Ark Restaurants(US:ARKR)2024-08-13 20:17Financial Performance - The company's operating income for the 13 weeks ended June 29, 2024, decreased by 77.3% to $824,000, and for the 39 weeks, it decreased by 79.1% to $1,225,000, primarily due to increased labor costs and inflationary pressures [101]. - Total revenues for the 13 weeks ended June 29, 2024, were $50,396,000, a decrease of 1.3% compared to $51,051,000 for the same period last year [102]. - Same-store sales decreased by 0.7% during the 13 weeks ended June 29, 2024, with notable declines in New York (-5.2%) and Washington, D.C. (-15.8%) [105]. - The company reported a total of $49,572,000 in costs and expenses for the 13 weeks ended June 29, 2024, an increase of 4.6% from $47,414,000 in the prior year [102]. - Total costs and expenses for the 39 weeks ended June 29, 2024, were $138,914,000, an increase of $1,884,000 compared to $134,530,000 for the same period last year [110]. - Net cash provided by operating activities for the 39 weeks ended June 29, 2024, was $3,926,000, down from $6,872,000 in the same period last year [117]. Labor and Costs - Labor costs increased by 1.7% to $17,479,000 for the 13 weeks ended June 29, 2024, compared to $17,194,000 in the prior year [102]. - Payroll expenses increased to 34.7% of total revenues for the 13 weeks ended June 29, 2024, compared to 33.7% in the same period last year [111]. - General and administrative expenses decreased by 23.0% to $2,690,000 for the 13 weeks ended June 29, 2024, compared to $3,495,000 in the same period last year [112]. - Food and beverage costs as a percentage of total revenues for the 39 weeks ended June 29, 2024, were 26.8%, slightly up from 26.7% in the prior year [110]. Impairment and Fixed Costs - Impairment losses on right-of-use and long-lived assets amounted to $2,500,000, representing a 100% increase compared to the previous period [102]. - The company faced substantial fixed costs that do not decline proportionally with sales, impacting overall profitability during the seasonal downturn [100]. - The company recognized impairment charges of $2,500,000 related to Sequoia's right-of-use and long-lived assets due to lower-than-expected operating results [113]. Future Outlook and Strategic Adjustments - The company anticipates potential future cash flow impacts due to ongoing inflation and geopolitical events, which may lead to strategic adjustments such as suspending dividends or increasing borrowings [97]. - The company believes its existing cash balances and internal cash-generating capabilities are sufficient to finance capital expenditures and operating activities for at least the next twelve months [125]. Credit and Financing - The Company entered into a Second Amended and Restated Credit Agreement on March 30, 2023, establishing a new revolving credit facility of $10,000,000, maturing on June 1, 2025 [123]. - As of June 29, 2024, no advances were outstanding under the Credit Agreement, and the weighted average interest on the outstanding indebtedness was approximately 9.0% [123]. - The Credit Agreement requires the Company to meet minimum quarterly tangible net worth amounts and maintain a minimum fixed charge coverage ratio [124]. - The Credit Agreement allows the Company to obtain letters of credit up to a sublimit of $1,000,000 [123]. - The Company has a 0.30% per annum fee for any unused portion of the $10,000,000 revolving facility [123]. Operational Updates - As of June 29, 2024, the company operated 17 restaurants and bars, 16 fast food concepts, and catering operations exclusively in the United States [98]. - Revenues from Gallagher's Steakhouse increased significantly post-renovation, with $3,056,000 for the current period compared to $1,068,000 during its closure [104]. - Same-store sales in Las Vegas increased by 1.9% to $42,175,000, while New York saw a 3.4% increase to $28,561,000; however, Washington, D.C. experienced a 12.6% decline to $7,079,000 [108]. - The company has committed to spend a minimum of $4,000,000 to refresh its premises at the New York-New York Hotel and Casino by December 31, 2024 [119]. Compliance and Controls - There have been no significant changes to the Company's critical accounting estimates during the second fiscal quarter of 2024 [127]. - The Company is not subject to pending legal proceedings that would materially impact results of operations [131]. - The Company has evaluated the effectiveness of its disclosure controls and procedures, concluding they were effective as of June 29, 2024 [128]. - There have been no changes in internal control over financial reporting that materially affected the Company's internal control during the third quarter of fiscal 2024 [129].