The audio at the beginning of the conference call was very poor.
"The results for this quarter are not difficult to explain"
Sequoia had a flood. A retaining wall failed and all the businesses in the building got flooded out and were closed for approximately 5 weeks. $600k in business interruption has been filed. Additionally, there is a $600k to $700k claim for property damage. There is also some small amount coming from the property owner.
New projects were also a drag on earnings. There was about $250k in legal fees (lease negotiations & such) that had to be expensed. About $100k in rent was also expensed (as the location was not yet open).
There was terrible weather in the North East for April & May.
The cost of food is WAY UP. Price increases were initiated in May. The price increases are not totally covering the increased cost of food, but it is coming close. ARKR is trying to hold the line on further price increases.
As an alternative, ARKR is considering reducing portion slightly, maybe 5%.
As a result of the food price increases, ARKR maybe lost $250k.
The Las Vegas locations sales are up. The new burger bar is doing $4mm in sales vs. $1.8mm for the previous incarnation.
New York City & Washington DC had good sales and the locations are well managed.
July sales comps are up 6%. As such, the increase in comp sales should cover increased costs and even add a little bit of profit.
CONFERENCE CALL QUESTIONS:
? regarding future projects. A: 2 Basketball related ventures are getting close to opening. Walt Frasier (jan 12) & Basketball City (October Nov 2011). Somewhat further away is the museum of African Art which will have a 6000 sq. ft. ballroom and a 300 seat restaurant. All of these locations have good rent. Landlords wanted ARKR to come in and run restaurants. Williamsburg Brooklyn is also being worked on.
Management let it slip that $9MM is the cash balance of the bank account (vs. $7.5MM reported in 10Q) .
Las Vegas EBIDTA is DOWN $4mm from 3 years ago. Additionally, costs are up in Vegas. Full employment is being maintained in Vegas to keep up quality service. Minimum wage & new regulations are hurting ARKR in Vegas. Room rates are going up. New capacity (rooms) needs to be filled in Vegas.
? regarding 6% comps A: A lot of that is Vegas. No unusual expenses are anticipated for the 4th quarter other than higher commodity prices. Cap-ex is up slightly, will be up mostly first part of next fiscal year.
? regarding catering & Boston expansion A: Catering is a big part of business & very important part of museum operations. Not looking to expand Boston, but not ruling it out (lack of management infrastructure).
NO PLANNED EXPANSION OR DEVELOPMENT IN DES MOINES!