ARK RESTAURANTS CORP. - 10-Q Summary
Business Context and Reporting Period
This is a Quarterly Report (Form 10-Q) for ARK RESTAURANTS CORP. for the 13-week and 26-week periods ended April 1, 1995. The company operates and manages restaurants and bars, primarily in New York City and Washington, D.C. As of May 12, 1995, there were 3,145,995 shares of common stock outstanding.
Key Financial Metrics
| Metric | 13 Weeks Ended Apr 1, 1995 | 26 Weeks Ended Apr 1, 1995 | 26 Weeks Ended Apr 2, 1994 |
|---|---|---|---|
| Net Sales | $14,759 | $31,117 | $26,785 |
| Gross Restaurant Profit | $10,584 | $24,422 | $19,237 |
| Operating Loss | $(1,171) | $(939) | $(1,208) |
| Net Loss | $(482) | $(191) | $(74) |
| Cash from Operations | N/A | $135 | $(1,025) |
| Cash & Equivalents | $791 | $791 | $1,355 |
| Working Capital | $202 | $202 | $1,517 |
| Total Debt (Current + Long-Term) | $4,915 | $4,915 | $761 |
Note: All dollar amounts in thousands, except per share data.
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 27.4% for the 13-week period and 16.2% for the 26-week period compared to the prior year. This growth is primarily attributed to new acquisitions (Lutece, Lor-e-lei, B. Smith's, and America) not present in the prior year.
- Profitability Improvement: The Net Loss for the 13-week period decreased significantly to $482,000 from $1,027,000 in the prior year. The prior year's loss included a $300,000 write-off of advances to a managed restaurant and a discontinued catering operation.
- Margin Expansion: Cost of sales as a percentage of net sales improved to 28.3% (13-week) and 27.9% (26-week) from 29.1% and 28.2% respectively. Operating expenses as a percentage of sales decreased to 74.7% (13-week) from 76.6% last year, driven by lower payroll costs.
- Liquidity Shift: Working capital declined from $1,517,000 to $202,000 due to capital expenditures for two restaurant acquisitions and construction of the Bryant Park Grill. Cash and cash equivalents dropped from $2,913,000 to $791,000.
- Debt Increase: Long-term debt increased substantially to $4,702,000 (plus current maturities) from $685,000 in the prior period, reflecting the utilization of a $4,250,000 revolving credit facility to fund expansion.
Guidance, Outlook, and Risks
- Expansion Projects: The company is constructing the Bryant Park Grill, scheduled to open in the third fiscal quarter of 1995. The company expects to spend up to $3,500,000, with the landlord contributing $750,000.
- Capital Sources: Future expansion is expected to be funded by cash from operations and existing credit facilities. Additional external financing may be required for further growth.
- Debt Covenants: The company's ability to borrow is limited by provisions in its revolving credit agreement with Bank Leumi Trust Company of New York.
- Tax Credits: The company estimates a tax credit in excess of $200,000 for the current year based on FICA taxes paid on tip income under the Revenue Reconciliation Act of 1993.
- Accounting Change: The prior year's 26-week results included a $508,000 benefit from the cumulative effect of adopting SFAS No. 109 (Accounting for Income Taxes).
Investor Verification Checklist
- Verify the status and projected opening date of the Bryant Park Grill construction project.
- Confirm the utilization rate and remaining availability of the $4,250,000 revolving credit facility.
- Review the performance of same-store sales (reported as +1.6% for 26 weeks) versus the impact of new acquisitions on total revenue.
- Assess the sustainability of the improved cost of sales and payroll expense percentages in future quarters.
- Monitor the company's ability to generate positive operating cash flow to service the increased debt load.