What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-13 compared with 2024-05-14 · 59 added, 52 removed, 144 unchanged (44% of the section changed)

13 unchanged sentences

Some of these measures may have an adverse impact on our business, including possible impairments of assets.

As of March 30, 2024, the Company owned and operated 17 restaurants and bars, 16 fast food concepts and catering operations, exclusively in the United States, that have similar economic characteristics, nature of products and service, class of customer and distribution methods.

As of June 29, 2024, the Company owned and operated 17 restaurants and bars, 16 fast food concepts and catering operations, exclusively in the United States, that have similar economic characteristics, nature of products and service, class of customer and distribution methods.

The Company believes it meets the criteria for aggregating its operating components into a single operating segment in accordance with applicable accounting guidance.

4 unchanged sentences

Under this method certain years will contain 53 weeks.

The periods ended March 30, 2024 and April 1, 2023 each included 13 and 26 weeks.

The periods ended June 29, 2024 and July 1, 2023 each included 13 and 39 weeks.

The Company has substantial fixed costs that do not decline proportionally with sales.

8 unchanged sentences

Results of Operations

The Company’s operating income (loss) for the 13 and 26 weeks ended March 30, 2024 decreased as compared to the same period of the prior year primarily as a result of continued increases in labor costs in connection with record low unemployment, inflation related to non-commodity related expenses, partially offset by the negative impact on the prior period of the temporary closure of Gallagher's Steakhouse for renovation on February 5, 2023 (which reopened on April 28, 2023).

The following table summarizes the significant components of the Company’s operating results for the 13- and 26-week periods ended March 30, 2024 and April 1, 2023:

The Company’s operating income for the 13 and 39 weeks ended June 29, 2024 (which include impairment charges of $1,561,000 and $939,000 related to Sequoia's ROU assets and long-lived assets, respectively) decreased 77.3% and 79.1%, respectively, as compared to the same periods of the prior year.

Excluding the impairment charges, operating income of $3,324,000 and $3,725,000 for the 13 and 39 weeks ended June 29, 2024, respectively, decreased 8.6% and 36.5% as compared to the same periods of the prior year.

These decreases resulted primarily from increases in labor costs combined with increased base rents and inflationary pressures related to non-commodity items partially offset by the reversal of stock-based compensation expenses relating to forfeitures in the amount of $774,000 combined with the negative impact on the prior period of the temporary closure of Gallagher's Steakhouse for renovation on February 5, 2023 (which reopened on April 28, 2023).

The following table summarizes the significant components of the Company’s operating results for the 13- and 39-week periods ended June 29, 2024 and July 1, 2023:

13 Weeks Ended Variance 39 Weeks Ended Variance

2024 April 1,

2023 $ % March 30,

2024 April 1,

2023 $ % June 29,

(in thousands) (in thousands)

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Depreciation and amortization 1,033 1,059 (26) -2.5 % 3,181 3,230 (49) -1.5 %

Total costs and expenses 43,459 41,874 1,585 3.8 % 89,342 87,115 2,227 2.6 %

OPERATING INCOME (LOSS) $ (1,202) $ 23 $ (1,225) NM $ 401 $ 2,227 $ (1,826) -82.0 %

Impairment losses on right-of

use and long-lived assets

2,500 — 2,500 100.0 % 2,500 — 2,500 100.0 %

NM - Not meaningful.

During the 13- and 26-week periods ended March 30, 2024, revenues increased marginally as compared to revenues for the 13- and 26-week periods ended April 1, 2023.

The net increases resulted primarily from decreases in same-store sales discussed below, offset by an increase in sales at Gallagher's Steakhouse at the New York-New York Hotel and Casino in Las Vegas, NV which was substantially closed for renovation in the prior period from February 5, 2023 through April 27, 2023.

Revenues for the period from closure through April 1, 2023 were $714,000 as compared to $2,114,000 for the comparable period in the current fiscal quarter.

