Hello, and thank you for standing by. Welcome to the Ark Restaurants Third Quarter 2015 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Bob Stewart, Chief Financial Officer. Please proceed, Mr. Stewart.

Thank you, operator. Good morning, and thank you for joining us on our conference call for the third fiscal quarter ended June 27, 2015. With me on the call today is Michael Weinstein, our Chairman and CEO; 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 Newswire 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 afternoon 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 will now turn the call over to Michael.

Hi, everybody. This is a good quarter for us, and a lot of interesting sidebars, which I'll talk about. The strength of the business is coming pretty much from New York; Washington, D.C. Our businesses there are performing very well. Las Vegas, which was flat for the 13 weeks, we've been more efficient. So we took more operating profit out of Vegas despite flat sales. What is really gunning the earnings to a great extent is our business at Rustic at Fort Lauderdale, which has been just a wonderful acquisition and continues to perform well, and the same-store sales are significantly above last year's sales at this time. We have had this churning of leases over the last 3 or 4 years where, despite doing very well with Robert and now with Clyde's and with Rustic in Florida, renegotiations of our leases which were not successful caused us to lose operating income as those leases terminated. We are almost complete with all of that, and there is one more lease which we will not be able to renew, which is the V Bar in the Venetian in Las Vegas. But after that, which -- that lease terminates in December, we have some clear sailing. All of our EBITDA will be intact for many years. Our leases -- the remaining leases are in very good shape. So this quarter sort of -- and the 9 months sort of represents what's happening going forward. The businesses that we have, we will keep. As I've said in the last conference call, everything we have on an annual basis is profitable. The Jupiter Rustic, which we brought online in February, had some significant preopening expenses, which were expected. We've lost money in this last quarter, some $175,000. That restaurant is in off-season right now.…

[Operator Instructions] The first question is from Bruce Geller of CGHM (sic) [ DGHM ].

Can you remind me what the operating contribution is from the lease that's not being renewed at the Venetian?

The V Bar?

Yes.

That's about $1 million a year.

Okay, so that will be lost. Okay. You just noted that you're close to an acquisition in Florida. Can you give a sense of the scale of that? Is it a one-off like Rustic?

I -- yes, I can. If we're right on that, first of all, the acquisition -- and I'm probably premature in terms of discussing it in great detail, but we think it's a deal that we will complete. It will be similar to Rustic in that we will own the property. We'll be our own landlord. We think the contribution to that will be -- to operating profits and EBITDA will be greater than that of V Bar. So that's about all I care to say about that. Like -- I'll say one more thing, that very much like Rustic in Fort Lauderdale, we believe that we can, through our efficiencies and viewpoint about pricing, we can increase the EBITDA that presently exists there.

So is it one restaurant?

It's one restaurant, yes.

And is it something like Rustic that has a good local name that you think you can expand to multiple restaurants?

That's very much so. Yes.

Okay, and then, one of my questions was going to be why -- how come you're maintaining a fairly sizable cash balance when you've got some debt on the balance sheet, but I guess, that's -- the thinking is you do plan to continue to be acquisitive with that cash.

Yes. Look, yes. What I did not mention, and I should have, in the opening monologue was Meadowlands. We really thought we would have legislation this year. Every indication from every legislator who was in contact with Hard Rock and with our other partner, Jeff Gural, was that the legislation would be on the ballot for this coming November. It, obviously, at this point, has not happened. The President of the New Jersey Senate said it can't happen this year, but it will happen next year. We -- so we are not hopeful that anything happens this year. We are very hopeful that something happens next year. In view of that, we have established credit lines to -- that we're still -- I shouldn't say establish, we are negotiating credit lines because we don't want to be diluted if this happens. We have talked about husbanding our cash and only using it if something extraordinary happened in the way of acquisitions that really moved the company forward in a logical, sensible way. We think the Florida acquisition does that, but we want to make sure that we have capital available if this Meadowlands thing happens. And we're a year away again. It's just a philosophy of trying to be prepared and also have available moneys for something that we think is extraordinary.

That's great. From some of the early polling I've seen on that, even if it gets on the ballot next year, it seems like the odds may still be somewhat against you, because it doesn't seem like there's majority support for that initiative. What are your thoughts on that?

