DENVER, March 12, 2010 (GLOBE NEWSWIRE) -- In a release issued today for VCG Holding Corp. (Nasdaq:VCGH), under the same headline, please note several changes have been made throughout the release and the financial tables. The corrected release follows:
Financial Results Overview
- 2009 revenues of $55.0 million; Q4 2009 revenues of $13.4 million
- 2009 operating income of $5.1 million; Q4 2009 operating loss of $1.3 million
- 2009 net income of $0.7 million, or $0.04 per share; Q4 2009 net loss of $1.3 million, or ($0.08) per share
- Results for 2009 included a non-cash impairment charge of $2.0 million related to licenses and goodwill and approximately $0.9 million for costs related to the advisory fees related to change in control.
- Excluding the non-cash impairment charge and advisory fees related to change in control:
- 2009 net income was $3.7 million, or $0.21 per diluted share
- Q4 2009 net income was $1.4 million, or $0.08 per diluted share
- Adjusted EBITDA was $8.4 million
- Free cash flow excluding non-cash impairment charge at December 31, 2009 was $2.7 million
VCG Holding Corp. (Nasdaq:VCGH), a growing and leading consolidator and operator of adult nightclubs, today announced financial results for the fourth quarter and full year ended December 31, 2009 (see attached tables, including reconciliation tables).
Troy Lowrie, Chairman and Chief Executive Officer, stated, "In light of a still weak economic environment, we are pleased with our results for the 2009 fourth quarter and full year. Lower revenues were driven by a decline in sales of alcohol, which we view as an effect of higher customer flow at our "C" clubs, offset by lower sales at our higher amenity "A" and "B" venues. Same-club revenues increased at four of our locations during the fourth quarter of 2009. Although most of our clubs operated profitably during the fourth quarter of 2009, we incurred pre-tax, non-cash impairment charges of $1.8 million – or $0.10 per share, after taxes – related to licenses and goodwill. Despite expenses of approximately $0.9 million for advisory fees related to change in control(1) and lower revenues, we were profitable for the full year. Exclusive of the non-cash impairment charges and advisory fees related to change in control, net income for the 2009 fourth quarter and full year was $1.4 million, or $0.08 per share, and $3.7 million, or $0.21 per share, respectively. Cash at December 31, 2009 improved to $2.7 million from $2.3 million at September 30, 2009. For the year ended December 31, 2009, cash from operations and free cash flow were $7.1 million and $2.7 million, respectively. If you exclude the non-cash impairment charges and advisory fees related to change in control, cash from operations was $10.1 million and free cash flow was $5.4 million."
Fourth Quarter Financial Results
Total revenue for fourth quarter of 2009 declined to $13.4 million from $14.5 million in the fourth quarter of 2008. The decline in revenue was due to primarily to lower sales of alcohol, which the Company believes reflects an increase in the number of patrons to its "C" clubs, which do not serve alcohol, offset by lower sales at its higher amenity "A" and "B" clubs.
Cost of goods sold (the cost of alcohol, food and merchandise) decreased by approximately $0.2 million from the fourth quarter of 2008, due primarily to tighter inventory controls.
Total operating expenses for the 2009 fourth quarter were $14.8 million, which included the above-referenced $1.8 million in non-cash impairment charges and approximately $0.9 million in advisory fees related to change in control, compared to $62.1 million in the fourth quarter of 2008, which included $48.0 million in primarily non-cash impairment charges. Operating expenses in 2009 also included higher salaries, legal fees, taxes and permits, and repairs. These were offset by declines in advertising and promotion, insurance, utilities, and other professional fees.
The operating loss for the fourth quarter of 2009 was $1.3 million, and included the $1.8 million in impairment charges and $0.9 million in advisory fees related to change in control. This compares to an operating loss of $47.6 million in the fourth quarter of 2008, which included $48.0 million in non-cash impairment charges. Excluding the impairment charges and advisory fees related to change in control, operating income for the 2009 fourth quarter was $1.4 million.
The net loss for the fourth quarter of 2009 was $1.3 million, or ($0.08) per share, as compared to a net loss of $35.7 million, or ($2.00) per share, for the 2008 fourth quarter. Excluding the impairment charges and advisory fees related to change in control, net income for the 2009 fourth quarter was $1.4 million, or $0.08 per share.
