SECURITIES AND EXCHANGE COMMISSION
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31,
2017[ ] 2023
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-13992
RCI HOSPITALITY HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | |
Texas | | 76-0458229 |
(State or other jurisdiction of incorporation or organization)
| | (I.R.S. Employer Identification No.)
|
(Address of principal executive offices) (Zip Code)
(281)
(Registrant’s telephone number, including area code)
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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]x No [ ]o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X]x No [ ]o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ]o Accelerated filer [X]x Non-accelerated filer [ ]o Smaller reporting company [ ]o Emerging growth company [ ]o 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. [ ]o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes [ ]
o No [X]x As of February
28, 2018, 9,718,7115, 2024, 9,359,685 shares of the registrant’s common stock were outstanding.
NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, among other things, statements regarding plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements, which are other than statements of historical facts. Forward-looking statements may appear throughout this report, including, without limitation, the following sections: Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q and those discussed in other documents we file with the Securities and Exchange Commission (“SEC”). Important factors that in our view could cause material adverse effects on our financial condition and results of operations include, but are 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,we operate, (iii) the success or lack thereof in launching and building
the company’sour businesses,
risks and uncertainties related to(iv) cyber security,
(v) conditions relevant to real estate transactions,
(vi) the impact of the COVID-19 pandemic, and
(vii) numerous other factors such as laws governing the operation of adult entertainment businesses, competition and dependence on key personnel. We undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
As used herein, the “Company,” “we,” “our,” and similar terms include RCI Hospitality Holdings, Inc. and its subsidiaries, unless the context indicates otherwise.
RCI HOSPITALITY HOLDINGS, INC.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
RCI HOSPITALITY HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par
value) | | December 31, 2017 | | | September 30,2017 | |
| | (unaudited) | | | | |
ASSETS | | | | | | | | |
Current assets | | | | | | | | |
Cash and cash equivalents | | $ | 11,954 | | | $ | 9,922 | |
Accounts receivable, net | | | 4,113 | | | | 3,187 | |
Inventories | | | 2,419 | | | | 2,149 | |
Prepaid insurance | | | 2,808 | | | | 3,826 | |
Other current assets | | | 746 | | | | 1,399 | |
Assets held for sale | | | 5,565 | | | | 5,759 | |
Total current assets | | | 27,605 | | | | 26,242 | |
Property and equipment, net | | | 154,259 | | | | 148,410 | |
Notes receivable | | | 4,965 | | | | 4,993 | |
Goodwill | | | 43,866 | | | | 43,866 | |
Intangibles, net | | | 74,420 | | | | 74,424 | |
Other assets | | | 1,464 | | | | 1,949 | |
Total assets | | $ | 306,579 | | | $ | 299,884 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
Current liabilities | | | | | | | | |
Accounts payable | | $ | 2,601 | | | $ | 2,147 | |
Accrued liabilities | | | 11,584 | | | | 11,524 | |
Current portion of long-term debt | | | 14,048 | | | | 17,440 | |
Total current liabilities | | | 28,233 | | | | 31,111 | |
Deferred tax liability, net | | | 15,844 | | | | 25,541 | |
Long-term debt | | | 111,944 | | | | 106,912 | |
Other long-term liabilities | | | 1,324 | | | | 1,095 | |
Total liabilities | | | 157,345 | | | | 164,659 | |
| | | | | | | | |
Commitments and contingencies (Note 8) | | | | | | | | |
| | | | | | | | |
Stockholders’ equity | | | | | | | | |
Preferred stock, $0.10 par value per share; 1,000 shares authorized; none issued and outstanding | | | - | | | | - | |
Common stock, $0.01 par value per share; 20,000 shares authorized; 9,719 and 9,719 shares issued and outstanding as of December 31, 2017 and September 30, 2017, respectively | | | 97 | | | | 97 | |
Additional paid-in capital | | | 63,453 | | | | 63,453 | |
Retained earnings | | | 83,214 | | | | 69,195 | |
Total RCIHH stockholders’ equity | | | 146,764 | | | | 132,745 | |
Noncontrolling interests | | | 2,470 | | | | 2,480 | |
Total stockholders’ equity | | | 149,234 | | | | 135,225 | |
Total liabilities and stockholders’ equity | | $ | 306,579 | | | $ | 299,884 | |
value and number of shares)
| | | | | | | | | | | |
| December 31, 2023 | | September 30, 2023 |
| (unaudited) | | |
ASSETS | | | |
Current assets | | | |
Cash and cash equivalents | $ | 21,155 | | | $ | 21,023 | |
Accounts receivable, net | 8,617 | | | 9,846 | |
Current portion of notes receivable | 253 | | | 249 | |
Inventories | 4,630 | | | 4,412 | |
Prepaid expenses and other current assets | 10,985 | | | 1,943 | |
Total current assets | 45,640 | | | 37,473 | |
Property and equipment, net | 284,398 | | | 282,705 | |
Operating lease right-of-use assets, net | 34,169 | | | 34,931 | |
Notes receivable, net of current portion | 4,362 | | | 4,443 | |
Goodwill | 70,772 | | | 70,772 | |
Intangibles, net | 178,486 | | | 179,145 | |
Other assets | 1,388 | | | 1,415 | |
Total assets | $ | 619,215 | | | $ | 610,884 | |
| | | |
LIABILITIES AND EQUITY | | | |
Current liabilities | | | |
Accounts payable | $ | 5,254 | | | $ | 6,111 | |
Accrued liabilities | 26,564 | | | 16,051 | |
Current portion of debt obligations, net | 19,789 | | | 22,843 | |
Current portion of operating lease liabilities | 3,037 | | | 2,977 | |
Total current liabilities | 54,644 | | | 47,982 | |
Deferred tax liability, net | 29,143 | | | 29,143 | |
Debt, net of current portion and debt discount and issuance costs | 214,324 | | | 216,908 | |
Operating lease liabilities, net of current portion | 34,392 | | | 35,175 | |
Other long-term liabilities | 328 | | | 352 | |
Total liabilities | 332,831 | | | 329,560 | |
| | | |
Commitments and contingencies (Note 9) | | | |
| | | |
Equity | | | |
Preferred stock, $0.10 par value per share; 1,000,000 shares authorized; none issued and outstanding | — | | | — | |
Common stock, $0.01 par value per share; 20,000,000 shares authorized; 9,359,685 and 9,397,639 shares issued and outstanding as of December 31, 2023 and September 30, 2023, respectively | 94 | | | 94 | |
Additional paid-in capital | 78,815 | | | 80,437 | |
Retained earnings | 207,714 | | | 201,050 | |
Total RCIHH stockholders’ equity | 286,623 | | | 281,581 | |
Noncontrolling interests | (239) | | | (257) | |
Total equity | 286,384 | | | 281,324 | |
Total liabilities and equity | $ | 619,215 | | | $ | 610,884 | |
See accompanying notes to
unaudited condensed consolidated financial statements.
