-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EdiEUkXY8MYZ6EPAdZfnhmt7W11qYlS+FpK0Hn8SPc52e4jj+NQURlDWSlUvwlNb xM9h8LTSWxbEXDQmMo9UEg== 0000950117-99-000296.txt : 19990217 0000950117-99-000296.hdr.sgml : 19990217 ACCESSION NUMBER: 0000950117-99-000296 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990102 FILED AS OF DATE: 19990216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARK RESTAURANTS CORP CENTRAL INDEX KEY: 0000779544 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 133156768 STATE OF INCORPORATION: NY FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09453 FILM NUMBER: 99541628 BUSINESS ADDRESS: STREET 1: 85 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10003-3019 BUSINESS PHONE: 2122068800 MAIL ADDRESS: STREET 1: 85 FIFTH AVENUE STREET 2: 85 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10003-3019 10-Q 1 ARK RESTAURANTS CORP. 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 2, 1999 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission file number 0-14030 ARK RESTAURANTS CORP. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New York 13-3156768 - --------------------------------------- ------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 85 Fifth Avenue, New York, New York 10003 - --------------------------------------- ------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 206-8800 ------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class Outstanding shares at February 12, 1999 - ------------------------------ ----------------------------------------- (Common stock, $.01 par value) 3,551,399
ARK RESTAURANTS CORP. AND SUBSIDIARIES - -------------------------------------------------------------------------------- INDEX - --------------------------------------------------------------------------------
PAGE ---- PART I - FINANCIAL INFORMATION: Item 1. Consolidated Financial Statements: Consolidated Condensed Balance Sheets - January 2, 1999 (Unaudited) and October 3, 1998 1 Consolidated Condensed Statements of Operations and Retained Earnings - 13-Week Periods Ended January 2, 1999 (Unaudited) and December 27, 1997 (Unaudited). 2 Consolidated Condensed Statements of Cash Flows - 13-Week Periods Ended January 2, 1999 (Unaudited) and December 27, 1997 (Unaudited) 3 Notes to Consolidated Condensed Financial Statements (Unaudited) 4-5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6-11 PART II - OTHER INFORMATION: Item 6. Exhibits and Reports on Form 8-K 12
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ARK RESTAURANTS CORP. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in Thousands) - --------------------------------------------------------------------------------
January 2, October 3, 1999 1998 --------- ---------- (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 1,111 $ 1,023 Accounts receivable 3,314 2,507 Inventories 1,942 1,950 Current portion of long-term receivables 413 416 Prepaid expenses and other current assets 417 491 Deferred income taxes 909 909 ------- ------- Total current assets 8,106 7,296 LONG-TERM RECEIVABLES 1,350 1,119 ASSETS HELD FOR SALE 1,131 1,768 FIXED ASSETS - At Cost: Leasehold improvements 22,524 22,465 Furniture, fixtures and equipment 18,642 18,592 Leasehold improvements in progress 195 19 ------- ------- 41,361 41,076 Less accumulated depreciation and amortization 16,605 15,834 ------- ------- 24,756 25,242 INTANGIBLE ASSETS - Less accumulated amortization of $2,975 and $2,829 5,380 5,515 OTHER ASSETS 1,342 1,131 DEFERRED INCOME TAXES 981 1,031 ------- ------- TOTAL ASSETS $43,046 $43,102 ------- ------- ------- ------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable - trade $ 3,819 $ 3,563 Accrued expenses and other current liabilities 3,308 2,908 Current maturities of long-term debt 614 609 Current maturities of capital lease obligations 206 230 Accrued income taxes 589 705 ------- ------- Total current liabilities 8,536 8,015 LONG-TERM DEBT - net of current maturities 3,399 4,405 OBLIGATIONS UNDER CAPITAL LEASES - net of current maturities 100 149 OPERATING LEASE DEFERRED CREDIT 1,471 1,471 SHAREHOLDERS' EQUITY: Common stock, par value $.01 per share - authorized, 10,000 shares; issued, 5,188 shares 52 52 Additional paid-in capital 14,215 14,215 Retained earnings 18,591 17,565 ------- ------- 32,858 31,832 Less treasury stock, 1,562 and 1,504 shares 3,318 2,770 ------- ------- Total shareholders' equity 29,540 29,062 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $43,046 $43,102 ------- ------- ------- -------
See notes to consolidated condensed financial statements 1 ARK RESTAURANTS CORP. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS & RETAINED EARNINGS (Unaudited) (In Thousands, Except per share amounts)