Adjusted EBITDA for the 2009 fourth quarter was $0.8 million as compared to adjusted EBITDA of $0.7 million in the fourth quarter of 2008.
Full Year Financial Results
Total revenue for 2009 declined to $55.0 million from $57.7 million in 2008, due primarily to lower sales of alcohol, food and customer migration to less expensive "C" clubs from "A" and "B" venues. This was offset by higher service revenue (wristband sales, suite rentals, tab and tip fees, and dance dollar and boutique programs).
Cost of goods sold declined by approximately 15.2%, or $1.1 million, from 2008, due primarily to tighter inventory controls and the benefits of the Company's tiered venue operating model. As a percentage of applicable revenues, costs of goods sold declined to 23.9% from 24.3% last year.
Total operating expenses were $50.0 million in 2009 compared to $95.1 million in 2008. For 2009, total operating expenses included the $2.0 million in non-cash impairment charges and approximately $0.9 million in advisory fees related to change in control, while 2008 included $48.0 million in non-cash impairment charges.
Operating income for 2009 was $5.1 million, and included the $2.0 million in impairment charges, $2.2 million in professional fees and $0.9 million in advisor fees related to change in control. This compares to an operating loss of $37.4 million in 2008, which included $48.0 million in non-cash impairment charges. Excluding the impairment charges and advisory fees related to change in control, operating income for 2009 was $8.1 million.
Net income for 2009 was $0.7 million, or $0.04 per share, as compared to a net loss of $30.7 million, or ($1.69) per share, last year. Excluding the impairment charges and advisory fees related to change in control, net income for 2009 was $3.7 million.
Adjusted EBITDA for 2009 was $8.4 million as compared to adjusted EBITDA of $12.1 million in 2008.
SHARE REPURCHASE
For the year ended December 31, 2009, VCGH has purchased a total of 444,655 shares of common stock for an aggregate purchase price of approximately $0.9 million.
LETTER OF INTENT TO MERGE WITH RICK'S CABARET INTERNATIONAL, INC. ("Rick's Cabaret")
As announced on February 16, 2010, VCG Holding Corp. and Rick's Cabaret signed a non-binding (except as to certain provisions, including exclusivity and confidentiality) letter of intent under which Rick's Cabaret will acquire all of the outstanding shares of VCG Holding to form the largest publicly traded operator of upscale gentlemen's clubs in North America. Additional details regarding this proposed transaction are available on Form 8-K, which VCG Holding filed on February 17, 2010 and March 11, 2010. VCG Holding will continue to update shareholders on material developments related to the status of the proposed transaction with Rick's Cabaret.
ABOUT VCG HOLDING CORP.
VCG Holding Corp. is an owner, operator, and consolidator of adult nightclubs throughout the United States. The Company currently owns 20 adult nightclubs. The nightclubs are located in Anaheim, Indianapolis, St. Louis, Denver, Colorado Springs, Ft. Worth, Dallas, Raleigh, Minneapolis, Louisville, Miami, and Portland, ME.
FORWARD LOOKING STATEMENT
Certain statements in this release are forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995. Such statements are based on current expectations, estimates and projections about the Company's business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors identified from time to time in the Company's reports with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2009, expected to be filed on March12, 2010. All forward-looking statements attributable to us or any persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. All guidance and forward-looking statements in this press release are made as of the date hereof and we do not undertake any obligation to update any forecast or forward-looking statements, except as may be required by law.
(1) As previously announced, The Special Committee of VCGH's Board of Directors was formed in order to evaluate the proposal made by Troy Lowrie, the Company's Chairman and Chief Executive Officer, Lowrie Management, LLLP, an entity controlled by Mr. Lowrie, and certain other unidentified investors (collectively, "Lowrie"), to acquire all of the outstanding common stock of the Company for $2.10 per share in cash. The Committee is now evaluating the merger offer from Rick's Cabaret.
