Ark Restaurants Corp (ARKR) 2014 Q2 法說會逐字稿

Greetings and welcome to the Ark Restaurants second-quarter 2014 results conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Bob Stewart, Chief Financial Officer of Ark Restaurants. Thank you sir. You may begin.

Thank you operator. Good morning and thank you for joining us on our conference call for the second fiscal quarter of March 29, 2014. With me on the call today is Michael Weinstein, our Chairman and CEO, and Vincent Pascal, our Chief Operating Officer.

For those of you who have not yet obtained a copy of our press release, it was issued over the newswire Friday 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 home page at www.arkrestaurants.com.

Before we begin, however, I'd like to read the safe harbor statement. I need to remind everyone that part of our discussion this afternoon 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 condition.

I will now turn the call over to Michael.

Hi everybody. This was a decent quarter, and the benefit that lead to a higher EBITDA was the acquisition of the Rustic Inn in Florida which did very well in its first six weeks of our ownership, and the improved performance of Clyde's in New York City.

The rest of the business, we're in seven venues. Las Vegas was down slightly in comp sales. New York in general is very, very strong. In addition to Clyde's doing well, all our restaurants in New York are doing extremely well. Washington DC was down a bit, Atlantic City up a little bit, Boston down a point, and Florida was down, away from the Rustic, in our two operations at the Hard Rock Casinos in Tampa and Hollywood were down. And that reflects a change in the marketing program that the Hard Rocks have imposed. Hard Rock used to do a lot of comping as part of the marketing program, giving out discount certificates or free email certificates for which we got reimbursed, and they have recently ended that. So, there's a significant amount of money, several million dollars, in comps that had been eliminated which we benefited from. Now, we are not going to lose $2 million in sales from that. First of all, we only got 80% of sales to start out with. But second of all, not everybody is going to stay away from the fast food costs because they don't have a free comp or a discount meal ticket.

We are extremely happy with the way all of our businesses are being run. Las Vegas still remains challenged with a lot of competition, expand the number of restaurants seats every single quarter, and we just don't feel the city is compact enough to absorb all that. So we lose a couple of points there.

As I said, New York is extremely strong. We are redoing our restaurants in Washington DC right now, refurbishing them. We think that will help dramatically. Atlantic City is doing very well in a difficult market. We are up a little bit. Boston, as I said, is down a little, flat. And the big issue for us right now is the Hard Rocks and how we regain those lost sales.

We are looking at some interesting new deals. I think all of you would like to hear about the progress at the Meadowlands. We think the odds of us and our group getting a casino license at the Meadowlands are improving every day. This was especially helped along by Caesars, who is in Atlantic City, having a bid in for one of the New York City -- New York State locations, about 60 miles outside of Manhattan. Atlantic City legislators have been protecting Atlantic City because of trying to help them convert it into an overnight resort location. That support arose quickly when the guy you are trying to help is trying to compete with you. So, there have been some strong editorials in the Newark Star-Ledger and the Brigantine Record which basically says what are we waiting for? We need the tax income that would come from the casino at the Meadowlands. We think we are getting closer and closer, and that progress, if it finalized in a license being issued to the Meadowlands, not only are we an owner of the Meadowlands but we have an exclusive to all the food at a casino at the Meadowlands, with the exception of one Hard Rock Cafe. Hard Rock is one of our partners in that deal. So that seems to be going along well, and we are looking at a couple of other big development deals.

I guess, at this point, I'll take questions.

(Operator Instructions). Bruce Geller, DGHM.

Good morning guys. It seemed like the second quarter of last year was kind of soft in its own right. Comps were down about 4%. So, you had a relatively easy comparable. I'm just wondering what held you back from seeing even better progress relative to what seemingly was a pretty easy comp year-over-year?

The March quarter is generally a very difficult quarter for us. The weather is a big factor. This year, the weather was atrocious in March. And part of the reason we are down in Washington DC is we just had horrendous weather. It has been cold, rainy; it was a very, very difficult period.

What helped us in New York and the reason our businesses were so strong in New York is we made some adjustments in Clyde's, so we picked up volume there. But we happen to have two very, very hot restaurants in New York, Bryant Park Grill and Robert at the Museum of Art and Design. And both of those were booked for a lot of events, many more events this year than last year, meaning closures where the restaurant wasn't open to the public, and on those closures, we get a premium. And one of those closures was an NFL Super Bowl event that Pepsi ran for about three days at Bryant Park.

So you are right. We had an easy quarter to compare with. March quarters are easy to compare with. But other than the event business in New York, we had really, really rough weather on the East Coast, and that affected Boston and Washington tremendously. Washington was down 9 points in the March quarter in comp sales. So I don't know if that helps you at all.

Yes. Looking back, when I look back to this quarter of last year, you also attributed a negative 4% comp to weather. So even though the weather was tough this year --

You're absolutely right.

Yes.

You're absolutely right. But this was a winter that was I think on record as brutal as anything we have seen.

So I guess, along those lines, April, May so far, what is kind of your outlook as the rest of the year progresses?

Well, we are going to do better than last year in EBITDA. We are up significantly already. And Rustic, while it's a seasonal business, it's profitable throughout every quarter. There is certainly a dip when you get into the June and September quarters as the weather gets better here, a few people I guess are there. But we will see accretion from Rustic.

We have not been lucky again this year in terms of weather. We have 13 weekends in New York before people start to go away for weekends to wherever they go, the Jersey Shore or Long Island.

