2014

Rick's Cabaret International, Inc. Reports $13.4 Million Non-GAAP Net Income For Fiscal 2013 vs. Year Ago $12.3 Million; Non-GAAP EPS Was $1.40 vs. $1.27

HOUSTON, Dec. 16, 2013 /PRNewswire/ -- Rick's Cabaret International, Inc., (NasdaqGM:RICK), the publicly traded hospitality company operating gentlemen's clubs and restaurants, today reported non-GAAP* net income of $13.4 million for the year ended September 30, 2013 vs. $12.3 million in the previous year, on revenue of $112.2 million vs. $95.2 in the previous year. Non-GAAP EPS was $1.40 vs. $1.27 in the previous year. GAAP net income was $9.2 million vs. $7.6 million, with EPS of 96 cents vs. 78 cents last year.

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

For its fourth quarter ended September 30, 2013, the Company GAAP net income was $1.6 million vs. $1.5 million in the previous year; non-GAAP net income was $2.5 million vs. $3.0 million last year; GAAP EPS was 17 cents for the quarter vs. 15 cents last year; non-GAAP EPS for the fourth quarter of 2013 was 27 cents vs. 31 cents last year.

"Fiscal 2013 was in many ways a transitional year for us as we moved from a recessionary model in many clubs to our more typical formats," said President and CEO Eric Langan. "This shift means that some lower margin customers are visiting the clubs less frequently, but higher margin guests are returning, which helps improve our income picture. The year was also notable for the launch of our restaurant division, which we believe will become a solid growth catalyst in the future. Going forward, we are looking at a strong 2014.  We have over 40 locations open at the present time, with six more in various stages of development or construction. We continue to examine acquisition possibilities and ways to unlock the value of our real estate."

The Company will hold a conference call today at 4:30 pm ET during which Mr. Langan will discuss the fiscal year and quarterly results, and comment on the outlook for fiscal 2014. The call-in number is 877-407-8033 (International: 201-689-8033), with webcast at www.ricksinvestor.com. Replay of the call is available at 877-660-6853 (ID number 13572974). In addition, following the conference call today the Company plans a "Due Diligence Reception" from 6 p.m. to 8 p.m. at its New York City Rick's Cabaret club (50 West 33rd St.) during which investors will get a chance to tour the club and see its operations first hand.

In the Management Discussion and Analysis section of the Company's Form 10K filed today with the SEC, the company said:

  • The increase in total revenues for fiscal 2013 was generated chiefly from new clubs and restaurants acquired or launched in 2013, a full year of revenues from clubs purchased in 2012, and increased sales at some existing clubs, especially XTC Cabaret in Austin, Rick's Cabaret DFW and the two cabarets in Minneapolis, MN.  
  • Non-GAAP operating margins were 24.5 percent, level with the previous year, while GAAP operating margins increased to 19.7 percent for 2013 compared to 17.3 percent for the prior year.  
  • The increase in both GAAP and non-GAAP net income, although slowed in part by costs associated with the opening of new restaurants, was attributed to pricing changes, lower cost of goods sold achieved through better inventory management and other efficiencies, and a decline in legal and professional expenses.
  • Cash flow generated from operating activities remained level with 2012, at $18.4 million.

As of September 30, 2013, the company had long-term debt of $78.6 million compared to $63.5 million a year earlier, of which $38.7 million is related to real estate. A total of $24.4 million in principally real estate debt was added as a result of 2013 acquisitions, while the Company also amortized $9.3 million of long-term debt during the year.

 

RICK'S CABARET INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

Year Ended September 30







Year Ended September 30,


(in thousands, except per share data)


2013



2012



2011












Revenues:













Sales of alcoholic beverages


$

43,189



$

38,687



$

32,575


Sales of food and merchandise



12,249




8,810




7,402


Service revenues



49,974




41,942




38,178


Other



6,796




5,781




5,336


Total revenues



112,208




95,220




83,491















Operating expenses:













Cost of goods sold



14,152




12,644




10,427


Salaries and wages



25,145




20,857




18,321


Stock-based compensation



847




315




8


Other general and administrative:













Taxes and permits



17,607




14,639




12,542


Charge card fees



1,482




1,352




1,361


Rent



3,642




2,872




2,988


Legal and professional



3,114




5,861




2,289


Advertising and marketing



4,611




4,046




3,471


Depreciation and amortization



5,314




4,921




3,904


Insurance



2,208




1,439




1,157


Utilities



2,241




1,762




1,605


 Loss on sale of property and other



16




332




-


Other



9,716




7,667




6,624


Total operating expenses



90,095




78,707




64,697


Income from operations



22,113




16,513




18,794















Other income (expense):













Interest income



9




19




118


Interest expense



(6,538)




(4,003)




(3,930)


Interest expense – loan origination costs



(539)




(310)




(359)


Gain on change in fair value of derivative instruments



1




117




129


Gain on settlement of debt



-




-




903


Income from continuing operations before income taxes



15,046




12,336




15,655


Income taxes



5,501




4,374




5,403


Income from continuing operations



9,545




7,962




10,252


Loss from discontinued operations, net of income taxes



(143)




(172)




(2,195)


Net income



9,402




7,790




8,057


Less: net income attributable to noncontrolling  interests



(211)




(212)




(211)


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


$

9,191



$

7,578



$

7,846















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













Income from continuing operations


$

0.98



$

0.80



$

1.01


Loss from discontinued operations



(0.02)




(0.02)




(0.22)


Net income


$

0.97



$

0.78



$

0.79


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













Income from continuing operations


$

0.98



$

0.80



$

1.01


Loss from discontinued operations



(0.01)




(0.02)




(0.22)


Net income


$

0.96



$

0.78



$

0.79















Weighted average number of common shares outstanding:













Basic



9,518




9,691




9,930


Diluted



9,615




9,697




9,932


 

 

RICK'S CABARET INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

Quarter Ended September 30




Quarter Ended September 30,

(in thousands, except per share data)

2013


2012





Revenues:




Sales of alcoholic beverages

$       10,635


$         9,654

Sales of food and merchandise

3,505


2,191

Service revenues

11,885


10,199

Other

2,006


1,823

Total revenues

28,031


23,867





Operating expenses:




Cost of goods sold

3,591


3,043

Salaries and wages

6,545


5,429

Stock-based compensation

2


282

Other general and administrative:




Taxes and permits

4,538


3,621

Charge card fees

356


310

Rent

1,443


722

Legal and professional

851


3,428

Advertising and marketing

1,159


1,052

Depreciation and amortization

1,345


1,213

Insurance

566


412

Utilities

677


498

 Loss on sale of property and other

16


-

Other

2,589


2,235





Total operating expenses

23,678


20,214

Income from operations

4,353


3,653

Other income (expense):




Interest income

3


17

Interest expense

(1,804)


(1,255)

Gain on change in fair value of derivative instruments

(1)


117

Gain on settlement of debt

-


-

Income from continuing operations before income taxes

2,551


2,532

Income taxes

893


1,008

Income from continuing operations

1,658


1,524

Loss from discontinued operations, net of income taxes

(2)


(17)

Net income

1,656


1,507

Less: net income attributable to non-controlling  interests

(52)


(53)

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

$         1,604


$         1,454

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




Income from continuing operations

$           0.17


$           0.15

Loss from discontinued operations

-


-

Net income

$           0.17


$           0.15

 

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




Income from continuing operations

$           0.17


$           0.15

Loss from discontinued operations

-


-

Net income

$           0.17


$           0.15





Weighted average number of common shares outstanding:




Basic

9,504


9,633

Diluted

9,603


9,636





 

 

RICK'S CABARET INTERNATIONAL, INC.

NON-GAAP* MEASURES FOR YEAR ENDING SEPTEMBER 30


The following tables present our non-GAAP measures for the periods indicated (in thousands, except per share amounts):




For the Year Ended


September 30,







(in thousands)

2013


2012


2011


Reconciliation of GAAP net income to







Adjusted EBITDA







GAAP net income

$      9,191


$      7,578


$        7,846


Income tax expense

5,501


4,374


5,403


Interest expense and income and gain on derivative

7,067


4,177


4,042


Litigation and other one-time settlements

707


2,533


-


Acquisition costs

166


-


119


Loss from discontinued operations

143


172


2,195


Depreciation and amortization

5,314


4,921


3,904


Adjusted EBITDA **

$    28,089


$    23,755


$      23,509









Reconciliation of GAAP net income (loss) to







non-GAAP net income







GAAP net income

$      9,191


$      7,578


$        7,846


Patron tax

3,236


3,019


2,875


Amortization of intangibles

409


463


459


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

(1)


(117)


(129)


Stock-based compensation

847


315


8


Litigation and other one-time settlements

707


2,533


-


Income tax expense

5,501


4,374


5,403









Acquisition costs

166


462


100


Loss from discontinued operations, net of income taxes

143


172


2,195


Non-GAAP provision for income taxes

(6,773)


(6,469)


(6,562)


Non-GAAP net income

$    13,426


$    12,330


$      12,195


 

Reconciliation of GAAP diluted net income






per share to non-GAAP diluted net income per share






Fully diluted shares

9,615


9,697


9,932

GAAP net income

$    0.96


$    0.78


$      0.79

Patron tax

0.34


0.31


0.29

Amortization of intangibles

0.04


0.05


0.05

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

(0.00)


(0.01)


(0.01)

Stock-based compensation

0.09


0.03


0.00

Litigation and other one-time settlements

0.07


0.26


-

Income tax expense

0.57


0.45


0.54







Acquisition costs

0.02


0.05


0.01

Loss from discontinued operations, net of income taxes

0.01


0.02


0.22

Non-GAAP provision for income taxes

(0.70)


(0.67)


(0.66)

Non-GAAP diluted net income per share

$    1.40


$    1.27


$      1.23







Reconciliation of GAAP operating income to






non-GAAP operating income






GAAP operating income

$22,113


$16,513


$  18,794

Patron tax

3,236


3,019


2,875

Amortization of intangibles

409


463


459

Stock-based compensation

847


315


8

Litigation and other one-time settlements

707


2,533


-







Acquisition costs

166


462


100

Non-GAAP operating income

$27,478


$23,305


$  22,236







Reconciliation of GAAP operating margin to






non-GAAP operating margin






GAAP operating income

19.7%


17.3%


22.5%

Patron tax

2.9%


3.2%


3.4%

Amortization of intangibles

0.4%


0.5%


0.5%

Stock-based compensation

0.8%


0.3%


0.0%

Litigation and other one-time settlements

0.6%


2.7%


0.0%

Acquisition costs

0.1%


0.5%


0.1%

Non-GAAP operating margin

24.5%


24.5%


26.6%

 

*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: Rick's Cabaret International, Inc. (NASDAQ: 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," "Jaguars" and "Tootsie's Cabaret" and other brand names. Restaurants include "Bombshells" and "Ricky Bobby Sports Saloon." 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 ir@ricks.com 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.

SOURCE Rick's Cabaret International, Inc.



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