<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- -- SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 28, 1996
OR
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 (IRS Employer Identification Number)
incorporation or organization)
85 Fifth Avenue, New York, N.Y. 10003
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(212) 206-8800
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, $.01 par value NASDAQ/NMS
Securities registered pursuant to Section 12(g) of the Act:
None
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 such 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
-- --
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ X ].
The aggregate market value at December 19, 1996 of shares of the
Registrant's Common Stock, $.01 par value (based upon the closing price per
share of such stock on the Nasdaq National Market) held by non-affiliates of the
Registrant was approximately $29,668,000. Solely for the purposes of this
calculation, shares held by directors and officers of the Registrant have been
excluded. Such exclusion should not be deemed a determination or an admission by
the Registrant that such individuals are, in fact, affiliates of the Registrant.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: At December 19, 1996, there
were outstanding 3,814,999 shares of the Registrant's Common Stock, $.01 par
value.
Document Incorporated by Reference: Certain portions of the Registrant's
definitive proxy statement to be filed not later than January 27, 1997 pursuant
to Regulation 14A are incorporated by reference in Items 10 through 13 of Part
III of this Annual Report on Form 10-K.
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PART I
ITEM 1. BUSINESS
GENERAL
Ark Restaurants Corp. (the "Registrant" or the "Company") is a holding
company which, through subsidiaries, operates 26 restaurants, two bakeries and
two corporate dining facilities. Of those facilities, 20 restaurants and two
bakeries are owned by the Company and six restaurants and the two corporate
dining facilities are owned by others and managed by the Company.
The Company was formed in 1983 to concentrate the ownership of four
restaurants previously operated by the Company's principals. Until 1987 all of
the Company's facilities were located in the New York City metropolitan area. In
1987, three facilities were opened in Boston, Massachusetts. Since then the
Company has opened five facilities in the Washington, D.C. metropolitan area,
one in Islamorada, Florida, one in Rhinebeck, New York and one in Jersey City,
New Jersey. The Company will open in early January 1997 a group of restaurants
in the 2,100-room hotel to be known as New York, New York Hotel & Casino under
construction in Las Vegas, Nevada.
In addition to the shift from a Manhattan-based operation, the nature of
the facilities operated by the Company has shifted from smaller, neighborhood
restaurants to larger, destination restaurants intended to benefit from high
patron traffic attributable to the uniqueness of the restaurant's location. Most
of the restaurants opened in recent years are of the latter description and the
Company intends to concentrate on developing or acquiring similar facilities in
the future. In fiscal 1995, the Company opened two such restaurants (B. Smith's
in Washington and Bryant Park Grill and Cafe in New York). The restaurant
operations in Las Vegas will constitute the Company's largest facilities at one
place and are to be situated in a new, destination-type hotel and casino in a
major destination city.
The names and themes of each of the Company's restaurants are different
except for the Company's three America restaurants, two B. Smith's restaurants
and two Sequoia restaurants. The Company intends to open a fourth America
restaurant and a second Gonzalez y Gonzalez restaurant in Las Vegas, Nevada at
the New York, New York Hotel & Casino. The menus in the Company's restaurants
are extensive, offering a wide variety of high quality foods at generally
moderate prices. Two of the Company's restaurants, Lutece and An American Place,
may be classified as expensive. The atmosphere at many of the restaurants is
lively and extremely casual. Most of the restaurants have separate bar areas
utilized by diners awaiting tables. A majority of the net sales of the Company
is derived from dinner as opposed to lunch service. Most of the restaurants are
open seven days a week and most serve lunch as well as dinner.
While decors differ from restaurant to restaurant, interiors are marked by
distinctive architectural and design elements which often incorporate dramatic
interior open spaces and extensive glass exteriors. The wall treatments,
lighting and decorations are typically vivid, unusual and, in some cases, highly
theatrical.
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The following table sets forth certain information with respect to the
Company's facilities currently in operation.
<TABLE>
<CAPTION>
Seating
Capacity(2)
Restaurant Size Indoor- Lease
Name Location Year Opened(1) (Square feet) (Outdoor) Expiration(3)
<S> <C> <C> <C> <C> <C>
Perretti Columbus Avenue 1977 1,600 124 2003
New York, New York
(between 72nd and 73rd
Streets)
Metropolitan Cafe First Avenue 1982 4,000 180-(50) 2006
New York, New York
(between 52nd and 53rd
Streets)
Ernie's Broadway 1983 6,600 300 2008
New York, New York
(between 75th and 76th
Streets)
America 18th Street 1984 9,600 350 2004
New York, New York
(between 5th Avenue
and Broadway)
Woody's (4) Seventh Avenue South 1986 1,700 90 1999
New York, New York
(between Charles and
10th Streets)
B. Smith's (5) Eighth Avenue 1986 8,000 400 2006
New York, New York
(at 47th Street)
The Marketplace Faneuil Hall Market 1987 3,000 100 2000
Cafe (4) Boston, Massachusetts
El Rio Grande Third Avenue 1987 4,000 160 2014
(4)(6) New York, New York
(between 38th and 39th
Streets)
The Brewskeller Faneuil Hall Market 1987 1,500 50 2000
Pub (4) Boston, Massachusetts
An American Park Avenue 1986 6,000 180 2005
Place New York, New York
(at 32nd Street)
Gonzalez y Broadway 1989 6,000 250 1999
Gonzalez New York, New York
(between Houston and
Bleeker Streets)
</TABLE>
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<TABLE>
<CAPTION>
Seating
Capacity(2)
Restaurant Size Indoor- Lease
Name Location Year Opened(1) (Square feet) (Outdoor) Expiration(3)
<S> <C> <C> <C> <C> <C>
America Union Station 1989 10,000 400 2009
Washington, D.C.
Center Cafe Union Station 1989 4,000 200 2009
Washington, D.C.
Sequoia Washington Harbour 1990 26,000 600-(400) 2005
Washington, D.C.
Sequoia South Street Seaport 1991 12,000 300-(100) 2006
New York, New York
Beekman 1766 Mill Street 1991 5,000 225 2001
Tavern Rhinebeck, New York
Canyon Road First Avenue 1984 2,500 130 2004
New York, New York
(between 76th and 77th
Streets)
Louisiana Broadway 1992 4,500 130 1999
Community Bar & New York, New York
Grill (between Houston &
Bleeker Streets)
Oar Bar & Grill Faneuil Hall Market 1987 2,500 130 2000
(4) Boston, Massachusetts
Jim McMullen Third Avenue 1993 6,000 250 2002
New York, New York
(between 76th and 77th
Streets)
America Tyson's Corner 1994 11,000 400 2014
McLean, Virginia
B. Smith's(5) Union Station 1994 8,600 280 2009
Washington, D.C.
Lutece East 50th Street 1994 2,500 92 2019
New York, New York
(between 2nd and 3rd
Avenues)
Lorelei Restaurant Islamorada, Florida 1994 10,000 400 2029
and Cabana Bar
Columbus Bakery Columbus Avenue 1988 2,000 25 2002
New York, New York
(between 82nd and 83rd
Streets)
Bryant Park Grill Bryant Park 1995 25,000 180-(820) 2025
& Cafe New York, New York
</TABLE>
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<TABLE>
<CAPTION>
Seating
Capacity(2)
Restaurant Size Indoor- Lease
Name Location Year Opened(1) (Square feet) (Outdoor) Expiration(3)
<S> <C> <C> <C> <C> <C>
Columbus Bakery First Avenue 1995 2000 75 2006
New York, New York
(between 52nd and 53rd
Streets)
The Market at Newport Office Tower 1995 7,500 250 2015
Newport (7) 525 Washington Blvd.
Jersey City, New Jersey
Universal Studios 100 Universal City 1996 8,000 280 (8)
Cafeteria (7) Plaza, Unviveral City,
California
The Moving Warner Bros. 1996 1,000 48 (8)
Picture Cafe (4) Studio Store
New York, New York
(at 57th Street)
</TABLE>
(1) Restaurants are, from time to time, renovated and/or renamed. "Year
Opened" refers to the year in which the Company or an affiliated
predecessor of the Company first opened, acquired or began managing a
restaurant at the applicable location, notwithstanding that the
restaurant may have been renovated and/or renamed since that date.
(2) Seating capacity refers to the seating capacity of the indoor part of a
restaurant available for dining in all seasons and weather conditions.
Outdoor seating capacity, if applicable, is set forth in parentheses and
refers to the seating capacity of terraces and sidewalk cafes which are
available for dining only in the warm seasons and then only in clement
weather.
(3) Assumes the exercise of all available lease renewal options.
(4) Restaurant owned by a third party and managed by the Company. Management
fees earned by the Company are based either on a percentage of cash flow
of the restaurant or a fixed amount or a combination of the two.
(5) 20% of the stock of each of the corporate subsidiaries operating the two
B. Smith's restaurants is owned by the manager of the restaurant. The
corporate subsidiaries owning or managing all of the other facilities
are wholly-owned by the Company.
(6) The Company owns a 19% interest in the partnership which owns El Rio
Grande.
(7) Corporate cafeteria managed by the Company.
(8) The management agreement for this corporate dining facility is
terminable by either party upon 60 days' notice.
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RESTAURANT EXPANSION
The Company has entered into an agreement with New York, New York Hotel &
Casino, a joint venture between Primadonna Resorts, Inc. and MGM Grand, Inc.,
for the Company to design, build and operate a group of restaurants in the
2,100-room Las Vegas resort casino which is currently under construction and is
expected to open in early January 1997. The Company is in the process of
building a 450-seat restaurant (to be named America and to be modeled after the
Company's other America restaurants), a 160-seat steakhouse (to be named
Gallagher's under a license agreement from the owner of the New York restaurant
of that name), a 120-seat restaurant (to be named Gonzalez y Gonzalez and to be
modeled after the Company's New York restaurant of the same name) and a group of
nine small fast food restaurants in a food court with a New York theme. In
addition, the Company will operate the hotel's room service, its banquet
facilities and its employee cafeteria.
