ARK RESTAURANTS CORP

Previous wording

Our operating results have been and continue to be impacted by geopolitical and macroeconomic events, causing supply chain challenges and significantly increased commodity and wage inflation and other increased costs. The ongoing impact of these events could lead to further shifts in consumer behavior, wage inflation, staffing challenges, product and services cost inflation, disruptions in the supply chain and delays in opening or acquiring new restaurants. If these factors significantly impact our cash flow in the future, we may again implement mitigation actions such as suspending dividends, increasing borrowings or modifying our operating strategies. Some of these measures may have an adverse impact on our business, including possible impairments of assets.

Current wording

Our operating results have been and continue to be impacted by geopolitical and macroeconomic events, causing increased commodity prices, wage inflation and other increased costs. The ongoing impact of these events could lead to further shifts in consumer behavior, wage inflation, staffing challenges, product and services cost inflation, disruptions in the supply chain and delays in opening or acquiring new restaurants. If these factors significantly impact our cash flow in the future, we may again implement mitigation actions such as suspending dividends, increasing borrowings or modifying our operating strategies. Some of these measures may have an adverse impact on our business, including possible impairments of assets.

Previous wording

Our fiscal year ends on the Saturday nearest September 30. We report fiscal years under a 52/53-week format. This reporting method is used by many companies in the hospitality industry and is meant to improve year-to-year comparisons of operating results. Under this method certain years will contain 53 weeks. The periods ended December 30, 2023 and December 31, 2022 each included 13 weeks.

Current wording

Our fiscal year ends on the Saturday nearest September 30. We report fiscal years under a 52/53-week format. This reporting method is used by many companies in the hospitality industry and is meant to improve year-to-year comparisons of operating results. Under this method certain years will contain 53 weeks. The periods ended March 30, 2024 and April 1, 2023 each included 13 and 26 weeks.

Previous wording

The Company’s operating income for the 13 weeks ended December 30, 2023 decreased 27.2% as compared to the same period of the prior year primarily as a result of continued increases in labor costs in connection with record low unemployment, inflation related to non-commodity related expenses partially offset by some easing in commodity prices.

Current wording

The Company’s operating income (loss) for the 13 and 26 weeks ended March 30, 2024 decreased as compared to the same period of the prior year primarily as a result of continued increases in labor costs in connection with record low unemployment, inflation related to non-commodity related expenses, partially offset by the negative impact on the prior period of the temporary closure of Gallagher's Steakhouse for renovation on February 5, 2023 (which reopened on April 28, 2023).

Previous wording

The following table summarizes the significant components of the Company’s operating results for the 13-week periods ended December 30, 2023 and December 31, 2022:

Current wording

The following table summarizes the significant components of the Company’s operating results for the 13- and 26-week periods ended March 30, 2024 and April 1, 2023:

Previous wording

During the 13 weeks ended December 30, 2023, revenues increased 0.1% as compared to revenues for the 13 weeks ended December 31, 2022.

Current wording

During the 13- and 26-week periods ended March 30, 2024, revenues increased marginally as compared to revenues for the 13- and 26-week periods ended April 1, 2023. The net increases resulted primarily from decreases in same-store sales discussed below, offset by an increase in sales at Gallagher's Steakhouseat the New York-New York Hotel and Casino in Las Vegas, NV which was substantially closed for renovation in the prior period from February 5, 2023 through April 27, 2023. Revenues for the period from closure through April 1, 2023 were $714,000 as compared to $2,114,000 for the comparable period in the current fiscal quarter.

Previous wording

On a Company-wide basis, same-store sales decreased 0.3% during the 13 weeks ended December 30, 2023 as compared to the same period of last year as follows:

Current wording

On a Company-wide basis, same-store sales increased 0.4% during the 13 weeks ended March 30, 2024 as compared to the same period of last year as follows:

Previous wording

Same-store sales in Las Vegas decreased 3.0% primarily as a result of lower headcounts in the current period. Same-store sales in New York increased 12.5% driven primarily by strong revenues from our event business. Same-store sales in Washington, D.C. decreased 12.6% as a result of lower headcounts. Same-store sales in Atlantic City decreased 6.3% as a result of lower customer traffic at the property where we are located. Same-store sales in Alabama decreased 1.6% primarily as a result of slightly lower customer headcounts. Same-store sales in Florida decreased 4.6% primarily as a result of lower headcounts as compared to the comparable prior period which benefited from outsized volumes as a result of the population increase in Southeast Florida.

