RICK RCI Hospitality Holdings Inc

Rick’s Cabaret International, Inc. (NASDAQ:RICK) today reported financial results for its fiscal year ending September 30, 2010. The company had consolidated total revenues of $83 million, an increase of 9.4 percent over the $75.8 million reported in the previous year. The company reported a loss from continuing operations of $7.6 million for the year, primarily because of non-cash balance sheet impairment charges of $20.5 million, compared with 2009 income from continuing operations $5.5 million.

“Our income statement was dramatically affected by the impairment charges incurred chiefly because of losses at the Las Vegas club we acquired in 2008 and we believe that the growth in our adjusted EBITDA to $17.6 million is a more realistic way to look at the year,” said Eric Langan, President and CEO of Rick’s Cabaret International, Inc.

Mr. Langan said the company generated cash flow from operations of $17.3 million compared with $8.9 million in 2009, despite the Las Vegas losses, benefitting from continuing strong performances of Rick’s Cabaret in New York City and Tootsie’s Cabaret in Miami.

“We think 2011 is looking very good,” Mr. Langan said. “We plan to add four more locations in 2011, staying on our goal of making at least one acquisition per quarter. In addition we will benefit from the Super Bowl in February in Dallas, where we will have a terrific cluster of seven clubs ready to welcome fans.”

Other highlights from results for the year ending September 30, 2010 include:

• The company’s adjusted EBITDA for 2010 $17.6 million, compared with $16.0 million in 2009. Diluted adjusted EBITDA per common share was $1.84 compared with $1.70, based on shares outstanding of 9.7 million and 9.4 million respectively. The adjusted EBITDA calculation (earnings before interest expense, income taxes, depreciation, amortization and impairment charges) is a non-GAAP performance measure that excludes the largest recurring non-cash charges (depreciation, amortization and impairment) and provides a core operational performance measurement that compares results without the need to adjust for Federal, state and local taxes that have considerable variation between domestic jurisdictions. Interest cost is also excluded from the calculation of adjusted EBITDA. The results are, therefore, without consideration of financing alternatives of capital employed. Adjusted EBITDA is one guideline to assess unleveraged performance return on the company’s investments and is also the target benchmark for acquisitions of nightclubs.
• The 9.4 per cent increase in total revenues was driven by revenues generated at new clubs and an overall 7.0 percent increase from clubs open more than one year, especially the New York location, offset by a decrease in revenues from the Las Vegas club.
• The Las Vegas club is still not profitable even with the taxi marketing costs under more control than in the prior year, due principally to decreased revenues since the Las Vegas market collapsed after September 2008. The company noted that the club it acquired had revenues of approximately $16.6 million in the year ended July 31, 2008, compared to $8.8 million and $9.7 million for the years ended September 30, 2010 and 2009. The club had adjusted EBITDA of approximately ($37,000) and ($1.4) million for the years ended September 30, 2010 and 2009, respectively, compared to pro forma EBITDA income of $2.6 million for the year ended July 31, 2008.

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 ir@ricks.com or visit www.ricksinvestor.com.

Forward-looking Statements: This document contains 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 document, 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.

Statement of Operations and Balance Sheet Are Available at www.ricksinvest.com

RICK'S CABARET INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS       Year Ended September 30,

(in thousands, except per share data)

