Ark Restaurants Announces Financial Results for the Fourth Quarter and Fiscal Year Ended 2023
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Insights
The reported financial results from Ark Restaurants Corp. reflect a challenging fiscal year, with a notable decline in quarterly revenue and a significant net loss attributed to a non-cash goodwill impairment charge. This impairment, primarily driven by stock price volatility and uncertainty surrounding key lease renewals, suggests a reevaluation of the company's assets and future earning potential.
From an investor's perspective, the stark contrast between the current year's net loss and the previous year's net income, despite a marginal annual revenue increase, raises concerns about the company's operational resilience and strategic direction. The reduction in EBITDA further underscores potential issues in cost management or underlying profitability challenges.
Long-term implications for stakeholders may include a reassessment of the company's valuation and the need for strategic initiatives to stabilize and improve financial performance. The disclosure of cash and debt positions provides a snapshot of the company's liquidity and leverage, which are critical factors for assessing financial health.
The reported decrease in same-store sales, a key indicator of a restaurant's health, suggests that Ark Restaurants Corp. is facing headwinds that are impacting customer traffic or spending. The temporary closure of Gallagher's Steakhouse for renovation, while necessary for long-term brand vitality, has contributed to revenue loss, highlighting the importance of strategic planning around significant operational disruptions.
The broader industry context, including competitive pressures and changing consumer preferences, must be considered when interpreting these financial results. The company's performance relative to industry benchmarks could indicate whether Ark Restaurants Corp. is facing systemic challenges or if its issues are more company-specific.
Investors and analysts will likely scrutinize the company's plans to address the identified impairment triggers, such as lease renewals and stock price volatility. The company's ability to negotiate favorable lease terms and present a compelling value proposition to shareholders will be critical for future stability and growth.
The goodwill impairment charge is a red flag for risk management, signaling a need for Ark Restaurants Corp. to closely monitor and adapt to market conditions and internal challenges. The reliance on the income approach for fair value estimation, due to low share volume and unreliable market data, indicates a less liquid market for the company's stock, potentially increasing investment risk.
Investors should be mindful of the risks associated with the upcoming lease expirations and the potential for non-renewal. These factors introduce significant uncertainty into the company's future cash flows and operational stability. Risk mitigation strategies, including diversifying revenue streams and securing long-term lease agreements, will be crucial for the company's risk profile.
Furthermore, the company's debt position and cash reserves will be important factors in its ability to navigate short-term challenges and invest in opportunities that may arise from a dynamic and competitive restaurant industry landscape.
The Company’s fiscal year ends on the Saturday nearest September 30. The fiscal years ended September 30, 2023 and October 1, 2022 both included 52 weeks and the quarters ended September 30, 2023 and October 1, 2022 both included 13 weeks.
Financial Results
Total revenues for the 13 weeks ended September 30, 2023 were
Total revenues for the year ended September 30, 2023 were
Company-wide same store sales decreased
The Company's EBITDA, excluding a non-cash goodwill impairment charge in the amount of
The Company's EBITDA, excluding the non-cash goodwill impairment charge of
As of September 30, 2023, the Company had cash and cash equivalents of
Other Matters
In performing its goodwill impairment test as of September 30, 2023, the Company determined that a triggering event had occurred. Due to the volatility of the Company's stock price in the fourth quarter of fiscal 2023, the upcoming expiration of the current Bryant Park Grill & Cafe and The Porch at Bryant Park leases on April 30, 2025 and the related requests for proposals from the landlord for both locations received in July 2023 and September 2023, respectively (see Note 11 - Commitments and Contingencies to the Consolidated Financial Statements), the Company determined that there were indicators of potential impairment of its goodwill as of September 30, 2023. As such, the Company performed a qualitative and quantitative assessment for its goodwill. The fair value of the equity was determined using the income approach. Given the relatively low volume of shares traded and the lack of reliable market data as of September 30, 2023, the Company determined the income approach provided the best approximation of fair value. In the income approach, we utilized a discounted cash flow analysis, which involved estimating the expected future after-tax cash flows generated and then discounting those cash flows to present value, reflecting the relevant risks associated with the achievement of projected cash flows, the possibility that the Bryant Park Grill & Cafe and The Porch at Bryant Park leases may not be renewed beyond their expirations on April 30, 2025 (see Note 11 - Commitments and Contingencies), and the time value of money. This approach requires the use of significant estimates and assumptions, including forecasted revenue growth rates, forecasted cash flows from operations, and discount rates that reflect the risk inherent in the future cash flows.