13 Weeks Ended -------------------------- January 2, December 27, 1999 1997 ---------- ------------ NET SALES $26,933 $26,940 COST OF SALES 7,110 7,248 ------- ------- GROSS RESTAURANT PROFIT 19,823 19,692 MANAGEMENT FEE INCOME 64 197 ------- ------- 19,887 19,889 ------- ------- OPERATING EXPENSES Payroll and payroll benefits 9,761 9,756 Occupancy 3,296 3,176 Depreciation and amortization 992 946 Other 2,636 3,490 ------- ------- 16,685 17,368 GENERAL AND ADMINISTRATIVE EXPENSES 1,535 1,392 ------- ------- 18,220 18,760 ------- ------- OPERATING INCOME 1,667 1,129 ------- ------- OTHER EXPENSE (INCOME): Interest expense, net 64 85 Other income (107) (167) ------- ------- (43) (82) ------- ------- INCOME BEFORE PROVISION FOR INCOME TAXES 1,710 1,211 PROVISION FOR INCOME TAXES 684 484 ------- ------- NET INCOME $ 1,026 $ 727 ------- ------- ------- ------- RETAINED EARNINGS, Beginning of period 17,565 12,953 ------- ------- RETAINED EARNINGS, End of period $18,591 $13,680 ------- ------- ------- ------- NET INCOME PER SHARE - BASIC & DILUTED $.28 $.19 ---- ---- ---- ---- WEIGHTED AVERAGE NUMBER OF SHARES - BASIC 3,646 3,835 ------- ------- ------- ------- WEIGHTED AVERAGE NUMBER OF SHARES - DILUTED 3,660 3,859 ------- ------- ------- -------
See notes to consolidated condensed financial statements 2 ARK RESTAURANTS CORP. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands) - --------------------------------------------------------------------------------
13 Weeks Ended -------------------------- January 2, December 27, 1999 1997 ---------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,026 $ 727 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of fixed assets 829 849 Amortization of intangibles 163 99 Gain on sale of restaurants (646) (185) Deferred income taxes 50 -- Changes in assets and liabilities: Decrease (Increase) in accounts receivable (807) (709) Decrease (Increase) in inventories 8 (32) Decrease (Increase) in prepaid expenses & other current assets 74 (101) Decrease (Increase) in other assets (211) 77 Increase (Decrease) in accounts payable - trade 256 (257) Increase (Decrease) in accrued expenses and other current liabilities 325 (131) Increase (Decrease) in accrued income taxes (116) (131) ------- ------- Net cash provided by operating activities 951 206 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to fixed assets, net (285) (12) Additions to intangible assets (11) -- Payments received on long-term receivables 80 122 Restaurant sales 975 200 ------- ------- Net cash used in investing activities 759 310 ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt 800 250 Principal payment on long-term debt (1,801) (993) Principal payment on capital lease obligations (73) (65) Purchase of treasury stock (548) -- Exercise of stock options -- 65 ------- ------- Net cash used in financing activities (1,622) (743) ------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 88 (227) CASH AND CASH EQUIVALENTS, beginning of period 1,023 722 ------- ------- CASH AND CASH EQUIVALENTS, end of period $ 1,111 $ 495 ------- ------- ------- ------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during year for: Interest $ 105 $ 141 ------- ------- ------- ------- Income taxes $ 749 $ 614 ------- ------- ------- -------
See notes to consolidated condensed financial statements. 3 ARK RESTAURANTS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) - -------------------------------------------------------------------------------- 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS The consolidated condensed financial statements have been prepared by Ark Restaurants Corp. (the "Company"), without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at January 2, 1999 and results of operations and changes in cash flows for the periods ended January 2, 1999 and December 27, 1997 have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended October 3, 1998. The results of operations for the period ended January 2, 1999 is not necessarily indicative of the operating results for the full year. 2. RESTAURANT SALES In the first quarter of fiscal 1999 the Company sold a restaurant located in New York City and a restaurant located in Washington, DC for an aggregate selling price of $1,225,000, of which $975,000 was paid in cash and the balance of $250,000 was financed by notes. The notes are due in monthly installments of $5,537, inclusive of interest at 10%, from May 1999 through April 2004. The Company recognized a gain of $611,000 on these sales. 3. INCOME PER SHARE OF COMMON STOCK The Company adopted in the first quarter of fiscal 1998, The Financial Accounting Standards Board Statement No. 128 "Earnings per Share" which established new standards for computing and presenting earnings per share. The Company now discloses "Basic Earnings per Share", which is based upon the weighted average number of shares of common stock outstanding during each period and "Diluted Earnings per Share" which requires the Company to include common stock equivalents consisting of dilutive stock options. 4 A reconciliation of the numerators and denominators of the basic and diluted per share computations follow:
