Ark Restaurants Corp (ARKR) 2010 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Ark Restaurant's first quarter 2010 results conference call.

(Operator Instructions).

I would now like to turn the conference over to Bob Towers, President and Chief Operating Officer of Ark Restaurants. Please go ahead.

Thank you, Doug. Good morning, and thank you for joining us on our conference call for the first fiscal quarter ended January 2, 2010. With me on the call today is Michael Weinstein, our Chairman and CEO, Vincent Pascal, our Senior Vice President and Director Bob Stewart, our Chief Financial Officer, and Michael Buck, our General Counsel. For those of you who have not yet obtained a counsel of our press release, it was issued over the news wire on February 12th -- Friday, February 12th and is available on our website. Our website is www.arkrestaurants -- plural -- .com. A R K restaurants -- plural -- .com. Before we begin however, I would 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 condition. I would now like to turn will call over to Michael Weinstein, our Chief Executive Officer.

Hi, everybody. This quarter was adversely affected by sharply reduced revenues in corporate parties during the Christmas season. early operating losses associated with with the ongoing opening months of Robert, somewhat challenged comp sales on our regular ala carte business, and high legal expenses related to ongoing litigations. In addition, in last year's quarter, December quarter, we would benefit from the deposits we captured on our cancelled Christmas parties -- had the effect of having revenues with no expenses attached to it. As well as we were able to be open for regular business on those cancelled dates. So, we got a little bit bumped last year from that. This year, there was a dearth of Christmas events. My instinct tells me we have seen the worse in all of this. The next move in comp sales should be up.

It's a little difficult to say because there is recent pain of the Christmas season, bad weather in the East Coast these last few weeks, and, obviously, the general outside influences of the economy and how they challenge sales. If I go through the venues, however, and we'll start with the worst, I think there is reason to be somewhat optimistic. Atlantic City may be permanently damaged by competing gaming in Pennsylvania, and Foxwoods in Connecticut seems to be compromised by an unenviable balance sheet and market challenges from Rhode Island gaming, and perhaps New York in the near future. Fortunately in neither Atlantic City or Foxwoods gives us much EBITDA, and we have to figure out a way to deal with these operations. We're still positive in cash flow in Atlantic City, and probably just slightly negative in Foxwoods.

But further observation tells me the following. In Tampa and Hollywood, we remain very strong. Our sales are holding up well at the Venetian, where we have only have fast food and the V Bar, which are certainly as not as challenged as full service restaurants in Las Vegas. Yolos and Planet Hollywood continues to do very well, and should benefit from the recent takeover by Harrah's, which has a better reservation system and the most superb marketing system of all the Vegas hotels. MGM, owner of New York-New York is forecasting sales increases, although modest, starting in the June quarter and a slow build after that.

In the current quarter, whether they (inaudible), Boston has done better, as had New York-New York, when you look at their a la carte business. Sequoia in Washington has been really challenged by weather, we have been closed several days there. We still have diminished corporate event business, but the improvements in the restaurant itself have been substantial, and I have to believe the public will take notice. Robert, which opened in December, has recently started to have some profitable weeks in February, interrupted only once by weather. So, all in all, I believe the assets we own are likely to stay strong, and to increase their cash flow as this economy improves.

We have finally extended our leases in New York-New York, giving us effectively another 12 years. In exchange for this, we committed to $3 million in improvements. We have already agreed to replace our fast food burger outlet, with a full service burger bar. I believe that this is really going to be positive for us. And maybe we'll be able to take another $1 million dollars in cash flow out of New York-New York, generated by the sales increases from the burger bar. This will take about a $1 million dollars in capital, and have to commit to another $2 million toward enhancing the fast food venue over a period of two years. I think that will also help us. At the construction of Robert, the -- and taking into account the special dividend, and the resumption of the quarterly dividend, our cash in the bank including float -- is hovering around $4 million to $4.5 million.

