Form 8-K RCI HOSPITALITY HOLDINGS For: Feb 13

February 14, 2020 1:56 PM

 

 

 

United States

Securities and Exchange Commission

Washington, D.C. 20549

 

FORM 8-K

 

Current Report

 

Pursuant to Section 13 or 15(d) of

 

The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): February 13, 2020

 

RCI HOSPITALITY HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Texas   001-13992   76-0458229

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

10737 Cutten Road

Houston, Texas 77066

(Address of Principal Executive Offices, Including Zip Code)

 

(281) 397-6730

(Issuer’s Telephone Number, Including Area Code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12)
   
[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d -2(b))
   
[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common stock, $0.01 par value   RICK   The Nasdaq Global Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

 

 

 
 

 

ITEM 2.02 Results of Operations and Financial Condition.

 

On February 13, 2020, we issued a press release announcing the filing of our Form 10-K for the fiscal year ended September 30, 2019 and announced results for the fourth quarter and fiscal year ended September 30, 2019. Also on February 13, 2020, we held a conference call to discuss these results and related matters. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

 

This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

 

(d) Exhibits

 

Exhibit Number   Description
     
99.1   Press release of RCI Hospitality Holdings, Inc. dated February 13, 2020

 

 
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  RCI Hospitality Holdings, INC.
     
Date: February 14, 2020 By: /s/ Eric Langan
    Eric Langan
    President and Chief Executive Officer

 

 

 

 

 

RCI Files 10-K and Reports 4Q19 and FY19 Results

 

HOUSTON – February 13, 2020 – RCI Hospitality Holdings, Inc. (Nasdaq: RICK) today filed its 10-K and reported 4Q19 and FY19 results for the year ended September 30, 2019.

 

4Q19 vs. 4Q18   FY19 vs. FY18
Diluted EPS of $0.05 compared to ($0.36)   Diluted EPS of $1.99 compared to $2.15, which included a large tax benefit
Non-GAAP* diluted EPS of $0.48 compared to $0.41   Non-GAAP diluted EPS of $2.31 compared to $2.18

GAAP results included $4.9 million in other charges compared to $6.4 million in 4Q18 

 

GAAP results included $2.6 million in other charges compared to $9.2 million in FY18

Free cash flow (FCF) totaled $7.0 million (based on net cash provided by operating activities of $8.8 million, less maintenance capital expenditures of $1.8 million) compared to $2.7 million   FCF totaled $33.3 million (based on net cash provided by operating activities of $37.2 million, less maintenance capital expenditures of $3.9 million) compared to $23.2 million
Total revenues of $45.2 million compared to $40.7 million on 45 and 43 units, respectively   Total revenues of $181.1 million compared to $165.7 million

 

Conference Call 4:30 PM ET Today   Meet Management 6-8 PM ET Tonight
A conference call to discuss 4Q19 results, outlook and related matters   Meet management at Rick’s Cabaret New York, Manhattan’s No. 1 gentlemen’s club, and tour its sister club, Hoops Cabaret and Sports Bar, next door
Live Participant Phone Number: Toll Free 877-407-9210, International 201-689-8049    
To access the live webcast, slides or replay, visit: https://www.webcaster4.com/Webcast/Page/2209/33080   Where: Rick’s Cabaret New York, at 50 W. 33rd Street, New York, NY, between Fifth Avenue and Broadway
Toll Free 877-481-4010, International 919-882-2331, Passcode: 58853   RSVP: With your contact information, to gary.fishman@anreder.com

 

CEO Comment

 

“With a solid performance in the fourth quarter, total revenues for the year increased 9.2%, to a record $181.1 million, and free cash flow increased 43.3%, to a record $33.3 million,” said Eric Langan, President & CEO. “We had FY 2017 and FY 2018 reaudited in conjunction with the FY 2019 audit, where our auditors issued an unqualified opinion on those financial statements. Utilizing our strong cash generating power, we also reduced shares outstanding another 1% in FY19. Now that the year-end audit is complete, we are preparing our 1Q20 10-Q for filing later this month.

 

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“We’re looking forward to a strong FY20. Total club and restaurant sales were up 10% in 1Q20. Nightclubs experienced added business from the big mixed-martial arts fight in January and the pro football championship in February. We expect the rebound in Bombshells same-store sales and margins to continue. New locations, including the most recently opened unit in Houston, are doing well.