RCI HOSPITALITY HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share
and number of share data)
(unaudited)
| | For the Three Months | |
| | Ended December 31, | |
| | 2017 | | | 2016 | |
Revenues | | | | | | | | |
Sales of alcoholic beverages | | $ | 17,805 | | | $ | 14,375 | |
Sales of food and merchandise | | | 5,307 | | | | 4,207 | |
Service revenues | | | 15,889 | | | | 13,475 | |
Other | | | 2,211 | | | | 1,682 | |
Total revenues | | | 41,212 | | | | 33,739 | |
Operating expenses | | | | | | | | |
Cost of goods sold | | | | | | | | |
Alcoholic beverages sold | | | 3,755 | | | | 3,168 | |
Food and merchandise sold | | | 2,094 | | | | 1,653 | |
Service and other | | | 36 | | | | 60 | |
Cost of goods sold (exclusive of items shown separately below) | | | 5,885 | | | | 4,881 | |
Salaries and wages | | | 11,377 | | | | 9,652 | |
Selling, general and administrative | | | 12,812 | | | | 11,193 | |
Depreciation and amortization | | | 1,909 | | | | 1,618 | |
Other charges, net | | | 89 | | | | 62 | |
Total operating expenses | | | 32,072 | | | | 27,406 | |
Income from operations | | | 9,140 | | | | 6,333 | |
Other income (expenses) | | | | | | | | |
Interest expense | | | (3,079 | ) | | | (2,015 | ) |
Interest income | | | 67 | | | | 37 | |
Income before income taxes | | | 6,128 | | | | 4,355 | |
Income tax expense (benefit) | | | (8,227 | ) | | | 1,450 | |
Net income | | | 14,355 | | | | 2,905 | |
Net income attributable to noncontrolling interests | | | (44 | ) | | | (7 | ) |
Net income attributable to RCIHH common shareholders | | $ | 14,311 | | | $ | 2,898 | |
| | | | | | | | |
Earnings per share attributable to RCIHH common shareholders | | | | | | | | |
Basic | | $ | 1.47 | | | $ | 0.30 | |
Diluted | | $ | 1.47 | | | $ | 0.30 | |
Weighted average number of common shares outstanding | | | | | | | | |
Basic | | | 9,719 | | | | 9,768 | |
Diluted | | | 9,719 | | | | 9,814 | |
| | | | | | | | |
Dividend per share | | $ | 0.03 | | | $ | 0.03 | |
| | | | | | | | | | | |
| For the Three Months Ended December 31, |
| 2023 | | 2022 |
Revenues | | | |
Sales of alcoholic beverages | $ | 33,316 | | | $ | 29,650 | |
Sales of food and merchandise | 10,802 | | | 10,347 | |
Service revenues | 25,119 | | | 25,563 | |
Other | 4,670 | | | 4,408 | |
Total revenues | 73,907 | | | 69,968 | |
Operating expenses | | | |
Cost of goods sold | | | |
Alcoholic beverages sold | 6,281 | | | 5,374 | |
Food and merchandise sold | 4,038 | | | 3,586 | |
Service and other | 40 | | | 49 | |
Total cost of goods sold (exclusive of items shown separately below) | 10,359 | | | 9,009 | |
Salaries and wages | 21,332 | | | 18,676 | |
Selling, general and administrative | 25,201 | | | 22,732 | |
Depreciation and amortization | 3,853 | | | 3,307 | |
Other charges, net | (3) | | | (654) | |
Total operating expenses | 60,742 | | | 53,070 | |
Income from operations | 13,165 | | | 16,898 | |
Other income (expenses) | | | |
Interest expense | (4,216) | | | (3,687) | |
Interest income | 94 | | | 91 | |
Income before income taxes | 9,043 | | | 13,302 | |
Income tax expense | 1,799 | | | 3,031 | |
Net income | 7,244 | | | 10,271 | |
Net income attributable to noncontrolling interests | (18) | | | (33) | |
Net income attributable to RCIHH common stockholders | $ | 7,226 | | | $ | 10,238 | |
| | | |
Earnings per share | | | |
Basic and diluted | $ | 0.77 | | | $ | 1.11 | |
| | | |
Weighted average shares used in computing earnings per share | | | |
Basic and diluted | 9,367,151 | | | 9,230,258 | |
See accompanying notes to
unaudited condensed consolidated financial statements.
RCI HOSPITALITY HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands, except number of shares)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-In Capital | | Retained Earnings | | Treasury Stock | | Noncontrolling Interests | | Total Equity |
| Number of Shares | | Amount | | | | Number of Shares | | Amount | | |
Balance at September 30, 2023 | 9,397,639 | | | $ | 94 | | | $ | 80,437 | | | $ | 201,050 | | | — | | | $ | — | | | $ | (257) | | | $ | 281,324 | |
Purchase of treasury shares | — | | | — | | | — | | | — | | | (37,954) | | | (2,072) | | | — | | | (2,072) | |
Canceled treasury shares | (37,954) | | | — | | | (2,072) | | | — | | | 37,954 | | | 2,072 | | | — | | | — | |
Excise tax on stock repurchases | — | | | — | | | (20) | | | — | | | — | | | — | | | — | | | (20) | |
Payment of dividends ($0.06 per share) | — | | | — | | | — | | | (562) | | | — | | | — | | | — | | | (562) | |
Stock-based compensation | — | | | — | | | 470 | | | — | | | — | | | — | | | — | | | 470 | |
Net income | — | | | — | | | — | | | 7,226 | | | — | | | — | | | 18 | | | 7,244 | |
Balance at December 31, 2023 | 9,359,685 | | | $ | 94 | | | $ | 78,815 | | | $ | 207,714 | | | — | | | $ | — | | | $ | (239) | | | $ | 286,384 | |
| | | | | | | | | | | | | | | |
Balance at September 30, 2022 | 9,231,725 | | | $ | 92 | | | $ | 67,227 | | | $ | 173,950 | | | — | | | $ | — | | | $ | 489 | | | $ | 241,758 | |
Purchase of treasury shares | — | | | — | | | — | | | — | | | (1,500) | | | (98) | | | — | | | (98) | |
Canceled treasury shares | (1,500) | | | — | | | (98) | | | — | | | 1,500 | | | 98 | | | — | | | — | |
Payment of dividends ($0.05 per share) | — | | | — | | | — | | | (462) | | | — | | | — | | | — | | | (462) | |
Stock-based compensation | — | | | — | | | 941 | | | — | | | — | | | — | | | — | | | 941 | |
Share in return of investment by noncontrolling partner | — | | | — | | | — | | | — | | | — | | | — | | | (600) | | | (600) | |
Net income | — | | | — | | | — | | | 10,238 | | | — | | | — | | | 33 | | | 10,271 | |
Balance at December 31, 2022 | 9,230,225 | | | $ | 92 | | | $ | 68,070 | | | $ | 183,726 | | | — | | | $ | — | | | $ | (78) | | | $ | 251,810 | |
See accompanying notes to unaudited condensed consolidated financial statements.
RCI HOSPITALITY HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in
thousands)thousands, except number of shares)
(unaudited)
| | For the Three Months | |
| | Ended December 31, | |
| | 2017 | | | 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | |
Net income | | $ | 14,355 | | | $ | 2,905 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
Depreciation and amortization | | | 1,909 | | | | 1,618 | |
Deferred taxes | | | (9,697 | ) | | | - | |
Amortization of debt discount and issuance costs | | | 324 | | | | 85 | |
Deferred rent | | | 75 | | | | 40 | |
Loss on sale of assets | | | 140 | | | | - | |
Gain on insurance settlements | | | (20 | ) | | | - | |
Debt prepayment penalty | | | 543 | | | | - | |
Changes in operating assets and liabilities: | | | | | | | | |
Accounts receivable | | | (926 | ) | | | 644 | |
Inventories | | | (270 | ) | | | (87 | ) |
Prepaid expenses and other assets | | | 1,044 | | | | 588 | |
Accounts payable and accrued liabilities | | | 668 | | | | (272 | ) |
Net cash provided by operating activities | | | 8,145 | | | | 5,521 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | |
Proceeds from sale of assets | | | 632 | | | | - | |
Proceeds from insurance | | | 20 | | | | - | |
Proceeds from notes receivable | | | 28 | | | | 20 | |
Additions to property and equipment | | | (2,769 | ) | | | (3,008 | ) |
Net cash used in investing activities | | | (2,089 | ) | | | (2,988 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | |
Proceeds from long-term debt | | | 58,920 | | | | 1,900 | |
Payments on long-term debt | | | (61,256 | ) | | | (2,152 | ) |
Debt prepayment penalty | | | (543 | ) | | | - | |
Purchase of treasury stock | | | - | | | | (1,101 | ) |
Payment of dividends | | | (292 | ) | | | (290 | ) |
Payment of loan origination costs | | | (799 | ) | | | (99 | ) |
Distribution to noncontrolling interests | | | (54 | ) | | | (54 | ) |
Net cash used in financing activities | | | (4,024 | ) | | | (1,796 | ) |
NET INCREASE IN CASH AND CASH EQUIVALENTS | | | 2,032 | | | | 737 | |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | | | 9,922 | | | | 11,327 | |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | | $ | 11,954 | | | $ | 12,064 | |
| | | | | | | | |
CASH PAID DURING PERIOD FOR: | | | | | | | | |
Interest | | $ | 2,890 | | | $ | 1,920 | |
Income taxes | | $ | 157 | | | $ | 385 | |
| | | | | | | | | | | |
| For the Three Months Ended December 31, |
| 2023 | | 2022 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | |
Net income | $ | 7,244 | | | $ | 10,271 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 3,853 | | | 3,307 | |
Stock-based compensation | 470 | | | 941 | |
Gain on sale of businesses and assets | (3) | | | (686) | |
Amortization of debt discount and issuance costs | 163 | | | 144 | |
Noncash lease expense | 762 | | | 719 | |
Gain on insurance | — | | | (64) | |
Doubtful accounts expense on notes receivable | 22 | | | — | |
Changes in operating assets and liabilities: | | | |
Accounts receivable | 1,229 | | | 1,447 | |
Inventories | (218) | | | (94) | |
Prepaid expenses, other current and other assets | (9,029) | | | (7,208) | |
Accounts payable, accrued and other liabilities | 9,140 | | | 6,118 | |
Net cash provided by operating activities | 13,633 | | | 14,895 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | |
Proceeds from sale of businesses and assets | — | | | 2,784 | |
Proceeds from insurance | — | | | 64 | |
Proceeds from notes receivable | 55 | | | 55 | |
Payments for property and equipment and intangible assets | (5,135) | | | (12,553) | |
Acquisition of businesses, net of cash acquired | — | | | (4,000) | |
Net cash used in investing activities | (5,080) | | | (13,650) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | |
Proceeds from debt obligations | 701 | | | 1,500 | |
Payments on debt obligations | (6,352) | | | (3,361) | |
Purchase of treasury stock | (2,072) | | | (98) | |
Payment of dividends | (562) | | | (462) | |
Payment of loan origination costs | (136) | | | (96) | |
Share in return of investment by noncontrolling partner | — | | | (600) | |
Net cash used in financing activities | (8,421) | | | (3,117) | |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 132 | | | (1,872) | |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 21,023 | | | 35,980 | |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 21,155 | | | $ | 34,108 | |
| | | | | | | | | | | |
| For the Three Months Ended December 31, |
| 2023 | | 2022 |
CASH PAID DURING PERIOD FOR: | | | |
Interest | $ | 4,017 | | | $ | 3,490 | |
Income taxes | $ | — | | | $ | — | |
| | | |
Noncash investing and financing transactions: | | | |
Debt incurred in connection with acquisition of businesses | $ | — | | | $ | 5,000 | |
Debt incurred in connection with purchase of property and equipment | $ | — | | | $ | 5,584 | |
Unpaid excise tax on stock repurchases | $ | 20 | | | $ | — | |
Unpaid liabilities on capital expenditures | $ | 1,719 | | | $ | 1,985 | |
See accompanying notes to
unaudited condensed consolidated financial statements.