The restaurant facilities at the New York, New York Hotel & Casino represent
the Company's first effort at designing, constructing and operating restaurants
in Las Vegas and the first such facilities in conjunction with a large-scale
hotel and casino operation. The number of patrons expected to be served at the
various facilities at the New York, New York Hotel & Casino far exceeds the
number of patrons served by the Company in any other single location.
The Company recently signed a lease for a 10,000 square foot site in the World
Financial Center in downtown New York City where the Company intends to open An
American Place Grill restaurant. The site was formerly occupied by a restaurant
and the Company does not therefore anticpate that it will be necessary to incur
significant capital expenditures in connection with the opening of this
restaurant.
The Company has also recently reached an agreement in principle to manage the
restaurant and other food service facilities at three hotel and casino
facilities located in Primm, Nevada and owned by Primadonna Resorts, Inc., one
of the partners in the New York, New York Hotel & Casino.
During the third quarter of fiscal 1996, the Company purchased two
restaurants, Jim McMullen and Mackinac Bar and Grill, which it had been
managing. During the first quarter of fiscal 1995, the Company opened its second
B. Smith's, this one in Union Station, Washington D.C. During fiscal 1994, the
Company entered into agreements to acquire Lutece in New York City and the
Lorelei Restaurant and Cabana Bar in Islamorada, Florida, both of which
acquisitions were completed in the first quarter of fiscal 1995.
During the first quarter of fiscal 1996, the Company opened a bakery (another
Columbus Bakery), operating on a retail basis similar to that of the existing
Columbus Bakery, in premises adjacent to the Company's Metropolitan Cafe
restaurant on First Avenue in Manhattan. During fiscal 1995, the Company
converted a restaurant on Columbus Avenue in Manhattan into the Columbus Bakery.
Both Columbus Bakery facilities supply baked goods to other facilities of the
Company in Manhattan and also sell at retail, coffee, baked goods and prepared
foods on a "take out" basis or for on premise consumption.
In the third fiscal quarter of 1995, the Company opened a major facility in
Bryant Park, Manhattan. The facility includes a restaurant, the Bryant Park
Grill and an outdoor cafe, the Bryant Park Cafe. The Bryant Park Grill has 180
seats indoors plus 350 additional seats on its roof and in an adjacent outdoor
garden. The Bryant Park Cafe has 470 outdoor seats in the Bryant Park terrace.
The opening of a new restaurant is invariably accompanied by substantial
pre-opening expenses and early operating losses associated with the training of
personnel, excess kitchen costs and costs of supervision and other expenses
during the pre-opening period and during a post-opening "shake out" period until
operations can be considered to be functioning normally. The amount of such
pre-opening expense and early
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operating loss can generally be expected to depend upon the size and complexity
of the facility being opened. The Company estimates that such pre-opening
expenses and early operating losses were approximately $950,000 in fiscal 1995
in connection with the opening of B. Smith's in Washington, the Columbus Bakery
and the Company's Bryant Park facilities and approximately $200,000 in fiscal
1996 in connection with the opening of the facilities at the New York, New York
Hotel & Casino. The Company expects to incur extensive additional pre-opening
expenses and early operating losses in connection with the opening of its Las
Vegas operations.
The Company's restaurants generally do not achieve substantial increases from
year to year in net sales or profits. The Company will have to continue to open
new and successful restaurants or expand existing restaurants to achieve
significant increases in net sales or to replace net sales of restaurants which
experience declining popularity or which close because of lease expirations or
other reasons. After a restaurant is opened, there can be no assurance that such
restaurant will be successful, particularly since in many instances the Company
will not operate new restaurants under a tradename currently used by the
Company, thereby requiring each new restaurant to establish its own identity.
The Company intends to continue to direct its restaurant expertise and
financial resources in developing larger restaurants benefitting from the high
patron traffic of unique locations, such as the Sequoia restaurants in the South
Street Seaport in New York and the Washington Harbour in Washington, the America
and B. Smith's restaurants in Union Station in Washington, the Bryant Park
facilities in New York and the planned Las Vegas facilities. Nevertheless, the
Company also intends to take advantage of other opportunities considered to be
favorable when they occur, such as the acquisition of the highly regarded
restaurant Lutece.
RECENT RESTAURANT DISPOSITIONS
In the third quarter of fiscal 1996, the Company sold the Whale's Tail
restaurant in Oxnard, California, which the Company had acquired in November
1993.
In the first quarter of fiscal 1997, the Company sold three of its smaller
restaurants (Mackinac Bar & Grill, The Museum Cafe and Albuquerque Eats/The
Rodeo Bar), each of which was operating at a loss at the time of its sale.
RESTAURANT MANAGEMENT
Each restaurant is managed by its own manager and has its own chef. Food
products and other supplies are purchased from various unaffiliated suppliers,
in most cases by the Company's headquarters personnel. Each of the Company's
restaurants has two or more assistant managers and assistant chefs. The
executive chef department designs menus and supervises the kitchens. Financial
and management control is maintained at the corporate level through the use of
an automated data processing system that includes centralized accounting and
reporting. The Company has developed its own proprietary software which
processes information input daily at the Company's restaurants. The Company
believes that the information generated by this process enables it to monitor
closely the activities at each restaurant and enhances the Company's ability to
effectively manage its restaurants.
EMPLOYEES
At December 7, 1996, the Company employed 1,942 persons (including employees
at managed facilities), 37 of whom were headquarters personnel, 127 of whom were
restaurant management personnel, 530 of whom were kitchen personnel and 1,175 of
whom were restaurant service personnel. A number of the
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Company's restaurant service personnel are employed on a part-time basis.
Changes in minimum wage levels may affect the labor costs of the Company and the
restaurant industry generally because a large percentage of restaurant personnel
are paid at or slightly above the minimum wage. With the exception of the
employees at Lutece in New York, the Company's employees are not covered by a
collective bargaining agreement. The Company believes its employee relations are
satisfactory.
COMPETITION
The restaurant business is intensely competitive and involves a high degree of
risk. The Company believes that a large number of new restaurants open each year
and that a significant number of them do not succeed. Even successful
restaurants can rapidly lose popularity due to changes in consumer tastes,
economic conditions and population and traffic patterns, turnover in key
personnel, the opening of competitive restaurants, unfavorable reviews and other
factors. There is active competition for competent chefs and management
personnel and intense competition among major restaurateurs and food service
companies for the larger, unique sites suitable for restaurants.
GOVERNMENT REGULATION
The Company is subject to various federal, state and local laws and
regulations affecting its business, including a variety of regulatory provisions
relating to the wholesomeness of food, sanitation, health, safety and licensing
in the sale of alcoholic beverages. A number of the Company's restaurants have
open or enclosed outdoor cafes which require the approval of, or licensing by, a
number of governmental agencies. The suspension by any regulatory agency of the
food service or the liquor license of any of the Company's restaurants would
have a material adverse effect upon the affected restaurant and may adversely
affect the Company as a whole.
The New York State Liquor Authority must approve any transaction in which a
shareholder of the Company increases his holdings to 10% or more of the
outstanding capital stock of the Company and any transaction involving 10% or
more of the outstanding capital stock of the Company.
SEASONAL NATURE OF BUSINESS
The Company's business is highly seasonal. The second quarter of the Company's
fiscal year, consisting of the non-holiday portion of the cold weather season in
New York, Boston and Washington (January, February and March), is the poorest
performing quarter. The Company achieves its best results during the warm
weather, attributable to the Company's extensive outdoor dining availability,
particularly at Bryant Park and Sequoia in Washington (the Company's largest
restaurants) and the Company's outdoor cafes. The Company anticipates that its
facilities in Las Vegas will operate on a more level basis through the year and,
accordingly, may have the effect of reducing the seasonal nature of the
Company's business as it currently exists.
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ITEM 2. PROPERTIES
The Company's restaurant facilities identified in the chart above and its
executive offices are occupied under leases. Most of the Company's restaurant
leases provide for the payment of base rents plus real estate taxes, insurance
and other expenses and, in certain instances, for the payment of a percentage of
the Company's sales at such facility. These leases (excluding leases for managed
restaurants) have initial terms expiring as follows:
Years Lease Number of
Term Expire Facilities
1996-2000 8
2001-2005 8
2006-2010 8
2011-2015 3
2016-2020 1
2021-2025 1
2026-2030 1
The Company's executive, administrative and clerical offices, located in
approximately 8,500 square feet of office space at 85 Fifth Avenue, New York,
New York, are occupied under a lease which expires in October 2008, which
includes one five-year renewal option. The Company maintains an office in
Washington, D.C. for its catering operations, the lease for which expires in
December 1997.
For information concerning the Company's future minimum rental commitments
under non-cancelable operating leases, see Note 8 of Notes to Consolidated
Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of its business, the Company is a party to various
lawsuits arising from accidents at its restaurants and workmen's compensation
claims, which are generally handled by the Company's insurance carriers.
The employment by the Company of management personnel, waiters, waitresses
and kitchen staff at a number of different restaurants has resulted in the
institution, from time to time, of litigation alleging violation by the Company
of employment discrimination laws. Various discrimination suits are currently
pending, some of which involve substantial claims for compensatory and punitive
damages. The Company does not believe that any of such suits will have a
materially adverse effect upon the Company, its financial condition or
operations.
A minority shareholder of two of the Company's subsidiaries has made
various demands which, if proven, would result in a claim against the Company
for approximately $300,000. The Company believes the demands are without merit
and the Company intends to defend against them vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names and ages of executive officers of
the Company and all offices held by each person:
<TABLE>
<CAPTION>
Name Age Positions and Offices
<S> <C> <C>
Michael Weinstein 53 President
Vincent Pascal 53 Vice President and
Secretary
Robert Towers 49 Vice President and
Treasurer
Andrew Kuruc 38 Vice President and
Controller
</TABLE>
Each executive officer of the Company serves at the pleasure of the Board
of Directors and until his successor is duly elected and qualifies.
