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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 1997
[ ] 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.
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(Exact name of registrant as specified in its charter)
New York 13-3156768
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
85 Fifth Avenue, New York, New York 10003
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code (212) 206-8800
----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding shares at August 8, 1997
- ------------------------------ ------------------------------------
(Common stock, $.01 par value) 3,832,499
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ARK RESTAURANTS CORP. AND SUBSIDIARIES
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INDEX
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<TABLE>
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PART I - FINANCIAL INFORMATION: PAGE
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<S> <C>
Item 1. Consolidated Financial Statements:
Consolidated Condensed Balance Sheets - June 28, 1997
(Unaudited) and September 28, 1996 1
Consolidated Condensed Statements of Operations and Retained Earnings -
13-week periods ended June 28, 1997 (Unaudited) and June 29, 1996
(Unaudited) and 39-week periods ended June 28, 1997 (Unaudited) and June 28,
1996 (Unaudited) 2
Consolidated Condensed Statements of Cash Flows - 39-week periods
ended June 28, 1997 (Unaudited) and June 29, 1996 (Unaudited) 3
Notes to Consolidated Condensed Financial
Statements (Unaudited) 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5-7
PART II - OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 8
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARK RESTAURANTS CORP. AND SUBSIDIARIES
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CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
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<TABLE>
<CAPTION>
June 28, September 28,
1997 1996
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ASSETS (Unaudited)
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<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 480 $ 907
Accounts receivable 2,702 1,462
Current portion of long-term receivables 337 94
Inventories 1,302 840
Prepaid expenses 504 465
Refundable and prepaid income taxes 274 -
Other current assets 828 409
Deferred income taxes 681 631
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Total current assets 7,108 4,808
LONG-TERM RECEIVABLES 1,037 360
ASSETS HELD FOR SALE 1,381 2,614
FIXED ASSETS - At Cost:
Leasehold improvements 22,873 13,020
Furniture, fixtures and equipment 18,165 11,114
Leasehold improvements in progress 35 6,289
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41,073 30,423
Less accumulated depreciation and
amortization 13,404 11,325
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27,669 19,098
INTANGIBLE ASSETS - Less accumulated
amortization of $2,313 and $2,070 3,619 3,885
OTHER ASSETS 547 680
DEFERRED INCOME TAXES 1,133 934
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TOTAL ASSETS $42,494 $32,379
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LIABILITIES AND SHAREHOLDERS' EQUITY
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CURRENT LIABILITIES:
Accounts payable - trade $ 3,629 $ 2,365
Accrued expenses and other current
liabilities 2,945 3,031
Current maturities of long-term debt 1,486 151
Current maturities of capital lease obligations 240 241
Accrued income taxes - 324
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Total current liabilities 8,300 6,112
LONG-TERM DEBT - net of current maturities 7,963 6,253
OBLIGATIONS UNDER CAPITAL LEASES - net of current
maturities 477 662
OPERATING LEASE DEFERRED CREDIT 1,547 1,547
SHAREHOLDERS' EQUITY:
Common stock, par value $.01 per share -
authorized, 10,000,000 shares;
issued, 5,177,836 and 4,608,882 shares 52 46
Additional paid-in capital 13,899 7,790
Retained earnings 11,503 11,216
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25,454 19,052
Less treasury stock, 1,345,337 shares 1,247 1,247
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Total shareholders' equity 24,207 17,805
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $42,494 $32,379
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</TABLE>
See notes to consolidated condensed
financial statements
1
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ARK RESTAURANTS CORP. AND SUBSIDIARIES
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CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
(In Thousands, Except per share amounts)
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<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
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June 28, June 29, June 28, June 29,
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
NET SALES $31,470 $22,601 $74,524 $56,774
COST OF SALES 8,547 5,916 20,757 15,396
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GROSS RESTAURANT PROFIT 22,923 16,685 53,767 41,378
MANAGEMENT FEE INCOME 250 316 901 946
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23,173 17,001 54,668 42,324
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OPERATING EXPENSES
Payroll and payroll benefits 10,476 7,254 28,078 20,559
Occupancy 3,577 2,561 9,374 7,352
Depreciation and amortization 947 669 2,393 2,007
Other 3,737 3,201 10,292 9,232
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18,737 13,685 50,137 39,150
GENERAL AND ADMINISTRATIVE
