Ark Restaurants Corp (ARKR) 2012 Q4 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Ark Restaurants fourth-quarter and full-year 2012 results conference call. During today's presentation all parties will be in a listen-only mode. Following the presentation the conference will be opened for questions. (Operator Instructions). This conference is being recorded today, Thursday, December 27, 2012.

I would now like to turn the 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 fourth fiscal quarter and year ended September 29, 2012.

With me on the call today is Michael Weinstein, our Chairman and CEO, and Vinny Pascal, our COO. For those of you who have not yet obtained a copy of our press release, that was issued over the Newswire yesterday and is available on our website. To review the full text of the 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 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 will now turn the call over to Michael.

Hi, everybody. Thanks for listening in. So this was a good quarter and a good year. We had particular strength in the New York and Washington, DC markets and also Atlantic City, which is not a big factor in our earnings, but we also had double-digit growth there, it was not [remarkable], given Atlantic City in general.

The distinct items to discuss are the opening Clyde's place in the current fiscal year, and I think we discussed in prior quarters the fact that we had a much delayed opening which cost us a great deal of money. And subsequent to finally opening, we also were inefficient and misread the market and the whole year was not a good one at Clyde's. It cost about $1,800,000.

We had believed that we had corrected that problem helped by the Christmas season, probably made money in December. Although we don't have final numbers, I am pretty confident we made money in December. And certainly the minimum we look forward to is a greatly (technical difficulty) operating cost in the current fiscal year.

We also in the year that just ended had a $500,000 charge for the severance package for Bob Towers, who had been with us for a great number of years and as President of the Company, and he retired. So there was the severance package, but that's in the year-end figures.

The other disappointment in the Company is Las Vegas which just remains flat to down a little. We think we are doing a very good job there. The revenue stream has just been mediocre for the last three or four years. If Vegas were to perk up that would have a significant impact on our EBITDA and cash flow, obviously.

There was also a charge this year, a small one, of some $300,000 as we wrote off an operation in Connecticut. We were at Foxwood Casino with [three] operations. One of them is a restaurant in a hotel, hotel that is on the -- [or borders in the investigation]. We are treading water there, but as the profitability is (technical difficulty) make a contribution to revenue up there, we will be exiting that sometime early this year and we wrote it off accordingly.

So that is about it. We just had very strong results in New York and Washington, DC. Decent results in Atlantic City, okay results in Boston, Las Vegas is still very good cash comp but nothing like it was in 2007. Florida remains very, very strong.

In the current year we have bought out some of our limited partners in our Florida operations. That will probably contribute another $0.5 million to EBITDA this current year. We have extended the offer to other limited partners. Whether or not we have any takers it is hard to tell, but we will keep trying to buy out that partnership as we go along.

Cash is good. The only debt we have is related to the purchase of [Zerico], and 250,000 shares of stock (technical difficulty) state, and we look forward to a better year this year. We think we are on a good track here. So I will take questions.

(Operator Instructions). [Robert Plump], private investor.

Thank you for taking my question. Can you tell me what effects Hurricane Sandy had on operations?

Well it had a big effect. And that will show up in the first quarter. We've lost essentially operations of most of our restaurants in New York for five days or so, most of our restaurants are south of 40th Street and that seemed to be the demarcation line of where you had power and didn't have power.

So, with the exception of Robert and Canyon Road, which were operating during the whole thing, I think we had one day closed for them both. The rest of the restaurants were closed and for five and six days.

Two of our restaurants, Sequoia and Red at the South Street Seaport, were closed much longer than that. Damage at Red's was quite extensive. We have a lease that ends May of 2013 and we met with the, actually, Chairperson and President of Howard Hughes, which owns the South Street Seaport and we decided on very [equitable] terms to give them back Red and not rebuild it. It made no sense for us to rebuild it and the whole South Street Seaport is in redevelopment phase. We think we are going to have a significant footprint when it is redeveloped.

The final, the project will be final and ready to open in 2015. And we have this very co-operative relationship with them. So we gave them back Red and decided not to rebuild. That was a prudent decision.

Sequoia, the lease was actually up at the end of this December. So -- excuse me, January. And again, we decided not to rebuild. And we're -- significant question about the safety of the pier. They had a (technical difficulty) [at 1,700 pilon] and for us not that it would have been expensive, there was very little damage at Sequoia, but we just decided again to work with them and not rebuild.