Michael Weinstein has been President and a director of the Company since
its inception in January 1983. Since 1978, Mr. Weinstein has been an officer,
director and 25% shareholder of Easy Diners, Inc., a restaurant management
company which operates two restaurants in New York City. Since 1976, Mr.
Weinstein has been an officer, director and shareholder of Teacher's Restaurant
Limited, which owns and operates another restaurant in New York City. Neither
Easy Diners, Inc. nor Teachers Restaurant Limited is a parent, subsidiary or
other affiliate of the Company. Mr. Weinstein spends substantially all of his
business time on Company-related matters.
Vincent Pascal was elected Vice President, Assistant Secretary and a
director of the Company in October 1985. Mr. Pascal became Secretary of the
Company in January 1994.
Robert Towers has been employed by the Company since November 1983 and was
elected Vice President, Treasurer and a director in March 1987.
Andrew Kuruc has been employed as Controller of the Company since April
1987 and was elected as a director of the Company in November 1989.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Effective December 14, 1994, the Company's Common Stock, $.01 par value,
began trading in the over-the-counter market on the Nasdaq National Market
("Nasdaq") under the symbol "ARKR". For more than the two-year period prior
thereto, the Company's Common Stock was traded on the American Stock Exchange
("AMEX"). The high and low sale prices for the Common Stock from October 3, 1994
through September 30, 1996 are as follows:
<TABLE>
<CAPTION>
Calendar 1994 High Low
<S> <C> <C>
Fourth Quarter
October 1 - December 13 (AMEX) 8 3/8 7
December 14 - December 31 (Nasdaq) 8 1/2 7
Calendar 1995
First Quarter 10 1/4 7 1/2
Second Quarter 10 1/2 8 1/4
Third Quarter 10 1/4 8
Fourth Quarter 10 7 1/4
Calendar 1996
First Quarter 8 6
Second Quarter 11 1/2 7 1/4
Third Quarter 10 7 3/4
</TABLE>
DIVIDENDS
The Company has not any paid cash dividends since its inception and does
not intend to pay dividends in the foreseeable future. Under the terms of the
Second Amended and Restated Credit Agreement between the Company and its main
lender, the Company may pay cash dividends and redeem shares of Common Stock in
any fiscal year only to the extent of an aggregate amount equal to 20% of the
Company's consolidated operating cash flow for such fiscal year.
NUMBER OF SHAREHOLDERS
As of December 19, 1996, there were 104 holders of record of the Company's
Common Stock.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain financial data for the fiscal years ended
1992 through 1996. This information should be read in conjunction with the
Company's Consolidated Financial Statements and the notes thereto appearing at
page F-1.
<TABLE>
<CAPTION>
Year Ended
----------------------------------------------------------------------
September 28, September 30, October 1, October 2, October 3,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales $76,795,940 $73,026,907 $60,404,339 $55,973,227 $49,283,481
Gross restaurant profit 55,934,475 53,001,963 43,562,653 40,364,491 35,406,559
Operating income 507,996 960,794 840,452 3,384,230 2,671,891
Other income, net 743,615 937,763 507,200 268,606 250,558
Income before provision
for income taxes and
extraordinary item 1,241,611 1,898,557 1,347,652 3,652,836 2,922,449
Income (loss) before
extraordinary item 788,762 1,121,126 643,032 1,817,637 1,473,133
NET INCOME (LOSS) 788,762 1,121,126 1,150,802 1,936,737 1,546,033
Income (loss) per share
before extraordinary
item and cumulative
effect of accounting
change $ 0.24 $ 0.34 $ 0.20 $ 0.57 $ 0.48
NET INCOME (LOSS)
PER SHARE $ 0.24 $ 0.34 $ 0.36 $ 0.61 $ 0.50
Weighted average
number of shares
used in computation 3,241,394 3,251,336 3,225,680 3,198,429 3,101,719
BALANCE SHEET DATA
(end of period):
Total assets 32,379,479 28,541,920 21,768,747 19,037,744 17,579,531
Working capital (deficit) (1,303,920) 40,996 1,517,601 490,956 (151,773)
Long-term debt 6,403,866 4,014,162 761,386 165,728 1,537,243
Shareholders' equity 17,804,394 16,706,301 15,210,202 13,908,116 11,444,566
Shareholders' equity
per share 5.49 5.24 4.88 4.51 3.88
Facilities in operation
at end of year, including
managed 32 32 27 26 24
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
ACCOUNTING PERIOD
The Company's fiscal year ends on the Saturday nearest September 30. The
fiscal years ended September 28, 1996, September 30, 1995 and October 1, 1994
included 52 weeks.
NET SALES
Net sales at restaurants and bars owned by the Company increased by 5.2%
from fiscal 1995 to fiscal 1996 and by 20.9% from fiscal 1994 to fiscal 1995.
The increase in fiscal 1996 was primarily due to the first full operating year
of one of the Company's largest restaurant which opened in fiscal 1995 (Bryant
Park Grill & Cafe) and a full operating year of a restaurant which was closed
for part of fiscal 1995 (Ernie's), offset in part by a decrease in sales
resulting from a restaurant which the Company sold in fiscal 1996 (Whale's Tail)
and from declining net sales at four restaurants classified as restaurants held
for sale (of which three were sold in the first quarter of fiscal 1997 (Museum
Cafe, Rodeo Bar and Mackinac Bar and Grill). Same store sales in fiscal 1996
decreased by 3.0% principally due to decreased customer counts.
The increase in fiscal 1995 was due primarily to sales from restaurants
acquired or opened in fiscal 1995 (Bryant Park Grill & Cafe, B. Smith's in
Washington, DC, Lorelei Restaurant and Cabana Bar and Lutece) and the first full
operating year of a restaurant opened in fiscal 1994 (America in McLean,
Virginia). Same store sales in fiscal 1995 decreased by 0.8%.
COSTS AND EXPENSES
The Company's cost of sales consists principally of food and beverage
costs at restaurants and bars owned by the Company. Cost of sales as a
percentage of net sales was 27.2% in fiscal 1996, 27.4% in fiscal 1995 and 27.9%
in 1994. The Company believes its sophisticated centralized purchasing system
has enabled it to efficiently utilize its purchasing power by upgrading product
quality while controlling costs.
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, were 67.9% in fiscal 1996, as compared to 66.7% in
fiscal 1995 and 64.2% in fiscal 1994. The increase in fiscal 1996 from fiscal
1995 was primarily due to a decline in same store sales in particular at the
restaurants held for sale combined with certain losses on the disposition of
those restaurants. Restaurant payroll as a percentage of net sales was 36.1%
in fiscal 1996, 35.9% in fiscal 1995 and 34.9% in fiscal 1994. Payroll expenses
in fiscal 1995 were impacted by costs associated with new restaurant openings
and to a special charge related to the settlement of a claim at one of the
Company's New York restaurants alleging violations of federal and state wage and
hour laws. Occupancy expenses (consisting of rent, rent taxes, real estate
taxes, insurance and utility costs) was 12.8% in fiscal 1996 and were
approximately 12.5% in both fiscal 1995 and fiscal 1994.
The Company incurred approximately $200,000 of pre-opening and early
operating losses at newly opened restaurants in fiscal 1996, $950,000 in fiscal
1995 and $430,000 in fiscal 1994. The Company typically incurs significant
pre-opening expenses in connection with its new restaurants which are expensed
as incurred. Furthermore, it is not uncommon that such restaurants experience
operating losses during the early months of operation.
-14-
<PAGE>
<PAGE>
General and administrative expenses, as a percentage of net sales,
remained constant at 5.8% in fiscal 1996 as compared to fiscal 1995 and were
6.6% in fiscal 1994. The decrease in fiscal 1995 was primarily due to the fact
that the Company was able to manage the 20.9% increase in net sales with only a
nominal increase in general and administrative expenses. In fiscal 1994 the
Company had increased development staff in expectation of the fiscal 1995 new
restaurants and acquisitions. If net sales at managed restaurants were included
in consolidated net sales, general and administrative expenses as a percentage
of net sales would have been 5.0% in both fiscal 1996 and fiscal 1995 and 5.6%
in fiscal 1994.
As of September 28, 1996 the Company managed seven facilities owned by
others (El Rio Grande, and Woody's in Manhattan, The Universal Studios Corporate
Dining Facilities in Universal City, California, The Market at Newport in Jersey
City, New Jersey, the Marketplace Cafe, Oar Bar & Grill, and the Brewskeller Pub
in Boston, Massachusetts). Net sales of these restaurants, which are not
included in net sales, were $12,802,000 during fiscal 1996, $10,839,000 during
fiscal 1995 and, $10,643,000 during fiscal 1994. Management fee income in fiscal
1994 is net of charges totaling $719,000 from the write-off of unrecoverable
advances to a managed restaurant in Miami, Florida, which the Company no longer
manages and from the write-off of a discontinued New York catering operation.
Interest expense was $426,000 in fiscal, $359,00 in fiscal 1995 and
$143,000 in fiscal 1994. The increases in fiscal 1996 from fiscal 1995 and in
fiscal 1995 from 1994 were principally due to borrowings to finance the new
restaurant openings and acquisitions.
Interest income was $87,000 in fiscal 1996, $78,000 in fiscal 1995,
$93,000 in fiscal 1994.
Other income, which generally consists of purchasing service fees, and the
sale of logo T-shirts at various restaurants, was $1,083,000 in fiscal 1996,
$1,219,000 in fiscal 1995 and $557,000 in fiscal 1994. A significant portion of
the amounts received in fiscal 1996 and fiscal 1995 were principally due to
amounts the Company received by a third party due to the temporary closing in
fiscal 1994 and fiscal 1995 of a restaurant (Ernie's).
