Ark Restaurants Corp (ARKR) 2011 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Ark Restaurants fourth-quarter 2011 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) I would now like to turn the conference over to Bob Stewart, Chief Financial Officer. Please go ahead, sir.

Thank you. Good morning and thank you for joining us on our conference call for the fourth fiscal quarter of October 1, 2011. With me on the call today is Michael Weinstein, our Chairman and CEO, and Vincent Pascal, our Senior Vice President of Operations. For those of you who have not yet obtained a copy of our press release it was issued over the newswire yesterday and is available on our website. To review the full text that press release along with the associated financial tables, please go to our homepage at www.arkrestaurants.com.

Before we begin however I'd like to read the Safe Harbor statement. I need to remind everybody 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 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 conditions.

I'd like to start with a brief discussion of our financials, particularly the impairment charge that we took in the last quarter of the year. The impairment charge for the [Light Store] properties at and MGM Foxwoods based on our current cash flow and projected cash flows, we felt the need to impair this asset. The charge totaled $2.6 million, of which a part of that belonged to the variable interest entities, our partners in this transaction. And to describe the impact on our earnings per share, when we tax in fact the transaction, without the impairment that we would have had an additional $0.33 of earnings. So when we are looking at our earnings per share, for the quarter, we would have earned $0.58 without the impairment as compared to $0.31 last year and for the year, it would have been $0.74 compared to $0.75. The EBITDA numbers on our press release are adjusted for the impairment. So for the quarter ended, we were up $1 million, $3.6 million compared to $2.6 million in EBITDA last year and for the year we were pretty much even, year-to-year. I just wanted to -- because I've received some calls on this subject I thought it would be good to go over that. And now I'll turn the call over to Michael.

Hi, everyone. So the last year was not dissimilar from the prior year and not dissimilar from the prior year before that. Sluggish sales until the fourth fiscal quarter, bad weather, which ended us early in the late spring and summer, in New York we had I think we had in the summer we had 66 inches of rainfall compared to our norm of 47. That impacts our outdoor cafes. We were struggling all year with food costs. That became a significant factor in our Business about 18, 20 months ago when food costs started to rise with all other commodity prices. We struggled with payroll expenses because minimum wage was phasing into higher minimum wage rates. And other labor laws that were enacted especially in New York.

And towards the middle of the summer, we made some decisions that I think were fortuitous. Number one, we decided that demand wasn't sufficient, and our confidence wasn't sufficient to raise prices. But we needed to do something about food costs in relation to our economic formula. And we decided to cut protein served on the plate by about 5% in all our restaurants. Now, we're not a one brand chain. So this is a difficult process for us. Every if restaurant has different menus. We had to gauge customer sensitivity in each restaurant, demand is different for each restaurant, but we have significantly impacted food costs and that starts to show up in the last quarter of this past fiscal year. Strangely, as this was going on, we started to see a resurgence in demand. That had a little bit to do with the better weather situation, but Las Vegas started to pick up. Our New York restaurants got very, very strong in the September quarter. Or the last fiscal quarter of last year.

And so two things are going on at the same time. There's not much we can do about payroll costs. We have to operate a full-service staff to keep customers happy. We've always been cognizant about that, we're not going to skimp on labor, but in terms of food costs, we're seeing improved percentages in relation to sales, given what we have accomplished in our menus. Again, a 5% reduction in protein, and some shifting in the type of product we use, not in the type of quality, but we're very flexible for instance in terms of fish entrees became too costly, we'd switch to another product with the same quality. So we've made our chefs more flexible, they are highly aware of prices every single morning when they walk in and order. So this has been effective. And then we had this remarkable pickup in the sales volume. We're ahead some 4% to 5% in the fourth fiscal quarter, and that number has only gotten better in the first 11 weeks of the current December quarter. So business is better, our food costs are better, our payroll costs are higher, but sales volume will help us with that as that increases.

So the Business seems to be on good footing in the last four months. And we have some exciting things happening in the current year. Our first new restaurant opens in February. It's 10,000 square feet, 400 person capacity facility in partnership with Walt Frazier, the former Knicks all-star basketball player. I think we're going to do really, really well there. And as the year progresses, some more leases will be timed and construction will be started in other places. The Burger Bar in the Las Vegas and New York, New York has been very successful. Again business in Las Vegas seems to be picking up. With that all said, I'm happy to take questions.

(Operator Instructions) Greg [Bach], (inaudible).

Just wanted to get clarification again on your EPS figures there. Obviously you went over them there in the beginning of the conference call. We just wanted to just get a clear understanding of what the EPS for the quarter was and also what the EPS for the year would be. Basically adding back your impairment charges. If you could just get a little clarity on that one more time please?

Right. The EPS for the quarter -- the total impact of this was in the last quarter when we wrote it down, so the impact on both quarters is $0.33. So you would add back -- that's tax adjusted so you would add back the $0.33 and get $0.58 for the quarter as compared to $0.31, and $0.74 compared to $0.75 last year, so it's a $0.33 impact from an EPS standpoint.

Okay. Well, thanks again for clarifying that. One thing we found to be very beneficial to investors, many investors are going to be perusing through press releases in the morning and trying to get an understanding of what a particular company has done, it many times is beneficial for companies to break out a non-GAAP EPS figure for investors, so that a larger component of the investor base can get a clearer picture of what your company has done. That's just a suggestion that we would make for the future so that the investors have clarity when they're looking to make their buying decisions or one they are perusing press releases that have come in in the past and they're looking for opportunities, it just helps them get an apples-to-apples comparison but very good quarter, and we thank you for taking our call.

Thank you. And we'll take that into consideration going forward. The one GAAP measure that we do include, non-GAAP measure is our EBITDA numbers, and those numbers have been adjusted for the impairment charge. So if you look at the quarter, again, we're $1 million above where we were last year last quarter, mid-quarter in EBITDA, and again, we have achieved that in difficult times. And also for the year, we started the year behind and we were able to in the last quarter -- last several quarters I would say, pick that up and match last year's EBITDA of $8 million. So that's an important metric that we pay attention to here.

(Operator Instructions) And I'm showing no additional questions. Please continue.

All right. Thank you, everybody. Things are better here. I think you'll be very pleased with the December quarter. We're 11 weeks into it and we're seeing very strong sales numbers, and better cost of goods sold, so we should do comparatively very well in the December quarter. And hopefully the start of a very, very strong year. Thank you for being on the call with us. We'll see you in three months.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.