Total costs and expenses 49,572 47,414 2,158 4.6 % 138,914 134,530 4,384 3.3 %

OPERATING INCOME $ 824 $ 3,637 $ (2,813) -77.3 % $ 1,225 $ 5,863 $ (4,638) -79.1 %

During the 13- and 39-week periods ended June 29, 2024, revenues decreased marginally as compared to revenues for the 13- and 39-week periods ended July 1, 2023.

The net decreases resulted primarily from decreases in same-store sales discussed below, offset by an increase in sales at Gallagher's Steakhouse at the New York-New York Hotel and Casino in Las Vegas, NV, which was substantially closed for renovation in the prior period from February 5, 2023 through April 27, 2023.

Revenues related to Gallagher's Steakhouse for the period of closure were $1,068,000 as compared to $3,056,000 for the comparable current period, of which $354,000 as compared to $918,000 related to the 13-week periods ended July 1, 2023 and June 29, 2024, respectively, and $714,000 as compared $2,138,000 related to the 39-week periods ended July 1, 2023 and June 29, 2024, respectively.

Food and Beverage Same-Store Sales

On a Company-wide basis, same-store sales increased 0.4% during the 13 weeks ended March 30, 2024 as compared to the same period of last year as follows:

On a Company-wide basis, same-store sales decreased 0.7% during the 13 weeks ended June 29, 2024 as compared to the same period of last year as follows:

13 Weeks Ended Variance

2024 April 1,

(in thousands)

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Same-store sales 48,455 48,817 $ (362) -0.7 %

Other 721 990

Food and beverage sales $ 49,176 $ 49,807

Same-store sales in Las Vegas increased 2.5% primarily as a result of the negative impact on the prior period of the temporary closure of Gallagher's Steakhouse for renovation on February 5, 2023 (which reopened on April 28, 2023).

Same-store sales in New York increased 5.1% driven primarily by strong revenues from our event business.

Same-store sales in New York decreased 5.2% primarily as a result of decreased revenues from our event business.

Same-store sales in Washington, D.C.

decreased 4.8% as a result of lower headcounts and the closure of the property after Sunday after close through lunch on Thursdays for the winter.

Same-store sales in Atlantic City increased 1.5% as a result of better than expected customer traffic at the property where we are located.

Same-store sales in Alabama increased 0.6% primarily as a result of menu price increase partially offset by slightly lower headcounts.

Same-store sales in Florida decreased 5.5% primarily as a result of lower headcounts as compared to the comparable prior period which benefited from outsized volumes as a result of the population increase in Southeast Florida.

On a Company-wide basis, same-store sales during the 26 weeks ended March 30, 2024 were consistent as compared to the same period of last year as follows:

decreased 15.8% as a result of lower headcounts, especially during lunch and after-work hours, which we attribute to continued hybrid work schedules.

Same-store sales in Atlantic City decreased 8.0% as a result of as a result of lower customer traffic at the property where we are located.

Same-store sales in Alabama increased 9.8% primarily as a result of better-than-expected customer traffic combined with targeted menu price increases.

Same-store sales in Florida increased 0.7% primarily as a result of increased traffic at our food court located in the Hard Rock Hotel and Casino in Hollywood, FL.

On a Company-wide basis, same-store sales during the 39 weeks ended June 29, 2024 were consistent as compared to the same period of last year as follows:

39 Weeks Ended Variance

2024 April 1,

(in thousands)

10 unchanged sentences

Same-store sales in Las Vegas increased 1.9% primarily as a result of the negative impact on the prior period of the temporary closure of Gallagher's Steakhouse for renovation on February 5, 2023 (which reopened on April 28, 2023), partially offset by lower headcounts in the current period.

Same-store sales in New York increased 10.2% driven primarily by strong revenues from our event business.

Same-store sales in New York increased 3.4% driven primarily by strong revenues from our event business in the first two quarters of fiscal 2024.