| VCG HOLDING CORP. | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| December 31, | ||
| 2009 | 2008 | |
| Assets | ||
| Current Assets | ||
| Cash | $ 2,677,440 | $ 2,209,060 |
| Assets held for sale | -- | 106,900 |
| Other receivables | 254,333 | 25,473 |
| Income taxes receivable | 594,720 | 276,267 |
| Inventories | 926,321 | 949,088 |
| Prepaid expenses | 354,730 | 282,485 |
| Current portion of deferred income tax asset | 76,920 | 171,000 |
| Total Current Assets | 4,884,464 | 4,020,273 |
| Property and equipment, net | 22,946,114 | 25,738,388 |
| Licenses, net | 34,834,018 | 36,413,189 |
| Goodwill, net | 2,279,045 | 2,453,122 |
| Trade names | 452,000 | 619,000 |
| Favorable lease rights, net | 1,647,968 | 1,705,364 |
| Non-compete agreements, net | 23,898 | 40,933 |
| Non-current portion of deferred income tax asset | 3,841,673 | 4,068,593 |
| Other long-term assets | 241,993 | 567,181 |
| Total Assets | $ 71,151,173 | $ 75,626,043 |
| Liabilities and Equity | ||
| Current Liabilities | ||
| Accounts payable — trade | $ 1,750,940 | $ 847,493 |
| Accrued expenses | 1,930,049 | 2,257,116 |
| Income taxes payable | 67,917 | -- |
| Current portion of capitalized lease | -- | 10,000 |
| Current portion of long-term debt | 3,805,277 | 2,602,000 |
| Current portion of long-term debt, related party | 62,067 | 1,024,000 |
| Deferred revenue | 110,010 | 109,455 |
| Current portion of unfavorable lease rights | 277,920 | 278,155 |
| Total Current Liabilities | 8,004,180 | 7,128,219 |
| Long-Term Liabilities | ||
| Deferred rent | 1,628,301 | 845,136 |
| Unfavorable lease rights, net of current portion | 6,156,123 | 6,425,626 |
| Capital lease, net of current portion | -- | 9,111 |
| Long-term debt, net of current portion | 19,751,021 | 25,916,111 |
| Long-term debt, related party, net of current portion | 7,129,018 | 6,915,098 |
| Total Long-Term Liabilities | 34,664,463 | 40,111,082 |
| Commitments and Contingent Liabilities (Note 9 and 12) | ||
| Equity | ||
| Common stock $.0001 par value; 50,000,000 shares authorized;17,310,723 (2009) and 17,755,378 (2008) shares issued and outstanding | 1,731 | 1,775 |
| Additional paid-in capital | 51,932,082 | 52,557,047 |
| Accumulated deficit | (26,996,863) | (27,732,554) |
| Total VCG Stockholders' Equity | 24,936,950 | 24,826,268 |
| Noncontrolling interests in consolidated partnerships | 3,545,580 | 3,560,474 |
| Total Equity | 28,482,530 | 28,386,742 |
| Total Liabilities and Equity | $ 71,151,173 | $ 75,626,043 |
| VCG HOLDING CORP. | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||
| Three Months Ended | Twelve Months Ended | |||
| December 31, | ||||
| 2009 | 2008 | 2009 | 2008 | |
| Revenue | ||||
| Sales of alcoholic beverages | $ 5,390,523 | $ 6,404,412 | $ 22,877,141 | $ 26,242,303 |
| Sales of food and merchandise | 479,846 | 498,621 | 1,868,576 | 2,502,393 |
| Service revenue | 6,785,037 | 6,873,901 | 27,170,918 | 25,568,380 |
| Other income | 761,978 | 754,109 | 3,123,399 | 3,379,595 |
| Total Revenue | 13,417,384 | 14,531,043 | 55,040,034 | 57,692,671 |
| Operating Expenses | ||||
| Cost of goods sold | 1,476,080 | 1,650,208 | 5,921,054 | 6,979,636 |
| Salaries and wages | 3,649,543 | 3,605,029 | 13,780,775 | 13,461,173 |
| Other general and administrative | ||||
| Taxes and permits | 669,346 | 1,196,055 | 3,478,871 | 2,894,076 |
| Charge card and bank fees | 197,382 | 235,577 | 797,340 | 869,210 |
| Rent | 1,467,454 | 2,012,993 | 5,855,191 | 5,798,066 |