Current wording

Same-store sales in Las Vegas increased 1.6% primarily as a result of the negative impact on the prior period of the temporary closure of Gallagher's Steakhouse for renovation on February 5, 2023 (which reopened on April 28, 2023), partially offset by lower headcounts in the current period. Same-store sales in New York increased 10.2% driven primarily by strong revenues from our event business. Same-store sales in Washington, D.C. decreased 9.9% as a result of lower headcounts. Same-store sales in Atlantic City decreased 1.9% as a result of lower customer traffic at the property where we are located. Same-store sales in Alabama decreased 0.4% primarily as a result of slightly lower customer headcounts. Same-store sales in Florida decreased 5.1% primarily as a result of lower headcounts as compared to the comparable prior period which benefited from outsized volumes as a result of the population increase in Southeast Florida.

Previous wording

Costs and expenses for the 13 weeks ended December 30, 2023 and December 31, 2022 were as follows (in thousands):

Current wording

Costs and expenses for the 13 and 26 weeks ended March 30, 2024 and April 1, 2023 were as follows (in thousands):

Previous wording

Food and beverage costs as a percentage of total revenues for the 13 weeks ended December 30, 2023 as compared with the same period of last year decreased as a result of a very strong event business in New York City, which has higher margins, combined with some easing in commodity prices.

Current wording

Food and beverage costs as a percentage of total revenues for the 13 weeks ended March 30, 2024 as compared with the same period of last year increased as a result of increases in commodity prices, which had been easing for several quarters. Food and beverage costs as a percentage of total revenues for the 26 weeks ended March 30, 2024 as compared with the same period of last year decreased marginally as a result of a strong event business in New York City, which has higher margins, partially offset by higher commodity prices in the current quarter.

Previous wording

Payroll expenses as a percentage of total revenues for the 13 weeks ended December 30, 2023 increased as compared with the same period of last year primarily as a result of record low unemployment combined with merit increases and increasing minimum wages in the states where we operate.

Current wording

Payroll expenses as a percentage of total revenues for the 13 and 26 weeks ended March 30, 2024 increased as compared with the same period of last year primarily as a result of record low unemployment combined with merit increases and increasing minimum wages in the states where we operate.

Previous wording

Occupancy expenses as a percentage of total revenues for the 13 weeks ended December 30, 2023 increased as compared with the same periods of last year primarily as a result of increases in base rents and increases in property and liability insurance premiums.

Current wording

Occupancy expenses as a percentage of total revenues for the 13 and 26 weeks ended March 30, 2024 increased as compared with the same periods of last year primarily as a result of increases in base rents and increases in property and liability insurance premiums.

Previous wording

Other operating costs and expenses as a percentage of total revenues for the 13 weeks ended December 30, 2023 as compared to the same period of last year increased primarily as a result of inflation.

Current wording

Other operating costs and expenses as a percentage of total revenues for the 13 and 26 weeks ended March 30, 2024 as compared to the same period of last year increased primarily as a result of inflation.

Previous wording

General and administrative expenses (which relate solely to the corporate office in New York City) for the 13 weeks ended December 30, 2023 increased as compared to the same periods of last year as a result of annual merit increases.

Current wording

General and administrative expenses (which relate solely to the corporate office in New York City) for the 13 and 26 weeks ended March 30, 2024 increased as compared to the same periods of last year as a result of annual merit increases.

Previous wording

Depreciation and amortization expense for the 13 weeks ended December 30, 2023 increased slightly as compared to the same period of last year primarily as a result of the Gallagher's Steakhouse renovation costs being placed into service on April 28, 2023.

