Greg Marcus - President and CEO Doug Neis - CFO.

James Goss - Barrington Research Associates, Inc. Eric Wold - B. Riley Michael Bellisario - Robert W. Baird & Co. Mike Hickey - The Benchmark Company Brian Rafn - Morgan Dempsey Capital Management Ryan Hamilton - Morgan Dempsey Capital Management.

Good morning, everyone. And welcome to The Marcus Corporation First Quarter Earnings Conference Call. My name is Whitley 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 toward 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 our fiscal 2015 first 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, our expectations about the future trends in the business group and leisure travel industry and in our markets, our expectations and plans regarding growth in the number and type of our properties and facilities, 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 of 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 2015 first quarter.

Certainly it was a quarter impacted by a well-documented weaker summer film slate, but with many positive signs that should bode well for future quarters when the movie lineup strengthens.

For the third straight quarter, our theater division significantly outperformed the industry and continue to improvement from our Hotels & Resorts Division contributed to record revenues for the company this quarter.

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

Now before I dig in each division, I usually spend a few minutes on each line item below operating income, but as you can see, we had virtually no change in any of the four applicable line items during the first quarter, so we will save some time and skip that step this time.

Our first quarter effective income tax rate adjusted for losses from non-controlling interest was 39.1% compared to 40.2% last year, which was slightly lower than the last year, but generally right in our historical range of 39% to 40%.

And as the press release noted, comparisons of last year were negatively impacted by a sizeable loss attributable to non-controlling interest during the first quarter last year, which favorably impacted last year’s reported net earnings attributable for the Marcus Corporation by over $0.01 per share.

Now shifting gears away from the earning statement just for a moment, our total capital expenditures during the first quarter of fiscal 2015 totaled approximately $13 million compared to just under $9 million last year.

Approximately $8 million of this amount was incurred in our Theater division, and the majority of which was related to the completion of multiple projects previously discussed as part of last year’s $50 million investment in our existing theaters.

At this early stage of our fiscal year, I have no reason to make any adjustments -- any major adjustments to our previous estimate for capital expenditures for fiscal 2015, of an amount in the $70 million to $90 million range, recognizing however that as we pointed out in our recent 10-K filing, the timing of several of our planned expenditures are still just estimates at this time.

We're still finalizing the scope and timing of many of the various requested projects by our two divisions and we anticipate proceeding with some of these projects as the year unfolds. Greg will expand on some of these comments -- some of these in his comments.

I will say that if we let history be our guide, some of these projects could carry over to the next fiscal year and if that occurred, it would be more likely that we would spend to the lower end of that projected range.

Of course the actual timing of the various projects currently underway or are proposed will certainly impact our final capital expenditure number as will any currently unidentified projects that could develop during the year. So now I would provide some financial comments on our operations for the first quarter beginning with theaters.

As you can see in our reported numbers, our Box Office revenues decreased to 1.8% during the first quarter, but thanks to a 5.2% increase in concession and food and beverage revenues, our total theater division revenues were actually up slightly compared to last year.

Now at the risk of sounding like a broken record, what’s most notable -- notable about these numbers and particularly the box office revenues is that we once again significantly outperformed the national numbers. According to Rentrak, which is national reporting -- a box office reporting service for the theater industry, the U.S.

Box Office actually decreased 12.7% during the comparable 13 weeks of our fiscal 2015 first quarter. So we’ve followed up two straight quarters where we outperformed the index by over nine percentage points for the quarter where we over-indexed by nearly 11 percentage points, no small feat.

The first quarter increases are attributable to an increase in attendance at our comparable theaters of a very impressive 9.9% for the first quarter despite a clearly weaker film slate.

Just as we reported during the last two quarters of fiscal 2014, we believe the majority of this attendance increase and the overall industry outperformance can be attributed to the new investments we're making in our theaters and innovative marketing strategies that we've initiated, our average admission price for our comparable theaters decreased by 10.6 for the quarter, --- 10.6% for the quarter, due entirely to our $5 Tuesday program for all movies.

Of course, if you surmise, that also contributed to our attendance gains.

Our average concession food and beverage revenues per person decreased by 4.3% for the first quarter due to promotions related to our $5 Tuesday program, and not insignificantly by the fact that this summer’s film slate was noticeably lacking in family films, a genre that typically produces higher concession per capitas as compared to other genres.

Conversely, I want to remind you that last year’s top two films for the first quarter were the animated family films Despicable Me 2 and Monsters University, further accentuating the impact this change in film mix had on our concession per capitas.

Of course with higher attendance, these changes in our per capita numbers don’t tell the whole story, as evidenced by an increase in total concession in food and beverage revenues for the quarter.

Now I also want to note that construction delays in several of our new Take Five Lounges, Zaffiro's Express outlets kept them from having much of an impact on our first quarter results. These new outlets should help drive higher food and beverage revenues per person at those locations in the future.

I am happy to report that four of the five new Take Five Lounges and Zaffiro's Express are now open and the fifth opens at the end of this month. So this should contribute to future quarter operating results.

I also want to point out a couple of other numbers with you that definitely impacted our reported results over and above the disappoint film slate. First, there were a couple of one-time negative comparisons to last year.

The first one is the fact that we incurred over $200,000 of pre-opening cost during our fiscal first quarter related to the opening of some of these aforementioned new amenities.

In addition, last year during the first quarter, we received an unexpected property tax refund of nearly $300,000 of one of our Chicago area theaters that consequently unfavorably impacted comparisons to this year.

These two items alone account for $500,000 of the $2 million decrease in Theater division operating income this quarter compared to last year. You’ll also note that our depreciation and amortization from our Theater division increased nearly $750,000 during the first quarter compared to last year.

