Q1 2010 Financial Results Overview
- Revenues of $13.8 million
- Income from operations of $1.9 million
- Net income of $0.66 million, or $0.04 per diluted share
- Adjusted EBITDA of $2.3 million
- Free cash flow of $1.2 million
- $1.7 million of debt paid during the first quarter of 2010
- Cash balance of $2.4 million
DENVER, May 14, 2010 (GLOBE NEWSWIRE) -- VCG Holding Corp. (Nasdaq:VCGH), a growing and leading consolidator and operator of adult nightclubs, today announced financial results for the first quarter ended March 31, 2010 (see attached tables, including reconciliation tables).
Troy Lowrie, Chairman and Chief Executive Officer, stated, "Our results for the first quarter of 2010 reflect our continued success at managing the business against our previously announced corporate initiatives. We reported a modest increase in revenues and net income, free cash flow, and a further reduction of long-term debt. At the top line, we saw the success of new club-level revenue streams such as increased table side services, wristband sales, and suite fees which do not have associated costs. Legal fees declined significantly from both the first quarter of 2009 and, on a consecutive quarterly basis, the three months ended December 31, 2009. We paid down an additional $1.7 million of long-term debt during the first quarter of 2010, reducing total long-term debt to $29.1 million at March 31, 2010. To put this reduction in context, we ended 2009 with $30.8 million of total long-term debt, a $5.7 million reduction from $36.5 million at December 31, 2008. The debt reductions completed during 2009 and the first quarter of 2010 are expected to produce annual interest savings of approximately $0.4 million in 2010. At March 31, 2010, VCG had access to liquidity of approximately $1.3 million and cash of $2.4 million."
Mr. Lowrie concluded, "Following the dissolution of the Special Committee in April 2010, the Board of Directors authorized the repurchase of up to $1.0 million of the Company's common stock. We view this as a reflection of our shared confidence in the long-term prospects of our business and industry. Our strategy during 2010 will continue to focus on generating free cash flow, optimizing the operations of our 20 gentlemen's clubs, buying back the company's common stock as allowed, further reducing long-term debt and considering select acquisitions."
First Quarter 2010 Financial Results
Total revenue for the first quarter of 2010 increased to $13.8 million from $13.7 million in the first quarter of 2009. Revenues increased due to higher sales of food and merchandise, higher service revenues, and increased other income. Service revenues increased by 7.1% from the first quarter of 2009, reflecting the success of table side services, wristband access to special areas, table dances, and suite fees, all of which were introduced company-wide in 2009.
Cost of goods sold (the cost of alcohol, food and merchandise) was $1.5 million, or 25.7% of revenues, compared to $1.49 million, or 23.6% of revenues, in the first quarter of 2009. The increase as a percentage of revenues was attributable to costs associated with VCG's four "A" club restaurants, which recently entered into management consulting agreements for their restaurant operations. These consultants elected to use the POS systems for customer convenience. Following the installation of the POS systems at the end of fourth quarter of 2009 and in January and February of 2010, operations for these subleased kitchens were included in VCG's financial data for the first time. By way of comparison, when "A" club restaurant cost of sales data is removed from the total, cost of goods sold as a percentage of applicable revenues for all other clubs drops to 24.2%.
Total operating expenses for the 2010 first quarter were $11.9 million, up from $11.6 million in the first quarter of 2009.
Income from operations for the first quarter of 2010 was $1.9 million compared to $2.2 million in the first quarter of 2009.
Net income for the first quarter of 2010 rose to $0.66 million, or $0.04 per share, from net income of $0.65 million, or $0.04 per share, for the 2009 first quarter.
Adjusted EBITDA for the 2010 first quarter was $2.3 million as compared to adjusted EBITDA of $2.6 million in the first quarter of 2009.
CONFERENCE CALL
Troy Lowrie, Chairman and Chief Executive Officer and Courtney Cowgill, Chief Financial Officer, will host a conference call today at 11:00 a.m. Eastern Time / 9:00 a.m. Mountain Time, to discuss the results. To participate in the conference call, please dial (877) 266-0483 (domestic) or (707) 287-9342 (international) approximately 10 minutes before the call is scheduled to begin. A replay will be available from 2:00 p.m. Eastern Time on May 14, 2010 until midnight on May 17, 2010. To hear the teleconference replay dial (800) 642-1687 (domestic) or (706) 645-9291 (international). The pass code for the replay is 69135992. The conference call will also be broadcast live over the Internet. To listen to the call via the Internet and to view a copy of the Company's presentation that will be referenced during the call, please visit the Company's website at under the heading "Investor Relations", then "Events & Presentations" and follow the instructions at the web cast link. The archived web cast will be available shortly after the call on the Company's website.