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 New
York 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 tax rate has varied depending on
the level of losses incurred at individual subsidiaries. The Company's overall
effective tax rate was 37% in fiscal 1996, 40% in fiscal 1995 and 52% in fiscal
1994. The Company's effective rate in fiscal 1996 and fiscal 1995 was
significantly benefited by tax credits available to the Company for FICA taxes
paid by the Company with respect to tip income of service personnel. The
effective tax rate in fiscal 1994 was negatively impacted by the charges to
management fee income totaling $719,000 from the write-off of unrecoverable
advances to a managed restaurant in Miami, Florida, which the Company no longer
manages and from the write-off of a discontinued New York catering operation.
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 (where income tax rates are
substantially lower in comparison to New York income tax rates) and the
utilization of state and local net operating loss
-15-
<PAGE>
<PAGE>
carry forwards. In order to more effectively utilize tax loss carry forwards at
restaurants that 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 FICA taxes paid by the Company with respect to the tip income of
restaurant service personnel. The net benefit to the Company was $349,000 in
fiscal, $299,000 in fiscal 1995 and $173,000 in fiscal 1994.
The Company adopted the Financial Accounting Standards Board Statement No.
109, "Accounting for Income Taxes" (SFAS No. 109), as of the beginning of fiscal
1994. This statement supersedes Accounting Principles Board Opinion No. 11 and
requires an asset and liability approach for financial accounting and reporting
of income taxes. The cumulative effect of this adoption was to increase net
income by $508,000 in fiscal 1994.
LIQUIDITY AND SOURCES OF CAPITAL
The Company's primary source of capital is cash provided by operations and
funds available from the $12,000,000 revolving credit agreement with its main
bank. The Company utilizes capital primarily to fund the cost of developing and
opening new restaurants and acquiring existing restaurants.
The net cash used in investing activities in fiscal 1996 ($6,693,000)
fiscal 1995 ($9,096,000) and fiscal 1994 ($3,008,000) was principally from the
Company's continued investment in fixed assets associated with constructing new
restaurants and acquiring existing restaurants. In fiscal 1996 the Company
commenced construction of a group of restaurant facilities (the "Business --
Restaurant Expansion") in the 2,035 room New York New York Hotel & Casino resort
in Las Vegas, Nevada which is scheduled to open in January 1997. In fiscal 1995,
the Company opened a 1,000 seat restaurant in Bryant Park, a nine-acre park
behind the New York City Public Library (Bryant Park Grill & Cafe) and opened
another restaurant in Union Station in Washington, DC (B.Smith's, the Company's
second such restaurant). The Company also acquired two restaurants - a renowned
French restaurant in New York City (Lutece) and a casual restaurant and bar in
the Florida Keys (Lorelei Restaurant and Cabana Bar). In fiscal 1994, the
Company opened a 400 seat restaurant (America in Tyson's Corner Shopping Complex
in McLean, Virginia) and completed the acquisition of a restaurant in Oxnard,
California (Whale's Tail).
The net cash provided by financing activities in fiscal 1996 was
principally from the Company's borrowings on its main credit facility exceeding
repayments on such facility. In fiscal 1995 net cash provided by financing
activities was principally from the Company's borrowings on its main credit
facility exceeding repayments on such facility and from the sale leaseback of
various kitchen equipment in a restaurant opened in New York City (Bryant Park
Grill & Cafe). In fiscal 1994 the Company received proceeds from the sale
leaseback of various kitchen equipment in the restaurant opened in McLean,
Virginia (America).
At September 28, 1996 the Company had a working capital deficit of
$1,304,000 as compared to working capital of $41,000 at September 30, 1995. The
significant decrease in working capital in fiscal 1996 from fiscal 1995 was
principally due to cash expended for the Las Vegas restaurants. The restaurant
business does not require the maintenance of significant inventories of
receivables, thus the Company is able to operate with minimal and even negative
working capital.
In March 1996 the Company and its main bank agreed to an extension and
increase of the existing Revolving Credit and Term Loan Facility. The agreement
includes a $5,000,000 facility for working capital purposes at the Company's
existing restaurants and a $7,000,000 facility for use in construction of
-16-
<PAGE>
<PAGE>
and as working capital for the Las Vegas restaurants which are scheduled to open
in January 1997. The Company expects that its capital commitments for the Las
Vegas restaurants to be approximately $15,000,000. The two facilities each have
two year terms enabling the Company to borrow until March 1998 at which time
outstanding loans may be converted into two year term loans. The $5,000,000
facility will convert into a two year self-amortizing term loan and the
$7,000,000 facility will convert into a two year loan amortizing $6,000,000 over
the two year period with the balance of $1,000,000 paid at maturity. At
September 28, 1996, the Company had borrowings of $5,400,000 outstanding under
this agreement.
The Company also a four year $2,000,000 Letter of Credit Facility for use
in lieu of lease security deposits and a one year (extendible for an additional
six months) $2,000,000 Letter of Credit of Facility to be used to assure
construction of the Las Vegas restaurants. At September 28, 1996 the Company had
delivered $3,325,000 in irrevocable letters of credit on these two facilities.
In December 1996, the Company raised $6,065,994 through a private
placement of 551,454 shares of its common stock at $11 per share. The proceeds
were used to repay a portion of the Company's outstanding borrowings on its
Revolving Credit and Term Loan Facility and for the payment of capital
expenditures on the Las Vegas restaurants.
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 recently signed a lease for a new facility in the World
Financial Center in downtown New York City where the Company intends to open An
American Place Grill restaurant. The site was formerly occupied by a restaurant
and the Company does not therefore anticpate that it will be necessary to incur
significant capital expenditures in connection with the opening of this
restaurant.
The Company has also recently reached an agreement in principle to manage
the restaurant and other food service facilities at three hotel and casino
facilities located in Primm, Nevada and owned by Primadonna Resorts, Inc., one
of the partners in the New York, New York Hotel & Casino. These arrangements
will not require any significant capital expenditures by the Company.
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 projects through cash from operations and existing
credit facilities. Additional expansion may require additional external
financing.
RECENT DEVELOPMENTS
In the first quarter of fiscal 1997, the Company sold three of its smaller
restaurants (Mackinac Bar & Grill, The Museum Cafe and Albuquerque Eats/The
Rodeo Bar), each of which was operating at a loss at the time of its sale. The
Company recognized a net gain of approximately $150,000 in connection with these
sales.
-17-
<PAGE>
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON WITH ACCOUNTANTS ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-18-
<PAGE>
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See Part I, Item 4. "Executive Officers of the Company." Other information
required by this item is incorporated by reference from the Company's definitive
proxy statement to be filed not later than January 27, 1997 pursuant to
Regulation 14A of the General Rules and Regulations ("Regulation 14A") under the
Securities Exchange Act of 1934, as amended.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from
the Company's definitive proxy statement to be filed not later than January 27,
1997 pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from
the Company's definitive proxy statement to be filed not later than January 27,
1997 pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from
the Company's definitive proxy statement to be filed not later than January 27,
1997 pursuant to Regulation 14A.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) (1) FINANCIAL STATEMENTS: PAGE
<S> <C>
Report of Independent Certified
Public Accountants F-1
Consolidated Balance Sheets --
at September 28, 1996 and September 30, 1995 F-2
Consolidated Statements of Operations --
For each of the three fiscal years ended
September 28, 1996, September 30, 1995 and October 1, 1994 F-3
Consolidated Statements of Shareholders' Equity -- For each of
the three fiscal years ended September 28, 1996, September 30,
1995 and October 1, 1994 F-4
Consolidated Statements of Cash Flows --
For each of the three fiscal years ended
September 28, 1996, September 30, 1995 and October 1, 1994 F-5
Notes to Consolidated Financial Statements F-6
</TABLE>
-19-
<PAGE>
<PAGE>
(2) EXHIBITS:
3.1 Certificate of Incorporation of the Registrant, filed on January
4, 1983, incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
October 1, 1994 (the "1994 10-K").
3.2 Certificate of Amendment of the Certificate of Incorporation of
the Registrant filed on October 11, 1985, incorporated by
reference to Exhibit 3.2 to the 1994 10-K.
3.3 Certificate of Amendment of the Certificate of Incorporation of
the Registrant filed on July 21, 1988, incorporated by reference
to Exhibit 3.3 to the 1994 10-K.
3.4 By-Laws of the Registrant, incorporated by reference to Exhibit
3.4 to the 1994 10-K.
10.1 Amended and Restated Redemption Agreement dated June 29, 1993
between the Registrant and Michael Weinstein, incorporated by
reference to Exhibit 10.1 to the 1994 10-K.
10.2 Form of Indemnification Agreement entered into between the
Registrant and each of Michael Weinstein, Ernest Bogen, Vincent
Pascal, Robert Towers, Jay Galin, Andrew Kuruc and Donald D.
Shack, incorporated by reference to Exhibit 10.2 to the 1994
10-K.
10.3 Ark Restaurants Corp. Amended Stock Option Plan, incorporated by
reference to Exhibit 10.3 to the 1994 10-K.
10.4 Second Amended and Restated Credit Agreement dated as of March 5,
1996 between the Company and Bank Leumi Trust Company of New
York, incorporated by reference to Exhibit 10.52 to the
Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended March 30, 1996 (the "March 1996 10-Q").
10.5 Ark Restaurants Corp. 1996 Stock Option Plan, incorporated by
reference to Exhibit 10.53 to the March 1996 10-Q.
*21 Subsidiaries of the Registrant.
*23 Consent of Deloitte & Touche LLP.
*27 Financial Data Schedule pursuant to Article 5 of Regulation S-X
filed with EDGAR Version only.
---------------------------------
*Filed Herewith
(b) Reports on Form 8-K:
None
-20-
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Ark Restaurants Corp.
We have audited the accompanying consolidated balance sheets of Ark Restaurants
Corp. and its subsidiaries as of September 28, 1996 and September 30, 1995, and
the related consolidated statements of operations, shareholders' equity and cash
flows for each of the three fiscal years in the period ended September 28, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Ark Restaurants Corp. and
subsidiaries as of September 28, 1996 and September 30, 1995, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended September 28, 1996, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, effective
October 3, 1993, the Company changed its method of accounting for income taxes
to conform with Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes.
