Marcus Corporation (The)

Good morning, everyone, and welcome to the Marcus Corporation fourth quarter earnings conference call. My name is Liz, and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. If at any time during the call you require assistance, please press star zero, and an operator will be happy to assist you. As a reminder, this conference is being recorded. Joining us today are Greg Marcus, President and Chief Executive Officer of and Doug Nice, Executive Vice President, Chief Financial Officer, and Treasurer of the Marcus Corporation. At this time, I'd like to turn the program over to Mr. Nice for his opening remarks. Please go ahead, sir.

Thanks, Liz, and good morning, everybody. Welcome to our fiscal 2020 fourth quarter year-end conference call. Please bear with me as, once again, as usual, I need to begin by stating that we plan on making a number of forward-looking statements on our call today, all of which we intend to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act. Our forward-looking statements may generally be identified by our use of words such as we believe, anticipate, expect, or words of similar import. Our forward-looking statements are subject to certain risks and uncertainties which may cause our actual results to differ materially from those expected, including but not limited to the adverse effects of the COVID-19 pandemic on our theaters and hotels and resorts businesses, results of operations, liquidity, cash flows, financial condition, access to credit markets, and ability to service our existing and future indebtedness. The duration of the COVID-19 pandemic and related government restrictions, social distancing requirements, and the level of customer demand following the relaxation of such requirements. Our forwarding statements are based upon our assumptions, which are based only upon currently available information, including assumptions about our ability to manage difficulties associated with or related to the COVID-19 pandemic, the assumption that our theater closures, hotel closures, and restaurant closures are not expected to be permanent or to reoccur, J.D. J.D. We're actually going to file that, I believe, on tomorrow, so I apologize. We'll be filing our 10-K tomorrow, which you can access on the SEC's website. We'll also post all Regulation G disclosures, when applicable, on our website at www.marcuscorp.com. With that behind us, let's begin. Our call will follow our usual format. We'll all start by spending a few minutes briefly sharing a few numbers from our quarter and year with you. And now I'll discuss our balance sheet and liquidity. I'll then turn the call over to Greg, who will focus his prepared remarks on where our businesses are today and what we're seeing for the near term and longer future. We'll then open the call up for questions. So you've seen the numbers, excluding some non-recurring items that I will address. Our fourth quarter was pretty much as expected. Our theater results improved compared to the third quarter, but were impacted by the limited number of new films, additional restrictions imposed in some of our markets in November and December, along with strategic decisions regarding openings and closings on our part. As a result, by the end of December, we only had 52% of our theaters open. Now, as we noted in our release, with restrictions being lifted and improved operating assessments, we're back up to nearly 70% of our theaters open and operating now. Also, as expected, results from our hotels and resorts segment were softer than our third quarter as the weather turned in our primary Midwestern markets and leisure travel declined from summer levels. All eight of our company-owned hotels are now open, and at the end of the year, all but one of our managed properties was open as well. As the press release notes, we did once again have several non-recurring items this quarter directly related to the impact of the COVID-19 pandemic. We incurred additional property closure and subsequent reopening expenses, with the majority of the expenses in our theater division. We also incurred impairment charges this quarter related to several theater properties and our trade name intangible asset. Conversely, we had several non-recurring items this quarter that favorably impacted our reported results and our liquidity. We were awarded multiple state government grants totaling approximately $7 million during the fourth quarter. We also received net insurance proceeds related to COVID-related insurance claims. And just to find all these numbers, we did include a non-GAAP reconciliation of our adjusted net loss and adjusted EBITDA J.D. J.D. J.D. J.D. Thank you very much. Other expense was partially offset by other income of approximately $1.4 million related to the receipt of movie tavern acquisition escrow funds that were returned to us in conjunction with a negotiated early release of remaining escrow funds to the seller. And finally, you'll note that we reported net gains on disposition of assets during the fourth quarter. This net gain was due primarily to the sale of two surplus land parcels and one theater during the period. Now, our effective income tax rate was 33.8% during the