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

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Aug 08, 2013, 04:05 ET

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 [email protected] 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.