8
Non-cash and other transactions:
During the quarter ended December 31, 2017, the Company refinanced $81.2 million
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements
of RCI Hospitality Holdings, Inc. (the “Company,” “RCIHH,” “we,” or “us”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP” or
“US“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q of Regulation S-X. They do not include all information and footnotes required by GAAP for complete financial statements. The September 30,
20172023 consolidated balance sheet data were derived from audited financial statements but do not include all disclosures required by GAAP. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements for the year ended September 30,
20172023 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on
FebruaryDecember 14,
2018.2023. The interim unaudited condensed consolidated financial statements should be read in conjunction with those consolidated financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for a fair
presentationstatement of the financial statements, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended December 31,
20172023 are not necessarily indicative of the results that may be expected for the year ending September 30,
2018.2024.
2. Recent Accounting Standards and Pronouncements
In May 2014,October 2021, the FASBFinancial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”("ASU") No. 2014-09,Revenue2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers(“. This ASU 2014-09”amends Accounting Standards Codification ("ASC"), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is Topic 805 to require acquiring entities to apply ASC 606 to recognize revenues when promised goods or services are transferred to customersand measure contract assets and contract liabilities in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services.business combinations. The ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. The standard’s effective date has been deferred by the issuance of ASU No. 2015-14, and is effective for annual periods beginning after December 15, 2017, and interim periods therein. The guidance permits using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). Early application is permitted but not before December 15, 2016, the ASU’s original effective date. The Company is still evaluating the impact of the standard and which transition method it is going to use upon adoption.In July 2015, the FASB issued ASU No. 2015-11,Inventory (Topic 330): Simplifying the Measurement of Inventory. This ASU does not apply to inventory that is measured using last-in, first-out (“LIFO”) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using FIFO or average cost. This ASU eliminates from U.S. GAAP the requirement to measure inventory at the lower of cost or market. Market under the previous requirement could be replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. Entities within scope of this update will now be required to measure inventory at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory using LIFO or the retail inventory method. The amendments in this update are effectivepublic entities for fiscal years beginning after December 15, 2016, with early adoption permitted, and should be applied prospectively. The Company2022, including interim periods within those fiscal years. We adopted ASU 2015-11 as of2021-08 on October 1, 2017, which2023. Our adoption of this ASU did not have ana significant impact on itsour consolidated financial statements.
In February 2016,June 2022, the FASB issued ASU No. 2016-02,Leases2022-03, Fair Value Measurement (Topic 842),820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The amendments in this ASU clarify that an entity should measure the fair value of an equity security subject to contractual sale restriction the same way it measures an identical equity security that is not subject to such a restriction. The FASB said the contractual restriction on accounting for leases which requires lessees to recognize most leases on their balance sheets for the rightssale of an equity security is not considered part of the unit of account of the equity security and, obligations created by those leases.therefore, should not affect its fair value. The guidance requires enhanced disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases, and will beASU is effective for interim and annual periodspublic entities for fiscal years beginning after December 15, 2018.2023, and interim periods within those fiscal years. Early adoption is permitted. The guidance requiresWe have not yet evaluated the useimpact of a modified retrospective approach. We expect our consolidated balance sheets to be materially impacted upon adoption due to the recognition of right-of-use assets and lease liabilities related to currently classified operating leases. We do not expectthis ASU 2016-02 to have a material impact on our consolidated financial statements.
In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842): Common Control Arrangements, which amends certain provisions of ASC 842 that apply to arrangements between related parties under common control. The ASU requires all companies to amortize leasehold improvements associated with common control leases over the asset's useful life to the common control group regardless of the lease term. It also allows private and certain not-for-profit entities to use the written terms and conditions of an agreement to account for common control leases without further assessing the legal enforceability of those terms. The guidance is effective for all entities in fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. We are still evaluating the impact of income though we expect a shift in the classificationthis ASU on our consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. Recent Accounting Standards and Pronouncements - continued
In January 2017,August 2023, the FASB issued ASU No. 2017-01,2023-05, Business Combination (Topic 805)Combinations—Joint Venture Formations (Subtopic 805-60): ClarifyingRecognition and Initial Measurement, which addresses the Definition ofaccounting for contributions made to a Business. According to the guidance, when substantially alljoint venture, upon formation, in a joint venture's separate financial statements. The objectives of the ASU are to (1) provide decision-useful information to investors and other allocators of capital in a joint venture's financial statements and (2) reduce diversity in practice. The FASB decided to require a joint venture to apply a new basis of accounting upon formation that will recognize and initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance). The amendments of gross assets acquiredthis ASU are effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. Additionally, a joint venture that was formed before January 1, 2025 may elect to apply the amendments retrospectively if it has sufficient information. early adoptions is concentratedpermitted in any interim or annual period in which financial statements have not yet been issued (or made available for issuance), either prospectively or retrospectively. We are still evaluating the impact of this ASU on our consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which aims to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments in the ASU enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single asset (or a group of similar assets), the assets acquired would not represent a business. If met, this initial screen eliminates the need for further assessment. To be considered a business, an acquisition would have to include an inputreportable segment, and a substantive process that together significantly contribute to the ability to create outputs. ASU 2017-01 provides a framework to evaluate when an input and a substantive process are present. To be a business without outputs, there will now need to be an organized workforce.contain other disclosure requirements. The FASB noted that outputs are a key element of a business and included more stringent criteria for aggregated sets of assets and activities without outputs. Finally, the guidance narrows the definitionpurpose of the term “outputs”amendments is to be consistentenable investors to better understand an entity's overall performance and assess potential future cash flows. The ASU applies to all public entities that are required to report segment information in accordance with how it is described in Topic 606,Revenue from Contracts with Customers. Under the final definition, an output is the result of inputsASC 280, and substantive processes that provide goods and services to customers, other revenue, or investment income, such as dividends and interest. The standard is effective for fiscal years beginning after December 15, 2017, with early2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments can be applied to transactions occurring beforeWe are evaluating the guidance was issued as long as the applicableimpact of this ASU on our consolidated financial statements have not been issued. We have early adopted ASU 2017-01 as of October 1, 2017, and will apply its amendments to future transactions.statements.
In May 2017,December 2023, the FASB issued ASU No. 2017-09,Compensation—Stock Compensation2023-09, Income Taxes (Topic 718)740): ScopeImprovements to Income Tax Disclosures. Under the ASU, public business entities must annually (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of Modification Accounting.those reconciling items is equal to or greater than five percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate. The amendments of this ASU provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all of the following are met: (1) the fair value of the modified award is the same as the fair value of the original award immediately before the modification; (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the modification; and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the modification. The current disclosure requirements in Topic 718 are not changed. The amendments in this ASU are effective for allpublic business entities for annual periods, and interim periods within those annual periods beginning after December 15, 2017, with2024. Entities are permitted to early adoption permitted. Since March 31, 2017, we doadopt the standard for annual financial statements that have not been issued or made available for issuance. We are enhancing our income tax reporting system to be able to capture the required disclosures of this ASU.
