Greg Marcus – President and CEO Doug Neis – Chief Financial Officer.

David Loeb – Robert W. Baird Mike Hickey – The Benchmark Company Brian Rafn - Morgan Dempsey Capital Management Jim Goss- Barrington Research.

Good morning, everyone. And welcome to The Marcus Corporation Fourth Quarter Earnings Conference Call. My name is Tony 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, Chief Financial Officer of The Marcus Corporation. At this time, I’d like to turn the program over to Mr. Neis for his opening remarks. Please go ahead, sir..

Thank you very much and welcome everybody to fiscal 2014 fourth quarter conference call. 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 rates expectations for our Hotels & Resorts division, our 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 factor section of our 10-K and 10-Q filings, which can be obtained from the SEC or the company.

We’ll also post our Regulation G disclosures when applicable on our website at www.marcuscorp.com. So with that behind us, let’s talk about our fiscal 2014 fourth quarter and yearend results.

It was another very nice quarter for us thanks primarily to another quarter of industry out performance from our Theater division and continued improvement from our Hotels & Resorts division.

I am going to take you through some of the detail behind the numbers both on the consolidated basis and for each division, and then turn the call over to Greg for his comments..

a higher average interest rate due to our issuance of $50 million of 4% 10-year seniors notes in the August 2013 replacing borrowings under our credit facility.

Next, a reminder that our fiscal 2014 losses and dispositional property plant and equipment including the $750,000 loss incurred in our second quarter related to sale of our JV interest in a hotel in Columbus, Ohio that really counts for the entire year-to-date variation on that line item.

And finally the largest unusual item of note in our reported fiscal 2014 yearend results occurred in the third quarter and was the allocation of a portion of the fiscal 2013 income from extension of debt to us during the current year as a result of a legal settlement with our minority partner the Skirvin Hilton in Oklahoma city.

This item shows up on the loss attributable to non controlling interest line and we pointed out that our previously as well okay and that after accounting for income taxes, this amount favorably impacted our reported yearend results, not the fourth quarter but our fiscal 2014 results by approximately $0.08 a share.

Now, moving on, our year-to-date effective income tax rate adjusted for losses from non-controlling interest was $40.2% which was slightly higher than last year but generally riding our historical range of 39% to 40%.

And shifting gears entirely, our total capital expenditures during fiscal 2014 totaled nearly $57 million compared to just under $23 million last year.

Now, approximately $38 million of this amount incurred in our Theatre division, the majority of which related to the items noted in our press release and that we have been talking about for a while now, Greg will expand upon some of this in his comments.

Keep in mind that this number comes from our statement of cash flows and it represents what we have paid to date on our various projects.

We have been talking about $50 million in capital expenditures in our theater division and what that means is that due to timing of payments and in some cases, short delays in completing the work, we are carrying over about $12 million of expenditures to the first couple of months of fiscal 2015.

In addition, we spent approximately $19 million in CapEx in our hotel division during fiscal 2014 with the renovation of the Cornhusker, Marriott and the Pfister accounting for the largest portion of that amount.

As we look forward to fiscal 2015 in our total capital expenditures, we are currently estimating that our fiscal 2015 capital expenditures maybe in the $70 million to $90 million range with approximately $45 million to $60 million estimated for our Theatre division including that $12 million carryover from this past year.

That would leave $25 million to $30 million currently estimated for hotels and resorts division with the largest piece related to the upcoming conversion of our Four Points Chicago hotel into an AC hotel by Marriott.

As is always the case at this point in the year, the range of the potential capital spending is fairly large because either the timing on several of our planned projects is not finalized yet or because some of the dollars are for several growth opportunities that may or may not come to fruition.

As a result our actual fiscal 2015 capital expenditure certainly could vary from this preliminary estimate just as it is as they did this past year. In addition if an acquisition opportunity would arise particularly in our Theatre division that could impact our actual capital expenditures as well.

Greg will expand some of our capital expenditure plans for each division during his prepared remarks. So now I would like to provide some financial comments on our operations for the fourth quarter in fiscal 2014 beginning with our Theatre division.

As you can see in our report numbers, our box office revenue increased 8.2% during the fourth quarter with concession in food and beverage revenues from this division increasing 15.5%. For the full year fiscal 2014 box office revenue were up 8.6% compared to last year and our concession in food and beverage revenues ended up a very healthy 14.9%.

What's most notable about these numbers and particularly the box office revenues is that we once again significantly outperformed the national numbers. According to Rentrak, a National Box Office Reporting Service for the Theatre Industry, the U.S. box office actually decreased 1.1% during the comparable 13 weeks of our fiscal 2014 fourth quarter.

So for the second quarter in a row, we outperformed the nation by over 9 percentage points. The fourth quarter increases are attributable to an increase in attendance at our comparable theaters of a very impressive 21.2% for the fourth quarter. For fiscal 2014 our comparable theater attendance ended up the year increasing 14.5%.

Just as we reported last quarter, we believe the majority of this attendance increase and the overall industry outperformance can be attributed to the new investments we are making in our theaters and innovative marketing strategies that we have initiated.

Our average admission price for our comparable theatres actually decreased by 10.6% for the quarter due entirely to our $5 Tuesday program for all movies. Of course, as you summarize they also contributed to our tremendous attendance gains. For the full fiscal 2014 year, our average admission price decreased to 4.8% compared to the prior year.

