking about what do we think about how we went to the question of how much will a leisure make up for missing business travel. And I tell look, I don't think it can completely make up for it, but I think it can certainly mitigate it. I don't know exactly what that will be. And it's the same -- look at it, it's a very similar pattern we've seen too as well. The leisure travelers just come out first because they have they're only responsible to themselves, not like somebody saying, "Hey, I got someone to send you out. And that's why we know that happens. And people, as we said, are itching out of their house and travel. And we know there were all sorts of anecdotal stories about when the vaccine started coming online, people booking travel ahead of time saying, "Oh, we're going somewhere". So we know that it will be helpful. Our properties, in a lot of instances, lend themselves to that. If you think about sort of just nature, even our urban properties and The Pfister has -- can attract that wedding business and that social business and that leisure business. Saint Kate, same, too. It's not like as a business hotel attached to an office building. We do have some of that but the Grand Geneva, Timber Ridge, the portfolio does lend itself to having some of that to be tilted in that direction. But still, look at the end of the day, our bread and butter is group business and that will take time to come back. As the profitability, the -- I think we'll see the same patterns we've seen before. Right now, we've batten down the hatches as tightly as you can batten them down. And that will benefit us on the upswing. And that will -- because you just -- you operate tightly and you're just getting that mode. Eventually, years from now, we'll be because I think I said this in the last conference call, we'll be saying, wait a minute. We were saving so much money before because people start to say, I need to get those people back. But I think -- but to your point, Pat, I think we have -- we'll have the luxury of some better margins for a while. Just, Doug, do you have anything specific on the margins, you want to add, go ahead.

No, no. That last point was what I would have brought up as well is that, look, I don't think anyone in our shop or anyone else in the industry thinks that we were all operating fat that we had. But we've had to -- as we said in the prepared remarks, there are costs that we looked at that we may be previously viewed as fixed that we were forced to challenge and look very closely at. And like in both of our businesses, we're trying to use technology in some very unique ways as well. And I think that, that also maybe speaks to a longer-term benefit that we'll see.

Okay. And then just a couple of quick ones on theatres. And the potential for, I guess, additional acquisitions. Could you think of maybe approaching that market in a similar way to how you're approaching the hotel market more of a management contract approach? And then I guess, just in terms of getting consumers back to theatres, I guess what -- how do you go out and reach those who don't necessarily have downloaded your apps or regularly go to the website to make them aware of the general customer satisfaction with all the cleaning initiatives and things of that nature?

Let me do that. Let me hand the first half and maybe Greg, you can think about the second half here. So the first half question, yes. I mean, look, I mean, again, we don't want to get ahead of ourselves. And the risk of being redundant, still balance sheet, balance sheet, balance sheet here. But having said that, there might be some opportunities looking ahead that could also allow us to be less capital-intensive. If there are leased properties that become available and can be done in a smart way, I mean, percentage rent and things different in ways that would make sense, that's one way of reducing the capital. And another way you referenced is management. Well, sure. I mean, if there were some opportunities where we could potentially offer some management services. Historically, you haven't seen that in the theatre business like we have in the hotel business. We have one managed hotel -- or 1 managed theatre that are currently in our portfolio. But there's been some speculation that there could be -- there may be some opportunities like that as well. And so certainly, that would be an option that we could certainly consider in the future.

And I'll build on that. And we talked about this, I think, on one of the previous conference calls. It wouldn't be the first time in our company's history. Back to my grandfather, when he started the business, and then TV came along and there was a lot of displacement. And he built the business by going to these landlords and saying, Okay, I'll take the theatre on, and I'll essentially manage them, I don't know if this deal was a percentage rent or they share in the equity of it. But the -- but that was how he then built the theatre business, knowing that, that was not the end of the theatre business. And so there is historical precedent when you're dealing with a company that's been in the business for 85 years, you get to hear the speech on historical precedent. As for getting customers back, that's what we have a crackerjack marketing team in our theatre business. But I think it's going to go beyond that because our trade organization, NATO, is going to be involved in that working with the studios and we're pushing our studio partners who have lots of media outlets that they also control to help push the message of, it's time to go back. And it's a great getaway and a great inexpensive getaway for people who might not have as much money in their pockets. That's always been the benefit that theatres have tended to outperform in softer economic times. We know that, that's, again, another piece of history. So I think something to that.

Yes. And I would just maybe add to that and to say that, look, as you know, we've got a great loyalty program. And -- but what we were already, never mind this post-COVID or pre-COVID times, we still had over half of our transactions being transacted by people who are not loyalty members. So we've already had a very integrated digital marketing campaign where we're trying to reach people who are just online and streaming and we see people who may not be loyalty members, but yet still need to know about all these fantastic promotions and programs that we have. So that's not new to us either, Pat, that we know that there -- we have to also reach people that aren't necessarily using some of the technology that we have.

Our next question comes from Mike Hickey with The Benchmark Company.

