Ark Restaurants (ARKR)

Filed: 11 Aug 20, 4:14pm

Exhibit 99.1                                                
Ark Restaurants Announces Financial Results for the Third Quarter of 2020
Anthony J. Sirica
(212) 206-8800

NEW YORK, New York - August 10, 2020 -- Ark Restaurants Corp. (Nasdaq:ARKR) today reported financial results for the third quarter ended June 27, 2020.

Third Quarter 2020 Financial Results

Total revenues for the 13 weeks ended June 27, 2020 were $7,199,000 versus $44,807,000 for the 13 weeks ended June 29, 2019.

Total revenues for the 39 weeks ended June 27, 2020 were $84,716,000 versus $120,667,000 for the 39 weeks ended June 29, 2019. The 39 weeks ended June 29, 2019 includes revenues of $1,040,000 related to Durgin-Park which was closed January 12, 2019.

Company-wide same store sales are not meaningful as a result of the temporary closure of all of our restaurants in March 2020.

The Company’s EBITDA for the 13 weeks ended June 27, 2020, adjusted for non-controlling interests and non-cash stock option expense was ($4,351,000) versus EBITDA adjusted for non-controlling interests, non-cash stock option expense and losses incurred on the closure of Durgin-Park (discussed below) of $5,838,000 during the same 13-week period of last year. Net loss for the 13 weeks ended June 27, 2020 was ($2,526,000) or ($0.72) per basic and diluted share, compared to a net income of $3,962,000 or $1.14 per basic and $1.12 per diluted share for the same 13-week period in the prior year.

The Company’s EBITDA for the 39 weeks ended June 27, 2020, adjusted for non-controlling interests, non-cash stock option expense and loss on lease termination was ($1,397,000) versus EBITDA adjusted for non-controlling interests, non-cash stock option expense and losses incurred on the closure of Durgin-Park (discussed below) of $9,705,000 during the same 39-week period of last year. Net loss for the 39 weeks ended June 27, 2020 was ($2,791,000) or ($0.80) per basic and diluted share, compared to net income of $3,231,000 or $0.93 per basic and $0.92 per diluted share, for the same 39-week period in the prior year.

COVID-19 Update

The Company’s 2020 fiscal year started strong with revenues and same store sales up 7.3% and 3.5%, respectively for the first quarter compared to the prior year and continuing through February. However, as the novel Coronavirus (“COVID-19”) rapidly spread throughout the world and to the United States we began to experience the impact of COVID-19 during March 2020, resulting in a decline in traffic in early March and the government mandated temporary closures of all of our restaurants during the last two weeks of March 2020. As state and local governments lifted “stay at home” orders and mandatory shut-down requirements in May and June 2020, the Company reopened: (i) all of its properties located in Florida and Alabama, (ii) its operations in the New York-New York Hotel & Casino Resort in Las Vegas, (iii) Sequoia in Washington DC, (iv) The Porch at Bryant Park in New York, NY, (v) Bryant Park Grill and Café in New York, NY, and (vi) El Rio Grande in New York, NY at varying levels of limited capacity as allowed by federal, state and local governments. Although we have experienced some recovery from the initial impact of COVID-19, to date, the impact on our business has been substantial and the long-term impact on our business remains uncertain. We continue to monitor and adhere to local restrictions and are maintaining elevated safety measures.

As a result of mandatory closures and operating at varying levels of limited capacity, included in our operating losses for the 13 and 39 weeks ended June 27, 2020, are approximately $2,300,000 and $3,000,000 of costs directly related to COVID-19. Such costs consist primarily of payments to employees for paid-time off during restaurant closures, inventory waste, and rent and related costs for closed restaurants from the day that they closed until reopening.

In response to these business disruptions and liquidity concerns caused by the COVID-19 pandemic, the Company took the following actions, which management expects will enable the Company to meet its obligations over the next twelve months:
While restaurants were closed or continue to be closed, we furloughed all hourly employees and approximately 95% of salaried restaurant management personnel, while enacting salary reductions for all remaining restaurant management personnel.
As restaurants re-open, restaurant management salaries were restored to 70% of pre-pandemic levels. When a location is producing sustained cash flow, restaurant management salaries were restored to 100% of pre-pandemic amounts.
Initially reduced the pay of all corporate and administrative staff by 50% to 75% and senior management salaries by 75% to 95%, and temporarily suspended all board fees. As of June 27, 2020, most corporate salaries have been restored to 65% of pre-pandemic levels.
Entered into a Payment Suspension Agreement with its bank which deferred aggregate principal payments of $675,000 due on June 1, 2020 to the respective loan maturity dates. In addition, our bank agreed to relaxed financial covenants through fiscal Q3 2021.
Canceled the payment of the $0.25 dividend declared on March 2, 2020.
Suspended future dividend payments until such time as the Board deems appropriate to reinstate.
Canceled or delayed all non-essential capital expenditures.
Suspended the vast majority of lease payments for the months of April, May and June 2020 and through August 2020 for all locations that are still closed and is currently in negotiations for rent concessions, abatements and deferrals with its landlords to reduce these lease payments. While most landlords have agreed to certain concessions subsequent to quarter end, there can be no assurance that the Company will be successful in obtaining all of the relief it is seeking.
Certain Company subsidiaries applied for and received a total of approximately $15.0 million of loans under the Paycheck Protection Program of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which was enacted March 27, 2020.
Utilized additional provisions of the CARES Act to obtain tax savings as well as the deferral of our portion of social security taxes to future years.