Same-store sales in Washington, D.C.

decreased 9.9% as a result of lower headcounts.

decreased 12.6% as a result of lower headcounts, especially during lunch and after-work hours, which we attribute to continued hybrid work schedules as well as the closure of the property from Monday through lunch on Thursdays for the winter.

Same-store sales in Atlantic City decreased 4.2% as a result of lower customer traffic at the property where we are located.

Same-store sales in Alabama decreased 0.4% primarily as a result of slightly lower customer headcounts.

Same-store sales in Alabama increased 4.0% primarily as a result of better-than-expected customer traffic combined with targeted menu price increases.

Same-store sales in Florida decreased 3.3% primarily as a result of lower headcounts as compared to the comparable prior period which benefited from outsized volumes as a result of the population increase in Southeast Florida.

Costs and Expenses

Costs and expenses for the 13 and 26 weeks ended March 30, 2024 and April 1, 2023 were as follows (in thousands):

Costs and expenses for the 13 and 39 weeks ended June 29, 2024 and July 1, 2023 were as follows (in thousands):

13 Weeks Ended

Revenues 13 Weeks Ended

April 1, 2023 %

July 1, 2023 %

Revenues Increase

(Decrease) 39 Weeks Ended

June 29, 2024 %

Revenues 39 Weeks Ended

April 1, 2023 %

July 1, 2023 %

Revenues Increase

5 unchanged sentences

Depreciation and amortization 1,033 2.0 % 1,059 2.1 % (26) -2.5 % 3,181 2.3 % 3,230 2.3 % (49) -1.5 %

Impairment losses on right-of use and long-lived assets 2,500 5.0 % — — % 2,500 100.0 % 2,500 1.8 % — — % 2,500 100.0 %

Total costs and expenses $ 49,572 $ 47,414 $ (342) $ 138,914 $ 134,530 $ 1,884

Food and beverage costs as a percentage of total revenues for the 13 weeks ended March 30, 2024 as compared with the same period of last year increased as a result of increases in commodity prices, which had been easing for several quarters.

Food and beverage costs as a percentage of total revenues for the 26 weeks ended March 30, 2024 as compared with the same period of last year decreased marginally as a result of a strong event business in New York City, which has higher margins, partially offset by higher commodity prices in the current quarter.

Payroll expenses as a percentage of total revenues for the 13 and 26 weeks ended March 30, 2024 increased as compared with the same period of last year primarily as a result of record low unemployment combined with merit increases and increasing minimum wages in the states where we operate.

Occupancy expenses as a percentage of total revenues for the 13 and 26 weeks ended March 30, 2024 increased as compared with the same periods of last year primarily as a result of increases in base rents and increases in property and liability insurance premiums.

Other operating costs and expenses as a percentage of total revenues for the 13 and 26 weeks ended March 30, 2024 as compared to the same period of last year increased primarily as a result of inflation.

General and administrative expenses (which relate solely to the corporate office in New York City) for the 13 and 26 weeks ended March 30, 2024 increased as compared to the same periods of last year as a result of annual merit increases.

Depreciation and amortization expense for the 13 and 26 weeks ended March 30, 2024 decreased slightly as compared to the same period of last year primarily as a result of certain assets becoming fully depreciated.

Food and beverage costs as a percentage of total revenues for the 13 weeks ended June 29, 2024 as compared with the same period of last year increased as a result of increases in commodity prices, which had been easing for several quarters.

Food and beverage costs as a percentage of total revenues for the 39 weeks ended June 29, 2024 as compared with the same period of last year increased marginally as a result of a strong event business in New York City in the first two quarters, which has higher margins, partially offset by higher commodity prices in the current quarter.

Payroll expenses as a percentage of total revenues for the 13 and 39 weeks ended June 29, 2024 increased as compared with the same period of last year primarily as a result of increasing minimum wages in the states where we operate.