While obviously not impacting EBITDA, this increase is attributable to our recent investments in our theaters and an increase in net depreciation of our digital cinema systems as we continue to amortize our initial license fees and capital lease obligation against continued reductions of the obligation resulting from earned virtual print fees; all of this of course, having no impact on cash.

Finally, we estimate that we incurred approximately $400,000 in cost this quarter related our new loyalty program including advertising, material cost, and the cost of accruing expected rewards being earned our new members. I am not suggesting this as a one-time cost, it’s not.

But I am pointing out that in the early months of the program, where are incurring cost that are expected to reap future benefits as we attempt to drive increased frequency and ultimately employ other methods of monetization through targeted communications.

Now, shifting to our Hotels & Resorts Division, as we noted in our release, our overall hotel revenues were up 4.1% for the first quarter, so RevPAR for nine comparable properties was up 6.5% during the quarter compared to the same period last year.

As we've noted in the past, our RevPAR performance did vary by market and type of property, and all but three of our nine comparable company-owned properties reported increased RevPAR again this quarter.

Now according to data received from Smith Travel Research and complied by us, in order to compare our fiscal year results, comparable upper upscale hotels throughout the United States experienced increase in RevPAR of 8.1% during our fiscal 2015 first quarter.

Breaking out our numbers more specifically, our fiscal 2015 first quarter overall RevPAR increase was due to an overall occupancy rate increase of 3.7 percentage points and a 1.9% increase in our average daily rate. With that, I will turn the call over to Greg..

Thanks, Doug. I'll begin my remarks today with our Theater division. You can see the numbers and Doug shared a lot of additional detail with you in order to help you understand our reported results. There certainly is plenty to be happy about this quarter, obviously beginning with our continued industry outperformance.

Clearly the investments we've made in our theaters in our new marketing and pricing initiatives are driving customers to our theaters and not only are we over-indexing the nation as a whole, the numbers we are getting from Rentrak suggest that we are once again the top performing theater circuit among the top 10 chains in the United States.

But the fact is it was a challenging summer films slate for the industry, with Box Office down approximately 15% for the summer as a whole and about 13% during our specific 13 week quarter, the first three weeks in June started our first quarter off in pretty decent shape and our August Box Office revenues were up approximately 30% compared to last year.

But the weeks in between, a time in the theater business when we should really be at our busiest, the film product was found significantly lacking and it was just too much to overcome.

To put this in perspective, the week that includes the 4th of July weekend is historically one of the busiest weeks of our entire fiscal year, often second-only to the week between Christmas and New Year's and it certainly was one of the best weeks in the last year.

This year, the fourth -- the July fourth week was our second worst week of our entire 13-week first quarter. There was an interesting article in the Wall Street Journal a few weeks ago that may have shed some light on why this summer film slate was disappointing.

And the article attributed the decline to the fact the studios released only 12 movies with budgets close to or more than $100 million between May and August, compared to 22 films during the same period in 2013. Apparently, production delays on several would be blockbusters such as Fast and Furious 6 contributed to the downturn in releases.

So, it certainly was significant that we were able to keep revenues relatively flat in the face of the steep industry-wide decline. Clearly, we've been able to move the dial on topline performance materially. Yet, with flat revenues our bottom-line declined.

Doug went through a series of numbers where he had highlighted most of the differences in our bottom-line and the common threat is that we are making investments in our business that we believe will position our company to compete for the long haul.

Some of these investments have more frontloaded costs such as the loyalty program and preopening costs and some of the investments add fixed costs such as depreciation, but, they are all designed to grow revenues and bottom-line over time. Having said that, there is no question we still have work to do as we adapt to our new environment.

We’ve had a lot of new initiatives, added new staff in both the field and in our corporate office and have introduced many new amenities in our theaters over the past year. We intentionally staffed up at our theaters as we focused on rapidly increasing our new loyalty program membership roles.

We also had several theaters opened throughout the summer that were not by design construction zones as we finished up our recent $50 million reinvestment in our theaters.

As a result, there is no question in my mind that we had some inefficiencies this quarter, particularly from a staffing perspective and particularly when put in the context of a disappointing July Box Office.

But, we’ve begun to address these and we’ve already started to see improvement, in fact as recently as our third period we began to see traction from our efforts with more to come. We’ve been through difficult Box Office quarters before.

So, I am confident that our outstanding management team is prepared to address any and all future challenges as they always have and I firmly believe that the programs we've put in place and the investments we're making are putting us in a position to continue to excel in the future.

One example of a program that is poised to provide dividends for us in the future is our new Magical Movie Rewards loyalty program.

As our press release notes, I find it astounding that we have signed up more than 640,000 members in just the first six months of the program and we’re just scraping the surface of what this program will do for us in the future.

In fact, as Dough shared with you, during these early months, it would be pretty easy to argue that the program has primarily only added cost at this point.

The fact is, we’re really only just getting started tapping into the real strength of the program, which is our ability to actually know our guests, know what their preferences are and ultimately target communications and programming to them as individuals in order to deliver an enhanced movie going experience to our members.

And our belief is that this will translate into increased frequency, higher per caps, additional monetization strategies, increased loyalty to Marcus theaters and ultimately, continued improved operating results. Of course, another reason we have outperformed the industry has been the strategic investments we've been making in our theaters.

With the recent completion of projects included in last year's $50 million investment, we're prepared to make further investments in DreamLounger Recliner seating, UltraScreen DLX auditoriums, Take Five Lounges, Zaffiro's Express lobby dining and Big Screen Bistro in theater dining.

Our recently filed Form-10k highlighted some of the growth we are targeting in these successful concepts and I am pleased to tell you that our investment committee has already approved fiscal 2015 projects that include one new full theater conversion of DreamLounger seating and two conversions of existing UltraScreens to UltraScreen DLX auditoriums with recliner seats, Dolby Atmos sound and reserved seating.

