Ark
Restaurants
Corp.
1999 ANNUAL REPORT
THE COMPANY
Ark Restaurants Corp. (the "Company") is a holding company which, through subsidiaries, owns and operates
22 restaurants and manages five restaurants owned by others. Fourteen of the restaurants owned or managed by the
Company are located in New York City, four are located in Washington, D.C., four are located in Las Vegas, Nevada
(one of which is within the Forum Shops at Caesar’s Shopping Center and three of which are within the New York-New
York Hotel & Casino), three are located in Boston, Massachusetts, and one is located in each of McLean, Virginia and
Islamorada, Florida. At the New York-New York Hotel & Casino, the Company also operates the room service, banquet
facilities and employee dining room and a complex of nine smaller eateries. The Company also owns and operates four
food court facilities at the Venetian Casino Resort. The Company’s other operations include catering businesses in New
York City and Washington, D.C., as well as wholesale and retail bakeries in New York City.
The Company will provide without charge a copy of the Company’s Annual Report on Form 10-K for the fiscal
year ended October 2, 1999, including financial statements and schedules thereto, to each of the Company’s
shareholders of record on February 7, 2000 and each beneficial holder on that date, upon receipt of a written request
therefor mailed to the Company’s offices, 85 Fifth Avenue, New York, New York 10003, attention: Treasurer.
Dear Shareholder:
Thanks to our excellent employees we have completed another good year. A summary of our financial results follow:
Net Income
Earnings per Share
Shareholders' Equity
Shareholders' Equity per Share
Return on Equity
Sales at Owned Restaurants (including Las Vegas)
Sales at Owned Restaurants (excluding Las Vegas)
Sales at Las Vegas
Increase (Decrease) of Same Store Sales
Cash Position
Long-Term Debt
Capital Lease Obligations
Working Capital Deficit
1999
$4,494,731
1.29
29,513,972
8.49
15.5%
110,800,913
71,362,915
39,437,998
-
333,621
7,655,406
148,657
3,044,204
1998
$4,612,141
1.20
29,062,140
7.54
17.8%
1997
$1,737,655
.46
25,888,880
6.92
9.8%
117,398,453
79,657,707
37,740,746
3.1%
104,326,386
76,048,425
28,277,961*
2.6%
1,023,046
5,014,634
378,438
719,343
722,283
6,126,797
651,945
2,373,859
General and Administrative Expenses
Restaurant Cash Flow (pre-tax, pre-depreciation)
6,069,903
17,203,092
6,052,435
17,659,589
5,445,990
11,648,992
Cost of Sales as a % of sales (all restaurants)
Cost of Sales (Excluding Las Vegas)
Cost of Sales at Las Vegas
Operating Expenses as a % of sales (all restaurants)
Operating Expenses (Excluding Las Vegas)
Operating Expenses at Las Vegas
Restaurant Payrolls as a % of sales (all restaurants)
Restaurant Payrolls (Excluding Las Vegas)
Restaurant Payrolls at Las Vegas
* 9 months
26.4%
25.6%
27.9%
62.7%
62.6%
62.9%
35.4%
34.7%
36.8%
26.6%
26.0%
27.9%
62.7%
63.1%
62.0%
35.1%
34.2%
36.9%
27.3%
26.3%
29.8%
65.9%
64.3%
70.4%
36.9%
35.0%
42.1%
Net income of $4,494,731 was slightly below that of the prior year, while per share earnings rose to $1.29 from $1.20.
We had a smaller number of shares outstanding due to our common stock buyback program; thus the increase in per
share earnings.
Shareholders’ equity increased by only $451,832 principally due to the common stock buyback program which totaled
$4,228,162. Equity per share rose to $8.49.
Comparable sales at restaurants open longer than one year were basically unchanged. Total sales decreased due to the
sale of some of our smaller restaurants as we continue to transition to an operator of high volume multi-concept food
facilities. We sold two restaurants in fiscal 1999 and three in fiscal 1998.
Our cash position decreased while our long term debt and our working capital deficit increased as we invested in new
restaurant projects.
Below I have charted restaurant cash flow and corporate overhead for all operations. The idea is to increase store cash
flow at an accelerated rate to any increase in corporate overhead. We only opened one restaurant in fiscal 1999 —
Thunder Grill which did not produce cash flow. This along with flat comparable same store sales left cash flow
basically similar to the prior year.
.
Restaurant Cash Flow
(Income before income taxes, corporate overhead & depreciation)
19
17
15
13
11
9
7
5
3
s
n
o
i
l
l
i
M
96
97
98
99
Fiscal Year Ended
Restaurant Cash Flow
Corporate Overhead
The current year will be defined by our new projects. We have opened two restaurants in the Venetian - Lutece and
Tsunami Asian Grill - along with three fast food outlets. These units are meeting our objectives. In early January 2000
we opened two restaurants - Volcano Grill and Z-Dim - at the Star Theatre Complex in Southfield, Michigan. Initial
sales volumes are considerably below our expectations. Obviously, if the early trend continues, it could have a
significant impact on our overall results for the current fiscal year.
As always I have attached a list of our managers and executive chefs. They all deserve special recognition. I would
also like to again thank Vinny Pascal, Bob Towers, Paul Gordon, Drew Kuruc, Mitch Levy, and John Oldweiler for
working so hard and effectively.
We have a strong catering and corporate party group now headed up by Walter Rauscher, a recent addition to our family.
Please call them at (212) 206-8815.
You can also visit us at www.arkrestaurants.com.
February 10, 2000
Sincerely,
Michael Weinstein
ARK RESTAURANTS CORP.
CORPORATE OFFICE
Michael Weinstein, President
Andrew Kuruc, Vice President-Chief Financial Officer
Mitchell Levy, Vice President
Vincent Pascal, Vice President-Operations
Walter Rauscher, Vice President - Corporate Sales & Catering
Robert Towers, Vice President-Chief Operating Officer
Paul Gordon, Vice President-Director of Las Vegas Operations
Nancy Alvarez, Assistant Controller
Beth Bardin, Director of Design
Kirsten Borstad, Director of Marketing
Marilyn Guy, Director of Human Resources
Colleen Hennigan, Director of Operations - Washington Division
John Oldweiler, Director of Purchasing
Donna Palamaro, Director of Operations - Michigan Division
Jennifer Sutton, Operations and Financial Analysis
Joe Vazquez, Facilities Management
JOINT VENTURE ASSOCIATES
Eberhard Müller, Lutèce
André Soltner, Lutèce
EXECUTIVE CHEFS
Charles Brucculeri
Mike Kiernan
Chun Liao
Damien McEvoy
RESTAURANT GENERAL MANAGERS
Jennifer Baquerizo, The Grill
Liz Caro, The Grill Room
Anna Cheeseboro, Columbus Bakery
Christine Allee-Escandon, America, NY
Tom Ferretti, Ernie's
Brian Fountain, Gallagher’s, Las Vegas
Charles Gerbino, Las Vegas Employee Dining Facility
Gus Guzman, Gonzalez Y Gonzalez, Las Vegas
Bridgeen Hale, Metropolitan Cafe
John Hausdorf, Las Vegas Room Service
Colleen Hennigan, America, DC, Sequoia, DC and Thundergrill, DC
Halbert Hernandez, Canyon Road
Shephard Lee, Columbus Bakery
Debra Lomurno, Sequoia, NY
John Maloughney, Lor-e-Lei
Tony Mehrvar, Village Streets, Las Vegas
James Mohn, Marketplace Cafe, Marketplace Grill and Brewskeller Pub
Paul O’hearn, Stage Deli, Las Vegas
Danny Ovalles, Gonzalez Y Gonzalez, NY
John Page, Las Vegas Catering
Donna Palamaro, Volcano Grill, MI and Z-Dim, MI
Ben Reid, America, Virginia
Bobbie Rihel, America, Las Vegas
Donna Simms, Bryant Park Grill
David Tecun, El Rio Grande
Ridgely Trufant, Red
Marty Weinstein, Arlo
RESTAURANT CHEFS
John Brady, Banquet, Las Vegas
Oscar Campos, Thunder Grill, DC
Henry Chung, The Grill
Armando Cortes, The Grill Room
Arvy Dumbrys, America, Las Vegas
Michael Foo, America, DC
William Foo, America, NY
Rosalio Fuentes, Metropolitan Cafe
Carlos Garcia, Sequoia, NY, Volcano Grill, MI and Z-Dim, MI
Raoul Juarez, El Rio Grande
Teow Chien Lin, America, VA
Chun Liao, Sequoia, Washington, D.C.