Occupancy expenses as a percentage of total revenues for the 13 and 39 weeks ended June 29, 2024 increased as compared with the same periods of last year primarily as a result of increases in base rents and increases in property and liability insurance premiums.

Other operating costs and expenses as a percentage of total revenues for the 13 and 39 weeks ended June 29, 2024 as compared to the same period of last year increased primarily as a result of inflation.

General and administrative expenses (which relate solely to the corporate office in New York City) for the 13 and 39 weeks ended June 29, 2024 decreased as compared to the same periods of last year primarily as a result of the reversal of compensation expense in the amount of $774,000 related to options that expired unexercised.

Depreciation and amortization expense for the 13 weeks and 39 weeks ended June 29, 2024 decreased slightly as compared to the same period of last year primarily as a result of certain assets becoming fully depreciated.

Impairment losses on Right-of-Use and Long-lived Assets

During the 13 weeks ended June 29, 2024, impairment indicators were identified at our Sequoia property located in Washington, D.C.

due to lower-than-expected operating results.

Accordingly, the Company tested the recoverability of Sequoia's ROU and long-lived assets and concluded they were not recoverable.

Based on a discounted cash flow analysis, the Company recognized impairment charges of $1,561,000 and $939,000 related to Sequoia's ROU assets and long-lived assets, respectively.

No impairment charges were recognized related to long-lived assets or ROU assets during the 13 and 39 weeks ended July 1, 2023.

Given the inherent uncertainty in projecting results of restaurants, the Company will continue to monitor the recoverability of the carrying value of the assets of Sequoia and several other restaurants on an ongoing basis.

If expected performance is not realized, further impairment charges may be recognized in future periods, and such charges could be material.

Liquidity and Capital Resources

4 unchanged sentences

We believe that our operating lease arrangements provide appropriate leverage of our capital structure in a financially efficient manner.

As of March 30, 2024, we had a cash and cash equivalents balance of $10,412,000.

The Company had a working capital deficit of $(7,028,000) at March 30, 2024 as compared with a working capital deficit of $(5,932,000) at September 30, 2023.

This increase in the deficit is primarily the result of higher accrued expenses from the collection of catering deposits.

As of June 29, 2024, we had a cash and cash equivalents balance of $11,467,000.

The Company had a working capital deficit of $(9,057,000) at June 29, 2024 as compared with a working capital deficit of $(5,932,000) at September 30, 2023.

This increase in the deficit is primarily the result of all of our note payments becoming current as they mature through May 31, 2025.

The country is currently experiencing multi-decade high inflation.

7 unchanged sentences

There can be no assurance that all of our future cost increases can be offset by higher menu prices or that higher menu prices will be accepted by our restaurant customers without any resulting changes in their visit frequencies or purchasing patterns.

Cash Flows for 26 Weeks Ended March 30, 2024 and April 1, 2023

Net cash provided by operating activities for the 26 weeks ended March 30, 2024 and April 1, 2023 was $766,000 and $2,111,000, respectively, and resulted primarily due to changes in working capital (primarily accrued expenses), partially offset by a decrease in operating income.

Net cash used in investing activities for the 26 weeks ended March 30, 2024 was $596,000 as compared to cash provided by investing activities of $2,998,000 in the same period as last year.

Cash Flows for 39 Weeks Ended June 29, 2024 and July 1, 2023

Net cash provided by operating activities for the 39 weeks ended June 29, 2024 and July 1, 2023 was $3,926,000 and $6,872,000, respectively, and resulted primarily due to changes in working capital, primarily accounts receivable and accrued expenses.

Net cash used in investing activities for the 39 weeks ended June 29, 2024 was $1,204,000 as compared to cash provided by investing activities of $2,008,000 in the same period as last year.

This resulted primarily from proceeds from the maturity of certificates of deposit in the prior period partially offset by lower purchases of fixed assets at existing restaurants in the current period.

