ARK RESTAURANTS CORP. - 10-K Summary (Fiscal Year Ended Oct 1, 2005)
Business Context and Reporting Period
Company: Ark Restaurants Corp.
Reporting Period: Fiscal year ended October 1, 2005 (52 weeks).
Operations: The Company owns and operates 23 restaurants and bars, 26 fast food concepts, catering operations, and bakeries. Locations are concentrated in New York City (8), Las Vegas (9), Washington D.C. (4), and Atlantic City (2). The Company also manages facilities in Florida (Hard Rock Hotels) and Atlantic City (Resorts Casino) for which it receives management fees but does not consolidate revenues.
Key Financial Metrics
| Metric (in thousands) | Fiscal 2005 | Fiscal 2004 |
|---|---|---|
| Total Revenues | $115,577 | $115,698 |
| Operating Income | $8,252 | $9,617 |
| Net Income | $6,579 | $6,657 |
| Diluted EPS | $1.85 | $1.93 |
| Operating Margin | 7.1% | 8.3% |
| Net Cash from Operations | $9,722 | $8,922 |
| Long-Term Debt | $0 | $0 |
| Working Capital | $4,299 | $1,893 |
| Cash and Equivalents | $5,723 | $4,435 |
Material Changes vs. Prior Period
- Revenue: Total revenues decreased slightly by 0.1% ($121,000) compared to fiscal 2004. Same-store sales decreased 0.9% primarily due to fiscal 2004 containing an extra week of sales. Excluding the 53rd week, same-store sales would have increased 1.2%.
- Expenses: Total costs and expenses increased 1.2% ($1,244,000), driven by minimum wage increases in NY and DC, Sarbanes-Oxley compliance costs, and higher energy costs.
- Discontinued Operations: The Company sold the "America" restaurant in NYC in March 2005, realizing a pre-tax gain of $644,000. Net income from discontinued operations was $362,000 in 2005 compared to a loss of $699,000 in 2004.
- Debt: The Company paid off all long-term debt. The revolving credit facility matured in March 2005, and the Company had no borrowings outstanding as of October 1, 2005.
Guidance, Outlook, and Risks
- Expansion: The Company opened "Gallagher's Steakhouse" and "Luna Lounge" at Resorts Atlantic City in late 2005. No other new projects are currently committed.
- Dividends: The Company declared a quarterly cash dividend of $0.35 per share in October 2005 and intends to continue paying quarterly dividends, subject to Board discretion and future earnings.
- Risks:
- Seasonality: Business is highly seasonal; Q2 (Jan-Mar) is typically the weakest quarter due to cold weather in NY and DC.
- Terrorism/Travel: Operations rely on tourist traffic; future acts of terrorism or international unrest could materially adversely affect revenues.
- Competition: The restaurant industry is intensely competitive with high failure rates for new concepts.
- Legal: Ongoing litigation regarding the lease of the Company's executive offices in NYC; the Company remains in possession pending appeal.
Investor Verification Checklist
- Debt Status: Verify the Company's ability to fund future expansion without a credit facility, relying solely on operating cash flow.
- Lease Litigation: Monitor the outcome of the lawsuit regarding the executive office lease at 85 Fifth Avenue, NY.
- Discontinued Operations: Confirm the sustainability of earnings without the gains from the sale of the "America" restaurant ($644,000 gain).
- Same-Store Sales: Analyze same-store sales trends excluding the 53rd week anomaly to gauge true organic growth.
- Minimum Wage Impact: Assess the long-term impact of rising minimum wages in NY and DC on payroll expenses (31.3% of revenue).