Our average concession in food and beverage revenues per person decreased by 4.6% for the fourth quarter due to promotions related to our $5 Tuesday program, but increased 0.7% for all the fiscal 2014 compared to the same period last year.

Of course, with significantly higher attendance these changes in our per capita numbers don't tell the whole story as evidenced by our significant increases in total concession in food and beverage revenues due in part to our continued focus on additional food and beverage concepts.

And finally, as great a quarter and year as it was for our theater division, believe it or not it could have been even better if not for the harsh winter we had in the Midwest this year. March was extremely cold in our Midwest markets and energy prices skyrocketed.

Our full year heating cost ended up approximately $475,000 higher than they were last year. Add to that increase annual snow removable costs of another $475,000 over the last year and it’s fair to say we are glad summer has finally arrived.

And both of these numbers that I just quoted are annual numbers, the energy costs are what impacted us the most during the fourth quarter, we certainly did that we had a couple of Mondays where schools were closed and so that certainly on the other side probably helped us a little bit, but these are – but still pretty significant increases in cost.

Shifting over to our hotels and resorts division, as we note in our release, our overall hotel revenues were up 4.2% for the fourth quarter and 5.9% for fiscal 2014.

Our total RevPAR for 9 comparable properties was up 3.3% during the quarter and our total RevPAR for 8 comparable properties was also up 3.3% for fiscal 2014 compared to the same period last year. We did not have The Cornhusker for a full year last year so they are excluded from our year-to-date RevPAR comparisons.

As we noted in the past, our RevPAR performance did vary by market and type of property and all the two of our 9 comparable company owned properties reported increased RevPAR again this quarter.

Now according to the data received from Smith Travel Research and complied by us in order to compare our fiscal year results to comparable upper upscale hotels throughout the United States, those comparable hotels experienced an increase in RevPAR of 6.1% during our fiscal 2014.

Now we believe our RevPAR increases during fiscal 2014 were lightly negatively impacted by difficult comparison at Chicago hotel market although I will point out that our hotel actually outperformed the market during this time period and a difficult Midwestern winter, a recent increase in room supply in Milwaukie market and the fact that we had rooms out of the service at our Pfister hotel as a result of the tower building room renovation that was completed at the end May 2014.

RevPAR increased at 6 of our 8 comparable company owned properties during our fiscal 2014 compared to the prior year and at if the two hotels with RevPAR decline and that would be that Chicago hotel and the Pfister with the rooms that were out of service, if we exclude those two hotels, our remaining six comparable company owned hotel’s reported RevPAR increase of 6.2% during fiscal 2014 compared to the prior year which actually slightly exceeded the national average.

Our fiscal 2014 fourth quarter overall RevPAR increase was due to an overall occupancy rate increase of 1.6% percentage points and 0.9% increase in our average daily rate. Our fiscal 2014 full year overall RevPAR increase was a result of an overall occupancy rate increase of 0.7 percentage points and an average daily rate increase of 2.2%.

Finally, while this didn’t have a significant impact on our fourth quarter comparisons, I do want to remind you that our comparisons last year in this division for the full year benefited from the fact that last's year result included $3.3 million of final legal and settlement cost related to our Las Vegas property.

With that I will now turn the call over to Greg..

Thanks, Doug. I'll begin my remarks today with our theater division. Once again we are pretty proud of the results we are announcing today for this division. And what makes this fourth quarter different from our record result that we reported during the third quarter was that this time we didn’t have the benefit of particularly strong slate of movies.

In fact, as Dough shared with you, the national box office was actually down slightly compared to the same 13 weeks last year due primarily to difficult comparisons during the month of May. Last year, our number two movie for the entire year Iron Man 3 played during May and there were several other strong openings as well.

Yet, as you saw on our press release, this year not one of our top movies in our fiscal 2014 fourth quarter cracked our fiscal 2014 top five list. But we have talked about this dynamic in our last call. It is difficult to project how the movies are going to do in any given quarter and there are going to be some ups and downs.

We can't control the prior product we get from Hollywood. Our goal is to consistently outperform these national numbers and in that regard this quarter was another rousing success. Dough shared with you the numbers we followed up our third quarter 900 basis point outperformance compared to the U.S.

numbers with 930 basis point outperformance during our fiscal 2014 fourth quarter. For the second quarter in row, according to the box office results complied by Rentrak, we were the top performing theater circuit among the top ten chains in the U.S. during this corresponding time period.

We believe this is an indication once again that our investments and operating strategies are making a difference and a significant one of that.

As evidenced by the numbers Dough shared with you earlier, we were able to drive attendance and ultimately box office revenues by making strategic investments in our theaters and by implementing innovative operating and marketing strategies.

By now you know one of those strategies was our $5 Tuesday promotion rolled out to all of our theaters in mid November in an effort to go after a mid week value customer who may have reduced their movie going frequency or stop going to the movies completely due to price.

We also included free 44 ounce popcorn for a temporary time period as an added incentive. We continued to be delighted with the customer response to this program coupled with an aggressive local marketing campaign in each individual theater market.

We have seen our Tuesday night attendance increase dramatically and the program seems to be getting stronger every week. As we share with you last quarter, we believe this program has created another weekend day for us without impacting the movie going habits of our regular weekend customers.