quarter and 36.2% for the year, and both periods benefited from previously described adjustments resulting from several accounting method changes and NOL carryback provisions arising out of CARES Act. Excluding favorable adjustments to income tax benefit, our effective income tax rate during fiscal 2020 was 26%. Now, we anticipate that our effective income tax rate for 2021 may be in that 24% to 26% range once again. Of course, our actual fiscal 2020 on effective income tax rate may be different depending on actual facts and circumstances. Shifting gears away from the earnings statement just for a moment, our total cash capital expenditures during fiscal 2020 totaled approximately $21 million compared to our original pre-COVID projected expenditures for the year of $65 to $85 million and approximately $94 million last year. which included the cash component of the movie tavern acquisition. Most of this year's dollars were spent in our theater division on several projects we started during the first quarter. We only spent $2.7 million during the fourth quarter. As we look towards capital expenditures for fiscal 2021, we're currently estimating that our fiscal 21 capital expenditures may be in the $15 to $25 million range. Many of our projected expenditures are back loaded to the second half of the year, J.D. J.D. J.D. for all or portions of the quarter and the fact that our open theaters are currently only operating on Tuesdays and weekends. When you narrow that math down to just comparable attendance for theaters that were open in any given week compared to last year, comparable attendance was down approximately 87% for the quarter. Our average admission price at our comparable theaters during the weeks that we were open decreased 13.7% during the fourth quarter J.D. J.D. Our investments in non-traditional food and beverage outlets, shorter lines at the concession stand, and the emphasis we're placing on encouraging guests to purchase their concessions and food and beverage ahead of time, either online or using our mobile app, is contributing to our increased per capita revenues. Shifting to our hotels and resorts division, our total REVPAR revenue per available room for our seven comparable owned hotels decreased 70.3% during the fourth quarter, and 54.1% during fiscal 2020 compared to last year's same periods. The St. Kate was not open for the entire fourth quarter and was closed for nearly half the year last year and thus was not included in those results. Now, according to data from Smith Travel Research and compiled by us in order to compare our results, our hotels were on a par with comparable upper upscale hotels throughout the United States during the fourth quarter and outperformed those same style hotels by nearly 8 percentage points The data also indicates that our hotels outperformed competitive hotels in our markets by nearly six points during the fourth quarter and nearly 16 points during fiscal 2020. Now, breaking out the numbers for all seven comparable hotels more specifically, our fiscal 2020 fourth quarter overall rev par decrease was due to an overall occupancy rate decrease of 44.7 percentage points. and a 16% decrease in our average daily rate, or ADR. Our fiscal 2020 full-year rev par decrease was due to an overall occupancy rate decrease of 35.4 percentage points and an 11.6% decrease in our ADR. Our fourth quarter occupancy rate for the seven comparable owned hotels was 24.4%, compared to a third quarter occupancy rate for those same seven hotels for the weeks that they were open up 36.6%, reflecting the reduction in leisure travel as schools reopened and colder weather arrived. Now finally, before I turn the call over to Greg, let me also briefly comment on our balance sheet and liquidity position. You may recall that we reported cash and revolving credit availability of over $218 million at the end of the third quarter. Thanks to the receipt of income tax refunds, a portion of the state government grants referenced earlier, J.D. J.D. J.D. J.D. J.D. J.D. J.D. J.D. That liquidity position only gets exponentially stronger assuming revenues in both of our businesses continue to improve particularly during the second half of the year as currently expected. As we'll continue to pursue additional opportunities to reinforce our liquidity in the future which would include sales of surplus real estate and other non-core real estate. As reported in our press release, we received approximately $3 million of proceeds from the sale of real estate during the fourth quarter and early in our fiscal 2021 first quarter, we sold another asset, further contributing to our liquidity. We also have over $4 million of carrying value in additional assets currently under contract or letter of intent to sell later in 2021. In fact, we believe we may receive total sale proceeds from real estate sales during the next 12 to 18 months totaling approximately $10 to $40 million, depending upon demand for the real estate in question. Finally, even after the worst year in our 85-year history, our debt-to-capitalization ratio at the end of fiscal 20 was a remarkably low 37%, giving us a lot of flexibility in the future. With that, I'll now turn the call over to Greg.