We've also green-lighted one new Take Five Lounge, so far as well as two new Zaffiro's Express outlets, including one that will serve beer and wine. Additional projects for fiscal 2015 are also currently under review.

Add to all this new state-of-the-art theater that is -- sorry, add to all this, the new state-of-the-art theater that is under construction Sun Prairie, Wisconsin that will combine all of these new features, and you can see that we continue to focus on holistic approach to growth that doesn’t just focus on new locations or acquisitions, but strives to achieve meaningful growth from our existing asset base as well.

I also want to point out that as we near the completion of our first full year with our original four Dream Lounger locations one of them opened last summer and the other three in time for the holiday season last year, it will be an appropriate time for our team to review the right pricing adjustments for our upgraded theaters.

We have an increased box office or concession prices in nearly a year and a half and with the price value proposition, we are now providing to the improvements in our theaters, we believe there is some room in the marketplace to make selected price increases in the months ahead.

Some of you have heard me say this before, but I like in this pricing discussion to the revenue management practices we use in our hotel division. There is replaceable premium offerings and value offerings in our theaters. Ultimately, our goal in both our divisions is to provide the right price at the right place at the right time.

Finally, looking ahead, we’ve listed some of the movies scheduled to be released during our fiscal 2015 second quarter and the early look at the holiday season looks promising as well. And of course, the entire industry is talking about the Calendar 2015 films slate and I must admit, on paper it looks very good, but here is my take on that.

I had bet 12 to 18 months ago not many people were suggesting that July 15th would be as bad as it was. So, I always try to view the movie slate through a longer term lens. There will be some really good movies that everyone expected to be good, some surprising movies and some disappointing movies.

Some quarters will be outstanding and some will be challenging, but regardless of the strength of the films slate at any particular quarter or year for that matter, our team has established a goal to outpace the industry and that is what we’re going to strive for. If we do that, I am confident the favorable results will speak for themselves.

With that, let’s move on to other divisional hotels and resource. You’ve seen the segment numbers and Doug gave you some additional detail. It was another quarter of steady year-over-year improvement from this division. We reported solid increases in RevPAR and came within about $25,000 of reporting record divisional operating income.

As noted in our release our $11 million in operating income was the highest we reported since fiscal 2007, prior to the recession.

Since we’ve been talking so much about outperforming the industry in our theater division, I thought I would spend a couple of minutes talking about how we evaluate our hotel division performance compared to the industry as a whole, and then more specifically within our specific markets or competitive sets, as we call in the hotel business.

The best way to compare ourselves to the industry as a whole is to compare our occupancy, average daily rate and revenue per available room growth to the industry segment that most closely aligns with our owned hotels. The upper upscale segment, as defined by Smith Travel.

Earlier, Doug told you that this segment experienced higher revenue per available room or RevPAR growth than we did during our fiscal 2015 first quarter, specifically 8.1% compared to our 6.5%. The challenge with this comparison is that with only nine hotels in our average, individual hotels can have a proportionate larger impact on our results.

In our case, increased supply in two of our markets Milwaukee and Oklahoma City, has exceeded supply growth on a national basis.

In addition, the fact that our owned hotels are primarily in the Midwest, also makes a difference, as there are many markets particularly on the coasts that have been experiencing more robust ADR growth than seen in the mid-west, which is why the second way of comparing how we are doing against our completion becomes more relevant as it takes individual market factors into account.

Smith Travel also provides us with nine individual market indices for RevPAR, occupancy and average daily rate for each of our owned and operated hotels. These industries are indicators of market share.

Are you getting your fair share of your respective market? To understand how this works, if every hotel in your competitive set was getting their fair share of business based purely upon room count, everyone would have an index of 100.

If your occupancy, average daily rate and our RevPAR exceeds the average of your competitive set, you would then have an index greater than 100, and vice versa, if you’re below the average.

So, when we look at this measure for our combined owned hotel portfolio, we see that like our theater division, we consistently over index in all three key revenue categories.

The Smith -- the Smith Travel numbers are not in yet for August, so we can’t calculate our first quarter index yet, but our combined RevPAR index during our recently completed fiscal 2014 first was a very healthy 121.9 indicating that we are over-indexing our combined competitive markets by nearly 22%.

And we’re getting this performance from both occupancy and average daily rate as we over-index both of these measures as well. As we have shared with you in the past, occupancy in particular has been the main driver this current recovery and it remains at historic highs. Our combined first quarter occupancy for our nine owned hotels was a record 86%.

The success of our fiscal 2015 first quarter was driven by strong group business at separate hotels.

The fact that we were able to increase our ADR by as much as 8% to 9% in a couple of selected hotels that had strong group business demonstrated the rate power we gain with non-group business when we have substantial blocks of rooms committed to by groups.

And ultimately, our best way of improving margins in future period is by increasing our average daily rate. By the way, this was our 15th straight quarter of reporting increased average daily rate. So, we’re headed in the right direction. And overall, our group booking pace for fiscal 2015 is now running ahead of fiscal 2014 – another encouraging sign.

As we noted in our release, we recently finished the final phase of our major renovation of the Cornhusker and we’re looking forward to what should be continued to improve operating results in that hotel as a result.

Now, we’re getting ready to begin our major renovation of our Chicago hotel, converting it to one of the first AC hotels by Marriott in the United States. We expect to begin the major renovation in November with a goal of bringing this stylish urban-lifestyle brand to this outstanding Chicago location next spring.

Looking ahead, our outlook for the future hasn’t really changed. I hope that trends in our revenues and operating income even if it continues to be slow and steady. Milwaukee saw yet another hotel open in the market late in our first quarter. This time, the 380 room casino hotel near Downtown.

