Here are my bnotes from the conference call for the 2nd quarter of 2011.
Here are my notes (my comments in parenthesis). if I have made any mistakes, please bring them to our attention in subsequent comments!
Management reports that all 3 properties in Vegas are improving. The two new facilities in NYNY are doing VERY well. The burger bar has table side service (i.e. waitstaff). The burger bar has replaced 3 food court operations. The Burger Bar is doing approximately $3.8MM in revenue vs. 1.8MM for prior locations. Of course, there is added payroll expense, but management estimates that the incremental profit is $800K greater than prior installations. Sales trends appear to be improving.
Former ESPN location pays no rent. The 1st million of cash flow goes to NYNY. Cash flow after 1st MM is split 50/50. Due to this arrangement, ARKR has not seen any cash flow, but will be seeing some in 3rd & 4th quarter.
New York City had bleak comparisons to year ago period because of bad weather for outside seating.
Washington DC was down about 4%
AC was down about 20% (was treading water, must now be losing $).
Boston is doing fine.
Florida is doing good.
If it wasn't for the bad weather, this would have been good quarter. (how is this with the food inflation & expense inflation?)
Management did not increase menu prices until the end of March & beginning of April. Very little of the price increases was reflected in this quarters results.
Problems for the quarter were A). Bad weather in NYC, B). Increased food prices, C). higher minimum wages, D). higher operating expenses (utilities & insurance).
Q & A period
? from Ms. Catherine Lee: "Can you give color to types of casino guests?"
A: Hard to say for each unit. Example is Gallager's Steak House which has 220 seats & $14MM in revenue. Gallageher's pulls from all over the strip, especially convention business, not so much NYNY. There were 800K convention rooms this year vs. 500k for last year. About 6% of NYNY's guests were cooking in their rooms, by bring rice cookers & hot plates (down scale guests I guess). Food court sales appears to have plateaued, Other locations can grow more.
? from Mr. Ben Schmidt "Are food costs now under control, fully recovered in new menu pricing?"
A: ARKR's formula is to be very efficient and give a bit more than competition. Traditionally, COGS (Cost Of Goods Sold) has been around 25.5% Lately, COGS has been 27% to 28%. There have been selective menu price raises of 3-4% NOW COGS is 26.2% MARGINS WILL IMPROVE IN THE NEAR FUTURE. CASH FLOW MAY NOT IMPROVE THOUGH because of setting price increases (utilities, wages, & insurance).
? From Mr. Mike Margolis "can you give any comments about current/future NYC projects?"
A: Yes, there is a 10K sq. ft. "sports bar" project on the West side of Manhattan being worked on. ARKR is working with a Mr. Walt Frasier as a partner on a totally new concept of a sports bar.
There is a 66K sq. ft. E. River "Basketball City" that ARKR is going to open a "Burger Bar" in. This facility has lots of league play, but frequently hosts small conventions, product demonstrations, etc. ARKR is going to have the catering concession, which could be excellent potential.
There are two other projects planned in NYC. They are another museum & Brooklyn waterfront.
Robert is doing well, but is going to be doing GREAT!
Management encourages you to call them if you have any specific questions.
"Former ESPN location pays no rent. The 1st million of cash flow goes to NYNY. Cash flow after 1st MM is split 50/50. Due to this arrangement, ARKR has not seen any cash flow, but will be seeing some in 3rd & 4th quarter."
This is accurate, but additionally ARKR gets paid a management fee even while NYNY is getting the 1st MM. So ARKR isn't "working for free", so to speak. Of course, they didn't say what was the amount of the management fee.