RCI HOSPITALITY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Revenues
Revenues, as disaggregated by revenue type, timing of recognition, and reportable segment (see also Note 4), are shown below (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended December 31, 2023 | | Three Months Ended December 31, 2022 |
| Nightclubs | | Bombshells | | Other | | Total | | Nightclubs | | Bombshells | | Other | | Total |
Sales of alcoholic beverages | $ | 26,236 | | | $ | 7,080 | | | $ | — | | | $ | 33,316 | | | $ | 22,098 | | | $ | 7,552 | | | $ | — | | | $ | 29,650 | |
Sales of food and merchandise | 5,240 | | | 5,562 | | | — | | | 10,802 | | | 4,594 | | | 5,753 | | | — | | | 10,347 | |
Service revenues | 25,119 | | | — | | | — | | | 25,119 | | | 25,533 | | | 30 | | | — | | | 25,563 | |
Other revenues | 4,438 | | | 89 | | | 143 | | | 4,670 | | | 4,100 | | | 96 | | | 212 | | | 4,408 | |
| $ | 61,033 | | | $ | 12,731 | | | $ | 143 | | | $ | 73,907 | | | $ | 56,325 | | | $ | 13,431 | | | $ | 212 | | | $ | 69,968 | |
| | | | | | | | | | | | | | | |
Recognized at a point in time | $ | 60,600 | | | $ | 12,730 | | | $ | 143 | | | $ | 73,473 | | | $ | 55,918 | | | $ | 13,428 | | | $ | 211 | | | $ | 69,557 | |
Recognized over time | 433 | | * | 1 | | | — | | | 434 | | | 407 | | * | 3 | | | 1 | | | 411 | |
| $ | 61,033 | | | $ | 12,731 | | | $ | 143 | | | $ | 73,907 | | | $ | 56,325 | | | $ | 13,431 | | | $ | 212 | | | $ | 69,968 | |
* Lease revenue (included in Other Revenues) as covered by ASC 842. All other revenues are covered by ASC 606.
The Company does not have any stock-based compensation awards outstanding. Wecontract assets with customers. The Company’s unconditional right to consideration for goods and services transferred to the customer is included in accounts receivable, net in our unaudited condensed consolidated balance sheet. A reconciliation of contract liabilities with customers is presented below (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Balance at September 30, 2023 | | Net Consideration Received (Refunded) | | Recognized in Revenue | | Balance at December 31, 2023 |
Ad revenue | $ | 49 | | | $ | 142 | | | $ | (114) | | | $ | 77 | |
Expo revenue | 1 | | | 181 | | | — | | | 182 | |
Franchise fees and other | 46 | | | — | | | (2) | | | 44 | |
| $ | 96 | | | $ | 323 | | | $ | (116) | | | $ | 303 | |
Contract liabilities with customers are included in accrued liabilities as unearned revenues in our unaudited condensed consolidated balance sheets (see also Note 5), while the revenues associated with these contract liabilities are included in other revenues in our unaudited condensed consolidated statements of income.
RCI HOSPITALITY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Segment Information
The Company owns and operates adult nightclubs and Bombshells Restaurants and Bars. The Company has identified such segments based on management responsibility and the nature of the Company’s products, services, and costs. There are no major distinctions in geographical areas served as all operations are in the United States. The Company measures segment profit (loss) as income (loss) from operations. Segment assets are those assets controlled by each reportable segment. The Other category below includes our media and energy drink divisions that are not significant to the unaudited condensed consolidated financial statements.
Below is the financial information related to the Company’s segments (in thousands):
| | | | | | | | | | | |
| For the Three Months Ended December 31, |
| 2023 | | 2022 |
Revenues (from external customers) | | | |
Nightclubs | $ | 61,033 | | | $ | 56,325 | |
Bombshells | 12,731 | | | 13,431 | |
Other | 143 | | | 212 | |
| $ | 73,907 | | | $ | 69,968 | |
| | | |
Income (loss) from operations | | | |
Nightclubs | $ | 20,369 | | | $ | 22,740 | |
Bombshells | 86 | | | 1,847 | |
Other | (196) | | | (185) | |
Corporate | (7,094) | | | (7,504) | |
| $ | 13,165 | | | $ | 16,898 | |
| | | |
Depreciation and amortization | | | |
Nightclubs | $ | 2,905 | | | $ | 2,485 | |
Bombshells | 643 | | | 458 | |
Other | 2 | | | 63 | |
Corporate | 303 | | | 301 | |
| $ | 3,853 | | | $ | 3,307 | |
| | | |
Capital expenditures | | | |
Nightclubs | $ | 1,532 | | | $ | 4,144 | |
Bombshells | 1,908 | | | 8,319 | |
Other | 1,498 | | | 37 | |
Corporate | 197 | | | 53 | |
| $ | 5,135 | | | $ | 12,553 | |
RCI HOSPITALITY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Segment Information - continued
| | | | | | | | | | | |
| December 31, 2023 | | September 30, 2023 |
Total assets | | | |
Nightclubs | $ | 491,046 | | | $ | 483,563 | |
Bombshells | 86,730 | | | 85,215 | |
Other | 7,628 | | | 6,936 | |
Corporate | 33,811 | | | 35,170 | |
| $ | 619,215 | | | $ | 610,884 | |
Excluded from revenues in the table above are intercompany rental revenues of the Nightclubs and Corporate segments for the three months ended December 31, 2023, amounting to $4.5 million and $227,000, respectively, and for the three months ended December 31, 2022, amounting to $3.7 million and $231,000, respectively; and intercompany sales of Robust Energy Drink included in Other segment for the three months ended December 31, 2023 and 2022 amounting to $39,000 and $37,000, respectively. These intercompany revenue amounts are eliminated upon consolidation.
General corporate expenses include corporate salaries, health insurance and social security taxes for officers, legal, accounting and information technology employees, corporate taxes and insurance, legal and accounting fees, depreciation and other corporate costs such as automobile and travel costs. Management considers these to be non-allocable costs for segment purposes.
Certain real estate assets previously wholly assigned to Bombshells have
early adopted ASU 2017-09 asbeen subdivided and allocated to other future development or investment projects. Accordingly, those asset costs have been transferred out of
October 1, 2017, and will apply its provisions to future stock compensation awards and transactions.3.the Bombshells segment.
5. Selected Account Information
The components of accounts receivable, net are as follows (in thousands):
| | | | | | | | | | | |
| December 31, 2023 | | September 30, 2023 |
Credit card receivables | $ | 4,297 | | | $ | 4,141 | |
Income tax refundable | 1,192 | | | 2,989 | |
ATM in-transit | 2,015 | | | 1,675 | |
Other (net of allowance for doubtful accounts of $64 and $62, respectively) | 1,113 | | | 1,041 | |
Total accounts receivable, net | $ | 8,617 | | | $ | 9,846 | |
Notes receivable consist primarily of secured promissory notes executed between the Company and various buyers of our businesses and assets with interest rates ranging from 6% to 9% per annum and having original terms ranging from 1 to 20 years.