Based on the impairment analysis, the carrying amount of our equity exceeded its estimated fair value, which indicated an impairment of the carrying value of our goodwill. Accordingly, during the fourth quarter of fiscal 2023, the Company recorded a pre-tax non-cash goodwill impairment charge of
About Ark Restaurants Corp.
Ark Restaurants owns and operates 17 restaurants and bars, 16 fast food concepts and catering operations primarily in
Cautionary Note Regarding Forward-Looking Statements
Except for historical information, this news release contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These statements involve unknown risks, and uncertainties that may cause the Company's actual results or outcomes to be materially different from those anticipated and discussed herein. Important factors that might cause such differences are discussed in the Company's filings with the Securities and Exchange Commission. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Actual results could differ materially from those anticipated in these forward-looking statements, if new information becomes available in the future.
Non-GAAP Financial Information
This news release includes non-generally accepted accounting principles ("GAAP") performance measures. Although EBITDA is not a measure of performance or liquidity calculated in accordance with GAAP, the Company believes the use of this non-GAAP financial measure enhances an overall understanding of the Company's past financial performance as well as providing useful information to the investor because of its historical use by the Company as both a performance measure and measure of liquidity, and the use of EBITDA by virtually all companies in the restaurant sector as a measure of both performance and liquidity. However, investors should not consider this measure in isolation or as a substitute for net income (loss), operating income (loss), cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with GAAP as it may not necessarily be comparable to similarly titled measure employed by other companies.
ARK RESTAURANTS CORP. |
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Consolidated Statements of Operations |
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(In Thousands, Except per share amounts) |
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13 Weeks Ended September 30, 2023 |
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13 Weeks Ended
2022 |
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52 Weeks Ended September 30, 2023 |
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52 Weeks Ended October 1, 2022 |
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TOTAL REVENUES |
|
$ |
44,400 |
|
|
$ |
46,884 |
|
|
$ |
184,793 |
|
|
$ |
183,674 |
|
COSTS AND EXPENSES: |
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|
|
|
|
|
|
|
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Food and beverage cost of sales |
|
|
12,152 |
|
|
|
13,036 |
|
|
|
49,624 |
|
|
|
52,573 |
|
Payroll expenses |
|
|
17,295 |
|
|
|
16,074 |
|
|
|
66,322 |
|
|
|
60,000 |
|
Occupancy expenses |
|
|
5,884 |
|
|
|
6,367 |
|
|
|
23,472 |
|
|
|
22,181 |
|
Other operating costs and expenses |
|
|
5,940 |
|
|
|
5,850 |
|
|
|
23,498 |
|
|
|
21,823 |
|
General and administrative expenses |
|
|
2,752 |
|
|
|
3,082 |
|
|
|
12,407 |
|
|
|
12,936 |
|
Goodwill impairment |
|
|
10,000 |
|
|
|
— |
|
|
|
10,000 |
|
|
|
— |
|
Depreciation and amortization |
|
|
1,080 |
|
|
|
1,052 |
|
|
|
4,310 |
|
|
|
4,297 |
|
Total costs and expenses |
|
|
55,103 |
|