It has increased frequency, added new customers and ultimately contributed to our industry outperformance. A true win, win, win for our customers, our studio partners and for us. We recently modified the free popcorn offer restricting it to only members of our newly launched loyalty program, Magical Movie Rewards.

Launched on March 30, 2014 this offer combined with our attendance increases has allowed us to enroll over 500,000 members in less than four months. The program allows members to earn points for each dollar spent and access special offers only available to members.

The rewards are then redeemable at the box office concession stand or at the mini market theaters food and beverage venues. In addition, we have partnered with movie O, a global leader in data analysis for the cinema industry in order to allow more targeted communication with our loyalty members.

The software will provide us with insight into customer preferences, attendance habits, and general demographics which would help us deliver an enhanced film going experience to our members and lever the value of having data on such a large group of customers.

Of course, you also know that we have been making major investments in our theaters that are already paying dividends for us and they have contributed to our performance.

You have heard us talk about the $50 million we committed to in fiscal 2014 to further enhance customer amenities across our circuit, most of which has now been spent with the final dollars being incurred this summer.

Our four theaters that we have previously installed, our luxurious state-of-the-art DreamLounger Recliners contributed significantly to our industry outperformance again this past quarter and I am happy to report that we completed our installation of our DreamLounger seats in four more of our theaters by the end of May.

While raising the benefits of these new installations during the early weeks of fiscal 2015, we now offer eight all DreamLounger locations representing 15% of our company owned theaters and nearly 19% of our company owned screens, a percentage that puts us among the leaders of our industry.

We also combine DreamLounger seating with our proprietary premium large format ultra screen concept and the Dolby Atmos immersive sound system to create the premiere presentation screen in any of our markets, the UltraScreen DLX.

We now have 11 UltraScreen DLX screens and nine traditional UltraScreen auditoriums in operation meaning that offer 35% of our theaters, offer a large format option to its guests again one of the highest percentages in the industry.

We have also been busy adding to our already strong line up of signature cocktail and dining amenities in our theaters nearly doubling the number of Take Five lounges and Zaffiro's Express outlooks in our circuit each from 6 to 11 by the end of this summer. We are also adding a total of nine more Big Screen Bistro auditorium to select theaters.

As you know, we believe we have a unique advantage in the industry in this area as The Marcus Corporation has over 50 years of food and beverage experience to draw from.

Finally, during our fiscal 2014 fourth quarter we began construction on our latest news theater, The Palace at Sun Prairie combining all the innovations we are currently expanding across the circuit this new 12 screen theater will feature all reserved DreamLounger Recliner seating in every auditorium, two UltraScreen DLX auditoriums, four Big Screen Bistro auditoriums, a Zaffiro's Express and Take Five lounge.

We currently expect this new state-of-the-art theater to open in February 2015. As you can guess, we are already looking at additional opportunities to further expand all of these innovative concepts in fiscal 2015 as we continue to invest in our business and customers while building The Marcus theaters brand.

We are still working our way through some of the numbers, but I will tell you that we are currently evaluating opportunities to add DreamLounger seating to another three to five theaters in fiscal 2015. We are also looking at several more Take Five Lounges, Zaffiro's Express and Big Screen Bistro outlets and select theaters during the upcoming year.

Looking at the movies it is no secret that the summer box office took a turn for the worse in July after a decent June. We knew coming in that we would have some tough comparisons during our fiscal 2015 first quarter compared to last year’s record results.

We do have cautious optimism that a few of the remaining summer movies mentioned in our press release might do quite well compared to the prior year, but as we have said before the movies will be what they are and I’m happy to tell you that we have continued to outperform the national number so far.

In fact, we remain number one of the top ten chains during the early weeks of fiscal 2015. I know we are all looking forward to calendar 2015 when the film slate is scheduled to include films from well known series such as The Avengers, The Hunger Games, Mission Impossible, Fast and Furious, Jurassic Park, James Bond and Star Wars.

But right now we’re just focused on trying to be the top performing chain in America again next week while making investments in our business designed to keep us there for the long-term. With that let’s move onto our other divisions Hotels & Resorts. You’ve seen the segment numbers and Doug gave you some additional detail.

It was another quarter and another year of steady year-over-year improvement from this division. Having completed another fiscal year I thought I would start my comments by addressing what we saw in our various customer segments this past year.

Leisure travel remains stronger in fiscal 2014 although the difficult winter weather in the Midwest likely impacted this customer segment during the third quarter of fiscal 2014. Leisure customers tend to be very loyal to online travel agencies, which is one of the reasons why we continue to experience rate pressure.

While we have been selective and choosing the online portals to which we grant access to our inventory such portals are part of the booking landscape today and our goal is to use them in the most efficient way possible. Non-group business travel was also strong during fiscal 2014.

Non-group travelers have increasingly looked for packaged deals, whether is with parking, breakfast or access to club rooms like the ones we recently added to our Pfister Hotel and Grand Geneva Resort & Spa.

Group business in total was down slightly during fiscal 2014 and group business remains a segment of our hotels and resorts business that has experienced the greatest ADR pressure.

However, improved group occupancy at two of our largest properties contributed to our strong 6.1% increase in food and beverage revenues during fiscal 2014 compared to the prior year. The challenge of group business continues to be a tendency towards smaller, shorter meetings often booked and execute within a window as short as 90 days.

