Business Context and Reporting Period
Company: ARK Restaurants Corp.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: March 28, 2009 (Second Fiscal Quarter)
Business Overview: The Company operates and manages a portfolio of restaurants, primarily in New York City, Las Vegas, Washington D.C., Atlantic City, Connecticut, and Boston. The Company is classified as a smaller reporting company.
Key Financial Metrics
| Metric | 13 Weeks Ended Mar 28, 2009 |
26 Weeks Ended Mar 28, 2009 |
13 Weeks Ended Mar 29, 2008 |
26 Weeks Ended Mar 29, 2008 |
|---|---|---|---|---|
| Total Revenues | $23,756 | $50,549 | $24,369 | $54,687 |
| Operating Income (Loss) | $(1,461) | $(1,076) | $93 | $2,204 |
| Net Income (Loss) | $(712) | $136 | $346 | $1,830 |
| EPS (Basic) | $(0.20) | $0.04 | $0.10 | $0.51 |
| Cash and Equivalents | $1,790 | (Balance Sheet Item) | ||
| Working Capital | $7,659 | (Surplus) | ||
| Debt (Notes Payable) | $609 | (Total) |
Note: All financial figures are in thousands, except per share amounts.
Material Changes vs. Prior Period
- Revenue Decline: Total revenues decreased 2.5% in the quarter and 7.6% for the year-to-date period compared to the prior year. Same-store sales decreased 10.0% company-wide.
- Profitability Shift: The Company reported a net loss of $712,000 for the quarter, a reversal from a net income of $346,000 in the same period last year. Year-to-date net income dropped significantly to $136,000 from $1,830,000.
- Regional Performance:
- Las Vegas: Same-store sales down 10.6% due to reduced gaming and tourism.
- New York: Same-store sales down 14.3% due to financial sector layoffs and reduced corporate events.
- Atlantic City: Same-store sales down 31.4% due to economic conditions and new competition.
- Washington D.C.: The only region with growth, up 7.3%.
- Expense Increases:
- Legal Costs: Approximately $309,000 in legal expenses related to litigation involving a New York City restaurant.
- Tax Adjustment: A $220,000 expense related to a real estate tax adjustment for a Washington D.C. restaurant.
- Occupancy & G&A: Percentages of revenue increased due to the decline in sales volume.
Guidance, Outlook, and Risks
- Dividend Policy: The Board suspended the quarterly dividend that would have been declared in January 2009. Future dividends will be determined on a quarter-by-quarter basis.
- Expansion Plans:
- Anticipates opening a restaurant at The Museum of Arts & Design in New York City in the third quarter of fiscal 2009.
- Yolos (Las Vegas) and a food court at Foxwoods Resort Casino are operational.
- Liquidity: The Company maintains a working capital surplus of $7.66 million. It does not currently plan to enter into a new credit facility, relying on cash from operations to fund requirements.
- Risks:
- Economic Conditions: Significant impact on tourism, gaming, and corporate spending in key markets.
- Seasonality: Business is highly dependent on weather for outdoor seating.
- Commodity Prices: Exposure to volatile food costs (chicken, beef, lobster, shrimp) without hedging contracts.
- Legal Proceedings: Ongoing litigation in New York City impacting expenses.
Investor Verification Checklist
- Dividend Suspension: Confirm the rationale and future likelihood of dividend resumption given the current loss position.
- Legal Exposure: Verify the status and potential financial impact of the New York City restaurant litigation ($309k expense incurred).
- Same-Store Sales Trend: Monitor if the 10% decline in same-store sales stabilizes or worsens in the upcoming quarter.
- Debt Maturity: Note that the Revolving Credit and Term Loan Facility matured in 2005 and has not been replaced; verify reliance on operating cash flow.
- Tax Rate Volatility: Review the effective tax rate (53.6% YTD) and the impact of state-level tax consolidation limitations on future profitability.