Ark Restaurants Corp (ARKR) 2009 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Ark Restaurants first quarter 2009 results conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions). As a reminder, this conference is being recorded today, Tuesday, February 10, 2009.

I would now like to turn to conference over to Bob Towers, President. Please go ahead, sir.

Thank you. Good morning, and thank you for joining us on our conference call for the first fiscal quarter ended December 27, 2008. With me on the call today is Michael Weinstein, our Chairman and Chief Executive Officer; Bob Stewart, our Chief Financial Officer; and Michael Buck, our General Counsel.

For those of you who have not obtained a copy of our press release, it was issued over the newswire yesterday afternoon, and it's also available on our website, which is arkrestaurants.com -- that's a-r-k restaurants, plural, dot com. To review the full text of that press release, go to that website.

Before we begin, however, I'd like to read the Safe Harbor statement. I need to remind everyone that part of our discussion this morning will include forward-looking statements, and that these statements are not guarantees of future performance and therefore, undue reliance should not be placed upon them. We refer everyone to our filings with the Securities and Exchange Commission for a more detailed discussion of the risks that may have a direct bearing on our operating results, performance, and financial conditions.

Obviously, this has been a complex quarter and during complex times, and Michael Weinstein will now discuss the quarter.

Hi, everybody. So, it's obviously challenging from a retail point of view, and restaurateurs or just retailers of (technical difficulty) -- we are somewhat handicapped in the December quarter. There were a lot of cancellations for Christmas events and just corporate functions in general, which is just part of our business.

We were down in every venue in terms of comp sales, with the exception of our Florida properties. They were benefited by the fact that the Seminoles in both Hollywood and Tampa got class-free gaming last year, and comp sales are spectacularly up in the December quarter from the prior year. As a matter of fact, Hollywood was up 39%; Tampa was up something like 25%. Other than that we were just down, and double digits in most venues.

The feeling we had is that this started in the summer with us. Our comp sales were still up going into December, but July, August, September, each successive month, there was a narrowing of the positive comp sales on a year-to-year basis. October, we turned negative about 6% or 7%. In November, we were probably down 12%, and in December, we were down roughly 15% -- 14.7%. This is on a company-wide basis, not regionally.

But the regions pretty much followed that. What we saw in January was a further steep decline. However, because the inauguration is in January, our Washington venues were up significantly from last year. And basically, the month of January, although (technical difficulty) preliminary numbers, looks okay, and looks about, on an EBITDA basis, about even with last year.

As we got past the Christmas, post-Christmas season, we think we're sort of seeing a bottoming. And the last two weeks, we're seeing some better results. And we're starting to see a narrowing coming back the other way in comp sales.

This all sort of makes sense -- when you rationalize it, the -- one would think that people had spent a great deal of money on their Christmas holiday season; January in the Northeast was very cold and we had three or four snow days. There was a warming trend in late January, early part of February now. So, it could all be coincidental, but the business feels better.

We have done all those things that I think you're supposed to do, in terms of trying to be as efficient in cost as possible in response to diminishing sales. We've cut payroll significantly, primarily through no -- certainly no bonuses at the quarter, no -- a freeze on salaries, trying to eliminate all overtime.

We have a lot of hourly people where the number of hours those hourly people are working, are less. Where there was any duplication of efforts in the restaurants, those duplications (technical difficulty) -- duplications when business was good. We've eliminated some jobs. But we haven't cut, what you would say, to the core yet, because we think we're supposed to offer our customers the full services they expect when they come into the restaurants. So we're not in the disaster mode we were, let's say, the months after 9-11.

We have triggered some of the menus to offer some more economical choices in our more expensive restaurants. But basically, the attitude we have here, we have very good assets.

These assets were very productive before; they're still productive. They'll be more productive as we see a turn. Hard to predict what the turn will look like, and when it will be, but right now, we're feeling more comfortable with our business the last couple of weeks than we were prior to that. And the numbers are decent in this environment.

Everybody expects to be down. We're down, but we're above breakeven. And we think we're going to have, under these circumstances, a fairly productive year.

So, saying all of that, why don't we open it up for questioning.

Thank you, sir. (Operator Instructions). Mike Margulus, Wachovia.

Could you please speak to the cash on hand with regard to any fluctuations from last quarter? And especially as it relates to any acquisitions or share buyback and, of course, the deletion of the dividend?