While meeting planners are working on such short notice, we believe we have distinct advantages that help us secure the business due to our strength and capabilities and amenities needed to make a meeting successful such as special audio visual needs, restaurant, catering options and clubrooms.

Our overall group booking pace for fiscal 2015 is approximately equal to the recently completed year at this moment, but we have seen signs of growth and pace during our recently completed fourth quarter that give us optimism for fiscal 2015 booking pace.

We reported our 14 straight quarter of increased ADR during our fiscal 2014 fourth quarter although an intentional strategy to trade rate for occupancy at one of our hotels kept our overall rate increase a little lower this quarter.

We don't usually call out specific hotels since our portfolio was not particularly large but as Dough pointed out our fiscal 2014 results were also impacted by difficult year-over-year market in Chicago even though our hotel outperformed the market and the fact that we have rooms out of service at our Pfister hotel as result of the tower building rooms renovations during our third and fourth quarters.

I am happy to say that the Pfister renovation is now completed, the tower rooms look great. And as you know, we are getting ready to begin our major renovation of our Chicago hotel converting it to one of the first AC hotels by Marriott in United States.

We are excited to bring this successful brand to Chicago and believe we have an ideal location for the stylish, urban-lifestyle brand. Looking ahead, our outlook for the future hasn’t really changed. I would hope that we would continue to experience favorable trends in our revenues and our operating income even if it continues to be slow and steady.

Milwaukee will see another hotel in the market shortly when a 380 room casino hotel opens up near Downtown. Time will tell what impact this hotel will have on the market. They believe that the majority of their occupancy will represent new demand to the marketplace as people come to gamble at their casino. We obviously hope they are right.

Conversely, we are excited to finally have the Cornhusker renovation nearing completion. The meeting rooms are all that is left to finish. So, we hope to start seeing the benefits of our investment there as time goes on. It is far in a way the nicest hotel in Lincoln.

And finally, we are still pursuing the number of additional potential growth opportunities with the particular focus on management contracts possibly with some sliver equity at times. We were happy to add the Heidel House Resort & Spa to our list of managed properties during our fiscal 2014 fourth quarter.

We also are excited to add another industry veteran, Tom Riley to our development team this past quarter. Tom comes to us from Kimpton Hotels and restaurants and has hit the road ground running looking for additional growth opportunities for this division.

Before I wrap up our prepared comments and open the call for questions, let me touch on two other subjects very briefly that continues to be positive behind the scenes actions on a number of fronts related to the Corners of Brookfield, of Von Maur anchored mixed used project that we have been advancing for some time now.

We are nearing completion of our negotiations with our majority equity partner and hope to have an announcement about that as well as additional tenants that have competed to the project in the very near future. In anticipation of a fall start to this project we have already demolished the former theater on the site with more to come.

As we have said in prior updates, this is a complicated infinite process and we plan to have a more – a lot more to say about this in the very near future.

And lastly as we have noted in our press release, although our share repurchase is slow in our fourth quarter we still ended repurchasing 314,000 shares of MCS stock during fiscal 2014 at an average price of $13.30, our Board also expressed confidence in future by raising our quarterly dividend by nearly 12% during our fourth quarter.

We obviously think our share repurchases over the last several years have been a very good investment and our strong balance sheet continues to give us a great deal of flexibility in the future as we invest in our businesses while still returning capital to shareholders through a variety of different means.

With that at this time Dough and I will be happy to open the call up for any questions you may have. .

[Operator Instructions] We will go first to Mr. David Loeb with Robert W Baird. Please proceed. .

Good morning gentlemen. I have a few of course, just kind of broadly in capital allocation Dough you talked a bit about where you see the CapEx in theaters and hotels, and Greg you mentioned the Corner’s Project and likely groundbreaking in the fall.

Can you just talk a little more broadly about how you look at using your balance sheet capacity between those kinds of normal CapEx projects, the Corners buybacks and acquisitions?.

I will touch on the Corners first David and just -- we have only used our balance sheet there to fund the pre-development cost and as the deal is currently being contemplated that's really the only thing as we have talked about in the past, the structure that we are working on will have a majority equity partner involved.

We will intend to still have an interest in it, but keep in mind that we also have land and so one of our opportunities potentially is to contribute the land to the project.

So it really doesn't from my perspective, as I say here right at this moment, it doesn't really have any capital allocation issues at all in this coming year from the Corner’s perspective.

We have been funding the pre-development cost and that's been our major outlay at this point but ultimately once the project gets going that wouldn't be the case anymore.

So you’ve any question related to share repurchase and dividends, is that correct?.

Share repurchases and acquisitions?.

On acquisitions, I’m sorry. It’s about the deals David I mean it’s where we are looking I mean we simply, we are opportunistic with the capital I think it’s been our history. If there are good acquisitions we are going to make it, if we think that stock price is at a price we think it’s a good investment, we’re going to make it..

And you’ve moved up that stock price a bit because it’s been pretty strong this quarter.

Do you, given the range whether the stock has been trading of late is it list of a good investment to buy back shares than other potential opportunities?.

Here is all I could say about that David, I think you can understand that that’s the question and the nature of that question, we are not a company that simply says we are going to buyback certain amount of shares and we don’t have a set target, it’s that simple.

I think there are companies that may do that, we don’t and we make at any given point in time we’re just going to make an analysis and make a decision what make sense..

Okay..

