ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) |
OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 28, 2019 |
or |
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) |
OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________ |
New York | 13-3156768 | ||
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) |
85 Fifth Avenue, New York, NY | 10003 | ||
(Address of Principal Executive Offices) | (Zip Code) |
Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $.01 per share | ARKR | The NASDAQ Stock Market LLC |
Large accelerated filer | o | Accelerated filer | o | |
Non-accelerated filer | x | Smaller Reporting Company | x | |
Emerging Growth Company | o |
ARK RESTAURANTS CORP. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (In Thousands, Except Per Share Amounts) |
December 28, 2019 | September 28, 2019 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents (includes $95 at December 28, 2019 and $170 at September 28, 2019 related to VIEs) | $ | 7,211 | $ | 7,177 | |||
Accounts receivable (includes $266 at December 28, 2019 and $219 at September 28, 2019 related to VIEs) | 2,407 | 2,621 | |||||
Employee receivables | 433 | 414 | |||||
Inventories (includes $34 at December 28, 2019 and $41 at September 28, 2019 related to VIEs) | 3,247 | 2,222 | |||||
Prepaid and refundable income taxes (includes $254 at December 28, 2019 and $254 at September 28, 2019 related to VIEs) | 254 | 254 | |||||
Prepaid expenses and other current assets (includes $13 at December 28, 2019 and $12 at September 28, 2019 related to VIEs) | 706 | 1,021 | |||||
Total current assets | 14,258 | 13,709 | |||||
FIXED ASSETS - Net (includes $236 at December 28, 2019 and September 28, 2019 related to VIEs) | 39,107 | 47,781 | |||||
OPERATING LEASE RIGHT-OF-USE ASSETS - Net (includes $2,846 at December 28, 2019 related to VIEs) | 60,749 | — | |||||
INTANGIBLE ASSETS - Net | 291 | 303 | |||||
GOODWILL | 15,570 | 15,570 | |||||
TRADEMARKS | 3,720 | 3,720 | |||||
DEFERRED INCOME TAXES | 3,981 | 4,106 | |||||
INVESTMENT IN AND RECEIVABLE FROM NEW MEADOWLANDS RACETRACK | 6,834 | 6,821 | |||||
OTHER ASSETS (includes $82 at December 28, 2019 and September 28, 2019 related to VIEs) | 2,640 | 2,642 | |||||
TOTAL ASSETS | $ | 147,150 | $ | 94,652 | |||
LIABILITIES AND EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Accounts payable - trade (includes $75 at December 28, 2019 and $65 at September 28, 2019 related to VIEs) | $ | 4,318 | $ | 3,549 | |||
Accrued expenses and other current liabilities (includes $431 at December 28, 2019 and $440 at September 28, 2019 related to VIEs) | 9,761 | 10,672 | |||||
Accrued income taxes | 471 | 285 | |||||
Dividend payable | 875 | 875 | |||||
Current portion of notes payable | 2,701 | 2,701 | |||||
Current portion of operating lease liabilities (includes $211 at December 28, 2019 related to VIEs) | 6,218 | — | |||||
Total current liabilities | 24,344 | 18,082 | |||||
OPERATING LEASE DEFERRED CREDIT (includes ($30) at September 28, 2019 related to VIEs) | — | 10,077 | |||||
NOTES PAYABLE, LESS CURRENT PORTION, net of deferred financing costs | 23,121 | 23,786 | |||||
OPERATING LEASE LIABILITIES, LESS CURRENT PORTION (includes $2,614 at December 28, 2019 related to VIEs) | 56,242 | — | |||||
TOTAL LIABILITIES | 103,707 | 51,945 | |||||
COMMITMENTS AND CONTINGENCIES | |||||||
EQUITY: | |||||||
Common stock, par value $.01 per share - authorized, 10,000 shares; issued and outstanding, 3,499 shares at December 28, 2019 and September 28, 2019 | 35 | 35 | |||||
Additional paid-in capital | 13,289 | 13,277 | |||||
Retained earnings | 29,190 | 28,552 | |||||
Total Ark Restaurants Corp. shareholders’ equity | 42,514 | 41,864 | |||||
NON-CONTROLLING INTERESTS | 929 | 843 | |||||
TOTAL EQUITY | 43,443 | 42,707 | |||||
TOTAL LIABILITIES AND EQUITY | $ | 147,150 | $ | 94,652 |
ARK RESTAURANTS CORP. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) (In Thousands, Except Per Share Amounts) |