Kok Mun Ma, Arlo
John Miller, Las Vegas Employee Dining Facility
James Mohn, Marketplace Cafe, Marketplace Grill and Brewskeller Pub
Virgilio Ortega, Columbus Bakery
Michael Parker, Gallagher's, Las Vegas
Christa Partlow, Lor-e-Lei
Ruperto Ramirez, Canyon Road Grill
Sergio Salazar, Gonzalez Y Gonzalez, Las Vegas
Raul Santos, Red
Mariano Veliz, Gonzalez Y Gonzalez, NY
Gadi Weinreich, Bryant Park Grill
Craig Woisin, Ernie’s
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain financial data for the fiscal years ended 1995 through 1999. This information
should be read in conjunction with the Company's Consolidated Financial Statements and the notes thereto appearing
at page F-1.
October 2,
1999
October 3,
1998
September 27,
1997
September 28,
1996
September 30,
1995
Year Ended
OPERATING DATA:
Net Sales
$110,800,913
$117,398,453
$104,326,386
$76,795,940
$73,026,907
Gross restaurant profit
81,499,610
86,132,751
75,874,499
55,934,475
53,001,963
Operating Income
Other income, net
Income before provision
for income taxes and
extraordinary item
Income before extraordinary
item
6,833,874
7,589,465
2,785,713
236,465
91,417
96,550
497,996
743,615
960,794
937,763
7,070,339
7,680,882
2,882,263
1,241,611
1,898,557
4,494,731
4,612,141
1,737,655
788,762
1,121,126
NET INCOME
4,494,731
4,612,141
1,737,655
788,762
1,121,126
NET INCOME PER SHARE:
Basic
Diluted
Weighted average number
of shares
Basic
Diluted
BALANCE SHEET DATA
(end of period):
$1.30
$1.29
$1.21
$1.20
$.0.47
$0.46
$0.24
$0.24
$0.34
$0.34
3,460,865
3,826,255
3,475,890
3,852,019
3,714,116
3,742,811
3,238,419
3,272,857
3,142,400
3,252,669
Total assets
47,379,103
44,045,179
42,079,098
33,020,479
28,541,920
Working capital (deficit)
(3,044,204)
(719,343)
(2,373,859)
(1,303,920)
40,996
Long-term debt
7,655,406
5,014,634
6,126,797
6,403,866
4,014,162
Shareholders’ equity
29,513,971
29,062,140
25,888,880
17,804,394
16,706,301
Shareholders’ equity per share
Facilities in operation at end
of year, including managed
8.49
40
7.54
42
6.92
46
5.44
32
5.14
32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Accounting Period
The Company's fiscal year ends on the Saturday nearest September 30. The fiscal years ended October 2, 1999
and September 27, 1997 included 52 weeks while the fiscal year ended October 3, 1998 included 53 weeks.
Net Sales
Net sales at restaurants owned by the Company decreased by 5.6% from fiscal 1998 to fiscal 1999 and
increased by 12.5% from fiscal 1997 to fiscal 1998. Net sales for fiscal 1999 decreased by $8,586,000 from the loss
of sales at restaurants which the Company no longer operate (B. Smith's in Washington, D.C. and Perretti Italian Café
were sold in fiscal 1999 and An American Place and the Beekman 1766 Tavern were sold in fiscal 1998). Additionally,
fiscal 1999 included 52 weeks while fiscal 1998 included 53 weeks. This decrease in fiscal 1999 was offset in part by
$3,827,000 in net sales from restaurants and food court operations which either opened in fiscal 1999 (Thunder Grill
at Union Station in Washington, D.C. and Rialto Deli in the food court at the Venetian Casino Resort) or did not operate
for the full fiscal 1998 year (Stage Deli of Las Vegas was acquired in February 1998 and Red opened in the fourth
quarter of fiscal 1998). Same store sales were basically unchanged for the year. Same store sales for the year at the
Company's Las Vegas operations increased by 2.0% offset in part by a 0.8% decrease at the Company's non-Las Vegas
operations.
The increase in fiscal 1998 was substantially due to sales from the food and beverage operations in the New
York-New York Hotel & Casino resort in Las Vegas (the “New York-New York facilities") which opened in January
1997. At the New York-New York facilities the Company operates a 450 seat, twenty four hour a day restaurant
(America); a 160 seat steakhouse (named Gallagher's under a license agreement with the owner of the New York
restaurant of that name); 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 City's Little Italy and Greenwich
Village. The increase in fiscal 1998 was also due in part to the acquisition of a restaurant located in the Forum Shops
at Caesar's Shopping Center in Las Vegas (Stage Deli of Las Vegas) and to the first full operating year of a restaurant
which the Company opened in fiscal 1997 (The Grill Room). Same store sales in fiscal 1998 increased by 3.1%
principally due to increased customer counts.
Costs and Expenses
The Company's cost of sales consists principally of food and beverage costs at restaurants owned by the
Company. Cost of sales as a percentage of net sales was 26.4% in fiscal 1999, 26.6% in fiscal 1998, and 27.3% in
fiscal 1997. Cost of sales in fiscal 1997 were impacted by higher cost of sales experienced during the early operating
period at the Company's Las Vegas operations.
Operating expenses of the Company, consisting of restaurant payroll, occupancy and other expenses at
restaurants owned by the Company, as a percentage of net sales, were 62.7% in both fiscal 1999 and fiscal 1998, and
65.9% in fiscal 1997. This decrease in operating expenses in fiscal 1998 as compared to fiscal 1997 was principally
due to efficiencies achieved at the Company's New York-New York facilities and to a lesser extent a benefit from the
3.1% increase in same store sales at the Company's other facilities. Operating expenses are net of gains on sale of
restaurants totaling $752,000 or 0.7% of net sales in fiscal 1999, as compared to gains on sale of restaurants totaling
$259,000 or 0.2% of sales in fiscal 1998. Gains on sale totaled $229,000 or 0.2% of sales in fiscal 1997. Restaurant
payroll was 35.4% of sales in fiscal 1999, 35.1% in fiscal 1998, and 36.9% in fiscal 1997. Occupancy expenses
(consisting of rent, rent taxes, real estate taxes, insurance and utility costs) were 12.2% of net sales in fiscal 1999, 11.7%
in fiscal 1998, and 12.5% in fiscal 1997.
The Company incurred pre-opening expenses and early operating losses at newly opened restaurants of
approximately $400,000 in fiscal 1999, $200,000 in fiscal 1998, and $2,000,000 in fiscal 1997. The fiscal 1997
pre-opening expenses and early operating losses were from the opening of the Company's New York-New York
facilities. 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 5.5% in fiscal 1999 and 5.2% in both
fiscal 1998 and fiscal 1997. If net sales at managed restaurants were included in consolidated net sales, general and
administrative expenses as a percentage of net sales would have been 5.0% in fiscal 1999, 4.7% in fiscal 1998, and 4.6%
in fiscal 1997.
As of October 2, 1999 the Company managed five restaurants owned by others (El Rio Grande and Arlo in
Manhattan, the Marketplace Cafe, the Marketplace Grill, and the Brewskeller Pub in Boston, Massachusetts). Net sales
of these restaurant facilities, which are not included in consolidated net sales were $9,804,000 in fiscal 1999,
$12,390,000 in fiscal 1998, and $14,151,000 in fiscal 1997. The decrease in net sales at managed operations is
principally due to the termination in fiscal 1998 of two management contracts at corporate dining facilities.
Interest expense was $526,000 in fiscal 1999, $608,000 in fiscal 1998, and $931,000 in fiscal 1997. The
decrease in fiscal 1999 from fiscal 1998 and the decrease in fiscal 1998 from fiscal 1997 is principally due to
repayments of borrowings incurred in fiscal 1997. Such borrowings financed the construction costs and working capital
requirements of the New York-New York facilities which opened in January 1997.
Interest income was $226,000 in fiscal 1999, $210,000 in fiscal 1998, and $72,000 in fiscal 1997. The
increase in fiscal 1999 and fiscal 1998 as compared to fiscal 1997 is due to interest earned on notes issued in connection
with restaurants sold in fiscal 1997 and fiscal 1998.
Other income, which generally consists of purchasing service fees, and the sale of logo merchandise at various
restaurants, was $436,000 in fiscal 1999, $490,000 in fiscal 1998, and $780,000 in fiscal 1997. A significant portion
of the amounts received in fiscal 1997 was principally due to amounts the Company received by a third party due to the
temporary closing in fiscal 1994 and fiscal 1995 of a restaurant (Ernie's).
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 New York 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 tax rate has varied depending on the level of losses incurred at individual subsidiaries. The
Company's overall effective tax rate was 36.4% in fiscal 1999 and 40% in both fiscal 1998 and fiscal 1997.
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 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 FICA taxes paid by the Company with respect to the tip income
of restaurant service personnel. The net benefit to the Company was $512,000 in fiscal 1999, $506,000 in fiscal 1998
and $373,000 in fiscal 1997.