And if refrain it properly David from a capital allocation perspective, so we have to any given point in time, we are taking a look at what we have to ahead of us from a capital expansion perspective, I mean the key lever is tend to be you can let them off pretty quickly by shares repurchases dividends, capital expenditures, acquisitions and maybe you thrill into that any asset sales, those are the five biggies and those are the five thing that we have to constantly be monitoring as we make those capital allocations decisions..

Okay, in the prepared remarks you mentioned the acquisitions more likely in theaters than hotels, you have bought the interest in a couple of hotels recently, if you are thinking that today the better buys are likely to be in theaters?.

Not necessarily, I think there are probably more capital that we got to theaters now than the hotels because a sort of just our different idea of saying that on the hotels we’re going to take smaller positions in properties as we grow our management business as opposed to theaters where that’s not really an option.

So, it wasn’t meant to reflect and I would say that wasn’t meant to reflect a number of properties or anything like that I mean we could do, maybe we get, maybe we do five hotels with sliver equity that dollar amount would still be relatively small amount compared to of a theater acquisition came along.

So I was just trying, I was talking about from that relativity..

Yes, and it’s been a few years since your most recent theater acquisition and do you think there are more of those and more groups similar to Douglas or the previous ones that might be looking at their options now?.

We’ve been giving this some thoughts, there was this whole theory that when digital cinema came along there might be a bunch of guys who were going to be first (inaudible) and they couldn’t make the investment in digital but I don't think that panned out because I know there was basically the studios with the big beneficiary of the digital role and in essence they in essence finance the digital rollout so that didn't create the (inaudible) that I think or the profit people are going to have.

Well theater is really interesting that we have been thinking about. It's now been this -- the investments that it takes to do the things that are potentially going to be competitive whether it's DreamLounges or Take Five lounges or food and beverage advanced food and beverage concepts that take not only capital but expertise.

That might create opportunities. Now I am not sitting here and telling you that I am giving you some window into that something is actually happening or I know but it's a theory, but potentially everyone has the made the (inaudible) digital there was theory too. But we sort of wonder if that’s where it's going to go.

That’s our current thinking right now that that may present some opportunities and just again it's one of those things where we just want to hang around the rim. We want to be there when people who have properties that the time and they may not have people in their family who want to continue to run because they tend to be more closely controlled.

They may care about who owns them where sometimes it isn’t about the last dollar, it's about who is going to maintain their name, because they have had their – their name has been invested in these communities and it's about going in and that dynamic is important as well. .

I would even say at sometimes the justice department may care about who owns and as well. It's another exactly great point. .

Very good point. Yes, Greg I knew that basketball scholarship you got when you were younger. It just a great segway into the theaters and it's clear that your initiatives are really paying off with the substantial out performance relative to the industry.

How bigger role do you think the loyalty program is relative to the things that are more capital intensive?.

It's too early to tell what where, how much that is going to benefit us in the -- right now.

And there is no really data and I don’t have it, I can tell you that we are seeing significant percentage of customers who are using it and it's very and that’s interesting data so whether they are becoming anywhere now we just don't know yet, but I will tell you this I do believe this is a great asset for a company.

It’s going to allow so many things for us. It's going to allow us, it's going to allow us to communicate with our guest better to give them more value, how great would it be for them to get a thank you for seeing a movie after they go. We couldn’t do that in the past. Now we know they went or some added bonus material.

We can give them added value by knowing about them. On top of that, we can target our marketing to them if we know what they like we can go to them and the only way we know they like is if we know who they are and know what they have seen. For years that has been a business that had a – basically anonymous customer base, we didn't know who was coming.

We didn't know what they were seeing. So to be able to add value and then lever the knowledge that we have got of what they like and what they tend to, what they do, we should be able to treat that as a very valuable asset.

But we don't know yet, we are still, we are only -- but I will tell you that we surprised ourselves of how much interest there is in the program. The team has done a great job I will say, they have done a great job of rolling it out. .

The results are impressive and half a million members is a big number. It's impressive as well.

And to shift over to the final topic of hotels, first housekeeping in the last Q you mentioned loan maturing on the Chicago asset and the likelihood of refinancing that during the third quarter, Dough were you in there?.

We actually did David was we actually choosing to pay that off we have significant excess capacity in our revolver and so we actually are saving few dollars and during this time period this is wholly owned property the only two mortgages that I currently have in place on hotels are on properties that we have – that majority owners but we have partners as well as the Skirvin and the Cornhusker.

So my thought was that at this point in time we have an opportunity to just pay this off with all of our availability under our revolving credit. All things being equal, that's a fairly significant savings that was fixed rate loan that we had in placed so this coming year, there is a difference of $500, 000 or $600,000.

As the year goes on as we take on, as we do this property, and we have talked openly that anyone of our properties is listed we can be accounted at some point maybe we consider taking partner on, but as stands right now we are prepared to spin the money for the renovation and I will currently fund out of our current facility..

And just for modeling purposes could you tell us what date you paid that off?.

Last date of fiscal year..

Perfect. That makes it easy for us. .

How clean is that, ah?.

Perfect.

Okay and on the leadership of that division, are you just going to make Tom Kissinger permanent?.

Tom, are you on the call? David what we’ve made final decision on that division you will come to know about it..

Okay and last one, kind of interrelated to your comments about Milwaukee supply but what are your thoughts about the intercontinental, I gather that, the franchise life on that isn’t all that much longer, so what are you thinking about the future of that hotel?.