| Legal fees | 589,197 | 367,424 | 1,465,638 | 1,100,991 |
| Other professional fees | 453,639 | 1,370,745 | 2,215,655 | 2,787,789 |
| Advertising and marketing | 721,707 | 656,847 | 2,805,260 | 2,921,327 |
| Insurance | 387,386 | 478,974 | 1,655,280 | 1,712,036 |
| Utilities | 228,179 | 264,838 | 1,032,494 | 1,104,047 |
| Repairs and maintenance | 402,977 | 269,328 | 1,242,276 | 1,022,100 |
| Advisory fees related to change in control proposals | 953,517 | -- | 953,517 | -- |
| Other | 1,377,714 | 1,554,265 | 5,023,061 | 4,777,060 |
| Impairment of building and land | -- | 1,961,200 | 268,000 | 1,961,200 |
| Impairment of indefinite-lived intangible assets | 1,758,000 | 27,323,855 | 1,741,000 | 27,323,855 |
| Impairment of goodwill | -- | 18,721,496 | 17,000 | 18,721,496 |
| Depreciation and amortization | 429,031 | 465,565 | 1,712,311 | 1,698,804 |
| Total Operating Expenses | 14,761,152 | 62,134,399 | 49,964,723 | 95,132,866 |
| Income (Loss) from Operations | (1,343,768) | (47,603,356) | 5,075,311 | (37,440,195) |
| Other Income (Expenses) | ||||
| Interest expense | (774,850) | (1,147,188) | (3,456,616) | (3,761,151) |
| Interest income | 2,809 | 3,430 | 7,382 | 23,381 |
| (Loss) gain on sale of assets | (17,304) | (72,399) | (74,669) | (205,825) |
| Total Other Expenses | (789,345) | (1,216,157) | (3,523,903) | (3,943,595) |
| Income (Loss) Before Income Taxes | (2,133,113) | (48,819,513) | 1,551,408 | (41,383,790) |
| Income tax expense (benefit) — current | (213,851) | (722,149) | (126,896) | 729,940 |
| Income tax expense (benefit) — deferred | (689,150) | (12,507,118) | 465,896 | (11,831,550) |
| Total Income Taxes | (903,001) | (13,229,267) | 339,000 | (11,101,610) |
| Net Income (Loss) | (1,230,112) | (35,590,246) | 1,212,408 | (30,282,180) |
| Net Income (Loss) Attributable to Noncontrolling Interests | 81,875 | 67,370 | 476,717 | 428,614 |
| Net Income (Loss) Attributable to VCG | $ (1,311,987) | $ (35,657,616) | $ 735,691 | $ (30,710,794) |
| Earnings Per Share | ||||
| Basic earnings (loss) per share attributable to VCG's stockholders | $ (0.08) | $ (2.00) | $ 0.04 | $ (1.71) |
| Fully diluted earnings (loss) per share attributable to VCG's stockholders | $ (0.08) | $ (2.00) | $ 0.04 | $ (1.69) |
| Basic weighted average shares outstanding | 17,321,213 | 17,854,636 | 17,541,376 | 17,925,132 |
| Fully diluted weighted average shares outstanding | 17,321,213 | 17,855,616 | 17,541,376 | 18,146,949 |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| FOR THE YEARS ENDED | ||
| For the Year Ended | ||
| December 31, | ||
| 2009 | 2008 | |
| Operating Activities | ||
| Net income (loss) | $ 735,691 | $ (30,710,795) |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
| Impairment of goodwill | 17,000 | 18,721,496 |
| Impairment of indefinite lived intangible assets | 1,741,000 | 27,323,546 |
| Impairment of building and land | 268,000 | 1,961,200 |
| Depreciation | 1,695,277 | 1,678,043 |
| Amortization of non-compete agreements | 17,035 | 20,761 |
| Amortization of leasehold rights and liabilities, net | (212,342) | (192,067) |
| Amortization of loan fees | 216,205 | 448,015 |
| Stock-based compensation expense | 244,383 | 421,379 |
| Issuance of stock for services | -- | 1,422,253 |
| Deferred income taxes | 465,896 | (11,831,550) |
| Noncontrolling interests | 476,717 | 428,614 |
| (Gain) Loss on disposition of assets | 74,669 | 216,539 |
| Accrued interest added to long-term debt | 243,901 | 180,613 |
