Q3 2008 Compared to Q3 2007 * Total Revenues increased 40% to $15.2 million * Income from Operations of $3.8 million * Net Income of $1.8 million, or $0.10 per fully diluted share * EBITDA up 2% at $4.4 million * Q3 2008 same store sales increased 9% First Nine Months 2008 Compared to First Nine Months 2007 * Total Revenues increased 61% to $43.2 million * Income from Operations of $10.2 million * Net Income of $4.6 million, or $0.25 per fully diluted share * EBITDA up 31% to $11.4 million * Year to date same store sales increased 10%
DENVER, Nov. 10, 2008 (GLOBE NEWSWIRE) -- VCG Holding Corp. (Nasdaq:VCGH), a growing and leading consolidator and operator of adult nightclubs, today announced financial results for the third quarter and nine months ended September 30, 2008 (see attached tables).
Troy Lowrie, Chairman and Chief Executive Officer, stated, "We are pleased with our results for the third quarter and first nine months of 2008. We experienced the third consecutive quarter of same store sales growth, and revenues for both the third quarter of 2008 and year to date were up 40% and 61%, respectively. We also saw increased operating cash flow for the first nine months of 2008, which attributes to our success with integrating high quality clubs we acquired since the third quarter of last year. Operating cash flow improved to $9.4 million for the nine months ended September 30, 2008, up $467,000 from the same period in 2007. Year to date free cash flow at September 30, 2008 was $5.7 million. Free cash flow for the quarter ended September 30, 2008 was $2.4 million."
Third Quarter 2008 Results
Net income and earnings per share for the third quarter of 2008 reflected an effective tax rate of 32.3% for the quarter and 32.9% for the year to date. The effective tax rate for the same three months in 2007 was 3.2%, due to the use of net operating loss carryforwards. EBITDA for the three months ended September 30, 2008 was $4.4 million, an increase of $77,000 or 2% from the same period in 2007.
Total revenue for the three months ended September 30, 2008 increased 40% to $15.2 million from $10.9 million for the same period in 2007. This is due primarily to the acquisitions of four new clubs after September 30, 2007. Same store sales in the third quarter of 2008 rose 3% over the second quarter in 2008 and 9% over the prior year.
Total operating expenses for the quarter ended September 30, 2008 increased to $11.4 million from $6.9 million for the same period in 2007. Those operating expenses primarily increased due to club acquisitions from the prior year. Salary and wages increased by $1.2 million or 58.4% because of more employees due to acquisition and an increase in the minimum wage for tipped employees, a majority of the Company's employee base. Legal and professional fees approximately increased by $753,000 over 2007 because of acquisitions costs, litigation charges and improvement of the financial infrastructure. Advertising and marketing increased for the quarter by $226,459 because of increased marketing of the new acquisitions in Texas and California. Other expenses included approximate increases of $125,000 in utilities due to increased energy costs, and $140,000 in repairs and maintenance to the clubs.
Income from operations for the three months ended September 30, 2008 was $3.8 million, and included expenses mentioned above, as compared to income from operations for the same period in 2007 of $4.0 million.
Net income for the three months ended September 30, 2008 (fully taxed at 32.3%) was $1.8 million, or $0.10 per fully diluted share, on approximately 18.4 million fully diluted shares outstanding, as compared to 2007 net income (taxed at 3.19%) of $3.1 million, or $0.19 per share, on approximately 17.0 million fully diluted shares outstanding for the same period in 2007. At a 32.3% effective tax rate, net income and earnings per share for the comparable period would have been $2.23 million and $0.13, respectively.
First Nine Months of 2008
Net income and earnings per share for the nine months of 2008 reflected an effective tax rate of 32.3% for the quarter and 32.9% for the year to date. The effective tax rate for the same period in 2007 was 3.2%, due to the use of net operating loss carryforwards. EBITDA for the nine months ended September 30, 2008 was $11.4 million, an increase of $2.7 million or 31% from the same period in 2007.