I would expect a somewhat small drop until we come to mid-March. Historically that represents the turning point for the Company. We will then start to build cash in excess of dividend requirements, and acceleration occurs as the weather warms. We are being very cautious. I recognize, and need to find new sources to generate cash flow, but we have done extremely well by extending the lease of New York-New York, and one of our leases at Bryant Park. We could benefit by settling the remaining outstanding litigations. We have reserves on the books for those. I think that should happen in -- on both of these before June is out. Obviously if we had to pay out any money, this would further reduce cash, but it would not affect EBITDA, as I think we have had more than enough on the books for any settlement that might occur. Our cash is precious. We have to be very clear when we invest in new operations. We have to have good visibility, and we continue to look for savings in every corner of the business. But I think we have a healthy business, and I think you can look forward to better quarters as the year progresses. If there are any questions, I'll be happy to answer them now. Doug?

I apologize.

(Operator Instructions).

Our first question comes from the line of [Gary Neil]. Please go ahead.

Yes, I wondered if you could maybe clarify your remarks relative to the dividend. It was unclear to me with the demands, potential demands of cash, legal settlements, et cetera, where you view the security of the dividend?

It's very secure. This is a highly seasonal business, and the -- we start to turn right at the end of the March quarter. And last year, which is a horrible year, we generated $6.5 million in cash in the June and September quarter. And it was a horrible year. It was just horrible. I can't imagine that we would do less. And we have the advantage, I think, Robert, which has turned profitable, and my expectations for it are really optimistic. So, there is nothing -- and we made several decisions. And let me tell you the philosophy about the dividend. We have always said, that we're going to distribute excess cash. We got to the end of last, the last fiscal year, and we were sitting with about $11.5 million, if my memory serves me. And we decided that if we, if we examined the litigations, and the impact they had on our EBITDA last year, and we added that back in. And in a terrible year we had generated about $9 million EBITDA, given that we add back the litigation expenses.

And there also in that year certain other -- not that you can't have additional black clouds -- but the black clouds last year were a terrible, terrible early spring season in New York, very bad weather, which inhibited sales in our outdoor cafes. We had also spent a lot of money sprucing up our facilities in Washington. We looked at that year and said, yes, $9 million in EBITDA, we can afford to pay out a dividend, and we could also afford to do a special dividend. And that attitude hasn't changed. Every year I get to this point in our business, and I'm depressed because I see cash go down, but that is what happens every time we come into January, February, March, until it turns. It will turn, so I don't think there is any risk to the dividend.

Okay, thank you. A followup question from the last conference call. You mentioned that you were purposely keeping head count higher than perhaps business might otherwise require, just to make sure you kept key people, the key people assets in the business. Is that still the case looking forward? Or is there a -- .

Yes, we had -- yes. Look, I think that when you have limited money to spend, and you are going out for dinner, you expect your -- those limited dollars to buy you full service. And if we try to skimp on that, I think we lose that customer permanently. So, we have, we retained everybody. Last year, and there was one awkward moment here -- which I shall describe in a second. But last year, we said just said to ourselves, look, no salary increases unless they are mandated legally, which was the situation we had with minimum wage at most of our venues. Let's try to eliminate overtime hours, which I think we did a good job on, by the way, and no bonuses.

This year we had the situation where we decided to to reinstate the dividend. And we had a dilemma -- in that -- we're increasing, we're reinstating the dividend to shareholders. And we thought that we should accompany that with some small bonuses to our employees, and we did that. But they were small. We just couldn't -- we couldn't morally say, hey, all of these people that are working very hard without raises and with their overtime hours cut. We didn't want to treat them -- as if we didn't have the money to give small bonuses, when we were giving the dividend to shareholders. So, that increased our payroll cost slightly as opposed to what we had been doing. We're still in the process of no overtime hours, no raises. We're still in that mode. But -- we want to give full service. We don't want to impair service. Okay. I hope that answers the question.

Yes, it did. Thank you very much.

Okay.

Thank you.

(Operator Instructions).

I show no further questions in queue. I would like to turn the call back over to management for closing remarks.

Well, thank you, everybody. We'll see how the year goes. I'm becoming somewhat optimistic, that we'll see improvements from here on in. Thank you, see you next quarter.

Ladies and gentlemen, this concludes the Ark Restaurants's first quarter 2010 conference call. We would like to thank you for your participation, and you may now disconnect.