Rick's Cabaret International, Inc. Reports Sharp Profit Increase in Fiscal Year 2011 Over Prior Year

Net Income Swings to $7.8 million from Loss of $8.0 million in 2010; Per Share Earnings Rise to $.79 vs. a Loss of $.82

News provided by

Dec 14, 2011, 04:05 ET

HOUSTON, Dec. 14, 2011 /PRNewswire/ -- Rick's Cabaret International, Inc. (NASDAQ: RICK), the nation's leading group of upscale adult nightclubs, today reported its revenue for the year ended Sept. 30, 2011 rose to $83.5 million, a 12.7 percent increase over the $74.0 million in 2010. Net income was $7.8 million, compared with a loss of $8.0 million in the previous year. Fully diluted earnings per share were $.79 vs. a loss of $.82 last year.

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

"Our strong fiscal 2011 results reflect a return to more normal growth patterns for the company across the board and the fact that we are no longer impacted by the drag from the now discontinued operation in Las Vegas," said Eric Langan, President and CEO of Rick's Cabaret, which operates 23 clubs around the country. "We are continuing the momentum we built in fiscal 2011 and we look forward to another strong year in 2012."

Mr. Langan said the revenue improvement included a 4.9 percent increase in sales at clubs open more than one year, particularly the New York City location, and about $6.1 million from new clubs acquired in 2010 and 2011. The results also reflect the closing of the Las Vegas club in April 2011, which was shut after determining it could not be made viable in the foreseeable future.

In a Form 10-K filed with the SEC today, the company also reported results for its fourth quarter ending September 30th, showing revenues of $21.5 million compared with $19.1 million for the same quarter in the prior year; net income of $2.0 million, compared with a loss of $12.5 million in 2010; fully diluted earnings per share of 20 cents, versus a loss of $1.24 last year.

Key factors in the full fiscal year 2011 results include:

Adjusted EBITDA (earnings before interest expense, income taxes, depreciation, amortization, and impairment charges) was $23.6 million in 2011, compared with $17.9 million last year. The company uses non-GAAP adjusted EBITDA as a core operational performance measurement it feels more accurately reflects the performance of the company in part because it allows companies to express results without the need to adjust for Federal, state and local taxes, which vary considerably by jurisdiction. (See Note below.)
Operating margins (excluding impairment) were 22.5 percent for the year, compared to 20.0 percent in the prior year.
Income from operations for same-location-same-period nightclubs open more than a year increased by 18.3%.
Net cash provided by operating activities increased to $18.9 million from $17.3 million in the prior year.
Interest expense declined to $3.9 million from $4.0 million as the company amortized loan balances. As of September 30, 2011, the balance of long-term debt was $35.6 million compared to $42.7 million a year earlier.
Legal and professional fees declined to $2.3 million from $3.0 million, reflecting a decrease in costs related to litigation for claims under the Fair Labor Standards Act.
No continuing operations assets were impaired in 2011, compared with $3.6 million in impairment charges in 2010.
Revenue improvements were noted in all three of the major revenue categories tracked by the company: alcoholic beverage sales were $32.6 million compared with $28.5 million last year; food and merchandise was $7.4 million compared with $6.3 million; service revenues were $38.2 million compared with $34.2 million.

Note: Adjusted EBITDA is a financial statement measure that was not derived in accordance with GAAP. We use Adjusted EBITDA (earnings before interest expense, income taxes, depreciation, amortization and impairment charges) as a non-GAAP performance measure. In calculating Adjusted EBITDA, we exclude our largest recurring non-cash charge, depreciation, amortization and impairment charges. 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 upscale adult nightclubs serving primarily businessmen and professionals that offer live entertainment, dining and bar operations. Nightclubs in New York City, Miami, Philadelphia, New Orleans, Charlotte, Dallas, Houston, Minneapolis and other cities operate under the names "Rick's Cabaret," "XTC," "Club Onyx" and "Tootsie's Cabaret". Sexual contact is not permitted at these locations. Rick's Cabaret also operates a media division, ED Publications, and owns the adult Internet membership Website couplestouch.com as well as a network of online adult auction sites under the flagship URL naughtybids.com. Rick's Cabaret common stock is traded on NASDAQ under the symbol RICK. For further information contact [email protected].

Forward-looking Statements: Certain statements contained in this release regarding Rick's Cabaret future operating results or performance or business plans or prospects and any other statements not constituting historical fact are "forward-looking statements" subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. Where possible, the words "believe," "expect," "anticipate," "intent," "would," "will," "planned," "estimated," "potential," "goal," "outlook," and similar expressions, as they relate to the company or its management have been used to identify such forward-looking statements. All forward-looking statements reflect only current beliefs and assumptions with respect to future business plans, prospects, decisions and results, and are based on information currently available to the company. Accordingly, the statements are subject to significant risks, uncertainties and contingencies, which could cause the company's actual operating results, performance or business plans or prospects to differ materially from those expressed in, or implied by, these statements. Such risks, uncertainties and contingencies include, but are not limited to, risks and uncertainties associated with (i) operating and managing an adult business, (ii) the business climates in cities where the company operates, (iii) the success or lack thereof in launching and building the company's businesses, (iv) the operational and financial results of the company's adult nightclubs, (v) conditions relevant to real estate transactions, (vi) the loss of key personnel, and (vii) laws governing the operation of adult entertainment businesses. Additional factors that could cause the company's results to differ materially from those described in the forward-looking statements are described in forms filed with the SEC from time to time and available at www.ricksinvestor.com or on the SEC's internet website at www.sec.gov. Unless required by law, Rick's Cabaret does not undertake any obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

