ark restaurants

I just found out that I am allowed to post info on some of the companies I have been researching at work. The firm I works for sells reports to a larger firm which usually purchases stocks we recommend. Any stocks which the company owns, might be buying soon or sells I will not write about due to any potential compliance issue.

Below are some notes on a company I researched a bit. This is not an indepth analysis just  figures and some of my thoughts on the company that my boss requested from me. In addition, this is not necessarily the way I research my own stocks, but rather information my boss wanted me to look into.

Ark Restaurants owns and operates 20 restaurants and bars, 31 fast food concepts and catering operations.  Seven restaurants are located in New York City, four are located in Washington, D.C., five are located in Las Vegas, Nevada, two are located in Atlantic City, New Jersey, one is located at the Foxwoods Resort Casino in Ledyard, Connecticut and one is located in Boston, Massachusetts. The Las Vegas operations include three restaurants within the New York-New York Hotel & Casino Resort and operation of the hotel’s room service, banquet facilities, employee dining room and nine food court concepts; one bar within the Venetian Casino Resort as well as three food court concepts and one restaurant within the Planet Hollywood Resort and Casino. In Atlantic City, New Jersey, the Company operates a restaurant and a bar in the Resorts Atlantic City Hotel and Casino. The operations at the Foxwoods Resort Casino include one fast food concept and six fast food concepts at the MGM Grand Casino. In Boston, Massachusetts, the Company operates a restaurant in the Faneuil Hall Marketplace. The Florida operations under management include five fast food facilities in Tampa, Florida and seven fast food facilities in Hollywood, Florida, each at a Hard Rock Hotel and Casino operated by the Seminole Indian Tribe at these locations. Restaurants range in size from the The Grill at Two Trees in Connecticut which can seat 101 to the Lucky Seven located in Foxwoods Connecticut which can seat 4,000.

The company’s restaurants generally do not achieve substantial increases in revenue from year to year, which the company considers to be typical of the restaurant industry. To achieve significant increases in revenue or to replace revenue of restaurants that lose customer favor or which close because of lease expirations or other reasons the company would have to open additional restaurant facilities or expand existing restaurants.

The company’s business is highly seasonal. Q2 of the fiscal year, consisting of the non-holiday portion of the cold weather season in New York and Washington (January, February and March), is the poorest performing quarter. The company achieves its best results during the warm weather, attributable to extensive outdoor dining availability, particularly at Bryant Park in New York and Sequoia in Washington, D.C. (some of ARKR’s largest restaurants) and our outdoor cafes. However, even during summer months these facilities can be adversely affected by unusually cool or rainy weather conditions. In terms of weather, the company’s facilities in Las Vegas generally operate on a more consistent basis through the year.

The weather factor is especially important considering the following information: Several of ARKR’s NYC and DC restaurants have significant outdoor space, such as Bryant Park Grill & Café in Bryant Park NY with capacity for 180 indoor seating and 820 outdoor seating, and Sequoia which seats 600 indoor and 400 outdoor.

The company’s revenue in 2009 and 2008 were highest in Q3 and Q4 and lowest in Q1 and Q2, indicating that colder weather conditions decrease revenue, confirming company’s statements.

  • Stock is currently trading at $14.70. 52 week range is 12.43 – 15.58.
  • NI for Q310 was $4.3m, Q210-(670K), and Q110-(807K).
  • Revenue for Q310-$35m, Q210-$26m, and Q110-$25.6m
  • EPS for Q310-$0.83, Q210- $(0.21), Q110-$(0.21)
  • FY09 Revenue-$115m, EBITDA-$8m, Diluted EPS- $0.87, same store sales decreased 10.4% from FY08
  • FY08 Revenue-$125m, EBITDA-$13.6m, Diluted EPS-$1.93, same store sales increased 0.9% from FY07
  • FY07; Revenue-$124m, EBITDA-$14.8m, Diluted EPS-$3.61($1.28 came from discontinued Ops), same store sales increased 8.6% from FY06
  • Stock is currently trading at $14.70. 52 week range is 12.43 – 15.58.
  • NI for FY09 was $3.1m.
  • As of Q310, the Company had cash, cash equivalents and short term investments totaling $9,130,000 and no debt. 18% of the company’s market cap consists of cash, cash equivalents and short term investments. $2.61 of the company’s share price of $15 consists of cash.
  • Although the company has DTA of $5.2m (as of Q310), the Company expects its effective tax rate to be approximately 32.0% to 36.0%.
  • Food and beverage costs for Q310 as a percentage of total revenues were 25.6% and have remained relatively consistent as compared to 25.5% in Q309.
  • Payroll expenses in Q310 were down 230bps compared to Q309. The decrease was due to the impact of increased revenue experienced during the Q310, as a result of improved weather conditions.

In addition, the company’s business is highly dependent on the success of the gambling industry as detailed further below.

Below is data for the Q310 ended June 30th:

  • Total revenues for the Q310 were $35.2m versus $31.1m in Q309. Total revenues for the nine month period ended Q310 were $85.9m versus $81.7m for the nine months ended Q309.
  • EBITDA for Q310 was $5.2m versus $3.5m for Q309. EBITDA for the nine month period ended Q310 was $5.4m versus $5.1m for the nine months ended Q309.
  • For Q310, the Company’s NI was $2.9m, or $0.84 per share ($0.83per diluted share), compared to $1.6m, or $0.46per share ($0.46 per diluted share), for Q309. For the nine months ended Q310, the Company’s NI was $1.5m or $0.44 per share ($0.43per diluted share), compared to $1.73m, or $0.50 per share ($0.50per diluted share), for the nine months ended Q309
  • Company-wide same store sales increased 9% for Q310 compared to Q309,  and increased 1.1% for the nine month period ended Q310 compared to the same nine month period ended in Q309
  • The increase in same store sales was primarily the result of improved weather conditions and greater utilization of the Company’s outdoor seating in Washington D.C. In addition same store sales in New York, increased $1.5m or 29.9% during Q3 as compared to Q309, were positively impacted by the improved weather conditions which allowed for significantly greater utilization of the Company’s outdoor seating facilities.  Same store sales declined in locations with high exposure to the gambling industry; 2.7% decrease in Los Vegas, 5.8% decrease in Atlantic City, and a decrease of 9.2% in Connecticut (where the company has a restaurant in Foxwoods).

Data from Q210 Ended March 30th:

  • Total revenues for the Q210 were $25.1m versus $23.8m for Q209. Total revenues for the six month period ended in Q210 were $50.7m versus $50.5m for the six month period ended Q209.
  • EBITDA was $130K in Q210 versus a -$370K during Q209. EBITDA, for the six months ended in Q210, was $185K versus $1,598,000 for the six months ended in Q209.
  • For Q210, the Company’s NI was -$670K, or -$0.19 per share ($0.19per diluted share), compared to a NI of -$710K, or -$0.20per share ($0.20 per diluted share), for Q209. For the six months ended in Q210, the Company’s NI was $1.4m, or $0.40 per share
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