Ark Restaurants Corp (ARKR) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, thank you for standing by. Welcome to the Ark Restaurants first-quarter 2011 results conference call.

During today's presentation all participants will be in a listen-only mode. Following the presentation the conference will be open for questions. (Operator Instructions) This conference is being recorded today, Tuesday, February 15, 2011.

At this time I would like to turn our conference over to Bob Stewart, Chief Financial Officer. Please go ahead, sir.

Thank you, operator. Good morning and thank you for joining us on our conference call for the first fiscal quarter ended January 1, 2011. With me today on the call is Michael Weinstein, our Chairman and CEO.

For those of you who have not yet obtained a copy of our press release, it was issued over the news wires yesterday and is available on our website. To review the full text of that press release, along with the associated financial tables, please go to our homepage at www.ArkRestaurants.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 those statements are not guarantees of future performance and, therefore, undue reliance should not be placed on 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 will now turn the call over to Michael.

Hey, everybody. I think before I even start with my review I would like Bob to talk about the consolidation this time around, because there was some new rules put into place. If you could just give them a summary so that they can understand the way we are reporting now.

We were one of the last companies to have to adopt ASC 810 which related to variable interest entities. It has to do with our fiscal year-end. So we adopted it the first quarter of this year, this fiscal year.

Now that standard required us to consolidate certain variable interest entities that we had not been consolidating before. You can see on the press release income statement that we have included amounts that represent the consolidation of these as well as the actual number of the consolidation.

It will not affect the net income or bottom line; it just impacts the various line items on the P&L. Their income is included in our revenues and their expenses are included in our expenses. They are consolidated now, while previously we were taking a management fee and a profit distribution from these variable interest [entities].

There will be more detail and more discussion of this in our 10-Q, but ultimately the main thing to understand is that the bottom line remains the same and it's Ark Restaurants' bottom line.

Essentially, what happens is where before we were just taking our management fee in profit, now we report 100% of the profits and deduct out at the end the participation of our partners, leaving us with the same net income. So I hope that is understandable.

I think I would like to review our business in the first quarter area of the country by area of the country. The first one is New York. So same stores sales in New York were up approximately 5.3%.

We are seeing good demand in New York. We have margin problems [as] food costs go up, facility costs going up again, paper costs are going up. The big issue for us is that the 5.3% increase barely maintained our dollar profit [because] our costs are going up.

So we are -- in New York especially we are looking at pricing. Started to put in some increases where we think we have an umbrella of safety given what other restaurants in similar categories are charging for their project. We have always been on the low side because of our efficiency, but now what we are approaching is as demand is increasing in some of these stores we think we can get more and we are trying to.

The same thing in DC. We had very good comps this year; we are up 11% in the first quarter. Those businesses continue to do better, Sequoia especially. So New York and DC we are all right. Our Boston same-store sales, we [only] have one deal in Boston, which is Durgin-Park, and that has an 8% increase this winter, this December.

I would point out that these increases really came from a la carte diners, not some corporate parties or events. Those were really down [this year]. There is still a softness in that business. We are just starting to see in the current season, January, some corporate events starting to flow back to us for the later part of this year, mid-year and later part of the calendar year.

Social functions are still very strong, that is weddings, bar mitzvahs. They don't seem to stop but corporate planning was a little shallow this past December; it's a little disappointing. So the uptake in terms of the cost of comps was just diners and that is always healthy.

Atlantic City and Connecticut we are in secondary casino properties, [Foxwood] in Connecticut and Resorts in Atlantic City. Those secondary casino markets right now we don't see -- we are down in both of those. Very disappointing in Atlantic City; we are down 18%, although the hotel, which is in bankruptcy, was just taken over by new owners with fresh capital. Hopefully they will be able to market the property better. It's sort of dusty and not well tended to by the previous ownership.

And Connecticut, I think Foxwoods is doing everything they can. They are just fighting a bad gaming market and area, two hours from the (inaudible) Center, so I think they have a tough road.

I may stay in both of those markets without losing money. We don't have a substantial investment in Atlantic City so we are in good shape there; did very well on our initial investment. We have been there a while so like it to do good but there is not a lot of capital involved.

Connecticut we have a lot of capital involved, just breaking even, making a couple of bucks. Although we have long leads, it seems like a long, tough road ahead. And then we come to Vegas.

I said in the last conference call we can't really get -- although we had a very good quarter and EBITDA was up almost $1 million, it was really driven by what was going on in New York and Washington. And Vegas still is battling difficult comps. We were down 4.3%.

There is a lot of talk on the part of hotel owners that they are starting in Vegas to get a little bit more increased room rates. Certainly the airlines, which have not increased to my knowledge the number of flights, they are charging more than they were a year ago flights through -- from the East Coast to Vegas.

So there seems to be some percolation of demand that we should eventually see at our properties in Vegas, but we were down 4.3% in the December quarter. You want to stay -- we are at the U, the bottom of this thing, the bottom of the U and it's just starting to be a swing up. But we really haven't seen it yet.

We are enthusiastic about Vegas in general. I said in my letter to shareholders that [will] go out that I am a believer in build it and they will come. When you look at City Center and Cosmopolitan some of the attractions, properties, it's a great invitation to Vegas and we should benefit from it.

The office at the corner of Tropicana on Las Vegas Boulevard that is a great location and property -- it's still a [must] property but we are not feeling the demand yet. Until we do it's really hard for EBITDA -- as a company with 50% of its sales coming from Las Vegas it's really hard to get EBITDA back to where it was.

So we have, however, made some in-roads to try and improve our operations, especially at New York, New York. We built a burger bar which opened in late October I guess, November. That has replaced three of our fast food -- smaller fast food locations and we have essentially doubled our sales in that square footage. So that is a good thing.

It's a well-liked proposition. We are serving liquor there and we didn't have any alcohol at all in the three previous predecessor locations that this replaced. And we took over the ESPN sports bar now called the Sporting House which is profitable and doing well and we think will start to contribute, [to earn] sometime in the quarter.

We are presently negotiating four deals in New York City that we are excited about. I think they all take place -- they all come on stream first quarter of next year.

Our capital position is very good. We have today about [$6 million] in the bank, a little more. Last year at this time we had $4 million in the bank, so our capital position is strong at a time in the year when we don't build capital. Earnings are meager until we get into this spring season which is about six weeks away.

So we are in a very good position here. Strong balance sheet; we still pay our vendors on a 10-day cycle. It's unusual in this industry.

We think the quality of our products are very good. We think -- and the quality of our products, not the quality of our food service but we think we maintain our facilities very well and we think we have great properties. As the economy comes back [we think we will] benefit.

Are there any questions?

(Operator Instructions) Management, I am showing there are no questions in the queue. I turn the call back over to you.

Thank you. Either I put everybody to sleep or I was thorough. Either way, I appreciate your attendance and we will see you next quarter.

Thank you, sir. Ladies and gentlemen, that concludes today's Ark Restaurants' first-quarter 2011 results conference call. Thank you for your participation. You may now disconnect.