Good morning, everyone, and welcome to The Marcus Corporation Fourth Quarter Earnings Conference Call. My name is Liz, and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. [Operator Instructions]. As a reminder, this conference is being recorded. Joining us today are Greg Marcus, President and Chief Executive Officer; and Doug Neis, Executive Vice President, Chief Financial Officer and Treasurer of The Marcus Corporation. At this time, I'd like to turn the program over to Mr. Neis for his opening remarks. Please go ahead, sir.

Thanks, Liz, and good morning, everybody. Welcome to our fiscal 2020 fourth quarter and year-end conference call. Please bear with me as, once again, as usual, I need to begin by stating that we plan on making a number of forward-looking statements on our call today, all of which we intend to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act. Our forward-looking statements may generally be identified by our use of words such as we believe, anticipate, expect, or words of similar import. Our forward-looking statements are subject to certain risks and uncertainties, which may cause our actual results to differ materially from those expected, including, but not limited, to the adverse effects of the COVID-19 pandemic on our theatres and hotels and resorts businesses, results of operations, liquidity, cash flows, financial condition and access to credit markets and ability to service our existing and future indebtedness, and the duration of the COVID-19 pandemic and related government restrictions, social distancing requirements and the level of customer demand following the relaxation of such requirements. Our forward-looking statements are based upon our assumptions, which are based only upon currently available information, including assumptions about our ability to manage difficulties associated with or related to the COVID-19 pandemic. The assumption that our theatre closures, hotel closures and restaurant closures are not expected to be permanent or to reoccur, and our assumption about the release of new movies and the temporary and long-term effects of the COVID-19 pandemic on our business. Listeners are cautioned not to place undue reliance on our forward-looking statements. And additional factors, risks and uncertainties, which could impact our ability to achieve our expectations are identified in our forward-looking statements are included under the heading Forward-Looking Statements in the press release that we…

Thanks, Doug. Before I comment on our businesses, I'm going to begin my remarks where Doug left off, discussing our balance sheet. Those of you who've been with us for a while know that in the same 85-year history Doug just referenced, a hallmark of this company has been the prudent management of our balance sheet. As such, we entered this crisis from a position of strength of the debt-to-capitalization ratio of 26%. Nearly a year later, that ratio has only increased to 37%, which is our press release notes is equal to or lower than the same ratio during 7 of our last 10 fiscal year ends. I find that remarkable. That conservative approach to our balance sheet has proved to be particularly important during this current environment. You can be confident that we will continue to prudently manage our balance sheet in the future, in order that not only will we successfully come out of this current environment, but that we will be in a position to grow and thrive once more in the years ahead. With that, I'll turn my attention to our operating businesses. We recognize that there still may be some bumpy weeks and/or months ahead of us, but we are very encouraged by a number of green shoots that are springing forth in both of our businesses. Of course, the most encouraging news of all since we last talked is the approval of an initial rollout of 3 vaccines for COVID-19, including the approval last week of the J&J vaccine. As an operator, movie theatres, hotels and resorts, restaurants and bars, each of which are based on public gathering, our businesses are significantly impacted by protective actions that federal, state and local governments have taken to control the spread of the pandemic and our…

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

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

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

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

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

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

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

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

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

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

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

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

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

You're going to do it anyway.

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

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

We have a 2-question limit, Mike.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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