EXPENSES 1,205 1,138 4,214 3,368
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19,942 14,823 54,351 42,518
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OPERATING INCOME (LOSS) 3,231 2,178 317 (194)
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OTHER EXPENSE (INCOME):
Interest expense, net 262 121 500 331
Other income (277) (219) (661) (793)
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(15) ( 98) (161) (462)
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INCOME BEFORE PROVISION FOR
INCOME TAXES 3,246 2,276 478 268
PROVISION FOR INCOME TAXES 1,298 1,138 191 134
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NET INCOME 1,948 1,138 287 134
RETAINED EARNINGS, Beginning
of period 9,555 9,423 11,216 10,427
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RETAINED EARNINGS, End of period $11,503 $10,561 $11,503 $10,561
======= ======= ======= =======
NET INCOME PER SHARE $.51 $.35 $.08 $.04
==== ==== ==== ====
WEIGHTED AVERAGE NUMBER OF SHARES
USED IN COMPUTATIONS 3,832 3,262 3,677 3,234
======= ======= ======= =======
</TABLE>
See notes to consolidated condensed
financial statements
2
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ARK RESTAURANTS CORP. AND SUBSIDIARIES
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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in Thousands)
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<TABLE>
<CAPTION>
39 Weeks Ended
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June 28, June 29,
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 287 $ 134
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization of fixed assets 2,264 1,761
Amortization of intangibles 316 354
Write-off and provision for uncollectible
long-term receivables 81
Loss (Gain) on sale of restaurants (229) 97
Deferred income taxes (249) (200)
Changes in assets and liabilities:
Decrease (Increase) in accounts receivable (1,240) (391)
Decrease (Increase) in inventories (462) (37)
Decrease (Increase) in prepaid expenses (39) 333
Decrease (Increase) in refundable and prepaid income taxes (274) (135)
Decrease (Increase) in other assets (359) 139
Increase (Decrease) in accounts payable - trade 1,264 569
Increase (Decrease) in accrued expenses and other
current liabilities (140) (402)
Increase (Decrease) in accrued income taxes (324) (265)
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Net cash provided by operating activities 815 2,038
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to fixed assets (10,650) (2,158)
Additions to intangible assets (12) (15)
Issuance of long-term receivables - (63)
Payments received on long-term receivables 138 143
Restaurant sales 308 250
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Net cash used in investing activities (10,216) (1,843)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of long-term debt 10,001 1,500
Principal payment on long-term debt (6,956) (1,816)
Principal payment on capital lease obligations (186) (171)
Proceeds from common stock private placement, net 6,023 -
Exercise of stock options 92 184
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Net cash provided by financing activities 8,974 (303)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (427) (108)
CASH AND CASH EQUIVALENTS, beginning of period 907 1,271
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CASH AND CASH EQUIVALENTS, end of period $ 480 $ 1,163
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during year for:
Interest $ 735 $ 400
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Income taxes $ 1,041 741
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</TABLE>
See notes to consolidated condensed financial statements.
3
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ARK RESTAURANTS CORP. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
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1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The consolidated condensed financial statements have been prepared by Ark
Restaurants Corp. (the "Company"), without audit. In the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position at June 28, 1997 and results of operations
and changes in cash flows for the periods end June 28, 1997 and June 29, 1996
have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed financial
statements be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's annual report on Form 10-K for the year
ended September 28, 1996. The results of operations for the periods ended June
28, 1997 is not necessarily indicative of the operating results for the full
year.
2. 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
selling price paid for the restaurants was $1,336,000, of which an aggregate of
$308,000 was paid in cash and the balance of $1,058,000 is payable in various
periods through December 2006. Gains of approximately of $188,000 were
recognized on these sales.
3. LONG-TERM DEBT
In January 1997, the Company borrowed from its main bank, $2,851,000 to
refinance the purchase of various restaurant equipment at its food and beverage
facilities in a hotel & casino in Las Vegas, Nevada. The note bears interest at
8.75% per annum and is payable in 60 equal monthly installments of $58,833
inclusive of interest, until maturity in January 2002. The Company granted the
bank a security interest in such restaurant equipment. In connection with such
financing, the Company granted the bank the right to purchase 35,000 shares of
the Company's common stock at the exercise price of $11.625 per share through
December 2001.