Income Shares Per-Share (Numerator) (Denominator) Amount ----------- ------------- ------ 13-weeks ended January 2, 1999: BASIC EPS $1,026,000 3,646,000 $.28 Stock Options & Warrants -- 14,000 - ---------- --------- ---- DILUTED EPS $1,026,000 3,660,000 $.28 ---------- --------- ---- 13-weeks ended December 27, 1997: BASIC EPS $727,000 3,835,000 $.19 Stock Options & Warrants -- 24,000 - -------- --------- ---- Diluted EPS $727,000 3,859,000 $.19 -------- --------- ----
Options to purchase 232,500 shares of common stock at prices ranging from $11.375 to $12 per share and warrants to purchase 35,000 shares of common stock at $11.625 were not included in the computation of diluted earnings per share at January 2, 1999 because the exercise prices were greater than the average market price of the common shares. Options to purchase 132,500 shares of common stock at $12 per share and warrants to purchase 35,000 shares of common stock at $11.625 were not included in the computation of diluted earnings per share at December 27, 1997 because the exercise prices were greater than the average market price of the common shares. 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements. NET SALES Net sales at restaurants and bars owned by the Company were basically unchanged in the 13-week period ended January 2, 1999 from the comparable period ended December 27, 1997. Net sales for the quarter increased by $1,310,000 from sales at restaurants which the Company did not operate in the 13-week period last year (Red and the Stage Deli in Las Vegas were opened or acquired in the fiscal year ended October 3, 1998) and decreased by $1,926,000 from sales at restaurants that the Company no longer operates (B. Smith's DC and Perretti Italian Cafe were sold in the 13-week period ended January 2, 1999 and An American Place and the Beekman 1766 Tavern were sold in the 1998 fiscal year). Same store sales in the 13-week period ended January 2, 1999 increased by 2.5% principally due to increased customer counts. The components of this change consisted of a 4.6% increase in the Company's Las Vegas operations along with a 1.5% increase in the Company's other operations. COSTS AND EXPENSES The Company's cost of sales consists only of food and beverage costs at restaurants and bars owned by the Company. For the 13-week period ended January 2, 1999 cost of sales as a percentage of net sales decreased to 26.4% from 26.9% for the comparable period last year. There were comparable decreases at the Company's Las Vegas and non Las Vegas facilities. Operating expenses of the Company, consisting of restaurant payroll, occupancy and other expenses at restaurants and bars owned by the Company, as a percentage of net sales, decreased to 62.0% for the 13-week period ended January 2, 1999 from 64.5% last year. Operating expense during the 13-week period ended January 2, 1999 is net of gains of $611,000, or 2.3% of net sales, from two restaurants which were sold (B. Smith's DC and Perretti Italian Cafe). General and administrative expenses, as a percentage of net sales, were 5.7% for the 13-week period ended January 2, 1999 as compared to 5.2% last year. If net sales at managed restaurants 6 and bars were included in consolidated net sales, general and administrative expenses as a percentage of net sales would have been 5.3% for the 13-week period ended January 2, 1999 as compared to 4.6% last year. The Company had net income of $1,026,000 for the 13-week period ended January 2, 1999 as compared to net income of $727,000 last year. The results for the 13-week period ended January 2, 1999 include after tax gains of $388,000 from the sale of two restaurants (B. Smith's DC and Perretti Italian Cafe) and the results for the 13-week period last year include after tax gains of $111,000 from the sale of one restaurant (Jim McMullen). During the 13-week period ended January 2, 1999 the Company managed five restaurants and during the 13-week period last year the Company managed five restaurants and two corporate dining facilities owned by third parties. Net sales of the managed locations were $2,157,000 during the 13-week period ended January 2, 1999 as compared to $3,466,000 last year. This decrease was primarily the result of the termination of management agreements in the fiscal year ended October 3, 1998 at two corporate dining facilities managed by the Company. Nets sales of these operations are not included in consolidated net sales. INCOME TAXES The provision for income taxes reflects Federal