We very much like the location, I think it’s a great location for a hotel, you are absolutely right the brand is not going to be have on the hotel, much longer and, I would tell the brand is not the strongest brand, it’s so what we’re looking for us the opportunity we’ve been making, we have been starting to think about what we’re going to do, what’s the game plan for it and part of this let’s see what going on with Milwaukee, let’s see what’s happening as the market evolves and it’s nice to have the flexibility to do if you want..

That’s great. This is a terrific, I really appreciate your candor all of this. Thank you..

Your next question comes from the line of Mr. Mike Hickey with Benchmark, please proceed..

Hi Greg and Doug, great quarter guys..

Thank you..

For your new Dreamline installations in fiscal ’15, do you have any color on sort of the casing of those installation as that relates to your fiscal year?.

Mike, we don’t like to obviously doing that in the heat of the summer turning the theaters upside down, so probably we’ll get started on the next one very shortly, but I would say by – we generally assume midyear for at least one or two of them and then the others would probably be more spring, I got to tell you we are still I mean 3 to 5 is the number that we are looking at but we are still going through the numbers I mean I’m really just kind of the (inaudible) right now in terms of the guess..

Fair enough and then on the on the locations you do have, obviously you are seeing some great, it looks like some great growth and relative attendance, have you experimented with any sort of premium on the pricing on those locations and that something you expect to do in the future?.

No and yes. Our goal has been first and foremost to build attendance and get people in and experience what a absolute wonderful experience movie in the DreamLounger. There is no better ways than movie I mean I see no better. There is not a bad way to see a movie when there is no better way to see it in a DreamLounger.

But you are right that we will have opportunities we believe to get a premium price for those seats except on Tuesdays. Mike, I want to use question that kind of also note that just to be clear in this quarter that we just completed. It really it was just the four original locations that impacted our results.

The other four that we have opened up really – they opened up at the end of quarter and in fact if anything you could even argue that those locations suffered a little bit this past quarter because we had – we were under construction and we – so we had auditorium out of service.

So I want to be clear as you are thinking about what happened this past quarter that was really still in four original locations. .

Okay. It's helpful. Thank you. And it looks like obviously you have sort of really polished kind of next gen auditorium model and of course counting ’15 we have what appears to be sort of magical slate in terms of driving overall box office growth.

I mean does that motivate you guys now to be more aggressive on the M&A front to kind of get in front of that and sort of inject your new model into that?.

I am more aggressive I think we will maintain the same pace of staying in touch with people, making people know that we are available that we are an interested acquirer. But again, it will depend on the pricing. I wish that what was coming in 2015 was a big secret but it's not. So will that, we will see where the pricing takes us. .

We look every deal and then decide where to make our investment does it in our own properties we are going to make them there and if there is opportunities it could return, a good returns we will do it there too. 2016 looks pretty good so we can, yes. .

Yes I have no doubt. Alright. Thanks guys. Good luck. .

Thanks Mike. .

Your next question comes from the line of Mr. Brian Rafn of Morgan Dempsey Capital Management. Please proceed. .

Good morning guys. .

Hey Brian. .

Hey Brian. .

Give me a sense and I know you guys have just started this, you talked a lot about it, the Tuesday night, $5 night, I am wondering as you roll off with the free popcorn has there been any more incremental sales in concession food and beverage and that Tuesday night customer, is he a guy who is just going to traffic because the Zaffiro’s or the Take Five.

.

Yes.

I will tell you yes – first start with the first question, the box office pretty and the concession, I recon the numbers have gone up as we modified the program and yes they do attend, they do visit our other F&B outlet, partly too we do know, remember understanding the nature of the customer and that is a value of customer, we didn’t respect, the offerings of value don’t just stop at the box office, we offer discounted, candy discount will do a $2 hotdog at the concession stand and there are more developed Zaffiro’s, the more developed F&B outlets we have $5 pizzas we offer, we offer something for that value customer those times and we are seeing increased volumes that work..

Yes, okay.

At your rollout, I agree your loyalty program have you been, have you got any anecdotal maybe phase traffic visuals what that guy is, is it kids, is it mix, is it family, is it little old ladies, who is your Tuesday night person?.

Well remember, loyalty is not just Tuesday night..

Right, right..

So loyalty is our entire customer base.

If you are asking about the mix of two customer, it certainly, it is a customer that is a different customer in a lot of way look there’s some, there’s obviously some overlap, we see a little bit of overlap between, we didn’t have any customers on Tuesdays and we see little bit of Monday and Wednesday customers shifted to Tuesday, but what you look at the aggregate the number that we are driving a clearly we’re bringing people to theater who haven’t come awhile and what’s is really, really interesting is that they are coming to just and this is what I frankly love the most about the whole program, if you are not coming to see a movie.

We’ve been talking about this little bit, they are coming to the movies and they all see whatever is there because its $5 they know the price is there and so the idea of building frequency and then ultimately building frequency into the more premium period too not every customer is going to be a customer they can startle both those.

But the idea of them coming to the theater and having a great out of home experience and being able to have a drink at Take Five lounge or have a bite one of in our BSPs or Zaffiro’s Express or Zaffiro’s Sport Service restaurants and the experience, I mean it’s as I talked about before we as an industry have not been very good at helping people understand here’s the benefit of being in this business for three generations, my grandfather had a line.

