Rick's Cabaret International, Inc. reports first quarter 2014 results, provides second quarter 2014 update and reaffirms guidance

HOUSTON – February 10, 2014 – Rick’s Cabaret International, Inc. (NasdaqGM: RICK) today announced results for the 2014 first quarter ended December 31, 2013, while also providing an update on sales growth experienced to date in the second fiscal quarter (ending March 31, 2014) and reaffirming previous guidance for Fiscal 2014.

“With the exception of the impact of unusually severe winter weather in mid-December in our important Texas markets, results are progressing according to plan with our gentlemen’s clubs and restaurant/sports bars,” said Eric Langan, President and CEO of Rick’s Cabaret International.

“Revenues at our Rick’s Cabaret and Vivid Cabaret New York clubs in New York City were excellent in January and early February, as we capitalized strategically and financially on the pro football championship game this year across the Hudson River in New Jersey.

“In addition, we continue to be engaged in a program to maximize the value of our extensive real estate, and overall we look forward to strong growth in Fiscal 2014.”

First Quarter 2014 Summary

  • First quarter 2014 revenues of $29.4 million increased 8.4% from $27.1 million in the year ago period. First quarter 2014 results were negatively impacted by severe ice storms in mid-December in Texas, a state representing approximately 75% of the Company’s units and generating approximately 50% of sales.
  • Rick’s earned $2.4 million, or $0.25 per diluted share (on a GAAP basis), compared to $2.6 million, or $0.28 per diluted share, in the corresponding year ago period. The weather is estimated to have resulted in approximately $500,000 in lost sales of which approximately 80% would have contributed to operating profit.
  • First quarter 2014 results were also impacted by planned expenses associated with the development of five units (adult gentleman’s clubs Vivid Cabaret in New York City and Rick’s Cabaret in Odessa, TX, and Bombshells restaurant/sports bars in Webster, Beaumont and Austin, TX).
  • Despite the above factors, the cash generating power of Rick’s remained strong. Adjusted EBITDA* for the first quarter of 2014 was $7.3 million, approximately level with the year ago period.
  • The Company had 41 units open during the first quarter of 2014, including nine open less than a year.

Second Quarter 2014 Update

Second quarter 2014 sales as of the end of last week were up strongly compared to the year ago period due to:

  • Opening of Vivid Cabaret New York in mid-January and a second Bombshells, in Webster, TX, in late January.
  • An overall beneficial effect from the February 2, 2014 professional football championship.
  • Continued seasoning of new adult clubs and restaurant/sports bars open less than a year.

“We had a terrific success due to The Big Game this year,” said Mr. Langan. “It truly was a non-stop party at both the Vivid and Rick’s clubs in New York. Based on this, we expect continued success when the Big East and NCAA Regionals college basketball championships come to New York City in March.”

 

FY14 Guidance Reaffirmed

  • Rick’s reaffirmed its fiscal 2014 guidance of approximately $130 million in revenue, $1.70 earnings per share non-GAAP, and $1.20 earnings per share GAAP, based on a continued strong performance company-wide from existing units over the balance of the year, plus contributions from new restaurant/sports bars already opened and those planned to open.
  • Plans for the balance of the fiscal year include the expected opening of a new adult club (Rick’s Cabaret in Odessa) and three new Bombshells currently under development (Beaumont, Austin and South Houston).
  • Rick’s expects to have a total of 10 sports bar/restaurants open or in development by year end calendar 2014, with a cluster in Texas and others possibly outside the state in select cities having significant tourist and convention traffic.
  • Rick’s FY14 guidance does not assume the acquisition of any gentlemen’s adult clubs, although they are factored in the Company’s longer term multi-year target of 20-30% revenue growth.

Conference Call

A conference call to discuss Rick’s results for the first quarter of 2014, outlook and related matters will be held today, February 10, 2014 at 4:30 PM Eastern Time.

Meet Management

Eric Langan, President and CEO, invites investors for a “Due Diligence Ball” to meet, talk and tour one of the Company’s major clubs, tonight in Manhattan.

  • When: Monday, February 10, 2014, 6:30 PM to 8:00 PM ET
  • Where: Rick’s Cabaret New York, at 50 W. 33rd Street, between Fifth Avenue and Broadway
  • RSVP: With your contact information, to gary.fishman@anreder.com

*Explanation of Non-GAAP Financial Measures

In addition to our financial information presented in accordance with GAAP, management uses certain “non-GAAP financial measures” within the meaning of the SEC Regulation G, to clarify and enhance understanding of past performance and prospects for the future. Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in or excluded from the most directly comparable measure calculated and presented in accordance with GAAP. We monitor non-GAAP financial measures because it describes the operating performance of the company and helps management and investors gauge our ability to generate cash flow, excluding some recurring charges that are included in the most directly comparable measures calculated and presented in accordance with GAAP. Relative to each of the non-GAAP financial measures, we further set forth our rationale as follows:

  • Non-GAAP Operating Income and Non-GAAP Operating Margin. We exclude from GAAP operating income and GAAP operating margin 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.
  • Non-GAAP Net Income and Non-GAAP Net Income per Basic Share and per Diluted Share. We exclude from GAAP net income and GAAP net income per diluted share and per basic share amortization of intangibles, patron taxes, income tax expense, impairment charges, gains and losses from asset sales, stock-based compensation, litigation, loss from discontinued operations  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.
  • Adjusted EBITDA. We exclude from GAAP net income 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.

About Rick’s Cabaret

With 43 units, Rick’s Cabaret International, Inc. (NasdaqGM: RICK) is the leading hospitality company operating adult gentlemen’s clubs and sports bar/restaurants in the US. Adult clubs in New York City, Los Angeles, Miami, Philadelphia, Charlotte, Dallas/Ft. Worth, Houston, Minneapolis, Indianapolis and other cities operate under brand names such as “Rick's Cabaret,” “XTC,” “Club Onyx,” “Vivid Cabaret,” “Jaguars” and “Tootsie’s Cabaret.” Sports bar/restaurants, which also feature live entertainment, operate under the brand names “Bombshells” and “Ricky Bobby Sports Saloon.”

For More Information

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.

Media & Investor Contacts

Gary Fishman and Steven Anreder at 212-532-3232 or gary.fishman@anreder.com and steven.anreder@anreder.com

RICK'S CABARET INTERNATIONAL, INC.

Consolidated Statements of Income

 

 

 

Three Months Ended

 

 

 

December 31,

 

(in thousands, except per share data)

 

2013

 

 

2012

 

 

 

(UNAUDITED)

 

Revenues:

 

 

 

 

 

 

 

 

Sales of alcoholic beverages

 

$

11,689

 

 

$

10,406

 

Sales of food and merchandise

 

 

3,423

 

 

 

2,578

 

Service revenues

 

 

12,730

 

 

 

12,655

 

Other

 

 

1,581

 

 

 

1,502

 

Total revenues

 

 

29,423

 

 

 

27,141

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

3,747

 

 

 

3,386

 

Salaries and wages

 

 

6,577

 

 

 

6,038

 

Stock-based compensation

 

 

3

 

 

 

282

 

Other general and administrative:

 

 

 

 

 

 

 

 

Taxes and permits

 

 

4,416

 

 

 

4,221

 

Charge card fees

 

 

428

 

 

 

374

 

Rent

 

 

1,228

 

 

 

570

 

Legal and professional

 

 

908

 

 

 

641

 

Advertising and marketing

 

 

1,285

 

 

 

1,109

 

Depreciation and amortization

 

 

1,390

 

 

 

1,320

 

Insurance

 

 

799

 

 

 

499

 

Utilities

 

 

595

 

 

 

489

 

Other

 

 

2,431

 

 

 

2,278

 

Total operating expenses

 

 

23,807

 

 

 

21,207

 

Income from operations

 

 

5,616

 

 

 

5,934

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest income and other

 

 

77

 

 

 

8

 

Interest expense

 

 

(2,012

)

 

 

(1,643

)

Gain on change in fair value of derivative instruments

 

 

-

 

 

 

(1

 )

Income from continuing operations before income taxes

 

 

3,681

 

 

 

4,298

 

Income taxes

 

 

1,323

 

 

 

1,584

 

Income from continuing operations

 

 

2,358

 

 

 

2,714

 

Loss from discontinued operations, net of income taxes

 

 

(1

)

 

 

(14

)

Net income

 

 

2,357

 

 

 

2,700

 

Less: (net income) loss attributable to noncontrolling interests

 

 

47

 

 

 

(53

)

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

 

$

2,404

 

 

$

2,647

 

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

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.25

 

 

$

0.28

 

Loss from discontinued operations

 

 

(0.00

)

 

 

(0.00

)

Net income

 

$

0.25

 

 

$

0.28

 

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

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.25

 

 

$

0.28

 

Loss from discontinued operations

 

 

(0.00

)

 

 

(0.00

)

Net income

 

$

0.25

 

 

$

0.28

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

9,546

 

 

 

9,575

 

Diluted

 