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.
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-K for the year ended December 31, 2009 filed on March 15, 2010 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 to be filed on or about May 14, 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.
| VCG HOLDING CORP. | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (unaudited) | (audited) | |
| March 31, | December 31, | |
| 2010 | 2009 | |
| Assets | ||
| Current Assets | ||
| Cash | $ 2,391,254 | $ 2,677,440 |
| Other receivables | 88,068 | 254,333 |
| Income taxes receivable | 403,711 | 594,720 |
| Inventories | 919,459 | 926,321 |
| Prepaid expenses | 664,515 | 354,730 |
| Current portion of deferred income tax asset | 43,350 | 76,920 |
| Total Current Assets | 4,510,357 | 4,884,464 |
| Property and equipment, net | 22,699,055 | 22,946,114 |
| Non-compete agreements, net | 19,639 | 23,898 |
| Trade names | 452,000 | 452,000 |
| Licenses, net | 34,796,919 | 34,834,018 |
| Goodwill, net | 2,279,045 | 2,279,045 |
| Favorable lease rights, net | 1,630,001 | 1,647,968 |
| Other long-term assets | 225,004 | 241,993 |
| Non-current portion of deferred income tax asset | 3,584,341 | 3,841,673 |
| Total Assets | $ 70,196,361 | $ 71,151,173 |
| Liabilities and Equity | ||
| Current Liabilities | ||
| Accounts payable — trade | $ 1,567,820 | $ 1,750,940 |
| Accrued expenses | 2,135,671 | 1,930,049 |
| Income taxes payable | -- | 67,917 |
| Deferred revenue | 81,535 | 110,010 |
| Current portion of unfavorable lease rights | 277,920 | 277,920 |
| Current portion of long-term debt | 3,850,054 | 3,805,277 |
| Current portion of long-term debt, related party | 23,309 | 62,067 |
| Total Current Liabilities | 7,936,309 | 8,004,180 |
| Long-Term Liabilities | ||
| Deferred rent | 1,802,243 | 1,628,301 |
| Unfavorable lease rights, net of current portion | 6,086,643 | 6,156,123 |
| Long-term debt, net of current portion | 17,997,870 | 19,751,021 |
| Long-term debt, related party, net of current portion | 7,184,187 | 7,129,018 |
| Total Long-Term Liabilities | 33,070,943 | 34,664,463 |
| Commitments and Contingent Liabilities | ||
| Equity | ||
|
Common stock $.0001 par value; 50,000,000 shares authorized;17,310,723 shares issued and outstanding |
1,731 | 1,731 |
| Additional paid-in capital | 51,974,077 | 51,932,082 |
| Accumulated deficit | (26,333,095) | (26,996,863) |
| Total VCG Stockholders' Equity | 25,642,713 | 24,936,950 |
| Noncontrolling interests in consolidated partnerships | 3,546,396 | 3,545,580 |
| Total Equity | 29,189,109 | 28,482,530 |
| Total Liabilities and Equity | $ 70,196,361 | $ 71,151,173 |
| VCG HOLDING CORP. | ||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||
| (unaudited) | ||
| Three Months Ended | ||
| March 31, | ||
| 2010 | 2009 | |
| Revenue | ||
| Sales of alcoholic beverages | $ 5,323,757 | $ 5,864,663 |
| Sales of food and merchandise | 522,221 | 471,532 |
| Service revenue | 7,174,456 | 6,698,281 |
| Other income | 789,373 | 739,942 |
| Total Revenue | 13,809,807 | 13,774,418 |
| Operating Expenses | ||
| Cost of goods sold | 1,500,491 | 1,492,923 |
| Salaries and wages | 3,604,002 | 3,269,881 |
| Other general and administrative: | ||
| Taxes, permits and licenses | 990,781 | 888,877 |
| Charge card and bank fees | 179,793 | 193,236 |
| Rent | 1,496,318 | 1,448,516 |
| Legal fees | 233,243 | 405,949 |
| Other professional fees | 680,647 | 426,571 |
| Advertising and marketing | 661,150 | 700,196 |
| Insurance | 416,844 | 380,358 |
| Utilities | 256,805 | 281,072 |
| Repairs and maintenance | 260,452 | 292,224 |
| Advisory fees related to change in control proposals | 16,401 | -- |
| Other | 1,186,400 | 1,382,140 |
| Depreciation and amortization | 455,497 | 425,369 |
| Total Operating Expenses | 11,938,824 | 11,587,312 |
| Income from Operations | 1,870,983 | 2,187,106 |
| Other Income (expenses) | ||
| Interest expense | (540,437) | (759,778) |
| Interest expense, related party | (180,076) | (169,078) |