4. COMMON STOCK PRIVATE PLACEMENT
In December 1996, the Company raised net proceeds of $6,066,000 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
borrowings and for the payment of capital expenditures on its Las Vegas food and
beverage facilities at the New York New York Hotel & Casino in Las Vegas, Nevada
which opened in January 1997.
5. 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 period; common stock
equivalents consist of dilutive stock options. For the periods ended June 28,
1997 and June 29, 1996 no effect has been given to outstanding options since the
effect was not material.
4
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements.
NET SALES
Net sales at restaurants owned by the Company increased 39.2% in the
13-week period ended June 28, 1997 from the comparable period ended June 29,
1996 and increased 31.2% in the 39-week period ended June 28, 1997 from the
comparable period last year. The increase in net sales for the 13-week and
39-week periods was primarily due to sales from the food and beverage operations
in the New York New York Hotel & Casino resort in Las Vegas which opened in
January 1997. At such facilities the Company operates a 450 seat, twenty four
hour a day restaurant (America); a 160 seat steak house (Gallagher's); a 120
seat Mexican restaurant (Gonzalez y Gonzalez); the resort's room service,
banquet facilities and an employee dining facility. The Company also operates a
complex of nine smaller eateries (Village Eateries) in the resort which simulate
the experience of walking through New York's Little Italy and Greenwich Village.
The increase in sales for the 13-week and 39-week periods ended June 28,
1997 were offset to a minor extent by the sale of one restaurant in fiscal 1996
(the Whale's Tail) and three restaurants in fiscal 1997 (Museum Cafe, Rodeo Bar
& Grill and Mackinac Bar & Grill). Same store sales in the 13-week period ended
June 28, 1997 decreased by 2.4% and same store sales in the 39-week period were
basically unchanged from the prior year's comparable periods.
COSTS AND EXPENSES
The Company's cost of sales consists of food and beverage costs at
restaurants owned by the Company. For the 13-week period ended June 28, 1997
cost of sales as a percentage of net sales was 27.2% as compared to 26.2% last
year and cost of sales for the 39-week period was 27.9% as compared to 27.1%
last year. The increase in cost of sales as a percentage of food and beverage
sales is due to higher cost of sales associated with the Company's Las Vegas
food and beverage operations as compared to the Company's other restaurants. The
Company believes that the higher cost of sales in the Las Vegas operations is in
part due to the inefficiencies typically encountered with new facilities and
that such cost of sales will improve in the upcoming fiscal quarters in
comparison to the 13-week period ended June 28, 1997.
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 59.5% for the 13-week period ended June 28, 1997
as compared to 60.5% last year and for the 39-week period were 67.3% as compared
to 69.0% last year. The decrease in operating expenses as a percentage of net
sales in the 13-week period ended June 28, 1997 was principally due to benefits
achieved from the sale of three restaurants in fiscal 1997 which had operated at
a loss in the comparable period last year. This decrease in operating expenses
for the 13-week period as a percentage of sales was somewhat offset by the 2.4%
decrease in same store sales and by higher payroll expenses at the Company's Las
Vegas food and beverage operations as compared to the Company's other
restaurants.
5
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General and administrative expenses, as a percentage of net sales, were
3.8% for the 13-week period ended June 28, 1997 as compared to 5.0% in the
comparable period last year and was 5.7% for the 39-week period as compared to
5.9% last year. If net sales at managed restaurants and bars were included in
consolidated net sales, general and administrative expenses as a percentage of
net sales would been 3.4% for the 13-week period ended June 28, 1997 as compared
to 4.3% last year and would have been 5.0% for the 39-week period as compared to
5.1% last year.
The Company had net income of $1,948,000 for the 13-week period ended June
28, 1997 as compared to net income of $1,138,000 last year. The increase in net
income for 13-week period was due in large part to the results of the Company's
Las Vegas food and beverage operations. Net income for the 39-week period ended
June 28, 1997 was $287,000 as compared to $134,000 last year. The results for
the 39-week period ended June 28, 1997 were impacted by approximately $2,000,000
in pre-opening and early operating losses at the the Company's Las Vegas food
and beverage operations. The Las Vegas operations have been profitable since
February 1997.
During the 13-week period ended June 28, 1997 the Company managed six
restaurants and two corporate dining facilities owned by third parties. Net
sales of the managed locations were $3,885,000 during the 13-week period ended
June 28, 1997 as compared to $3,973,000 last year and net sales were $10,018,000
during the 39-week period as compared to $8,916,000 last year. Net sales of
these operations are not included in consolidated net sales.