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 net cash used in investing activities in fiscal 1999 ($6,096,027), fiscal 1998 ($4,179,043) and fiscal 1997
($10,445,385) was principally from the Company's continued investment in fixed assets associated with constructing
new restaurants and acquiring existing restaurants. In fiscal 1999, the Company opened a restaurant in Union Station
in Washington, D.C. (Thunder Grill) and began constructing three restaurants and four food court outlets at the Venetian
Casino Resort in Las Vegas, Nevada. In fiscal 1998, the Company acquired an existing restaurant in Las Vegas (the
Stage Deli) and opened a new restaurant in Manhattan (Red). In fiscal 1997, the Company finished and opened the New
York-New York facilities.
The net cash used in financing activities in fiscal 1999 ($1,631,906) was due to the repurchase of 422,700
shares of the Company's outstanding common stock offset by a net increase in long-term debt in excess of debt
repayments. The net cash used in financing activities in fiscal 1998 ($2,824,552) was principally due to the repurchase
of 159,000 shares of the Company's outstanding common stock and repayments of debt on the Company's main credit
facility in excess of borrowings on such facility. The net cash provided by financing activities in fiscal 1997
($5,643,505) was principally due to proceeds of a private placement of 551,454 shares of the Company's common stock.
At October 2, 1999, the Company had a working capital deficit of $3,044,204 as compared to working capital
deficit of $719,343 at October 3,1998. Working capital deficit in fiscal 1999 was significantly impacted by cash
expended for the construction of three restaurants and four food court outlets in the Venetian Casino Resort in Las
Vegas, Nevada and four restaurants in Star Theatres entertainment center in Southfield, Michigan. The restaurant
business does not require the maintenance of significant inventories or receivables, thus the Company is able to operate
with negative working capital.
The Company's Revolving Credit and Term Loan Facility with its main bank includes an $16,000,000 facility
for use in construction of and acquisition of new restaurants and for working capital purposes at the Company's existing
restaurants. The facility allows the Company to borrow up to $16,000,000 (less the amount of any outstanding letters
of credit) until April 2001 at which time outstanding loans mature. The loans bear interest at a rate of prime plus ½%.
At October 2, 1999 the Company had borrowings of $5,850,000 outstanding on the facility. For each 1% change in the
prime rate, the impact on the Company will be $60,000 based on the outstanding borrowings at October 2, 1999. The
facility was amended in December 1999 to increase the Company’s borrowing capacity. See “Recent Developments.”
The Company also has a $4,000,000 equipment financing line with its main bank, Bank Leumi for the
acquisition of various kitchen equipment at the projects currently under construction in Las Vegas and Southfield,
Michigan. The loans are repayable in 60 equal installments. As of October 2, 1999 the Company had no borrowings
on this facility.
The Revolving Credit and Term Loan Facility also includes a two year $2,000,000 Letter of Credit Facility for
use in lieu of lease security deposits. At October 2, 1999 the Company had delivered $489,000 in irrevocable letters
of credit on this facility.
In December 1996, the Company raised net proceeds of $6,028,000 through a private placement of 551,454
shares of its common stock at $11 per share. The proceeds 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 restaurant facilities.
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 is constructing three restaurants in the recently opened Venetian Casino Resort in Las Vegas,
Nevada. One restaurant is scheduled to open in the first quarter of fiscal 2000 and the other two will follow thereafter
in fiscal 2000. The Company also opened one food court facility in May 1999 and three additional food court facilities
opened in the first quarter of fiscal 2000. The Company expects to spend up to $15,000,000 to open and operate the
restaurants and food court facilities at the Venetian Casino Resort.
The Company is also constructing four restaurants, which are scheduled to open in the second quarter of fiscal
2000, at a large theatre development in Southfield, Michigan under a joint venture agreement with Sony Theatres' Loeks
Star Partners and Millennium Partners. The Company anticipates that its share of the required capital contributions to
meet the construction costs, initial inventories and pre-opening expenses will be $8,500,000.
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 projects through cash from operations and
existing credit facilities. Additional expansion may require additional external financing.
Recent Developments
In December 1999, the Company entered into a new credit agreement with its main bank, Bank Leumi USA.
The new agreement allows the Company to borrow up to $28,000,000 for use in construction of and acquisition of new
restaurants and for working capital purposes at the Company's existing restaurants. After two years, the revolving loans
will be converted into term loans payable over 36 months. Outstanding loans bear interest at prime plus ½%. The new
facility also includes a five-year $2,000,000 Letter of Credit Facility for use at the Company's restaurants in lieu of lease
security deposits. At December 28, 1999, the Company had borrowings outstanding under the new facility in the
amount of $16,800,000.
The Financial Accounting Standards Board has recently issued several new accounting pronouncements:
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, establishes accounting and
reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and
for hedging activities. It requires that the Company recognize all derivatives as either assets or liabilities in the statement
of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be
specifically designed as a hedge of the exposure to changes in fair value of a recognized asset or liability or hedge of
the exposure to variable cash flows of a forecasted transaction. The accounting for changes in fair value of a derivative
(e.g. through earnings or outside earnings, through comprehensive income) depends on the intended use of the derivative
and the resulting designation, SFAS No. 137 extends the effective date until fiscal years beginning after June 15, 2001.
Statement of Position 98-5, Reporting on the Costs of Start-Up Activities, requires costs of start-up activities
and organization costs to be expensed as incurred. The Statement is effective for fiscal years beginning after December
15, 1998. The Company currently expenses all start-up costs as incurred while organization costs are capitalized and
amortized over five years. The initial application of this Statement will be reported by the Company in fiscal 2000 as
a cumulative effect of a change in accounting principle. The Company had net deferred organization expenses of
$300,513 in intangible assets as of October 2, 1999.
SFAS No. 134, Accounting for Mortgage-Backed Securities Retained after the Securitization of Mortgage
Loans Held for Sale by a Mortgage Banking Enterprise, SFAS No. 135, Rescission of FASB Statement No. 75 and
Technical Corrections, SFAS No. 136, Transfers of Assets to a Not-for-Profit Organization or Charitable Trust that
Raises or Holds Contributions for Others, and SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities have been issued in the current year.
Year 2000
The Company has assessed and continues to assess the impact of the Year 2000 issue on its reporting systems
and operations. The Year 2000 issue exists because many computer systems and applications currently use two-digit
fields to designate a year. When the century date occurs, date-sensitive systems may recognize the year 2000 as 1900
or not at all. This inability to recognize or properly treat the year 2000 may cause systems to process critical financial
and operational information incorrectly.
The Company's centralized financial accounting and reporting software system which processes information
generated daily at each of the Company's restaurants is Year 2000 compliant. Additionally all hardware which processes
such information is compliant at both corporate headquarters and the applicable restaurants. Several of the Company's
restaurants had non-compliant point-of-sale systems. These systems process customer orders and generate billing
information. The Company has modified those systems and or replaced the non-compliant systems. The Company's
centralized purchasing system which process numerous orders from the Company's restaurants is Year 2000 compliant.
All critical non-compliant systems have been remedied. The Company has contingency plans in place should
there be a Year 2000 problem. Backup manual procedures are in place should the restaurant systems fail to properly
address the Year 2000 date. The Company has spent to date approximately $115,000 and estimates that the additional
cost of remediation will not exceed $10,000.
The Company has had communications with its significant vendors and service providers to determine the
extent to which the Company's systems are vulnerable to those third parties' failure to remediate their own Year 2000
issues. At the Company's facilities at the New York-New York Hotel and Casino, for example, the Company utilizes
and interfaces with systems provided by the Hotel and failure of the Hotel's computer systems to adequately address
the Year 2000 issue may have a material adverse effect upon the Company. The Company has been advised by the
Hotel that its systems are expected to be Year 2000 compliant.
The Company is dependent upon major credit card issuers for the remittance to the Company of charges
incurred by customers. The Company has been advised that the major credit card issuers in the United States have
addressed the Year 2000 issues they confront and do expect that their systems will function properly in the Year 2000.
Other vendors and service providers with which the Company does business may not have adequately
addressed the year 2000 issue. However, the Company believes that there are numerous sources for the various products
and services used by the Company and does not anticipate that Year 2000 compliance issues confronted by its vendors
and service providers will have a material effect upon the Company.
Market Information
The Company’s Common Stock, $.01 par value, is traded in the over-the-counter market on the Nasdaq
National Market (“Nasdaq”) under the symbol “ARKR”. The high and low sale prices for the Common Stock from
October 4, 1998 through October 2, 1999 are as follows:
Calendar 1997
Third Quarter
Fourth Quarter
Calendar 1998
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Calendar 1999
First Quarter
Second Quarter
Third Quarter
Dividends
11 ½
12 ½
13 (cid:1)
12 (cid:1)
12 (cid:2)
11 5/8
10 1/4
11
11 5/8
8 1/4
10 ¾
11 ½
11
9 ¼
8 1/4
9 ½
9 3/8
9 3/8
The Company has not any paid cash dividends since its inception and does not intend to pay dividends in the
foreseeable future. Under the terms of the Credit Agreement between the Company and its main lender, the Company
may pay cash dividends and redeem shares of Common Stock in any fiscal year only to the extent of an aggregate
amount equal to 20% of the Company’s consolidated operating cash flow for such fiscal year.
