Doug Neis – CFO and Treasurer Greg Marcus – President

Eric Palm – Baird

Good morning, everyone, and welcome to the Marcus Corporation Second Quarter Earnings Conference Call. My name is Nakita 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 Doug Neis, Chief Financial Officer of the Marcus Corporation. At this time, I would like to turn the program over to Mr. Neis for opening remarks. Please go ahead, sir.

Well, thank you very much. And welcome everybody to our fiscal 2009 second quarter conference call. As usual, I need to begin by stating that we plan on making a number of forward-looking statements on our call today. Our forward-looking statements could include, but not be limited to, statements about our future revenues and earnings expectations, our future RevPAR, occupancy rates and room rate expectations for our hotels and resorts division, expectations about the quality, quantity and audience appeal of film product expected to be made available to us in the future, and expectations about the future trends in the business group and leisure travel industry and in our markets, our expectations and plans regarding growth in the number and type of our properties and facilities, expectations regarding various non-operating line items on our earnings statement, and expectations regarding future capital expenditures. Of course, our actual results could differ materially from those projected or suggested by our forward-looking statements. Factors, risks and uncertainties, which could impact our ability to achieve our expectations, are included in the risk factors section of our 10-K and 10-Q filings which can be obtained from the SEC or the company. We’ll also post all Regulation G disclosures, when applicable, on our website at www.marcuscorp.com. So that behind us, let’s talk about our fiscal 2009 second quarter and first-half results. We are certainly living in very interesting and turbulent times, so I guess it is only fitting that we report an interesting set of results for you this quarter. As Steve notes in our press release, if not for several one-time non-operating adjustments recorded this quarter, that are a direct result of this challenging market, we will be sitting here today talking about a quarter with net earnings essentially equal to last year’s same quarter. In this environment, that is no small feat. And as noted, it is the direct result of a very strong quarter in our theatre division. But before I get into the operating results let me first briefly address the significant variations in the line items below operating income versus last year. As you can see, the largest variation versus last year occurs in our investment income and loss line. Two one-time adjustments totaling approximately $2.2 million pretax accounted for the investment loss reported this quarter. As noted in our footnotes for our financial statements, any available for sale securities held by the company are typically stated at fair market value on our balance sheet with any unrealized gains and losses reported as component of shareholders equity. Having said that, we regularly evaluate these securities for, as the accountants call them, other than temporary declines in value. While our investments in securities are very limited, the drop in the markets have been significant enough that we have chosen to report the decline in the value of the securities versus our original cost as an investment loss during the quarter. I can say with all confidence that you can view this as a one-time adjustment as the remaining value of the securities on our balance sheet is insignificant. In addition, an investment loss was also reported this quarter on loans to an investment in the form of Baymont joint-venture. In this particular joint venture, as a result of a 1031 transaction, it now owns a piece of land and seven operating hotels. Given the current state of real estate values for raw land, we felt it was prudent to increase our reserve on our investment in and loans to this particular venture. The second significant non-operating below the line variation this quarter is found on our gains and losses from dispositions of property, equipment and other asset lines. What you’re looking at here is a $1.1 million pretax adjustment of the prior gains that we recorded on the sale of condominium units at our Platinum Hotel and Spa in Las Vegas. Prior gains were recorded on a percentage of completion method based upon our estimated total proceeds once all 255 units are sold. Essentially what happened here is that, based upon the impact the current environment has had on Las Vegas real estate prices, we have lowered our estimate of expected proceeds that we’ll ultimately receive when we sell the remaining 16 units that we are still carrying on our balance sheet. These units are generating cash flow as part of our nightly rental inventory, so we are in no hurry to sell them at the current distressed pricing to stop, but we still once again felt that it would be prudent and conservative to reduce our estimated final selling prices on these units. Now as we noted in our release, these aforementioned items, which negatively impacted pretax earnings by over $3.3 million, represent approximately $0.07 per share based upon our year to date income tax rate of just over 39%. Now the remaining items below operating income did not change significantly compared to last year’s second quarter other than interest expense once again running slightly less than last year due to the relatively low capital spending and lower average interest rate. Our overall debt to capitalization ratio at the end of the quarter was a very strong 44.9%, down from 47.3% at the end of our May year end. With cash on our balance sheet and over $114 million in available credit lines, we also remain in an enviable liquidity position as well. And finally our effective income tax rate for the first half of fiscal 2009 is 39.2%, with our quarterly rate slightly higher due to a small adjustment to our estimated full-year rate. Shifting gears, our total capital expenditures during the first half of fiscal 2009 now total approximately $14.5 million compared to over just $10 million last year. Nearly $11 million of this year’s amount occurred in our theatre division and relates primarily to land purchases, construction costs at our latest UltraScreen in Orland Park, Illinois, the purchase of 3-D digital projectors and a food and beverage project at a theatre in Minnesota. Now before I turn the call over to Greg, let me provide a few additional financial comments on our operations for the second quarter and first-half beginning with theatres. Our box-office revenues were up 26% during the second quarter with our year-to-date box-office now up 18.8% compared with last year this time. Concession revenues were up 27.9% for the quarter and are now up 20.4% for the year. Of course, these numbers were impacted by the seven newly acquired Nebraska theatres. So if you exclude the seven Douglas theatres, our box-office and concession revenues were still actually up 8.6% and 9.2% respectively during the quarter. Year-to-date, excluding the same theatres, our box-office revenues are now up 1.8% and concession revenues are up approximately 2.4%. Total attendance increased 20.6% for the second quarter and is now up 14.4% year to date, but again that includes the Douglas theatres. Excluding the acquired theatres, our same-store attendance was actually up 3.3% for the quarter, and is now down only 2.4% year-to-date. If you recall, most of the same-store decrease in year-to-date attendance occurred in August in our first quarter. Box-office revenues for these comparable theatres were favorably impacted by an increase in our average admission price for these theatres of 5.1% for the quarter and 4.5% year-to-date. Similarly, concession revenues per person for these same theatres increased 5.8% for the quarter and are now up 4.9% for the first half of fiscal 2009. With this strong box-office performance, our operating margins in this division during the quarter increased from 12.9% to 14.1%, and year-to-date our margins have decreased slightly to 20.9% compared to 21.6% last year. Shifting to our hotel and resorts division, our overall hotel revenues were down 7.7% and are now down 4.4% year-to-date. Total RevPAR, as the press release notes, was down 6.8% during the quarter compared to the same period last year, and has declined by 3.7% year-to-date. But as we noted in this release, it has not been an across-the-board decrease. In fact as noted, we had three properties with increased RevPAR during the quarter, this is of our eight owned hotels, and we still have more properties with increased RevPARs year-to-date than those of decreases. By the time we get to the end of the fiscal year, we may not be able to make that same statement, but it does demonstrate that there is some variation in performance by geographic market. Our fiscal 2009 second quarter overall RevPAR decrease was the result of an overall occupancy rate decrease of 5.3 percentage points as we managed to hold our average daily rate during the period. In fact our ADR actually increased by 0.7% during the second quarter. Year-to-date, our overall occupancy rate has declined by 3.1 percentage points, and our ADR has remained virtually unchanged at plus 0.4%. With that, I’ll now turn the call over to Greg.