| Interest income | 1,327 | 36 |
| Loss on sale of assets | (3,000) | (936) |
| Total Other Income (expenses) | (722,186) | (929,756) |
| Income Before Income Taxes | 1,148,797 | 1,257,350 |
| Income tax expense — current | 46,000 | 140,412 |
| Income tax expense — deferred | 328,000 | 339,588 |
| Total Income Taxes | 374,000 | 480,000 |
| Profit of consolidated and affiliated companies | 774,797 | 777,350 |
| Net Income Attributable to Noncontrolling Interests | (111,029) | (125,177) |
| Net Income Attributable to VCG | $ 663,768 | $ 652,173 |
| Earnings Per Share | ||
| Basic and fully diluted income per share attributable to VCG's stockholders | $ 0.04 | $ 0.04 |
| Basic and fully diluted weighted average shares outstanding | 17,310,723 | 17,658,726 |
| VCG HOLDING CORP. | ||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (unaudited) | ||
| For the Three Months Ended | ||
| March 31, | ||
| 2010 | 2009 | |
| Operating Activities | ||
| Profit of consolidated and affiliated companies | $ 774,797 | $ 777,350 |
|
Adjustments to reconcile profit of consolidated and affiliated companies to net cash provided by operating activities: |
||
| Depreciation | 451,239 | 421,110 |
| Amortization of non-compete agreements | 4,259 | 4,259 |
| Amortization of leasehold rights and liabilities, net | (51,513) | (48,605) |
| Amortization of loan fees | 17,249 | 80,343 |
| Stock-based compensation expense | 41,995 | 77,789 |
| Deferred income taxes | 328,000 | 339,588 |
| Loss on disposition of assets | 3,000 | 937 |
| Accrued interest added to long-term debt | 60,672 | 74,718 |
| Changes in operating assets and liabilities | 154,403 | (35,507) |
| Net cash provided by operating activities | 1,784,101 | 1,691,982 |
| Investing Activities | ||
| Additions to property and equipment | (207,179) | (131,258) |
| Deposits | (260) | -- |
| Proceeds from sale of assets | -- | 107,326 |
| Net cash used by investing activities | (207,439) | (23,932) |
| Financing Activities | ||
| Proceeds from debt | 100,000 | 1,098,000 |
| Payments on debt | (1,820,456) | (695,200) |
| Proceeds from related party debt | -- | 25,100 |
| Payments on related party debt | (12,179) | (257,802) |
| Payments on revolving line of credit, net of borrowings | (20,000) | (810,000) |
| Payments on capital leases | -- | (19,111) |
| Repurchase of stock | -- | (320,631) |
| Distributions to noncontrolling interests | (110,213) | (127,158) |
| Net cash used by financing activities | (1,862,848) | (1,106,802) |
| Net increase (decrease) in cash | (286,186) | 561,248 |
| Cash, beginning of period | 2,677,440 | 2,209,060 |
| Cash, end of period | $ 2,391,254 | $ 2,770,308 |
| Supplemental cash flow information: | ||
| Income taxes paid in cash | $ 67,048 | $ 50,000 |
| Interest paid in cash | $ 650,200 | $ 769,583 |
| VCG Holding Corp. | ||
| Adjusted EBITDA Reconciliation | ||
| (unaudited) | ||
| Three Months Ended | ||
| March 31, | ||
| 2010 | 2009 | |
| Net Income (loss) attributable to VCG | $ 663,768 | $ 652,173 |
| Add back: | ||
| Depreciation | 451,239 | 421,110 |
| Amortization of covenants not-to-compete | 4,259 | 4,259 |
| Amortization of leasehold rights and liabilities, net | (51,513) | (48,605) |
| Component 2 amortization | 37,099 | 36,224 |
| Interest expense | 720,513 | 928,856 |
| Amortization of loan fees | 17,249 | 80,344 |
| Non-cash stock-based compensation expense | 41,995 | 77,789 |
| Total income taxes | 374,000 | 480,000 |
| EBITDA | $ 2,258,609 | $ 2,632,150 |
| VCG Holding Corp. | ||
| Calculation of Free Cash Flow | ||
| (unaudited) | ||
| Three Months Ended | ||
| March 31, | ||
| 2010 | 2009 | |
| EBITDA from above: | $2,258,609 | $2,632,150 |
| Less: | ||
| Interest expense | (720,513) | (928,856) |
| Net income (loss) attributable to noncontrolling interests | (111,029) | (125,177) |
| Current income tax | (46,000) | (140,412) |
| Capital expenditures | (207,179) | (131,258) |
| Free cash flow | $1,173,888 | $1,306,447 |