Greetings, and welcome to the Ark Restaurants Third Quarter 2023 Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Christopher Love, Secretary for Ark Restaurants. Thank you. You may begin.

Thank you, operator. Good morning, and thank you for joining us on our conference call for the third quarter ended July 1, 2023. My name is Christopher Love, and I am the Secretary of Ark Restaurants. With me on the call today is Michael Weinstein, our Chairman and CEO; Anthony Sirica, our President and Chief Financial Officer; and Vinny Pascal, our Chief Operating Officer. For those of you who have not yet obtained a copy of our press release, it was issued over the Newswires yesterday and is available on our website. To review the full text of that press release, along with the associated financial tables, please go to our homepage at www.arkrestaurants.com. Before we begin, however, I'd like to read the safe harbor statement. I need to remind everyone that part of our discussion this morning will include forward-looking statements and that these statements are not guarantees of future performance, and therefore, undue reliance should not be placed on them. We refer everyone to our filings with the Securities and Exchange Commission for a more detailed discussion of the risks that may have a direct bearing on our operating results, performance and financial condition. I'll now turn the call over to Mike.

Hi, everybody. Thank you for joining us. I think I want to first hand over everything to Anthony, so we can go over some balance sheet items, and then I'll take the call back and discuss where we are.

Thanks, Michael. The quarter was really quiet with respect to the balance sheet. We ended the quarter with $14 million in cash and $7.7 million in debt. We paid down an additional $6 million of loans early on April 4 due to the high rates that -- and we're now being charged because of the interest rate environment. Our current cash position is approximately the same as it was at the end of the quarter. Other than that, on the balance sheet, there really aren't any significant changes, very quiet. I think you also -- the Board also declared the dividend last week of $0.1875 payable on September 12 to record holders on August 31.

All right. Thank you, Anthony. Obviously, we did not create or generate the EBITDA we did last year for this quarter. There are three components to that: Number one in Las Vegas, our Gallagher's restaurant because of the refurbishing requirements and our new leases required us, we started the refurbishing somewhere in the prior quarter, but we will still close until April 27 in this quarter when it reopened. So that caused us a significant dollar revenue and therefore, some EBITDA cash flow. The second factor is our Florida full-service restaurants. They are just down. Even though the down end revenue of about 10%, 12% on average, if you take all of them, if you’ll beach (ph), followed one by the Sea, Rustic and Shuckers. So those four restaurants, on average, are down about 10%. It's slightly worse with headcounts because we've had some menu price increases, post-pandemic and as we continue those menu price increases, and we're up maybe 4%, 5% in menu prices from the prior quarter in 2022. So given that headcounts are down 13%, 14%. I can tell you from what we're hearing and we speak to people, we are not alone at most full-service Florida restaurants in the southern part of the state are experiencing the same thing. We have no excuses. We think our menus are fairly priced in the environment we're in, and the product is good. I think we were comparing to pent-up demand in the prior year's quarter. That's not visible to us this year. Our Alabama restaurants are doing very well. Our Las Vegas sales have been very strong. The New York sales have been very good, Washington, D.C. So Florida remains the weak spot. Another factor in the EBITDA difference between this year and last year are payrolls. We're able to find people now, but the price points are higher than they've been in the past. We think it's starting to stabilize. We have most positions filled throughout the company. So we're fully staffed. It's just costing us more.

We've had minimum wage increase in Vegas, Florida.