Consolidated Balance Sheets and Statement of Operations Follow

RICK'S CABARET INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS

	September 30,
(in thousands, except per share data)	2011		2010
Assets
Current assets:
Cash and cash equivalents	$	9,698	$	18,599
Accounts receivable:
Trade, net		779		662
Other, net		1,161		204
Marketable securities		515		-
Inventories		1,174		1,082
Deferred tax asset		5,195		1,504
Prepaid expenses and other current assets		1,025		863
Assets of discontinued operations		112		4,851
Total current assets		19,659		27,765

Property and equipment, net		65,892		56,786

Other assets:
Goodwill and indefinite lived intangibles, net		65,642		61,761
Definite lived intangibles, net		1,091		1,139
Other		1,093		920
Total other assets		67,826		63,820

Total assets	$	153,377	$	148,371

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	1,215	$	696
Accrued liabilities		2,766		4,301
Texas patron tax liability		6,830		3,955
Current portion of derivative liabilities		1,209		1,276
Current portion of long-term debt		5,494		7,883
Liabilities of discontinued operations		177		588
Total current liabilities		17,691		18,699

Deferred tax liability		23,033		15,288
Other long-term liabilities		785		719
Long-term debt		30,060		34,803
Derivative liabilities at fair value, less current portion		-		1,243
Total liabilities		71,569		70,752

Commitments and contingencies

Temporary equity - Common stock, subject to put rights 66 and 198 shares, respectively		1,586		4,366

PERMANENT STOCKHOLDERS' EQUITY:
Preferred stock, $.10 par, 1,000 shares authorized; none issued and outstanding		-		-
Common stock, $.01 par, 20,000 shares authorized; 9,604 and 9,766 shares issued and outstanding, respectively		96		98
Additional paid-in capital		61,446		62,326
Accumulated other comprehensive income		10		-
Retained earnings		15,361		7,515
Total Rick's permanent stockholders' equity		76,913		69,939
Noncontrolling interests		3,309		3,314
Total permanent stockholders' equity		80,222		73,253

Total liabilities and stockholders' equity	$	153,377	$	148,371

RICK'S CABARET INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended September 30,
(in thousands, except per share data)	2011		2010		2009
Revenues:
Sales of alcoholic beverages	$	32,575	$	28,532	$	23,641
Sales of food and merchandise		7,402		6,327		5,615
Service revenues		38,178		34,179		31,786
Internet revenues		470		562		641
Media revenues		1,248		1,440		1,404
Other		3,618		3,023		2,328
Total revenues		83,491		74,063		65,415

Operating expenses:
Cost of goods sold		10,427		9,136		7,884
Salaries and wages		18,321		16,305		14,799
Stock-based compensation		8		405		96
Other general and administrative:
Taxes and permits		12,542		11,452		8,351
Charge card fees		1,361		1,229		1,300
Rent		2,988		2,737		2,166
Legal and professional		2,289		3,002		2,848
Advertising and marketing		3,471		3,167		2,588
Depreciation and amortization		3,904		3,225		2,806
Insurance		1,157		985		894
Utilities		1,605		1,507		1,390
Impairment of assets		-		3,574		-
Other		6,624		5,948		5,258
Total operating expenses		64,697		62,672		50,380
Income from operations		18,794		11,391		15,035

Other income (expense):
Interest income		118		19		16
Interest expense		(3,930)		(4,023)		(3,352)
Interest expense – loan origination costs		(359)		(450)		(65)
Gain (loss) on change in fair value of derivative instruments		129		(31)		145
Gain on settlement of debt		903		-		-
Gain (loss) on sale of property and other		-		(3)		182
Income from continuing operations before income taxes		15,655		6,903		11,961
Income taxes		5,403		2,998		4,013
Income from continuing operations		10,252		3,905		7,948
Loss from discontinued operations, net of income taxes		(2,195)		(11,603)		(2,446)
Net income (loss)		8,057		(7,698)		5,502
Less: net income attributable to noncontrolling interests		(211)		(260)		(294)
Net income (loss) attributable to Rick's Cabaret International, Inc.	$	7,846	$	(7,958)	$	5,208

Basic earnings (loss) per share attributable to Rick's shareholders:
Income from continuing operations	$	1.01	$	0.38	$	0.83
Loss from discontinued operations		(0.22)		(1.20)		(0.26)
Net income (loss)	$	0.79	$	(0.82)	$	0.56
Diluted earnings (loss) per share attributable to Rick's shareholders:
Income from continuing operations	$	1.01	$	0.38	$	0.81
Loss from discontinued operations		(0.22)		(1.20)		(0.26)
Net income (loss)	$	0.79	$	(0.82)	$	0.55

Weighted average number of common shares outstanding:
Basic		9,930		9,697		9,266
Diluted		9,932		9,697		9,428