13 Weeks Ended | |||||||
December 28, 2019 | December 29, 2018 | ||||||
REVENUES: | |||||||
Food and beverage sales | $ | 42,829 | $ | 39,838 | |||
Other revenue | 685 | 710 | |||||
Total revenues | 43,514 | 40,548 | |||||
COSTS AND EXPENSES: | |||||||
Food and beverage cost of sales | 10,940 | 10,476 | |||||
Payroll expenses | 15,122 | 14,105 | |||||
Occupancy expenses | 5,439 | 5,005 | |||||
Other operating costs and expenses | 5,328 | 4,975 | |||||
General and administrative expenses | 3,054 | 3,409 | |||||
Depreciation and amortization | 1,195 | 1,206 | |||||
Total costs and expenses | 41,078 | 39,176 | |||||
RESTAURANT OPERATING INCOME | 2,436 | 1,372 | |||||
Loss on closure of Durgin-Park | — | (1,067 | ) | ||||
OPERATING INCOME | 2,436 | 305 | |||||
OTHER (INCOME) EXPENSE: | |||||||
Interest expense | 459 | 311 | |||||
Interest income | (13 | ) | (14 | ) | |||
Total other expense, net | 446 | 297 | |||||
INCOME BEFORE PROVISION FOR INCOME TAXES | 1,990 | 8 | |||||
Provision for income taxes | 319 | 23 | |||||
CONSOLIDATED NET INCOME (LOSS) | 1,671 | (15 | ) | ||||
Net income attributable to non-controlling interests | (158 | ) | (47 | ) | |||
NET INCOME (LOSS) ATTRIBUTABLE TO ARK RESTAURANTS CORP. | $ | 1,513 | $ | (62 | ) | ||
NET INCOME (LOSS) PER ARK RESTAURANTS CORP. COMMON SHARE: | |||||||
Basic | $ | 0.43 | $ | (0.02 | ) | ||
Diluted | $ | 0.43 | $ | (0.02 | ) | ||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: | |||||||
Basic | 3,499 | 3,474 | |||||
Diluted | 3,541 | 3,474 |
ARK RESTAURANTS CORP. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN EQUITY (Unaudited) FOR THE 13 WEEKS ENDED DECEMBER 28, 2019 AND DECEMBER 29, 2018 (In Thousands, Except Per Share Amounts) |
Common Stock | Additional Paid-In Capital | Retained Earnings | Total Ark Restaurants Corp. Shareholders’ Equity | Non- controlling Interests | Total Equity | |||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||
BALANCE - September 29, 2018 | 3,470 | $ | 35 | $ | 12,897 | $ | 29,364 | $ | 42,296 | $ | 1,440 | $ | 43,736 | |||||||||||||
Net income | — | — | — | (62 | ) | (62 | ) | 47 | (15 | ) | ||||||||||||||||
Exercise of stock options | 7 | — | 94 | — | 94 | — | 94 | |||||||||||||||||||
Stock-based compensation | — | — | 12 | — | 12 | — | 12 | |||||||||||||||||||
Distributions to non-controlling interests | — | — | — | — | — | (97 | ) | (97 | ) | |||||||||||||||||
Dividends paid - $0.25 per share | — | — | — | (868 | ) | (868 | ) | — | (868 | ) | ||||||||||||||||
BALANCE - December 29, 2018 | 3,477 | $ | 35 | $ | 13,003 | $ | 28,434 | $ | 41,472 | $ | 1,390 | $ | 42,862 | |||||||||||||
Common Stock | Additional Paid-In Capital | Retained Earnings | Total Ark Restaurants Corp. Shareholders’ Equity | Non- controlling Interests | Total Equity | |||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||
BALANCE - September 28, 2019 | 3,499 | $ | 35 | $ | 13,277 | $ | 28,552 | $ | 41,864 | $ | 843 | $ | 42,707 | |||||||||||||
Net income | — | — | — | 1,513 | 1,513 | 158 | 1,671 | |||||||||||||||||||
Stock-based compensation | — | — | 12 | — | 12 | — | 12 | |||||||||||||||||||
Distributions to non-controlling interests | — | — | — | — | — | (72 | ) | (72 | ) | |||||||||||||||||
Dividends accrued - $0.25 per share | — | — | — | (875 | ) | (875 | ) | — | (875 | ) | ||||||||||||||||
BALANCE - December 28, 2019 | 3,499 | $ | 35 | $ | 13,289 | $ | 29,190 | $ | 42,514 | $ | 929 | $ | 43,443 |
ARK RESTAURANTS CORP. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands) |
13 Weeks Ended | |||||||
December 28, 2019 | December 29, 2018 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Consolidated net income (loss) | $ | 1,671 | $ | (15 | ) | ||
Adjustments to reconcile consolidated net income (loss) to net cash provided by operating activities: | |||||||
Stock-based compensation | 12 | 12 | |||||
Asset impairment on closure of Durgin-Park | — | 1,067 | |||||
Deferred income taxes | 125 | 26 | |||||