New York, New York
December 6, 1996
F-1
<PAGE>
<PAGE>
ARK RESTAURANTS CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------------------------------------
September 28, September 30,
ASSETS 1996 1995
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 907,003 $ 1,271,284
Accounts receivable 1,462,499 1,273,827
Current portion of long-term receivables (Note 2) 93,951 163,436
Inventories (Note 3) 840,216 888,344
Deferred income taxes (Note 11) 631,027 395,539
Prepaid expenses 464,571 957,018
Other current assets 409,374 534,852
---------- -----------
Total current assets 4,808,641 5,484,300
---------- -----------
LONG-TERM RECEIVABLES (Note 2) 360,344 1,414,909
ASSETS HELD FOR SALE (Note 3) 2,614,090 -
FIXED ASSETS - At cost (Notes 4 and 7):
Leasehold improvements 13,019,524 14,421,187
Furniture, fixtures and equipment 11,113,933 12,369,017
Leasehold improvements in progress 6,289,726 133,789
---------- -----------
30,423,183 26,923,993
Less accumulated depreciation and amortization 11,325,141 10,548,687
---------- -----------
19,098,042 16,375,306
---------- -----------
INTANGIBLE ASSETS - Net (Note 4) 3,885,095 4,336,347
DEFERRED INCOME TAXES (Note 11) 933,547 476,543
OTHER ASSETS (Note 5) 679,720 454,515
---------- -----------
$32,379,479 $ 28,541,920
---------- -----------
---------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 2,365,939 $ 2,035,769
Accrued expenses and other current liabilities (Note 6) 3,030,684 2,849,292
Current maturities of capital lease obligations (Note 8) 240,855 204,042
Current maturities of long-term debt (Note 7) 150,689 88,832
Accrued income taxes (Note 11) 324,394 265,369
---------- -----------
Total current liabilities 6,112,561 5,443,304
---------- -----------
OBLIGATIONS UNDER CAPITAL LEASES (Note 8) 662,347 929,985
LONG-TERM DEBT - Net of current maturities (Notes 4 and 7) 6,253,177 3,925,330
OPERATING LEASE DEFERRED CREDIT (Note 8) 1,547,000 1,537,000
COMMITMENTS (Notes 7 and 8)
SHAREHOLDERS' EQUITY (Notes 7 and 9):
Common stock par value S.01 per share - authorized,
10,000,000 shares; issued, 4,608,882 and
4,536,382 shares, respectively 46,089 45,364
Additional paid-in capital 7,79O,242 7,481,636
Retained earnings 11,215,462 10,426,700
---------- -----------
19,051,793 17,953,700
Less treasury stock, 1,345,337 shares 1,247,399 1,247,399
---------- -----------
17,804,394 16,706,301
---------- -----------
$ 32,379,479 $ 28,541,920
---------- -----------
---------- -----------
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
<PAGE>
ARK RESTAURANTS CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------
Year Ended
------------------------------------------------------
September 28, September 30, October 1,
1996 1995 1994
<S> <C> <C> <C>
NET SALES $ 76,795,940 $ 73,026,907 $ 60,404,339
COST OF SALES 20,861,465 20,024,944 16,841,686
------------ ------------ -----------
Gross restaurant profit 55,934,475 53,001,963 43,562,653
MANAGEMENT FEE INCOME (Note 10) 1,204,808 925,332 59,159
------------ ------------ -----------
57,139,283 53,927,295 43,621,812
OPERATING EXPENSES:
Payroll and payroll benefits 27,740,390 26,191,191 21,092,870
Occupancy 9,843,110 9,035,078 7,554,536
Depreciation 2,664,892 2,289,211 1,694,530
Other 11,918,198 11,227,851 8,427,639
------------ ------------ -----------
52,166,590 48,743,331 38,769,575
GENERAL AND ADMINISTRATIVE EXPENSES 4,474,697 4,223,170 4,011,785
------------ ------------ -----------
56,641,287 52,966,501 42,781,360
------------ ------------ -----------
OPERATING INCOME 497,996 960,794 840,452
------------ ------------ -----------
OTHER EXPENSE (INCOME):
Interest expense (Note 7) 425,810 359,159 143,130
Interest income (86,708) (77,856) (93,347)
Other income (Note 12) (1,082,717) (1,219,066) (556,983)
------------ ------------ -----------
(743,615) (937,763) (507,200)
------------ ------------ -----------
INCOME BEFORE PROVISION FOR INCOME TAXES AND CUMU-
LATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE 1,241,611 1,898,557 1,347,652
PROVISION FOR INCOME TAXES (Note 11) 452,849 777,431 704,620
------------ ------------ -----------
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE 788,762 1,121,126 643,032
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE (Note 11) - - 507,770
------------ ------------ -----------
NET INCOME $ 788,762 $ 1,121,126 $ 1,150,802
------------ ------------ -----------
------------ ------------ -----------
INCOME PER SHARE:
Income before cumulative effect of a change in
accounting principle $ .24 $ .34 $ .20
Cumulative effect of a change in accounting principle - - .16
------------ ------------ -----------
NET INCOME $ .24 $ .34 $ .36
------------ ------------ -----------
------------ ------------ -----------
WEIGHTED AVERAGE NUMBER OF SHARES USED IN
COMPUTATIONS 3,241,394 3,251,336 3,225,680
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
<PAGE>
ARK RESTAURANTS CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 28, 1996, SEPTEMBER 30, 1995, AND OCTOBER 1, 1994
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock Additional Total
--------------- Paid-In Retained Treasury Shareholders'
Shares Amount Capital Earnings Stock Equity
<S> <C> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 2, 1993 4,430,582 $44,306 $6,956,437 $8,154,772 $(1,247,399) $13,908,116
Exercise of stock options 31,250 312 67,813 - - 68,125
Tax benefit on exercise of options - - 83,159 - - 83,159
Net income - - - 1,150,802 - 1,150,802
--------- -------- ---------- ----------- ------------ ----------
BALANCE, OCTOBER 1, 1994 4,461,832 44,618 7,107,409 9,305,574 (1,247,399) 15,210,202
Exercise of stock options 74,550 746 182,111 - - 182,857
Tax benefit on exercise of options - - 192,116 - - 192,116
Net income - - - 1,121,126 - 1,121,126
--------- -------- ---------- ----------- ------------ ----------
BALANCE SEPTEMBER 30, 1995 4,536,382 45,364 7,481,636 10,426,700 (1,247,399) 16,706,301
Exercise of stock options 72,500 725 183,650 184,375
Tax benefit on exercise of options 124,956 124,956
Net income 788,762 - 788,762
--------- -------- ---------- ----------- ----------- ----------
BALANCE, SEPTEMBER 28, 1996 4,608,882 $ 46,089 $7,790,242 $11,215,462 $(1,247,399) $17,804,394
--------- -------- ---------- ----------- ----------- ----------
--------- -------- ---------- ----------- ----------- ----------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
<PAGE>
ARK RESTAURANTS CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended
------------------------------------------------------
September 28, September 30, October 1,
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before cumulative effect of a change in
accounting principle $ 788,762 $1,121,126 $ 643,032
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of fixed assets 2,324,304 1,988,968 1,508,489
Amortization of intangibles 492,207 450,787 264,092
Provision for loss on sale of restaurants 297,000 - -
Provision for uncollectible long-term receivables 96,000 100,000 200,000
Operating lease deferred credit 10,000 151,000 220,000
Deferred income taxes (692,492) (302,100) (107,005)
Changes in assets and liabilities:
Increase in accounts receivable (184,672) (188,651) (420,737)
(Increase) decrease in inventories (79,847) (126,205) 9,450
Decrease (increase) in prepaid expenses 492,447 (564,747) 34,734
(Increase) decrease in other assets, net (106,727) 223,411 647,891
Increase in accounts payable - trade 330,167 229,830 315,830
Increase (decrease) in accrued income taxes 59,025 238,211 (47,819)
Increase (decrease) in accrued expenses and other current liabilities 181,392 397,528 (66,257)
----------- ----------- -----------
Net cash provided by operating activities 4,007,566 3,719,158 3,201,700
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to fixed assets (6,833,018) (6,610,540) (2,820,366)
Additions to intangible assets (110,849) (145,872) (39,887)
Issuance of demand notes and long-term receivables (63,O92) (224,913) (206,512)
Payments received on demand notes and long-term receivables 171,651 220,772 58,940
Restaurant sale 250,000 - -
Restaurant acquisitions (108,000) (2,335,712) -
----------- ----------- -----------
Net cash used in investing activities (6,693,308) (9,O96,265) (3,007,825)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment on long-term debt (1,857,045) (1,847,224) (2,095,342)
Issuance of long-tam debt 4,100,000 4,500,000 2,250,000
Exercise of stock options 309,331 374,973 151,284
Principal payment on capital lease obligations (230,825) (117,218) (52,144)
Proceeds from sale lease back - 824,947 478,442
----------- ----------- -----------
Net cash provided by financing activities 2,321,461 3,735,478 732,240
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (364,281) (1,641,629) 926,115
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,271,284 2,912,913 1,986,798
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 907,003 $ 1,271,284 $ 2,912,913
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL INFORMATION:
Cash payments for the following were:
Interest $ 515,810 $ 422,159 $ 143,130
----------- ----------- ------------
----------- ----------- ------------
Income taxes $ 966,434 $ 649,689 $ 776,473
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
<PAGE>
ARK RESTAURANTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 28, 1996, SEPTEMBER 30, 1995, AND OCTOBER 1, 1994
- --------------------------------------------------------------------------------
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ark Restaurants Corp. and subsidiaries (the "Company") own and operate 20
restaurants, and manage 5 restaurants, of which 15 are in New York City, 4
in Washington, D.C., three in Boston and one each in Rhinebeck, New York,
McLean, Virginia, and Islamorada, Florida. Additionally, the Company
operates catering businesses in New York City and Washington, D.C., as well
as wholesale and retail bakeries in New York City, a cafe at the Warner
Bros. store in New York City and corporate dining facilities at Universal
Studios, California and in an office building in Jersey City, New Jersey.