So we have two restaurants that we've lost. They probably together, last year, contributed something slightly under $0.5 million to EBITDA. But we had every indication that our footprint in the new projects, again which is 2 1/2 years off, will be much more significant (technical difficulty).

Okay. Thank you.

Richard Krutsinger, private investor.

Good morning, gentlemen. Thanks for taking my call. I am calling from Edmonton, Alberta, Canada. Do you have any plans on expanding into Canada? We have a very good footprint for you in Calgary which is right on the east end of Canada. So like I say if you have any plans on coming up here.

Well, thank you for the invitation. No, we don't. We tried to stay within trading areas where we think we have some knowledge on the ground. And the most efficient way for us to operate our overhead is sort of cluster restaurants around local overhead. So, obviously, Las Vegas and New York and Washington, DC, we have done that.

Florida is sort of easy for us to service because of their fast food operations and casinos and we have great management in place, which reports directly to New York. The same -- the same with Boston. The projects that we are looking at center around where we have corporate overhead. And we think those opportunities are significant.

While you are -- so I hope that explains your question.

I would like to just go back a second to the previous gentleman's question. One of the problems that we faced last year is not only with Sandy but with a flood in Sequoia in Washington, DC, took place the previous year and a fire in Boston which took place this year is the collection of business interruption insurance, which always seems to be a negotiation and a difficult process.

So we still have some insurance money owing to us in terms of several hundred thousand dollars in total that we have not accrued for. We will take it when it is received -- when it's received into our P&L. Or in the terms of content that's a balance sheet item.

So there's still a little sloppiness around our negotiations with the insurance company. We plead innocent, but we think the sloppiness is with the insurance company.

So thank you for the invitation, but we have to turn it down at this present time.

Thank you and don't forget the doors are always open for you guys.

Thank you.

Thank you.

(Operator Instructions). Robert Plump, private investor.

Can you tell me what effect, if any, the tax increase of dividends will have on future policies for the Company?

We are -- we sort of think there will be some -- like everybody else, there will be some increase on dividend income. If it were to go to 49% or some ridiculous number, we would reevaluate. If this is going to go to 20%, the dividend policy will remain in effect. The -- many years ago, we said and we continue to believe that we want to return money to our investors above any structure requirement we have for expansion or a level of safety that we want to retain here in terms of our cash.

We have not been a borrower at the corporate level except this note that we executed when we bought back this 250,000 shares of stock. We intend to stay that way. And so the availability of our excess cash is going to be available to our shareholders. And unless it's a dramatic shift in tax policy on dividends, we are going to continue to think that way.

Okay. Thank you.

There are no further questions at this time. I will turn it back over to management for any closing comments.

So, I guess I am supposed to speak again. I think one of the things that we should discuss before we end this call was healthcare. And this will have a significant impact on companies our size and especially those that are in the restaurant business. We probably have on a full-time basis 1,500 employees here. Some number like that. It expands in the summer months dramatically when we open our outdoor cafe in the Northeast. We probably go up to 1,800, 1,900 employees. Most of those are not insured.

Although we offer insurance to everybody, it tends to be a young work force that doesn't want to spend money on health insurance. Well, now, they are going to. And we are going to have to pick up 60% of that.

How this is handled in 2014, when the law becomes in effect, may vary region by region in the country. In San Francisco, they have already put on many restaurants a healthcare charge on checks. I don't know if that is going to expand throughout the country.

My guess is the whole world is going to go up in price. And if it costs us $1.00 a check to cover healthcare, I think we can increase our prices to reflect that and one of the indications to me that this will have the increase to prices will have little impact on our customer account, is the fact that we raised prices in the middle of the bad economy because the food cost is going up dramatically and there are two things. We have lowered the content of our meal size by about 5% [non-protein] and raised prices about 2% or 3% at the same time. I think part of the good results that we had this year is direct correlation to that move.

Food costs are going crazy and you know and not have a lid on them two years ago and expenses were going up in a bad economy and we just had to do something and, surprisingly, our customer counts went up this last year with these increases in price and with the reduction of protein on the plate.

So, I think we have ample room, if history serves me correctly, to take care of healthcare costs. So, we are not overly concerned. We are anxious to see what the final legislation is in terms of the impact on temporary employees and other areas which have not been well defined.

So with that thought, I want to thank you all for participating in the call. I think we are going to have a very, very good year and I look forward to speaking to you at the end of the first quarter. Thank you.

Ladies and gentlemen, this does conclude the conference call. You may now disconnect and thank you for your participation.