Current wording

Depreciation and amortization expense for the 13 and 26 weeks ended March 30, 2024 decreased slightly as compared to the same period of last year primarily as a result of certain assets becoming fully depreciated.

Previous wording

As of December 30, 2023, we had a cash and cash equivalents balance of $12,122,000. The Company had a working capital deficit of $(5,079,000) at December 30, 2023 as compared with a working capital deficit of $(5,932,000) at September 30, 2023. This decrease in the deficit is primarily the result of lower accrued expenses from the collection of catering deposits partially offset by an increase in distributions to non-controlling interests.

Current wording

As of March 30, 2024, we had a cash and cash equivalents balance of $10,412,000. The Company had a working capital deficit of $(7,028,000) at March 30, 2024 as compared with a working capital deficit of $(5,932,000) at September 30, 2023. This increase in the deficit is primarily the result of higher accrued expenses from the collection of catering deposits.

Previous wording

Net cash provided by operating activities for the 13 weeks ended December 30, 2023 was $558,000 as compared to cash used in operating activities of $(903,000) in the same period of last year. This increase was primarily due to a favorable change in working capital (primarily accrued expenses), partially offset by a decrease in operating income.

Current wording

Net cash provided by operating activities for the 26 weeks ended March 30, 2024 and April 1, 2023 was $766,000 and $2,111,000, respectively, and resulted primarily due to changes in working capital (primarily accrued expenses), partially offset by a decrease in operating income.

Previous wording

Net cash used in investing activities for the 13 weeks ended December 30, 2023 and December 31, 2022 was $(254,000) and $(751,000), respectively, and resulted primarily from purchases of fixed assets at existing restaurants.

Current wording

Net cash used in investing activities for the 26 weeks ended March 30, 2024 was $596,000 as compared to cash provided by investing activities of $2,998,000 in the same period as last year. This resulted primarily from proceeds from the maturity of certificates of deposit in the prior period partially offset by lower purchases of fixed assets at existing restaurants in the current period.

Previous wording

Net cash used in financing activities for the 13 weeks ended December 30, 2023 and December 31, 2022 was $(1,597,000) and $(2,358,000), respectively, and resulted primarily from principal payments on notes payable, the payment of dividends and the payment of distributions to non-controlling interests and in the prior year principal payments on PPP Loans.

Current wording

Net cash used in financing activities for the 26 weeks ended March 30, 2024 and April 1, 2023 was $(3,173,000) and $(10,658,000), respectively, and resulted primarily from principal payments on notes payable, the payment of dividends and the payment of distributions to non-controlling interests and in the prior year principal payments on PPP Loans.

Previous wording

On July 21, 2022, the Company extended its lease for the Village Eateries at the New York-New York Hotel and Casino in Las Vegas, NV through December 31, 2034. As part of this extension, the Broadway Burger Bar and Grilland Gonzalez y Gonzalez, were carved out of the Village Eateries footprint and the extended date for those two locations is December 31, 2033. In connection with the extension, the Company has agreed to spend a minimum of $3,500,000 to materially refresh all three of these premises by June 30, 2024, as extended. To date approximately $100,000 has been spent on this refresh.

Current wording

On July 21, 2022, the Company extended its lease for the Village Eateries at the New York-New York Hotel and Casino in Las Vegas, NV through December 31, 2034. As part of this extension, the Broadway Burger Bar and Grilland Gonzalez y Gonzalez, were carved out of the Village Eateries footprint and the extended date for those two locations is December 31, 2033. In connection with the extension, the Company has agreed to spend a minimum of $3,500,000 to materially refresh all three of these premises by June 30, 2024, as extended. To date approximately $150,000 has been spent on this refresh.

