Digiplex Destinations
  Digiplex Investor Relations
 Financial News


Moderator: Robert Rinderman, JCIR

6:11 pm CT


Operator:               Ladies and gentlemen thank you for standing by. Welcome to the Digiplex’s Fiscal 2013 Third Quarter Financial Results Conference Call.


                              During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time if you have a question please press the 1 followed by the 4 on your telephone.


                              If at any time during the conference you need to reach an operator please press Star Zero. As a reminder, this conference is being recorded Tuesday, May 14, 2013.


                              And now, it’s my pleasure to turn the conference over to Mr. Robert Rinderman, Digiplex Investor Relations. Please go ahead, sir.


Robert Rinderman:     Thank you very much, (Jason). Good afternoon, everyone. This call and Web cast may contain forward-looking statements related to the company’s future operating results.


                              Such statements are based upon current expectations and assumptions and may involve certain risks and uncertainties within the meaning of the US Private Securities Litigation Reform Act of 1995.


                              These risks and uncertainties are detailed from time to time in our SEC filings. Digiplex’s actual performance may differ materially because of these or other factors as discussed in the management’s discussion and analysis section of our filings copies of which can be obtained from the SEC or via digiplexdest.com.


                              All information discussed is as of today May 14, 2013 and the company undertakes no obligation to update any statements or expectations from prior conversations. Today’s call is being Web cast live over the Internet and a replay will be available on the corporate Web site for a minimum of 30 days.


                              I will now turn the call over to Chairman and CEO, Bud Mayo who is joined by CFO, Brian Pflug and Senior Vice President, Chuck Goldwater. Bud?


Bud Mayo:            Thanks Rob, and thanks to all of you for joining us today. At the conclusion of my opening commentary Brian will cover the company’s fiscal Q3 financials.


                              Following a very strong December quarter for the industry, including a well-attended holiday cinema going season the domestic box office performance in the March 13 quarter was somewhat underwhelming, following 12.4% compared to last year.


                              To be fair, the year over year box comparison was a challenging one from a start as the March 2012 quarter had risen more than 20% a year ago.


                              Although the June quarter got off to a somewhat sluggish start, the recent release of Iron Man 3 as the all-important pre-summer movie going season off to a rousing start. It’s domestic opening weekend receipts of more than $174 million made it the second best box office debut in history.


                              Looking at the big picture of what we’re striving to accomplish here at Digiplex in the future when our circuit is considerably larger and all of the requisite digital technology is in place for playing alternative content at all of our locations our social media and target marketing are further differentiating us from our peers slower quarterly periods when Hollywood titles don’t play as well as they did in this quarter are the times when our strategy will truly shine and make the most sense.


                              Focusing on an enhanced capacity utilization during the shoulder periods of the movie slate, especially Monday through Thursday when theatres are traditionally, virtually empty, is one of the keys for us.


                              As we have been saying, Digiplex is offering a peak at the future of theatrical exhibition. And if we’re successful and demonstrate that we can make our platform strategy work then we expect a large number of other exhibitors, in many respects the industry to want to follow our lead.


                              Speaking of innovation, Digiplex recently became the first major exhibitor offer special presentations of select Hollywood titles in Spanish language.


                              We started with GI Joe in early April and have also presented Oblivion, as well as Iron Man 3 with Star Trek up next.


                              It’s a good example of leveraging our digital platform to bring our customers the best entertainment options available in any language.


                              Our DigiNext initiative is a key example of our long term business plan and another creative way we’re capitalizing on presenting and (eventizing) quality alternative programs such as intriguing documentaries on important issues of our time.


                              This is obviously a new concept for theatrical exhibitors who have historically played a more passive role in showing whatever Hollywood sends their way.


                              With our DigiNext alliance with Nehst Studios, we actually get the chance to curate our own content while capitalizing on some of the ancillary incremental revenues after the theatrical run.