It depends which poll you read. There have been 3 polls. One is done by the guy who was hoping to get a license for Jersey City/Bayonne, which is a mega complex, $4 billion. And we don't think -- while we like him involved and trying to get legislation to be passed, we think his project, in terms of polling, receives negative reviews. Our project is much, much smaller. It's in the Meadowlands. There's no residential community around us, and so that poll is taken just for the Meadowlands, turns out slightly positive. We think it passes. The Atlantic City poll that was done, was -- sort of supported the delay in legislation. It was a negative poll, but that question was basically, "Would you like to see gaming in the North?" And I'm being brief here, I mean, it was a very restricted poll. It didn't say, "Would you like to see gaming in the North that would contribute $400 million to $500 million of taxes to the state to improve education and to port the restructuring of Atlantic City?" If you did that poll, that was a positive poll. The problem that we have in just being delayed 1 year is it gets mixed up in the gubernatorial and presidential election. And therefore, it becomes more expensive in terms of trying to support the ballot with the marketing money and trying to get the public to understand what we're trying to accomplish here. So I'd say to you that we would've had a better chance this year, when it would -- the referendum would have stood on its own without the complications of the presidential and gubernatorial election. But we'll see. I mean, I honestly believe it has to happen somewhere along the line. The state of New Jersey is in terrible financial shape. Atlantic City continues to suffer. It just -- if you're looking for significant revenues to contribute to the tax basis of the state, the Meadowlands is one of those things that you've got to take seriously. So the economics of it are compelling. It doesn't mean it's going to pass, but we think we have a better than 50-50 shot.

How much do you think you will have to contribute to the PR campaign next year as the initiative heats up?

Well, that's going to be more Hard Rock's responsibility than Ark's responsibility. We own 10%, 11% of this thing. We would slate it to -- there was -- the number thrown about was $20 million to $30 million. Obviously, in the presidential election year, ad space and radio space cost much more than in an off-election year. So I don't have the number for what it would be next year, but it's going to be a multiple of the $20 million.

But as a partner in the project, won't they ask you to pony up your share?

Yes, but there's some limitation on it . The contract that we have -- for instance, there was extensive lobbying done this year. There were 2 lobbying firms, Ark did not have to participate in the cost of that. So there are certain expenses that we just don't participate in or are limited to.

Okay. And on the topic of Hard Rock, you guys have struggled down in those Florida casinos for several quarters now. Can you give an update on how the most recent quarter fared and maybe going forward?

Well, we're closing the gap not because of increased sales. We're closing the gap because the -- we're 1 year away from the change in the marketing plans of Hard Rock with a stock accepting comps -- or sending comps into the food court. So now we've sort of lapped that 1-year period and our sales are flat with last year to slightly ahead.

Is it contributing any profit at this time?

Oh, yes, very much so.

Okay. I'll just ask one last question, if I could, related to Rustic, and then, I'll get out of the way here.

You're not in the way, Bruce.

Thanks for breaking out, in the press release, by the way, the operating losses related to the new Rustic, for both the quarter and year-to-date. I think that was very helpful. I presume, the fourth quarter, since it's off-season, will also have some operating losses related to the new Rustic. But then, I'm curious, as we get into next year, with this year having been roughly negative $1 million, would you expect it to be profitable for the full year next year? I'm just talking about the new restaurant. And if so, is that confirming that you would have over a $1-million swing in operating income related to that?

In Jupiter?

Yes.

Or the new acquisition?

No, no. The Jupiter location of Rustic.

So look, I'll break out Jupiter, as best as I can for you. We now think, in the off-season, we have a breakeven around $72,000, $73,000 a week. Last week, we made a few dollars at $73,000, but we had lower food costs than we should have, just because of the ordering cycle. The volume has gone as low as $54,000 during this season. We think that's lower than we should expect next year during the summer season, because the Rustic only opened in February -- late February this year, and really did not have the visibility that we think we will have next summer. But at any rate, in the 5 or 6 weeks in season that we did have when we geared up, we had done as much as $180,000 a week. So the swings during this first year have been dramatic. And what happens is, when you open a restaurant, you don't know what the volume expectations are and you sort of overstaff. And when we were doing $180,000 a week, even though we were still overstaffed at that, we were making lots of money. And then, all of a sudden, May came and we dropped off a cliff and went right down to $55,000 to $60,000 a week. And we -- it took us a long time to bring the payroll down from a very inefficient $55,000 a week -- inefficient for 2 reasons: number one, we had startup payroll there, we were overstaffed; and then, we brought the payroll down to $23,000 a week. So I would tell you that it looks to me like -- you do, do close to $7 million there next year. And if you do $7 million, we'd probably make 10% to 15%, because we're still going to be overstaffed.…

That sounds great. So just to confirm, you said you thought the new Jupiter restaurant could do $7 million next year and you can make 10% to 15%.