Time would tell, what impact this hotel will have on the market. And finally, we’re still pursuing a number of additional potential growth opportunities, with a particular focus on management contracts, possibly with some sliver equity at times.

We were happy to add the Heidel House and resort to our list of managed properties during our fiscal 2014 fourth quarter, and I think ownership would agree, we added value during our first summer with this property. With that, at this time, Doug and I would be happy to open the call up for any questions you may have..

(Operator Instructions) We'll go to Jim Goss with Barrington Research. Please go ahead..

Good morning..

Hey, Jim..

How are you guys doing? I thought I'd start with hotels this time.

I'm wondering in terms of the strategy you're using to try to add to the management contracts, could you discuss the process of securing management contracts and the areas of focus you might have in terms of types of hotel properties or geography or whatever else you might think is important.

And to the extent that you're trying to do it in terms of your management skills rather than the financing part, would you have sort of a REIT financing partner you would partner with and securing such contracts?.

Jim, the process is, we have a team of people devoted to looking for the different deals. We'll take multiple approaches to them. It can be in a case like the Heidel House, there was an ownership group that wanted to bring in a more experienced manager. They were only running one hotel, that hotel. They have other investments.

They saw the need to bring in professional management and dedicated professional hotel management. So, there are those transactions where we you have an ownership group already looking and so we have going on is we have a development person who's out calling on these people and trying to make the sale. The management is a product.

That's the way I look at it. So we're out selling our product. At the same time, we talked about Bill Reynolds before and our development efforts inside the Company. That's where we're out looking for -- Bill is out looking for deals to put together and we put in a little more equity but we also find partners. It could be a REIT.

It could be private equity. There's certainly a slew of hotel investors out there who are looking for management and the one advantage we bring -- we bring a number of advantages to the table, to partner with these kind of people. First of all, we can bring capital, even in the form of sliver equity.

For a lot of management companies they don't have the capital base we have.

Then also because of the extensive properties we have in both our divisions, we have an infrastructure that really can take on very complicated projects and bring them on quickly and add value and that -- so we're not dependent on -- we've got a team of people and lots of parts -- lots of different pieces we can fit into the parts, into the properties.

And in types of properties we're looking for – we’re looking for full service hotels. We're looking for upper upscale hotels. That's what we focus on. Those are more complicated assets. That's where we bring value to the company through our experience.

Geographically, we will pretty much go anywhere, because the one thing when you get into the upper upscale segment, the type of manager that we have to put at the property is one that can -- is one that's going to be able to operate somewhat autonomously. That doesn't say we're not bringing best practices.

That's the other thing, the other advantage we bring to an ownership group, best practices, purchasing scale, accounting scale, IT scale. We will then lever -- we will put that on top but we can manage it from a distance..

The only thing I would add, Jim, I think Greg nailed it all with comments. The only thing I would add would be we're not trying to position ourselves as a hired gun for a short-term period. We're looking for deals and arrangements where there's a mutual investment for some time period. We're not looking for 30 day outs and things along those lines.

We're looking for things that have a little more time to it and -- because as you know, we tend to look through things with a little longer term lens..

And to build on Doug's point, thank you Doug for catching that. The point is that to take on an asset, the kind of assets we’re talking about, with the complexity they have, these are complicated assets. To do that, it requires an investment.

It's an investment of time but time is money and so we have to put up a good size upfront investment to get it online, to get our systems in place and so if we're working on 30 day outs, we can't get that investment back. We need some with a longer term focus..

I assumed it was longer term focus. That wouldn't be in character of Marcus to do otherwise. Although I wonder if you have any answer to polar vortex two, if that happens to materialize this year.

On the film side, what were your film rental margins in the quarter or can you at least speak trend-wise to what they are since you I think don't break them out specifically..

You correctly noted that we don't break them out specifically. And if there would have been a big variation, I would have highlighted that, at least noted that in the overall in terms of from a margin perspective. Film cost was not the issue with this quarter.

And again, that's one of the weird factors about this business, Jim, is that in fact when the film slate is stronger, that's when the film cost percentage goes up. And so but it was not materially different from previous..

Okay. Last couple of things, I don't want to take too much time.

But when you talk about your reseatings, and getting strong attendance and outperforming, despite the film slate, do you think -- do you get a sense that you're getting attendance due to taking share from other theaters or do you think people like the experience so much that they're more likely to come despite films they might not otherwise be tempted to go to?.

It's both. No matter what we're doing, we're seeing it be a mixture of both. When it's the reseating programs and the improvements to the theaters, we're seeing a mixture of share shift and we refer to as organic growth in the market. We're studying all the markets where everybody's doing this and we're seeing a mixture of both.

And the same thing on our programs with discounting. We're seeing people who clearly haven't been to the movies in a while. I think that's less share shift going on, frankly, than when you see the reseating stuff. The stuff that's more value oriented, we're seeing a value oriented customer.

So probably that proportion then shifts more toward customers we haven't seen, which we love, customers we haven't seen come to the movie, come back..

The last thing, Zaffiro's, have you detected any significant difference in the operating metrics for the Zaffiro's that are in or around the theaters versus the ones that are free-standing in some other locations?.

It really is a different model entirely, Jim. As you alluded to, we have three theaters that have free-standing Zaffiro's - when we say free-standing, they're built within the movie theater. We actually took an auditorium out. But it's still a separate full-blown restaurant and bar. It's a restaurant half of it.

I think our study, I don't think we updated it, but last time I saw the numbers half the customers were just there to eat. It was not even – so it's a restaurant as well. So that whole cost structure is so different. Of course, we've lived that, being in the Appleby's business and a variety of other restaurant businesses over the years.