Number of Shareholders
As of December 27, 1999, there were 80 holders of record of the Company’s Common Stock.
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281-1414
Telephone: (212) 436-2000
Facsimile: (212) 436-5000
INDEPENDENT AUDITORS’ REPORT
To the Board of Directors and Shareholders of
Ark Restaurants Corp.
We have audited the accompanying consolidated balance sheets of Ark Restaurants Corp. and its
subsidiaries as of October 2, 1999 and October 3, 1998, and the related consolidated statements
of operations, shareholders’ equity and cash flows for each of the three fiscal years in the period
ended October 2, 1999. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the
financial position of Ark Restaurants Corp. and subsidiaries as of October 2, 1999 and October 3,
1998, and the results of their operations and their cash flows for each of the three fiscal years in
the period ended October 2, 1999, in conformity with generally accepted accounting principles.
New York, New York
November 22, 1999
F-1
ARK RESTAURANTS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Accounts receivable
Current portion of long-term receivables (Note 2)
Inventories
Deferred income taxes (Note 12)
Prepaid expenses and other current assets
Total current assets
LONG-TERM RECEIVABLES (Note 2)
ASSETS HELD FOR SALE (Note 3)
FIXED ASSETS - At cost
Leasehold improvements
Furniture, fixtures and equipment
Leasehold improvements in progress
Less accumulated depreciation and amortization
INTANGIBLE ASSETS - Net (Note 4)
DEFERRED INCOME TAXES (Note 12)
OTHER ASSETS (Note 5)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable - trade
Accrued expenses and other current liabilities (Note 6)
Current maturities of capital lease obligations (Note 8)
Current maturities of long-term debt (Note 7)
Accrued income taxes (Note 12)
Total current liabilities
OBLIGATIONS UNDER CAPITAL LEASES (Note 8)
LONG-TERM DEBT - Net of current maturities (Notes 4 and 7)
OPERATING LEASE DEFERRED CREDIT (Notes 1 and 8)
COMMITMENTS AND CONTINGENCIES (Notes 5, 7 and 8)
SHAREHOLDERS’ EQUITY (Notes 7, 9 and 10):
Common stock, par value $.01 per share - authorized, 10,000,000
shares; issued, 5,208,336 and 5,187,836 shares, respectively
Additional paid-in capital
Retained earnings
Less treasury stock, 1,927,037 and 1,504,337 shares
See notes to consolidated financial statements.
F-2
October 2,
1999
October 3,
1998
$
333,621
$
1,023,046
3,073,615
446,043
1,916,436
710,095
336,041
6,815,851
1,184,331
988,004
23,500,280
19,352,078
4,408,071
47,260,429
3,450,307
415,755
1,950,146
908,468
491,129
8,238,851
1,119,110
1,767,782
22,464,922
18,591,938
18,906
41,075,766
18,162,614
15,833,403
29,097,815
25,242,363
5,294,531
846,657
3,151,914
5,514,932
1,030,908
1,131,233
$
47,379,103
$
44,045,179
$
3,815,760
$
3,563,068
4,736,897
148,657
972,330
186,411
9,860,055
-
6,683,076
1,322,000
-
52,084
14,399,956
22,059,989
36,512,029
6,998,057
29,513,972
3,850,766
229,944
609,283
705,133
8,958,194
148,494
4,405,351
1,471,000
-
51,879
14,214,898
17,565,258
31,832,035
2,769,895
29,062,140
$
47,379,103
$
44,045,179
ARK RESTAURANTS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
NET SALES
COST OF SALES
Gross restaurant profit
MANAGEMENT FEE INCOME (Note 11)
OPERATING EXPENSES:
Payroll and payroll benefits
Occupancy
Depreciation and amortization
Other
GENERAL AND ADMINISTRATIVE EXPENSES
OPERATING INCOME
OTHER EXPENSE (INCOME):
Interest expense (Note 7)
Interest income
Other income (Note 13)
Year Ended
October 2,
1999
October 3,
1998
September 27,
1997
$
110,800,913
$
117,398,453
$
104,326,386
29,301,303
31,265,702
28,451,887
81,499,610
86,132,751
75,874,499
869,254
1,139,799
1,153,264
82,368,864
87,272,550
77,027,763
39,254,439
13,492,931
4,062,849
12,654,868
41,171,865
13,788,992
3,998,272
14,671,521
38,520,986
13,031,811
3,320,739
13,922,524
69,465,087
73,630,650
68,796,060
6,069,903
6,052,435
5,445,990
75,534,990
79,683,085
74,242,050
6,833,874
7,589,465
2,785,713
425,141
(225,996)
(435,610)
608,278
(209,577)
(490,118)
755,383
(71,652)
(780,281)
(236,465)
(91,417)
(96,550)
INCOME BEFORE PROVISION FOR INCOME TAXES
7,070,339
7,680,882
2,882,263
PROVISION FOR INCOME TAXES (Note 12)
NET INCOME
NET INCOME PER SHARE - BASIC
NET INCOME PER SHARE - DILUTED
2,575,608
3,068,741
1,144,608
$
4,494,731
$
4,612,141
$
1,737,655
$
1.30
$
1.21
$
.47
$
1.29
$
1.20
$
.46
WEIGHTED AVERAGE NUMBER OF SHARES - BASIC
3,460,865
3,826,255
3,714,116
WEIGHTED AVERAGE NUMBER OF SHARES - DILUTED
3,475,980
3,852,019
3,742,811
See notes to consolidated financial statements.
F-3
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ARK RESTAURANT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of fixed assets
Amortization of intangibles
Gain on sale of restaurants
Operating lease deferred credit
Deferred income taxes
Changes in assets and liabilities:
Decrease (increase) in accounts receivable
Decrease (increase) in inventories
Increase (decrease) in prepaid expenses and other current assets
(Increase) decrease in other assets, net
Increase in accounts payable - trade
Decrease (increase) in accrued income taxes
Increase (decrease) in accrued expenses and other current liabilities
October 2,
1999
Year Ended
October 3,
1998
September 27,
1997
$
4,494,731
$
4,612,141
$
1,737,655
3,330,568
732,281
(752,274)
(149,000)
382,624
376,692
33,710
155,088
(2,111,012)
252,692
(518,722)
811,130
3,432,104
566,168
(258,684)
(57,000)
57,164
(663,873)
(17,020)
(58,313)
(543,820)
2,818
291,263
(58,590)
3,047,422
445,123
(229,000)
(19,000)
(431,966)
(682,935)
(890,567)
112,961
60,008
1,194,311
89,476
183,672
Net cash provided by operating activities
7,038,508
7,304,358
4,617,160
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to fixed assets
Additions to intangible assets
Issuance of demand notes and long-term receivables
Payments received on demand notes and long-term receivables
Restaurant sales
Restaurant acquisitions
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment on long-term debt
Issuance of long-term debt
Exercise of stock options
Principal payment on capital lease obligations
Purchase of treasury stock
Proceeds from common stock private placement
(6,989,405)
(384,880)
(95,611)
398,869
975,000
-
(1,713,847)
(229,524)
(81,580)
315,908
265,000
(2,735,000)
(11,006,116)
(11,639)
-
264,370
308,000
-
(6,096,027)
(4,179,043)
(10,445,385)
(5,659,226)
8,300,000
185,263
(229,781)
(4,228,162)
-
(8,012,164)
6,900,000
83,615
(273,507)
(1,522,496)
-
(10,277,900)
10,000,831
143,205
(251,257)
-
6,028,626
Net cash provided by (used in) financing activities
(1,631,906)
(2,824,552)
5,643,505
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
(689,425)
1,023,046
300,763
722,283
(184,720)
907,003
CASH AND CASH EQUIVALENTS, END OF YEAR
$
333,621
$
1,023,046
$
722,283
SUPPLEMENTAL INFORMATION:
Cash payments for the following were:
Interest
Income taxes
See notes to consolidated financial statements.
$
526,382
$
608,278
$
931,383
$
2,690,443
$
2,699,651
$
1,502,643
ARK RESTAURANTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 2, 1999, OCTOBER 3, 1998 AND SEPTEMBER 27, 1997
1.
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ark Restaurants Corp. and subsidiaries (the “Company”) own and operate 22 restaurants, and manage
five restaurants, of which 14 are in New York City, four in Washington, D.C., four in Las Vegas,
Nevada (three within the New York New York Hotel and Casino Resort), three in Boston,
Massachusetts and one each in McLean, Virginia; and Islamorada, Florida. Along with the three
restaurants within the New York New York Hotel & Casino Resort, the Company also operates the
Resort’s room service, banquet facilities, employee dining room and a complex of nine smaller cafes
and food operations. The Company also operates four food court operations within the Venetian Casino
Resort in Las Vegas, Nevada.
