<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 1, 2000
[___] 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)
<TABLE>
<S> <C>
New York 13-3156768
- ---------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
85 Fifth Avenue, New York, New York 10003
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code (212) 206-8800
-------------------
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [ X ] No [___]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<S> <C>
Class Outstanding shares at February 14, 2000
- ------------------------------ ---------------------------------------
(Common stock, $.01 par value) 3,181,699
</TABLE>
<PAGE>
ARK RESTAURANTS CORP. AND SUBSIDIARIES
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INDEX
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PART I - FINANCIAL INFORMATION: PAGE
Item 1. Consolidated Financial Statements:
Consolidated Condensed Balance Sheets - January 1, 2000
(Unaudited) and October 2, 1999 1
Consolidated Condensed Statements of Operations and
Retained Earnings - 13-Week Periods Ended January 1, 2000
(Unaudited) and January 2, 1999 (Unaudited). 2
Consolidated Condensed Statements of Cash Flows - 13-Week Periods
Ended January 1, 2000 (Unaudited) and January 2, 1999 (Unaudited) 3
Notes to Consolidated Condensed Financial
Statements (Unaudited) 4-5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-10
PART II - OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 11
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARK RESTAURANTS CORP. AND SUBSIDIARIES
- --------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
- --------------------------------------------------------------------------------------
January 1, October 2,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 276 $ 334
Accounts receivable 4,079 3,074
Inventories 2,187 1,916
Current portion of long-term receivables 371 446
Prepaid expenses and other current assets 420 336
Refundable and prepaid income taxes 90 --
Deferred income taxes 680 710
------- -------
Total current assets 8,103 6,816
LONG-TERM RECEIVABLES 1,195 1,184
ASSETS HELD FOR SALE 944 988
FIXED ASSETS - At Cost:
Leasehold improvements 27,207 23,500
Furniture, fixtures and equipment 21,011 19,352
Leasehold improvements in progress 7,027 4,408
------- -------
55,245 47,260
Less accumulated depreciation and
amortization 18,949 18,163
------- -------
36,296 29,097
INTANGIBLE ASSETS - Less accumulated
amortization of $2,899 and $3,259 4,865 5,295
OTHER ASSETS 5,529 3,152
DEFERRED INCOME TAXES 988 847
------- -------
TOTAL ASSETS $57,920 $47,379
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable - trade $ 4,743 $ 3,816
Accrued expenses and other current
liabilities 3,933 4,737
Current maturities of long-term debt 613 972
Current maturities of capital lease obligations 99 149
Accrued income taxes -- 186
------- -------
Total current liabilities 9,388 9,860
LONG-TERM DEBT - net of current maturities 18,627 6,683
OBLIGATIONS UNDER CAPITAL LEASES - net of current
maturities -- --
OPERATING LEASE DEFERRED CREDIT 1,322 1,322
SHAREHOLDERS' EQUITY:
Common stock, par value $.01 per share -
authorized, 10,000 shares;
issued, 5,188 shares 52 52
Additional paid-in capital 22,151 22,060
Retained earnings 14,728 14,400
------- -------
36,931 36,512
Less treasury stock, 2,068 and 1,927 shares 8,348 6,998
------- -------
Total shareholders' equity 28,583 29,514
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $57,920 $47,379
======= =======
</TABLE>
See notes to consolidated condensed financial statements
1
<PAGE>
ARK RESTAURANTS CORP. AND SUBSIDIARIES
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<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS & RETAINED EARNINGS (Unaudited)
(In Thousands, Except per share amounts)
- --------------------------------------------------------------------------------------
13 Weeks Ended
-------------------------------
January 1, January 2,
2000 1999
------------ ------------
<S> <C> <C>
NET SALES $26,957 $26,933
COST OF SALES 7,060 7,110
------- -------
GROSS RESTAURANT PROFIT 19,897 19,823
MANAGEMENT FEE INCOME 34 64
EQUITY IN EARNINGS OF UNCONSOLIDATED
SUBSIDIARIES (160) --
------- -------
19,771 19,887
------- -------
OPERATING EXPENSES
Payroll and payroll benefits 9,985 9,761
Occupancy 3,535 3,296
Depreciation and amortization 1,007 992
Other 3,203 2,636
------- -------
17,730 16,685
GENERAL AND ADMINISTRATIVE EXPENSES 1,633 1,535
------- -------
19,363 18,220
------- -------
OPERATING INCOME 408 1,667
------- -------
OTHER EXPENSE (INCOME):
Interest expense, net 93 64
Other income (126) (107)
------- -------
(33) (43)
------- -------
INCOME BEFORE INCOME TAXES 441 1,710
PROVISION FOR INCOME TAXES 160 684
------- -------
NET INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 281 1,026
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 190 --
------- -------
NET INCOME 91 1,026
RETAINED EARNINGS, Beginning of period 22,060 17,565
------- -------
RETAINED EARNINGS, End of period $22,151 $18,591
======= =======
PER SHARE INFORMATION - BASIC & DILUTED:
INCOME BEFORE ACCOUNTING CHANGE $.09 $.28