|
|
45,461 |
|
|
|
189,633 |
|
|
|
173,810 |
|
OPERATING INCOME (LOSS) |
|
|
(10,703 |
) |
|
|
1,423 |
|
|
|
(4,840 |
) |
|
|
9,864 |
|
OTHER (INCOME) EXPENSE: |
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|
|
|
|
|
|
|
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Interest expense, net |
|
|
161 |
|
|
|
305 |
|
|
|
906 |
|
|
|
1,083 |
|
Other income |
|
|
(26 |
) |
|
|
(37 |
) |
|
|
(52 |
) |
|
|
(421 |
) |
Gain on forgiveness of PPP Loans |
|
|
— |
|
|
|
— |
|
|
|
(272 |
) |
|
|
(2,420 |
) |
Total other (income) expense, net |
|
|
135 |
|
|
|
268 |
|
|
|
582 |
|
|
|
(1,758 |
) |
INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES |
|
|
(10,838 |
) |
|
|
1,155 |
|
|
|
(5,422 |
) |
|
|
11,622 |
|
Provision (benefit) for income taxes |
|
|
(370 |
) |
|
|
157 |
|
|
|
(64 |
) |
|
|
1,448 |
|
CONSOLIDATED NET INCOME (LOSS) |
|
|
(10,468 |
) |
|
|
998 |
|
|
|
(5,358 |
) |
|
|
10,174 |
|
Net (income) loss attributable to non-controlling interests |
|
|
104 |
|
|
|
(236 |
) |
|
|
(570 |
) |
|
|
(893 |
) |
NET INCOME (LOSS) ATTRIBUTABLE TO ARK RESTAURANTS CORP. |
|
$ |
(10,364 |
) |
|
$ |
762 |
|
|
$ |
(5,928 |
) |
|
$ |
9,281 |
|
|
|
|
|
|
|
|
|
|
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NET INCOME (LOSS) PER ARK RESTAURANTS CORP. COMMON SHARE: |
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|
|
|
|
|
|
|
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Basic |
|
$ |
(2.88 |
) |
|
$ |
0.21 |
|
|
$ |
(1.65 |
) |
|
$ |
2.61 |
|
Diluted |
|
$ |
(2.88 |
) |
|
$ |
0.21 |
|
|
$ |
(1.65 |
) |
|
$ |
2.58 |
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: |
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|
|
|
|
|
|
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Basic |
|
|
3,602 |
|
|
|
3,566 |
|
|
|
3,601 |
|
|
|
3,556 |
|
Diluted |
|
|
3,602 |
|
|
|
3,616 |
|
|
|
3,601 |
|
|
|
3,603 |
|
|
|
|
|
|
|
|
|
|
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EBITDA Reconciliation: |
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|
|
|
|
|
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|
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Income (loss) before provision (benefit) for income taxes |
|
$ |
(10,838 |
) |
|
$ |
1,155 |
|
|
$ |
(5,422 |
) |
|
$ |
11,622 |
|
Depreciation and amortization |
|
|
1,080 |
|
|
|
1,052 |
|
|
|
4,310 |
|
|
|
4,297 |
|
Interest expense, net |
|
|
161 |
|
|
|
305 |
|
|
|
906 |
|
|
|
1,083 |
|
EBITDA (a) |
|
$ |
(9,597 |
) |
|
$ |
2,512 |
|
|
$ |
(206 |
) |
|
$ |
17,002 |
|
EBITDA, adjusted: |
|
|
|
|
|
|
|
|
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EBITDA (as defined) (a) |
|
$ |
(9,597 |
) |
|
$ |
2,512 |
|
|
$ |
(206 |
) |
|
$ |
17,002 |
|
Non-cash stock option expense |
|
|
78 |
|
|
|
76 |
|
|
|
314 |
|
|
|
298 |
|
Goodwill impairment |
|
|
10,000 |
|
|
|
— |
|
|
|
10,000 |
|
|
|
— |
|
Gain on forgiveness of PPP Loans |
|
|
— |
|
|
|
— |
|
|
|
(272 |
) |
|
|
(2,420 |
) |
Net (income) loss attributable to non-controlling interests |
|
|
104 |
|
|
|
(236 |
) |
|
|
(570 |
) |
|
|
(893 |
) |
EBITDA, as adjusted |
|
$ |
585 |
|
|
$ |
2,352 |
|
|
$ |
9,266 |
|
|
$ |
13,987 |
|
(a) |
EBITDA is defined as earnings before interest, taxes, depreciation and amortization. A reconciliation of EBITDA to the most comparable GAAP financial measure, pre-tax income, is included above. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20231218063402/en/
Anthony J. Sirica
(212) 206-8800
ajsirica@arkrestaurants.com
Source: Ark Restaurants Corp.
FAQ
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