 

“We have approximately $6.7 million in excess property sales under contract, and we expect to continue to generate strong free cash flow, which we’ll deploy for the optimal return according to our capital allocation strategy.”

 

4Q19 & FY19 REVIEW (All comparisons to year ago periods unless otherwise noted)

 

Revenues

 

4Q19: Total revenues of $45.2 million increased 11.1%. By revenue line, growth reflected increases of $2.5 million (+15.3%) in alcoholic beverages, $1.1 million (+20.4%) in food, $680K (+4.3%) in service, and $210K (+6.8%) in other, which includes Drink Robust business and Gentlemen’s Club Expo trade show in August.
FY19: Total revenues of $181.1 million increased 9.2%. By revenue line, growth reflected increases of $6.0 million (+8.7%) in alcoholic beverages, $4.0 million (+6.2%) in service, $3.4 million (+15.1%) in food, and $1.9 million (+19.3%) in other.

 

Operating Income

 

4Q19: Operating income more than tripled, to $2.4 million. Margin expanded to 5.4% of revenues from 1.7%. Other charges declined 23.3% to $4.9 million due to gains on insurance and property sales, and all other costs and expenses increased 158 basis points greater than sales growth due to higher accounting and related legal costs. On a non-GAAP basis, operating income increased 4.3% to $7.4 million, with a margin at 16.5% of revenues compared to 17.6%.
FY19: Operating income increased 25.9% to $34.7 million as margin expanded to 19.2% of revenues from 16.6%. Other charges declined $6.6 million due to gains on sale of business and assets compared to losses, and from lower legal settlements. All other costs and expenses increased 156 basis points greater than sales growth due to higher accounting and related legal costs. On a non-GAAP basis, operating income increased 2.6% to $37.9 million, with a margin of 21.0% compared to 22.3%.

 

Other Charges

 

4Q19: Other charges, net of $4.9 million primarily reflected: (i) two impairments in Fort Worth ($3.6 million of Cabaret East’s building and land, and $1.1 million of Rick’s Cabaret goodwill), (ii) two gains ($747K from insurance covering costs earlier in FY19 to repair two clubs) and from the sale of excess property ($1.6 million proceeds and $677K gain); and (iii) miscellaneous smaller impairments, gains and losses related to 9 other assets.
FY19: Other charges, net of $2.6 million reflected: (i) $2.9 million in gains primarily from the sale of eight excess properties in Texas and (ii) 4Q19 items mentioned above.

 

Nightclubs Segment

 

4Q19: Sales increased 5.3% to $35.9 million, with 37 units in both periods. Sales growth reflected larger new locations (Rick’s Chicago and Pittsburgh) more than offsetting smaller closed locations. Operating income increased 7.5% to $6.2 million. Margin expanded to 17.3% of sales from 17.0%. The increase in segment profit and profitability was due to improved revenues and lower other charges. On a non-GAAP basis, operating income increased 1.9% to $11.0 million, with a margin of 30.6% of sales compared to 31.6%.
FY19: Sales increased 6.1% to $148.6 million. Operating income increased 16.3% to $50.7 million. Margin expanded to 34.1% of sales from 31.1%. The increase in segment profit and profitability reflected improved revenues and margins and lower other charges. On a non-GAAP basis, operating income increased 8.5% to $53.3 million, with a margin of 35.9% of sales compared to 35.1%.

 

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Bombshells Segment

 

4Q19: Sales increased 53.9% to $8.5 million, with 8 units compared to 6. Sales from new locations (Pearland, I-10 and Tomball) increased 194.4%. Comparable same-store sales increased 19.4%. Operating income improved $2.0 million, to $764K (9.0% of sales) from a loss of $1.2 million (-21.8% of sales). 4Q18 included $1.4 million in other charges, net. On a non-GAAP basis, operating income quadrupled to $790K, with margin at 9.3% of sales compared to 3.3%.
FY19: Sales increased 27.9% to $30.8 million. Sales from new locations increased 201.9%, which more than offset a 6.1% decline in same-store sales in FY19. Operating income increased 13.1% to $2.3 million, with margin at 7.5% of sales compared to 8.5%. On a non-GAAP basis, operating income was $2.3 million (7.6% of sales) compared to $3.6 million (15.1%).
Non-GAAP operating income included pre-opening costs without the benefit of revenues related to the four new Bombshells over the course of FY19. These costs ended in late January 2020 with the recent opening of the fourth of these new Bombshells on US 59 in Houston.