Versus the in line Zaffiro's Express is just a different model. There still is -- by definition, and all these additional alternate food and beverage concepts, by definition the food cost, the cost of sales will be as a percentage higher than your base popcorn, soda, candy that we've all learned over the years.

But they're incremental dollars and our studies have shown that we're getting some incremental dollars. And so it has kind of this two-fold effect. It has a somewhat slight negative effect on margin from a percentage basis but again, it should be adding more dollars..

Okay. I'll leave it go at that. Appreciate it..

Thanks, Jim..

Your next question comes from the line of Eric Wold with B. Riley. Please proceed..

Thank you. Good morning. Two questions. One on the theater side, you mentioned you're looking at possibly taking selective price increases at theaters.

I guess as you come up to the comp against the start of the $5 Tuesday promotion, any thoughts on adjustments you may need to make or may make around promotions around that in terms of going back and doing some things at concessions or all that or you kind of want to ride it out and see how that comps during the holiday?.

We're constantly looking at it and evaluating. We haven't come to any conclusions yet. As we come up on the first year, we're going to take a look at everything we're doing and make decisions on that..

I would add, Eric, that we've already -- when we first introduced it if you recall, that would be -- we'll come on that in November, early to mid-November. It was that free 40-ounce popcorn for everybody.

When we rolled out our Magical Movie Rewards program, the loyalty program on March 31st, we transition into only free popcorn then for reward members. So that was already an initial change. And we're not -- our guys will consistently look at that in terms of what the promotions might be. That's the current promotion that's going on.

But we'll certainly be looking at all those things..

We do test. We have enough locations that we test different opportunities in different markets. So we're studying it..

So $4 Wednesday is probably off the table?.

You made my day, Eric..

Switching to the hotel, you talk about taking price on the theater side. You guys have done a lot of remodels there. With the completion of some of these hotel remodels what has been the impact to ADR of those properties.

Have you pushed them up once the remodels are done or you holding the line for some period of time to see how the customers react?.

It's market dependent. We are trying -- hopefully the idea is that we're doing these renovations and we're driving more business and then the ADRs do push up. We're seeing the ADRs go up on these hotels with the renovations, there's no doubt about that.

The trick to the hotel business is as we alluded to in the comments is as this group business comes back, strategy is to put in a layer of group business, so you essentially shrink the size of your hotel and then by constraining that supply, you are able to then drive more price on what is left. That's the simple strategy that we try to go with.

And so as you put these improvements in place you become more attractive to these groups and we then are able to layer in that group base of business and then build from there..

One thing I would add to this, Eric, the one particular project that we have coming up that we've been talking a lot about and that's the Chicago one, that's a complete repositioning. That's taking -- that's rebranding the hotel.

The market position of that asset will be significantly different than it is currently at Four Points and frankly we would expect that it's going to be positioned with a higher ADR and so that's different from like for example the Pfister where we just did the renovation where it's still a Pfister. So it really depends on a project by project basis..

Okay. And then last question, taking the opposite of Jim's question around you're going out looking at properties to kind of take sliver equity, flash management contract stakes as you've done.

Have you experienced any of the opposite in terms of other industry buyers coming and looking at properties you own for potential opportunities?.

Nobody's come and knocked on our door. But that doesn't mean that we're not looking at -- we always look at our portfolio and that we're not analyzing our portfolio, we are given what's going on in the market..

It's no secret we've been talking about this openly, Eric, that we take a look at each of the assets in our portfolio. We think we're in a decent window. I don't think the window's slamming shut tomorrow. I think we're in a decent window here for us that we should be evaluating some of our assets and we are doing that..

And the way we're looking at it is, we want to -- we have a couple goals.

One is to make sure that we're keeping management of the properties because that's -- keep our infrastructure and then to make sure that the pricing is -- if there's a transaction, the pricing is appropriate and we keep investing in the assets so we're comfortable no matter where the strategy takes us..

Perfect. Thank you, guys..

Your next question comes from the line of Michael Bellisario with Baird. Please proceed..

Good morning, guys..

Hey, Michael..

Just a few questions for you. Wanted to start on hotels. As you guys evaluate the Milwaukee market, does the additional supply that's been announced, and that's the Kimpton that's now going to break ground by year end in the western, which is a little bit further out.

Do these new projects force your hand to evaluate the rebranding opportunities at the InterCon sooner rather than later in order to be ahead of that supply? And on that same topic, how do you evaluate the potential returns for a project like this given that it would be more of -- more defensive spending rather than offensive?.

I'm sorry, project like what? Like the InterCon..

Like a rebranding project where you would have to put some capital in, similar to what you're doing in Chicago with the AC..

We evaluate the market regularly. We've actually had pretty good success right now with that property. We don't get into specific details, obviously, if you're in the market you can see that that property, positioned. We've gotten aggressive with rate there. You can see it just go online, and look at our rates.

But when the market's strong we're taking advantage of that as well. I would tell you, we evaluate it at all times. We're under a license agreement with them now. So there is no change in anyway for a second. And we'll make the investment we feel needs to be. The additional investment is going to be looked at as how will it do.

These other hotels, if they're going to come they're going to come. They're going to cause the impact they're going to cause. What we do then has. What would be the -- assuming something happens, what would be the return on the additional investment and we would assume there will be some return there then..

Got it. And is that return that you're requiring, is that different for a project like this, that was kind of what I was asking, where it would be more defensive rather than putting new capital to work for a potential acquisition either on the hotel or theater side. Sounds like that's not the case..

No, I mean -- look, there's some capital you have to put into a hotel no matter what. It's not like every dollar you put into a hotel has got pure ROI because these things depreciate. So you have to figure in as you know, there's a certain amount of just replacement that we have to put in to keep the asset stable.

So a chunk of that doesn't have return associated with it. A chunk of it needs to have returns and it has to have returns based on our return models..