Accrued interest on note receivable from NMR | (13 | ) | (15 | ) | |||
Depreciation and amortization | 1,195 | 1,206 | |||||
Amortization of deferred financing costs | 10 | 8 | |||||
Operating lease deferred credit | (98 | ) | (171 | ) | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 214 | 440 | |||||
Inventories | (1,025 | ) | (28 | ) | |||
Prepaid, refundable and accrued income taxes | 186 | 294 | |||||
Prepaid expenses and other current assets | 315 | (66 | ) | ||||
Other assets | 2 | 41 | |||||
Accounts payable - trade | 769 | (521 | ) | ||||
Accrued expenses and other current liabilities | (911 | ) | (1,438 | ) | |||
Net cash provided by operating activities | 2,452 | 840 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of fixed assets | (777 | ) | (554 | ) | |||
Loans and advances made to employees | (68 | ) | (113 | ) | |||
Payments received on employee receivables | 49 | 48 | |||||
Net cash used in investing activities | (796 | ) | (619 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Principal payments on notes payable | (675 | ) | (311 | ) | |||
Dividends paid | (875 | ) | (1,736 | ) | |||
Proceeds from issuance of stock upon exercise of stock options | — | 94 | |||||
Distributions to non-controlling interests | (72 | ) | (97 | ) | |||
Net cash used in financing activities | (1,622 | ) | (2,050 | ) | |||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 34 | (1,829 | ) | ||||
CASH AND CASH EQUIVALENTS, Beginning of period | 7,177 | 5,012 | |||||
CASH AND CASH EQUIVALENTS, End of period | $ | 7,211 | $ | 3,183 | |||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | |||||||
Cash paid during the period for: | |||||||
Interest | $ | 379 | $ | 210 | |||
Income taxes | $ | 8 | $ | 10 | |||
Non-cash financing activities: | |||||||
Accrued dividend | $ | 875 | $ | — |
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS December 28, 2019 (Unaudited) |
1. | BASIS OF PRESENTATION AND CRITICAL ACCOUNTING POLICIES |
2. | VARIABLE INTEREST ENTITIES |
December 28, 2019 | September 28, 2019 | ||||||
(in thousands) | |||||||
Cash and cash equivalents | $ | 95 | $ | 170 | |||
Accounts receivable | 266 | 219 | |||||
Inventories | 34 | 41 | |||||
Prepaid and refundable income taxes | 254 | 254 | |||||
Prepaid expenses and other current assets | 13 | 12 | |||||
Due from Ark Restaurants Corp. and affiliates (1) | 394 | 392 | |||||
Fixed assets - net | 236 | 236 | |||||
Operating lease right-of-use assets - net | 2,846 | — | |||||
Other assets | 82 | 82 | |||||
Total assets | $ | 4,220 | $ | 1,406 | |||
Accounts payable - trade | $ | 75 | $ | 65 | |||
Accrued expenses and other current liabilities | 431 | 440 | |||||
Current portion of operating lease liabilities | 211 | — | |||||
Operating lease deferred credit | — | (30 | ) | ||||
Operating lease liabilities, less current portion | 2,614 | — | |||||
Total liabilities | 3,331 | 475 | |||||
Equity of variable interest entities | 889 | 931 | |||||
Total liabilities and equity | $ | 4,220 | $ | 1,406 |
(1) | Amounts Due from and to Ark Restaurants Corp. and affiliates are eliminated upon consolidation. |
3. | RECENT RESTAURANT EXPANSION AND OTHER DEVELOPMENTS |
Cash | $ | 11 | |
Inventory | 80 | ||
Furniture, fixtures and equipment | 200 | ||
Trademarks | 1,110 | ||
Goodwill | 5,690 | ||
Liabilities assumed | (55 | ) | |
$ | 7,036 |
13 Weeks Ended | |||
December 29, 2018 | |||
(unaudited) | |||
Total revenues | $ | 43,144 | |
Net income | $ | 24 | |
Net income per share - basic | $ | 0.01 | |
Net income per share - diluted | $ | 0.01 | |
Basic | 3,474 | ||
Diluted | 3,539 |
4. | RECENT RESTAURANT DISPOSITIONS |
5. | INVESTMENT IN NEW MEADOWLANDS RACETRACK |
6. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
December 28, 2019 | September 28, 2019 | ||||||
(In thousands) | |||||||
Sales tax payable | $ | 1,666 | $ | 1,141 | |||
Accrued wages and payroll related costs | 2,348 | 2,942 | |||||
Customer advance deposits | 3,506 | 5,071 | |||||