The components of prepaid expenses and other current assets are as follows (in thousands):
| | | | | | | | | | | |
| December 31, 2023 | | September 30, 2023 |
Prepaid insurance | $ | 9,297 | | | $ | 375 | |
Prepaid legal | 156 | | | 184 | |
Prepaid taxes and licenses | 265 | | | 486 | |
Prepaid rent | 215 | | | 346 | |
Other | 1,052 | | | 552 | |
Total prepaid expenses and other current assets | $ | 10,985 | | | $ | 1,943 | |
RCI HOSPITALITY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. Selected Account Information - continued
The components of accrued liabilities are as follows (in thousands):
| | December 31, 2017 | | | September 30, 2017 | |
Insurance | | $ | 2,173 | | | $ | 3,160 | |
Payroll and related costs | | | 2,375 | | | | 1,889 | |
Income taxes | | | 1,862 | | | | 549 | |
Property taxes | | | 1,361 | | | | 1,270 | |
Sales and liquor taxes | | | 1,000 | | | | 990 | |
Patron tax | | | 834 | | | | 801 | |
Unearned revenues | | | 454 | | | | 196 | |
Lawsuit settlement | | | 37 | | | | 295 | |
Other | | | 1,488 | | | | 2,374 | |
| | $ | 11,584 | | | $ | 11,524 | |
| | | | | | | | | | | |
| December 31, 2023 | | September 30, 2023 |
Insurance | $ | 9,022 | | | $ | 9 | |
Sales and liquor taxes | 2,499 | | | 2,468 | |
Payroll and related costs | 4,100 | | | 4,412 | |
Property taxes | 3,607 | | | 3,086 | |
Interest | 690 | | | 654 | |
Patron tax | 1,543 | | | 914 | |
Unearned revenues | 303 | | | 96 | |
Lawsuit settlement | 2,123 | | | 2,448 | |
Other | 2,677 | | | 1,964 | |
Total accrued liabilities | $ | 26,564 | | | $ | 16,051 | |
The components of selling, general and administrative expenses are as follows (in thousands):
| | For the Three Months | |
| | Ended December 31, | |
| | 2017 | | | 2016 | |
Taxes and permits | | $ | 2,166 | | | $ | 2,289 | |
Advertising and marketing | | | 1,965 | | | | 1,657 | |
Supplies and services | | | 1,368 | | | | 1,146 | |
Insurance | | | 1,259 | | | | 935 | |
Rent | | | 940 | | | | 690 | |
Charge card fees | | | 887 | | | | 570 | |
Accounting and professional fees | | | 886 | | | | 497 | |
Utilities | | | 695 | | | | 670 | |
Security | | | 638 | | | | 541 | |
Repairs and maintenance | | | 570 | | | | 466 | |
Legal | | | 377 | | | | 703 | |
Other | | | 1,061 | | | | 1,029 | |
| | $ | 12,812 | | | $ | 11,193 | |
| | | | | | | | | | | |
| For the Three Months Ended December 31, |
| 2023 | | 2022 |
Taxes and permits | $ | 4,042 | | | $ | 2,684 | |
Advertising and marketing | 3,474 | | | 2,670 | |
Supplies and services | 2,695 | | | 2,424 | |
Insurance | 3,315 | | | 2,582 | |
Legal | 733 | | | 985 | |
Lease | 1,824 | | | 1,762 | |
Charge card fees | 1,732 | | | 1,897 | |
Utilities | 1,485 | | | 1,271 | |
Security | 1,411 | | | 1,164 | |
Stock-based compensation | 470 | | | 941 | |
Accounting and professional fees | 1,186 | | | 1,518 | |
Repairs and maintenance | 1,099 | | | 1,164 | |
Other | 1,735 | | | 1,670 | |
Total selling, general and administrative expenses | $ | 25,201 | | | $ | 22,732 | |
RCI HOSPITALITY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Long-Term Debt
Long-term debt consisted of the following (in thousands):
| | December 31, 2017 | | | September 30, 2017 | |
| | | | | | |
Notes payable at 10-11%, mature August 2022 and December 2024 | | $ | - | | | $ | 2,358 | |
Note payable at 7%, matures December 2019 | | | - | | | | 95 | |
Notes payable at 5.5%, matures January 2023 | | | 1,136 | | | | 1,157 | |
Notes payable at 5.5%, matures January 2023 and January 2022 | | | - | | | | 4,510 | |
Note payable refinanced at 6.25%, matures July 2018 | | | - | | | | 1,120 | |
Note payable at 9.5%, matures August 2024 | | | - | | | | 6,941 | |
Notes payable at 9.5%, mature September 2024 | | | - | | | | 6,423 | |
Notes payable at 5-7%, mature from 2018 to 2028 | | | - | | | | 1,679 | |
7.45% note payable, matures January 2019 | | | - | | | | 2,740 | |
Non-interest-bearing debt to State of Texas, matures May 2022, interest imputed at 9.6% | | | 5,365 | | | | 5,613 | |
Note payable at 6.5%, matures January 2020 | | | - | | | | 4,484 | |
Note payable at 6%, matures January 2019 | | | - | | | | 504 | |
Notes payable at 5.5%, matures May 2020 | | | - | | | | 5,320 | |
Note payable at 6%, matures May 2020 | | | - | | | | 1,037 | |
Note payable at 5.25%, matures December 2024 | | | - | | | | 1,777 | |
Note payable initially at 5.45%, matures July 2020 (amended to December 2027 with refinancing) | | | 10,536 | | | | 10,620 | |
Note payable at the greater of 2% above prime or 5% (6.25% at September 30, 2017), matures October 2025 | | | - | | | | 4,303 | |
Note payable at 5%, matures January 2026 | | | - | | | | 9,672 | |
Note payable at 5.25%, matures March 2037 | | | - | | | | 4,651 | |
Note payable at 6.25%, matures February 2018 | | | 1,894 | | | | 1,894 | |
Note payable initially at 5.95%, matures August 2021 (amended to December 2027 with refinancing) | | | 8,095 | | | | 8,267 | |
Note payable at 12%, matures October 2021 | | | 6,704 | | | | 9,671 | |
Note payable at 4.99%, matures April 2037 | | | 934 | | | | 941 | |
Notes payable at 12%, mature May 2020 | | | 5,440 | | | | 5,440 | |
Note payable at 5%, matures November 2017 | | | 3,025 | | | | 5,000 | |
Note payable at 8%, matures May 2029 | | | 15,090 | | | | 15,291 | |
Note payable at 5%, matures May 2038 | | | 4,456 | | | | 3,441 | |
Note payable initially at 5.75%, matures December 2027 | | | 57,904 | | | | - | |
Note payable at 5.95%, matures December 2032 | | | 7,098 | | | | - | |
Total debt | | | 127,677 | | | | 129,949 | |
Less unamortized debt issuance costs | | | (1,685 | ) | | | (597 | ) |
Less current portion | | | (14,048 | ) | | | (17,440 | ) |
| | | | | | | | |
Total long-term debt | | $ | 111,944 | | | $ | 106,912 | |
RCI HOSPITALITY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6. Debt
On December 14, 2017,October 25, 2023, the Company entered into a loan agreement (“New Loan”)debt modification transaction under which 26 investors holding a total principal amount of $15.7 million in unsecured promissory notes agreed to extend the maturity dates of such notes, with a bank for $81.2 million. The New Loan fully refinances 20no other changes to the terms and conditions of the Company’soriginal promissory notes, payablewhich original promissory notes were issued in October 2021 and partially pays downhad original maturity dates in October 2024. The transaction was effected by the 26 investors returning for cancellation their original promissory notes, with us issuing new amended and restated promissory notes to such investors. The original promissory notes were deemed cancelled as of the end of the day on October 31, 2023, and the new amended promissory notes will have an original issue date, and be deemed effective, as of November 1, note payable (collectively, “Repaid Notes”) with interest rates ranging from 5% to 12% covering 43 parcels2023.
Other than the extension of
real properties the
Company previously acquired (“Properties”). The New Loan consists of three promissory notes: | (i) | The first note amounts to $62.5 million with a term of 10 years at a 5.75% fixed interest rate for the first five years, then repriced one time at the then current U.S. Treasury rate plus 3.5%, with a floor rate of 5.75%, and payable in monthly installments of $442,058, based upon a 20-year amortization period, with the balance payable at maturity; |
| | |
| (ii) | The second note amounts to $10.6 million with a term of 10 years at a 5.45% fixed interest rate until July 2020, after which to be repriced at a fixed interest rate of 5.75% until the fifth anniversary of this note, and then to be repriced again at the then interest rate of the first note. This note is payable $78,098 monthly for principal and interest until July 2020, based upon a 20-year amortization period, after which the monthly payment for principal and interest is adjusted accordingly based on the repricing, with the balance payable at maturity; and |
| | |
| (iii) | The third note amounts to $8.1 million with a term of 10 years at a 5.95% fixed interest rate until August 2021, after which to be repriced at 5.75% until the fifth anniversary of this note, and then to be repriced again at the then interest of the first note. This note is payable $100,062 monthly for principal and interest until August 2021, based upon a 20-year amortization period, after which the monthly payment for principal and interest is adjusted accordingly based on the repricing, with the balance payable at maturity. |
In additionmaturity dates, there were no other changes to the monthlyterms and conditions of the original promissory notes (except for the reduction in principal, as described below, and interest payments as provided above, the Company will paycorresponding reduction in monthly installments of principal of $250,000, applied to the first note, until such time as the loan-to-value ratio of the Properties, based upon reduced principal balance of the New Loan and the then current value of the Properties, is not greater than 65%interest). The New Loan has eliminated balloon paymentsnew amended notes will continue to bear interest at the rate of 12% per annum. Of the Repaid Notes worth $2.9new amended promissory notes, $9.1 million originally scheduledare payable interest-only monthly (or quarterly) in fiscal 2018, $19.4 million originally scheduled in fiscal 2020 and $5.3 million originally scheduled in fiscal 2021.
In connection with the Repaid Notes, we wrote off $279,000 of unamortized debt issuance costs to interest expense. Prior to September 30, 2017, the Company paid a portion of debt issuance costs amounting to $612,500, which was included in other assets until the closing of the transaction. At closing, the Company paid an additional $764,000 in debt issuance costs, which together with the $612,500 prepayment will be amortized for the term of the loan using the effective interest rate method. We also paid prepayment penalties amounting to $543,000 on the Repaid Notes.
Included in the $62.5 million note detailed in (i) above, was $4.6 million that was escrowed and due to the bank lender of one of the Repaid Notes. The amount will be released from escrow when the construction, for which the original note was borrowed, is completed.
In December 2017, the Company borrowed $7.1 million from a lender to purchase an aircraft at 5.95% interest. The transaction was partly funded by trading in an aircraft that the Company ownedarrears, with a carrying valuefinal lump sum payment of $3.4principal and accrued and unpaid interest due on October 1, 2026. The remaining $6.6 million with an assumption of the old aircraft’s notein promissory notes are payable liability of $2.0 million. The note is payable in 15 years with monthly payments of $59,869, which includes interest.
As of December 31, 2017, the Company is in compliance with all its debt covenants.
