Paul Robert Stewart - Chief Financial Officer, Principal Accounting Officer, Treasurer and Director Michael Weinstein - Founder, Chairman and Chief Executive Officer

Bruce Howard Geller - Dalton, Greiner, Hartman, Maher & Co., LLC

Ladies and gentlemen, thank you for standing by, and welcome to the Ark Restaurants Second Quarter 2013 Results Conference Call. [Operator Instructions] Today's conference is being recorded, May 14, 2013. I would now like to turn the conference over to Bob Stewart, Chief Financial Officer. Please go ahead.

Thank you, operator. Good morning and thank you for joining us on our conference call for the second fiscal quarter ended March 30, 2013. With me on the call today is Michael Weinstein, our Chairman and CEO; and Vincent 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. I'll just give a review area by area of the country and talk about the results in relation to that. Our big problem in this quarter was weather in the Northeast. We have several thousand outdoor café seats that were pretty much in full use last year. In March this year, we've had no utilizations of outdoor café seats at night and very little utilization during the day. The weather has just been too cold, too rainy, not at -- climatized for us to do good business. When we do have some nice weather in the afternoons, our outdoor cafés are full, the restaurants are vibrant. We just don't see any problem, economically, affecting our restaurants. This is all weather. We've had some -- we made some efforts to have some small price increases. They've been taken well. Restaurants that are not weather-oriented, like Robert at the Museum of Art and Design; Canyon Road, which is small; Thunder Grill; and then Center Café in Washington D.C., where there are very few outdoor café seats, their business is robust. What's dragging the earnings in New York down, EBITDA down, is the Bryant Park, which has 800 outdoor café seats; Sequoia in Washington, D.C., 600 outdoor café seats. Las Vegas remains very flat to down slightly from last year. And when I say down slightly, maybe 1% or 2% in sales. I had a meeting the other today with the senior people at MGM. We are obviously attached at the hip to these hotels. In New York, New York, we pretty much -- 70% of the food and beverage sales, and act as their Food and Beverage Director. We are going to make some structural payroll changes there, which we've always hesitated to do, but we think it's timely. There's been no rebound that we can see in Vegas. Demand may be increasing for hotel rooms, but there are not significant price increases in room rates, and the spend by customers coming to Vegas seems to still be down dramatically from where it was 5 years or 6 years ago. So we're flat in Vegas. In Washington, D.C., again, Sequoia is not utilizing those outdoor café seats. Atlantic City, we're doing well. The hotel we're in, Resorts International, is being changed to a Margaritaville. It's a significant upgrade. We think we'll do better with that Grand on the marquee of the hotel. We are also about to open another burger bar in the Tropicana in Atlantic City in the quarter. We have very high hopes for that. That'll open right around June 1, 2 or 3 weeks from now. Connecticut, we're -- it's not a big deal for us. Obviously, we've had problems with Foxwoods all along. Their demand is way, way down, and it's going to go further down, I believe, once Massachusetts and Rhode Island open up, but we're cash flow positive there. And the -- yes, our business is basically good. We're running on the numbers, our food costs are good, our payrolls are good. The other area I should mention is Hollywood in Tampa, Florida, where we're in the Hard Rocks. Those sales remain strong. The hotel's comping policies have changed a little bit. So our comp sales, which are important to us in Tampa, are down slightly. And that's basically the outlook for the company, is it's weather. We get good weather, our earnings are going to increase dramatically. We don't think there's any economic conditions that are disadvantaging us, and if Vegas were to pop up again, it would be significant leverage for us in our EBITDA. With that, any questions?

[Operator Instructions] Our first question comes from the line of Bruce Geller with DGHM. Bruce Howard Geller - Dalton, Greiner, Hartman, Maher & Co., LLC: In the last call, you mentioned that you felt, even with the difficult first quarter, that you can still potentially show positive EBITDA growth for the year. I'm curious how you feel in that regard after the tough weather of late?

