RCI Hospitality Holdings Inc (RICK)

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Rick's Cabaret International, Inc. Reports 20.4% Increase In Net Income For Its Third Quarter; Revenues Rose 18.3%

Non-GAAP Net Income Rose 31.5% to $3.4 Million

PR NewswirePress Release: Rick's Cabaret International, Inc. –
HOUSTON, Aug. 8, 2013 /PRNewswire/ -- Rick's Cabaret International, Inc. (RICK) today reported consolidated total revenues of $28.3 million for its third quarter ended June 30, 2013, an increase of 18.3 percent over the $23.9 million in the same period last year.

(Logo: http://photos.prnewswire.com/prnh/20110418/MM85342LOGO)

Consolidated net income was $2.2 million, an increase of 20.4 percent over the $1.8 million last year; non-GAAP* net income of $3.4 million versus $2.6 million last year; GAAP earnings of 23 cents per diluted share vs. 19 cents last year; non-GAAP earnings per share of 35 cents versus 27 cents last year; GAAP income from operations this quarter was $5.7 million compared with $4.0 million in the same quarter last year while non-GAAP income from operations** was $7.0 million compared with $5.1 million. Adjusted EBITDA*** was $6.9 million, versus $5.4 million last year.

Net income was impacted by $540,000 in one time or unusual expenses of $230,000 in costs for new businesses yet to be opened, and $310,000 to settle two lawsuits. "The quarter was strong and we are particularly pleased with the performance of the Jaguars clubs and our new Bombshells Restaurant in Dallas," said Eric Langan, president and CEO of the company. "The challenges of the last four years are largely behind us, we have learned from mistakes such as the Las Vegas acquisition, and we are now on a solid growth trajectory."

Mr. Langan noted that the cost of goods sold for same-location-same-period of club operations for the third quarter was 12.9 percent, compared to 13.7 percent for the same period ended June 30, 2012. The decrease was due principally to the hiring of a corporate beverage director and the continuing of the company's national buying power for alcoholic beverages and energy drinks. Operating margin, the percentage of operating income to total revenues, was 20 percent this year versus 16.9 percent.

Mr. Langan will discuss the quarterly results in a conference call today at 4:30 p.m. EDT. The call is being webcast by PrecisionIR, www.precisionir.com and can be accessed at the Rick's Cabaret investor website, www.ricksinvestor.com or via www.InvestorCalendar.com. The toll free dial-in number is 877-407-8033; live international dial-in is 201-689-8033. The replay number is 877-660-6853 (International:201-612-7415) with Conference ID 416486 and replay is available until August 15th at 11:59 PM.





RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS




ASSETS








(in thousands, except per share data)



June 30,

2013


September 30, 2012


Assets



(UNAUDITED)




Current assets:






Cash and cash equivalents



$ 9,045




$ 5,520


Accounts receivable:









Trade, net



1,876




1,743


Other, net



486




296


Marketable securities



551




1,059


Inventories



1,475




1,260


Deferred tax asset



4,463




3,635


Prepaid expenses and other current assets



2,297




1,123


Assets of discontinued operations



26




72


Total current assets



20,219




14,708











Property and equipment, net



95,359




79,940











Other assets:









Goodwill



43,987




43,421


Other indefinite lived intangibles



54,966




50,608


Definite lived intangibles



1,153




1,177


Other



4,717




2,539


Total other assets



104,823




97,745











Total assets



$ 220,401




$ 192,393






















LIABILITIES AND STOCKHOLDERS' EQUITY










(in thousands, except per share data)





June 30,

2013



September 30, 2012


Liabilities and Stockholders' Equity



(UNAUDITED)





Current liabilities:








Accounts payable


$

2,364


$

1,865


Accrued liabilities



6,878



4,298


Texas patron tax liability



12,335



9,849


Current portion of derivative liabilities



-



75


Current portion of long-term debt



7,770



6,603


Liabilities of discontinued operations



47



163


Total current liabilities



29,394



22,853










Deferred tax liability



25,824



23,963


Other long-term liabilities



876



833


Long-term debt



68,774



56,925


Total liabilities



124,868



104,574










Commitments and contingencies
















Temporary equity - Common stock, subject to put rights zero and 9 shares, respectively



-



207










PERMANENT STOCKHOLDERS' EQUITY:








Preferred stock, $.10 par, 1,000 shares authorized; none issued and outstanding



-



-


Common stock, $.01 par, 20,000 shares authorized; 9,520 and 9,584 shares issued and outstanding, respectively



95



96


Additional paid-in capital



61,554



61,212


Accumulated other comprehensive income



46



59


Retained earnings



30,536



22,939


Total Rick's permanent stockholders' equity



92,231



84,306


Noncontrolling interests



3,302



3,306


Total permanent stockholders' equity



95,533



87,612










Total liabilities and stockholders' equity


$

220,401


$

192,393


























RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME







(in thousands, except per share data)