                              Many of our patrons have also told us they especially enjoyed our live Q&As with cast and crew members who starred in and produced these unique features.


                              Our first season of eight releases has covered a wide range of subject matter from gun control to the healthcare system.


                              Last month, we had a successful presentation launch of Kinderblock 66: Return To Buchenwald. And this has been our best attended DigiNext title to date.


                              In this way we are successfully diversifying our entertainment offerings without increasing our cost of content.


                              Digiplex’s key role is giving these titles a theatrical release throughout our growing circuit and putting our hyper-local marketing machine to work in order to garner additional publicity and awareness not only within the local communities where we operate, but also generally setting up media buzz from at various other outlets such as all forms of social media, bloggers and trade publications for our Digiplex and DigiNext brands.


                              Also, to supplement our admissions receipts we participate as a 50/50 partner in the net downstream and ancillary revenues. This includes revenues from DVD sales, digital downloads, television licensing and other relating sources including international rights in most cases.


                              There are several key takeaways from alternative content in general that our investors should keep in mind.


                              First off, we are diversifying what we present to our patrons. And in the process, Digiplex is uncovering new niche audiences bringing them into what are now entertainment centers, where we hope they will enjoy themselves and also learn about other upcoming attractions that they may also want to attempt.


                              Our goal is to put the success of the amazon.com model to the test, which you have heard me often discuss in the past.


                              In other words, if you like this, we think you may also want to attend that. Our focus on social media and targeted marketing keeps growing and improving with every feature.


                              We have a dedicated corporate team focused on this function. It is paying off and we’re learning a lot about what works and perhaps equally important, what does not.


                              Secondly, our alternative program strategies are modeled to generate incremental results throughout our circuit without cannibalizing or taking audience a share away from the Hollywood titles we regularly show in our theatres.


                              Before turning it over to Brian, I want to leave you with some additional thoughts on where Digiplex is headed.


                              The long range goal remains operating a circuit with 100 theatres and 1000 screens, spread throughout the nation’s top markets.


                              We’re close to 20% of the way there so there’s clearly a lot of runway (ahead).


                              On our prior quarterly call we established an intermediate target of 300 or more screens by year end which would place us among the 15th largest US exhibitors by screen count.


                              With M&A it’s not always easy to predict timing, but we continue to have a solid pipeline of potential acquisition targets and are engaged in active dialogue with a number of theater owners and landlords many of which we’ve had longstanding relationships with.


                              Our goal is to make accretive purchases of these cash flow positive theatres and then further improve both theatre level and adjusted EBITDA metrics with our operating strategies.


                              With our senior team already in place, we’re moving toward our goal of having most of the company’s incremental theatre level cash flow from acquired theatres reach our corporate EBITDA line, as we continue to grow.


                              We hope to have more news on screen additions in the very near future. At this point, I’m going to turn it over to Brian.


Brian Pflug:           Thanks, Bud, and good afternoon, everyone. Similar to last quarter I will be provided most year over year percentage changes in my remarks as these are not an appropriate comparison because of our more than nine-fold growth in screen count since that time.


                              The three month period ended March 2013 marks the first full quarter including results from the 74 newly acquired screens in Southern California and Arizona and also our newly leased Sparta, New Jersey facility.


                              We also include two months performance from our 16-plex in Solon, Ohio where we signed a long term lease agreement effective February 1.


                              Digiplex’s fiscal Q3 is the second full quarter, including results from our Lisbon, Connecticut 12-plex and the third full quarter with financial contributions from our 54 Pennsylvania-based screens.


                              The year ago reporting period only reflects the financials in our original 19 screens in New Jersey in Connecticut.


                              For the three months ended March 31, 2013, total revenues were $8.8 million, including admissions revenues of approximately $6 million, concession sales of $2.5 million with the balance from other revenues.


                              Ticket sales from alternative programming events at theatres owned more than a year amounted to over 6% of box office revenue for the three month period.


