Greetings, and welcome to Ark Restaurants' Fourth Quarter Fiscal 2018 Results Conference 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, Sonal Shah, General Counsel. Please go ahead.

Thank you, operator. Good morning and thank you for joining us on our conference call for the fourth fiscal quarter ended September 29, 2018. With me on the call today is Michael Weinstein, our Chairman and CEO; Vinny Pascal, our Chief Operating Officer; and Anthony Sirica, our Chief Financial 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, I would 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 Michael.

Hi, everybody. So, if we go back in time at the beginning of the fiscal year, we sort of projected that we thought we could hit $14 million in EBITDA. Obviously, we haven't done that. Somewhere during the third quarter, it became obvious to us that we were being impacted dramatically by weather. The third quarter was disappointing. We changed that projection or guidance from $14 million to $12 million. What happened in the fourth quarter was worse weather. So, a big part of what occurred is the disappointment in our outdoor cafe utilizations during the fourth quarter. Just to give you an idea, Bryant Park, which has some 500 or 600 store seats, was down 12% for the quarter. Southwest Porch was down; Sequoia in D.C. was down terribly, 18% for the quarter. The reliance on weather is reality unfortunately. And not only do we have the loss of revenues, which cannot be made up. I think, you lose a day, it's gone. But, we also have the payroll that is in place to service those outdoor seats. So, again, in Washington D.C., we have some 550 outdoor seats and in Bryant Park alone we have 500 and some odd seats, and in the Rio Grande, we have about 100 seats 150 seats outside plus outdoor bars. In Bryant Park, we also have Southwest Porch, we have the 42nd Street Café. Between those two, there's 600 seats. Those are all outdoor seats. So, we're bringing in payroll every day to service that. We have to pay a minimum four hours every time somebody comes in, even if we send them home. If they're on the schedule, they get paid. So, we have undue operating expenses and a failure revenue during the quarter. So, that's a large part of what…

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Bruce Geller from DGHM. Please proceed with your question.

Can you give a sense of -- it sounds like first quarter is running a bit better? Can you give a sense of what same-store sales are running thus far in the first quarter? And then, maybe as you’ve done in the past, can you provide some bridge from 2018 to 2019? Where you see positive or negative swing factors, and potentially order of magnitude across the Company? Thank you.

So, we think the first quarter is fine. Last few, we had a very strong first quarter. We think we match that, maybe eke out a little better. But, we had a good -- we were on projection last year at $14 million. The big bump that we could get is from Rustic. Because last year, if you remember, the bridge that went over the canal, has been down for two years, went up very late in December. So, the numbers out of Rustic should be very strong for us, they had been in October and November. Vegas give is also doing well. There are a lot of good things. The only disappointment we have in the December quarter compared to last year’s December quarter, just -- and obviously I haven’t seen the December numbers yet, but I have seen October and November. We've been sort of inventorying our Boston restaurants at Durgin-Park and hoping to make a deal either with the landlord or with a third party because we're just not effective there. And unfortunately, when you start to do that, everybody knows it. On the staff and that sort of has an infectious quality to it in terms of revenue. And so, Boston will be down from last December. But, we're not keeping it past the end of this year. Hopefully, we'll make a deal, but if we don't, we're going to close it. The other disappointment is that it's not a management problem, it’s Thunder Grill, Union Station, our lease runs out at the end of January. The landlord wants to keep us. We still don't have a deal on keeping it. But one of the problems with the station is Amtrak was the biggest tenant, left the station, and that has had a real big impact…

Our next question comes from Paul Johnson, a private investor. Please proceed with your question.

Yes. Good morning. Couple of questions. First of all, I don't think you attached the balance sheet to your press release. Can you give us an idea of quarter ending, or year ending I guess, cash and debt?

The balance was $5 million and the debt is $22.5 million.

Okay. And because of the cash flow that you're throwing off, you don't see any concern about the quarterly dividend, I assume?

No, not at all. We're -- the operations more than support the continuation of the quarterly dividend at this level. Even if we have -- we don't have big CapEx expenses in terms of keeping the roofs on. We keep these things in excellent shape. Linda Clous who runs facilities here for us, facilities management. her directions are always -- we have a balance sheet, we have cash flow, make sure things are in proper condition all the time. So, that's maintenance for us is a continuing thing. We don't even think about postponing anything.

We also completed refinance of the debt due where our principal payments reduced from about $4.3 million a year to $1.2 million a year. So, we have reduced principal payments with term out about seven years down the road; that created over $3 million in cash flow as well.

And to add to that. Expansion that we have planned for this year is putting a new barge on the Canal next to Rustic Inn. And that's probably $1 million to $1.2 million and it’ll be in place in April. But, we think that expands our business dramatically. Otherwise, we won't be doing it. The old barge was basically one level -- it wasn't attractive at all. This -- the new barge is going to have two levels to it with an open bar on the roof. The problem we have Rustic is, you have a two-hour wait and no place to put people. So, we think bar at the barge will satisfy that need, that demand and should be incremental revenue for us. Everything else going on is just ordinary maintenance right now. There's nothing planned, unless all of a sudden we find something that we want to purchase. And we think we have the appropriate banking relations to do that, and we think we have the appropriate balance sheet to do that.

Okay, understood. And with regard to the Meadowlands. If the casino -- when the casino falls into place, can you give us any -- I imagine it’s probably hard to project what kind of cash could be thrown off on that. But can we just understand what the model would be at the very least, if all went all, how that would work for you?

So, look, it’s hard and I’m probably going further than I should, not that I think I’m giving anything away that’s inside information, it’s not. This is my own personal projection. I don’t think my Board would agree with it or necessarily. But, when we were -- when three years ago, when the referendum came up and was easily defeated, because the partners in this which -- were the 1, 2, 3, 4th largest partner. One of the partners is a hedge fund in Canada, the major two partners are Hard Rock, which owns twice as much as we do and Jeffrey Gural who owns -- who is a private real estate investor in New York and owns two harness tracks in upstate New York among his many, many holdings that are racinos, meaning they have slots. And he was the promoter in this field. He made the investment. We bought our interest at the same values that he bought his interest in Hard Rock. Hard Rock will be the operator. That was the major reason for their investment. But before that the original referendum in New Jersey requires a licensee from Atlantic City to be a 50% partner in any casino operation in the North. So, again, the legislators were trying to protect the Atlantic City operators. Hard Rock at that time did not have a license in Atlantic City. So, we were forced in case this referendum went through to try to find Atlantic City partner and NTM [ph] approached us. And the numbers we were getting from NTM were they thought the project to throw a $300 million to $400 million a year in the cash flow. That was their protection, ;t doesn’t mean anything. I’m sort of one of those guys, leave your projections at home. I’ve been through this many times. But that was their indication. I don’t -- our purchase of our interest was based upon we would have the exclusive rights to all food and beverage operations in the casino, if the casino occurs with a carve out for a Hard Rock Café that Hard Rock would run. I anticipate that that if Hard Rock -- if we get a license and Hard Rock becomes the operator, they’re not going to want us to have all the food and beverage operations. They can do their own job. And my guess is that there would be a transaction at that point. There’s never been a conversation about it; we’re too far away. But, I think they would be -- I think Hard Rock would want to own the whole thing basically. James Allen, who is the CEO of Hard Rock, does not have any partners anywhere else. So, I don’t think we get that far to find out what our share of the cash flow is.

Understood. That makes sense. So, thank you for that. I just have one more question, which is going back to sort of the disparate nature of the various holdings of Ark in the far-flung corners, it's very different from the usual profile obviously of the restaurant industry. Given that and the unique nature -- and you've been very opportunistic and that's great, but just trying to think about sort of end game just because I don't imagine you want to be doing this for too many more years. Doesn't it also therefore become difficult for…

I want to be doing this for a long. That means I could postpone the inevitable demise of myself, not the Company. So go ahead. I'm sorry.

So, I just wanted to understand, doesn't that therefore make it complicated, I guess for a potential publicly traded let's say restaurant company to understand the value or to even sort of merge it easily into their operations if that were a goal?

So, there are several ways to look at this. The one way would be find the ideal bar fire. Just before 9/11, we had a deal working with Delaware North who had come to us because they don't do restaurants well or didn't at that time do restaurants well. And they had to pay a decent multiple for the earnings of the restaurants. So, right now, the restaurants in a bad year, which is just this year, are in something between $21 million and $22 million at the restaurant level. The restaurants that were profitable probably earned $23.5 million because there are some losses in there. So, if you were a company that paired up well with us, you would be looking not at our $10 million in EBITDA, you would be looking at $23 million in restaurant earnings and how much of this $11 million overhead that we have or $12 million -- well, it’s 11, do you need to keep. Well, my guess would be if you pair up well with us and you have a back office and you have your own buying department, maybe what you want to keep is the events department, which is specific to our restaurants. The people at the table sitting with me today would be at jobs for the most part because they would have the CFO, they would have the in-house corporate lawyer, they would have a COO. So, I think the probability is you're looking at $22 million, $23 million based upon last year and maybe another $2.5 million in corporate overhead that you want to keep. So, put a multiple on that. It’s 6 times EBITDA, 5 times, 7 times. I mean, I know it depends upon the market and where the transactions are going for. But there's…

And we own the real estate.

And the real estate. So, what do you pay for that? Is that worth 8 times?, I mean if you’re a real estate investor, you would say, Jesus, let’s put a 5 cap on it, maybe it’s worth 20 times. But, then, you have a problem of running a restaurant. But, the alternative to that is management’s been in place for 23 years, and they’re still young. The same situation is at Jensen Beach. We not only own the land under this, we’re accumulating over time. I think we have 14 units -- 13 units, I’m getting corrected, 13 units, 1 bedroom units, and the condominium next door to us. It’s all owned by investors, they will use it as -- they’re getting 11% returns for the most part, cash-on-cash returns. We’re getting close to that. We run the brokerage firm that rents these things at, we own that. So, we have contracts with 45 of the apartments. I will tell you we’re buying 1 bedroom apartments with $700 a month maintenance roughly and a few dollars in taxes. We’re paying under $200,000 for the ones that takes pay and maybe $222,000 for the ones that are on the other side. There’s a lot of value in those 14 units, eventually. Our goal is going to buy a few years, they come up; we’re not in a hurry. But eventually, we want to control the building. If we control the building, we upgrade the building, 1 bedroom units on Jensen Beach in new buildings, they’re going to $700,000, $800,000, somewhere along the line. But this is 10 years out. Somebody will benefit from these investments. So, I think, if you look at things one-by-one, you could put a number on this company that is significantly higher than the market value…

Thank you. That's extremely helpful.

Well, thank you. Nice to speak to you.

[Operator Instructions] There are no further questions at this time. And I would like to turn the call back to Michael Weinstein for any closing remarks.

Thank you so much. As always, we are available anytime for phone calls, if you want more information. We'd like to get phone calls from our investors. Have a very healthy and happy holiday to all. And we'll see you at the end of the next quarter. Thank you.

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