Yeah. As Anthony is saying legislative minimum wage increases in Vegas, Florida and D.C. So we're up against it in terms of labor. Food costs have stabilized. In some cases, we've seen a dive back towards where we used to be. We're managing our food costs very well, I think. And I think we're managing payroll. When we're fully staffed, we're trying to eliminate all overtime, but prices for labor are just higher. So I think that sort of gives you an explanation of the environment we're in. This quarter, so far, we haven't seen any increase in demand in the full-service Florida restaurants. The other restaurants seem to be doing what we -- what our expectations are. So Florida remains a big disappointment. I might add that New York, New York, where we do many disciplines. We have fast food court operations. We have full-service restaurants. We have room service. What you see there is a flow into -- demand flow into the fast food court. The food court is doing better than the full-service restaurants. On balance, if you looked at that in the prior year. We just think people are not spending as much. New York, New York happens to be a middle income crowd. That's the demographic. So we think we're seeing people opting for less expensive options. That's probably taking place in our Florida restaurants as well. Check averages are down, people are carrying entrees. So it's not only fewer people coming to the restaurant. People coming are not spending what they used to spend. It's just the environment we're in. So with that, I'll take the questions.

Thank you. [Operator Instructions] Our first question comes from the line of Paul Johnson, Private Investor. Please proceed with your question/

Yes. Good morning. I just joined the call, so you may have spoken about this already, but can you give us an update on the Meadowlands?

Yeah, I'm happy to. So there's nothing really going on there. In terms of the state legislature or the governor, they have taken the same attitude as the majority partners in the Meadowlands. We're the third largest holder of the limited partnership interest. Hard Rock and an individual developer in New York in the majority -- represents the majority of the limiteds. The attitude has been that we should not be pushing for a referendum to the state constitution to allow for gaming outside of Atlantic City until casinos in New York have either been issued their licenses for downstate or are in operation downstate. That seems to be Murphy's position as well and key legislatures who my partners speak to. This is essentially the fear that the public will not understand the importance of a casino to tax revenues in New Jersey until they see people driving through the tunnels or over the bridges to get to downstate New York casinos. We have -- I don't think -- we have one clear good shot of getting the public behind us. We do polling of the public. It's slightly in favor if the referendum was to be proposed to the legislature, but it's by no means a slam dunk. And therefore, we think the pressure created by New York casinos being open would be advantageous to our cause. In the meantime...

And what would be...

Pardon?

Sorry, I was just going to ask what would the timing be for that in a perfect world?

Well, the perfect world is that before the end of this year, New York is supposed to issue three downstate casino licenses. We know -- we don't know. We -- by the way, we speak to law firms that are representing individual developers in New York to get their take on it all. So I don't do this every day, but once every two or three months, I call a couple of partners in these firms and -- who I happen to know. And the feeling is strongly that Yonkers gets a license that's owned by MGM, Genting gets a license at Aqueduct. And then there's one up for grabs (ph). There's the Trump property in the Bronx that's vying for it. There are three or four properties in Manhattan, Hudson Yards being one of the primaries. And then Steve Cohen at Shea stadium -- MET Stadium is vying for one. We don't think -- and we don't think Cohen gets it because that's public parkland. And we think there'll be a lot of litigation with that. So we think it's likely to be -- there's another player. The Venetian has put together acreage in Queens as well. That's a viable property. We had difficulty thinking about a casino in Manhattan. But that's my point of view. We think there would a lot of litigation. One of the managers that Meadowlands has, and I've said this in the past, we are already built for first phase of the casino project. We could be in business literally in 60 days. All the environmental studies have been done. There is no residential around us to litigate that this is going to be an impactful on them. There's plenty of parking. So we just think with the natural habitat for a casino license. So that's basically where we are. We're honestly highly confident. It just requires New York to follow through and issue these licenses. If they issue the licenses, by the way, MGM gets one for Yonkers, Genting gets one for Aqueduct, they'll be in business in a matter of months. So it will push the timetable forward dramatically for legislation in New York. I would think there's a good shot that legislation is brought up next -- in the next year session, prior to November.

Got it. Thank you. And then you've got a fair amount of cash on the balance sheet, which is great and you announced the dividend. Is the idea instead of maybe buying back stock, it's kind of the liquid, but is the idea that you want to hold on to that cash in case there's attractive acquisition opportunity?