                              This is a metric we devote a lot of focus to and we’ll continue to keep you updated on our progress.


                              As we’ve said all along with new theaters that are added to our growing circuit, it will take us at least a few quarters to install the requisite technology, train all employees and fully integrate the facility into our unique fully digital platform.


                              Once these new facilities are up and running, we immediately begin marketing and scheduling alternative programming events that we believe will appeal to a surrounding local community.


                              While it does take some time to educate guests and affinity groups about the wide array of programming offered at their local Digiplex theater, we expect this incremental revenue stream to grow and build over time.


                              Turning back to the income statement, film rent expense was $2.8 million representing approximately 48% of admissions revenues.


                              For the year to date period, film rent expense was approximately 49% of box office revenues.


                              These percentages include the benefit of Virtual Print Fees or VPFs. Those of you familiar with us know that we are presently the only public theatrical exhibitor to receive VPFs which provide incremental cash flow from the digital system that we funded and owned and is accounted for as an offset of film rent expense.


                              During the quarter, we earned VPFs on 85 of our 178 screens. In addition, we expect Digiplex’s total film rent margin on admissions to be affected by the number of screens that receive VPFs going forward as a percentage of total screen count.


                              The Hollywood independent and alternative content mix will also impact this percentage.


                              Cost of concessions in fiscal Q3 represented 16.8% of concession revenues and 16% year to date. We expect Digiplex’s gross margin on concessions to average somewhere around 85% annually although, this percentage may fluctuate due to product mix, material changes in supply pricing, and seasonality.


                              As we acquire new locations, we benefit from our national pricing contracts with concession vendors.


                              Average concessions per patron in Q3 was $3.22, -- up significantly from $2.69 in the prior year period.


                              We attribute the increase in our concession per caps to the initiatives of Senior Vice President, Chuck Goldwater and his operations team who have been hard at work, integrating the newly acquired facilities on to our platform and identifying ways to achieve further operating efficiencies, while improving theatre level performance.


                              In this regard when examining our concession strategy, we found that customers attending a Metropolitan Opera event of screening a Bollywood title, have very different tastes outside of the typical theatre fare of assorted candy, fountain drinks and popcorn.


                              To drive more per patron spending, we’ve started to roll out an expanded menu of concession offerings, including healthier options and are beginning to feature unique products in select locations.


                              For example our theaters that do strong business in Bollywood titles, we started offering chai teas and samosas.


                              While we are still in the very early stages of experimenting with our concession strategy, we believe we can materially increase our per patron spending over the long term.


                              Returning to our operating costs, while the majority of the increases all related to the much larger screen count, it’s important to note that our facility lease expense, staffing, utilities, and other costs for the 74 screens we purchased from UltraStar have a slightly higher run rate compared to the rest of our circuit primarily due to our market locations.


                              We are, however, marrying our best of breed practices from our existing operations, including the use of certain benchmarks such as daily costs per patron calculations to carefully manage our cost structure.


                              G&A costs were just under $1.4 million and as I said on last quarters call these expenditures are impacted by M&A related costs due to the active expansion of our circuit now and for the foreseeable future.


                              However, over time as grow and achieve improved economics of scale, we fully expect G&A expenses to decrease as a percentage of our overall revenue.


                              Depreciation and amortization expenses were $1.4 million for the quarter, which of course, increased due to our depreciable asset base which now stands at over $33 million.


                              Interest expense was 326,000 for the quarter mostly from our $10 million of notes payable that we incurred last year.


                              Our Q3 operating loss was $1.7 million and the net loss amounted to $2.2 million, or 25 cents per diluted share based on approximately $6.1 million weighted average diluted shares outstanding at quarter end.


                              The operating loss was primarily attributable to a soft quarter for the industry -- down over 12% at the box office and higher costs associated with our increased asset base and larger corporate infrastructure which will support expected future growth.


                              It’s worth nothing that we do not anticipate having to materially increase our corporate overhead from present levels in the near to mid-term as our senior team’s already in place.