Accrued occupancy and other operating expenses | 2,241 | 1,518 | |||||
$ | 9,761 | $ | 10,672 |
7. | NOTES PAYABLE – BANK |
December 28, 2019 | September 28, 2019 | ||||||
(In thousands) | |||||||
Promissory Note - Rustic Inn purchase | $ | 3,972 | $ | 4,043 | |||
Promissory Note - Shuckers purchase | 4,590 | 4,675 | |||||
Promissory Note - Oyster House purchase | 4,573 | 4,728 | |||||
Promissory Note - JB's on the Beach purchase | 6,500 | 6,750 | |||||
Promissory Note - Sequoia renovation | 2,972 | 3,086 | |||||
Revolving Facility | 3,366 | 3,366 | |||||
25,973 | 26,648 | ||||||
Less: Current maturities | (2,701 | ) | (2,701 | ) | |||
Less: Unamortized deferred financing costs | (151 | ) | (161 | ) | |||
Long-term debt | $ | 23,121 | $ | 23,786 |
• | Promissory Note – Rustic Inn purchase – On February 25, 2013, the Company issued a promissory note to BHBM for $3,000,000. The note bore interest at LIBOR plus 3.5% per annum, and was payable in 36 equal monthly installments of $83,333, commencing on March 25, 2013. On February 24, 2014, in connection with the acquisition of the Rustic Inn, the Company borrowed an additional $6,000,000 from BHBM under the same terms and conditions as the original loan which |
• | Promissory Note – Shuckers purchase – On October 22, 2015, in connection with the acquisition of Shuckers, the Company issued a promissory note to BHBM for $5,000,000. The note bore interest at LIBOR plus 3.5% per annum, and was payable in 60 equal monthly installments of $83,333, commencing on November 22, 2015. In connection with the Refinancing, this note was amended and restated and increased by $2,433,324 of credit facility borrowings. The new principal amount of $5,100,000, which is secured by a mortgage on the Shuckers real estate, is payable in 27 equal quarterly installments of $85,000, commencing on September 1, 2018, with a balloon payment of $2,805,000 on June 1, 2025 and bears interest at LIBOR plus 3.5% per annum. |
• | Promissory Note – Oyster House purchase – On November 30, 2016, in connection with the acquisition of the Oyster House properties, the Company issued a promissory note under the Revolving Facility to BHBM for $8,000,000. The note bore interest at LIBOR plus 3.5% per annum, and was payable in 60 equal monthly installments of $133,273, commencing on January 1, 2017. In connection with the Refinancing, this note was amended and restated and separated into two notes. The first note, in the principal amount of $3,300,000, is secured by a mortgage on the Oyster House Gulf Shores real estate, is payable in 19 equal quarterly installments of $117,857, commencing on September 1, 2018, with a balloon payment of $1,060,716 on June 1, 2023 and bears interest at LIBOR plus 3.5% per annum. The second note, in the principal amount of $2,200,000, is secured by a mortgage on the Oyster House Spanish Fort real estate, is payable in 27 equal quarterly installments of $36,667, commencing on September 1, 2018, with a balloon payment of $1,210,000 on June 1, 2025 and bears interest at LIBOR plus 3.5% per annum. |
• | Promissory Note - JB's on the Beach purchase – On May 15, 2019, in connection with the previously discussed acquisition of JB’s on the Beach, the Company issued a promissory note under the Revolving Facility to BHBM for $7,000,000 which is payable in 23 equal quarterly installments of $250,000, commencing on September 1, 2019, with a balloon payment of $1,250,000 on June 1, 2025 and bears interest at LIBOR plus 3.5% per annum. |
• | Promissory Note - Sequoia renovation – Also on May 15, 2019, the Company converted $3,200,000 of Revolving Facility borrowings incurred in connection with the Sequoia renovation to a promissory note which is payable in 23 equal quarterly installments of $114,286, commencing on September 1, 2019, with a balloon payment of $571,429 on June 1, 2025 and bears interest at LIBOR plus 3.5% per annum. |
8. | LEASES |
13 Weeks Ended | |||
December 28, 2019 | |||
(In thousands) | |||