ACCOUNTING PERIOD - The Company's fiscal year ends on the Saturday nearest
September 30. The fiscal years ended September 28, 1996, September 30, 1995
and October 1, 1994 included 52 weeks.
SIGNIFICANT ESTIMATES - In the process of preparing its consolidated
financial statements, the Company estimates the appropriate carrying value
of certain assets and liabilities which are not readily apparent from other
sources. The primary estimates underlying the Company's financial
statements include allowances for potential bad debts on accounts and notes
receivable, the useful lives and recoverability of its assets, such as
property and intangibles, fair values of financial instruments, the
realizable value of its tax assets and other matters. Management bases its
estimates on certain assumptions, which they believe are reasonable in the
circumstances, and while actual results could differ from those estimates,
management does not believe that any change in those assumptions in the
near term would have a material effect on the Company's consolidated
financial position or the results of operation.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of the Company and its wholly owned and majority owned
subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation. Investments in affiliated companies where
the Company is able to exercise significant influence over operating and
financial policies even though the Company holds 50% or less of the voting
stock, are accounted for under the equity method.
CASH EQUIVALENTS - Cash equivalents include instruments with original
maturities of three months or less.
INVENTORIES - Inventories are stated at the lower of cost (first-in,
first-out) or market, and consist of food and beverages.
FIXED ASSETS - Leasehold improvements and furniture, fixtures and equipment
are stated at cost. Depreciation of furniture, fixtures and equipment
(including equipment under capital leases) is computed using the
straight-line method over the estimated useful lives of the respective
assets (7 years). Amortization of improvements to leased properties is
computed using the straight-line method based upon the initial term of the
applicable lease or the estimated useful life of the improvements,
whichever is less, and ranges from 5 to 35 years.
F-6
<PAGE>
<PAGE>
Certain costs incurred during the construction period of restaurants,
including rental of premises, training and payroll, are expensed as
incurred.
INTANGIBLE AND OTHER ASSETS - Costs associated with acquiring leases and
subleases, principally purchased leasehold rights, have been capitalized
and are being amortized on the straight-line method based upon the initial
terms of the applicable lease agreements, which range from 10 to 21 years.
Goodwill recorded in connection with the acquisition of shares of the
Company's common stock from a former shareholder, as discussed in Note 4,
is being amortized over a period of 40 years. Goodwill arising from
restaurant acquisitions is being amortized over a period of 15 years.
Legal and other costs incurred to organize restaurant corporations are
capitalized as organization costs and are amortized over a period of 5
years.
Covenants not to compete arising from restaurant acquisitions are amortized
over the contractual period of 5 years.
Certain legal and bank commitment fees incurred in connection with the
Company's Revolving Credit and Term Loan Facility were capitalized as
deferred financing fees and are being amortized over four years, the term
of the facility.
The Company periodically assesses the recoverability of intangible assets
on an asset by asset basis using the projected undiscounted operating
income.
OPERATING LEASE DEFERRED CREDIT - Several of the Company's operating leases
contain predetermined increases in the rentals payable during the term of
such leases. For these leases, the aggregate rental expense over the lease
term is recognized on a straight-line basis over the lease term. The excess
of the expense charged to operations in any year and amounts payable under
the leases during that year are recorded as a deferred credit. The deferred
credit subsequently reverses over the lease term (Note 8).
OCCUPANCY EXPENSES - Occupancy expenses include rent, rent taxes, real
estate taxes, insurance and utility costs.
INCOME TAXES - In February 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes. Statement 109 requires a change from the deferred method of
accounting for income taxes of APB Opinion 11 to the asset and liability
method of accounting for income taxes. Under the asset and liability method
of Statement 109, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes enactment date.
Effective October 3, 1993, the Company adopted Statement 109 and has
reported the cumulative effect of that change in the method of accounting
for income taxes in the 1994 statement of operations.
F-7
<PAGE>
<PAGE>
INCOME PER SHARE OF COMMON STOCK - Per share data is based upon the
weighted average number of shares of common stock and common stock
equivalents outstanding during each year. Common stock equivalents consist
of dilutive stock options. Fully dilutive income per share of common stock
is not shown for the effect is not material.
FUTURE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS - The Financial
Accounting Standards Board has issued Statement No. 121, "Accounting for
the Impairment of Long-Lived Assets and for the Impairment of Long-Lived
Assets to Be Disposed of ("SFAS 121"), which requires that long-lived
assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. This Statement will be adopted by the Company as of September
29, 1996. The effect of the adoption of SFAS 121 on the Company's
consolidated financial statements is not expected to be material.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 establishes accounting and disclosure
requirements using a fair value-based method of accounting for stock-based
employee compensation plans. Under the provisions of SFAS No. 123,
effective for the fiscal year beginning September 29, 1996, the Company may
either adopt the new fair value-based accounting method or continue the
intrinsic value-based method for employee stock-based compensation and
provide pro forma disclosure of net income and earnings per share as if the
accounting provisions of SFAS No. 123 had been adopted. The Company plans
to adopt only the disclosure requirements of SFAS No. 123. The Company
generally does not grant options to outsiders, accordingly, the adoption of
SFAS No. 123 is not expected to have a material effect on the Company's
consolidated net earnings or cash flows.
RECLASSIFICATIONS - Certain reclassifications have been made to the 1995
and 1994 financial statements to conform to the 1996 presentation.
F-8
<PAGE>
<PAGE>
2. LONG-TERM RECEIVABLES
Long-term receivables consist of the following:
<TABLE>
<CAPTION>
September 28, September 30,
1996 1995
<S> <C> <C>
Advances for construction, working capital and certain
bankruptcy claims, at one of the Company's managed
locations, at prime interest rate plus 2% (a) $ - $ 860,131
Advances for construction and working capital, at one of
the Company's managed locations, at 15% interest; due
in monthly installments through December 2000 270,829 311,674
Advances for construction, at one of the Company's managed
locations, at prime plus 1%; due in monthly installments
through December 1999 79,521 99,244
Note receivable, at 8% interest, due in monthly installments,
through August2001 (b) - 186,612
Note receivable, secured by personal guarantees of officers of a
managed restaurant and fixed assets at that location, at 15%
interest; due in monWy installments, through September 2000 98,548 115,287
Other 5,397 5,397
-------- ----------
454,295 1,578,345
-------- ----------
Less current portion 93,951 163,436
-------- ----------
$360,344 $1,414,909
-------- ----------
-------- ----------
</TABLE>
(a) In June 1996 the Company acquired this restaurant which had been
operated under a management agreement since December 1990. The Company
paid the former owners $108,000 in cash and canceled advances totaling
approximately $880,000. The purchase price totaling $1,026,000 was
then allocated to fixed assets and intangible assets (Note 4).
(b) In fiscal 1993 the Company was issued a note by a third party who
subleased and operated a restaurant since 1989 from the Company. In
fiscal 1996, the third party defaulted on the payments. The Company
subsequently received approximately $91,000 on settlement of the
outstanding receivable and wrote off the remaining balance of
approximately $96,000.
3. ASSETS HELD FOR SALE
At September 28, 1996 the Company was actively pursuing the sale of four
restaurants and accordingly reclassified the net fixed assets ($2,248,231),
net intangible assets ($503,884) and inventories ($61,975) as assets held
for sale. The Company also provided a $200,000 charge as its estimated loss
on disposal of these restaurants. (See Notes 4 and 14.)
F-9
<PAGE>
<PAGE>
4. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
September 28, September 30,
1996 1995
<S> <C> <C>
Goodwill (a) $3,962,877 $3,812,877
Purchased leasehold rights (b) 552,740 1,277,740
Noncompete agreements and other (a) 840,000 1,158,000
Organization costs 600,030 575,949
---------- ----------
5,955,647 6,824,566
Less accumulated amortization 2,070,552 2,488,219
---------- ----------
$3,885,095 $4,336,347
---------- ----------
---------- ----------
</TABLE>
(a) In August 1985, certain subsidiaries of the Company acquired
approximately one-third of the then outstanding shares of common stock
(964,599 shares), from a former officer and director of the Company
for a purchase price of $3,000,000. The consolidated balance sheets
reflect the allocation of $2,946,000 to goodwill.
During fiscal 1996 the Company acquired two restaurants for
approximately $108,000 in cash, the cancellation of long-term
receivables of $880,000 and the assumption of notes payable totaling
$550,000. The acquisitions were accounted for as purchase transactions
with the purchase price allocated as follows: inventories $28,000,
leasehold improvements $575,000, furniture, fixtures and equipment
$350,000 and intangible assets $679,000.
During fiscal 1995, the Company acquired two restaurants for
approximately $2,336,000 in cash plus the assumption of $900,000 in
liabilities. These acquisitions were accounted for as purchase
transactions with the purchase prices allocated as follows:
inventories, $348,000; other assets, $30,000; leasehold improvements,
$865,000; furniture, fixtures and equipment, $393,000; and intangible
assets, $1,600,000.
(b) Purchased leasehold rights arise from acquiring leases and subleases
of various restaurants.
5. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
September 28, September 30,
1996 1995
<S> <C> <C>
Deposits $ 453,038 $ 392,018
Investments in and advances to affiliates (a) 53,740 62,497
Deferred financing fees 172,942 -
--------- ---------
$ 679,720 $ 454,515
--------- ---------
--------- ---------
</TABLE>
F-10
<PAGE>
<PAGE>
(a) The Company, through a wholly owned subsidiary, became a general
partner with a 19% interest in a partnership which acquired on July 1,
1987 an existing Mexican food restaurant, El Rio Grande, in New York
City. Several related parties also participate as limited partners in
the partnership. The Company's equity in earnings of the limited
partnership was $48,000, $60,000, and $75,000 for the years ended
September 28, 1996, September 30, 1995 and October 1, 1994,
respectively.