Greg, Doug. Cool, obviously, a lot of great data today on the call. Curious, I guess, what we've seen over the last weekend here with Tom and Jerry. So who would have guessed is that film, Greg. I didn't see that coming. And we thought Wonder Women, we thought maybe those films that are more blockbuster-type films may create a heartbeat in the theatrical space, but it was Tom and Jerry. Family-friendly films, so you're seeing sort of families bring their kids back to the theatres. I mean, is there sort of -- I guess, is that more or less encouraging to you when you see that sort of demo really show up here in terms of how you think about a bounce back on the theatre side, especially when you've got what looks like a lot more films coming?

I'll tell you what's the most -- to me, what's the most encouraging about that is that if you look at -- if you -- we've been -- we study all the -- there's always -- there's lots of research going on, which I'm sure you know about, about people and their comfort levels going back. And frankly, the people who were the least comfortable were women. And so the worry was, okay, they bring the families. And so to see them come back, that's really encouraging. And I think it just -- look at it directly relates to a combination of people feeling more comfortable as we get off the virus being so severe and the vaccines coming online and the -- look at -- they're going nuts. Anyone with anyone I talked to with Kids at home is losing their minds. I mean they just want to get out of the house. Which speaks to, hey, look at when things -- when everybody starts feeling comfortable, that should -- looking to China and seeing people they talked about one of the things that helped China was nobody was able to really travel during their new year. And so they were able to -- that really pushed their numbers up substantially. Well, not like we're going to not be in a no-traveling mode. But again, to the point we brought up on the call, you're seeing all these festivals getting canceled because they take so much lead time, and they're worried about capacity restrictions. And so our content is, as you know, is loaded up, ready to go, and we can show that -- where a performer could maybe do 2 contents if he or she were so inclined, that's it on a given day. And it's probably just 1. And where we can -- we have an accordion basically for how many showtimes we can run. And that's what happened in China, too. I saw strengths in part of what drove it was people because they still have some capacity restrictions, not like they're going 100%. And they were able to run later and earlier shows and get people in the door. So I think that bodes well.

And Mike, the other still a piece of recent information is in the last day or two, you probably saw that we saw a film move into this more current period. And you saw Peter Rabbit 2 get moved into the May time period, and it goes right to your the May time period, and it goes right to your question, essentially, right? I mean, it's -- I think they probably saw what happened with Tom and Jerry and said, "Hey, let's jump in on this. And so all this talk about movies moving out, well, here, we had a movie that was then moved into the near-term here, and that was very encouraging.

Nice. Good. Doug, not to put you on the spot here, but I'm going to...

You're going to do it anyway.

Hey, Mike, better Doug than me. So go ahead.

Yes, you're next. You're next.

We have a 2-question limit, Mike.

The -- I'm going to go past it, if we do. Doug, the EBITDA on your segments, I know you don't guide, obviously, but can you give us any sense here when you look at Q3, Q4, obviously, we're supposed to. By May, have everyone that wants one, I think, can have a vaccine, and you've got a ton of content coming into the theatres. You're seeing already the desire to come back from a very interesting demo, not the one that you would suspect, I think initially. So should we start to think about maybe going EBITDA-positive on the theatre piece in 3 or 4? And what sort of, I guess, just broad KPIs or performance level, what should we think about to get you there?

Yes. Well, okay. So you're right, we don't provide guidance per se. So I'm going to watch my words carefully here. But certainly, the second half of the year is where most of us are focused, right? And so if the film -- on the theatre side, if the film schedule holds, like it currently is and certainly we've seen a lot of encouraging signs that suggest that it's going to, then yes, we have much higher hopes for the second half of the year, starting and that we're going to have a real summer season. And it won't be 2019 levels, please no one -- I think it's going to be fully back yet. But we certainly would think that on the -- that we could be looking at those types of positive things in the second half of the year. Hotel business. Look, the summer, because the main customer is drive through leisure, our hotel team is pretty energized about what the summer could look like. As we exit the summer, we're going to face some of the same issues if we don't have a lot of group business because what we saw is -- and you saw in our numbers this time around. It naturally happens every year is that kids go back to school and the weather starts to turn. And so the leisure travel, at least mid-week, drops off. And so I don't expect that pattern to necessarily change, but we we're certainly encouraged about what the summer could hold for us, no question.

Good. Summer on Milwaukee sounds nice, to be honest. The last question, Greg, for me, you can be short here. I know it's early days, but a lot of people and a lot -- from a certain demo are getting vaccinated, have been vaccinated. Are you sort of seeing, anecdotal or not, sort of a reengagement from what you would suspect to be sort of that vaccinated demo when you look at sort of your movie patrons, I guess, more specifically, given weather is still limiting on the leisure side in the hotel? But are you saying, "Oh, yes, they got vaccinated, they're back. I mean, are you seeing that group start to reengage? Or are they sort of still being a bit cautious here?