 

Other Metrics

 

Cash and cash equivalents of $14.1 million at September 30, 2019 increased 28.7% from June 30, 2019 and declined 20.5% from September 30, 2018. 4Q18 balances benefitted from funds borrowed in advance to fund club acquisitions in 1Q19.
Long-term debt of $143.5 million at September 30, 2019 fell 2.1% from June 30, 2019 and increased 2.1% from September 30, 2018.
Occupancy costs (rent and interest expense as a percentage of total revenues) fell to 7.6% from 7.8%, 4Q19 vs. 4Q18, and increased to 7.8% from 7.7%, FY19 vs. FY18.
Adjusted EBITDA increased 7.3% to $9.6 million, 4Q19 vs. 4Q18, and 4.2% to $46.2 million, FY19 vs. FY18.
Effective Tax Rate for FY19 was an expense of 20.1% compared to a FY18 benefit of 17.5%, which included the benefit of $8.8 million as a final calculation of the reduction of deferred tax liability because of the new Tax Cuts and Jobs Act. The FY18 ETR resulted in a 4Q18 income tax increase to adjust for the year. On a non-GAAP basis, FY18 ETR was an expense of 24.5%, which resulted in a 4Q18 income tax reduction to adjust for the year.

 

*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 (or including) some items that management believes are not representative of the ongoing business operations of the Company, but are included in (or excluded from) 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 calculate non-GAAP operating income and non-GAAP operating margin by excluding the following items from income from operations and operating margin: (a) amortization of intangibles, (b) impairment of assets, (c) gains or losses on sale of businesses and assets, (d) gains or losses on insurance, (e) settlement of lawsuits, and (f) gains or losses on settlement of patron tax case. 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.

 

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Non-GAAP Net Income and Non-GAAP Net Income per Diluted Share. We calculate non-GAAP net income and non-GAAP net income per diluted share by excluding or including certain items to net income attributable to RCIHH common shareholders and diluted earnings per share. Adjustment items are: (a) amortization of intangibles, (b) impairment of assets, (c) costs and charges related to debt refinancing, (d) gains or losses on sale of businesses and assets, (e) gains or losses on insurance, (f) unrealized gains or losses on equity securities, (g) settlement of lawsuits, (h) gains or losses on settlement of patron tax case, and (i) the income tax effect of the above described adjustments. Included in the income tax effect of the above adjustments is the net effect of the non-GAAP provision for income taxes, calculated at 20.1%, 24.5% and 37.0% effective tax rate of the pre-tax non-GAAP income before taxes for 2019, 2018 and 2017, respectively, and the GAAP income tax expense (benefit). We believe that excluding and including such items help management and investors better understand our operating activities. The calculated amount for adjustment (i) above in fiscal 2018 was significantly affected by the change in the statutory federal corporate tax rate caused by the Tax Act.
Adjusted EBITDA. We calculate adjusted EBITDA by excluding the following items from net income attributable to RCIHH common shareholders: (a) depreciation and amortization, (b) income tax expense (benefit), (c) net interest expense, (d) gains or losses on sale of businesses and assets, (e) gains or losses on insurance (f) unrealized gains or losses on equity securities, (g) impairment of assets, (h) settlement of lawsuits, (i) gains or losses on settlement of patron tax case. We believe that adjusting for such items helps management and investors better understand our 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. The results are, therefore, without consideration of financing alternatives of capital employed. We use adjusted EBITDA as one guideline to assess the unleveraged performance return on our investments. Adjusted EBITDA multiple is also used as a target benchmark for our acquisitions of nightclubs.
Management also uses non-GAAP cash flow measures such as free cash flow. Free cash flow is derived from net cash provided by operating activities less maintenance capital expenditures. We use free cash flow as the baseline for the implementation of our capital allocation strategy.

 

Notes

 

Unit counts above are at period end.
All references to the “company,” “we,” “our,” and similar terms include RCI Hospitality Holdings, Inc. and its subsidiaries, unless the context indicates otherwise.
Planned opening dates are subject to change due to weather, which could affect construction schedules, and scheduling of final municipal inspections.