Thanks, Doug. Before I comment on our businesses, I'm going to begin my remarks where Doug left off. discussing our balance sheet. Those of you who've been with us for a while know that the same 85-year history Doug just referenced, a hallmark of this company has been the prudent management of our balance sheet. As such, we entered this crisis from a position of strength with a debt-to-capitalization ratio of 26%. Nearly a year later, that ratio has only increased to 37%, which is our press release notes, is equal to or lower than the same ratio during seven of our last ten fiscal year ends. I find that remarkable. That conservative approach to our balance sheet has proved to be particularly important during this current environment. You can be confident that we will continue to prudently manage our balance sheet in the future in order that not only will we successfully come out of this current environment, but that we will be in a position to grow and thrive once more in the years ahead. With that, I'll turn my attention to our operating businesses. We recognize that there still may be some bumpy weeks, J.D. Thank you very much. J.D. I said each of the last quarters, but it is worth repeating. In this rapidly changing, truly unprecedented environment, there is one thing that has not changed and will not change. Our priority, as it has been throughout our history, is the safety and well-being of our associates, customers, and communities. This has guided everything we've done so far and will guide us in the weeks and months ahead as well. So let's start with the hotel division. Doug shared some of the numbers with you, including the fact that that the data suggests we outperformed both the industry and our competitive sets this year. I'd like to expand on that point for a moment. Another way of looking at our outperformance is to examine market share, which in the hotel business is usually expressed as an index. For example, a REVPAR index value of 100 wouldn't indicate that a given hotel is getting its exact fair market share of revenues per available room compared to competitive hotels in this particular market. During the previous four fiscal years, our average combined company-owned hotel rev par index ranged between 108 and 112, meaning that on average, our hotels were getting 8 to 12% more market share than you would expect if everyone got their proportionate share of business. Fast forward to fiscal 2020, certainly an unusual year where our hotels and others in our markets may have been closed for portions of the year. I'm pleased to report that our average rev par index for these same company-owned hotels increased to 136, Our hotels had rev par 36% higher than you would expect if everyone got their fair share. Now, as demand increases and all hotels are fully operating, you might expect that number to decrease some. But I think it speaks to a flight to quality that should be beneficial in the future and our ability to consistently outperform in our markets. The vast majority of our customers during the fourth quarter and continuing today come from the drive-to leisure market. It wasn't that we didn't have any transient business. We continue to have weddings and some small group business. And just like in the summer when we had Major League Baseball teams staying with us, we've had success booking basketball teams this winter. But there are also some green shoots in individual business travel, and we believe the continued progress with the vaccine rollout will further spark growth in both of these business travel segments. But as I said, the majority of our customers have been transient leisure customers who are looking to get away and change their scenery after months of staying home. As a result, not surprisingly, weekend business was the strongest at all our hotels. Properties like the Grand Geneva Resort and Spa and Timber Ridge Lodge perform the best among our hotels as they are well suited for families looking to get away. During our last call, I shared with you that our golf revenues at the Grand Geneva were actually higher than they were in the previous year. Well, now I'm happy to tell you that we're having a record ski season at that property. We've been at or near sellouts on multiple winter Saturdays at this resort. As you know, J.D. Despite the expected reduction in occupancy in the fourth quarter as kids went back to school and winter weather arrived, we believe our hotels collectively significantly outperformed what they would have done if they had been closed. And that is a tribute to Michael Evans, our hotel division president, and his entire team. They've done a fantastic job of streamlining our operations, reducing both variable costs and costs that might have previously deemed fixed in order to keep our hotels open and operating. And that is paying off an increased market share. Looking to future periods, the hotel division's call to action in 2021 is aptly named Rebuilding Together. We know that we have a longer road ahead of us as we work to get our hotel business back to pre-COVID levels. It will almost certainly take beyond 2021. Overall occupancy in the U.S. bottomed out last spring, slowly increased during the summer and early fall, and leveled off in the fourth quarter. Higher-end hotels like the ones we generally operate have been impacted more than lower-end hotels. Most current demand continues to come from the drive-to leisure market. Most organizations implemented travel bans at the onset of the pandemic, and while there are some signs that some of these bans are beginning to loosen slightly, business travel will still likely be limited in the near term. On the other hand, we have very high hopes for leisure travel and believe there remains a lot of pent-up demand to go somewhere. Assuming the vaccine rollout continues to progress and overall COVID numbers in our markets continue to improve, that may bode well as the weather improves and summer arrives. Thank you very much. As you would expect, our company-owned hotels have experienced a significant decrease in group bookings for fiscal 2021 compared to where we were last year at the