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Weinstein's Ark

Brendan Mathews
February 20, 2007

Ark Restaurants (Nasdaq: ARKR  ) , led by longtime CEO Michael Weinstein, is attempting to load the corporate ship with two restaurants in every casino. The strategy is that restaurants in premium, high-traffic locations like casinos, train stations, parks, or waterfronts are more reliable than stand-alone spots. In Ark's most recent quarter, the company reported moderate growth compared with last year. Revenue, same-store sales, and operating income all floated up slightly.

Ark experiences normal seasonal fluctuations. Winter is typically a slower season, because the company is heavily dependent on outdoor seating at many of its locations. In the summer, Ark's outdoor seating is a draw, especially for the company's large restaurants, like the Bryant Park Grill in New York and Sequoia in Washington, D.C. During winter, those places slow down significantly.

For this reason, it's best to compare Ark's results with the same quarter in the previous year. Ark reported $28.2 million in revenues this quarter, compared with $26 million last year -- 8.6% growth. This was primarily driven by company-wide same-store sales growth of 7%, which should please investors. This same-store sales growth is an important metric in the restaurant business, proving that Ark's concept is still fresh and appealing to consumers.

Net income was $6.6 million this quarter, compared with $916,000 last year. Not all of that growth is due to operations. The company booked $5.2 million (after accounting for taxes) in net income from the sale of two restaurants in Las Vegas. Therefore, to gauge the company's performance, let's look at operating income, which doesn't include taxes, interest income, or income from discontinued operations. By that measure, the company is continuing to improve -- this quarter's operating income was $2.4 million, compared with $1.7 million last year.

So the company's operations are reasonably sound, and management is giving money back to shareholders. Ark's quarterly dividend is $0.35 per share. At today's share price of around $32.50, that