  2010     2009     2008     Revenues: Sales of alcoholic beverages $ 33,101 $ 28,679 $ 21,764 Sales of food and merchandise 6,850 6,203 5,145 Service revenues 37,725 36,310 28,362 Internet revenues 562 641 716 Media revenues 1,440 1,404 801 Other   3,309     2,592     2,220   Total revenues 82,987 75,829 59,008   Operating expenses: Cost of goods sold 9,927 8,895 6,796 Salaries and wages 17,767 16,429 13,485 Stock-based compensation 405 96 157 Other general and administrative: Taxes and permits 12,367 9,396 7,365 Charge card fees 1,434 1,612 1,060 Rent 4,108 3,716 2,371 Legal and professional 3,071 2,963 1,629 Advertising and marketing 6,740 8,174 2,510 Depreciation and amortization 3,743 3,423 2,439 Insurance 1,125 1,100 845 Utilities 1,721 1,646 1,218 Impairment of assets 20,511 823 - Other   6,441     5,826     5,147   Total operating expenses   89,360     64,099     45,022     Income (loss) from operations (6,373 ) 11,730 13,986   Other income (expense): Interest income 18 16 60 Interest expense (4,023 ) (3,358 ) (2,713 ) Interest expense – loan origination costs (450 ) (65 ) - Gain (loss) on change in fair value of derivative instruments (31 ) 145 - Gain (loss) on sale of property and other   (3 )   181     -     Income (loss) from continuing operations before income taxes (10,862 ) 8,649 11,333 Income taxes   (3,221 )   2,854     3,532     Income (loss) from continuing operations (7,641 ) 5,795 7,801 Loss from discontinued operations, net of income taxes   (57 )   (293 )   (171 )   Net income (loss) (7,698 ) 5,502 7,630 Less: net income attributable to noncontrolling interests   (260 )   (294 )   31  

Net income (loss) attributable to Rick’s Cabaret International, Inc.

$ (7,958 ) $ 5,208   $ 7,661     Basic earnings (loss) per share attributable to Rick’s shareholders: Income (loss) from continuing operations $ (0.81 ) $ 0.59 $ 0.99 Loss from discontinued operations   (0.01 )   (0.03 )   (0.02 ) Net income (loss) $ (0.82 ) $ 0.56   $ 0.97    

 

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

Income (loss) from continuing operations $ (0.81 ) $ 0.58 $ 0.93 Loss from discontinued operations   (0.01 )   (0.03 )   (0.02 ) Net income (loss) $ (0.82 ) $ 0.55   $ 0.91     Weighted average number of common shares outstanding: Basic   9,697     9,266     7,931   Diluted   9,697     9,428     8,413     See accompanying notes to consolidated financial statements.   RICK'S CABARET INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS September 30,

(in thousands, except share data)

  2010     2009 Assets Current assets: Cash and cash equivalents $ 19,168 $ 12,850 Accounts receivable: Trade, net 888 777 Other, net 204 137 Inventories 1,264 1,232 Deferred tax asset 1,504 120 Prepaid expenses and other current assets 951 726 Assets of discontinued operations   148   210 Total current assets 24,127 16,052   Property and equipment, net 59,559 48,300   Other assets: Goodwill and indefinite lived intangibles, net 62,076 78,331 Definite lived intangibles, net 1,197 1,161 Other   1,412   1,232 Total other assets   64,685   80,724   Total assets $ 148,371 $ 145,076   Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 731 $ 788 Accrued liabilities 4,529 2,414 Texas patron tax liability 3,955 1,163 Current portion of derivative liabilities 1,276 886 Current portion of long-term debt 7,883 5,856 Liabilities of discontinued operations   47   52 Total current liabilities 18,421 11,159   Deferred tax liability 15,566 18,581 Other long-term liabilities 719 642 Long-term debt 34,803 31,956 Derivative liabilities at fair value, less current portion   1,243   2,456 Total liabilities 70,752 64,794   Commitments and contingencies   Temporary equity - Common stock, subject to put rights 198 and 317 shares, respectively 4,366 6,871   PERMANENT STOCKHOLDERS' EQUITY: Preferred stock, $.10 par, 1,000 shares authorized; none issued and outstanding - -

Common stock, $.01 par, 20,000 shares authorized; 9,766 and 8,880 shares issued and

outstanding, respectively

98 89 Additional paid-in capital 62,326 54,530 Retained earnings   7,515   15,473 Total Rick’s permanent stockholders’ equity 69,939 70,092 Noncontrolling interests   3,314   3,319 Total permanent stockholders’ equity   73,253   73,411  

Total liabilities and stockholders’ equity

$ 148,371 $ 145,076 See accompanying notes to consolidated financial statements.