Thanks, Doug. Now I’ll begin my remarks with our theatre division. You know I have read a series of articles in recent weeks debating whether the movie business is recession proof, probably all for the statistics and arguments. Box-office results increased during five of the last several recessions. Going to the movies is an escape from the challenges of daily life. People are traveling less but they still want to get out of the house. Going to the movies is an inexpensive form of entertainment compared to other out of home options. The list goes on and on. I am not here to say I definitely know whether there is a business that is ever really completely recession proof. But certainly our results this quarter speaks volumes about the recession resistant nature of the theatre business. It seems that once again despite economic turmoil that most of us have never seen before, consumers demonstrated that they are willing and able to allocate a portion of their busy schedules and stress pocketbooks to a night out at the movies, provided that Hollywood does their part by producing compelling films that people want to see. Only time will tell whether we will be able to look back on this recession and change our industry’s recession busting statistics the six out of the last eight. But we certainly are pleased with our results so far. While the external influences, other things like the state of the economy or the weather, or here in Wisconsin, the success or failure of the Packers, can have a significant bearing on the performance of our theatres. At the end of the day, it is the product that matters. During the last three months, the product was very good, particularly in October and November. We listed the top films of the quarter in our press release, as well as some of the films already released or scheduled for release during this holiday season and our fiscal third-quarter. And despite the national box-office taking it on the chin this past week when compared to last year, when two of the top three films of the season, Alvin and the Chipmunks and I Am Legend opened, the slate of films to be released tomorrow and next week offer a great variety and high hopes for some very successful weeks ahead. As you may know, the between Christmas and New Year is traditionally the busiest movie going week of the year, and we are fortunate that the calendar is in our favor this year with both Christmas and New Year falling on Thursdays extending both weekends. With theatres based on the Midwest, we of course will also be hoping for good weather during this very important timeframe, but enough about the elements of our business we can’t control with his film product and the weather. We also continue to execute on the many strategies we have highlighted for you in the past. Our press release mentioned several of these. We opened our 12th UltraScreen in the second last day of the quarter and we began construction on our 13th such screen at our North Shore Cinema in Mequon, Wisconsin. We previously introduced digital 3-D to 14 screens in our circuit and shot our second feature film Disney Bolt on those screens during the quarter. While the overall box-office from this film was slightly under initial expectations, the theatres with 3-D presentation performed much better than 2-D, further demonstrating the appeal of this format. The pipeline of 3-D films scheduled for release over the next couple of years seems to be growing daily which is very encouraging. We also recently introduced our latest food and beverage concept dubbed the Hollywood Café to our Oakdale cinema in Minneapolis market. Add to that the new projects under development in Madison, Wisconsin and Omaha, Nebraska, as well as additional land we have been acquiring for future growth, and you can see that we have a lot in our plate right now. One thing that still remains in a holding pattern for the moment is a broader roll out of digital cinema beyond the 3-D locations I mentioned earlier. On that front, we continue to test several systems in our theatres, and have been pretty pleased with the results from an operational standpoint. As many of you may know, all of the industrial financial models have found [ph] a full-scale roll out has now been agreed to with many of the studious, and the turnover [ph] in the credit markets may once delay the broader rollout. So as I wrap up my comments on this division, I think that it is pretty clear that this remains an exciting time for the theatre industry. Having said that, we have been in this business too long to take anything for granted and you can rest assured that we are poised to make the adjustments necessary in order to fulfill our mission of creating magical movie memories for our guests. Transitioning to our second division, hotels and resorts, I think it is safe to say that there won’t be any articles written suggesting that the hotel business is recession proof. In fact, there is historically a very strong correlation between GDP and hotel revenues. Since we last spoke to you in September, conditions have changed considerably and not for the better as you well know. Our second-quarter results clearly reflect that with each month generally worse than the prior one. During our first quarter, you’ve heard us focused primarily on the declining group business at several of our properties. As the second quarter unfolded, group business certainly