There’s a kitchen in every home but people still go out to eat, why they go out to eat because it is a differentiated experience and going for movies is not a substitute for watching something on your television screen and so what we have to do is get people to understand that it’s about going for movies and the experience and all he marketing the studio is doing they are geniuses I will not take that away from them, they can get 10 million people to get off their sofa on a weekend which is pretty incredible.

But for marketing they don't talk about the experience of the movie but that this program helps build that and it's been really good for that to build that experience and to bring people out who haven’t come for long time..

Yes okay. Okay.

And I am assuming in the four theaters that you have Greg with the DreamLounger, is that DreamLounger in every auditorium or just selective auditoriums?.

The four we are talking about they all are in auditoriums but we have done different things, we are – where we are putting on the UltraScreen DLXs, DLX, the DreamLounger experience there are theaters where all we have is the UltraScreen with the DreamLoungers and we have regular premium seating in all the other. .

Got you. Got you and any you have only rolled it out for short period, that the – it's a beautiful seat, you know the complicity of the mechanisms and clean – I am only thinking of my bunch is ten year old with popcorn and liquids on those nice seats, you guys must have (inaudible)somewhere.

Is the maintenance of that and I know it's early, is that going to be an issue with the DreamLounger or they almost bulletproof. .

Right it's early. .

Okay. .

It's got an electric mechanism. It's just early. So we will see. And then to clarify I want to clarify on your past question Brian so all eight now, so the original four you asked about that was in every auditorium, the additional four that we did we are in every auditorium as well.

So that the eighth now are that we are – we have been talking about are all completely DreamLounger locations..

Okay. Okay. Greg in the past you talked a little bit about depth of movies, you talked a little bit about top five.

Did you talk in the past year-over-year movie 6 to 10, 10 to 20 how would that look fiscal year versus fiscal year for that in some of those lower not the top five or maybe top ten, the depth maybe of the quality?.

You know Brian, well Dough is looking for data, but I am going to tell you, I won't, who knows. We don't know.

We are in this business for – we look at this multiple years a time and I mean I have seen this I know you have seen someone, there is some analyst who has written some research and talked about it, well the top movie really good but the depth doesn't, but I read the research and I respect the research but I don't think anybody really knows and they get harder to pick.

There is no line in the movie business. The only sure thing is a sequel, everything else is R&D.

But the other side to that is we know overtime it's a stable business hat if you view it not quarter-to-quarter or even year-to-year so if you view it over period of years it's going to have certain amount of growth and you have to keep reinvesting in your business and marketing and staying fresh and relevant and then you will have a nice business and that's how we look at it.

Brian I do have access, I mean if you talk about this past year --.

Yes right, the past, right..

It was pretty much a push. Our top 15 pictures this past year were 39% of our box office. The year before our top 15 pictures were 38% of our box office..

Okay. That's what I was looking for. Yes great. Great.

Relative to the Dolby® Atmos sound system, is that just integrated, is that a separate installation or are you mating that with new theaters or mating with DreamLounger or mating it just to the UltraScreen?.

Well, so far we have only put them, you can put them anywhere.

We have only put them in our UltraScreens though I will tell you that we are running a test in our (inaudible) theater we have done what's the super screen and which is a little bit, which carries less of a premium and it's less, it's our best house in a smaller market and there we are testing a less robust version but still very impressive and so where does that take us I don't know but right now all it is in the, just in the UltraScreen.

.

Got you and I missed one of the -- can you give a sense on the hotel side what you are seeing trends in your business traveler from occupancy or volume?.

Well look at it, it continues to grow. We are seeing some positive signs but it's not, it's still until the employment levels really pick up I don't know where, I don't see that being, it going to be a big robust turn. It's just going to grow subtly with the economy..

Okay.

And just one more, when you talked about being playing around the rim being some perceptively acquisitive, for you guys if you find properties whether they be rural and it maybe the geographic specificity that you have, are you versatile to just knocking the things down, buying the real estate and building something new or do you – you try to rehab the current footprint.

How much I guess how much slash and burn reconstruction are you guys willing to, would you do turn around or you are really looking at something that just added the margins..

I mean I don't know. I can't think of any examples where that's happened right now. Brian maybe there has been somewhere in the country but for the general case that would not be what you would with generally with the theater. .

Okay. Right. Thanks guys..

[Operator Instructions] Your next question comes from the line of Mr. Jim Goss from Barrington Research, please proceed..

Thanks. I have got a few but first regarding the hotel area, I was sort of interested in your comments about possibly some sliver equity being perhaps either desired on your part or the other parts.

I just wanted if you go through the process of how you are going to select some of these additional hotel contracts and if you are thinking of either branding or certain franchises you would want to concentrate your dealings with could you give us any color on that whole process?.

You know I mean we are out there in the markets looking at as many opportunities as we can look at.

I think that we look – we have couple of, we have one great interesting thing about us if you look at our hotel business, and it's been over 50 years, we have such a variety of hotels that we run from a full service 1200 acre resort to historic properties and whether it's Milwaukie or in Oklahoma city, to conventional center hotels, to branded hotels, to boutique hotels, we have got a pretty broad skill set.

So what's important to us though is that we find opportunities where we can add value, we can add value in a lot of places. We want to – we don't want to take things that are going to last five minutes. You know there is a big up front that people forget it.