Operating lease expense - occupancy expenses (1) | $ | 2,524 | |
Occupancy lease expense - general and administrative expenses | 157 | ||
Variable lease expense | 1,756 | ||
Total lease expense | $ | 4,437 |
(1) | Includes short-term leases, which are immaterial. |
13 Weeks Ended | |||
December 28, 2019 | |||
(In thousands) | |||
Cash paid for amounts included in the measurement of lease liabilities: | |||
Operating cash flows related to operating leases | $ | 3,740 | |
Non-cash investing activities: | |||
Right-of-use-assets obtained in exchange for new operating lease liabilities | $ | 62,330 |
Weighted-Average Remaining Lease Term (Years) | Weighted-Average Discount Rate | |||
Operating leases | 11.0 Years | 5.5 | % |
Operating Leases | ||||
Fiscal Year Ending | (In thousands) | |||
October 3, 2020 | $ | 7,087 | ||
October 2, 2021 | 9,552 | |||
October 1, 2022 | 9,638 | |||
September 30, 2023 | 8,125 | |||
September 28, 2024 | 7,739 | |||
Thereafter | 41,079 | |||
Total future lease commitments | 83,220 | |||
Less imputed interest | (20,760 | ) | ||
Present value of lease liabilities | $ | 62,460 |
9. | COMMITMENTS AND CONTINGENCIES |
10. | STOCK OPTIONS |
2020 | ||||||||||
Shares | Weighted Average Exercise Price | Weighted Average Contractual Term | Aggregate Intrinsic Value | |||||||
Outstanding, beginning of period | 363,500 | $18.46 | 4.8 Years | |||||||
Options: | ||||||||||
Granted | — | |||||||||
Exercised | — | |||||||||
Canceled or expired | — | |||||||||
Outstanding and expected to vest, end of period | 363,500 | $19.25 | 4.5 Years | $ | 1,090,000 | |||||
Exercisable, end of period | 341,000 | $19.21 | 4.1 Years | $ | 1,043,000 | |||||
Shares available for future grant | 441,000 |
11. | INCOME TAXES |
12. | INCOME PER SHARE OF COMMON STOCK |
13 Weeks Ended | ||||||
December 28, | December 29, | |||||
2019 | 2018 | |||||
Basic | 3,499 | 3,474 | ||||
Effect of dilutive securities: | ||||||
Stock options | 42 | — | ||||
Diluted | 3,541 | 3,474 |
13. | DIVIDENDS |
14. | SUBSEQUENT EVENT |
13 Weeks Ended | Variance | |||||||||||||
December 28, 2019 | December 29, 2018 | $ | % | |||||||||||
(in thousands) | ||||||||||||||
REVENUES: | ||||||||||||||
Food and beverage sales | $ | 42,829 | $ | 39,838 | $ | 2,991 | 7.5 | % | ||||||
Other revenue | 685 | 710 | (25 | ) | -3.5 | % | ||||||||
Total revenues | 43,514 | 40,548 | 2,966 | 7.3 | % | |||||||||
COSTS AND EXPENSES: | ||||||||||||||
Food and beverage cost of sales | 10,940 | 10,476 | 464 | 4.4 | % | |||||||||
Payroll expenses | 15,122 | 14,105 | 1,017 | 7.2 | % | |||||||||
Occupancy expenses | 5,439 | 5,005 | 434 | 8.7 | % | |||||||||
Other operating costs and expenses | 5,328 | 4,975 | 353 | 7.1 | % | |||||||||
General and administrative expenses | 3,054 | 3,409 | (355 | ) | -10.4 | % | ||||||||
Depreciation and amortization | 1,195 | 1,206 | (11 | ) | -0.9 | % | ||||||||
Total costs and expenses | 41,078 | 39,176 | 1,902 | 4.9 | % | |||||||||
RESTAURANT OPERATING INCOME | $ | 2,436 | $ | 1,372 | $ | 1,064 | 77.6 | % |
13 Weeks Ended | Variance | |||||||||||||
December 28, 2019 | December 29, 2018 | $ | % | |||||||||||
(in thousands) | ||||||||||||||
Las Vegas | $ | 12,206 | $ | 12,504 | $ | (298 | ) | -2.4 | % | |||||
New York | 11,489 | 11,580 | (91 | ) | -0.8 | % | ||||||||
Washington, DC | 3,107 | 2,852 | 255 | 8.9 | % | |||||||||
Atlantic City, NJ | 1,513 | 1,639 | (126 | ) | -7.7 | % | ||||||||
Connecticut | 410 | 471 | (61 | ) | -13.0 | % | ||||||||
Alabama | 2,601 | 2,443 | 158 | 6.5 | % | |||||||||
Florida | 7,631 | 6,143 | 1,488 | 24.2 | % | |||||||||
Same-store sales | 38,957 | 37,632 | $ | 1,325 | 3.5 | % | ||||||||
Other | 3,872 | 2,206 | ||||||||||||
Food and beverage sales | $ | 42,829 | $ | 39,838 |
13 Weeks Ended December 28, 2019 | % to Total Revenues | 13 Weeks Ended December 29, 2018 | % to Total Revenues | Increase (Decrease) | ||||||||||||
$ | % | |||||||||||||||
Food and beverage cost of sales | $ | 10,940 | 25.1 | % | $ | 10,476 | 25.8 | % | $ | 464 | 4.4 | % | ||||