Yes.

So roughly close to $1 million, and then, this year through the 9 months, you lost over $800,000. So it sounds like, potentially, on a full year basis, you could have almost a $2-million favorable swing in operating kind of...

Yes, yes, but be conservative. But, yes, we think it's a huge swing. And we saw -- it's -- I don't want to put a curse on us, but everything we've done in the last 4 years, starting with Robert and Clyde's and Rustic and -- even though it took Clyde's a while, we have been really, really successful with these restaurants. But you haven't seen the success because every time we have something that's doing well, we're losing a couple of leases where -- that were strong contributors. So it's been like the Chinese guy with the bamboo stalks with the plates spinning on the top, and you get down to the 17th bamboo stick and you got to re-twirl the first one. That seems to be what's been going on here, but that's ended for us. So everything we have that's contributing is -- has significant lease years left, and the new stuff that we're either buying the property or we're looking like 25-, 30-year leases in the face -- on the new stuff. So I think we're building a better business here.

That sounds great. Are there other locations where you could see opening more Rustics so that it becomes more of a chain?

We would like to see if we're right on Jupiter. I mean, every indication is that we are. We're watching the product mix at Jupiter very carefully. When we started out, only 14% of the people who would walk in into Jupiter -- again, this is -- most of the stat is coming from off-season, so only 14% of the people were eating the crabs. That now is up to 25%. We're curious to see what happens in season. And if it's seen as the crab house with the hammers that we would like it to be seen has, yes, then we would look for a third location. If they're eating fish and not eating the crabs, then we don't really have -- we haven't expanded with a crab house. We've expanded with a good restaurant that people are liking, and they're going there for another reason. We want to make sure that, in Jupiter, that we find -- that we're comfortable that people are going for the product that we intended them to come for. And if that proves out, yes, we will look for another location. Quite honestly, we're looking for new locations now, but they're in developments that won't be built for 1.5 years or 2 years. We need that time, anyway, to just know that we're -- we built the right restaurant for the right demographic.

[Operator Instructions] The next question is from Chris Petherick of Valcata Capital.

The last line of questions are quite thorough, so many of my mine have been answered, but I just had a couple of follow-ups. Real quickly, you mentioned your purchase in an events space behind Clyde's, you've got a minority interest in the events planning business, and then, this Florida acquisition. Can you just give us any kind of estimate as for the cash cost for those?

The Florida acquisition, if we go forward with it, which I think we will, is roughly $5.6 million. I should explain what happens here when I say $5.6 million, and why we were able to buy the Rustic in Fort Lauderdale as well, which is an all-cash deal as well. Most times, if you're buying a one-off, or if a one-off restaurant is for sale, like the Rustic and this other restaurant, the -- especially if ownership is older, which it was in both of these cases -- or is, they are not looking for notes. They're -- and most restaurants are bought for cash down plus a series of notes over a period of 5, 6, 7, 8 years. So the market for sellers of restaurants that are doing well or that own property is limited. Rustic would be an interesting acquisition for any large restaurant company, except, because it's a Rustic, it doesn't extend Cheesecake's brand or some other person's -- some other entity's brand. They won't want to change it because it's specific in its menu and it's successful with that menu, and yet, it doesn't extend the brand. So they tend not to look at it. So the guys that have the money in the restaurant business generally don't by one-offs, and it leaves the local restaurateur to the vagaries of local restaurateurs who also probably don't have the money to do an all-cash purchase. And therefore, they have to take notes. Well, that's where we come in. We, first of all, know how to run restaurants, hopefully, outside of our New York-based company. We've done it before, so people are comfortable with the fact that -- or we're comfortable with the fact that we can run it. And the seller gets an all-cash deal. Now…

Okay, that's helpful. I appreciate that. Now in terms of minority interest, you said that if the relationship works out, you may do more with them in other locations. Do they -- does this event-planning firm already do events elsewhere that they'll -- or Ark just [indiscernible]...

They have 5 venues, which they manage. And yes, they're -- in New York, they represent a sizable event-planning company.