| Write-off uncollectible deposits | 7,151 | -- |
| Changes in operating assets and liabilities : | ||
| Income taxes and other receivables | (287,894) | 152,136 |
| Inventories | 22,767 | 20,030 |
| Prepaid expenses | (72,245) | (6,480) |
| Accounts payable - trade and accrued expenses | 576,380 | 693,896 |
| Income taxes payable | 67,917 | -- |
| Deferred revenue | 555 | (40,811) |
| Deferred rent | 783,165 | 845,136 |
| Net cash provided by operating activities | 7,081,228 | 11,751,954 |
| Investing Activities | ||
| Acquisitions of businesses, net of cash acquired | -- | (9,670,691) |
| Additions to property and equipment | (1,454,478) | (1,324,252) |
| Deposits | (19,444) | (206,068) |
| Purchase of assets held for sale | -- | (127,952) |
| Proceeds from sale of assets | 238,241 | 243,131 |
| Net cash used by investing activities | (1,235,681) | (11,085,832) |
| Financing Activities | ||
| Proceeds from debt | 1,212,115 | 14,009,000 |
| Payments on debt | (4,152,700) | (13,345,601) |
| Proceeds from related party debt | 25,099 | 2,140,000 |
| Payments on related party debt | (912,843) | (949,900) |
| Borrowing (payments) on revolving line of credit | (90,000) | (2,190,000) |
| Loan fees paid | (78,724) | (268,218) |
| Payment on capital lease | (19,111) | (9,343) |
| Proceeds from exercise of warrants | -- | 459,250 |
| Repurchase of stock | (869,392) | (753,202) |
| Distributions to noncontrolling interests | (491,611) | (529,055) |
| Net cash used by financing activities | (5,377,167) | (1,437,069) |
| Net increase (decrease) in cash | 468,380 | (770,947) |
| Cash beginning of period | 2,209,060 | 2,980,007 |
| Cash end of period | $ 2,677,440 | $ 2,209,060 |
| Supplemental cash flow information: | ||
| Income taxes paid in cash | $ 225,972 | $ 822,307 |
| Interest paid in cash | $ 3,067,195 | $ 3,108,962 |
| Non-cash acquisition activities: | ||
| Issuance of notes payable for acquisitions | $ -- | $ (5,793,027) |
| Fair value of liabilities assumed | $ -- | $ (2,095,105) |
| Non-cash divestiture activities: | ||
| Book value of note payable transferred to buyer | $ 1,771,854 | $ -- |
| Issuance of note receivable to buyer | $ 322,963 | $ -- |
| VCG Holding Corp. | ||
| Adjusted EBITDA Reconciliation | ||
| (unaudited) | ||
|
|
December 31, | |
|
|
2009 | 2008 |
| Net Income (loss) attributable to VCG | $735,691 | $ (30,710,794) |
| Add back: | ||
| Depreciation | 1,695,277 | 1,678,043 |
| Amortization of covenants not-to-compete | 17,035 | 20,761 |
| Amortization of leasehold rights and liabilities, net | (212,342) | (192,067) |
| Amortization of loan fees | 216,205 | 448,015 |
| Amortization of component 2 goodwill | 157,077 | 144,896 |
| Interest expense | 3,456,616 | 3,761,151 |
| Income taxes | 339,000 | (11,101,610) |
| EBITDA before non-cash impairment charges | 6,404,559 | (35,951,605) |
| Add back: | ||
| Non-cash impairment charges | 2,026,000 | 48,006,241 |
| EBITDA excluding non-cash impairment charges | $ 8,430,559 | $ 12,054,636 |
| VCG Holding Corp. | ||
| Calculation of Free Cash Flow | ||
| (unaudited) | ||
| December 31, | ||
| 2009 | 2008 | |
| EBITDA (excluding non-cash impairment charges) | $ 8,430,559 | $ 12,054,636 |
| Less: | ||
| Interest expense | 3,456,616 | 3,761,151 |
| Net income (Loss) attributable to noncontrolling interests | 476,717 | 428,614 |
| Total income tax | 339,000 | (11,101,610) |
| Capital expenditures | 1,454,478 | 1,324,252 |
| Free cash flow | $ 2,703,748 | $ 17,642,229 |