                              Our Q3 theatre level cash flow was $1.1 million at Digiplex after we removed the impact of our JV partner share.


                              Q3 adjusted EBITDA was R00,000 versus negative EBITDA in the prior year. And we expect continued improvement as we leverage G&A expenses, refine operations, and cultivate new revenue streams.


                              Both of these metrics are non-GAAP figures and reconciliations through our reported GAAP figures can be found in today’s quarterly news announcement.


                              We filed a mixed shelf offering with the SEC subsequent to quarter end for $10.5 million. This shelf covers a wide range of equity and debt securities and covers a three year period. It’s possible that we may amend and increase the amount of shelf as time goes by to assist us with our growth plans.


                              In summary, although, it was challenging quarter for the industry, we’re pleased with the recent progress we’ve achieved and are encouraged by the strong Hollywood film strip late - for the remainder of the year as we have already begun the ever popular summer and holiday cinema going seasons.


                              As usual, we have a wide array of alternative programming planned and we remain optimistic about our prospects through the remainder of fiscal 2013 and beyond.


                              This concludes our prepared remarks. Operator, please open up the lines for questions.


Operator:               Thank you, sir. Ladies and gentlemen if you’d like to register for a question please press the 1 followed by the 4 on your telephone now. You’ll hear a three-toned prompt to acknowledge your request.


                              If your question has already been answered and you would like to withdraw registration please press the 1 followed by the 3. And if you’re using a speakerphone please lift your handset before entering your request.


                              Once again ladies and gentlemen if you’d like to register for a question please press the 1 followed by the 4 on your telephone.


                              Our first question comes from the line of Eric Wold with B. Riley. Please go ahead.


Eric Wold:             Thank you. Good afternoon, a couple of questions. I guess, one, Bud, can you update us on just kind of how the pipeline of potential acquisitions, you know, has changed at all since the last call and if there’s, kind of what’s the major obstacle in your mind to getting some of these transactions across the goal line? And is any of that involved with, you know, changes in sellers’ valuations expectations?


Bud Mayo:            None about seller’sexpectations although we have run into at least one situation where we had to, you know, really close down discussions. The bid mask were just two far apart.


                              We did spend a fair amount of time looking at what we thought were good assets but not at the price that the seller was looking at.


                              We have as I mentioned earlier a robust pipeline. We hope to have some of those closed in the coming month.


                              But in every case, it’s not just about price. It, you know, in particular it’s also about the negotiations with each individual landlord as the case maybe.


                              Those are usually the long lead items and until we have all of that we’re not announcing agreements in principal. We’re announcing only contracted, you know, transaction.


                              So we hope to have some news very shortly, but I don’t see any real issue with evaluations. I think the anomaly was one that we did pursue.


                              But I think that was a disconnect on the parts of the sellers and kind of a retrading of the thinking.


                              But by and large, you know, with more than 400 screens right now in the pipeline and some additions - some recent additions that we had a lot of interest in, we still feel pretty good about closing a lot of these deals in the current year.


Eric Wold:             Okay. And then last question kind of a, you know, follow-up on, you know, with the shell filing out there, is yes, I know there’s still some dry powder left in the JV with StartMedia.


                              I know you’ve kind of, you’ve looked at different joint venture, you know, kind of structures. Is the shell filing indication that you may lean more towards wholly owned acquisitions or it’s still like a blend of both and this is just getting access to potential capital to investors in JV?


Bud Mayo:            Both. We really want the dry powder to be able to compliment more than $10 million available in the JV.


                              It’s very possible our partner in the JV will go a little further than that. We want to be good partners and be able to match that.


                              But in addition any theatre within a 10-mile radius of our first nine theatres we’re free to acquire directly under the basic premise that it’s better to have common ownership of theatres that are within close proximity to one another.


                              But no, the partnership we have in the JV has been excellent, where they are a true business partners with a lot of interest in everything we’re doing and bringing some very interesting opportunities to the table as well.