The Company also manages El Rio Grande through another wholly owned
subsidiary on behalf of the partnership. Management fee income
relating to these services was $450,000, $519,000 and $383,000 for the
years ended September 28, 1996, September 30, 1995 and October 1,
1994, respectively (Note 10).
6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
<S> <C> <C>
Sales tax payable $ 569,731 $ 667,399
Accrued wages and payroll related costs 717,772 636,734
Other current liabilities 1,743,181 1,545,159
------------- -------------
$ 3,030,684 $ 2,849,292
------------- -------------
------------- -------------
</TABLE>
7. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
<S> <C> <C>
Revolving Credit and Term Loan Facility with interest at the prime rate, plus 1%,
payable on March 1, 1998 (a) $ 5,400,000 $ 3,000,000
Promissory note payable to a landlord of a restaurant site, payable in monthly
installments through May 1996 - 29,717
Note issued in connection with acquisition of restaurant site, at 7.25%, payable in
monthly installments through January 1, 2000 (b) 516,320 572,063
Note issued in connection with acquistion of restaurant site, at 8.5%, payable in
monthly installments through April 2001 (c) 487,546 -
Note issued in conneciton with acquisition of restaurant site, at prime plus 2.5%,
payable in monthly installments through February 1997 (d) - 412,382
------------- -------------
6,403,866 4,014,162
Less current maturities 150,689 88,832
------------- -------------
$ 6,253,177 $ 3,925,330
------------- -------------
------------- -------------
</TABLE>
F-11
<PAGE>
<PAGE>
(a) In March 1996, the Company and its main bank agreed to an extension
and increase of the existing Revolving Credit and Term Loan Facility.
The agreement includes a $5,000,000 facility for working capital
purposes at the Company's existing restaurants and a $7,000,000
facility for use in construction of and as working capital for
restaurant facilities to be operated by the Company in a new
resort/casino under construction in Las Vegas, Nevada. The facilities
each have two-year revolving terms, at the end of which they will
convert into term loans payable over 24 months. The $5,000,000
facility will convert into a two-year self-amortizing term loan, and
the $7,000,000 facility will convert into a two-year loan amortizing
$6,000,000 over the two-year period with the $1,000,000 balance due at
maturity. Outstanding revolving loans bear interest at 1% above the
bank's prime rate until converted into term loans, at which time the
interest rate is 1 1/2% above the bank's prime rate. The Company paid
a commitment fee of $150,000 at closing and a facility of 1/2% is due
on any unused portion of the revolving credit facility.
The agreement includes a four-year $2,000,000 Letter of Credit
Facility for use for the Company's existing restaurants, and a
one-year (with a six-month extension available at the Company's
option) $2,000,000 Letter of Credit Facility for the Las Vegas
Project. The Company is generally required to pay commissions of
1 1/2% per annum on outstanding letters of credit.
The Company's subsidiaries each guaranteed the obligations of the
Company under the foregoing facilities and granted security interests
in their respective assets as collateral for such guarantees. In
addition, the Company pledged stock of such subsidiaries as security
for obligations of the Company under such facilities.
The agreement includes restrictions relating to, among other things,
indebtedness for borrowed money, capital expenditures, advances to
managed businesses, mergers, sale of assets, dividends, and liens on
the property of the Company. The agreement also contains financial
covenants requiring the Company to maintain a minimum ratio of debt to
net worth, minimum shareholders' equity, and a minimum ratio of cash
flow prior to debt service. The Company is in compliance with all
covenants.
(b) In November 1994, the Company issued a $600,000 note in connection
with the acquisition of a restaurant in the Florida Keys. The Company
remits monthly payments of $7,044 inclusive of interest until January
1, 2000, at which time the outstanding balance of $358,511 is due. The
debt is secured by the leasehold improvements and tangible personal
property at the restaurant.
(c) In April 1996 the Company acquired a restaurant for $550,000, which
was financed by issuing a note payable in monthly installments of
$13,461, inclusive of interest.
(d) In March 1996 the Company sold a restaurant in Oxnard, California to
the note holder. The note holder remitted $250,000 in cash to the
Company and released the Company from its then-remaining note
obligation totaling $404,589, resulting in a loss of $97,000.
F-12
<PAGE>
<PAGE>
Required principal payments on long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
<S> <C>
1997 $ 150,689
1998 1,525,534
1999 2,497,840
2000 2,229,803
----------
$6,403,866
----------
----------
</TABLE>
During the fiscal years ended September 28, 1996, September 30, 1995 and
October 1, 1994, interest expense was $515,810, $422,159 and $143,130,
respectively, of which $90,000 and $63,000 was capitalized during the
fiscal years ended September 28, 1996 and September 30, 1995.
The carrying value of the Corporation's long-term debt approximates its
current aggregate fair value.
8. LEASES
The Company leases its restaurants, bar facilities, and administrative
headquarters through its subsidiaries under terms expiring at various dates
through 2029. Most of the leases provide for the payment of base rents plus
real estate taxes, insurance and other expenses and, in certain instances,
for the payment of a percentage of the restaurants' sales in excess of
stipulated amounts at such facility.
As of September 28, 1996, future minimum lease payments, net of sublease
rentals, under noncancellable leases are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR LEASES LEASES
<S> <C> <C>
1997 $ 6,698,957 $ 321,235
1998 7,218,288 321,235
1999 6,805,795 263,365
2000 6,456,808 154,118
2001 6,587,227 -
Thereafter 38,218,707 -
----------- -----------
Total minimum payments $71,985,782 1,059,953
-----------
-----------
Less amount representing interest 156,751
-----------
Present value of net minimum lease payments $ 903,202
-----------
-----------
</TABLE>
In connection with the leases included in the table above, the Company
obtained and delivered irrevocable letters of credit in the aggregate
amount of $3,325,130 as security deposits under such leases.
Rent expense (net of sublease rental income of $124,025 and $182,800 for
the fiscal years ended September 30, 1995 and October 1, 1994,
respectively) was $6,117,296, $5,633,662 and $4,558,202, during the fiscal
years ended September 28, 1996, September 30, 1995 and October 1, 1994,
respectively. Rent expense for the fiscal years ended September 28, 1996,
September 30, 1995 and October 1, 1994
F-13
<PAGE>
<PAGE>
includes approximately $10,000, $151,000 and $220,000 of operating lease
deferred credits, representing the difference between rent expense
recognized on a straight-line basis and actual amounts currently payable.
Contingent rentals, included in rent expense, were $547,038, $405,399 and
$253,725 for the fiscal years ended September 28, 1996, September 30, 1995
and October 1, 1994, respectively.
9. STOCK OPTIONS
On October 15, 1985, the Company adopted a Stock Option Plan (the "Plan")
pursuant to which the Company reserved for issuance an aggregate of 175,000
shares of common stock. In May 1991 and March 1994, the Company amended
such Plan to increase the number of shares issuable under the Plan to
350,000 and 447,650, respectively. In March 1996, the Company adopted a
second plan and reserved for issuance an additional 135,000 shares. Options
granted under the Plans to key employees and directors are exercisable at
prices at least equal to the fair market value of such stock on the dates
the options were granted. The options expire five years after the date of
grant and are generally exercisable as to 25% of the shares commencing on
the first anniversary of the date of grant and as to an additional 25%
commencing on each of the second, third and fourth anniversaries of the
date of grant.
Additional information follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Shares under option, beginning of year 189,125 183,800 195,050
Options:
Granted - 81,000 20,000
Exercised (72,500) (74,550) (31,250)
Canceled or expired (11,000) (1,125) -
------------ ----------- ------------
Shares under option, end of year (a) 105,625 189,125 183,800
------------ ----------- ------------
Shares available for future grant 135,000 20,075 99,950
------------ ----------- ------------
Options exercisable (a) 43,125 88,125 162,550
------------ ----------- ------------
Price range of outstanding options (b) $4.375-$8.00 $2.25-$8.00 $2.125-$6.50
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
(a) Options become exercisable at various times until expiration dates
ranging from May 1997 through October 1999.
(b) Prices reflect the fair market value on the dates of grant.
The exercise of nonqualified stock options in the fiscal years ended
September 28, 1996, September 30, 1995 and October 1, 1994 resulted in
income tax benefits of $124,956, $192,116 and $83,159, respectively, which
were credited to additional paid-in capital. The income tax benefits result
from the difference between the market price on the exercise date and the
option price.
F-14
<PAGE>
<PAGE>
10. MANAGEMENT FEE INCOME
As of September 28, 1996, the Company provides management services to five
restaurants and two corporate dining facilities owned by outside parties.
In accordance with the contractual arrangements, the Company earns fixed
fees and management fees based on restaurant sales and operating profits as
defined by the various management agreements.
The Company terminated a management agreement for a restaurant located in
Miami, Florida in fiscal 1994 and incurred a charge of approximately
$507,000 from uncollectible advances for working capital and restaurant
supplies at such location.
Restaurants managed had net sales of $12,802,305, $10,838,664 and
$10,642,895 during the management periods within the years ended September
28, 1996, September 30, 1995 and October 1, 1994, respectively, which are
not included in consolidated net sales of the Company.
11. INCOME TAXES
As discussed in Note 1, the Company adopted Statement 109 as of October 3,
1993. The cumulative effect of this change in accounting for income taxes
of $507,770 is determined as of October 3, 1993 and is reported separately
in the statement of operations for the year ended October 1, 1994.
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 nonconsolidated basis. For New York State and City income
tax purposes, the losses incurred by a subsidiary may only be used to
offset that subsidiary's income.