same time. Of course, last year we were still anticipating Milwaukee hosting the Democratic National Convention in July of 2020. We were pleased to see the Ryder Cup rescheduled for September 2021 and is contributing to our 2021 group pace. Looking further up, the Wisconsin District approved financing during the fourth quarter for the expansion of its convention center. J.D. J.D. J.D. J.D. J.D. Hotel revenues have historically tracked very closely with traditional macroeconomic statistics such as the gross domestic product. So we will be monitoring the economic environment very closely. After past shocks to the system, such as 9-11 and the 2008 financial crisis, hotel demand took longer to recover than other components of the economy. Conversely, we now anticipate that hotel supply growth will be limited for the foreseeable future, which can be beneficial for our existing hotels, which we believe are uniquely positioned to capture increased demand. In the near term, we believe it will be very important to have our marketing message focus on the health and safety of our associates and guests. We are focused on reaching the drive-to leisure market through aggressive campaigns promoting creative packages for our guests. Overall, we generally expect our revenue trends to track or exceed the overall industry trends for our segment of the industry, particularly in our respective markets. Finally, let me end my remarks about hotels by allowing myself to talk about growth for a second. First off, Let me preface my comments about growth in both of our divisions by reiterating that priorities one, two, and three as we emerge from this pandemic will continue to be our balance sheet. Every decision we make will always have our balance sheet in mind. On the hotel side, there are clear strategies for growth that can be balance sheet friendly. Besides continuing to selectively seek management contracts that we believe are a good fit for us, There may be opportunities to acquire hotels via strategic partnerships or possibly by the creation of a fund, all of which would allow growth without significant outlays of capital. No one really knows yet what the hotel transactional market might look like and whether there may be many opportunities to acquire hotels that might be experiencing distress. In addition, with the entire industry needing capital, many properties are going without much-needed capital investments. We think there may be an opportunity to acquire properties in this position as well as to provide significant value add. If opportunities arise, we want to be prepared on the other side of this. Bottom line, there may be bumps along the way, but as spring slowly arrives here in the Midwest after a long winter, our hotel team is prepared and energized to manage our award-winning hotels, resorts, and restaurants and rebuild our hotel business together. So let's shift to our theater division. Doug went over the numbers with you. While I don't intend to spend a lot of my time looking backwards, let me make a couple of comments. First off, Rolando Rodriguez and his team once again did a very good job managing through a very challenging quarter. With very few new films and renewed restrictions implemented in several very important markets for us in November and December, including Illinois, Minnesota, Ohio, Missouri, and Pennsylvania, the team still managed to improve adjusted EBITDA from this division by over $3 million compared to last quarter. Once again, managed costs in such a way that it was clearly better for our theaters to be open and closed. Our field personnel also continues to do a terrific job executing on all the new operating protocols we implemented in response to the pandemic. Our customer experience scores are some of the highest levels we've ever seen, and I think it speaks directly to the efforts we've put in to offer a safe and comfortable experience at our theaters. Once again, a big thanks goes out to all of our associates in this division. Face of the limited amount of new film product and the pandemic that was further limiting customer willingness to go to public places, our team had to get creative. We had to come up with innovative promotions and programs that would encourage the return of movie going to an audience who we believe wanted to come back but was reticent to do so. Out of that came what was probably the most important accomplishment of the fourth quarter, which was the development of Marcus Private Cinema, or as referred to it internally, MPC for short. Developed and introduced in the second half of the fourth quarter, J.D. J.D. J.D. J.D. And MPC has given it longer legs than we ever might have significantly originally thought. We also charge $99 for all older library films and have experienced some very nice success with that product as well, which is particularly interesting when you consider that customers could choose to see that same product for free at home. Just to throw a few numbers at you, in the last seven weeks alone, with just under 70% of our theaters open, we've averaged over 1,500 Marcus private cinema shows per week across our circuit. contributing over 25% of our admissions revenue during this time. And in large part, because of this program, we've seen our overall market share of U.S. admissions revenues increase by approximately 50% during the first two months of 2021. Our market share on some individual films has more than doubled compared to our historical averages. Nearly 90% of the shows during this time period were booked directly by the customer online or on our app. We estimate that we are averaging approximately 13 people per showing, And every Monday morning our team meets and reviews the film scheduled to be shown in the upcoming weekend in order to determine how many auditoriums to dedicate to MPC that week. And one last comment on MPC. It has brought people back to the theaters and allowed some who might have been reticent to return to see and experience the protocols we have in place. And while I can't put a number on it, we anecdotally have heard that it has encouraged many to come back for a regular show as well. Discussing