RCI HOSPITALITY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Future maturities of long-term debt consist of the following (in thousands) as of December 31, 2017:
| | Regular | | | Balloon | | | Total | |
12-Month Period Ending | | Amortization | | | Payments | | | Payments | |
December 31, 2018 | | $ | 9,129 | | | $ | 4,919 | | | $ | 14,048 | |
December 31, 2019 | | | 9,289 | | | | - | | | | 9,289 | |
December 31, 2020 | | | 7,381 | | | | 5,440 | | | | 12,821 | |
December 31, 2021 | | | 7,707 | | | | - | | | | 7,707 | |
December 31, 2022 | | | 6,587 | | | | 3,779 | | | | 10,366 | |
Thereafter | | | 16,928 | | | | 56,518 | | | | 73,446 | |
| | $ | 57,021 | | | $ | 70,656 | | | $ | 127,677 | |
On February 15, 2018, the Company borrowed $3.0 million from a bank for the purchase of land at a cost of $4.0 million with the difference paid by the Company in cash. The bank note bears interest at 5.25% adjusted after 36 months to prime plus 1% with a floor of 5.2% and matures on February 15, 2038. The bank note is payable interest-only during the first 18 months, after which monthly payments of principal and interest will be made based on a 20-year10-year amortization period, with the remaining balance to be paid at maturity.
of the entire principal amount together with all accrued and unpaid interest due and payable in full on November 1, 2027. The original promissory notes that were returned and cancelled as consideration for the issuance of the $6.6 million in new amended promissory notes had an original principal amount of $7.5 million in October 2021.
On February 20, 2018,November 17, 2023, the Company refinanced a bank note with a balance of $1.9 million, bearing interest of 2% over prime with a 5.5% floor, with the same bank forclosed on a construction loan agreement with maximum availabilitya bank lender for a total amount of $4.7 million. The construction loan agreement bears$7.2 million bearing an interest rate of prime plus 0.5% with8.5% per annum for the construction of a floor of 5.0% and matures on August 20, 2029. DuringBombshells restaurant in Rowlett, Texas. The promissory note is payable in 120 monthly payments, the first 18 months of the construction loan, the Companywhich will make monthly interest-only payments, and after such,be interest-only. The succeeding 101 monthly payments will be payable in equal installments of $63,022 in principal and interest, will be made based on a 20-year amortization withand the remaining balance in principal and accrued interest payable on the 120th month. The loan is secured by the real estate property under construction. There are certain financial covenants with which the Company is to be paidin compliance related to this loan.
Future maturities of long-term debt as of December 31, 2023 are as follows: $20.4 million, $24.1 million, $22.6 million, $21.9 million, $19.9 million and $128.2 million for the twelve months ending December 31, 2024, 2025, 2026, 2027, 2028, and thereafter, respectively. Of the maturity schedule mentioned above, $5.7 million, $11.1 million, $9.1 million, $7.9 million, $5.7 million and $70.6 million, respectively, relate to scheduled balloon payments. Unamortized debt discount and issuance costs amounted to $2.9 million and $2.9 million as of December 31, 2023 and September 30, 2023, respectively.
7. Stock-based Compensation
On February 7, 2022, our board of directors approved the 2022 Stock Option Plan (the “2022 Plan”). The board’s adoption of the 2022 Plan was approved by the shareholders during the annual stockholders' meeting on August 23, 2022. The 2022 Plan provides that the maximum aggregate number of shares of common stock underlying options that may be granted under the 2022 Plan is 300,000. The options granted under the 2022 Plan may be either incentive stock options or non-qualified options. The 2022 Plan is administered by the compensation committee of the board of directors. The compensation committee has the exclusive power to select individuals to receive grants, to establish the terms of the options granted to each participant, provided that all options granted shall be granted at
maturity.5. Stockholders’ Equity
Duringan exercise price not less than the quarterfair market value of the common stock covered by the option on the grant date, and to make all determinations necessary or advisable under the 2022 Plan. On February 9, 2022, the board of directors approved a grant of 50,000 stock options to each of six members of management subject to the approval of the 2022 Plan.
Stock-based compensation for the three months ended December 31,
2017, the Company did not purchase shares2023 and 2022, which is included in corporate segment selling, general and administrative expenses, amounted to $470,000 and $941,000, respectively. As of
its common stock. The Company also paid a $0.03 per share cash dividend totaling approximately $292,000.During the quarter ended December 31, 2016, the Company purchased and retired 89,685 common shares at2023, we had unrecognized compensation cost amounting to $4.0 million related to stock-based compensation awards granted, which is expected to be recognized over a cost of $1.1 million. The Company also paid a $0.03 per share cash dividend totaling approximately $290,000.
6. Earnings Per Share
Basic earnings per share (“EPS”) includes no dilution and is computed by dividing income available to common stockholders by the weighted average numberperiod of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution2.1 years.
Table of securities that could share in the earnings of the Company. Potential common stock shares consist of shares that may arise from outstanding dilutive common restricted stock, stock options and warrants (the number of which is computed using the “treasury stock method”) and from outstanding convertible debentures (the number of which is computed using the “if converted method”). Diluted EPS considers the potential dilution that could occur if the Company’s outstanding common restricted stock, stock options, warrants and convertible debentures were converted into common stock that then shared in the Company’s earnings (as adjusted for interest expense that would no longer occur if the debentures were converted).The table below presents the reconciliation of the numerator and the denominator in the calculation of basic and diluted EPS (in thousands, except per share amounts):
| | For the Three Months | |
| | Ended December 31, | |
| | 2017 | | | 2016 | |
Numerator - | | | | | | | | |
Net income attributable to RCIHH common shareholders – basic | | $ | 14,311 | | | $ | 2,898 | |
Adjustment to net income from assumed conversion of debentures(2) | | | - | | | | 5 | |
Adjusted net income attributable to RCIHH common shareholders – diluted | | $ | 14,311 | | | $ | 2,903 | |
Denominator(1)(3)- | | | | | | | | |
Weighted average number of common shares outstanding – basic | | | 9,719 | | | | 9,768 | |
Effect of potentially dilutive convertible debentures(2) | | | - | | | | 46 | |
Adjusted weighted average number of common shares outstanding – diluted | | | 9,719 | | | | 9,814 | |
| | | | | | | | |
Basic earnings per share | | $ | 1.47 | | | $ | 0.30 | |
Diluted earnings per share | | $ | 1.47 | | | $ | 0.30 | |
RCI HOSPITALITY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) | There were no outstanding restricted stock, warrants and options during the three months ended December 31, 2017 and 2016. |
| |
(2) | Convertible debentures (principal and accrued interest) outstanding at the beginning of the quarters ended December 31, 2017 and 2016 totaling $0 and $859,000, respectively, were convertible into common stock at a price of $10.25 and $12.50 per share until January 4, 2017, when the last conversion option expired in relation to the payment of the last convertible note.
|
| |
(3) | Since January 4, 2017 to date, the Company has no outstanding convertible debt. |
7. Stock-based Compensation - continued
The February 9, 2022 stock options vest over four years with the first 20% having vested on the approval of the 2022 Plan at the 2022 annual stockholders' meeting on August 23, 2022, and 20% vesting on February 9 of each year thereafter, provided however that the options will be subject to earlier vesting under certain events set forth in the Plan, including without limitation a change in control. All of the options will expire, if not exercised, at the end of five years. The weighted average grant-date fair value of the stock options was $31.37 per share. No stock options were exercised during the three months ended December 31, 2023. As of December 31, 2023, 120,000 stock options were vested and exercisable.
For the three months ended December 31, 2023 and 2022, we excluded 300,000 stock options from the calculation of diluted earnings per share because their effect was anti-dilutive. Aside from the outstanding stock options, there were no other potentially dilutive securities for inclusion in the calculation of diluted earnings per share.
Income
taxes were a benefit of $8.2tax expense was $1.8 million
forand $3.0 million during the
first quarter of 2018 compared to an expense of $1.5 million for the same quarter of 2017.three months ended December 31, 2023 and 2022, respectively. The effective income tax
expense rate
was 19.9% and 22.8% for the
first quarter of 2018 was a benefit of 134.3% compared with an expense of 33.3% for the comparable period of 2017.three months ended December 31, 2023 and 2022, respectively. Our effective
income tax rate is affected by state taxes, permanent differences, and tax credits, including the FICA tip credit, for both years,
while the first quarter of 2018 was significantly impacted by a $9.7 million reduction of our deferred tax liability caused by newly enacted tax laws.On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted into law. The Act amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. For businesses, the Act reduces the corporate federal tax rate from a maximum of 35% to a flat 21% rate. The corporate tax rate reduction was effective January 1, 2018. Because the Company has a fiscal year end of September 30, the reduced corporate tax rate will result in the application of a blended federal statutory tax rate for its fiscal year 2018 and then a flat 21% thereafter.