 

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About RCI Hospitality Holdings, Inc. (Nasdaq: RICK)

 

With more than 40 units, RCI Hospitality Holdings, Inc., through its subsidiaries, is the country’s leading company in gentlemen’s clubs and sports bars/restaurants. Clubs in New York City, Chicago, Dallas/Ft. Worth, Houston, Miami, Minneapolis, St. Louis, Charlotte, Pittsburgh, and other markets operate under brand names such as Rick’s Cabaret, XTC, Club Onyx, Vivid Cabaret, Jaguars Club, Tootsie’s Cabaret, and Scarlett’s Cabaret. Sports bars/restaurants operate under the brand name Bombshells Restaurant & Bar. Please visit http://www.rcihospitality.com/

 

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, but not limited to, the risks and uncertainties associated with (i) operating and managing an adult business, (ii) the business climates in cities where it operates, (iii) the success or lack thereof in launching and building the company’s businesses, (iv) cyber security, (v) conditions relevant to real estate transactions, (vi) our ability to regain and maintain compliance with the filing requirements of the SEC and the Nasdaq Stock Market, and (vii) numerous other factors such as laws governing the operation of adult entertainment businesses, competition and dependence on key personnel. The company 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

 

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RCI HOSPITALITY HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share and percentage data)

 

  

For the Three Months Ended

September 30,

  

For the Twelve Months Ended

September 30,

 
   2019   2018   2019   2018 
   Amount   % of
Revenue
   Amount   % of
Revenue
   Amount   % of
Revenue
   Amount   % of
Revenue
 
Revenues                                
Sales of alcoholic beverages  $18,774    41.6%  $16,285    40.0%  $75,140    41.5%  $69,120    41.7%
Sales of food and merchandise   6,655    14.7%   5,527    13.6%   25,830    14.3%   22,433    13.5%
Service revenues   16,446    36.4%   15,766    38.8%   68,055    37.6%   64,104    38.7%
Other   3,308    7.3%   3,098    7.6%   12,034    6.6%   10,091    6.1%
Total revenues   45,183    100.0%   40,676    100.0%   181,059    100.0%   165,748    100.0%
Operating expenses                                        
Cost of goods sold                                        
Alcoholic beverages sold   3,762    20.0%   3,351    20.6%   15,303    20.4%   14,327    20.7%
Food and merchandise sold   2,199    33.0%   1,935    35.0%   9,056    35.1%   8,133    36.3%
Service and other   271    1.4%   276    1.5%   578    0.7%   449    0.6%
Total cost of goods sold (exclusive of items shown below)   6,232    13.8%   5,562    13.7%   24,937    13.8%   22,909    13.8%
Salaries and wages   12,665    28.0%   11,461    28.2%   49,833    27.5%   44,547    26.9%
Selling, general and administrative   16,633    36.8%   14,688    36.1%   59,896    33.1%   53,824    32.5%
Depreciation and amortization   2,354    5.2%   1,916    4.7%   9,072    5.0%   7,722    4.7%
Other charges, net   4,870    10.8%   6,350    15.6%   2,620    1.4%   9,184    5.5%
Total operating expenses   42,754    94.6%   39,977    98.3%   146,358    80.8%   138,186    83.4%
Income from operations   2,429    5.4%   699    1.7%   34,701    19.2%   27,562    16.6%
Other income (expenses)                                        
Interest expense   (2,500)   -5.5%   (2,461)   -6.1%   (10,209)   -5.6%   (9,954)   -6.0%
Interest income   91    0.2%   47    0.1%   309    0.2%   234    0.1%
Non-operating loss   (204)   -0.5%   -    0.0%   (612)   -0.3%   -    0.0%
Income before income taxes   (184)   -0.4%   (1,715)   -4.2%   24,189    13.4%   17,842    10.8%
Income tax expense (benefit)   (684)   -1.5%   1,781    4.4%   4,863    2.7%   (3,118)   -1.9%
Net income (loss)   500    1.1%   (3,496)   -8.6%   19,326    10.7%   20,960    12.6%
Net income attributable to noncontrolling interests   (42)   -0.1%   (10)   0.0%   (151)   -0.1%   (81)   0.0%
Net income (loss) attributable to RCIHH common shareholders  $458    1.0%  $(3,506)   -8.6%  $19,175    10.6%  $20,879    12.6%
                                         
Earnings (loss) per share                                        
Basic and diluted  $0.05        $(0.36)       $1.99        $2.15      
                                         
Weighted average shares outstanding                                        
Basic and diluted   9,616         9,719         9,657         9,719      
                                         
Dividends per share  $0.04        $0.03        $0.13        $0.12      

 

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RCI HOSPITALITY HOLDINGS, INC.