Sure. That's makes sense. And then just switching to theaters, the Tuesday $5 promotion.

Jim touched on it earlier, on one of his questions , but do you have a Tuesday only attendance figure and a non-Tuesday attendance figure you could share with us and I ask because we have yet to really see the bottom line EBITDA boost and just like to get your take on the potential cannibalization and how you track success, not in terms of revenues but really in terms of profits for this promotion..

Unfortunately, Michael no. We're not going to provide. We don't provided for this and we wouldn't provide it for anything else either. We don't actually even give our total attendance. We only talk about change in attendance. We're in a competitive business, a competitive marketplace, and we've chosen not to do that.

So no, I can't help you out from that perspective.

I might take issue a little bit with your comment that you haven't seen any because the fact is that in our third and fourth quarters we had some -- we did have some pretty good performance and certainly the summer, I can't underplay the impact of what July was because that is -- that should be the month that we're making hay.

That should be the month where seven days a week, never mind Tuesdays too, seven days a week you're just packed because that's when all the big pictures are playing. And last year it was. Look, that's the business we're in. We're going to have times like that.

And so I'm not sure that I agree with what I think I heard you saying that we haven't necessarily seen any EBITDA from that. I think we have seen some and I think overall it's accomplishing what we wanted to do which is take a business that -- everyone loves to talk about -- you've seen our presentation, everything else.

Everyone else puts it up there, that chart that, 20, 30 year chart of box office revenues and it's growing 3.7% compounded. But no one likes to talk about that line that shows attendance where attendance has been kind of flattish or even down a little bit.

And so it's doing exactly what we want it to do which is to bring people back to the theaters and when we do that, again, we start looking at -- strip out all the other noise that's going on with the film product, Greg already talked about a lot of the issues that we’re dealing with and investments that we're making.

When you strip all that out, the fact that we're getting, these customers coming back, going to movies, talking about going to movies again and spending dollars at the concession stand..

Let's just build on that a little bit. To your point, trust me, we look at this and we analyze this in 19 different directions. Is there some cannibalization? Sure, there is a little bit of cannibalization and at a lower margin.

But the net-net, this is one where we will see a little bit of margin impact but we will see greater volume increases that makeup for the margin overtime. Add to that the -- we firmly believe that and have seen that.

Because even if we look back and say well, if we hadn't done this, because trust me, we've done that, if we hadn't done this what would it look like. It would look not how it looks now. It would be a little bit less than it looks now. We've had to take some risk and stuff to do that.

We've had to add, make investments to make that happen but I would argue that's a great thing because we have got a physical plan. If you look at what it looks like a year ago, and you look at what it looks like now, it's substantially improved.

So we're getting a little bit better result with a much better physical plan which then when things are cooking should really lead to good stuff for us. On top of that, the advantage of having more people coming to our theaters can't be underplayed. What happens, there's some great dynamics. Obviously they're buying more concessions.

Obviously there's more people seeing our advertising. There's a lot of ancillary revenue. There's more people that now can be in our loyalty program that we can lever up. There's more people who see the preshow, the coming attractions.

Nothing makes me happier than when the theaters are busy because people are being exposed to the marketing for the movies to come. Those momentum cycles work in both directions, good and they can work against you too when things are not going so good.

So there's a lot of positive in addition to just seeing a material, we've done the math and just a pure mathematics level we're ahead..

Sure. That all makes sense. It's still early days for a lot of your investments. Appreciate the comments..

Thank you, Michael..

Your next question comes from the line of Mike Hickey with The Benchmark Company. Please proceed..

Hey, guys. Good afternoon. Obviously we've had some weakness here in the box office but I think everyone's still enthusiastic for 2015 and 2016. Seeing any sort of impact in the M&A environment on the theatrical side and obviously haven't seen a deal there for a while but any thoughts there would be helpful. Thank you..

I'd say that's sort of the pace sort of what's out there seems to be about the same. We've looked at some stuff. But we're not in a period where anybody feels pressed to sell and they're looking ahead. Not a secret that things look like they could be great for the next few years. We'll see what plays out.

But to answer your question, no change in one direction or the other..

Okay. Fair enough.

And then can you update us on your headcount and I think you sort of alluded to this in your prepared remarks but where that headcount's going to trend through the remainder of the year?.

Are you talking -- when you say headcount, on the corporate side, on the administration side or --?.

Total headcount..

Yes. We pretty much have made the investments now that we intend to make. In this past year, we did talk about that and I've separately talked at these investor conferences and things along those lines, you can start with marketing where in old days you never even really had a marketing department.

And so we certainly have made some investments in people. But I think we're for the most part now we're where we think we should be and so I don't see -- best answer I can give you, I'm not going to give you a number, per se, but best answer I can give you is I don't see that changing significantly from where we are now..

Okay. Fair enough. As it sort of relates to your attendance growth, obviously the $5 Tuesdays seems to be a huge boost for you guys.

But thinking about maybe the theaters where you've retrofits with recliner seating, what kind of attendance outperformance are you seeing in those theaters versus your standard seated theaters?.

It is, Mike. The fact is that while we've refrained from putting the specific numbers, we have -- you've seen some of the other numbers and some of the -- one of our major competitors who has been touting some of their numbers and we've seen some pretty similar improvements as we put some of these things in.

As we've talked about, we're now into kind of the second wave of some of those and so it's really a little hard to look at, the last four that we did basically opened up at the end of May. So all we have to show for it is this summer which was a pretty not so great film slate. But still so we're seeing some nice increases.

We've green lighted one more location right now. We're looking at a couple more. And we're performing in these things. We're penciling things out to have still some very healthy increases once you put them in. And obviously those are the candidates for the more significant pricing increases.