The Company’s other operations include catering businesses in New York City and Washington, D.C.
as well as wholesale and retail bakeries in New York City.
Accounting Period - The Company’s fiscal year ends on the Saturday nearest September 30. The fiscal
years ended October 2, 1999, and September 27, 1997, included 52 weeks and the fiscal year ended
October 3, 1998, included 53 weeks.
Significant Estimates - In the process of preparing its consolidated financial statements, the Company
estimates the appropriate carrying value of certain assets and liabilities which are not readily apparent
from other sources. The primary estimates underlying the Company’s financial statements include
allowances for potential bad debts on accounts and notes receivable, the useful lives and recoverability
of its assets, such as property and intangibles, fair values of financial instruments, the realizable value
of its tax assets and other matters. Management bases its estimates on certain assumptions, which they
believe are reasonable in the circumstances, and while actual results could differ from those estimates,
management does not believe that any change in those assumptions in the near term would have a
material effect on the Company’s consolidated financial position or the results of operation.
Principles of Consolidation - The consolidated financial statements include the accounts of the
Company and its wholly owned and majority owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. Investments in affiliated companies
where the Company is able to exercise significant influence over operating and financial policies even
though the Company holds 50% or less of the voting stock, are accounted for under the equity method.
Cash Equivalents - Cash equivalents include instruments with original maturities of three months or
less.
Accounts Receivable - Included in accounts receivable are amounts due from employees of $994,915
and $1,069,852 at October 2, 1999 and October 3, 1998, respectively. Such amounts, which are due on
demand, are principally due from various employees exercising stock options in accordance with the
Company’s Stock Option Plan (see Note 10).
F-6
Inventories - Inventories are stated at the lower of cost (first-in, first-out) or market, and consist of food
and beverages, merchandise for sale and other supplies.
Fixed Assets - Leasehold improvements and furniture, fixtures and equipment are stated at cost.
Depreciation of furniture, fixtures and equipment (including equipment under capital leases) is
computed using the straight-line method over the estimated useful lives of the respective assets (seven
years). Amortization of improvements to leased properties is computed using the straight-line method
based upon the initial term of the applicable lease or the estimated useful life of the improvements,
whichever is less, and ranges from 5 to 35 years.
The Company includes in leasehold improvements in progress restaurants that are under construction.
Once the projects have been completed the Company will begin depreciating the assets.
The Company annually assesses any impairments in value of long-lived assets and certain identifiable
intangibles to be held and used. For the year ending October 2, 1999, no impairments were deemed
necessary.
Costs incurred during the construction period of restaurants, including rental of premises, training and
payroll, are expensed as incurred.
Intangible and Other Assets - Costs associated with acquiring leases and subleases, principally
purchased leasehold rights, have been capitalized and are being amortized on the straight-line method
based upon the initial terms of the applicable lease agreements, which range from 10 to 21 years.
Goodwill recorded in connection with the acquisition of shares of the Company’s common stock from a
former shareholder, as discussed in Note 4, is being amortized over a period of 40 years. Goodwill
arising from restaurant acquisitions is being amortized over periods ranging from 10 to 15 years.
Legal and other costs incurred to organize restaurant corporations are capitalized as organization costs
and are amortized over a period of 5 years (See Future Impact of Recently Issued Accounting
Standards).
Covenants not to compete arising from restaurant acquisitions are amortized over the contractual period
of 5 years.
Certain legal and bank commitment fees incurred in connection with the Company’s Revolving Credit
and Term Loan Facility, as discussed in Note 7, were capitalized as deferred financing fees and are
being amortized over four years, the term of the facility.
Operating Lease Deferred Credit - Several of the Company’s operating leases contain predetermined
increases in the rentals payable during the term of such leases. For these leases, the aggregate rental
expense over the lease term is recognized on a straight-line basis over the lease term. The excess of the
expense charged to operations in any year and amounts payable under the leases during that year are
recorded as a deferred credit. The deferred credit subsequently reverses over the lease term (Note 8).
Occupancy Expenses - Occupancy expenses include rent, rent taxes, real estate taxes, insurance and
utility costs.
Income Per Share of Common Stock - Net income per share is computed in accordance with Statement
of Financial Accounting Standard (“SFAS”) No. 128, Earnings Per Share, and is calculated on the basis
of the weighted average number of common shares outstanding during each period plus the additional
dilutive effect of common stock equivalents. Common stock equivalents consist of dilutive stock
options.
F-7
Stock Options - The Company accounts for its stock options granted to employees under the intrinsic
value-based method for employee stock-based compensation and provides pro forma disclosure of net
income and earnings per share as if the accounting provision of SFAS No.123 had been adopted. The
Company generally does not grant options to outsiders.
Impact of Recently Issued Accounting Standards - The Financial Accounting Standard Board has
issued SFAS No. 130, Reporting Comprehensive Income, which is effective for fiscal years beginning
after December 15, 1997 and establishes standards for reporting and display of comprehensive income
and its components. There are no items that would require presentation in a separate statement of
comprehensive income.
SFAS No. 131, Disclosure about Segments of an Enterprise and Related Information established
standards for the way that public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. It also established standards for
related disclosures about products and services, geographic areas, and major customers. Management
views its operations as one segment. SFAS No. 131 is effective for fiscal years beginning after
December 15, 1997.
The Financial Accounting Standards Board has issued SFAS No. 132, Employers’ Disclosures about
Pensions and Other Postretirement Benefits, which revises employers’ disclosures about pension and
other postretirement benefit plans. SFAS No. 132 is effective for fiscal years beginning after
December 15, 1997. This statement has no impact on the Company.
Future Impact of Recently Issued Accounting Standards – The Financial Accounting Standards Board
has recently issued several new accounting pronouncements. SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other contracts and for hedging
activities. It requires that the Company recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designed as a hedge of the exposure to changes in fair value of a
recognized asset or liability or hedge of the exposure to variable cash flows of a forecasted transaction.
The accounting for changes in fair value of a derivative (e.g., through earnings or outside earnings,
through comprehensive income) depends on the intended use of the derivative and the resulting
designation. SFAS No. 137 extends the effective date until fiscal years beginning after June 15, 2001.
Statement of Position 98-5, “Reporting on the Costs of Start-Up Activities” requires costs of start-up
activities and organization costs to be expensed as incurred. The Statement is effective for fiscal years
beginning after December 15, 1998. The company currently expenses all start-up costs as incurred while
organization costs are capitalized and amortized over five years. The initial application of this
Statement will be reported by the Company in 2000 as a cumulative effect of a change in accounting
principle. The Company carried approximately $300,000 of net deferred organizational expenses on its
books as of October 2, 1999.
F-8
SFAS No. 134, Accounting for Mortgage-Backed Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking Enterprise, SFAS No. 135, Rescission of FASB
Statement No. 75 and Technical Corrections, SFAS No. 136, Transfers of Assets to a Not-for-Profit
Organization or Charitable Trust That Raises or Holds Contributions for Others, and SFAS No. 137,
Accounting for Derivative Instruments and Hedging Activities have all been issued in the current year.
The effect of the adoption of the statements on the Company’s consolidated financial statements is not
expected to be material.
Reclassifications - Certain reclassifications have been made to the 1998 and 1997 financial statements
to conform to the 1999 presentation.
F-9
2.
LONG-TERM RECEIVABLES
Long-term receivables consist of the following:
Note receivable secured by fixed assets and lease at a
restaurant sold by the Company, at 8% interest; due in
monthly installments through December 2006 (a)
Note receivable secured by fixed assets and lease at a
restaurant sold by the Company, at 7.5% interest; due in
monthly installments through March 2002 (b)
Note receivable secured by fixed assets and lease at a
restaurant sold by the Company, at 7.5% interest; due in
monthly installments through April 2000 (c)
Note receivable secured by fixed assets and lease at a
restaurant sold by the Company, at 7.5% interest; due in
monthly installments commencing May 2000
through December 2008 (c)
Note receivable secured by fixed assets and lease at a
restaurant sold by the Company, at 10.0% interest; due in
monthly installments through April 2004 (d)
Advances for construction and working capital, at one of
the Company’s managed locations, at 15% interest; due
in monthly installments through December 2000
Advances for construction, at one of the Company’s managed
locations, at prime plus 1%; due in monthly installments
through December 1999
Note receivable, secured by personal guarantees of officers of a
managed restaurant and fixed assets at that location, at 15%
interest; due in monthly installments, through September 2000
Less current portion
October 2,
1999
October 3,
1998
$
514,706
$
564,769
112,571
153,187
126,796
331,700
445,118
207,983
244,565
-
98,110
164,446
9,390
33,662
79,118
79,118
1,630,374
446,043
1,534,865
415,755
$
1,184,331
$
1,119,110
(a)
(b)
In December 1996, the Company sold a restaurant for $900,000. Cash of $50,000 was
received on sale and the balance is due in installments through December 2006.