Previous wording

On March 30, 2023, the Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”), with its lender, Bank Hapoalim B.M. (“BHBM”). This facility, which matures on June 1, 2025, replaced our revolving credit facility which was entered into in June 1, 2018. Under the terms of the Credit Agreement: (i) a promissory note under the Prior Credit Agreement in the amount of $6,666,000 was repaid, (ii) BHBM established a new revolving credit facility in the amount of $10,000,000, with a commitment termination date of May 31, 2025, (iii) the Company may use the revolving commitments of BHBM to obtain letters of credit up to a sublimit thereunder of $1,000,000, and (iv) the LIBOR rate option for all borrowings was replaced with the secured overnight financing rate for U.S. Government Securities (“SOFR”). Advances under the Credit Agreement bear interest, at the Company's election at the time of the advance, at either BHBM's prime rate of interest plus a 0.45% spread or SOFR plus a 3.65% spread. In addition, there is a 0.30% per annum fee for any unused portion of the $10,000,000 revolving facility. As of December 30, 2023, no advances were outstanding under the Credit Agreement. As of December 30, 2023, the weighted average interest on the outstanding BHBM notes payable was approximately 9.0%.

Current wording

On March 30, 2023, the Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”), with its lender, Bank Hapoalim B.M. (“BHBM”). This facility, which matures on June 1, 2025, replaced our revolving credit facility which was entered into in June 1, 2018 (the "Prior Credit Agreement"). Under the terms of the Credit Agreement: (i) a promissory note under the Prior Credit Agreement in the amount of $6,666,000 was repaid, (ii) BHBM established a new revolving credit facility in the amount of $10,000,000 with a commitment termination date of May 31, 2025, (iii) the Company may use the revolving commitments of BHBM to obtain letters of credit up to a sublimit thereunder of $1,000,000, and (iv) the LIBOR rate option for all borrowings was replaced with the secured overnight financing rate for U.S. Government Securities (“SOFR”). Advances under the Credit Agreement bear interest, at the Company's election at the time of the advance, at either BHBM's prime rate of interest plus a 0.45% spread or SOFR plus a 3.65% spread. In addition, there is a 0.30% per annum fee for any unused portion of the $10,000,000 revolving facility. As of March 30, 2024, no advances were outstanding under the Credit Agreement. As of March 30, 2024, the weighted average interest on the outstanding BHBM indebtedness was approximately 9.0%.

Previous wording

Borrowings and all other obligations under Credit Agreement, which include the promissory notes as discussed in Note 8 of the consolidated condensed financial statements, are secured by all tangible and intangible personal property (including accounts receivable, inventory, equipment, general intangibles, documents, chattel paper, instruments, letter-of-credit rights, investment property, intellectual property and deposit accounts) and fixtures of the Company. The Credit Facility also requires, among other things, that the Company meet minimum quarterly tangible net worth amounts, maintain a minimum fixed charge coverage ratio and meet minimum annual net income amounts. The Credit Agreement contains customary representations, warranties and affirmative covenants as well as customary negative covenants, subject to negotiated exceptions on liens, relating to other indebtedness, capital expenditures, liens, affiliate transactions, disposal of assets and certain changes in ownership.

Current wording

Borrowings and all other obligations under Credit Agreement, which include the promissory notes as discussed in Note 8 of the consolidated condensed financial statements, are secured by all tangible and intangible personal property (including accounts receivable, inventory, equipment, general intangibles, documents, chattel paper, instruments, letter-of-credit rights, investment property, intellectual property and deposit accounts) and fixtures of the Company. The Credit Agreement also requires, among other things, that the Company meet minimum quarterly tangible net worth amounts, maintain a minimum fixed charge coverage ratio and meet minimum annual net income amounts. The Credit Agreement contains customary representations, warranties and affirmative covenants as well as customary negative covenants, subject to negotiated exceptions on liens, relating to other indebtedness, capital expenditures, liens, affiliate transactions, disposal of assets and certain changes in ownership.

Previous wording

The Company’s critical accounting estimates are described in the Company’s MD&A included in Form 10-K for the year ended September 30, 2023. There have been no significant changes to such critical accounting estimates during the first fiscal quarter 2024.

Current wording

The Company’s critical accounting estimates are described in the Company’s MD&A included in Form 10-K for the year ended September 30, 2023. There have been no significant changes to such critical accounting estimates during the second fiscal quarter 2024.