We've driven -- we're providing a spectacular product and we've looked at our competitors and seeing what they're doing and clearly those -- they're taking advantage of that as well and they've stated it publicly..

Thanks, guys. Last question from me, I don't think you guys have talked much about this recently at least.

But your entertainment network as it relates to alternative content and I'm just curious how you see that as a potential growth opportunity in particular you now that you have a lot of success it looks like here out of the gate with your membership program and thinking about maybe ways that you could leverage that membership program in terms of marketing potential alternative content to that base of potential business..

You are exactly right about using that, using loyalty as -- using that program and knowing who to market to as a way to drive some of that business. I can't tell you where it's going to end up. It's incremental. It should be incremental dollars for us.

But even being able to make it better by using tricks like loyalty, because it addresses the -- what you hit on is the key issue, right. On any given weekend, it's amazing. In the big weekends, Hollywood can get 10 million people off their couches.

When you're playing a film, if you've got a 3,000 print release and you're playing it seven days a week and you're playing it five times a day at an absolute minimum, you've got hundreds of thousands of show times, to which to throw against marketing as opposed to independent, something alternative content.

If you were to play it on if you're lucky 1,000 screens twice, how much money do you throw against 2,000 showings as opposed to 200,000 showings? So the marketing becomes a challenge. That's why Hollywood gets the kudos they get and the scale they have is so necessary.

But to the extent that we're able to do things like lever our knowledge of our customer base to be able to more efficiently market the smaller things we're going to do it and it will continue to grow and it will continue to be a nice add-on to what we're doing.

The Indy focused stuff we're doing now I think has been a nice add-on and we are able to do more independent marketing. I think that will continue to flourish. I can't tell you where I think it's going to end up as a percentage of our revenue or anything..

Fair enough. Thanks, guys, for your insight. Appreciate it. Good luck..

Your next question comes from the line of Brian Rafn with Morgan Demsey Management. Please proceed..

Good morning, guys.

Give me a sense, you talked in the past, maybe a question for you, Doug, relative to the film slate, we certainly from your 4th of July weekend as you move down from the top five or top 10 pictures, was that same weakness from picture 10 to 20, 20 to 30 and where that was year-over-year, was there any strength as you went down in some of those smaller pictures?.

I'd love to say yes, but not really. Look, it's all relative to -- because we're doing all these comparisons to last year. So the film mix itself was changed.

I talked about that in terms of how we had these two family pictures, our top two pictures last year and this year you've got to kind of go down to our number six picture, didn't make the press release would be How to Train your Dragon 2. Otherwise, that's kind of the equivalent, the first time it shows up.

But no, if you look at it in total, it was -- there was no -- you're right. Sometimes we'll have a particular quarter where it's just deeper than usual and that makes up for the fact that maybe you don't have a bunch of those big blockbusters.

This was not one of those quarters and Greg kind of alluded to the -- when he quoted that Wall Street article. There just were -- I don't know pure quantity, I don't have that number in front of me if we played less or not. There certainly were less big bigger budget pictures, not just the top two or three.

There were 10 less $100 million type budget movies. That's a big change..

Basically the highest highs were lower and the middle was not so strong. And frankly, we looked at it and part of it was just what they released, they didn't release the kids movies as Doug pointed out. Movies like Fast & Furious 6 got moved.

There could be something, I have seen some banter, but we don’t know for sure about where this international focus of the whole movie business with World Cup in the middle of summer, I suspect that there was some, our margins at Gee, I don't want my film out during World Cup time. That causes them to move some stuff out of the summer.

You get all that together, it can be challenging summer. But we had an unbelievably great spring. This is a business that just if you look at it quarter-to-quarter, you're going to be frustrated. If you look at it over time, you'll be satisfied..

Do you guys get a sense of -- I've asked this in the past -- of shifting seasonally pictures, not just saying we're Hollywood, we're going to make our money in the summer and then at Christmas but starting to spread it out over and really looking at the business as a four quarter business, not just summer, 4th of July and Christmas?.

We are seeing some spread-out. Captain America came much earlier than it might have come in prior years. Frankly, Guardians came pretty late. So we are seeing some spread of the films. There's no doubt about it. But it's not just a spread of films. There was less product..

Relative to your $5 Tuesday's, I know you guys don't break out attendance, can you given us a qualitative delta change at all? Are you still seeing a build in traffic on $5 Tuesdays or have you reached a level of saturation?.

I guess my reaction is still we're seeing a build. This was our first summer where we had it. And so we had some really big Tuesdays.

Maybe kind of goes to -- there was an earlier question that kind of dealt with this a little bit in terms of since the slate wasn't so good, yes, I suspect that in some cases people who just last year -- without this program they would never have come.

I'm sure we got some people who said well, for a $5, I'll even see this movie even though I'm not super excited about it. So look, we had -- I think we definitely had growth throughout, continue to see some growth. We're going to lap it in November.

But frankly, I think we'll -- even when we lap it, based on the growth that we saw when we first introduced versus where we are now, I suspect that still we’ll see year-over-year improvement for at least some time period..

Yes, okay. No, that's fair enough. That's a good answer.

Let me ask you that value customer, that is usually a $5 guy, how have you witnessed again just since summer, from the standpoint of concession penetration as you roll off some of the free popcorn and that, is this the guy that smuggles in M&Ms, or do you get that guy to do anything at the beverage and food area..

Are you tipping your hand? That's what you’re doing Brian..

No..

There is specific M&M detector at the front door. With changing it, it has helped our per caps, with changing our policy from free popcorns for all the free popcorn for loyalty.

But, we’re still working on ways to improve our per caps and because there is still obviously, and they’ll never be at the level where they are during the regular part of time, it’s value oriented customer. But we just need to continue to work on ways to sell to that value oriented customer and we continue to make progress with it..