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (.06) --
NET INCOME $.03 $.28
WEIGHTED AVERAGE NUMBER OF SHARES - BASIC 3,201 3,646
======= =======
WEIGHTED AVERAGE NUMBER OF SHARES - DILUTED 3,207 3,660
======= =======
</TABLE>
See notes to consolidated condensed financial statements
2
<PAGE>
ARK RESTAURANTS CORP. AND SUBSIDIARIES
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<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in Thousands)
- --------------------------------------------------------------------------------------------------
13 Weeks Ended
--------------------------------
January 1, January 2,
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before cumulative effect of accounting change $ 281 $ 1,026
Cumulative effect of accounting change (190) --
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of fixed assets 830 829
Amortization of intangibles 164 163
Gain on sale of restaurants -- (646)
Deferred income taxes 111 50
Changes in assets and liabilities:
Decrease (Increase) in accounts receivable (1,005) (807)
Decrease (Increase) in inventories (271) 8
Decrease (Increase) in prepaid expenses & other
current assets (84) 74
Decrease (Increase) in refundable & prepaid taxes (90) --
Decrease (Increase) in other assets (23) (211)
Increase (Decrease) in accounts payable - trade 927 256
Increase (Decrease) in accrued expenses and other
current liabilities (804) (116)
Increase (Decrease) in accrued income taxes (186) 325
-------- -------
Net cash provided by (used in) operating activities (340) 951
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to fixed assets, net (7,985) (285)
Additions to intangible assets -- (11)
Investment in joint venture (2,358) --
Payments received on long-term receivables 110 80
Restaurant sales -- 975
-------- -------
Net cash provided by (used in) investing activities (10,233) 759
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 12,050 800
Principal payment on long-term debt (465) (1,801)
Principal payment on capital lease obligations (48) (73)
Purchase of treasury stock (1,350) (548)
Exercise of stock options 328 --
-------- -------
Net cash provided by (used in) financing activities 10,515 (1,622)
-------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (58) 88
CASH AND CASH EQUIVALENTS, beginning of period 334 1,023
-------- -------
CASH AND CASH EQUIVALENTS, end of period $ 276 $ 1,111
======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during year for:
Interest $ 280 $ 105
======== =======
Income taxes $ 436 $ 749
======== =======
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE>
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 January 1, 2000 and results of
operations and changes in cash flows for the periods ended January 1, 2000 and
January 2, 1999 have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed financial
statements be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's annual report on Form 10-K for the year
ended October 2, 1999. The results of operations for the period ended January 1,
2000 is not necessarily indicative of the operating results for the full year.
2. Accounting Change
The Company adopted in the quarter ended January 1, 2000, Statement of
Position 98-5, Reporting on the Costs of Start-Up Activities, which requires
costs of start-up activities and organization costs to be expensed as incurred.
The Company had previously capitalized organization costs and then amortized
such costs over five years. The Company had net deferred organization expenses
of $300,000 in intangible assets as of October 2, 1999 and such amount ($190,000
after taxes) is reported as a cumulative effect of a change in accounting
principle.
3. INCOME PER SHARE OF COMMON STOCK
The Company adopted in the first quarter of fiscal 1998, The Financial
Accounting Standards Board Statement No. 128 "Earnings per Share" which
established new standards for computing and presenting earnings per share. The
Company now discloses "Basic Earnings per Share", which is based upon the
weighted average number of shares of common stock outstanding during each period
and "Diluted Earnings per Share" which requires the Company to
4
<PAGE>
include common stock equivalents consisting of dilutive stock options.
A reconciliation of the numerators and denominators of the basic and diluted
per share computations follow:
<TABLE>
<CAPTION>
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ----------
<S> <C> <C> <C>
13-weeks ended January 1, 2000:
BASIC EPS $ 91,000 3,201,000 $.03
Stock Options &
Warrants -- 6,000 --
---------- --------- ----
Diluted EPS $ 91,000 3,207,000 $.03
---------- --------- ----
13-weeks ended January 2, 1999:
BASIC EPS $1,026,000 3,646,000 $.28
Stock Options &
Warrants -- 14,000 --
---------- --------- ----
DILUTED EPS $1,026,000 3,660,000 $.28
---------- --------- ----
</TABLE>
Options to purchase 454,000 shares of common stock at prices ranging from $9.50
to $12 per share and warrants to purchase 35,000 shares of common stock at
$11.625 were not included in the computation of diluted earnings per share at
January 1, 2000 because the exercise prices were greater than the average market
price of the common shares.