didn’t improve, but we began to see rapidly declining occupancies from our corporate, transient and leisure customer segments. In fact, right now declines in our group business exceeds those of group business, the dynamic only adds to the uncertainty facing all of us in the hotel industry as the booking lead time for non-group business has historically always been shorter than that of the group business. In other words, it is very difficult to have a lot of visibility into the future right now. I’m sure that is one of the reasons why whatever guidance anyone has given have either been pulled or changed frequently. You may also note in our second quarter results that our food and beverage revenues declined at a slightly higher percentage than our room revenues. This is not an unexpected byproduct of times like these. Besides an expected decline in restaurant revenues, you often find group spending less at your hotel while they are there, as companies tighten their belts. They may still have their meeting or conference, but they might send fewer attendees and they will cut back on their food and beverage spend as well. Another example would be what we are seeing in the current month of December with holiday parties have been scaled back or in some cases even cancelled. Now as Doug noted, the situation is not all doom and gloom. Some markets are doing better than others, and in many cases, we are fortunate enough to be in markets where the highs may not be as high, but the lows are not as low. Markets like Oklahoma City, Houston, Madison, and even Milwaukee have held up better than others. Conversely, the Chicago market has been weaker than many and has impacted a couple of our properties. Another bright spot in the numbers Doug shared with you was the fact that at least thus far we have been able to hold our average rates, something we were also fairly successful at during the post 9/11 downturn in the industry. The bottom line is that we really don’t know for sure how long or how deep this recession will be. We are preparing for significant headwinds for all of 2009 but I don’t think anyone really knows just how strong those headwinds would be. Obviously, cost control becomes very important during times like this, and we’re challenging all of our cost very aggressively. The key of course is to do this while not negatively impacting the guest experience. This will require all of our years of experience to walk this fine line. It is not just about reducing costs. We have actually increased our sales efforts at several of our hotels and have seen favorable results thus far. This can be a time when we can strengthen our already leading market share at many of our properties. And if there is another silver lining in his otherwise dark cloud, supply growth, which had been outpacing demand growth, is now expected to subside due to the lack of financing, which is not necessarily a bad thing for owners of existing properties like us. We continue to seek additional opportunities to expand the management portion of our business, and we are actively looking on several potential opportunities as we speak. Now before we open up the call for questions, I also want to update you on our plans for capital expenditures during the fiscal year. As you may know, we have previously estimated capital expenditures for fiscal 2009 in a $60 million to $80 million range, while noting that there was a fair amount of flexibility in those numbers. In the face of this current environment, where maintaining a strong balance sheet becomes even more important, we have taken a hard look at our planned spending for the year. As a result of this review, we now expect our fiscal 2009 capital expenditures will more likely end up in the $30 million to $40 million range, depending upon the ultimate time of some of the expenditures. We are proceeding with our planned renovation projects at our Grand Geneva and Milwaukee Hilton properties where the scope of those projects in fiscal 2009 has been reduced by breaking the project into multiple phases. We also have several capital projects underway of being prepared in our theatre division, including the previously announced renovation at our North Shore Cinema in Macon, Wisconsin (inaudible) UltraScreen, and a separate Zaffiro's pizza restaurant. The actual timing of the various projects currently underway or proposed will certainly impact our final capital expenditure numbers, as well any currently unidentified projects that could develop doing that fiscal year. Of course, we can maintain a meaningful capital expenditure program while keeping ourselves in a position to take advantage of any potential growth opportunities that could arise during these turbulent times because of the strong balance sheet and liquidity position Doug referenced to earlier. Over the years, there has been many a time when we have been told that we’re just too conservative, that we should leverage the company more. Well, the fact is that our Board and management built our company to withstand times like these. Our foundation is solid and we are confident that when the economic environment improves, and it will improve, we will be standing on the other side as strong as ever, and poised to continue to create value for our shareholders, customers and associates. With that, at this time, we will be happy to open up the call for any questions you may have.