Yes. Let me just repeat -- we suspended the dividend -- and suspended in quotes -- because we thought that the -- that our balance sheet would become a more important asset in these times, because I think that there's going to be product, other restaurant chains, small chains, available to us, as people find it difficult to navigate their way through this economy.

So, we have, on any given date, between $8 million and $9 million in cash here. We are spending our money on capital requirements, one of them for our build-out at the Museum of Art and Design in Columbus Circle in New York City. That's a 3 plus million dollar obligation.

We are seeing opportunities. We're pretty long, far along on one opportunity. And we found that we couldn't close the deal, maybe we were negotiating too hard, but just were concerned about certain elements of the business we were looking at and that sort of fell away.

We are looking at other product. In fact, we will find something, but the pressure on the restaurant industry is, although we're doing fairly well, again, in the context of the environment, there are a lot of stories out there that are unpleasant. Maybe we can find something. We're certainly looking.

We suspect our cash during the March quarter will stay close to this, this $8 million to $9 million level. And then, as we get into warmer months and our outdoor cafes become productive, we think the cash will build, other than any capital requirements we have or the need for money for an acquisition. That's where we are.

Thank you.

Thank you. (Operator Instructions). And gentlemen, we have no more audio questions at this time. I apologize, we have a follow-up question from Mike Margulus. Go ahead, please.

Mike, the last quarter was two days shorter, I believe, than the year-ago quarter. Is that true? And was that of any significance?

Not really. We have years -- we closed the last Saturday of December. So this year, it was on the 27th. There are some times when it pushes over and New Year's Eve falls in one quarter as opposed to the other. But that didn't happen this year and the comp was pretty much the same comp. It's not significant.

We lost a week.

Oh, yes. The big issue -- I should mention this -- there was one week, because of the way Thanksgiving fell this year, there was, I think, five fewer days between Thanksgiving and Christmas this year than there were last year. Well, those are the days when we sell our corporate parties. And people try to pick dates between generally December 1 and the 18th of December, are the time dates. But it does flow out right to the day before Christmas and the day after Thanksgiving, generally.

It wasn't significant this year. Even if you had fewer days to sell corporate parties, there were very few corporate parties this year. The cancellations were extraordinary. So I don't think it had -- that had any impact on us either.

One last thing, Mike. What about share buybacks during the quarter?

I think we addressed that. You know, the last conference call, I think, was still consistent with that. We want our balance sheet to be strong. And we think we have a better opportunity to utilize any cash on our balance sheet right now than in the last seven, eight years.

So, I'm told that those opportunities either prove elusive or we can't execute on that. Our philosophy? We want to keep our cash. If there's an excess of cash that we don't think we can use, we're going to again begin to pay a dividend. If our stock gets to a point where there's size available, where it makes a difference, and we can buy a block at values that we think are very compelling, we'll do that also.

There's no rules here on buying back stock. Our Board is flexible, we're flexible, but we just don't think that's the most productive use of the cash right now.

So you bought back no shares during the quarter or just a nominal few or --?

[100,000].

We bought -- we purchased about $500,000 worth of stock during the quarter.

Okay, thank you.

Thank you. [Noah Ebin], Gilford Securities.

I just quickly was curious to know what your outlook is for this quarter and the rest of the year for the 20 or so higher-end restaurants in your portfolio?

What the outlook is for them?

Yes.

I would imagine the comp sales will be negative by somewhere in the low two-digits for most of them. We have a few surprises. We have a few restaurants that are doing better than last year. We never know why that is.

I mean, we think -- we disperse good service and good food, we believe, amongst all our restaurants, but sometimes for reasons we don't understand, that some are doing better than others. But I just don't see a big improvement in comp sales from where we are now. But I do see, as I said before, I think we're sort of bouncing along at this low double-digit negative comp. When I say low double-digit, 11%, 12%, 13% down in general, with the exception of Florida, which defies gravity right now.

I think with payroll savings and, without a question, costs of goods sold starting to come back, we'll see -- certainly on sales, we'll see better gross profit margins, I would believe, some better payroll efficiency. I could see the quarter being okay.

I don't think we'll earn as much as last year, but I think we'll be okay. And I do see when the June and [September] numbers come in, that we'll have a decently profitable year within the context of this economy.

Okay, thank you.

Thank you. (Operator Instructions). And gentlemen, we have no further questions at this time.

Thank you very much for joining us today.

Ladies and gentlemen, this does conclude the Ark Restaurants first quarter 2009 results conference call. Thank you for your participation and you may now disconnect.