I don't think so. Just because, frankly, the group that's been mostly getting it has been the older segment, a lot of the people in the nursing homes and senior living facilities. And that -- now the health care workers, for sure, but look -- but I think there's been -- and understandably, there's been a lot of messaging, hey, look, don't go nuts. Once you get vaccinated, just -- because there's still a lot of virus in the world. And so I think you're seeing the same messaging we're all seeing, which is, yes, they're trying to sort of walk the way around it, what can you do? And I saw them talking about, well, now, you could get together with friends who are all vaccinated and have dinner without masks on in your house. So there I think as that broadens, and I think we all know it's coming sooner than we all -- than everybody anticipated in a way that when they're talking about how much their vaccine there is going to be. The bigger challenge, frankly, is going to be getting people to get vaccinated and the importance of that message. But I know people are focused on that as well. And -- but the short answer is, I don't think so, not yet.

[Operator Instructions]. Our next question comes from Eric Wold with B. Riley.

What are the odds you can get your crack marketing team to convince moms that a Quiet Place 2 is a family movie? A couple of questions, Doug, on kind of liquidity kind of cash flow. I guess, one, can you provide kind of more details, mention can kind of what's in that $10 million to $40 million potential proceeds the next 12 to 18 months? How much of that is "pure surplus"? Are there theatres in there? Are there hotels in there?

No. There's no -- there are no hotels in that kind of projection. It is primarily -- we've used the terms surplus and non-core. And so that's how I would describe it. It skews towards -- I mean, certainly, what's happened early on has been mostly what -- mostly surplus. I mean it's land parcels and things along those lines, things that -- and frankly, we have more of it than we probably ever had before. We may have talked about this in a previous call, where as we've rapidly expanded and gotten to the point where we've got the significant penetration with the recliner seats at our theatres, we've recalculated parking ratios, et cetera. And we've actually created more outlots, for example, than what we -- was originally what we considered in our inventory. And so we just have a lot of that. And non-core, the definition of non-core would be -- I suppose you could have, I mean, we did sell a former theatre. It was a budget theatre in the fourth quarter. And I think it was like sold to a church or something on those lines. And so there could be a few things like that, that would fit into the non-core category. And we've got some other real estate as well that maybe might fit the definition of non -core, but it's not some -- it's all stuff that really shouldn't affect our operating results very much at all, if any. So

By the way, just for people who don't know this, the reason when you go to recliners, okay, let me just build that bridge that one step for you, Doug, and that is -- so codes -- building codes are for parking are based on the number of seats you have in a theatre. And as people know, when you go to recliners, you virtually reduce the seats by half. Now we aren't cutting the parking in half, we can't do that. But it is creating outlot opportunities because we do need less parking based on code. So that help fill that in.

And then on the -- you talked about your $21 million in CapEx last year versus the original guidance of 65 to 85 and now 15 to 25 for this year. That kind of from last year, that $40 million to $60 million, is that still kind of sitting out there for future periods to come back? Or have you kind of rethought that maybe that's something you thought needed to get done, just like what expenses may not need to be spent now? Or should we expect kind of 2022 plus to see that kind of ramp back up above kind of maintenance levels?

Well, what's still hanging out there, Eric, is the -- not a significant, not a meaningful piece of that previous guidance included -- we previously spoke about the fact that several of our largest hotels are going to be due for some larger renovations. And so that's still out there. Now what -- I think we mentioned and I mentioned in my prepared remarks, we have actually already -- we told you how well Grand Geneva is doing. And so we've actually kicked off a very customer-facing renovation in the lobby and the whole lobby area and the front restaurant and things like that right now, and that's going on and as well as some select guest improvements, with more to come essentially. And so certainly, there will be some capital dollars for several of our largest hotels in the subsequent -- in '22 and '23. I mean, look, depending on -- I mean, is it possible that we could accelerate a little bit of that into -- the last half of '21, depending on conditions, it's possible but it also takes time to prepare and be ready for that. So longer winded answer is, yes, there certainly is some of that capital that would be coming through in the next couple of years.

Got it. And then just final question is a numbers question. The 30% or so of theatres that are still closed, how much of that is local restriction driven? How much of that is your proactive decision based on the slate? And based on the current slate if it holds, when would those proactive theatres open?

Almost entirely the latter, Eric, in terms of that. The theatres that are not open are mostly strategic decisions on our part. And most of the common theme for many of them, if not most of them, is that they're in markets where we already have theatres. And so we made strategic decisions to try to concentrate the attendance and the things that we do have right now with our other theatres. And so they're poised to reopen as soon as we see enough of those green shoots and enough of the film product, clearly firming up that we can start reopening some of those additional theatres as well. It truly is. I mean, we mentioned the math exercise on the hotel side, it's a math exercise in the theatre side as well.

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.

Great. Well, thank you, everybody. We really would like to thank you once again for joining us, and we look forward to talking to you again. First quarter always comes pretty quickly afterwards and so we're looking at -- we'll be talking to you once again in early May when we release our first quarter results. Until then, thank you, and have a great day.

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