Thank you. (Operator instructions) Our first question comes from the line of Eric Palm, Baird. You may proceed. Eric Palm – Baird: Hi guys. How are you doing?

Fine, thank you. Eric Palm – Baird: I have a couple of questions for you. You obviously have capacity to take advantage of others distressed, either on their hotel or theatre side. What is your appetite to utilize your balance sheet for distressed acquisition opportunities on either side of the business?

Well, Eric, it is a tough call. We are watching it very carefully. I think let me break it into two parts. On the theatre site, you are not seeing a lot of distress. I mean the only distress you will see on the theatres side I think will be potentially from financial sponsors that may have some economic problems. But the properties themselves are operating fairly robustly right now. The hotel side as you are well aware is a different story and we continue to evaluate these opportunities regularly. We are monitoring the market, we have maintained a balance sheet just for this, for these kinds of opportunities. Our history shows that we do take advantage of these going all the way back to the acquisition of (inaudible) which was essentially a purchase out of bankruptcy. So we will utilize our balance sheet, but as usual be conservative in our approach and cognizant of the times so that we don't want to cause ourselves any problems in these great times of uncertainty. Eric Palm – Baird: If that is not too much distress on the theatre site, does that mean there is not a lot of pricing change on a per screen basis from last year or the year before?

I don't think there is – really the only transaction in the last couple of years have been ours. There really been many theatre transactions to even benchmark it with. Eric Palm – Baird: Because obviously that contrasts with the hotel side where there has obviously has been a lot of contraction in pricing?

I think look at the multiple of the theatre stocks, you'll see some contraction in the theatre stock and those multiples across the board in almost every industry. Eric Palm – Baird: Okay. What sort of steps are you taking at your hotels to rein in cost? I mean are you closing floors, are you cutting staffing, what sort of steps are you taking?

Well, Eric, I mean, as Greg said in his prepared remarks, first of all there is really no stone that has been left unturned. And again trying to find that balance because we don't want to cut into muscle here, but are we watching staffing very closely, yes. We, from a hiring perspective, I don't know that any hotel companies are hiring, so most people have gone into more of a freeze from a hiring perspective. We have certainly through attrition, while there certainly has been cut backs because of that, and frankly we have had to look very hard at overall staffing, at all of our hotels. In some cases, there have been some small cuts, small relatively so, but to the people involved, it's a big deal. And so it's been a tough time in that regard. And so but we're looking at every type of expense and just saying, how can we be efficient, how can we be smarter, and how can we – what can we do without impacting ultimately impacting the guest, and that is the challenge.

And if I can add to that, Doug, you know the point though where we are in our markets, we are in the Midwestern markets, we tend not to not see the highs and lows, although we have been impacted as our numbers indicate. But we are not having, I don't think we have at this point come to the point of having to close floors, but we are, in terms of operationally, we have had to curtail hours at some of our restaurant outlets, so we're watching things on the margins as Doug pointed out from where can we be as efficient as we possibly can be. Eric Palm – Baird: Okay, great. And then I have one last one, on the Platinum, you took an adjustment of $1.1 million in the current quarter and you're still holding you said the 16 units, what is the likelihood that given the downturn in Las Vegas residential real estate market that you are going to have to take additional write downs on your stake in that?

Well, my answer would be, my answer as I look at it today would be literally none, because we would have – from our best view of the world right now, we would have taken that now if that was the case there. We took the $1.1 million kind of adjustment and that puts us at a level that we are very comfortable with given our stated intention to not sell at that price. There basically aren’t any transactions occurring other than a few distressed sales, and we are not motivated to do that. We have cash flow coming in from these properties, these assets, and so we are motivated to be patient. And so with that perspective, we are comfortable with where our carrying cost is right now. Eric Palm – Baird: Okay, that is great. Thanks a lot, guys.

(Operator instructions) At this time, it appears there are no further questions. I would like to turn the call back over to Mr. Neis for any additional closing comments.

Well, once again, we would like to thank you for joining us today. We look forward to talking to you once again in March when we release our third quarter fiscal 2009 results. Thank you and we hope you all have a very wonderful holiday season and a happy New Year.

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