income taxes calculated on a consolidated basis and state and local income taxes calculated by each subsidiary on a non consolidated basis. Most of the restaurants owned or managed by the Company are owned or managed by a separate subsidiary. For state and local income tax purposes, the losses incurred by a subsidiary may only be used to offset that subsidiary's income, with the exception of the restaurants which operate in the District of Columbia. Accordingly, the Company's overall effective income tax rate has varied depending on the level of the losses incurred at individual subsidiaries. The Company's overall effective tax rate in the future will be affected by factors such as the level of losses incurred at the Company's New York facilities (which cannot be consolidated for state and local tax purposes), pre-tax income earned outside of New York City (Nevada has no state income tax and other states in which the Company operate have income tax rates substantially lower in comparison to New York) and the utilization of state and local net operating loss carry forwards. In order to more effectively utilize tax loss carry forwards at restaurants that 7 were unprofitable, the Company has merged certain profitable subsidiaries with certain loss subsidiaries. As a result of the enactment of the Revenue Reconciliation Act of 1993, the Company is entitled, commencing January 1, 1994, to a tax credit based on the amount of tip income of restaurant service personnel. The Company estimates that this credit will be in excess of $500,000 for the current year. The Internal Revenue Service is currently examining the Company's Federal Income Tax returns for the fiscal years ended September 28, 1991 through October 1, 1994, and has proposed certain adjustments, all of which are being contested by the Company. The adjustments primarily relate to (i) pre-opening, legal and accounting expenses incurred in connection with new or acquired restaurants that the Internal Revenue Service asserts should have been capitalized and amortized rather than currently expensed and (ii) travel and meal expenses for which the Internal Revenue Service asserts the Company did not comply with certain record keeping requirements of the Internal Revenue Code. The Company does not believe that any adjustments resulting from such examination will have a material effect on the Company's financial condition. LIQUIDITY AND SOURCES OF CAPITAL The Company's primary source of capital is cash provided by operations and funds available from the revolving credit agreement with its main bank, Bank Leumi USA. The Company from time to time also utilizes equipment financing in connection with the construction of a restaurant and seller financing in connection with the acquisition of a restaurant. The Company utilizes capital primarily to fund the cost of developing and opening new restaurants and acquiring existing restaurants. The Company's Revolving Credit facility with its main bank includes a $10,000,000 facility for use in construction and acquisition of new restaurants and for working capital at the Company's existing restaurants. The facility allows the Company to borrow up to $10,000,000 until April 2000 at which time outstanding loans mature. The loans bear interest at a rate of prime plus 1/2%. At January 2, 1999 the Company had borrowings of $1,700,000 outstanding on the facility. The Company also has a two-year $1,000,000 letter of credit facility for use in lieu of lease security deposits. At January 2, 1999 the Company had delivered $706,000 in irrevocable letters of credit on this facility. 8 At January 2, 1999, the Company had a working capital deficit of $430,000 as compared to a working capital deficit of $719,000 at October 3, 1998. The restaurant business does not require the maintenance of significant inventories or receivables, thus the Company is able to operate with minimal and even negative working capital. The amount of indebtedness that may be incurred by the Company is limited by the revolving credit agreement with its main bank. Certain provisions of the agreement may impair the Company's ability to borrow funds. RESTAURANT EXPANSION The Company is constructing a 500 plus seat Southwestern style restaurant at Union Station in Washington, D.C., where the Company operates two other restaurants. The Company expects to incur up to $1,800,000 in capital costs and other pre-opening expenses to open this restaurant. The Company expects to open this restaurant in the March 1999 fiscal quarter. The Company expects to shortly begin construction on its previously announced project at a large theatre development in Southfield, Michigan under a joint venture agreement with Sony Theatres' Loeks Star Partners and Millennium Partners. There the Company will develop and operate