                              So we will do both. The shelf gives us the ability to raise additional capital and to take advantage of some larger opportunities whether it’s a group of individual opportunities in the aggregate that could go out to $20 million or more.


                              And again, all of these are unleveraged, so we certainly want to be looking in the future at banking opportunities as we move into the fall to open, you know, and to lever up to some degree all the equity that we’ve been using and we will be using hopefully between now and the fall.


Eric Wold:             Perfect. Thank you.


Bud Mayo:            Thank you, Eric.


Operator:               Our next question comes from the line of John Tinker with Maxim. Please go ahead.


John Tinker:          Thank you. Just picking up on your VPF comment on Iron Man, there was a lot about discussion in the industry when Disney tried to get sort of robbers out of town. And it was quite a public route. So where do you stand in terms of where the theatrical rental split is going these days?


Bud Mayo:            Well there’s no question that the trend is up on real blockbusters. And if we look at the trends in Hollywood what we’re seeing is an ever increasing number of tent-pole movies, all of which cost a fortune to make.


                              And needless to say based on their performance the percentage film rent will be going higher. It always has been. That’s nothing new to us.


                              On the other hand, when we think about filling seats from these tent-pole movies, we think about the opportunities below that admissions line and below that (unintelligible) line that provide us with an opportunity to sell an above the average amount of popcorn and soda, and any other things we can sell at our candy stand.


                              And we think about those attendance figures affecting our advertising revenues, which are based on the CPM model.


                              So when we look at the business, we have to look at it holistically. We have to look at each element. And so it’s our pleasure to pay a little bit more for a blockbuster movie that’s going to do a couple a hundred million dollars on a opening weekend or something approaching that and then fill in around it with these middle market movies that are aimed at specific audiences.


                              What we’d like to see is a lot more of that type of content to go with these tent-pole movies which typically settle at lower film rents.


                              That combined with the VPF support that we have, which brings us I’m sure well below the industry average for those companies reporting as public companies for film rent by several percentage points.


                              And also to do our own content where we know we can bring that number down by splitting with the content owner and incrementing our own results by the downstream revenues and our share in those downstream revenues.


                              So if we make 50% in a theatrical release to be clear and we see ourselves getting the equivalent of another 50% from the downstream revenues during the life of that product we’re really not paying anything for the theatrical release.


                              What we’re doing is creating an asset for the company. And while that’s been a fairly modest contributor so far we’re seeing a new season coming at us with a much broader appeal. And I’m speaking specifically about DigiNext all of which fall into the general category of effecting what we pay for content.


                              And then if you look at the bottom line, we’re looking at all the effects of those movies. Does that answer your question, John?


John Tinker:          Yes that’s right (unintelligible). And just so I may have misheard this (or) what was the percentage of revenues for alternative content this quarter?


Bud Mayo:            Over 6%. And that includes all the new screens we added right after the IPO. So it’s 73 screens that we’ve owned for more than a year.


John Tinker:          Right.


Bud Mayo:            Because that’s given us the time to get ramped up. Those are also much higher growths in theaters than the first 19.


                              So that 6% is very meaningful because it’s a bigger number, than the, you know, doing 6% of a theater that’s doing millions of dollars in revenue compared to one that’s doing $1 million or a $2 million we’re looking at absolute dollars. And we’re looking at the ancillary revenues that come with that, meaning concessions and advertising


John Tinker:          Great, thank you and good revenue number given how tough the quarter was with the box office. Thanks.


Bud Mayo:            Well, thanks for noticing that. We’re pretty happy with it compared to what everybody else has been doing and we’re very optimistic about the current quarter.


John Tinker:          Okay, thanks.


Bud Mayo:            Thank you John.


Operator:               Ladies and gentlemen as another reminder if you’d like to register for a question please press the 1 followed by the 4 on your telephone now.