this innovative program is a nice segue to our theater division's call to action in 2021, with a twist on the classic three R's we all remember growing up. Our goal for 2021 is to redefine, refocus, and rebuild our business. Marcus Private Cinema is a great example of redefining our business, and our goal is to take some of our learnings from this past year and make them part of the theater experience in the future. Even after our business returns to normal and studios begin to once again release new films on a weekly basis, We believe there will be a place for MPC, particularly as a way to enhance traditionally slower periods of any given film week. Another example of redefining comes out of our expansion of the use of technology. Given our focus on food and beverage, we were one of the first theater chains to offer the ordering of concessions, food and beverage on our website and mobile app. We had already developed this technology pre-COVID and were in the midst of rolling it out at several theaters, beginning with our new movie tavern that we'd opened in October 2019. When the pandemic hit, we accelerated our plan and we now offer this technology at all of our theaters. Not only is it a great customer convenience that will reduce our labor requirements, we believe it is contributing to our already highest among the major theater chains average concession revenues per person and will likely only get better over time. In the coming weeks and months, as we emerge from the most challenging time in our theater's history, we also need to refocus and rebuild our business. J.D. The vast majority of new films have been delayed over the past year, which is clearly an indication of the importance of the theatrical release to the profitability of the studios. And while no one was happy to see films delayed, the result has been a tremendous backlog of exciting films that are waiting for moviegoers as we all emerge from our houses. Several new films have been released recently to improving box office results, and in our press release we've listed a number of films out on an even longer list, They're scheduled for release in the coming weeks and months. Another extremely encouraging piece of recent news was the announcement that theaters in New York City would begin reopening with restrictions starting tomorrow. With counties in California reopening in San Francisco and L.A. rumored to be not far behind, that bodes well for the studio's willingness to hold to their current release plans in the spring and summer. And while some have wondered whether customers would return to the theaters after this was over, all you have to do is take a look at what has happened in China and Japan. Both of these countries have experienced record-breaking box office performance on several films, which we find very encouraging and we hope is a harbinger of things to come here in the U.S. as we get the pandemic under control. Which brings me to yet another green shoot. This past weekend, we saw the release of Tom and Jerry. As you might have seen, its performance greatly exceeded expectations. In fact, I'm thrilled to tell you that this past Saturday was our best day in our theaters since COVID. In fact, J.D. J.D. J.D. J.D. J.D. We have, as we look ahead, is that we've already completed the majority of our theater renovations and we offer what we believe is the highest percentage of recliner seating, proprietary large format screens, and food and beverage options in the industry, certainly among the largest chains. Our theaters are truly state-of-the-art and our future capital needs are greatly reduced because of that. Now, like my comments about the hotel division, please don't interpret my optimism about what lies ahead to suggest we may not still face challenges in the near term. There certainly is the possibility that there may be further changes in the release schedule and there have been a lot of discussions about what the theatrical window will look like in the future. We know there are uncertainties in the weeks ahead, but my larger point is that we have demonstrated that we've met every challenge we've faced so far and I believe we are prepared to navigate through any further challenges as we redefine, refocus, and rebuild our industry-leading theater business. And finally, while clearly right now our focus needs to be on the near term, And my same comments regarding the balance sheets still apply. Our long-term goal is not only to survive, but to thrive. So I'm looking forward to the day when we can once again refocus on growth as well. In closing, in this continually changing environment, you can be sure that we are constantly reviewing the situation in both our businesses and making changes to our plans as warranted. We still have a lot of work to do. I need to take a moment to do something important and show gratitude. These are not easy times. And so many people are working so very hard J.D. J.D. and Tom Kissinger continue to work tirelessly developing and executing strategies focused on getting us through this crisis while also putting us in a strong position for continued growth over the long term. Our board has been invaluable and special recognition goes to our chairman, my dad, Steve. One of the benefits of our family orientation is the years of experience and insights that he has and we remain beneficiaries of. I can promise you he is fully engaged. Trust me on that one. Being in the movie business We tend to quote lines from movies around the office. In this case, I'm reminded of a line from Apollo 13. One of the characters had just recited all the things that could go wrong and noted that this might be the worst disaster NASA has ever experienced. Like a true leader of the actor plane, Gene Kranz at Mission Control responded by saying, With all due respect, sir, I believe this will be our finest hour. And that's how I feel about how our people have responded to this situation. I could not be prouder of each and every one of our associates. I thank you for indulging me on that. With that, at this time, Doug and I will be happy to open up the call for any questions you may have.