NON-GAAP FINANCIAL MEASURES

(in thousands, except per share and percentage data)

 

   For the Three Months   For the Twelve Months 
   Ended September 30,   Ended September 30, 
   2019   2018   2019   2018 
Reconciliation of GAAP net income (loss) to Adjusted EBITDA                
Net income (loss) attributable to RCIHH common shareholders  $458   $(3,506)  $19,175   $20,879 
Income tax expense (benefit)   (684)   1,781    4,863    (3,118)
Interest expense, net   2,409    2,414    9,900    9,720 
Settlement of lawsuits   81    395    225    1,669 
Impairment of assets   6,040    4,020    6,040    5,570 
Loss (gain) on sale of businesses and assets   (390)   1,935    (2,877)   1,965 
Unrealized loss on equity securities   204    -    612    - 
Gain on insurance   (861)   -    (768)   (20)
Depreciation and amortization   2,354    1,916    9,072    7,722 
Adjusted EBITDA  $9,611   $8,955   $46,242   $44,387 
                     
Reconciliation of GAAP net income (loss) to non-GAAP net income                    
Net income (loss) attributable to RCIHH common shareholders  $458   $(3,506)  $19,175   $20,879 
Amortization of intangibles   150    93    624    254 
Settlement of lawsuits   81    395    225    1,669 
Impairment of assets   6,040    4,020    6,040    5,570 
Loss (gain) on sale of businesses and assets   (390)   1,935    (2,877)   1,965 
Unrealized loss on equity securities   204    -    612    - 
Gain on insurance   (861)   -    (768)   (20)
Costs and charges related to debt refinancing   -    -    -    827 
Net income tax effect of adjustments above   (1,071)   1,092    (744)   (9,984)
Non-GAAP net income  $4,611   $4,029   $22,287   $21,160 
                     
Reconciliation of GAAP diluted earnings (loss) per share to non-GAAP diluted earnings per share                    
Diluted shares   9,616    9,719    9,657    9,719 
GAAP diluted earnings (loss) per share  $0.05   $(0.36)  $1.99   $2.15 
Amortization of intangibles   0.02    0.01    0.06    0.03 
Settlement of lawsuits   0.01    0.04    0.02    0.17 
Impairment of assets   0.63    0.41    0.63    0.57 
Loss (gain) on sale of businesses and assets   (0.04)   0.20    (0.30)   0.20 
Unrealized loss on equity securities   0.02    -    0.06    - 
Gain on insurance   (0.09)   -    (0.08)   (0.00)
Costs and charges related to debt refinancing   -    -    -    0.09 
Net income tax effect of adjustments above   (0.11)   0.11    (0.08)   (1.02)
Non-GAAP diluted earnings per share  $0.48   $0.41   $2.31   $2.18 
                     
Reconciliation of GAAP operating income to non-GAAP operating income                    
Income from operations  $2,429   $699   $34,701   $27,562 
Amortization of intangibles   150    93    624    254 
Settlement of lawsuits   81    395    225    1,669 
Impairment of assets   6,040    4,020    6,040    5,570 
Loss (gain) on sale of businesses and assets   (390)   1,935    (2,877)   1,965 
Gain on insurance   (861)   -    (768)   (20)
Non-GAAP operating income  $7,449   $7,142   $37,945   $37,000 
                     
Reconciliation of GAAP operating margin to non-GAAP operating margin                    
GAAP operating margin   5.4%   1.7%   19.2%   16.6%
Amortization of intangibles   0.3%   0.2%   0.3%   0.2%
Settlement of lawsuits   0.2%   1.0%   0.1%   1.0%
Impairment of assets   13.4%   9.9%   3.3%   3.4%
Loss (gain) on sale of businesses and assets   -0.9%   4.8%   -1.6%   1.2%
Gain on insurance   -1.9%   0.0%   -0.4%   0.0%
Non-GAAP operating margin   16.5%   17.6%   21.0%   22.3%
                     
Reconciliation of net cash provided by operating activities to free cash flow                    
Net cash provided by operating activities  $8,760   $3,358   $37,174   $25,769 
Less: Maintenance capital expenditures   1,786    680    3,858    2,527 
Free cash flow  $6,974   $2,678   $33,316   $23,242 

 

  7
 

 

RCI HOSPITALITY HOLDINGS, INC.