Options to purchase 232,500 shares of common stock at prices ranging from
$11.375 to $12 per share and warrants to purchase 35,000 shares of common stock
at $11.625 were not included in the computation of diluted earnings per share at
January 2, 1999 because the exercise prices were greater than the average market
price of the common shares.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements.
NET SALES
Net sales at restaurants and bars owned by the Company were basically
unchanged in the 13-week period ended January 1, 2000 from the comparable period
ended January 2, 1999. Net sales for the quarter increased by $1,116,000 from
sales at restaurants which the Company did not operate in the 13-week period
last year (Thunder Grill at Union Station in Washington, D.C. and Rialto Deli in
the food court at the Venetian Casino Resort opened in the fiscal year ended
October 2, 1999 and three additional food court outlets opened in the 13-week
period ended January 1, 2000) and decreased by $1,248,000 from sales at
restaurants that the Company no longer operates (B. Smith's DC and Perretti
Italian Cafe were sold in the 13-week period ended January 2, 1999 and Louisiana
Community Bar & Grill closed in the fourth quarter of fiscal 1999). Same store
sales in the 13-week period ended January 2, 1999 increased by 0.6% principally
due to increased customer counts. The components of this change consisted of a
0.9% increase in the Company's Las Vegas operations along with a 0.5% increase
in the Company's other operations.
COSTS AND EXPENSES
The Company's cost of sales consists only of food and beverage costs at
restaurants and bars owned by the Company. For the 13-week period ended January
2, 1999 cost of sales as a percentage of net sales decreased to 26.2% from 26.4%
for the comparable period last year.
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, increased to 65.8% for the 13-week period ended January
1, 2000 from 62.0% last year. A significant portion of the increase for the
13-week period ended January 1, 2000 is due the fact that last year's 13-week
period ended January 2, 1999 included gains on sale totaling $611,000, or 2.3%
of net sales, from the sale of two restaurants (B. Smith's DC and Perretti
Italian Cafe). There were no sales in the current fiscal quarter.
The Company incurred pre-opening expenses and early operating losses at
newly opened restaurants of approximately $475,000 in the period ended January
1, 2000 as compared to comparable
6
<PAGE>
expenses of approximately $100,000 last year. 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.
General and administrative expenses, as a percentage of net sales, were
6.1% for the 13-week period ended January 1, 2000 as compared to 5.7% 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
have been 5.6% for the 13-week period ended January 1, 2000 as compared to 5.3%
last year.
The Company had net income of $91,000 for the 13-week period ended January
1, 2000 as compared to net income of $1,026,000 last year. The results for the
13-week period ended January 1, 2000 include $300,000 of after tax pre-opening
expenses and early operating losses at newly opened restaurants and $190,000 of
after tax charges resulting from the adoption of Statement of Position 98-5
which required the company to write-off the unamortized balance of organization
costs. The results for the 13-week period ended January 2, 1999 include after
tax gains of $388,000 from the sale of two restaurants (B. Smith's DC and
Perretti Italian Cafe).
During the 13-week period ended January 1, 2000 the Company managed five
restaurants owned by third parties. Net sales of the managed locations were
$2,032,000 during the 13-week period ended January 1, 2000 as compared to
$2,157,000 last year. This decrease was primarily the result of the termination
of a management agreement at a cafe. 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.
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
7
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New York City (Nevada has no state income tax and other states in which the
Company operate have income tax rates substantially lower in comparison to New
York) and the utilization of state and local net operating loss carry forwards.
In order to more effectively utilize tax loss carry forwards at restaurants that
were unprofitable, the Company has merged certain profitable subsidiaries with
certain loss subsidiaries.
As a result of the enactment of the Revenue Reconciliation Act of 1993,
the Company is entitled, commencing January 1, 1994, to a tax credit based on
the amount of tip income of restaurant service personnel. The Company estimates
that this credit will be in excess of $500,000 for the current year.
The Internal Revenue Service is currently examining the Company's Federal
Income Tax returns for the fiscal years ended September 28, 1991 through October
1, 1994, and has proposed certain adjustments, all of which are being contested
by the Company. The adjustments primarily relate to (i) pre-opening, legal and
accounting expenses incurred in connection with new or acquired restaurants that
the Internal Revenue Service asserts should have been capitalized and amortized
rather than currently expensed and (ii) travel and meal expenses for which the
Internal Revenue Service asserts the Company did not comply with certain record
keeping requirements of the Internal Revenue Code. The Company has reached an
agreement in principle with the Internal Revenue Service to resolve the proposed
adjustments. The Company does not believe that the final adjustments
contemplated by the agreement in principle will have a material effect on the
Company's financial condition.
