Ark Restaurants(ARKR) - 2020 Q4 - Annual Report

Part I Business Ark Restaurants Corp. operates 37 food and beverage concepts, significantly impacted by COVID-19, resulting in a $3,234,000 working capital deficiency and strategic adjustments - The COVID-19 pandemic led to mandatory closures, significantly impacting revenues, resulting in a working capital deficiency of $3,234,000, and creating operational uncertainty[17][19][20] - To preserve liquidity during the pandemic, the company furloughed employees, reduced salaries, canceled dividends, delayed capital expenditures, and negotiated rent concessions[21][23][25] - The company secured approximately $15.0 million in Paycheck Protection Program (PPP) loans and utilized CARES Act provisions for tax savings and deferred social security tax payments[27][28] - As of fiscal year-end 2020, the company operated 20 restaurants and bars and 17 fast food concepts across major US cities and states[30][31] - The company holds a $5.1 million investment in New Meadowlands Racetrack LLC, granting a 7.4% ownership and exclusive food and beverage concession rights upon casino gaming approval[56][57] - On October 2, 2020, the company agreed to acquire Blue Moon Fish Company in Florida for $2.75 million, with the transaction closing on December 1, 2020[50] Risk Factors This section is marked as 'Not applicable' in the report - This section is marked as 'Not applicable' in the report[77] Properties The company primarily leases its restaurant facilities and executive offices, with four owned properties, and lease terms extending through 2045 - All restaurant facilities and executive offices are occupied under leases, except for four owned properties (The Rustic Inn, Shuckers, and two Original Oyster Houses)[78] Lease Expiration Schedule | Fiscal Year Lease Terms Expire | Number of Facilities | | :--- | :--- | | 2021-2025 | 10 | | 2026-2030 | 5 | | 2031-2035 | 4 | | 2041-2045 | 1 | Legal Proceedings The company is involved in various lawsuits, including a class action by former tipped workers that was settled on December 14, 2020 - On December 14, 2020, the company settled a class action lawsuit by former tipped service workers regarding New York State Labor Laws for an amount previously accrued[83] Part II Market For The Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq, with dividends suspended due to COVID-19, and its stock performance has significantly underperformed peers over five years - Due to COVID-19's financial impact, the dividend declared on March 2, 2020, was canceled, and future dividends are not expected[88][89] Stock Performance Comparison (Cumulative Total Return) | Period Ending | Ark Restaurants Corp. | NASDAQ Composite | SIC Code 5812 Peer Group | | :--- | :--- | :--- | :--- | | 10/03/15 | $100.00 | $100.00 | $100.00 | | 09/30/16 | $102.14 | $116.42 | $104.00 | | 09/30/17 | $115.57 | $144.00 | $121.32 | | 09/30/18 | $114.89 | $180.24 | $137.34 | | 09/28/19 | $105.36 | $181.19 | $181.14 | | 10/03/20 | $61.37 | $255.40 | $188.69 | Equity Compensation Plan Information (as of Oct 3, 2020) | Plan Category | Securities to be issued upon exercise | Weighted-average exercise price | Securities remaining for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by shareholders | 626,500 | $20.41 | 174,500 | Management's Discussion and Analysis of Financial Condition and Results of Operations The company's fiscal 2020 financial performance was severely impacted by COVID-19, resulting in a $(7,796) thousand operating loss and 34.4% revenue decline, leading to liquidity management and ASC 842 adoption Fiscal Year 2020 vs. 2019 Results of Operations (in thousands) | Metric | FY 2020 | FY 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $106,490 | $162,354 | $(55,864) | -34.4% | | Total Costs and Expenses | $114,286 | $159,108 | $(44,822) | -28.2% | | Operating Income (Loss) | $(7,796) | $3,246 | $(11,042) | -340.2% | Same-Store Sales by Region (in thousands) | Region | FY 2020 | FY 2019 | Variance ($) | Variance (%) | | :--- | :--- | :--- | :--- | :--- | | Las Vegas | $30,445 | $48,787 | $(18,342) | -37.6% | | New York | $18,049 | $39,324 | $(21,275) | -54.1% | | Washington, D.C. | $6,774 | $13,028 | $(6,254) | -48.0% | | Atlantic City, NJ | $3,392 | $6,954 | $(3,562) | -51.2% | | Total Same-Store Sales | $95,778 | $152,340 | $(56,562) | -37.1% | - The company reported a working capital deficiency of $(3,234,000) at October 3, 2020, an improvement from $(4,373,000) in the prior year, primarily due to $15.0 million in PPP loan proceeds[144] - The CARES Act enabled the company to record an income tax receivable of $2,673,000 by carrying back fiscal 2020 taxable losses to recover prior taxes paid at higher rates[136] - The company adopted ASC 842 on September 29, 2019, recognizing Right-of-Use (ROU) assets of $62.3 million and lease liabilities of $63.9 million[185] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of October 3, 2020, despite operational changes due to COVID-19 - Management concluded that disclosure controls and procedures were effective as of October 3, 2020, ensuring proper information recording and reporting[194] - Based on the COSO framework, management determined the company's internal control over financial reporting was effective as of October 3, 2020[198] - Changes to internal controls, including electronic sign-offs due to COVID-19 remote work, were implemented but are not believed to have materially affected internal control over financial reporting[200] Part III Directors, Executive Compensation, and Corporate Governance Information for Items 10-14, covering directors, executive compensation, and corporate governance, is incorporated by reference from the company's forthcoming 2020 proxy statement - Detailed information on directors, executive officers, compensation, security ownership, and accountant fees is incorporated by reference from the company's forthcoming Proxy Statement[205][207][208][209] - The company has adopted a code of ethics for its principal financial and executive officers, available on its website[206] Part IV Exhibits and Financial Statement Schedules This section includes the company's consolidated financial statements for fiscal years 2020 and 2019, the independent auditor's report, and a comprehensive list of filed exhibits - This part includes the consolidated financial statements and the list of exhibits required by Item 601 of Regulation S-K[212] Financial Statements and Notes Audited financial statements for fiscal 2020 and 2019 show a $(4,688) thousand net loss due to COVID-19, with balance sheet changes from ASC 842 and PPP loans, and subsequent event details - The independent auditor, CohnReznick LLP, issued an unqualified opinion on the company's consolidated financial statements[214] Consolidated Balance Sheet Highlights (in thousands) | Account | Oct 3, 2020 | Sep 28, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $16,886 | $7,177 | | Total current assets | $26,901 | $13,709 | | Operating Lease ROU Assets | $54,191 | $0 | | Total Assets | $153,316 | $94,652 | | Total current liabilities | $30,135 | $18,082 | | Operating Lease Liabilities | $56,077 | $0 | | Notes Payable (Long-term) | $36,068 | $23,786 | | Total Liabilities | $116,163 | $51,945 | | Total Equity | $37,153 | $42,707 | Consolidated Statement of Operations Highlights (in thousands) | Account | FY 2020 | FY 2019 | | :--- | :--- | :--- | | Total Revenues | $106,490 | $162,354 | | Operating Income (Loss) | $(7,796) | $3,246 | | Net Income (Loss) Attributable to ARKR | $(4,688) | $2,676 | | Diluted EPS | $(1.34) | $0.76 | - Subsequent to fiscal year-end, the company faced mandatory closures of two Atlantic City restaurants and indoor dining in New York City, expected to have a material adverse impact[363][367] - The company received $14,995,000 in PPP loans during fiscal 2020, with forgiveness uncertain and classified as long-term debt[330][331]