So it's out intellectual property but there is generally a big upfront investment in getting these things up and going because we are probably coming into something that we are going to add value or we are going to make changes to.

We are going to come up with new ideas re-concept restaurants, we could be involved in a big -- if you look at our western Atlanta that was a significant rehab of that hotel. And again we have done deep rehabs I mean we can hold probably multiple more other stories over the years of the deep rehabs we have done.

So we are going to put a lot of up front time into it. It's got to have some length in the contracts and then have enough scale that for us it makes sense for us to take a small little contract for small dollar amount doesn’t make a lot of sense because it's got to have some time and recoup that investment of our intellectual property. .

So do you feel there is definite advantage to having that varied approach rather than select one or two concepts that might make more sense to create a greater emphasis on?.

I really do because again it give us the ability to look at a lot of different opportunities and I guess, look at if right now given the market, there has been a ton of trading activity in the asset, there we saw it’s better than it was but it’s not (inaudible).

So the ability to look at a lot of opportunities is good if the market were really get kind of velocity you might say look, I’ve got to narrow my focus a little bit, but right now it’s not as robust – the trade market is not robust..

Okay and on the theatrical side rather than being concerned that you will be soon lapping some of the advancements you’ve made, should we be thinking more in terms of continual evolution of you either the re-seatings or the Zaffiro’s and Take Fives and that sort of thing such that you don’t necessarily see a quarter over the next year or so where we’re going to say we’ve got into that at the end point and we are in a more comparable basis and the things are level off if you are in the still in that growth mode..

You know Jim, in the last quarter someone asked if, essentially asked whether we could – it almost sounded like, could we guarantee another 900 basis points outperformance and we understandably didn’t say put a number to it and as it turned out, it was there another 900 basis points and – but I am not again now I’m not going to sit here and we are not going to try to suggest that we can sustain 900 basis points forever, on the other hand we do expect our goal and our plan is to continue to outperform and we think with the investments that we are making with the continued evolution of we introduced the $5 Tuesdays in mid November last year, the first four locations opened up by late November, on the other hand now we’ve got four more locations reduced more the $5 Tuesday program has grown.

We’ve introduced the magical movie rewards program we’re opening up the new food and beverage outlets. We think we have lot of things and still provide us a wind to our back, but we’re not going to make some sort of projections say it’s going to be exactly this number but our goal is to outperform every quarter..

You are right.

it gets more challenging, but I promise you, there is a group of people sitting on the floor above me it seems that they are trying to figure out and paying attention to that and saying )okay, what’s our next step? What do we keep doing, how do we keep outperforming? What that level is, you are right when we picked the DreamLounger stuff, we picked the easiest theatres to do first that the decision has become more challenging.

It’s just like if you were going to a market with a piece of real-estate to cover a market you pick the best pieces of real-estate first and then you but you still build out your market and you still do things that are accretive and good deals and to Doug’s point there are so many other levers still left to pull.

And so – and we would just keep doing it and I know that they are sitting up there trying to figure out how to keep that going and keep out-performing..

But could the $5 Tuesday be a $5 Tuesday and Wednesday or Monday and Tuesday so that even if you cannibalize a little bit you gave another option that sort of an increase the – basically prices the week in a different way, where the weekend is one package and some of the weekly properties or another?.

Look, I don’t know what the government plans are, upstairs who knows they might want to down with that idea. I would tell you that just at first blush what I like about $5 Tuesday, we like as a business about $5 Tuesdays is opposed to creating a discount period of the week or a couple of days, it [eventises] the idea.

It takes us Tuesday’s are special. And it creates an urgency and it maximizes this idea we talked about of yield management, the right customer, the right time at the right price. And it maximizes that impact, because that’s what we are trying to do. We are taking what is a hotel maximum in yield management and applying it to theatres.

And you know you by Tuesday we really get a momentum that is really an energy in the theatres. I mean you have to come see it, it’s really interesting. And I worry that if you start to dilute that a little bit, you lose some of the magic beyond just having a discount..

That’s a fair point. Last thing, this Sun Prairie complex seems to have a number of different initiatives going on all at once.

Is it -- what sort of configuration do you have, or do you have and do you have different pricing by the types of screen, does it get a little more complicated to manage that particular property when you have that many different elements going on?.

We have other properties that are really doing the same thing which is the most modern version. We have other properties that have a Take Five Lounge and Big Screen, excuse me Big Screen Bistros in it and DreamLounger and Ultra Screens we’ve got a number of those. They are more complex, there is no doubt about it.

This isn’t the first one, it’s just the newest shiniest pain version of it we’ve got..

Alright..

The only one that currently has any premium pricing associated with it is the Ultra Screen DLXs. They do have a premium price, Jum. We answered an earlier question that suggested that at some point we certainly could be looking at pricing in our DreamLounger locations, but that’s not how we came out of the gate. .

Okay. Thanks to both of you. .

Ladies and gentlemen thank you so much for your participation. At this time, it appears there are no other questions. I would like to turn the call back to Mr. Neis for any additional or closing comments. .

Well, listen I want to echo that one thank you all for joining us again today. We look forward to talking to you once again in September just in two short months when we release our fiscal 2015 first quarter results. Until then thank you and have a great day. .

Ladies and gentlemen that is the conclusion of the conference call. Thank you again for your participation. You may now disconnect and have a great day..