In October 1996, the Company sold a restaurant for $258,500. Cash of $50,000 was received
on sale and the balance is due in installments through March 2002. The Company
recognized a gain of $134,000 on this sale in the fiscal year ended September 27, 1997.
F-10
(c)
In October 1997, the Company sold a restaurant for $1,750,000, of which $200,000 was paid
in cash and the balance is due in monthly installments under the terms of two notes bearing
interest at a rate of 7.5%. One note, with an initial principal balance of $400,000, is being
paid in 24 monthly installments of $18,569 through April 2000. The second note, with an
initial principal balance of $1,150,000, will be paid in 104 monthly installments of $14,500
commencing May 2000 and ending December 2008. At December 2008, the then
outstanding balance of $519,260 matures.
The Company recognized a gain on sale of approximately $142,000, and $185,000 in the
fiscal years ended October 2, 1999 and October 3, 1998, respectively. Additional deferred
gains totaling $882,000 and $1,024,000 for the fiscal years ended October 2, 1999 and
October 3, 1998, respectively, could be recognized in future period as the notes are collected.
The Company deferred recognizing this additional gain and recorded an allowance for
possible uncollectible note against the second outstanding note. This uncertainty is based on
the significant length of time of this note (over 10 years) and the substantial balance which
matures in December 2008 ($519,260).
(d)
In December 1998, the company sold a restaurant for $500,000, of which $250,000 was paid
in cash and the balance of $250,000 was financed by a note. The note is due in monthly
installments of $5,537, inclusive of interest at 10%, from May 1999 through April 2004. The
Company recognized a gain of $207,220 on this sale in the fiscal year ended October 2, 1999.
The carrying value of the Company’s long-term receivables approximates its current aggregate fair
value.
3. ASSETS HELD FOR SALE
At October 2, 1999, the Company was actively pursuing the sale of one restaurant and accordingly
reclassified the net fixed assets ($935,097) and inventories($52,907) as assets held for sale.
At October 3, 1998, the Company was actively pursuing the sale of two restaurants and accordingly
reclassified the net fixed assets($1,625,834) and inventories($141,948) as assets held for sale.
4.
INTANGIBLE ASSETS
Intangible assets consist of the following:
Goodwill (a)
Purchased leasehold rights (b)
Noncompete agreements and other (c)
Organization costs
Less accumulated amortization
F-11
October 2,
1999
October 3,
1998
$
6,222,877
750,740
790,000
789,521
$
6,222,877
652,740
790,000
678,491
8,553,138
3,258,607
8,344,108
2,829,176
$
5,294,531
$
5,514,932
(a)
In August 1985, certain subsidiaries of the Company acquired approximately one-third of the
then outstanding shares of common stock (964,599 shares) from a former officer and director
of the Company for a purchase price of $3,000,000. The consolidated balance sheets reflect
the allocation of $2,946,000 to goodwill.
(b) Purchased leasehold rights arise from acquiring leases and subleases of various restaurants.
(c) During fiscal 1998, the Company acquired a restaurant for $2,735,000 in cash. The
acquisition was accounted for as a purchase transaction with the purchase price allocated as
follows: leasehold improvements $200,000; furniture, fixtures and equipment $300,000; and
goodwill $2,235,000.
5. OTHER ASSETS
Other assets consist of the following:
Deposits
Deferred financing fees
Investments in and advances to affiliates (a)
October 2,
1999
October 3,
1998
$
313,142
144,195
2,694,577
$
353,674
214,192
563,367
$
3,151,914
$
1,131,233
(a) The Company, through a wholly owned subsidiary, became a general partner with a 19%
interest in a partnership which acquired on July 1, 1987 an existing Mexican food restaurant,
El Rio Grande, in New York City. Several related parties also participate as limited partners
in the partnership. The Company’s equity in earnings of the limited partnership was
$65,000, $80,000 and $40,000, for the years ended October 2, 1999, October 3, 1998 and
September 27, 1997, respectively.
The Company also manages El Rio Grande through another wholly owned subsidiary on
behalf of the partnership. Management fee income relating to these services was $358,000,
$421,000 and $311,000 for the years ended October 2, 1999, October 3, 1998 and September
27, 1997, respectively (Note 11).
The Company, through a wholly owned subsidiary, became a partner with a 50% interest in a
partnership to construct and develop four restaurants at a large theatre development in
Southfield, Michigan. At October 2, 1999 and October 3, 1998 the Company’s investment in
the partnership was $2,691,000 and $567,000, respectively. The Company is committed to
investing $6,000,000 in the partnership, and also anticipates loaning an additional
$2,500,000 to open the restaurants, which are expected to open in the March 2000 fiscal
quarter.
F-12
6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following:
Sales tax payable
Accrued wages and payroll related costs
Customer advance deposits
Accrued and other liabilities
7.
LONG-TERM DEBT
Long-term debt consists of the following:
October 2,
1999
October 3,
1998
$
782,365
877,758
1,083,000
1,993,774
$
928,225
675,520
943,000
1,304,021
$
4,736,897
$
3,850,766
Revolving Credit and Term Loan Facility with interest at the
prime rate, plus 1/2%, payable on April 30, 2001 (a)
$
5,850,000
$
2,600,000
October 2,
1999
October 3,
1998
Notes issued in connection with refinancing of restaurant
equipment, at 8.75%, payable in monthly installments through
January 2002 (b)
Note issued in connection with acquisition of restaurant site,
at 7.25%, payable in monthly installments through
January 1, 2000 (c)
Less current maturities
1,439,171
1,990,827
366,235
423,807
7,655,406
972,330
5,014,634
609,283
$
6,683,076
$
4,405,351
(a) The Company’s Revolving Credit and Term Loan Facility with its main bank (Bank Leumi
USA), as amended September 1999, includes a $16,000,000 facility to finance the
development and construction of new restaurants and for working capital purposes at the
Company’s existing restaurants. Outstanding loans bear interest at ½% above the bank’s
prime rate. Any outstanding loans on April 2001 are due in full. The Facility also includes a
two-year Letter of Credit Facility for use in lieu of lease security deposits. The Company
generally is required to pay commissions of 1½% per annum on outstanding letters of credit.
The Company’s subsidiaries each guaranteed the obligations of the Company under the
foregoing facilities and granted security interests in their respective assets as collateral for
such guarantees. In addition, the Company pledged stock of such subsidiaries as security for
obligations of the Company under such facilities.
F-13
The agreement includes restrictions relating to, among other things, indebtedness for
borrowed money, capital expenditures, advances to managed businesses, mergers, sale of
assets, dividends and liens on the property of the Company. The agreement also contains
financial covenants requiring the Company to maintain a minimum ratio of debt to net worth,
minimum shareholders’ equity and a minimum ratio of cash flow prior to debt service. The
Company is in compliance with all covenants.
(b)
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 and
casino in Las Vegas, Nevada. The notes bear interest at 8.75% per annum and are 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. The fair value of the warrants was estimated at the date of grant, credited to
additional paid-in capital and is being amortized over the life of the warrant.
(c)
In November 1994, the Company issued a $600,000 note in connection with the acquisition
of a restaurant in the Florida Keys. The Company remits monthly payments of $7,044
inclusive of interest until January 1, 2000, at which time the outstanding balance of $358,511
is due. The debt is secured by the leasehold improvements and tangible personal property at
the restaurant.
Required principal payments on long-term debt are as follows:
Year
2000
2001
2002
Amount
$
972,330
6,509,122
173,954
$
7,655,406
During the fiscal years ended October 2, 1999, October 3, 1998 and September 27, 1997, interest
expense was $526,411, $608,278 and $931,383, respectively, of which $101,000 and $176,000 was
capitalized during the fiscal years ended October 2, 1999 and September 27, 1997, respectively.
The carrying value of the Company’s long-term debt approximates its current aggregate fair value.
8. COMMITMENTS AND CONTINGENCIES
Leases - The Company leases its restaurants, bar facilities, and administrative headquarters through its
subsidiaries under terms expiring at various dates through 2029. Most of the leases provide for the
payment of base rents plus real estate taxes, insurance and other expenses and, in certain instances, for
the payment of a percentage of the restaurants’ sales in excess of stipulated amounts at such facility.
F-14
As of October 2, 1999, future minimum lease payments, net of sublease rentals, under noncancelable
leases are as follows:
Year
2000
2001
2002
2003
2004
Thereafter
Total minimum payments
Less amount representing interest
Present value of net minimum lease payments
Operating
Leases
Capital
Leases
$
7,147,104
7,353,938
7,406,725
7,406,003
6,845,236
24,392,535
$
60,551,541
$
154,281
-
-
-
-
-
154,281
5,624
$
148,657
In connection with the leases included in the table above, the Company obtained and delivered
irrevocable letters of credit in the aggregate amount of $488,750 as security deposits under such leases.