Payroll expenses | 15,122 | 34.8 | % | 14,105 | 34.8 | % | 1,017 | 7.2 | % | |||||||
Occupancy expenses | 5,439 | 12.5 | % | 5,005 | 12.3 | % | 434 | 8.7 | % | |||||||
Other operating costs and expenses | 5,328 | 12.2 | % | 4,975 | 12.3 | % | 353 | 7.1 | % | |||||||
General and administrative expenses | 3,054 | 7.0 | % | 3,409 | 8.4 | % | (355 | ) | -10.4 | % | ||||||
Depreciation and amortization | 1,195 | 2.7 | % | 1,206 | 3.0 | % | (11 | ) | -0.9 | % | ||||||
Total costs and expenses | $ | 41,078 | $ | 39,176 | $ | 1,902 |
Date: | February 11, 2020 |
ARK RESTAURANTS CORP. | |
By: | /s/ Michael Weinstein |
Michael Weinstein | |
Chairman & Chief Executive Officer | |
(Principal Executive Officer) | |
By: | /s/ Anthony J. Sirica |
Anthony J. Sirica | |
Chief Financial Officer | |
(Authorized Signatory and Principal | |
Financial and Accounting Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Ark Restaurants Corp.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Michael Weinstein | |
Michael Weinstein | |
Chairman and Chief Executive Officer | |
(Principal Executive Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Ark Restaurants Corp.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Anthony J. Sirica | |
Anthony J. Sirica | |
Chief Financial Officer | |
(Authorized Signatory and Principal Financial and Accounting Officer) |
(i) | this Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78m or 78o(d)); and |
(ii) | the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
/s/ Michael Weinstein | /s/ Anthony J. Sirica | |
Michael Weinstein | Anthony J. Sirica | |
Chairman and Chief Executive Officer | Chief Financial Officer | |
(Principal Executive Officer) | (Authorized Signatory and Principal Financial and Accounting Officer) |
INVESTMENT IN NEW MEADOWLANDS RACETRACK (Details) - USD ($) |
3 Months Ended | 12 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Feb. 07, 2017 |
Apr. 25, 2014 |
Nov. 19, 2013 |
Mar. 12, 2013 |
Dec. 28, 2019 |
Dec. 31, 2015 |
Sep. 28, 2019 |
Jul. 13, 2016 |
|
New Meadowlands Racetrack LLC | ||||||||
INVESTMENT IN NEW MEADOWLANDS RACETRACK (Details) [Line Items] | ||||||||
Payments to acquire businesses | $ 4,200,000 | |||||||
Ownership percentage | 7.40% | |||||||
Payments to acquire additional interest in subsidiaries | $ 222,000 | $ 464,000 | $ 222,000 | |||||
Long-term Investments | $ 5,108,000 | |||||||
Meadowlands Newmark LLC | ||||||||
INVESTMENT IN NEW MEADOWLANDS RACETRACK (Details) [Line Items] | ||||||||
Ownership percentage | 11.60% | 63.70% | ||||||
Loans to related party | $ 1,500,000 | |||||||
Interest rate | 3.00% | |||||||
Loan maturity date | Jan. 31, 2024 | |||||||
Additional loan | $ 200,000 | |||||||
Principal and accrued interest | $ 1,726,000 | $ 1,713,000 | ||||||
Ark Meadowlands LLC | ||||||||
INVESTMENT IN NEW MEADOWLANDS RACETRACK (Details) [Line Items] | ||||||||
Ownership percentage by parent | 97.00% | |||||||
Profit participation percentage | 5.00% | |||||||
Maximum loss | $ 0 | $ 0 |
NOTES PAYABLE - BANK |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 28, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Payable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Payable - Bank | NOTES PAYABLE – BANK Long-term debt consists of the following:
On June 1, 2018, the Company refinanced (the "Refinancing") its then existing indebtedness with its current lender, Bank Hapoalim B.M. (“BHBM”), by entering into an amended and restated credit agreement (the "Revolving Facility”), which expires on May 31, 2021. The Revolving Facility provides for total availability of the lesser of (i) $10,000,000 and (ii) $35,000,000 less the then aggregate amount of all indebtedness and obligations to BHBM. Borrowings under the Revolving Facility are payable upon maturity of the Revolving Facility with interest payable monthly at LIBOR plus 3.5%, subject to adjustment based on certain ratios. As of December 28, 2019 and September 28, 2019, borrowings of $3,366,000, were outstanding under the Revolving Facility and had a weighted average interest rate of 4.4% and 4.9%, respectively. As of December 28, 2019, $6,396,000 was available under the Revolving Facility. In connection with the Refinancing, the Company also amended the principal amounts and payment terms of its outstanding term notes with BHBM as follows:
Deferred financing costs in the amount of $207,000 are being amortized over the life of the agreements on a straight-line basis, which is materially consistent with the effective interest method, and included in interest expense. Amortization expense of approximately $10,000 and $8,000 is included in interest expense for the 13 weeks ended December 28, 2019 and December 29, 2018, respectively. Borrowings under the Revolving Facility, which include all of the above promissory notes, are secured by all tangible and intangible personal property (including accounts receivable, inventory, equipment, general intangibles, documents, chattel paper, instruments, letter-of-credit rights, investment property, intellectual property and deposit accounts) and fixtures of the Company. The loan agreements provide, among other things, that the Company meet minimum quarterly tangible net worth amounts, as defined therein, maintain a fixed charge coverage ratio of not less than 1.1:1 on a latest 12-months' basis and minimum annual net income amounts, and contain customary representations, warranties and affirmative covenants. The agreements also contain customary negative covenants, subject to negotiated exceptions on liens, relating to other indebtedness, capital expenditures, liens, affiliate transactions, disposal of assets and certain changes in ownership. The Company was in compliance with all of its financial covenants under the Revolving Facility as of December 28, 2019. |
RECENT RESTAURANT EXPANSION AND OTHER DEVELOPMENTS |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 28, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recent Restaurant Expansion and Other Developments | RECENT RESTAURANT EXPANSION AND OTHER DEVELOPMENTS On May 15, 2019, the Company, through a newly formed, wholly-owned subsidiary, acquired the assets of JB's on the Beach, a restaurant and bar located in Deerfield Beach, Florida, for $7,036,000 as set out below. The acquisition is accounted for as a business combination and was financed with a bank loan from the Company’s existing lender in the amount of $7,000,000 and cash from operations. The fair values of the assets acquired, none of which are amortizable, were allocated as follows (amounts in thousands):
Goodwill recognized in connection with this transaction represents the residual amount of the purchase price over separately identifiable intangible assets and is expected to be deductible for tax purposes. Concurrent with the acquisition, the Company entered into a 20 year lease (with a five year extension option) for the restaurant facility and parking lot with the former owner of JB's on the Beach, who is also the owner of the underlying real estate. Payments under the lease are $600,000 per year with 10% increases every five years. The consolidated condensed statements of income for the 13 weeks ended December 28, 2019 include revenues and income of approximately $2,422,000 and $43,000, respectively, related to JB's on the Beach. The unaudited pro forma financial information set forth below is based upon the Company’s historical consolidated condensed statements of income for the 13 weeks ended December 29, 2018 and includes the results of operations for JB's on the Beach for the period prior to acquisition. The unaudited pro forma financial information (which is presented in thousands except per share and share data), which has been adjusted for payments under the lease discussed above as well as interest expense of the term loan, is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the acquisition of JB's on the Beach occurred on the dates indicated, nor does it purport to represent the results of operations for future periods.