Thursdays is our big day at Bryant Park. I just want to give you a sense of this. So there are 13 Thursdays that we consider critical. On a good Thursday, which we had a couple of weeks ago, we did $130,000 at one restaurant at Bryant Park. Last week it rained, and we did $50,000.

So the differential is not only at Bryant Park. It's at Rio Grande. It doesn't affect us so much at Robert but it certainly affects us in Sequoia in DC where we have 600 outdoor seats. So those swings could be, on a bad Thursday, it's in excess of $100,000 in revenue. But that revenue is basically bar revenue, and highly profitable to us. So, if we have a normal season, I think we will be up a couple of million dollars in EBITDA from last year. If we have a good season, we will be up a little more. If we have a horrible season, we will still be up but not quite as much.

Okay, fair enough.

Everything else is -- I hate to trivialize the other operations. Las Vegas should be up a point, you'll be down a point. You know, Boston you're up a point. And I'm talking about comp sales. We're down a couple of points. Florida, as I said, the Hard Rocks are going to be down 8%, 9%, 10% compared to last year because of this comp change. New York, because of the event business in Robert and Bryant Park, even with bad weather, you'll be up in events. The question is how much down you are in a la carte.

But nothing moves that much. There's no catastrophes here in any one of our seven venues.

So what you've really got to pay attention to I think -- not you but what we pay attention to is what new stuff are we doing? How are we handling these lease terminations that are coming up when they come up? What new developments take place?

And what we really keep our eye on now in terms of really expanding the top line as well as the bottom line is what's going on in the Meadowlands, what's going on with a couple of these other developments that we are getting closer to doing.

We are looking for a new site for Rustic Inn to expand it to a second venue to see -- I mean we bought Rustic Inn at a very, very good enterprise value for us. You know, if we can make it work in a second location, we think this restaurant is unique enough that we could have several of them over a short period of time. The question is does it work in a second location? I mean, right now, I don't know if you've ever been there, I can't find it. I know one way to get there from the south. I mean, on 95, I know if I make a left on Griffin Road to take a right at the second stop sign, I get there. But if you asked me to come from the western part of Fort Lauderdale to try and find it, I can't find it. But this thing has a two or three hour wait in a location that you literally can't find that's in the middle of nowhere. And so we think we found a second location that's not in the middle of nowhere that's pretty, pretty visible. So we'll see if it works if we do manage to sign this lease. So there are things we are doing.

I mean I think our core business doesn't really move that much. You live in a small EBITDA range. Depending upon weather, depending upon the world economic situation, you are in a tight range. What really has to happen here is we have to move this forward with more Rustics, new developments. Obviously, the Meadowlands would be extremely important to us.

Sure. When does the Bryant Park lease go through?

13 more years.

And can you give an update on Clyde's? I know that's been a struggle and you're getting closer to breakeven.

We incurred a bit of money on an operating basis in the March quarter, a little bit. It looks like the June quarter will be all right. That restaurant suffers dramatically in July and August. At least in the first two years, we've had a really tough time. We think we are gaining traction very slowly. We are having decent weeks. We're starting to see more event business. The area is improving dramatically.

The only good thing we have done there so far, I mean the food -- the place gets very high ratings on OpenTable, Yelp, all of the review sites. It gets enormously good reviews. It's in an area of town that's difficult to gain traction, but that area is being built up quickly and we are seeing better progress.

And we are sort of on a cycle. The first year -- we are a block away from the Java's Center. The first year we never saw any business from the Java's Center. They didn't know we were there. This year, we are starting to see, when there are events at the Java's Center, we're doing better lunches, we are doing after work business, we are getting there. There's no question we're going to get there. It's just a slow, slow pull. But to come out of the March quarter with a profit and I think the June quarter with a small operating profit, beat depreciation. You know, we are sort of happy about that right now, given where we were.

Okay. And what is the noncontrolling interest attributable to on the P&L? Because that went up a fair amount year-over-year.

I'll let Bob Stewart answer that.

Yes, the large part of that is the Florida operations, where we have partners in that venue, the two, Tampa and Hollywood. So that's primarily the noncontrolling interest. We also have a partnership with a real operation, which we've had for --

25 years.

-- 25 years. So those are the main impacts, and that's what you will see in our controlling interest.

All right, great. Thanks a lot guys.

(Operator Instructions). Tom [Winner], a private investor.

Hi. You've gone over most of my questions already. I was hoping for an update. In the past, you had talked about future involvement with South Street Seaport. I know you closed two properties there whilst being developed. I think you had mentioned there may be future interest there. Is that still on the table?

No. We walked away from that.

Okay, you walked away from that.

We came up here on several occasions, and quite -- look. We may be getting long in the tooth and I hope we are not disadvantaging our shareholders by our attitude. But we thought they were disingenuous, and what we were offered, we were not comfortable with what their plans were, had evolved to for the South Street Seaport. And we didn't think the company of retailers that they were bringing to the site would be advantageous to what we do. We want to be in a certain -- in a development that has, especially at the South Street Seaport, that has retailers that are interesting, that will bring people down to a part of town that most people don't go to unless they have a strong reason. And it was going to be the same bunch of retailers they had there before. There's The Limited, the Gap and there were 400 of those in New York Uptown and Midtown, Tribeca and Chelsea. And we didn't think they were building something that was going to be enough of a draw.

Got you. Thank you.

So we passed.

Makes sense. Thank you.

(Operator Instructions). Mr. Weinstein, it appears we have no further questions at this time. I would now like to turn the floor back over to you for closing comments.

Our closing comments is thank you for paying attention, and we will see you next quarter.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

Thank you.