INCOME TAXES
The provision for income taxes reflects Federal income taxes calculated on
a consolidated basis and state and local income taxes calculated by each
subsidiary on a non consolidated basis. Most of the restaurants owned or managed
by the Company are owned or managed by a separate subsidiary. For state and
local income tax purposes, the losses incurred by a subsidiary may only be used
to offset that subsidiary's income, with the exception of the restaurants which
operate in the District of Columbia. Accordingly, the Company's overall
effective income tax rate has varied depending on the level of the losses
incurred at individual subsidiaries.
As a result of the enactment of the Revenue Reconciliation Act of 1993, the
Company is entitled, commencing January 1, 1994, to a tax credit based on the
amount of tip income of restaurant service personnel. The Company estimates that
this credit will be in excess of $400,000 for the current year.
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 Company's Revolving Credit and Term Loan facility with its main bank
includes a $7,000,000 facility for use in construction of and as working capital
for the Company's Las Vegas food and beverage facilities and a $5,000,000
facility for working capital purposes at the Company's other restaurants. 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 $7,000,000 facility will
6
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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 and the $5,000,000 facility will
convert into a two year self-amortizing term loan. At June 28, 1997 the Company
had borrowings of $5,900,000 outstanding on the Las Vegas facility and no
borrowings outstanding on the working capital facility.
In January 1997, pursuant to a new equipment financing facility, the
Company borrowed from its main bank $2,851,000 at an interest rate of 8.75% to
refinance the purchase of various restaurant equipment at the Las Vegas
restaurant facilities. The note, which is payable in 60 equal monthly
installments through January 2002, is secured by such restaurant equipment. At
June 28, 1997 the Company had an outstanding balance of $2,658,000 on this
facility.
The net cash used in investing activities for the 39-week period ended June
28, 1997 ($10,216,000) was principally due to capital expenditures for the Las
Vegas food and beverage facilities.
The net cash provided by financing activities for the 39-week period ended
June 28, 1997 includes net proceeds of $6,023,000 from the private placement in
December 1996 of 551,454 shares of its common stock at $11 per share. The funds
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 food and beverage facilities.
At June 28, 1997, the Company had a working capital deficit of $1,192,000
as compared to a working capital deficit of $1,304,000 at September 28, 1996.
The restaurant business does not require the maintenance of significant
inventories or receivables, thus the Company is able to operate with minimal and
even negative working capital.
The Company also has a four year $1,300,000 Letter of Credit Facility with
its main bank for use in lieu of lease security deposits. At June 28, 1997 the
Company had delivered $1,051,000 in irrevocable letters of credit on this
facility.
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
Although the Company is not currently committed to any other projects, the
Company is exploring additional opportunities for expansion of its business. The
Company expects to fund its existing projects through cash from operations and
existing credit facilities. Additional expansion may require additional external
financing.
7
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K - none
8
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: August 8, 1997
ARK RESTAURANTS CORP.
By /S/ Michael Weinstein
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Michael Weinstein, President
By /S/ Andrew B. Kuruc
----------------
Andrew B. Kuruc
Vice President, Controller and
Principal Accounting Officer
9
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from the balance sheet and income statment for the
39 weeks of Ark Restaurants Corp. and is qualified in its
entirety by reference to such financial statements
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> Sep-27-1997
<PERIOD-END> Jun-28-1997
<CASH> 480
<SECURITIES> 0
<RECEIVABLES> 2,702
<ALLOWANCES> 0
<INVENTORY> 1,302
<CURRENT-ASSETS> 7,108
<PP&E> 41,073
<DEPRECIATION> 13,404
<TOTAL-ASSETS> 42,494
<CURRENT-LIABILITIES> 8,300
<BONDS> 10,166
<COMMON> 52
0
0
<OTHER-SE> 24,155
<TOTAL-LIABILITY-AND-EQUITY> 42,494
<SALES> 74,524
<TOTAL-REVENUES> 74,524
<CGS> 20,757
<TOTAL-COSTS> 20,757
<OTHER-EXPENSES> 54,351
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 500
<INCOME-PRETAX> 478
<INCOME-TAX> 191
<INCOME-CONTINUING> 287
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 287
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