Due to the rapid development and fluidity of this situation, the management cannot determine the ultimate impact that the COVID-19 pandemic will have on the Company’s consolidated financial condition, liquidity, future results of operations, suppliers, industry, and workforce and therefore any prediction as to the ultimate material adverse impact on the Company’s consolidated financial condition, liquidity, and future results of operations is uncertain. The disruption in operations has led the Company to consider the impact of the COVID-19 pandemic on its liquidity, debt covenant compliance, and recoverability of long-lived and ROU assets, goodwill and intangible assets, among others. In addition, we cannot predict how soon we will be able to reopen all of our restaurants at full capacity, and our ability to reopen will depend in part on the actions of a number of governmental bodies over which we have no control. Moreover, once restrictions are lifted, it is unclear how quickly customers will return to our restaurants, which may be a function of continued concerns over safety and/or depressed consumer sentiment due to adverse economic conditions, including job losses. If these disruptions continue, the Company expects a continued material negative

impact on its consolidated financial condition, future results of operations and liquidity. The extent of such negative impact will be determined, in part, by the longevity and severity of the pandemic.

Other Matters

As of December 29, 2018, the Company determined that it would not be able to operate Durgin-Park profitably due to decreased traffic at the Faneuil Hall Marketplace in Boston, MA, where it was located, and rising labor costs. As a result, included in the Consolidated Condensed Statement of Operations for the 13 and 39 weeks ended June 29, 2019 are losses on closure in the amount of $39,000 and $1,106,000 consisting of: (i) impairment of trademarks of $721,000, (ii) accelerated depreciation of fixed assets of $333,000, and (iii) write-offs of prepaid and other expenses of $52,000. The restaurant was closed on January 12, 2019.

The Company adopted the new lease accounting standards on September 29, 2019 (the first day of fiscal year 2020) which requires us to recognize assets and liabilities for leases with lease terms of more than twelve months on our balance sheet. We used a modified retrospective approach and therefore did not restate comparative periods for those lease contracts for which we have taken possession of the property as of September 28, 2019. Accordingly, prior period amounts were not revised and continue to be reported in accordance with the accounting standards then in effect. As a result of the adoption of this standard, we recorded right-of-use assets of $62,330,000 and lease liabilities related to our real estate operating leases of $63,943,000. The adoption of this standard did not materially impact retained earnings or our Consolidated Condensed Statement of Operations and had no impact on cash flows.

About Ark Restaurants Corp.

Ark Restaurants owns and operates 20 restaurants and bars, 17 fast food concepts and catering operations primarily in New York City, Florida, Washington, D.C, Las Vegas, Nevada and the gulf coast of Alabama. Five restaurants are located in New York City, two are located in Washington, D.C., five are located in Las Vegas, Nevada, three are located in Atlantic City, New Jersey, three are located on the east coast of Florida and two are located on the Gulf Coast of Alabama. The Las Vegas operations include four restaurants within the New York-New York Hotel & Casino Resort and operation of the hotel's room service, banquet facilities, employee dining room and six 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 and a restaurant in the Tropicana Hotel and Casino. The operation at the Foxwoods Resort Casino in Connecticut consists of one fast food concept. The Florida operations include the Rustic Inn in Dania Beach, Shuckers in Jensen Beach and JB’s on the Beach in Deerfield Beach, and the operation of four fast food facilities in Tampa and six fast food facilities in Hollywood, each at a Hard Rock Hotel and Casino operated by the Seminole Indian Tribe at these locations. In Alabama, the Company operates two Original Oyster Houses, one in Gulf Shores and one in Spanish Fort.

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.

Consolidated Statements of Operations
For the 13- and 39-week periods ended June 27, 2020 and June 29, 2019
(In Thousands, Except per share amounts)                                                
13 Weeks Ended
June 27,
13 Weeks Ended
June 29,
39 Weeks Ended
June 27,
39 Weeks Ended
June 29,
     Food and beverage cost of sales 1,847
     Payroll expenses 3,701
     Occupancy expenses 3,004
     Other operating costs and expenses 852
     General and administrative expenses 2,437
     Loss of termination of lease 
     Loss on closure of Durgin-Park 
     Depreciation and amortization 981
            Total costs and expenses 12,822
 (5,123) 5,114
 (6,065) 4,131
Provision (benefit) for income taxes (3,118) 283
 (3,213) 728
 (2,852) 3,403
Net (income) loss attributable to non-controlling interests 233
 (132) 61
 $(2,791) $3,231


     Basic $(0.72) $1.14
 $(0.80) $0.93
     Diluted $(0.72) $1.12
 $(0.80) $0.92
     Basic 3,502
     Diluted 3,502
 EBITDA Reconciliation:  
Income (loss) before provision (benefit) for income taxes $(5,877) $4,377
 $(6,065) $4,131
Depreciation and amortization 981
Interest expense, net 254
EBITDA (a) $(4,642) $5,905
 $(1,935) $8,682
EBITDA adjusted for non-controlling interests, non-cash stock option expense and losses on lease termination and the closure of Durgin-Park  
EBITDA (as defined) (a) $(4,642) $5,905
 $(1,935) $8,682
Net (income) loss attributable to non-controlling interests 233
 (132) 61
Non-cash stock option expense 58
Loss on lease termination 
Loss closure of Durgin-Park 
EBITDA, as adjusted $(4,351) $5,838
 $(1,397) $9,705

EBITDA is defined as earnings before interest, taxes, depreciation and amortization.  Although EBITDA is not a measure of performance or  liquidity calculated in accordance with generally accepted accounting principles ("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, it may not necessarily be comparable to similarly titled measures employed by other companies.  A reconciliation of EBITDA to the most comparable GAAP financial measure, income before provision for income taxes, is included above.