Net cash used in financing activities for the 26 weeks ended March 30, 2024 and April 1, 2023 was $(3,173,000) and $(10,658,000), respectively, and resulted primarily from principal payments on notes payable, the payment of dividends and the payment of distributions to non-controlling interests and in the prior year principal payments on PPP Loans.

Net cash used in financing activities for the 39 weeks ended June 29, 2024 and July 1, 2023 was $(4,670,000) and $(18,333,000), respectively, and resulted primarily from principal payments on notes payable, the payment of dividends and the payment of distributions to non-controlling interests and in the prior year principal payments on PPP Loans.

Recent Restaurant Expansions and Other Developments

1 unchanged sentence

In connection with the extension, the Company has agreed to spend a minimum of $4,000,000 to materially refresh the premises by December 31, 2024, subject to various extensions as set out in the agreement.

No amounts have been expended to date related to this refresh.

To date approximately $100,000 has been spent on this refresh.

On July 21, 2022, the Company extended its lease for the Village Eateries at the New York-New York Hotel and Casino in Las Vegas, NV through December 31, 2034.

4 unchanged sentences

We will continue to pay all rent as required by the leases without abatement during construction.

Note that our substantial completion of work set forth in plans approved by the landlord shall constitute our compliance with the requirements of the completion deadlines, regardless of whether or not the amount actually expended in connection therewith is less than the minimum.

On September 19, 2023, the Company extended the lease for its corporate office through December 31, 2038.

The amended lease provides for rents, beginning on January 1, 2024.

The lease also provides for, among other things, the ability for the Company to vacate the premises upon 12 months' notice.

Note that our substantial completion of work set forth in plans approved by the landlord shall constitute our compliance with the requirements

of the completion deadlines, regardless of whether or not the amount actually expended in connection therewith is less than the minimum.

Our restaurants generally do not achieve substantial increases in revenue from year to year, which we consider to be typical of the restaurant industry.

13 unchanged sentences

In addition, there is a 0.30% per annum fee for any unused portion of the $10,000,000 revolving facility.

As of March 30, 2024, no advances were outstanding under the Credit Agreement.

As of March 30, 2024, the weighted average interest on the outstanding BHBM indebtedness was approximately 9.0%.

As of June 29, 2024, no advances were outstanding under the Credit Agreement.

As of June 29, 2024, the weighted average interest on the outstanding BHBM indebtedness was approximately 9.0%.

Borrowings and all other obligations under Credit Agreement, which include the promissory notes as discussed in Note 8 of the consolidated condensed financial statements, are secured by all tangible and intangible personal property (including accounts receivable, inventory, equipment, general intangibles, documents, chattel paper, instruments, letter-of-credit rights, investment property, intellectual property and deposit accounts) and fixtures of the Company.

4 unchanged sentences

We believe that our existing cash balances, internal cash-generating capabilities, current banking facilities and ability to secure additional financing, if necessary, are sufficient to finance our capital expenditures, debt maturities and other operating activities for at least the next twelve months.

Recent Events

On May 7, 2024, the Board of Directors declared a quarterly cash dividend of $0.1875 per share to be paid on June 12, 2024 to shareholders of record of the Company's common stock at the close of business on May 31, 2024.

Critical Accounting Estimates

3 unchanged sentences

Management bases its estimates on certain assumptions, which it believes are reasonable in the circumstances, and actual results could differ from those estimates.

Although management does not believe that any change in those assumptions in the near term would have a material effect on the Company’s consolidated condensed financial position or the results of operations, differences in actual results could be material to the consolidated condensed financial statements.

Although management does not believe that any change in those assumptions in the near term would have a material effect on the Company’s consolidated condensed

financial position or the results of operations, differences in actual results could be material to the consolidated condensed financial statements.

The Company’s critical accounting estimates are described in the Company’s MD&A included in Form 10-K for the year ended September 30, 2023.

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis