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

HOUSTON, Aug. 8, 2013 /PRNewswire/ -- Rick's Cabaret International, Inc. (NasdaqGM: 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.

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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. (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" 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 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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