That's always been the case. We're always looking -- we'll find something once a year, I would think that's attractive. We also are believers that our cash position will be helpful in the Meadowlands if a license is issued. We have exclusivity with the product -- exception of a cut out for a Hard Rock Cafe, we have exclusivity to all the food and beverage if a casino is built. So we're going to need cash for that as well. We think we don't -- we won't have very much trouble capital to do those projects, but whatever capital we can keep on the balance sheet will be helpful.

I thought you had said in the past that if that all came to pass that it's more likely you'd sell the interest to Hard Rock.

If Hard Rock is a developer with us, I really believe before we -- there are two parts of this: number one, I want to be in a position not to be diluted very much, so the cash on the balance sheet helps; number two, I really believe at some point before the casino were to open, that Hard Rock would want to consolidate its position and buy out minority limited partners, even though we're the third largest -- our interest is in the 7%.

7.4%.

7.4%. So I don't know that I would think it's logical that they would want us out. But I can't guarantee that to myself. So obviously, the statement that cash on our balance sheet helps our position still stands until they come around with an offer. So that's the way we're playing it.

It’s very helpful. Thank you.

Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Jeffrey Kaminsky with JJK Consultants. Please proceed with your question.

Good morning, guys. Thanks for taking the call. A few questions for you, Mike and team. Approximately $14 million in cash on the balance sheet and approximately $7 million in debt. You said you paid off some debt. Is the current $7 million debt locked in at lower rates or is there some interest rate risk there? And I have a couple of...

They're at the current rates. We considered paying those off, but we were looking at a couple of deals, which didn't pump to fruition. So again, we want to keep that cash to do an acquisition, which we hope will come along soon.

But we also have a credit line available to us beyond all of this.

Okay. With respect to leases, whether it would be Vegas, New York, any developments in terms of any important leases that are up for renewal or extension? Anything to report there?

We have -- our lease in Brian Park runs through May of 2025. And that lease will be the subject of request of proposal from the Parks Department in New York. We think we're well positioned to extend the lease. We've extended it twice over the 27 years we've been there. We think we're the best use for it. Obviously, other people will respond to the request for proposal. But I think the odds are very much in our favor.

Okay. And last question, guys. With respect to Meadowlands, which you just discussed, should this play out on the timetable that we're all optimistic about. Mike, you just mentioned about Hard Rock would probably want to consolidate ownership and get rid of minority partners. Do you envision, should it work out that way that they buy out the interest, the arc interest you maintain the exclusivity in terms of having the concessions, but for the Hard Rock Cafe or they would go buy you and you [indiscernible].

Yes. Jeff, so yeah. So what I would say to you is this, we had a long talk with the tax experts, the Simpson Thatcher about 4 years ago, spinning off our interest in the Meadowlands. Why? Because if we sell our interest in the Meadowlands at any point, it is taxable to the company. And then on a dividend, if we were to pay a dividend, it's again taxable to our shareholders. So there's a double tax involved. We were trying to figure out a way to spin it off so that there would be at a low basis because there's no operation there, so that we won't be subject to double taxation, thinking this through to the future and some projection. There is no strong basis where the IRS won't challenge you for spinning this off. So then you look at other possibilities. We're in the restaurant business. We want to keep our restaurants. We would certainly like to operate the restaurants in the casino, we think that would be a terrific opportunity for our shareholders. So how do you go about that? And at the same time, entertain a bid. It's too fuzzy right now. But the -- our interest would be if the price was attractive, figuring out some way to do it and then somehow go back into business as a restaurant company with the properties we presently own. How that could be accomplished? It's not worth thinking about now. But that would be our interest to maintain our restaurants.

Okay. Thanks so much. Thanks for answering the questions.

Thank you.

Thank you. I'm showing no other questions at this time. I'll turn the floor back to Mr. Weinstein for any final comments.

All right. Thank you. We'll speak to you in about three months. I appreciate your interest and look forward to our next conference call. Take care.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.