Under generally accepted accounting principles, the Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. At September 30, 2017, the Company’s deferred tax assets and liabilities were determined based on the then-current enacted federal tax rate of 35%. As a result of the reduction in the corporate income tax rate under the Act, the Company revalued its deferred tax assets and liabilities at December 31, 2017. Deferred tax assets and liabilities expected to be realized in fiscal year 2018 were re-measured using the aforementioned blended rate. All remaining deferred tax assets and liabilities were re-measured using the new statutory federal rate of 21%. These re-measurements collectively resulted in a discrete tax benefit of $9.7 million that was recognized during the three months ended December 31, 2017. The Company’s revaluation of its deferred tax assets and liabilities is subject to further clarification of the Act and refinements of its estimates. As a result, the actual impact on the deferred tax assets and liabilities and income tax expense due to the Act may vary from the amounts estimated.
as presented below.
| | | | | | | | | | | |
| For the Three Months Ended December 31, |
| 2023 | | 2022 |
Federal statutory income tax expense | 21.0 | % | | 21.0 | % |
State income taxes, net of federal benefit | 3.4 | % | | 4.0 | % |
Permanent differences | 0.5 | % | | 0.5 | % |
Tax credits | (5.0) | % | | (2.8) | % |
Other | — | % | | 0.1 | % |
Total income tax expense | 19.9 | % | | 22.8 | % |
The Company or one of its subsidiaries files income tax returns
forin the U.S. federal jurisdiction, and various states.
The Company is no longer subject to federal, state and local income tax examinations by tax authorities for years before 2013. The Company’s federal income tax returns for the fiscal yearsFiscal year ended September 30,
2015, 20142020 and
2013 are currently under examination by the Internal Revenue Service.subsequent years remain open to federal tax examination. The Company accountsordinarily goes through various federal and state reviews and examinations for uncertainvarious tax positions pursuant to ASC Topic 740,Income Taxes. As of December 31, 2017matters.
9. Commitments and September 30, 2017, the liability for uncertain tax positions totaled approximately $865,000 in each period, which is included in current liabilities on our condensed consolidated balance sheets. The Company recognizes interest accrued related to uncertain tax positions in interest expense and penalties inContingencies
Legal Matters
Texas Patron Tax
A declaratory judgment action was brought by five operating
expenses.On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 18 (“SAB 118”), which provides guidance on accounting for the tax effectssubsidiaries of the Tax Cuts and Jobs Act. In accordance with SAB 118, the Company has made reasonable estimatesto challenge a Texas Comptroller administrative rule related to the following areas impacted$5 per customer Patron Tax Fee assessed against Sexually Oriented Businesses. An administrative rule attempted to expand the fee to cover venues featuring dancers using latex cover as well as traditional nude entertainment. The administrative rule was challenged on both constitutional and statutory grounds. On November 19, 2018, the Court issued an order that a key aspect of the administrative rule is invalid based on it exceeding the scope of the Comptroller’s authority. On March 6, 2020, the U.S. District Court for the Western District of Texas, Austin Division, ruled that the Texas Patron Tax is unconstitutional as it has been applied and enforced by the Act: existing timing differences, reversalComptroller. The State of existing timing differences, and accelerated depreciation. As such,Texas appealed to the Company has leftFifth Circuit Court of Appeals, who affirmed that the measurement period openTexas Patron Fee is unconstitutional as applied. The State of December 31, 2017.
8. Commitments and Contingencies
Legal Matters
New York Settlement
Filed in 2009,Texas next sought review from the Supreme Court, but the high court declined to take the case claimed Rick’s Cabaret New York misclassified entertainersand in doing so exhausted the State's rights to appeal the judgment. The lawsuit was sent back to the trial court for post-trial proceedings, which resulted in the award of attorneys' fees to the operating subsidiaries. Pursuant to the rulings, the Texas Patron Fee is unconstitutional as independent contractors. Plaintiffs sought minimum wage for the hours they danced and returnapplied to clubs featuring dancers using latex cover.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On April 1, 2015, we
9. Commitments and
our subsidiaries, RCI Entertainment (New York), Inc. and Peregrine Enterprises, Inc., entered into an agreement to settle in full a New York based federal wage and hour class and collective action filed in the United States District Court for the Southern District of New York. On September 22, 2015, the Court granted final approval of the settlement. Under the terms of the agreement, Peregrine Enterprises, Inc. was to make up to $15.0 million available to class members and their attorneys. The actual amount paid was determined based on the number of class members responding by the end of a two-month notice period which ended on December 4, 2015. Unclaimed checks or payments reverted back to Peregrine at that time. Based on the current schedule, an initial payment for attorneys’ fees of $1,833,333 was made in October 2015, with two subsequent payments of $1,833,333 each being made in equal annual installments. As part of the settlement, RCIHH was required to guarantee the obligations of RCI Entertainment (New York), Inc. and Peregrine Enterprises, Inc. under the settlement.Contingencies - continued
Indemnity Insurance Corporation
As previously reported, the Company and its subsidiaries were insured under a liability policy issued by Indemnity Insurance Corporation, RRG (“IIC”) through October 25, 2013. The Company and its subsidiaries changed insurance companies on that date.
On November 7, 2013, the Court of Chancery of the State of Delaware entered a Rehabilitation and Injunction Order (“Rehabilitation Order”), which declared IIC impaired, insolvent and in an unsafe condition and placed IIC under the supervision of the Insurance Commissioner of the State of Delaware (“Commissioner”) in her capacity as receiver (“Receiver”). The Rehabilitation Order empowered the Commissioner to rehabilitate IIC through a variety of means, including gathering assets and marshaling those assets as necessary. Further, the order stayed or abated pending lawsuits involving IIC as the insurer until May 6, 2014.
On April 10, 2014, the Court of Chancery of the State of Delaware entered a Liquidation and Injunction Order With Bar Date (“Liquidation Order”), which ordered the liquidation of IIC and terminated all insurance policies or contracts of insurance issued by IIC. The Liquidation Order further ordered that all claims against IIC must
behave been filed with the Receiver before the close of business on January 16, 2015 and that all pending lawsuits involving IIC as the insurer
arewere further stayed or abated until October 7, 2014. As a result, the Company and its subsidiaries no longer
havehad insurance coverage under the liability policy with IIC.
Currently, there are several civil lawsuits pending against the Company and its subsidiaries. The Company has retained counsel to defend against and evaluate these claims and lawsuits. We are funding 100% of the costs of litigation and will seek reimbursement from the bankruptcy receiver. The Company filed the appropriate claims against IIC with the Receiver before the January 16, 2015 deadline and has provided updates as requested; however, there are no assurances of any recovery from these claims. It is unknown at this time what effect this uncertainty will have on the Company. As previously stated, since October 25, 2013, the Company has obtained general liability coverage from other insurers, which have covered and/or will cover any claims arising from actions after that date.
WeAs of December 31, 2023, we have
81 remaining unresolved
cases leftclaim out of the original 71
cases.General
The Company has been sued byclaims.
Shareholder Derivative Action
On January 21, 2022, Shiva Stein and Kevin McCarty filed a
landlordshareholder derivative action in the
33rd JudicialSouthern District
Court of
Harris County, Texas,
for a Houston
Bombshells which was under renovation in 2015. The plaintiff allegesDivision against former director Nourdean Anakar, Yura Barabash, former director Steven L. Jenkins, Eric Langan, Luke Lirot, former CFO Phillip K. Marshall, Elaine J. Martin, Allan Priaulx, and Travis Reese as defendants, as well as against RCI Hospitality Holdings, Inc.