Thank you. Ladies and gentlemen, to ask a question at this time, please press the star, then the number one key on your touch-tone telephone. To withdraw your question, press the pound key. Again, that is star, then one, to ask a question. We'll first go to Jim Goss with Barrington Research.

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

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

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

Okay. And then just a couple quick ones on theater. The potential for, I guess, additional acquisition, could you think of maybe approaching that market in a similar way to how you're approaching the hotel market, more of a J.D. J.D.

Let me do that. Let me have the first half and maybe, Greg, you can think about the second half here. So the first half question, yeah, I mean, look, you know, I mean, again, we don't want to get ahead of ourselves and, you know, the risk of being redundant, still balance sheet, balance sheet, balance sheet here. But having said that, there might be some opportunities looking ahead that could also allow us to be less capital intensive. You know, if there are leased properties, J.D. Historically, you haven't seen that in the theater business like we have in the hotel business. We have one managed theater currently in our portfolio. But there's been some speculation that there may be some opportunities like that as well. And so certainly that would be an option that we could certainly consider in the future.

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

Yeah, and I would just maybe add to that and just say that, look, as you know, we've got a great loyalty program, but we were already, never mind... J.D. So that's not new to us either, Pat, that we know that we have to also reach people that aren't necessarily using some of the technology that we have.

Okay. Thank you. Our next question comes from Mike Hickey with the Benchmark Company.

Hey, Greg, Doug. How are you guys doing? Hey, Mike.

Hey, Mike.

Hey, obviously a lot of great data today on the call. Curious, I guess, what we've seen over the last weekend here with Tom and Jerry. Who would have guessed it was that film, Greg? Didn't see that coming. We thought Tenet, Wonder Woman, we thought maybe those films that are more blockbuster-type films may create a heartbeat in the theatrical space, but it was Tom and Jerry. You know, a family-friendly... J.D. J.D.

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

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

Nice. Good. Thank you for that. Doug, not to put you on the spot here, but I'm going to. You're going to do it anyway.

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

Yeah, you're next.

You're next, Doug.

We have a two-question limit. Yeah, well, I'm going to go past it if we do. Doug, the EBITDA on your segments, and I know you don't guide, obviously, but can you give us, you know, any sense here when you look at Q3, Q4, obviously, you know, we're supposed to. J.D. J.D. J.D. J.D. So should you start to think about maybe going positive on the theater piece in three or four, and what sort of, I guess, just broad KPIs or performance levels should we think about to get you there?

Yeah, well, okay, so you're right. We don't provide guidance per se, so I'm going to watch my words carefully here. But certainly the second half of the year, J.D. J.D. J.D. J.D. J.D. J.D. As we exit the summer, we're going to face some of the same issues if we don't have a lot of group business because what we saw, and you saw in our numbers this time around, it naturally happens every year, is that kids go back to school and the weather starts to turn and so the leisure travel, at least midweek, drops off. And so I don't expect that pattern to necessarily change, but we... We're certainly encouraged about what the summer could hold for us, no question.

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

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

All right. Fair enough. Thanks, guys. Best of luck. Thanks, Mike.

As a reminder, ladies and gentlemen, that is star, then one, if you'd like to ask a question at this time. Our next question comes from Eric Walt with me, Riley.

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

No, there are no hotels in that kind of projection. It is primarily, and we've used the terms surplus and non-core. And so that's how I would describe it. It's huge towards, I mean, certainly what's happened early on has been mostly surplus. I mean, it's land parcels and things along those lines, things that, and frankly, we have more of it. J.D. J.D. And now non-core, the definition of non-core would be, you know, I suppose you could have, I mean, we did sell a former theater. It was a budget theater in the fourth quarter. I think it was like sold to a church or something along those lines. And so there could be a few things like that that would fit into the non-core category. And, you know, we've got some other real estate as well that maybe might fit the definition of non-core. But it's all stuff that really shouldn't affect our operating results very much at all, if any.

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

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

Well, what's still hanging out there, Eric, is not a significant, not a meaningful piece of that previous guidance, including we previously spoke about the fact that several of our largest hotels are going to be due for some larger renovations. And so that's still out there. Now, what, you know, as I think we mentioned and I mentioned in my prepared remarks, we have actually already told you how well Grand Geneva is doing, and so we've actually – J.D. J.D. I mean, look, depending on, I mean, is it possible that we could accelerate a little bit of that into the last half of 21, depending on conditions? It's possible, but it also takes time to prepare and be ready for that. So, longer-winded answer is yes, there certainly is some of that capital that would be coming through in the next couple of years.

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

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

Got it. Thank you both.

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

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

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