Rent expense was $9,638,551, $9,940,639 and $9,102,267 during the fiscal years ended October 2,
1999, October 3, 1998 and September 27, 1997, respectively. Rent expense for the fiscal years ended
October 2, 1999, October 3, 1998 and September 27, 1997 includes approximately $149,000, $57,000
and $19,000 operating lease deferred credits, representing the difference between rent expense
recognized on a straight-line basis and actual amounts currently payable. Contingent rentals, included
in rent expense, were $2,799,585, $2,769,721 and $2,432,404 for the fiscal years ended October 2,
1999, October 3, 1998 and September 27, 1997, respectively.
Legal Proceedings - In the ordinary course of its business, the Company is a party to various lawsuits
arising from accidents at its restaurants and workmen’s compensation claims, which are generally
handled by the Company’s insurance carriers.
The employment by the Company of management personnel, waiters, waitresses and kitchen staff at a
number of different restaurants has resulted in the institution, from time to time, of litigation alleging
violation by the Company of employment discrimination laws. The Company does not believe that
any of such suits will have a materially adverse effect upon the Company, its financial condition or
operations.
A lawsuit was commenced against the Company in October 1997 in the District Court for the Southern
District of New York by 44 present and former employees alleging various violations of Federal wage
and hour laws. The complaint seeks an injunction against further violations of the labor laws and
payment of unpaid minimum wages, overtime and other allegedly required amounts, liquidated
damages, penalties and attorneys’ fees. The Company believes that most of the claims asserted in this
litigation, including those with respect to minimum wages, are insubstantial. The Company believes
that there were certain violations of overtime requirements, which have today been largely corrected,
for which the Company will have liability. The period of time in which affected employees could “opt-
in” to the lawsuit asserting similar violations has expired and a total of 214 individuals have so elected.
Discovery in this action has not been completed. This uncertainty prevents the Company from making
any reasonable estimate of its ultimate liability. However, based upon information available to the
Company at this time, the Company does not believe that the amount of liability which may be
sustained in this action will have a materially adverse effect on the Company’s business or financial
condition.
F-15
A lawsuit was commenced against the Company in April 1997 in the District Court for Clark County,
Nevada by one former employee and one current employee of the Company’s Las Vegas subsidiary
alleging that: (i) the Company forced food service personnel at the Company’s Las Vegas facilities to
pay a portion of their tips back to the Company in violation of Nevada law and (ii) the Company failed
to timely pay wages to terminated employees. The action was brought as a class action on behalf of all
similarly situated employees. The Company believes that the first allegation is entirely without merit
and that the Company has no liability. The Company also believes that its liability, if any, from an
adverse result in connection with the second allegation would be inconsequential. The Company
intends to vigorously defend against these claims.
In addition, several unfair labor practice charges have been filed against the Company before the
National Labor Relations Board with respect to the company’s Las Vegas subsidiary. One consolidated
complaint alleged that the Company unlawfully terminated seven employees and disciplined seven other
employees allegedly in retaliation for their union activities. An Administrative Law Judge (ALJ) found
that five employees were terminated unlawfully and two were discharged for valid reasons. As far as the
discipline, the judge found that the Company acted legally in disciplining four employees but not
lawfully with respect to three employees. The Company has appealed the adverse rulings of the ALJ to
the National Labor Relations Board in Washington, D.C. The Company believes that there are
reasonable grounds for obtaining a reversal of the unfavorable findings by the ALJ and does not believe
that an adverse outcome in this proceeding will have a material adverse effect upon the Company’s
financial condition or results of operations. In May 1999, the ALJ issued a favorable decision involving
unfair labor practice charges filed against the Company before the National Labor Relations Board with
respect to the Company’s Las Vegas subsidiary. The complaint alleged that four employees were
terminated and three other employees disciplined because of their union activities. The ALJ found that
none of the employees were terminated or disciplined for inappropriate reasons. The ALJ found two
violations of management communications rules for which non-economic remedies were proposed. A
second unfair labor practice matter is pending before the full National Labor Relations Board. The
company does not believe that an adverse outcome in any of the unfair practice charges will have a
material adverse effect upon the Company’s financial condition or results of operations.
The Company believes that these unfair labor practice charges and the litigation described above are
part of an ongoing campaign by the Culinary Workers Union which is seeking to represent employees at
the Company’s Las Vegas restaurants. However, rather than pursue the normal election process
pursuant to which employees are given the freedom to choose whether they should be represented by a
union, a process which the Company support. The Company believes the union is seeking to achieve
recognition as the bargaining agent for such employees through a campaign directed not at the
Company’s employees but at the Company and its stockholders. The Company intends to continue to
support the right of its employees to decide such matters and to oppose the efforts of the Culinary
Workers Union to circumvent that process.
An action was commenced in May 1998 in Superior Court of the District of Columbia against the
Company and its Washington, D.C. subsidiaries by 7 present and former employees of the restaurants
owned by such subsidiaries alleging violations of the District of Columbia Wage & Hours Act relating
to minimum wages and overtime compensation. The Company does not believe that its liability, if any,
from an adverse result in this matter would have a material adverse effect upon its business or financial
condition.
F-16
9.
SHAREHOLDERS’ EQUITY
Common Stock Private Placement - In December 1996, the Company raised net proceeds of
$6,028,626 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 restaurant facilities at the New York New
York Hotel & Casino in Las Vegas which opened in January 1997.
Common Stock Repurchase Plan - In August 1998, the Company authorized the repurchase of up to
500,000 shares of the Company’s outstanding common stock. In April 1999, the Company authorized
the repurchase of an additional 300,000 shares of the Company’s outstanding common stock. For the
years ended October 2, 1999 and October 3, 1998 the Company repurchased 422,700 and 159,000
shares at a total cost of $4,228,162 and $1,522,496, respectively.
10. STOCK OPTIONS
On October 15, 1985, the Company adopted a Stock Option Plan (the “Plan”) pursuant to which the
Company reserved for issuance an aggregate of 175,000 shares of common stock. In May 1991 and
March 1994, the Company amended such Plan to increase the number of shares issuable under the Plan
to 350,000 and 447,650, respectively. In March 1996, the Company adopted a second plan and reserved
for issuance an additional 135,000 shares. In March 1997, the Company amended this plan to increase
the number of shares included under the plan to 270,000. Options granted under the Plans to key
employees are exercisable at prices at least equal to the fair market value of such stock on the dates the
options were granted. The options expire five years after the date of grant and are generally exercisable
as to 25% of the shares commencing on the first anniversary of the date of grant and as to an additional
25% commencing on each of the second, third and fourth anniversaries of the date of grant.
F-17
Additional information follows:
1999
1998
1997
Weighted
Average
Exercise
Price
Shares
Outstanding, beginning of year
311,500
$
10.86
Options:
Granted
Exercised
Canceled or expired
Outstanding, end of year (a)
214,000
(20,500)
(16,500)
488,500
10.00
8.00
9.24
10.65
Weighted
Average
Exercise
Price
$
10.38
11.38
6.50
8.63
10.86
Shares
227,500
100,000
(10,000)
(6,000)
311,500
Shares
105,625
150,000
(17,500)
(10,625)
227,500
Weighted
Average
Exercise
Price
$
7.18
11.71
4.89
6.37
10.38
Price Range, Outstanding Shares
$8.00 - $12.00
$8.00 - $12.00
$6.50 - $12.00
Weighted Average Years
Shares available for future grant
3.3 years
22,500
3.2 years
20,000
3.53 years
120,000
Options exercisable (a)
178,917
10.78
117,583
10.13
47,500
7.65
(a) Options become exercisable at various times until expiration dates ranging from October 1999
through April 2004.
Statement of Financial Accountings Standards No. 123, Accounting for Stock-Based Compensation
(“SFAS No. 123”), requires the Company to disclose pro forma net income and pro forma earnings per
share information for employee stock option grants to employees as if the fair-value method defined in
SFAS No. 123 had been applied. The fair value of each stock-option grant is estimated on the date of
grant using the Black-Scholes option pricing. The assumptions for fiscal 1999 include: risk-free
interest rate of 6.25%; no dividend yield; expected life of four years; and expected volatility of 38%.
The assumptions for fiscal 1998 include; risk free interest rate of 5.5%; no dividend yield; expected life
of four years; and expected volatility of 75%. The assumptions for fiscal 1997 include; risk-free
interest rate of 6.5%; no dividend yield; expected life of 4 years and expected volatility of 38%.