FOR THE THREE MONTHS

ENDED JUNE 30,


FOR THE NINE MONTHS

ENDED JUNE 30,












2013


2012


2013


2012



(UNAUDITED)


(UNAUDITED)











Revenues:









Sales of alcoholic beverages

$ 11,105


$ 9,711


$ 32,554


$ 29,033


Sales of food and merchandise

3,288


2,286


8,744


6,619


Service revenues

12,382


10,576


38,089


31,743


Other

1,533


1,348


4,790


3,958


Total revenues

28,308


23,921


84,177


71,353











Operating expenses:









Cost of goods sold

3,680


3,279


10,561


9,601


Salaries and wages

6,413


5,299


18,600


15,428


Stock compensation

282


12


845


33


Other general and administrative:









Taxes and permits

4,275


3,618


13,069


11,018


Charge card fees

410


361


1,126


1,042


Rent

846


726


2,199


2,150


Legal and professional

642


992


2,263


2,433


Advertising and marketing

1,181


959


3,452


2,994


Insurance

573


387


1,642


1,027


Utilities

523


454


1,564


1,264


Depreciation and amortization

1,337


1,398


3,969


3,708


Settlement of lawsuits

160


200


160


2,031


Loss on sale of assets

-


332


-


332


Other

2,336


1,867


6,967


5,432


Total operating expenses

22,658


19,884


66,417


58,493


Operating income

5,650


4,037


17,760


12,860











Other income (expense):









Interest income and other

(2)


(2)


6


2


Interest expense

(1,868)


(1,098)


(5,273)


(3,178)


Gain (loss) on change in fair value of derivative instruments



1




(17)




2




120


Income from continuing operations before income taxes



3,781




2,920




12,495




9,804


Income taxes

1,409


1,022


4,608


3,366


Income from continuing operations

2,372


1,898


7,887


6,438


Loss from discontinued operations, net of income taxes



(124)




(22)




(141)




(155)


Net income

2,248


1,876


7,746


6,283


Less: net income attributable to noncontrolling interests



(53)




(53)




(159)




(159)


Net income attributable to Rick's Cabaret International, Inc.





$ 2,195






$ 1,823






$ 7,587






$ 6,124








































Basic earnings (loss) per share attributable to Rick's shareholders:









Income from continuing operations

$ 0.24


$ 0.19


$ 0.81


$ 0.65


Loss from discontinued operations

$ (0.01)


$ (0.00)


$ (0.01)


$ (0.02)


Net income

$ 0.23


$ 0.19


$ 0.80


$ 0.63


Diluted earnings (loss) per share attributable to Rick's shareholders:









Income from continuing operations

$ 0.24


$ 0.19


$ 0.81


$ 0.65


Loss from discontinued operations

$ (0.01)


$ (0.00)


$ (0.01)


$ (0.02)


Net income

$ 0.23


$ 0.19


$ 0.79


$ 0.63




Weighted average number of common shares outstanding:









Basic

9,479


9,725


9,523


9,710


Diluted

9,647


9,731


9,871


9,717




The following tables present our non-GAAP measures for the periods ended June 30, 2013 and 2012 (in thousands, except per share amounts):






For the Three Months


For the Nine Months



Ended June 30,


Ended June 30,









(in thousands)

2013


2012


2013


2012


Reconciliation of GAAP net income to









Adjusted EBITDA









GAAP net income

$ 2,195


$ 1,823


$ 7,587


$ 6,124


Income tax expense

1,409


1,022


4,608


3,366


Interest expense and income and gain on derivative

1,869


1,117


5,265


3,056


Loss from discontinued operations

124


22


141


155


Depreciation and amortization

1,337


1,398


3,969


3,708


Adjusted EBITDA

$ 6,934


$ 5,382


$ 21,570


$ 16,409

















Reconcilation of GAAP net income (loss) to









non-GAAP net income









GAAP net income

$ 2,195


$ 1,823


$ 7,587


$ 6,124


Patron tax

746


726


2,536


2,265


Amortization of intangibles

92


117


322


345


(Gain) loss on change in fair value of derivative instruments

(1)


17


(2)


(120)


Stock-based compensation

282


12


845


33


Litigation and other one-time settlements

160


200


160


2,031


Income tax expense

1,409


1,022


4,608


3,366


Acquisition costs

30


-


119


131


Loss from discontinued operations, net of income taxes

124


22


141


155


Non-GAAP provision for income taxes

(1,664)


(1,374)


(5,415)


(5,004)


Non-GAAP net income

$ 3,373


$ 2,565


$ 10,901


$ 9,326











Reconciliation of GAAP diluted net income









per share to non-GAAP diluted net income per share









Fully diluted shares

9,647


9,731


9,871


9,717


GAAP net income

$ 0.23


$ 0.19


$ 0.77


$ 0.63


Patron tax

0.08


0.07


0.26


0.23


Amortization of intangibles

0.01


0.01


0.03


0.04


(Gain) loss on change in fair value of derivative instruments

-


0.00


(0.00)