We still think we're positioned for a very good EBITDA number for this year. We think we can make it up. One of the things I should say, and I'm sorry for, in my little oratory, not having said it: Clyde's is doing better. And the fact that Clyde's is doing better from last year is good, but the fact that it's doing better also indicates how poorly the weather has been for the other restaurants, because last year, we were just opening and we took a big hit for -- to EBITDA. Clyde's really did badly well into the fall of last year. So we're going to pick up EBITDA just on that differential. Clyde's, I think, last year, cost us about $1.7 million in negative EBITDA. It's -- so we've got $1 million sitting there, from now going forward to the end of the year, that we're going to benefit by to a good extent in comparisons. So we're sort of confident that with that, and with a break in weather, which we still haven't had, it's cold today here, we should be fine on EBITDA. And we should approach last year's EBITDA. Bruce Howard Geller - Dalton, Greiner, Hartman, Maher & Co., LLC: Okay. Could you give a little more insight on this new Meadowlands investment?

Be delighted. So this takes a couple of minutes, if I could. Because it goes to the heart of the philosophy of the company. We are -- even though we're building the third Broadway Burger Bar off -- we don't see ourselves as brands. We see ourselves as opportunists trying to find yields where the rent allows us a very good risk-reward ratio. We're not looking for 42nd Street and Broadway as a location, pay $3 million of rent and have that hurdle to overcome, even though there's a lot of volume there. So we've always been fairly good to be early in locations where other people were not necessarily believers and we were. We though we could either attract business to an offbeat location, or we thought the location would become a mainstream location. When we went into New York, New York or Bryant Park, for that matter, or Sequoia in Washington D.C., Sequoia was a failure when we took it over, and people thought it was a hard location to get to, but it was waterfront. And New York, New York was Las Vegas Boulevard and Tropicana, and even though everything used to be union there, we thought we could make a stand with a non-union group of facilities, which we were successful in doing. And Bryant Park was a druggie park that the city literally closed to improve. And we were the only one who wanted the deal. Meadowlands fits into that grouping because, first of all, the scale is very, very large. We believe that New Jersey, at some point, has no choice but to figure out how to make the Meadowlands into a casino. Atlantic City is fine, was down from $5 billion to $3.2 billion in the last 6 or 7 years. It is not going to get better. Pennsylvania and Delaware are eroding the customer base. Aqueduct is probably -- and Yonkers are eroding the customer base. And Northern New Jersey, where the Meadowlands is located, is one of the most highly dense packed high-income areas in the country. And you have this racetrack sitting now there, where racing has declined as a sport. Attendance is down dramatically. And our partner, Jeff Gural, who owns 2 casinos in Las Vegas -- New York, was approached by Christie's people to take over the racetracks. He's a horseman. Harness racing's biggest venue is the Meadowlands racetrack. Horsemen did not want to see it die, but it makes no economic sense as a racetrack. We can -- it was losing a great deal of money when the state was running it, I think $25 million, between Monolith [ph] and Meadowlands. And the state was about to close it, so Gural raised his hand and made a deal with the state where he would lease that facility for 40 (sic) [30] years, on the premise that New Jersey, at some point, would make it into a casino site. So the gamble there is we became an investor of -- we own, I think, something like 7% or 8% of the investment there. There are other investors. Hard Rock just made an announcement. They became a 15% investor, centrally, along with Gural. But what we got in return for our investment was not only an undiluted interest, meaning that there is no promote in this deal. They're $1 for $1 of equity, the same as Gural or Hard Rock. There are no preferences to anybody. But what we did get was the right to all the food and beverage in the facility as it is now, which is a racetrack. And if there is future development on this site, meaning a casino, we would have all of those restaurants as well. So I can tell you, if it doesn't become a casino, this investment is dead in the water. Racing is not coming back as a [indiscernible] sport. But if it does become a casino, we think there is a huge, huge, huge opportunity for this company that's more than transformative. So that's why we made the investment. Bruce Howard Geller - Dalton, Greiner, Hartman, Maher & Co., LLC: I see. And so what kind of volume would you expect next year, presuming it stays as it is, in terms of the food and beverage?