Total revenue for the nine months ended September 30, 2008 increased 61% to $43.2 million from $26.8 million for the same period in 2007. This is due primarily to the acquisitions of four new clubs after September 30, 2007. Same store sales for the first nine months of 2008 increased 10% over the same period 2007.
Year to date total operating expenses for the period ended September 30, 2008 increased to $33.0 million from $18.9 million for the same period in 2007. Those operating expenses increased due to club acquisitions from the prior year and included approximate increases of $413,000 in utilities due to increased energy costs, $331,000 in repairs and maintenance to the clubs and unique expenses of $496,000 previously reported in the second quarter. Legal and professional fees approximately increased by $671,000 or 45.4% over 2007 because of acquisitions costs, litigation charges and improvement of the financial infrastructure.
Income from operations for the nine months ended in 2008 was $10.2 million, and included expenses mentioned above, as compared to income from operations for the same period in 2007 of $7.9 million.
Net income for the nine months ended September 30, 2008 (fully taxed at 32.9%) was $4.6 million, or $0.25 per fully diluted share, on approximately 18.3 million fully diluted shares outstanding, as compared to 2007 net income (taxed at 7.0%) of $5.9 million, or $0.44 per share, on approximately 13.4 million fully diluted shares outstanding for the same period in 2007. At a 32.9% effective tax rate, net income and earnings per share for the comparable period would have been $4.3 million and $0.32, respectively.
Mr. Lowrie continued, "We remain optimistic about the future of our business and industry. While no company is immune from the current economic environment, we are pleased with the performance of our clubs so far in the fourth quarter. We believe that our tiered venue-operating model provides a substantial hedge against the impact of any potential decline in consumer spending. We are also continuing to explore potential accretive acquisitions in markets we currently operate and in new geographies, and the pipeline of such acquisitions is considerable. We have, however, assumed a prudent posture as it relates to our use of cash by weighing the benefits of acquisitions against other potential uses of capital, as market trends dictate."
SHARE REPURCHASE
As previously announced, the Company's Board of Directors has authorized the repurchase of up to $1 million of VCG Holding common stock, through dealers or agents in transactions on the Nasdaq Stock Market or in privately negotiated transactions. The plan commenced on October 1 and through October 23, 2008, VCG Holding bought back 225,045 shares of its common stock at an aggregate cost of $588,012.
CONFERENCE CALL
Management will host a web cast and conference call to discuss the 2008 third-quarter results today, Monday, November 10, 2008 at 11:00 a.m. ET / 9:00 am MT. Interested parties may participate in the conference call by dialing 877-675-4755 (domestic) or 719-325-4915 (international) ten minutes before the call is scheduled to begin and ask to be connected to the VCG Holding conference call. A replay will be available from 2:00 p.m. Eastern Time November 10, 2008 until midnight November 13, 2008. To hear the teleconference replay dial 888-203-1112 (domestic) or 719-457-0820 (international). The pass code for the replay is 4086794.
The conference call will be broadcast live over the internet. To listen to the live call, please go to the "Investor Relations" section of VCG's website at www.vcgh.com, click on "Events & Presentations," and follow the instructions at the webcast link. Please go to the website at least 15 minutes early to register, download and install any necessary audio software. If you are unable to participate in the live call, the conference call will be archived and can be accessed for approximately 90 days.
To view a copy of the Company's presentation that will be referenced during the call, please visit the Company's website at www.vcgh.com under the heading "Investor Relations" then "Events & Presentations."
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 night clubs are located in Anaheim, Indianapolis, St. Louis, Denver, Colorado Springs, Ft. Worth, Dallas, Raleigh, Minneapolis, Louisville, Miami, and Portland, ME.
The VCG Holding Corp. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5105
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-KSB for the year ended December 31, 2007. 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.
VCG Holding Corp.
Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
2008 2007
---- ----
Assets
Current Assets
Cash & cash equivalents $ 2,798,725 $ 2,980,007
Assets held for sale -- 372,606
Other receivables 328,882 181,632
Inventories 931,363 964,595
Prepaid expenses 740,149 276,002
Income taxes receivable 286,782 272,244
------------ ------------
Total current assets 5,085,901 5,047,086
Property, plant and equipment, net 27,878,705 24,517,181
Deposits and prepaid expenses 844,351 82,766
Loan fees, net 424,043 389,604
Deferred offering costs 37,011 37,011
Intangible assets 77,123,028 64,123,908
------------ ------------
Total $111,393,039 $ 94,197,556
============ ============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable - trade $ 844,896 $ 764,182
Accrued expenses 2,158,608 1,646,531
Deferred revenue 114,204 150,266
Income taxes payable 631,517 --
Current portion of long-term debt
and capitalized leases 7,295,203 9,343,029
------------ ------------
Total current liabilities 11,044,428 11,904,008
------------ ------------
Deferred income tax 1,960,123 1,060,777
Long-term debt and capitalized lease 31,064,789 21,505,497
------------ ------------
Total long-term liabilities 33,024,912 22,566,274
------------ ------------
Total liabilities 44,069,340 34,470,282
------------ ------------
Minority interest liability 4,591,618 3,662,767
------------ ------------
Stockholders' equity
Common stock $.0001 par value;
50,000,000 shares authorized;
18,025,248 (2008) and 17,723,975
(2007) shares issued and outstanding 1,802 1,772
Paid-in-capital 54,287,803 52,251,847
Retained earnings 8,442,476 3,810,888
------------ ------------
Total stockholders' equity 62,732,081 56,064,507
------------ ------------
Total liabilities and
stockholders' equity $111,393,039 $ 94,197,556
============ ============
VCG Holding Corp.
Consolidated Statements of Income
(Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, September 30,
2008 2007 2008 2007
---- ---- ---- ----
Revenue
Sales of
alcoholic
beverages $ 6,713,551 $ 5,350,924 $19,837,895 $13,197,154
Sales of food
and merchandise 656,787 645,183 2,003,773 1,536,961
Service revenue 7,052,312 4,251,364 18,694,480 9,402,356
Management
fees and
other income 808,262 651,916 2,627,344 2,667,288
----------- ----------- ----------- -----------
Total revenue 15,230,912 10,899,387 43,163,492 26,803,759
----------- ----------- ----------- -----------
Operating expenses
Cost of goods
sold 1,779,038 1,438,290 5,329,431 3,612,060
Salaries and
wages 3,311,570 2,091,462 9,856,145 5,586,606
Other
general and
administrative
Taxes and
permits 589,680 430,582 1,698,022 1,025,091
Charge card
and bank fees 223,337 146,461 633,635 308,162
Rent 1,308,444 1,061,935 3,785,073 2,577,105
Legal and
professional 855,215 102,213 2,150,614 1,479,176
Advertising
and marketing 712,630 486,171 2,264,482 1,134,094
Insurance 431,774 262,980 1,233,062 800,885
Other 1,770,365 527,630 4,814,790 1,575,935
Depreciation &
amortization 458,488 339,889 1,233,244 845,653
----------- ----------- ----------- -----------
Total
operating
expenses 11,440,541 6,887,613 32,998,498 18,944,965
----------- ----------- ----------- -----------
Income from
operations 3,790,371 4,011,774 10,164,994 7,858,794
----------- ----------- ----------- -----------
Other income
(expenses)
Interest expense (1,000,331) (707,758) (2,613,963) (1,826,444)
Interest income 15,416 30,311 19,952 320,529
Unrealized gain
on investments -- (8,934) -- --
Gain (loss) on
sale of assets 4,500 -- (133,426) 190,256
----------- ----------- ----------- -----------
Total other
income
(expenses) (980,415) (686,381) (2,727,437) (1,315,659)
----------- ----------- ----------- -----------
Income from
continuing
operations
before income
taxes 2,809,956 3,325,393 7,437,557 6,543,135
----------- ----------- ----------- -----------
Total income taxes 907,764 106,000 2,444,726 456,000
----------- ----------- ----------- -----------
Minority interest
expense (132,239) (80,584) (361,243) (173,400)
----------- ----------- ----------- -----------
Income from
continuing
operations 1,769,953 3,138,809 4,631,588 5,913,735
----------- ----------- ----------- -----------
Loss from
discontinued
operations, net
of zero income
taxes -- (22,723) -- (22,723)
----------- ----------- ----------- -----------
Net income $ 1,769,953 $ 3,116,086 $ 4,631,588 $ 5,891,012
=========== =========== =========== ===========
Earnings per
share:
Basic income per
common share $ 0.10 $ 0.19 $ 0.26 $ 0.44
Fully diluted
income per
common share $ 0.10 $ 0.19 $ 0.25 $ 0.44
Weighted
average shares
outstanding 18,025,248 16,970,404 17,948,802 13,357,204
Fully diluted
weighted
average shares
outstanding 18,350,627 16,976,747 18,336,055 13,359,318
VCG Holding Corp.
Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
September 30,
------------------------
2008 2007
----------- -----------
Operating Activities
Net income $ 4,631,588 $ 5,891,012
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 1,233,244 845,653
Amortization of loan fees 226,056 28,896
Stock-based compensation expense 665,249 200,808
Deferred tax expense 992,636 456,000
Minority interest expense 361,243 173,400
(Gain) loss on disposition of assets 133,426 (179,189)
Deferred revenue (36,062) 121,436
Changes in current operating assets
and liabilities 1,242,511 335,133
----------- -----------
Net cash provided by operating
activities 9,449,891 7,873,149
----------- -----------
Investing Activities
Investments -- (49,182)
Acquisitions of businesses, net of
cash acquired (10,721,159) (37,870,673)
Purchases of property and equipment (1,268,549) (571,055)
Deposits (163,885) (526,226)
Proceeds from disposition of assets 237,811 206,000
----------- -----------
Net cash used by investing activities (11,915,782) (38,811,136)
----------- -----------
Financing Activities
Loan fees paid (223,954) (66,000)
Stock offering costs paid -- (128,830)
Payment on capitalized leases (6,906) (978,119)
Proceeds from mortgages and notes
payable 6,044,815 12,200,676
Payments on mortgages and notes payable (3,611,240) --
Distributions to minority interests (377,357) (312,963)
Purchase of treasury stock -- (257,732)
Proceeds from stock issuances 459,251 21,201,214
----------- -----------
Net cash provided by financing
activities 2,284,609 31,658,246
----------- -----------
Net increase (decrease) in cash (181,282) 720,259
Cash beginning of period 2,980,007 2,011,178
----------- -----------
Cash end of period $ 2,798,725 $ 2,731,437
=========== ===========
Income taxes paid in cash $ 822,307 $ --
Interest paid in cash $ 2,267,597 $ 1,826,444
Supplemental disclosure of non-cash
investing and financing activities:
Common stock issued for services $ 1,330,015 $ 527,286
Issued notes payable for acquisitions $ 5,793,027 $ --
Purchased general partnership
interests for common stock $ -- $ 2,555,192
Purchase common stock of wholly
owned subsidiary for common stock $ -- $ 4,392,000
Preferred stock converted to common
stock $ -- $ 325,000
Cancelled common stock for payment
of Epicurean $ -- $(2,370,000)
VCG Holding Corp.
Calculation of Free Cash Flow
(Unaudited)
Year to date Quarter to date
------------ ---------------
EBITDA $11,398,238 $ 4,428,859
Less:
Interest expense (2,613,963) (1,000,331)
Minority interest expense (361,243) (132,239)
Cash income tax expense (1,430,897) (606,986)
Maintenance Cap Ex (1,268,549) (261,359)
----------- -----------
Free cash flow $ 5,723,586 $ 2,427,944
=========== ===========