During 2019, the Company was advised by the landlord of our food court at the Hard Rock Casino and Hotel in Hollywood, Florida, that they were exercising their right to relocate our space, at their sole cost, as contractually agreed to in the original lease. The new facilities were completed on September 16, 2019, on which date we closed our existing location and opened the new facilities. The Company recorded the value of the renovations made by the landlord, which includes leasehold improvements and furniture, fixtures and equipment, in the amount of $5,474,000 with a corresponding increase in deferred rent. The net book value of the existing leasehold improvements relating to the original location in the amount of $918,000 is being reflected as a reduction of deferred rent on a straight-line basis over the remaining lease term. During 2019, the Company was advised by the landlord of our food court at the Hard Rock Casino and Hotel in Tampa, Florida, that they were exercising their right to renovate the front of the house space, at their sole cost, as contractually agreed to in the original lease. In connection with this renovation we closed our existing facilities on June 2, 2019 and re-opened the renovated facilities on September 28, 2019. The Company recorded the value of the renovations made by the landlord, which includes leasehold improvements and furniture, fixtures and equipment, in the amount of $3,179,000 with a corresponding increase in deferred rent. The net book value of the existing leasehold improvements relating to the original location in the amount of $459,000 is being reflected as a reduction of deferred rent on a straight-line basis over the remaining lease term. Upon adoption of ASC 842, the unamortized Hollywood and Tampa balances of leasehold improvements and deferred rent in the amounts of $8,269,000 and $7,198,000, respectively were reclassified as right-of-use assets in the net amount of $1,071,000 and are being amortized to lease expense on a straight line basis over the remaining terms of the respective leases. |
INCOME TAXES |
3 Months Ended |
---|---|
Dec. 28, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | INCOME TAXES The Company’s provision (benefit) for income taxes consists of federal and state taxes, as applicable, in amounts necessary to align the Company’s year-to-date tax provision with the effective rate that it expects to achieve for the full year. Each quarter, the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary. The income tax provision for the 13-week periods ended December 28, 2019 and December 19, 2018 were $319,000 and $23,000, respectively. The effective tax rate for the 13 week period ended December 28, 2019 was 15.2% and differed from the statutory rate of 21% as a result of the tax benefits related to the generation of FICA tax credits and operating income attributable to non-controlling interests that is not taxable to the Company. The effective tax rate for the 13 week period ended December 29, 2018 was 287.5% and differed significantly from the statutory rate of 21% as a result of the estimated income tax provision for the quarter which included a discrete item of $22,000 divided by the marginal ordinary income for the quarter. The Company’s overall effective tax rate in the future will be affected by factors such as the utilization of state and local net operating loss carryforwards, the generation of FICA tax credits and the mix of earnings by state taxing jurisdictions as Nevada does not impose a state income tax, as compared to the other major state and local jurisdictions in which the Company has operations. The final annual tax rate cannot be determined until the end of the fiscal year; therefore, the actual tax rate could differ from current estimates. |
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