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------
SEPTEMBER 28, SEPTEMBER 30, OCTOBER 1,
1996 1995 1994
<S> <C> <C> <C>
Current provision:
Federal $ 519,771 $ 532,947 $ 365,464
State and local 625,570 475,062 446,161
------------- ------------- ----------
1,145,341 1,008,009 811,625
------------- ------------- ----------
Deferred provision (credit):
Federal (592,721) (314,745) (206,955)
State and local (99,771) 84,167 99,950
------------- ------------- ----------
(692,492) (230,578) (107,005)
------------- ------------- ----------
$ 452,849 $ 777,431 $ 704,620
------------- ------------- ----------
------------- ------------- ----------
</TABLE>
F-15
<PAGE>
<PAGE>
The provision for income taxes differs from the amount computed by applying
the Federal statutory rate due to the following:
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------
SEPTEMBER 28, SEPTEMBER 30, OCTOBER 1,
1996 1995 1994
<S> <C> <C> <C>
Provision for Federal income taxes (34%) $ 426,000 $ 646,000 $ 458,000
State and local income taxes net of Federal tax benefit 347,000 369,000 360,000
Amortization of goodwill 26,000 26,000 26,000
Tax credits (349,000) (299,000) (173,000)
Other 2,849 35,431 33,620
------------- ------------- ----------
$ 452,849 $ 777,431 $ 704,620
------------- ------------- ----------
------------- ------------- ----------
</TABLE>
Deferred tax assets or liabilities are established for (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes,
and (b) operating loss carryforwards. The tax effects of items comprising
the Company's net deferred tax asset are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 30,
1996 1995
<S> <C> <C>
Deferred tax assets:
Operating loss carryforwards $ 804,641 $ 639,096
Operating lease deferred credits 671,537 673,530
Carryforward tax credits 835,721 361,539
Provision for uncollectible long-term receivable 68,000 34,000
Valuation allowance (738,277) (690,204)
------------- -------------
1,641,622 1,017,961
Deferred tax liabilities:
Depreciation and amortization 77,048 145,879
------------- -------------
Net deferred tax asset $ 1,564,574 $ 872,082
------------- -------------
------------- -------------
</TABLE>
A valuation allowance for deferred taxes is required if, based on the
evidence, it is more likely than not that some of the deferred tax assets
will not be realized. The Company believes that uncertainty exists with
respect to future realization of certain operating loss carryforwards and
operating lease deferred credits. Therefore, the Company provided a
valuation allowance of $738,277 at September 28, 1996 and $690,204 at
September 30, 1995. The Company has state operating loss carryforwards of
$9,819,734 and local operating loss carryforwards of $7,101,623, which
expire in the years 2000 through 2010.
F-16
<PAGE>
<PAGE>
12. OTHER INCOME
Other income consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------
SEPTEMBER 28, SEPTEMBER 30, OCTOBER 1,
1996 1995 1994
<S> <C> <C> <C>
Purchasing service fees $ 55,551 $ 67,367 $126,780
Insurance proceeds (a) 726,415 914,475 242,666
Sales of logo T-shirts and hats 214,291 180,364 67,455
Other 86,460 56,860 120,082
------------- ------------- ----------
$ 1,082,717 $ 1,219,066 $556,983
------------- ------------- ----------
------------- ------------- ----------
</TABLE>
(a) In July 1994, the Company was required to close a restaurant in
Manhattan (Ernie's) on a temporary basis to enable structural repairs
to be made to the ceiling of the restaurant. The cost of such repairs,
other ongoing restaurant operating expenses and a guaranteed profit
were borne by a third party. The restaurant reopened in February 1995
and the agreement provides that the third party continue to guarantee
some level of operating profits through January 1998. During the
fiscal years ended September 28, 1996 and September 30, 1995, the
Company received $726,415 and $914,475, respectively, in excess of the
continuing restaurant operating expenses.
13. QUARTERLY INFORMATION (UNAUDITED)
The following table sets forth certain quarterly operating data.
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
------------------------------------------------------------
DECEMBER 30, MARCH 30, JUNE 29, SEPTEMBER 28,
1995 1996 1996 1996
<S> <C> <C> <C> <C>
1996
Net sales $18,723,119 $15,450,293 $22,600,958 $20,021,570
Gross restaurant profit 13,545,173 11,147,783 16,684,719 14,556,800
Net income (loss) 25,108 (1,028,807) 1,137,265 655,196
Net income (loss) per share $ 0.01 $ (0.32) $ 0.35 $ 0.20
</TABLE>
F-17
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
---------------------------------------------------------
SEPTEMBER
DECEMBER 31, APRIL 1, JULY 1, 30,
1995 1996 1996 1996
<S> <C> <C> <C> <C>
1995
Net sales $16,357,705 $14,759,085 $21,046,818 $ 20,863,299
Gross restaurant profit 11,837,623 10,584,425 15,359,109 15,220,807
Net income (loss) 291,213 (482,122) 635,834 676,200
Net income (loss) per share $ 0.09 $ (0.15) $ 0.20 $ 0.20
</TABLE>
14. SUBSEQUENT EVENTS (UNAUDITED)
COMMON STOCK PRIVATE PLACEMENT - In December 1996, the Company raised
$6,065,994 in a private placement of 551,454 shares of its common stock at
$11 per share. The proceeds of such offering were used to repay a portion
of the Company's outstanding bank debt and for the payment of capital
expenditures on its Las Vegas restaurant facilities at the New York-New
York Hotel & Casino in Las Vegas which is scheduled to open in January
1997.
RESTAURANT SALES - In the first quarter of fiscal 1997, the Company sold
three of its smaller restaurants located in the borough of Manhattan in New
York City. The aggregate purchase price for the restaurants was $1,362,000,
of which an aggregate of $308,000 was paid in cash and balance of
$1,054,000 is payable over various periods. Gains of approximately $150,000
were recognized on these sales.
******
F-18
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York, on the 20th day of December, 1996.
ARK RESTAURANTS CORP.
By: /s/Michael Weinstein
-------------------------------
MICHAEL WEINSTEIN, President
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been duly signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Ernest Bogen Chairman of the Board December 20, 1996
- ----------------
(Ernest Bogen)
/s/ Michael Weinstein President and Director December 20, 1996
- ---------------------
(Michael Weinstein)
/s/ Vincent Pascal Vice President, December 20, 1996
- ------------------ Secretary and Director
(Vincent Pascal)
/s/ Robert Towers Vice President, Treasurer, December 20, 1996
- ----------------- Principal Financial Officer
(Robert Towers) and Director
/s/ Andrew Kuruc Vice President, Controller, December 20, 1996
- ---------------- Principal Accounting Officer
(Andrew Kuruc) and Director
/s/ Donald D. Shack Director December 20, 1996
- -------------------
(Donald D. Shack)
/s/ Jay Galin Director December 20, 1996
- --------------
(Jay Galin)
/s/ Paul Gordon Director December 20, 1996
- -------------------
(Paul Gordon)
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 21
Subsidiaries of the Registrant
<TABLE>
<CAPTION>
Jurisdiction of
Subsidiary Incorporation
<S> <C>
Columbus Cafe Corp. New York
SSWB Restaurants, Inc. New York
MEB Emporium Corp. New York
MEB On Columbus Inc. New York
MEB Dining 18, Inc. New York
MEB On First, Inc. New York
Conis Realty Corp. New York
Conis Restaurant Corp. New York
Ernie's Hackensack, Inc. New Jersey
Four Gentlemen From Verona, Inc. New Jersey
La Femme Noire, Inc. New York
Ark 27th Street, Inc. New York
Ark Seventh Avenue South Corp. New York
Ark Rio Corp. New York
Ark Operating Corp. New York
Ark Sub-One Corp. New York
Ark 474 Corp. New York
Ark Twenty-Ninth Street Corp. New York
Ark Boston Corp. Massachusetts
Ark Union Station, Inc. District of Columbia
Ark D.C. Kiosk, Inc. District of Columbia
Ark Potomac Corporation District of Columbia
Washington Parties & Events Related Industries, Inc. District of Columbia
Aroc and Ark Corporation New York
Ark Bryant Park Corp. New York
Ark of the Seaport, Inc. New York
Ark Parties, Inc. New York
Tysons America Corp. Virginia
Ark JC Corp. Florida
Ark Oxnard Corp. California
Ark California Restaurants Corp. California
Ark JMR Corp. New York
Ark Fifth Avenue Corp. New York
Ark Islamorada Corp. Florida
KRA Holdings, Inc. New York
La Femme Noire D.C. Incorporated District of Columbia
Ark Cafeteria Corp. New Jersey
Las Vegas Steakhouse Corp. Nevada
Las Vegas America Corp. Nevada
Las Vegas Festival Food Corp. Nevada
Ark WFC Corp. New York
Ark Las Vegas Restaurant Corp. Nevada
</TABLE>
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Form S-8 Registration Statement
No. 33-48217 and Registration Statement No. 33-85724 of Ark Restaurants Corp. of
our report dated December 6, 1996, appearing in this Annual Report on Form 10-K
of Ark Restaurants Corp. for the year ended September 28, 1996.
New York, New York
December 20, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated balance sheet of Ark Restaurants Corp. and its subsidiaries
as of September 28, 1996, and the related consolidated statement of operations,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-END> SEP-28-1996
<CASH> 907,003
<SECURITIES> 0
<RECEIVABLES> 1,462,499
<ALLOWANCES> 0
<INVENTORY> 840,216
<CURRENT-ASSETS> 4,808,691
<PP&E> 30,423,183
<DEPRECIATION> 11,325,141
<TOTAL-ASSETS> 32,379,479
<CURRENT-LIABILITIES> 6,112,561
<BONDS> 7,307,608
<COMMON> 0
0
46,089
<OTHER-SE> 17,758,305
<TOTAL-LIABILITY-AND-EQUITY> 32,379,479
<SALES> 76,795,940
<TOTAL-REVENUES> 76,795,940
<CGS> 20,861,465
<TOTAL-COSTS> 20,861,465
<OTHER-EXPENSES> 56,641,287
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 425,810
<INCOME-PRETAX> 1,241,611
<INCOME-TAX> 452,849
<INCOME-CONTINUING> 788,762
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 788,762
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