                              Our next question comes from the line of Jim Goss with Barrington Research. Please go ahead.


Jim Goss:               Okay, thank you. When you gear yourself up for getting to another 300 screens by year end Bud how many screens per purchase are you envisioning in this mix? And, you know, sort at color, are they all negotiated deals and who is your competition?


Bud Mayo:            They’re not all negotiated deals. There are some larger transactions that we are throwing our hat in the ring on. And those out of necessity require more time and energy.


                              But at the same time we’re going after the one-offs and the individual one and two Zs that can help us grow this year and can aggregate enough to get us to the finish line by themselves.


                              So to be clear, we’re not looking to add 300 screens, we’re looking to get to 300 screens by the end of the year.


Jim Goss:               Okay.


Bud Mayo:            And we think we’re - we have those theaters in our sites. And we hope to be making some progress shortly to - you know, it would have been great to make some announcements preceding this call but it’s not possible using our basic premise that we - until we have a contractor that’s negotiated and really have a good sense with the landlords and leases are structured the way we need them to be and are properly assignable, you know, we’re choosing not to put out that information until that’s done.


                              But, you know, in terms of what we’re going to spend for them, you know, we’ve been pretty clear that our range is anywhere from 4-1/2 to as much as six times cash flow. And that’s average over the last few years.


                              Because 2012 was a record year, we can’t just price our theater acquisitions off 2012 alone. We don’t - we’re off to a slow start in 2013. And certainly while we expect to be narrowing that gap it’s hard to necessarily project this year from an industry standpoint being as good as last year.


                              It could happen. We’re seeing some amazing titles coming up right through till the end of the year. But we’re more focused on a multiple of historical cash flow than we are what we’re paying per screen.


                              I mean we’re looking for ROI. And from our perspective if we’re paying somewhere in that area and we’re leveraging that in any way whether it’s through our joint venture in which we get management fees off the top or we’re leveraging it because we’re able to secure a favorable bank line, you know, that we can use as part of the acquisition we’re seeing a return on our investment north of 20%, which is really our goal.


Jim Goss:               Okay. And to the extent that I think a lot of the theaters have been upgraded to digital does that impact the VPF element that you have indicated you’re getting in some of your current screens?


Bud Mayo:            It could. I would say about half of the screens that are in our, you know, on our list of targets and on our pipeline have their own equipment and paid for it and are in a position to collect Virtual Print Fees.


                              And the other half are being financed by third parties and therefore, we won’t see virtual print fees but we’ll also pay less for those theaters as a result.


Jim Goss:               Okay and in the documentaries area with DigiNext, are you envisioning being somewhat of a distributor of documentaries beyond your own screens to the extent that you test them out, you find something that might work and then in digital world, you might theoretically be able to, you know, help that process along in a way that wouldn’t really been possible prior to this digital transition?


Bud Mayo:            Absolutely. I think the opportunity is there. We are distributing. DigiNext is fully equipped to not only play in our theaters where we prefer to play them but also to distribute worldwide in every format.


                              And so we’re already doing this with the first few of our releases, which started last October. And for all eight we would be addressing each of those downstream markets in DigiNext.


                              In the new season we hope to launch product that is more widely appealing and the very issue-based documentaries we did this year.


                              But we’ve been hesitant to offer in particular our first season product to other exhibitors who are friends of ours, who know us.


                              In the non-competing markets there’s no question we could have gotten a lot of them to play the product.


                              But until we know how the product would do in theaters, we have a totally different perspective on asking another circuit to play something that we own and are betting - are benefiting from in all of these downstreams which they’re not participating in.


                              So calling in favors is not the kind of thing we would do to maintain any kind of credibility.


                              When we have something we think will do business in a theatrical release that’s meaningful and then we will call on some of the other exhibitors that we know well and offer them the product.


                              I’d like to do so based on the results we demonstrated and say okay, we’ve done it in Digiplex, here are the numbers, we’ve reported them to Rentrak and now if you’d like to play them, we’ll help promote them, and we’ll book them for you. I think it’s very important...