SEGMENT INFORMATION

(in thousands)

 

   For the Three Months   For the Twelve Months 
   Ended September 30,   Ended September 30, 
   2019   2018   2019   2018 
Revenues                    
Nightclubs  $35,942   $34,146   $148,606   $140,060 
Bombshells   8,533    5,544    30,828    24,094 
Other   708    986    1,625    1,594 
   $45,183   $40,676   $181,059   $165,748 
                     
Income (loss) from operations                    
Nightclubs  $6,225   $5,789   $50,724   $43,624 
Bombshells   764    (1,207)   2,307    2,040 
Other   97    295    (309)   (252)
General corporate   (4,657)   (4,178)   (18,021)   (17,850)
   $2,429   $699   $34,701   $27,562 

 

  8
 

 

RCI HOSPITALITY HOLDINGS, INC.

NON-GAAP SEGMENT INFORMATION

($ in thousands)

 

   For the Three Months Ended September 30, 2019   For the Three Months Ended September 30, 2018 
   Nightclubs   Bombshells   Other   Corporate   Total   Nightclubs   Bombshells   Other   Corporate   Total 
Income (loss) from operations  $6,225   $764   $97   $(4,657)  $2,429   $5,789   $(1,207)  $295   $(4,178)  $699 
Amortization of intangibles   -    -    -    150    150    -    -    -    93    93 
Settlement of lawsuits   40    -    -    41    81    366    -    -    29    395 
Impairment of assets   5,920    -    -    120    6,040    4,447    1,123    -    -    5,570 
Loss (gain) on sale of businesses and assets   (446)   26    -    30    (390)   188    267    (63)   (7)   385 
Gain on insurance   (747)   -    -    (114)   (861)   -    -    -    -    - 
Non-GAAP operating income (loss)  $10,992   $790   $97   $(4,430)  $7,449   $10,790   $183   $232   $(4,063)  $7,142 
                                                   
GAAP operating margin   17.3%   9.0%   13.7%   -10.3%   5.4%   17.0%   -21.8%   29.9%   -10.3%   1.7%
Non-GAAP operating margin   30.6%   9.3%   13.7%   -9.8%   16.5%   31.6%   3.3%   23.5%   -10.0%   17.6%

 

   For the Twelve Months Ended September 30, 2019   For the Twelve Months Ended September 30, 2018 
   Nightclubs   Bombshells   Other   Corporate   Total   Nightclubs   Bombshells   Other   Corporate   Total 
Income (loss) from operations  $50,724   $2,307   $(309)  $(18,021)  $34,701   $43,624   $2,040   $(252)  $(17,850)  $27,562 
Amortization of intangibles   -    -    -    624    624    -    -    -    254    254 
Settlement of lawsuits   169    3    -    53    225    1,440    200    -    29    1,669 
Impairment of assets   5,920    -    -    120    6,040    4,447    1,123    -    -    5,570 
Loss (gain) on sale of businesses and assets   (2,858)   27    -    (46)   (2,877)   (400)   267    -    2,098    1,965 
Gain on insurance   (654)   -    -    (114)   (768)   -    -    -    (20)   (20)
Non-GAAP operating income (loss)  $53,301   $2,337   $(309)  $(17,384)  $37,945   $49,111   $3,630   $(252)  $(15,489)  $37,000 
                                                   
GAAP operating margin   34.1%   7.5%   -19.0%   -10.0%   19.2%   31.1%   8.5%   -15.8%   -10.8%   16.6%
Non-GAAP operating margin   35.9%   7.6%   -19.0%   -9.6%   21.0%   35.1%   15.1%   -15.8%   -9.3%   22.3%

 

  9
 

 