We have no P&L effect at all on the food and beverage in the new grandstands we're building. We're building -- not we, the group, who has made this investment. It's closing, as of November 23, the old grandstands. We are in the process of building a new, smaller grandstand that'll be more economically viable as a business. And that new grandstand will have some food and beverage in it. And in all honesty, all we are doing is managing that for the racing season. But it has no P&L effect on Ark at all. We don't make money. We don't lose money. We get a very, very minor management fee for doing it. The reason to do this deal was not to become a food operator in the grandstands of a racetrack. The reason to do this deal is, if there is a casino, we think the investment itself that we have made becomes a significantly positive asset for our company. And the food and beverage opportunity beyond that becomes really significant. Bruce Howard Geller - Dalton, Greiner, Hartman, Maher & Co., LLC: And what was the size of the investment?

$4.2 million. Bruce Howard Geller - Dalton, Greiner, Hartman, Maher & Co., LLC: And so if a casino was allowed there, wouldn't that also hurt your investment in Atlantic City?

We have -- first of all, we have an investment in Atlantic City where I think, on the books, it's probably a couple of hundred thousand dollars at this point, and in Gallagher's, which is in Resorts, which is now a Margaritaville. We have a slightly over $1 million investment in Tropicana. We don't think those investments get significantly hurt by what goes on in the Meadowlands or by what goes on in Delaware and Pennsylvania. Atlantic City has been significantly impacted by gaming in areas contiguous to New Jersey. We don't necessarily think it's going to get worse. We just don't think it's going to get any better. But the location we're in, in Tropicana Quarter, the restaurants -- the 4 restaurants that are our neighbors are doing outstanding volume. So we have -- we think we're going to do very well there. And we're not worried about dilution. But the truth of the matter is, even if there was dilution in Atlantic City, if you have a casino given to us at the Meadowlands, you can take the rest of the company, it becomes insignificant in relation to what we think that means for this company.

[Operator Instructions] And our next question comes from the line of Bruce Gellar with DGHM. Bruce Howard Geller - Dalton, Greiner, Hartman, Maher & Co., LLC: Well, since it looks like it's just me, I'll keep going. There's been a lot of talk about online gambling, and I guess it was just legalized in Nevada. I'm curious, with the proliferation of casinos around the country and online gambling, would you -- if you think that, that is -- or what kind of impact do you think that's having on your Vegas operation?

Look, I'm sure the expansion of Indian gaming and then state-authorized gaming throughout the country has had a huge impact on Las Vegas. Also, what's going on in Asia has a huge impact. There was a time -- we went into Vegas in 1997. And all through the first 6 or 7 years or 8 years I was out there, I kept -- I was out there every week for the first 5 years. Literally, every week. And I was kind of amazed at the number of foreign languages that were spoken when you walk along the streets. And now what you get when you're walking on the streets there is it's basically American, it's not as fun. There's an absence of Asians. This whole thing has been diluted by other gaming venues all over the country. Online gaming, I'm sure it'll have effect if -- New Jersey, by the way, which has passed sports betting to try to help Atlantic City, but giving the Meadowlands the right to sports betting, if the federal government loses its case in trying to prevent that expansion, New Jersey will have sports betting. I'm sure that would hurt Las Vegas a little bit. But all that said, what you must keep in mind is Las Vegas has 120,000 to 130,000 hotel rooms, no other city in the United States can handle that, for conventions or the ease of booking. It is the entertainment capital of the United States and probably of the world. There are shows there that cost $150 million to mount that don't exist anywhere else. There is a party atmosphere that doesn't exist anywhere else that I know of, except maybe in New Orleans, where you can walk the streets with an alcoholic drink in your hand. So there are certainly advantages to Atlantic -- to Las Vegas that don't exist in other states because there's not a compilation of 20 or 30 casinos on one strip. Biloxi [ph] doesn't do it, even though they have many facilities there, but you just don't get the same feel that you're going to get in Las Vegas. So Las Vegas will always be a destination whether or not they can build incremental traffic beyond what it is. But whether the spending rates of the consumers going there start to increase, I can't tell you. But one would think, as the economy gets a little bit better, spending should increase, and that should benefit our business. New York, New York has just announced, where most of our business is in Las Vegas, has just announced an extraordinary expansion of their entertainment center. And -- but they're also expanding somewhat the number of food and beverage outlets, not significantly, but whether or not that expansion, which will be completed in the next 2 or 3 years, brings more demand to that side of the street and benefits our food and beverage outlets, I think maybe it does. But the big thing is the spending dollars. They're just not there right now. And Vegas needs people to spend more money while they're there. I hope that gives you an explanation. Bruce Howard Geller - Dalton, Greiner, Hartman, Maher & Co., LLC: In the past, you've talked about the catering opportunity that you see as being a nice grower and offering some good upside. Can you elaborate on any current developments there?