Jim Goss:               I was thinking more...




Jim Goss:               ...on the lines...


Bud Mayo:            Go ahead, I’m sorry.


Jim Goss:               No I was just going to say, I was thinking more along those lines where you were somewhat of a test kitchen for some of the documentaries and if it worked in your theatres than you - it was sort of presold rather than having them share the risk with you?


Bud Mayo:            Exactly, well, then that’s precisely our strategy Jim.


Jim Goss:               Okay.


Bud Mayo:            We want to prove that the product works before we ask others to play it.


Jim Goss:               Sounds great. Thanks very much.


Bud Mayo:            Thank you, Jim.


Operator:               Our next question comes from the line of Ross Silver with Vista Partners. Please go ahead.


Ross Silver:           Thanks for taking my question and congratulations on the quarter.


                              Just a question with you or question as it relates to your acquisition strategy or acquisitions in general.


                              You know, in terms of the marketplace for these opportunities, how crowded is it currently? And also are you looking for larger type opportunities or sort of smaller opportunities than just being more active? I mean how would you describe that?


Bud Mayo:            The way I’d describe it is we’re doing both. We have to show our - we’re not an insignificant circuit today.


                              We have resources, we have dry powder enough to throw our hat in the ring on a larger acquisition that would be a major step forward for the circuit.


                              But at the same time, we can’t, you know, we can’t place those bets and expect all of them to pay off.


                              We don’t want to be the high bid. We want to be the best bid and provide certainty of closing to a seller.


                              The best job we do is across the kitchen table or a conference room table when we’re talking to an owner who’s ready to retire, who’s ready to exit the business and has built a circuit.


                              It might be two or three theaters, it could be five or ten and negotiate a deal and put something together, get the deal to stand still and then figure out the best way to finance that from an optimal standpoint. We need to do both and what we’re doing is exactly that.


                              We are presence in a - in more of an auction environment for some larger theaters. And then we have our own pipeline that we’re chipping away at.


                              And those are the ones that we think are more certain and will get us to the finish line at least for the - for this year with greater certainty.


                              But we need to be prepared at the same time to make that groundbreaking deal that will bring us to another level.


Ross Silver:           Got it, and then one other question for you. In terms of acquiring a theater and, you know, sort of integrating it within your system what does that, you know, what’s sort of the typical time period, you know, how long does it take for that adjustment period?


Bud Mayo:            Well, we bought (seven four) screen in December. We added another 19 in the first quarter. We have just completed the conversion of most of those on to our digital platform now four months later.


                              It takes about two quarters to complete not only the digital platform conversion and integration. We’re not talking about just digital projectors now. We’re talking about our platform which includes all means of delivery, monitoring, data gathering, and playback options.


                              And then we have to teach our - and during that period we have to train our staff who’s never done this before even though they are really good data management and personnel and how to communicate with our audiences.


                              And then we actually have to begin to communicate with our audiences to let them know that this theatre is not just a movie theatre anymore, it’s an entertainment center.


                              And as an entertainment center we’re now offering this very broad range of choices for every part of the audience.


                              And that takes about six months to really implement, so that’s why we’re measuring alternative content as a percentage of admissions for those theatres that we’ve had for a year.


                              We’re seeing results after about six months and then we hope to grow that results in each theater, one theater at a time, one market at a time.


Ross Silver:           Great. Well, thank you again for taking my question and congratulations again on the quarter.


Bud Mayo:            Thanks Ross.


Operator:               And there are no further questions at this time.


Bud Mayo:            Well, thank you all for joining us. We would have been happy to show even better per screen results, but I have to say that without any self-congratulations, I think we did a pretty good job of integrating, of acquiring and growing over the past couple of quarters. And I can promise you there will be more to come.


                              Thank you all and enjoy the rest of the day.


Operator:               Ladies and gentlemen that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.