four restaurants containing a total of approximately 50,000 square feet. The Company anticipates that its share of the required capital contributions to meet the construction costs, initial inventories and pre-opening expenses will be $6,500,000. The project is currently scheduled to open in the September 1999 fiscal quarter. Although the Company is not currently committed to any other projects, the Company is exploring additional opportunities for expansion of its business. The Company expects to fund its existing projects through cash from operations and from the anticipated revision of the existing credit facilities. Additional expansion may require additional external financing. YEAR 2000 The Company has assessed and continues to assess the impact of the Year 2000 issue on its reporting systems and operations. The Year 2000 issue exists because many computer systems and applications currently used two-digit fields to designate a year. When the century date occurs, date-sensitive systems may recognize the year 2000 as 1900 or not at all. This inability to recognize or properly treat the year 2000 may cause systems to 9 process critical financial and operational information incorrectly. The Company is currently reviewing, testing and correcting non-compliant systems. The review stage should be completed by the end of the March 1999 quarter and all non-compliant systems should be remedied by the end of the September 1999 quarter. The Company estimates that the cost of remediation will not exceed $150,000. The Company's centralized financial accounting and reporting software system which processes information generated daily at each of the Company's restaurants is Year 2000 compliant. However, certain hardware which processes such information is currently non-compliant and is in the process of being modified or replaced as needed at both corporate headquarters and the applicable restaurants. Several of the Company's restaurants have non-compliant point-of-sale systems. These systems process customer orders and generate billing information. The Company is modifying those systems which can be modified and replacing the systems which can not be modified. The Company's centralized purchasing system which process numerous orders from the Company's restaurants is Year 2000 compliant. The Company has initiated communications with its significant vendors and service providers to determine the extent to which the Company's systems are vulnerable to those third parties' failure to remediate their own Year 2000 issues. At the Company's facilities at the New York-New York Hotel and Casino, for example, the Company utilizes and interfaces with systems provided by the Hotel and failure of the Hotel's computer systems to adequately address the Year 2000 issue may have a material adverse effect upon the Company. The Company has been advised by the Hotel that its systems are expected to be Year 2000 compliant. The Company is dependent upon major credit card issuers for the remittance to the Company of charges incurred by customers. The Company has been advised that the major credit card issuers in the United States have addressed the Year 2000 issues they confront and do expect that their systems will function properly in the Year 2000. Other vendors and service providers with which the Company does business may not have adequately addressed the year 2000 issue. However, the Company believes that there are numerous sources for the various products and services used by the Company and does not anticipate that Year 2000 compliance issues 10 confronted by its vendors and service providers will have a material effect upon the Company. The Company does not believe that any further contingency plans are warranted at the present time. If for any reason the Company's remaining non-compliant systems cannot be remedied, the Company expects to have developed appropriate contingency plans by the end of the September 1999 fiscal quarter. 11 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K - none 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: February 12, 1999 ARK RESTAURANTS CORP. By /S/ Michael Weinstein --- ----------------- Michael Weinstein, President By /S/ Andrew B. Kuruc --- --------------- Andrew B. Kuruc Vice President, Controller and Principal Accounting Officer 13 EX-27 2 EXHIBIT 27
5 This schedule contains summary financial information extracted from the balance sheet and income statment for the 13 weeks of Ark Restaurants Corp. and is qualified in its entirety by reference to such financial statements 1000 3-MOS OCT-02-1999 JAN-02-1999 111 0 3,314 0 1,942 8,106 41,631 16,605 43,046 8,536 4,319 52 0 0 29,488 43,046 26,933 26,933 7,110 7,110 18,220 0 64 1,710 684 1,026 0 0 0 1,026 .28 .28
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