(0.01)


Stock-based compensation

0.03


0.00


0.09


0.00


Litigation and other one-time settlements

0.02


0.02


0.02


0.21


Income tax expense

0.15


0.11


0.47


0.35


Acquisition costs

0.00


-


0.01


0.01


Loss from discontinued operations, net of income taxes

0.01


0.00


0.01


0.02


Non-GAAP provision for income taxes

(0.17)


(0.14)


(0.55)


(0.51)


Non-GAAP diluted net income per share

$ 0.35


$ 0.27


$ 1.11


$ 0.96











Reconciliation of GAAP operating income to









non-GAAP operating income









GAAP operating income

$ 5,650


$ 4,037


$ 17,760


$ 12,860


Patron tax

746


726


2,536


2,265


Amortization of intangibles

92


117


322


345


Stock-based compensation

282


12


845


33


Litigation and other one-time settlements

160


200


160


2,031


Acquisition costs

30


-


134


131


Non-GAAP operating income

$ 6,960


$ 5,092


$ 21,757


$ 17,665











Reconciliation of GAAP operating margin to









non-GAAP operating margin









GAAP operating income

20.0%


16.9%


21.1%


18.0%


Patron tax

2.6%


3.0%


3.0%


3.2%


Amortization of intangibles

0.3%


0.5%


0.4%


0.5%


Stock-based compensation

1.0%


0.1%


1.0%


0.0%


Litigation and other one-time settlements

0.6%


0.8%


0.2%


2.8%


Acquisition costs

0.1%


0.0%


0.2%


0.2%


Non-GAAP operating margin

24.6%


21.3%


25.8%


24.8%













* Non-GAAP Net Income. We exclude from non-GAAP net income amortization of intangibles, patron taxes, income tax expense, impairment charges, gains and losses from asset sales, stock based compensation, litigation and other one-time legal settlements and acquisition costs, and include the Non-GAAP provision for income taxes, calculated as the tax-effect at 35% effective tax rate of the pre-tax non-GAAP income before taxes less stock-based compensation, because we believe that excluding such measures helps management and investors better understand our operating activities.

** Non-GAAP Operating Income. We exclude from Non-GAAP operating income amortization of intangibles, patron taxes, gains and losses from asset sales, stock-based compensation charges, litigation and other one-time legal settlements and acquisition costs. We believe that excluding these items assists investors in evaluating period-over-period changes in our operating income and operating margin without the impact of items that are not a result of our day-to-day business and operations.

*** Adjusted EBITDA. We exclude from Adjusted EBITDA depreciation expense, amortization of intangibles, income tax, interest expense, interest income, gains and losses from asset sales, acquisition costs, litigation and other one-time legal settlements and impairment charges because we believe that adjusting for such items helps management and investors better understand operating activities. Adjusted EBITDA provides a core operational performance measurement that compares results without the need to adjust for Federal, state and local taxes which have considerable variation between domestic jurisdictions. Also, we exclude interest cost in our calculation of Adjusted EBITDA. The results are, therefore, without consideration of financing alternatives of capital employed. We use Adjusted EBITDA as one guideline to assess our unleveraged performance return on our investments. Adjusted EBITDA is also the target benchmark for our acquisitions of nightclubs.

Our Form 10-Q contains additional details relative to each of the non-GAAP financial measures and is posted on our website at www.ricksinvestor.com.

About Rick's Cabaret: Rick's Cabaret International, Inc. (RICK) is home to restaurants and upscale adult nightclubs serving primarily businessmen and professionals that offer live entertainment, dining and bar operations. Nightclubs in New York City, Los Angeles, Miami, Philadelphia, Charlotte, Dallas/Ft. Worth, Houston, Minneapolis, Indianapolis and other cities operate as "Rick's Cabaret," "XTC," "Club Onyx," "Vivid Cabaret" and "Tootsie's Cabaret" and other brand names. Sexual contact is not permitted at any locations. Rick's Cabaret also operates a media division, ED Publications. Rick's Cabaret common stock is traded on NASDAQ under the symbol RICK. For further information contact [e-mail] or visit www.ricksinvestor.com. Twitter: @rickscabaret; Facebook: http://www.facebook.com/rickscabaretintl.

Forward-looking Statements: This press release may contain forward-looking statements that involve a number of risks and uncertainties that could cause the company's actual results to differ materially from those indicated in this press release, including the risks and uncertainties associated with operating and managing an adult business, the business climates in cities where it operates, the success or lack thereof in launching and building the company's businesses, risks and uncertainties related to the operational and financial results of our Web sites, conditions relevant to real estate transactions, and numerous other factors such as laws governing the operation of adult entertainment businesses, competition and dependence on key personnel. Rick's has no obligation to update or revise the forward-looking statements to reflect the occurrence of future events or circumstances. For further information visit www.ricksinvestor.com.