LIQUIDITY AND SOURCES OF CAPITAL
The Company's primary source of capital is cash provided by operations and
funds available from the revolving credit agreement with its main bank, Bank
Leumi USA. The Company from time to time also utilizes equipment financing in
connection with the construction of a restaurant and seller financing in
connection with the acquisition of a restaurant. The Company utilizes capital
primarily to fund the cost of developing and opening new restaurants and
acquiring existing restaurants.
The Company's Revolving Credit facility with its main bank includes a
$28,000,000 facility for use in construction and acquisition of new restaurants
and for working capital at the Company's existing restaurants. The facility
allows the Company to borrow up to $28,000,000 until December 2001 at which time
outstanding loans can be converted into a term loan not to exceed $22,000,000
payable over 36 monthly installments. The loans bear interest at a rate of prime
plus 1/2%. At January 1, 2000 the Company had borrowings of $17,900,000
outstanding on the facility.
8
<PAGE>
The Company also has a five-year $2,000,000 letter of credit facility
for use in lieu of lease security deposits. At January 1, 2000 the Company had
delivered $489,000 in irrevocable letters of credit on this facility.
At January 1, 2000, the Company had a working capital deficit of
$1,285,000 as compared to a working capital deficit of $3,044,000 at October 2,
1999. The restaurant business does not require the maintenance of significant
inventories or receivables, thus the Company is able to operate with minimal and
even negative working capital.
The amount of indebtedness that may be incurred by the Company is limited
by the revolving credit agreement with its main bank. Certain provisions of the
agreement may impair the Company's ability to borrow funds.
RESTAURANT EXPANSION
The Company recently opened two restaurants (Lutece and Tsunami Asian Grill)
and three food court facilities in the Venetian Casino Resort in Las Vegas,
Nevada. One additional restaurant is scheduled to open later in the fiscal year.
The Company has also recently opened two restaurants (Volcano Grill and Z-Dim)
at a large theatre development in Southfield, Michigan under a joint venture
agreement with Sony Theatres' Loeks Star Partners and Millennium Partners and is
also constructing two additional restaurants, which are scheduled to open in the
third quarter of fiscal 2000. The Company anticipates that its share of the
required capital contributions in fiscal 2000 to meet the construction costs,
initial inventories and pre-opening expenses will be approximately $5,000,000.
Initial sales volumes at the two new restaurants are considerably below the
Company's expectations and if the trend continues, it could have a significant
impact on the Company's overall results for the current fiscal year.
The Company has also signed leases to open one large restaurant along with a
number of food court outlets at the new Aladdin Resort and Casino in Las Vegas,
Nevada. This casino is currently under construction and is expected to open in
the later part of fiscal 2000. The Company expects to spend up to $12,000,000 to
open and operate these facilities.
Although the Company is not currently committed to any other projects, the
Company is exploring additional opportunities for expansion of its business. The
Company expects to fund its existing projects through cash from operations and
from the anticipated revision of the existing credit facilities. Additional
expansion may require additional external financing.
9
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YEAR 2000
To date there have been no adverse effects to the Company's financial
statements as a result of the year 2000 issues.
10
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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
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: February 14, 2000
ARK RESTAURANTS CORP.
By /S/ Michael Weinstein
------------------------------------
Michael Weinstein, President
By /S/ Andrew B. Kuruc
------------------------------------
Andrew B. Kuruc
Vice President, Controller and
Principal Accounting Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet and income statment for the 13 weeks of Ark Restaurants Corp. and is
qualified in its entirety by reference to such financial statements
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> JAN-1-2000
<CASH> 276
<SECURITIES> 0
<RECEIVABLES> 4,079
<ALLOWANCES> 0
<INVENTORY> 2,187
<CURRENT-ASSETS> 8,103
<PP&E> 55,245
<DEPRECIATION> 18,949
<TOTAL-ASSETS> 43,046
<CURRENT-LIABILITIES> 8,536
<BONDS> 19,339
<COMMON> 52
0
0
<OTHER-SE> 28,531
<TOTAL-LIABILITY-AND-EQUITY> 57,920
<SALES> 26,957
<TOTAL-REVENUES> 26,957
<CGS> 7,060
<TOTAL-COSTS> 7,060
<OTHER-EXPENSES> 19,363
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 93
<INCOME-PRETAX> 441
<INCOME-TAX> 160
<INCOME-CONTINUING> 281
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 91
<EPS-BASIC> .03
<EPS-DILUTED> .03
</TABLE>