Yes. The -- our catering business continues to grow. A lot of that has to do, again, with Robert, which has a catering facility in the museum, in addition to our restaurant. We're looking at other venues to try to make a couple of deals that we have not been successful, where we've become the primary caterer at a site. So our catering volume is up, but we want to expand that business where we control other museum sites or large facilities where we become the exclusive caterer. We've not been as successful as I hoped at this juncture, but we keep pounding on the door to try to make further inroads. Bruce Howard Geller - Dalton, Greiner, Hartman, Maher & Co., LLC: Okay. Are you looking to go through a period of digestion with some of these new initiatives, or are there additional things that are kind of in the works as well?

We have -- we continue to look for other venues. We don't need -- we may have indigestion, but -- because of the weather, but we certainly have no problem funding the facilities that we presently have, and expanding on that, the -- our home office is certainly capable of handling the additional volume, and we have managers who have been with us a long, long time and just willing and able to expand their horizons and do more. So -- we're not -- we never stop looking for good business opportunities. Bruce Howard Geller - Dalton, Greiner, Hartman, Maher & Co., LLC: Great. And then my last question relates to Landry's. You mentioned there was some cost in the quarter, but you didn't quantify it. I'd be -- I'm wondering if you'd be willing to quantify that. And also, maybe give a status update. I saw a few press releases back and forth, but I didn't know if there was anything further beyond that in terms of engaging in discussions with them?

We have not engaged in discussions with them. Our last public announcement is the last thing that occurred, in which we just said we weren't interested. We're not interested. We have not heard back, and that was some 5 or 6 weeks ago, I would take a guess. In terms of the expense, it was several hundred thousand dollars. Beyond that, there's not much to say. Bruce Howard Geller - Dalton, Greiner, Hartman, Maher & Co., LLC: In their -- in one of their last filings, they alluded to the potential to raise the offer based on due diligence. I'm curious why, and in light of that, that it wouldn't make sense to at least have a discussion with them?

It's not something I want to say a lot about. But I could tell you, the one statement that I think is fair is we think the opportunities that we either have in the Meadowlands or other negotiations that we are having are all significant, significant future opportunities for this company. And quite honestly, we would like to see how they play out under our management. And we think we can get good value for shareholders. Obviously, I'm a large shareholder. But I think about this as if I own 50 shares, what would I do and if I knew all the facts, and I know all the facts, and I think that the decision for us to continue to go forward independently is the right one for all shareholders.

Thank you. I am showing no further questions in the queue at this time. I'd like to turn the conference back over to management for any final remarks.

Well, thank you, everybody. We'll see you in the next quarter. Hope the weather gets better.

Ladies and gentlemen, that concludes our conference for today. Thank you for your participation. You may now disconnect.