Okay. Should we assume that's profitable at this point? So there'll be some sort of income coming in from that?

Yes. It's not going to be much. It'll be a few hundred thousand dollars, but yes, it'll profit.

Okay, okay. That's great. And then, the last follow-up question on the operational side of things. Just looking at the 9 months, you've got food and beverages up, call it, 6% roughly; payroll's up about 3.5%; G&A's about 5.25%. But talking about the food and beverage side of things, should we expect pricing -- I guess, price inflation like that going forward? Is this 9 months not necessarily indicative of going forward? Or for any of those line items, just if you could touch on those a little bit, that would be helpful.

So let's talk about food and beverage cost. First of all, food and beverage costs, after having a significant price inflation over the last couple of years, have stabilized, and in some cases, moderated, and we've seen better pricing on the products we buy. Obviously, this is venue by venue. We use different suppliers in different states, and -- but overall, I think, the existing inflation that was prevalent has moderated dramatically. Our big problem with pricing, because we think we're fully priced at this point in most of our venues, our big price -- problem with pricing over the next couple of years will be minimum wage and Obama Health Care. And how we respond to that in terms of pricing is going to be an equation based upon what the total dollar cost of minimum wage is venue by venue, and Obama Health Care is venue by venue. Somewhere along the line, we've got to reflect those increased costs and increase the revenue from menu pricing. We -- I think we did a smart thing about 7, 8 months ago when we raised prices, even though we didn't think we had to, just to see how the public would accept it. And we were sort of surprised that we had more elasticity in pricing, especially in Rustic in Fort Lauderdale, which was terribly underpriced when we bought it. We were very aggressive with our price increases there, and that's been a bonanza for us. This is one of the few cases that I can remember raising prices 10%, 12% and having more headcount show up. We thought there will be a declination in the headcounts, but actually, because of the dynamics of demand in the market there, more cruise ships coming into Fort Lauderdale, we're very near the…

And so last question here. You're spending roughly $6.6 million of your cash, and obviously, the Meadowlands, that's been pushed out a year. You've discussed kind of at length how you want to, to use your terms, husband the cash so that there isn't any dilution if and when the Meadowlands goes through. I guess, as I look at this and see the acquisitions that you guys are doing now, and you seem a bit more aggressive with acquisitions, is there any read-through with this cash spend to the Meadowlands and your optimism, or whatever you want call it, of the Meadowlands going through?

We think that we have bank -- a bank relationship that will support what we want to do in the Meadowlands, if that goes through, and that we will not have dilution of our position. We've been very debt-averse here, as you know, from 9/11 forward. We've seen 2 big hits to the economy: one, 9/11, when we -- I think, we went into that with $30 million in debt, and -- but we had 3 venues at that time: New York; Washington, D.C. and Las Vegas, and they were all doing lousy. And I think, there was 1 week here that we figured out we were losing $1 million a week in cash. And we became very debt-averse. That served us well during the economy of 2008-2009. We're only going to spend money here, spend cash here, on something that we consider, and maybe wrongly so, a slam dunk. We're really, really conservative in approaching deals, which we try not to be speculative. We see some great deals and we say to ourselves, yes, but something could go wrong here. And we look at the restaurant business -- it's a very dangerous business. There's a lot of competition. We don't have a brand, but we fit well in being able to do locations like Bryant Park, where they don't want a brand, of doing -- many years ago in New York - New York where they didn't want a brand. And we fit well in acquiring these one-offs that we may be able to expand and create a small chain off of it that is branded. And Rustic's our first attempt to do that. But we're not anxious to take on a lot of debt. We just need to see the Meadowlands as a significant, significant opportunity for this company. Significant. And that would be the reason that -- the only reason that we would create this extensive credit line facility and put that on our balance sheet. Right now, as of this morning, we have nearly $10 million in cash on the books or in the bank, I should say that. So we're not harming our ability to operate our company by making these 2 acquisitions. And our cash will continue to build. We're doing good right now. So that's our philosophy.

There are no more questions at this time. For now, I will turn the call back over to Michael Weinstein for closing remarks.

Well, I thank the 2 people who asked the questions. I think it helped me explain the business in a little bit more detail. We're always happy to take your calls if you think of anything subsequent to this conversation, and we'll look forward to seeing you next quarter. Thank you so much.

This concludes today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.