RCI HOSPITALITY HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

   For the Three Months Ended   For the Twelve Months Ended 
   September 30, 2019   September 30, 2018   September 30, 2019   September 30, 2018 
CASH FLOWS FROM OPERATING ACTIVITIES                    
Net income (loss)  $500   $(3,496)  $19,326   $20,960 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                    
Depreciation and amortization   2,354    1,916    9,072    7,722 
Deferred tax expense (credit)   (416)   2,884    821    (6,775)
Loss (gain) on sale of businesses and assets   (262)   2,092    (2,966)   2,162 
Unrealized loss on equity securities   204    -    612    - 
Amortization of debt discount and issuance costs   58    91    334    560 
Deferred rent expense (credit)   46    (21)   282    203 
Impairment of assets   6,040    4,020    6,040    5,570 
Gain on insurance settlements   (381)   -    (288)   (20)
Debt prepayment penalty   -    -    -    543 
Changes in operating assets and liabilities:                    
Accounts receivable   (729)   (1,834)   1,576    (3,622)
Inventories   (129)   58    (216)   (199)
Prepaid expenses, other current assets and other assets   (4,880)   (3,853)   (681)   (2,589)
Accounts payable and accrued liabilities   6,355    1,501    3,262    1,254 
Net cash provided by operating activities   8,760    3,358    37,174    25,769 
CASH FLOWS FROM INVESTING ACTIVITIES                    
Proceeds from sale of businesses and assets   2,117    182    7,223    811 
Proceeds from insurance   100    -    100    20 
Proceeds from notes receivable   51    29    158    127 
Issuance of notes receivable   -    -    (420)   - 
Additions to property and equipment   (3,807)   (6,436)   (20,708)   (25,263)
Acquisition of businesses, net of cash acquired   -    (1,550)   (13,500)   (2,034)
Net cash used in investing activities   (1,539)   (7,775)   (27,147)   (26,339)
CASH FLOWS FROM FINANCING ACTIVITIES                    
Proceeds from long-term debt   1,181    11,846    13,511    84,233 
Payments on long-term debt   (4,290)   (2,386)   (22,924)   (72,830)
Debt prepayment penalty   -    -    -    (543)
Purchase of treasury stock   (537)   -    (2,901)   - 
Payment of dividends   (385)   (292)   (1,252)   (1,168)
Payment of loan origination costs   -    (178)   (20)   (1,138)
Distribution to noncontrolling interests   (49)   (18)   (70)   (180)
Net cash provided by (used in) financing activities   (4,080)   8,972    (13,656)   8,374 
NET INCREASE (DECREASE) IN CASH AND CASH                    
EQUIVALENTS   3,141    4,555    (3,629)   7,804 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   10,956    13,171    17,726    9,922 
CASH AND CASH EQUIVALENTS AT END OF PERIOD  $14,097   $17,726   $14,097   $17,726 

 

  10
 

 

RCI HOSPITALITY HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

 

   September 30,   June 30,   September 30, 
   2019   2019   2018 
ASSETS               
Current assets               
Cash and cash equivalents  $14,097   $10,956   $17,726 
Accounts receivable, net   6,289    5,001    7,320 
Current portion of notes receivable   954    1,152    - 
Inventories   2,598    2,502    2,353 
Prepaid insurance   5,446    896    4,910 
Other current assets   2,521    2,090    1,591 
Assets held for sale   2,866    -    2,902 
Total current assets   34,771    22,597    36,802 
Property and equipment, net   183,956    191,493    172,403 
Notes receivable, net of current portion   4,211    3,810    2,874 
Goodwill   53,630    55,271    43,591 
Intangibles, net   75,951    76,285    71,532 
Other assets   1,118    1,422    2,530 
Total assets  $353,637   $350,878   $329,732 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY               
Current liabilities               
Accounts payable  $3,810   $2,544   $2,825 
Accrued liabilities   14,644    9,117    11,973 
Current portion of long-term debt   15,754    16,374    19,047 
Total current liabilities   34,208    28,035    33,845 
Deferred tax liability, net   21,658    22,076    19,552 
Long-term debt, net of current portion   127,774    130,205    121,580 
Other long-term liabilities   1,696    1,656    1,423 
Total liabilities   185,336    181,972    176,400 
    143,528    146,579    140,627 
Commitments and contingencies               
                
Stockholders’ equity               
Preferred stock   -    -    - 
Common stock   96    96    97 
Additional paid-in capital   61,312    61,849    64,212 
Retained earnings   107,049    106,976    88,906 
Accumulated other comprehensive income   -    -    220 
Total RCIHH stockholders’ equity   168,457    168,921    153,435 
Noncontrolling interests   (156)   (15)   (103)
Total stockholders’ equity   168,301    168,906    153,332 
Total liabilities and stockholders’ equity  $353,637   $350,878   $329,732 

 

  11

 

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