Yes, okay. You developed a Majestic out in Brookfield several years ago. And now it sounds like Sun Prairie may be the new big prototype.

What kind of penetration, and have you changed with Sun Prairie? Are there more UltraScreens? Are there more Dream Lounger cinema theaters? What might be the difference as you look at Sun Prairie, as the new big project?.

Well, first of all – it’s all DreamLounger's. So, there’ll be all DreamLounger’s. There will be two UltraScreens. We are going to have the BSBs, the Big Screen Bistros there. We are going – we’ll have – it’s basically the sort of – it’s the next version of Majestic but a bit of a smaller scale.

In terms of the – it's going to have all the different amenities that we’ve been working on for all these year, but I would say more refined. In a way – we started with– if you think about, when we did the Majestic, we were just – we were at the front edge of all these, of adding these amenities of trying out in-theater dining.

If you remember the Majestic, that in-theater dining has had three names, it’s on its third name. First it was the Palladium, and then it became CineDine, and then it became Big Screen Bistro. And we went from one to three – one auditorium near to three auditoriums there.

Our Take Five Lounge that was our first – that was the first lounge we ever have done in a movie theater.

So, it’s using all the elements that we started back there all those years ago, but have worked on and refined and – it’s that long term outlook and the patience that we take with this business, is what you see happening throughout our circuit and coming to fruition in a new theater like the Palace..

Okay. Your Marcus, the movie loyalty program, 640,000 people signed up.

Are you at a level or scale where you can really start doing the ad and the promotion, or is there a time period that you’re waiting to continue to build to a specific mass, or talk about when you can really start going on making those contacts? Or have you done it from day one?.

It’s just starting right now. But we are absolutely – look at – I would tell you we have absolutely blown our projections out of water, and what we thought loyalty could be. I think that we were somewhere in the – between 350,000 and 400,000 was our original projection for the first year of this. So, we’re significantly ahead of our projections.

And we’re planning on doing all things we’re talking about with a smaller base. So, absolutely – but, that being said, just getting all the – we’re caught with a wave of activity that we never even anticipated.

So, it’s been sort of digesting that, that’s been the challenge and getting it all in a position because to market those people, the technology has to be in place, and you have to be able to execute on these things that we’re just catching our breath and getting there..

Yes, you guys talked a little about price raising.

Are you looking at raising selective concessions into the fall and the holidays? Have you made those changes already? Is that something you are phasing in over the next year? How do you kind of see the timing of that?.

We’ll be looking at things as we head into the holiday season. We don’t have – I don’t have a specific date or timing for you but we’ll be looking at them in the coming weeks and months here.

As I did say in the prepared remarks, we really haven’t maybe tweaking here and there but for the most we have not had any circuit wide increases in either our concession or our box office pricing since I believe it’s April of 2013. And so – and that was intentional.

There was a specific strategy in place here as we’re creating this value proposition and so- we do believe that this fall will be the time for us to be looking at some of those..

Yes, I mean the idea to Doug's point was that we were – it was very intentional. The theater gang there said look at, let’s make these improvements, let’s put this stuff in and let’s let people come in and see what we’re doing. Let's give them a little taste of how good it is and then we’ll go from there as opposed to starting with the price increase.

That didn’t make sense to us..

Yes, okay. Okay. And then just one comment, Greg, you talked a little about layering in kind of the business group convention type stuff.

How would you say across the nine hotels, what would you get a sense of that kind of business customer today? Has that continued to do well? Would you say you recovered to the old levels pre-2007? Where are you kind of with the business guy?.

I would tell you, it’s getting better. It’s not where it was, because it’s a combination of still less group business and spending less when they are there. But, it’s better, it’s improving and it continues to improve and I think it’s going to be one of these cases of a slow and steady issue goes.

But that's going to be - there should be some pretty good leverage in that as we move along..

Okay.

And then, anything on the Von Maur project, the Brookfield at Road, or excuse me, the Bluemound Avenue, the project?.

Yes, we didn't want to use this earnings release as a time to be talking, making announcements about that but there's a lot going on behind that, we’re still very excited about the project and there is some – I think we’ll be talking – you will be hearing a lot more from us on that in the very near future.

Good things are happening and so - I’ll just leave that for the moment and you’ll be hearing from us on that shortly..

All right, guys. Thanks much..

(Operator Instructions) Your next question comes from the line of Ryan Hamilton with Morgan Dempsey Capital Management. Please proceed..

Hey guys, I was wondering if we could talk real briefly about Ghost Busters re-release.

Is that something you guys see happening more frequently, or is that something that is just happening because of a weak schedule?.

I think you’ll see more things like that again, all said and done the question is, how relevant is it? And I think time will play out. For example, we got – we were able to get an exclusive showing of – a bunch of our theaters the Wizard of Oz that first week in September..

It’s the benefit of digital. You’re going to see more repertory film with the benefit of digital because they don’t have to go and strike a thousand prints to do it. They can start to move that film into our complex as much more easily and much more efficiently. And so you will see more of it absolutely..

Is that something you charge a full price for or is that a discounted price?.

We’re looking at each other..

I don’t know. I want to tell you that I have every answer you have a question for..

Well, I stumped you. Well, I appreciate it guys..

Thank you..

Thank you..

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

Well, listen everybody, we sure appreciate you all joining us again today. Maybe we’ll see some of you at our upcoming annual meeting on Wednesday, October 1st, at our North Shore Cinema in Mequon, Wisconsin, get to experience those DreamLounger seats and our UltraScreen DLX there.

And, for those of you who cannot attend, we will be webcasting the meeting. We also look forward to talking to you once again at December, when we release our fiscal 2015 second quarter. And till then, thanks and have a great day..

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