The pro forma impact was as follows:
Net earnings as reported
Net earnings - pro forma
Earnings per share as reported - basic
Earnings per share as reported - diluted
Earnings per share pro forma - basic
Earnings per share pro forma - diluted
Year Ended
October 2,
1999
October 3,
1998
September 27,
1997
$
4,494,731
4,307,357
$
1.30
1.29
1.24
1.24
$
4,612,141
4,464,576
$
1.21
1.20
1.17
1.16
$
1,737,655
1,694,991
$
0.47
0.46
0.46
0.45
F-18
The exercise of nonqualified stock options in the fiscal years ended October 2, 1999, October 3, 1998
and September 27, 1997 resulted in income tax benefits of $21,263, $18,615 and $57,580, respectively,
which were credited to additional paid-in capital. The income tax benefits result from the difference
between the market price on the exercise date and the option price.
11. MANAGEMENT FEE INCOME
As of October 2, 1999, the Company provides management services to five restaurants owned by
outside parties. In accordance with the contractual arrangements, the Company earns fixed fees and
management fees based on restaurant sales and operating profits as defined by the various management
agreements.
Restaurants managed had net sales of $9,803,693, $12,738,639 and $14,151,888 during the management
periods within the years ended October 2, 1999, October 3, 1998 and September 27, 1997, respectively,
which are not included in consolidated net sales of the Company.
12.
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 nonconsolidated basis. For New York
State and City income tax purposes, the losses incurred by a subsidiary may only be used to offset that
subsidiary’s income.
The provision for income taxes consists of the following:
Current provision:
Federal
State and local
Deferred provision (credit):
Federal
State and local
October 2,
1999
Year Ended
October 3,
1998
September 27,
1997
$
1,298,451
894,533
$
1,892,997
1,117,363
$
668,391
908,183
2,192,984
3,010,360
1,576,574
349,299
33,325
382,624
100,486
(42,105)
(329,602)
(102,364)
58,381
(431,966)
$
2,575,608
$
3,068,741
$
1,144,608
F-19
The provision for income taxes differs from the amount computed by applying the Federal statutory rate
due to the following:
October 2,
1999
Year Ended
October 3,
1998
September 27,
1997
Provision for Federal income taxes (34%)
$
2,404,000
$
2,612,000
$
980,000
State and local income taxes net of Federal
tax benefit
Amortization of goodwill
Tax credits
Other
612,000
26,000
710,000
26,000
532,000
26,000
(512,000)
(506,000)
(373,000)
45,608
226,741
(20,392)
$
2,575,608
$
3,068,741
$
1,144,608
Deferred tax assets or liabilities are established for (a) temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes, and (b) operating loss carryforwards. The tax effects of items comprising the Company’s net
deferred tax asset are as follows:
Deferred tax assets:
Operating loss carryforwards
Operating lease deferred credits
Carryforward tax credits
Depreciation and amortization
Deferred Gains
Valuation allowance
October 2,
1999
October 3,
1998
$
1,035,396
570,370
976,725
114,662
(270,112)
(870,289)
$
839,253
634,516
1,086,025
22,104
-
(642,522)
$
1,556,752
$
1,939,376
A valuation allowance for deferred taxes is required if, based on the evidence, it is more likely than not
that some of the deferred tax assets will not be realized. The Company believes that uncertainty exists
with respect to future realization of certain operating loss carryforwards and operating lease deferred
credits. Therefore, the Company provided a valuation allowance of $870,289 at October 2, 1999 and
$642,522 at October 3, 1998. The Company has state operating loss carryforwards of $11,671,000 and
local operating loss carryforwards of $8,270,000, which expire in the years 2002 through 2014.
The Internal Revenue Service is currently examining the Company’s federal income tax returns for
fiscal years ended September 28, 1991 through October 1, 1994, and the Internal Revenue Service 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.
F-20
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.
13. OTHER INCOME
Other income consists of the following:
Purchasing service fees
Insurance proceeds (a)
Sales of logo T-shirts and hats
Other
October 2,
1999
$
88,061
-
133,819
213,730
Year Ended
October 3,
1998
$
124,455
-
160,596
205,067
September 27,
1997
$
86,073
377,427
171,259
145,522
$
435,610
$
490,118
$
780,281
(a)
In July 1994, the Company was required to close a restaurant in Manhattan (Ernie’s) on a
temporary basis to enable structural repairs to be made to the ceiling of the restaurant. The cost of
such repairs, other ongoing restaurant operating expenses and a guaranteed profit were borne by a
third party. The restaurant reopened in February 1995 and the agreement provided that the third
party continue to guarantee some level of operating profits through January 1998. During the
fiscal year ended September 27, 1997, the Company received $377,427 in excess of the continuing
restaurant operating expenses.
14.
INCOME PER SHARE OF COMMON STOCK
The Company adopted in the first quarter of fiscal 1998, 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 include common stock equivalents
consisting of dilutive stock options and warrants. The Company also retroactively applied the new
standard to all periods presented.
F-21
A reconciliation of the numerators and denominators of the basic and diluted per share computations
follow.
Year ended October 2, 1999:
Basic EPS
Stock options and warrants
Diluted EPS
Year ended October 3, 1998:
Basic EPS
Stock options and warrants
Diluted EPS
Year ended September 27, 1997:
Basic EPS
Stock options and warrants
Diluted EPS
Income
(Numerator)
Shares
Per-Share
(Denominator) Amount
$
4,494,731
-
4,494,731
3,460,865
15,115
3,475,980
$
1.30
0.01
1.29
4,612,141
-
4,612,141
1,737,655
-
1,737,655
3,826,255
25,764
3,852,019
3,714,116
28,695
3,742,811
1.21
0.01
1.20
0.47
0.01
0.46
15. QUARTERLY INFORMATION (UNAUDITED)
The following table sets forth certain quarterly operating data.
1999
Net sales
Fiscal Quarter Ended
January 2
1999
April 3
1999
July 3
1999
October 2,
1999
$
26,933,489
$
23,344,731
$
31,563,976
$
28,958,717
Gross restaurant profit
19,823,052
16,983,679
23,408,382
21,284,497
Net income (loss)
1,025,576
(156,178)
2,115,333
1,510,000
Net income (loss) per share -
basic
Net income (loss) per share -
diluted
1998
Net sales
$
0.28
$
(0.04)
$
0.63
$
0.46
$
0.28
$
(0.04)
$
0.63
$
0.45
December 27,
1997
March 28,
1998
June 27,
1998
October 3,
1998
Fiscal Quarter Ended
$
26,940,384
$
25,198,012
$
33,029,512
$
32,230,545
Gross restaurant profit
19,692,165
18,345,554
24,432,866
23,662,166
Net income (loss)
727,441
(254,154)
2,428,676
1,710,178
Net income (loss) per share -
basic and diluted
$
0.19
$
(0.07)
$
0.63
$
0.45
F-22
1997
Net sales
December 28,
1996
March 29,
1997
June 28,
1997
September 27,
1997
Fiscal Quarter Ended
$
18,166,656
$
24,887,795
$
31,469,304
$
29,802,631
Gross restaurant profit
13,068,926
17,775,683
22,922,594
22,107,296
Net income (loss)
(552,503)
(1,108,203)
1,947,476
1,450,885
Net income (loss) per share
basic and diluted
$
(0.16)
$
(0.29)
$
0.51
$
0.38
16. SUBSEQUENT EVENTS (UNAUDITED)
In December 1999 the Company entered into a new credit agreement with its main bank, Bank Leumi
USA. The new amendment allows the Company to borrow up to $28,000,000 for use in construction of
and acquisition of new restaurants and for working capital purposes at the Company’s existing
restaurants. After two years, the revolving loans will be converted into term loans payable over 36
months. Outstanding loans bear interest at prime + ½%. The agreement also includes a five year
$2,000,000 Letter of Credit Facility for use at the Company’s restaurants in lieu of lease security
deposits.
* * * * * *
F-23
CORPORATE INFORMATION
BOARD OF DIRECTORS
Ernest Bogen
Chairman
Michael Weinstein
President
Paul Gordon
Vice President – Director of Las Vegas Operations
Andrew Kuruc
Vice President – Chief Financial Officer
Vincent Pascal
Vice President - Operations
Robert Towers
Vice President – Chief Operating Officer
Donald D. Shack
Shack & Siegel, P.C.
Jay Galin
President, G.&G. Shops, Inc.
Bruce Lewin
Owner, Bruce R. Lewin Gallery
EXECUTIVE OFFICE
AUDITORS
85 Fifth Avenue
New York, N.Y. 10003
(212) 206-8800
Deloitte & Touche
Two World Financial Center
New York, N.Y. 10281
TRANSFER AGENT
GENERAL COUNSEL
Continental Stock Transfer &
Trust Company
2 Broadway
New York, N.Y. 10001
Shack & Siegel, P.C.
530 Fifth Avenue
New York, N.Y. 10036
Ark Restaurants Corp.
85 Fifth Avenue
New York, N.Y. 10003-3019
(212) 206-8800