 

9,855

 

 

 

9,833

 

 


 

RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES

 

Non-GAAP* measures for the quarters ended December 31, 2013 and 2012

 

(in thousands)

 

 

For the Quarter Ended

 

December 31,

         
 

2013

 

2012

 

Reconciliation of GAAP net income to

       

Adjusted EBITDA

       

GAAP net income attributable to Rick’s shareholders

 $    2,404

 

 $    2,647

 

Income tax expense

      1,323

 

      1,584

 

Interest expense and income and gain on derivative

      2,012

 

      1,644

 

Litigation and other one-time settlements

        120

 

           -  

 

Acquisition costs

           -  

 

        55

 

Loss from discontinued operations

           1

 

         14

 

Depreciation and amortization

      1,390

 

      1,320

 

Adjusted EBITDA

 $    7,250

 

 $    7,264

 

 

Reconcilation of GAAP net income (loss) to

       

 

non-GAAP net income

       

 

GAAP net income attributable to Rick’s shareholders

 $ 2,404

 

 $ 2,647

 

Patron tax

    738

 

   891

 

Amortization of intangibles

      89

 

     131

 

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

        -  

 

        1

 

Stock-based compensation

        3

 

     282

 

Litigation and other one-time settlements

     120

 

        -  

 

Income tax expense

  1,323

 

  1,584

 

Acquisition costs

        -  

 

      55

 

Loss from discontinued operations, net of income taxes

        1

 

      14

 

Non-GAAP provision for income taxes

(1,636)

 

 (1,863)

 

Non-GAAP net income

 $ 3,042

 

 $ 3,742

 
         
                             

 


 

RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES

 

Non-GAAP* measures for the quarters ended December 31, 2013 and 2012

 

(in thousands, except per share data)

 

 

For the Quarter Ended

 

 

December 31,

 

         

 

 

2013

 

2012

 

 

Reconciliation of GAAP diluted net income

       

per share to non-GAAP diluted net income per share

       

Fully diluted shares

         9,855

 

         9,833

 

GAAP net income attributable to Rick’s shareholders

 $  0.25

 

 $  0.28

 

Patron tax

    0.07

 

    0.09

 

Amortization of intangibles

    0.01

 

    0.01

 

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

        -  

 

    0.00

 

Stock-based compensation

    0.00

 

    0.03

 

Litigation and other one-time settlements

    0.01

 

        -  

 

Income tax expense

    0.14

 

    0.16

 

Acquisition costs

        -  

 

    0.01

 

Loss from discontinued operations, net of income taxes

    0.00

 

    0.00

 

Non-GAAP provision for income taxes

  (0.17)

 

  (0.19)

 

Non-GAAP diluted net income per share

 $  0.31

 

 $  0.39

 
         

Reconciliation of GAAP operating income to

       

non-GAAP operating income

       

GAAP operating income

 $ 5,616

 

 $ 5,934

 

Patron tax

     738

 

     891

 

Amortization of intangibles

      89

 

     131

 

Stock-based compensation

        3

 

     282

 

Litigation and other one-time settlements

     120

 

        -  

 

Acquisition costs

        -  

 

      55

 

Non-GAAP operating income

 $ 6,566

 

 $ 7,293

 
         

Reconciliation of GAAP operating margin to

       

non-GAAP operating margin

       

GAAP operating income

19.1%

 

21.9%

 

Patron tax

2.5%

 

3.3%

 

Amortization of intangibles

0.3%

 

0.5%

 

Stock-based compensation

0.0%

 

1.0%

 

Litigation and other one-time settlements

0.4%

 

0.0%

 

Acquisition costs

0.0%

 

0.2%

 

Non-GAAP operating margin

22.3%

 

26.9%

 
                   

 

RICK'S CABARET INTERNATIONAL, INC.

Reconciliation of GAAP Earnings Guidance To

Non-GAAP Earnings Guidance

Fiscal Year Ending September 30, 2014

 

Reconciliation of GAAP diluted net income

 

 

 

per share to non-GAAP diluted net income per share

Low

 

High

GAAP net income

 $      1.20

 

 $     1.51

Patron tax

        0.33

 

         0.33

Amortization of intangibles

         0.04

 

         0.04

Income tax expense

         0.65

 

         0.81

Acquisition costs

         0.01

 

         0.03

Loss from discontinued operations, net of income taxes

       (0.01)

 

       (0.02)

Non-GAAP provision for income taxes

       (0.78)

 

       (0.95)

Non-GAAP diluted net income per share

 $      1.44

 

 $      1.76