’s subsidiary, BMB Dining Services (Willowbrook) as nominal defendant. The action, styled Stein v. Anakar, et al.,
Inc.No. 4:22-mc-00149 (S.D. Tex.),
breachedalleges claims for breach of fiduciary duty based on alleged dissemination of inaccurate information and failure to maintain internal controls. These allegations are substantively similar to claims asserted in a
leaseprior securities class action that was settled in August of 2022 and a prior derivative action that was dismissed in June of 2021. On July 24, 2023, the parties reached an agreement
by constructingin principle to resolve the action. On October 10, 2023, the parties submitted an
outdoor patio, which allegedly interfered withagreement to settle the
common areas ofaction to the
shopping center, and by failing to provide Plaintiff with proposed plans before beginning construction. Plaintiff also asserts RCI Hospitality Holdings, Inc. is liable as guarantor ofCourt for the
lease.Court's preliminary approval. The
lease was for a Bombshells restaurant to be opened in the Willowbrook Shopping Center in Houston, Texas. Both RCI Hospitality Holdings, Inc. and BMB Dining Services (Willowbrook), Inc. have denied liability and assertCompany believes that
Plaintiff has failed to mitigate its claimed damages. Further, BMB Dining Services (Willowbrook), Inc. asserts that Plaintiff affirmatively represented that the patio could be constructedpayments under the
lease and has filed counter claims and third-party claims against Plaintiff, Plaintiff’s manager, and Plaintiff’s broker asserting that they committed fraud and that the landlord breached the applicable agreements. It is unknown at this time whether the resolution of this uncertaintysettlement agreement will
have a material effect on the Company’s financial condition.RCI HOSPITALITY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On June 23, 2014, Mark H. Dupray and Ashlee Dupray filed a lawsuit against Pedro Antonio Panameno and our subsidiary JAI Dining Services (Phoenix) Inc. (“JAI Phoenix”) in the Superior Court of Arizona for Maricopa County. The suit allegesalleged that Mr. Panameno injured Mr. Dupray in a traffic accident after being served alcohol at an establishment operated by JAI Phoenix. The suit allegesalleged that JAI Phoenix iswas liable under theories of common law dram shop negligence and dram shop negligence per se. After a jury trial proceeded to a verdict in favor of the plaintiffs against both defendants, in April 2017 the Court entered a judgment under which JAI Phoenix’s share of compensatory damages is approximately $1.4 million and its share of punitive damages is $4$4.0 million. In May 2017, JAI Phoenix filed a motion for judgment as a matter of law or, in the alternative, motion for new trial. The Court denied this motion in August 2017. In September 2017, JAI Phoenix filed a notice of appeal. A hearing date forIn June 2018, the appeal has not yet been scheduled. JAI Phoenix believes the Court’s assessments of liability and damages are unsupportablematter was heard by the factsArizona Court of Appeals. On November 15, 2018 the Court of Appeals vacated the jury’s verdict and remanded the case andto the law, andtrial court. It is anticipated that a new trial will occur at some point in the future. JAI Phoenix will continue to vigorously defend itself.
RCI Hospitality Holdings, Inc.HOSPITALITY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
9. Commitments and Contingencies - continued
As set forth in the risk factors as disclosed in this report, the adult entertainment industry standard is to classify adult entertainers as independent contractors, not employees. While we take steps to ensure that our adult entertainers are deemed independent contractors, from time to time, we are named in lawsuits related to the alleged misclassification of entertainers. Claims are brought under both federal and where applicable, state law. Based on the industry standard, the manner in which the independent contractor entertainers are treated at the clubs, and the entertainer license agreements governing the entertainer’s work at the clubs, the Company believes that these lawsuits are without merit. Lawsuits are handled by attorneys with an expertise in the relevant law and are defended vigorously.
In March 2023, the New York State Department of Labor assessed a final judgment against one of our subsidiaries in a state unemployment tax matter for the years 2009-2022. The assessment of $2.8 million, which was recorded by the Company during the quarter ended March 31, 2023, was issued in final notice by the NY DOL after several appeals were denied by the Supreme Court of the State of New York, Appellate Division, Third Department. In September 2023, the NY DOL assessed another of our subsidiaries for approximately $280,000 on the same matter for the period January 2015 through June 2022. We recorded this latter assessment during the quarter ended September 30, 2023.
General
In the regular course of business affairs and operations, we are subject to possible loss contingencies arising from third-party litigation and federal, state, and local environmental, labor, health and safety laws and regulations. We assess the probability that we could incur liability in connection with certain of these lawsuits. Our assessments are made in accordance with generally accepted accounting principles, as codified in ASC 450-20, and is not
a party toan admission of any liability on the
lawsuit. Thepart of the Company
estimates a possible lossor any of its subsidiaries. In certain cases that are in the
early stages and in light of the uncertainties surrounding them, we do not currently possess sufficient information to determine a range of
$0 to $5.0 millionreasonably possible liability. In matters where there is insurance coverage, in
this matter.Settlementsthe event we incur any liability, we believe it is unlikely we would incur losses in connection with these claims in excess of lawsuits forour insurance coverage.
There were no lawsuit settlements incurred during the
quartersthree months ended December 31,
20172023 and
2016 total $27,000 and $73,000, respectively.2022. As of December 31,
20172023 and September 30,
2017,2023, the Company has accrued
$37,000$2.1 million and
$295,000$2.4 million in accrued liabilities, respectively, related to settlement of lawsuits.
9. Segment Information
The Company owns and operates adult nightclubs and Bombshells Restaurants and Bars. The Company has identified such reportable segments based on management responsibility and the nature of the Company’s products, services and costs. There are no major distinctions in geographical areas served as all operations are in the United States. The Company measures segment profit (loss) as income (loss) from operations. Segment assets are those assets controlled by each reportable segment. The other category below includes our media divisions and rental income that are not significant to the consolidated financial statements.
Below is the financial information related to the Company’s segments (in thousands):
| | For the Three Months | |
| | Ended December 31, | |
| | 2017 | | | 2016 | |
Revenues | | | | | | | | |
Nightclubs | | $ | 35,218 | | | $ | 29,282 | |
Bombshells | | | 5,828 | | | | 4,295 | |
Other | | | 166 | | | | 162 | |
| | $ | 41,212 | | | $ | 33,739 | |
| | | | | | | | |
Income (loss) from operations | | | | | | | | |
Nightclubs | | $ | 13,371 | | | $ | 9,216 | |
Bombshells | | | 891 | | | | 638 | |
Other | | | (137 | ) | | | (341 | ) |
General corporate | | | (4,985 | ) | | | (3,180 | ) |
| | $ | 9,140 | | | $ | 6,333 | |
| | | | | | | | |
Depreciation and amortization | | | | | | | | |
Nightclubs | | $ | 1,335 | | | $ | 1,242 | |
Bombshells | | | 336 | | | | 218 | |
Other | | | 2 | | | | 5 | |
General corporate | | | 236 | | | | 153 | |
| | $ | 1,909 | | | $ | 1,618 | |
| | | | | | | | |
Capital expenditures | | | | | | | | |
Nightclubs | | $ | 450 | | | $ | 795 | |
Bombshells | | | 2,228 | | | | 1,104 | |
Other | | | - | | | | 1 | |
General corporate | | | 91 | | | | 1,108 | |
| | $ | 2,769 | | | $ | 3,008 | |
RCI HOSPITALITY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| | December 31, 2017 | | | September 30,2017 | |
Total assets | | | | | | | | |
Nightclubs | | $ | 248,187 | | | $ | 254,432 | |
Bombshells | | | 28,206 | | | | 18,870 | |
Other | | | 969 | | | | 780 | |
General corporate | | | 29,217 | | | | 25,802 | |
| | $ | 306,579 | | | $ | 299,884 | |
General corporate expenses include corporate salaries, health insurance and social security taxes for officers, legal, accounting and information technology employees, corporate taxes and insurance, legal and accounting fees, depreciation and other corporate costs such as automobile and travel costs. Management considers these to be non-allocable costs for segment purposes.
10.
Noncontrolling InterestsNoncontrolling interests represent the portion of equity in a consolidated entity held by owners other than the consolidating parent. Noncontrolling interests are reported in the consolidated balance sheets within equity, separately from stockholders’ equity. Revenue, expenses and net income attributable to both the Company and the noncontrolling interests are reported in the consolidated statements of income.
Our consolidated financial statements include noncontrolling interests related principally to the Company’s ownership of 51% of an entity which owns the real estate for the Company’s nightclub in Philadelphia.
11. Related Party Transactions
Presently, our Chairman and President, Eric Langan, personally guarantees all of the commercial bank indebtedness of the Company. Mr. Langan receives no compensation or other direct financial benefit for any of the guarantees.
The balance of our commercial bank indebtedness, net of debt discount and issuance costs, as of December 31, 2023 and September 30, 2023, was $116.7 million and $119.2 million, respectively. Included in the October 2023 debt transaction (see Note 6) are notes borrowed from related parties—one note for $500,000 (Ed Anakar, an employee of the Company and brother of our former director Nourdean Anakar) and another note for $150,000 (from a brother of Company CFO, Bradley Chhay) in which the terms of the notes are the same as the rest of the lender group. We used the services of Nottingham Creations, and previously Sherwood Forest Creations, LLC, both furniture fabrication companies that manufacture tables, chairs and other furnishings for our Bombshells locations, as well as providing ongoing maintenance. Nottingham Creations is owned by a brother of Eric Langan (as was Sherwood Forest). Amounts billed to us for goods and services provided by Nottingham Creations and Sherwood Forest were $142,098 and $0 during the three months ended December 31, 2023 and 2022, respectively. As of December 31, 2023 and September 30, 2023, we owed Nottingham Creations and Sherwood Forest $36,308 and $10,700, respectively, in unpaid billings.
RCI HOSPITALITY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
10. Related Party Transactions - continued
TW Mechanical LLC provided plumbing and HVAC services to both a third-party general contractor providing construction services to the Company, as well as directly to the Company during fiscal 2024 and 2023. A son-in-law of Eric Langan owns a 50% interest in TW Mechanical. Amounts billed by TW Mechanical to the third-party general contractor were $0 and $0 for the three months ended December 31, 2023 and 2022, respectively. Amounts billed directly to the Company were $2,932 and $0 for the three months ended December 31, 2023 and 2022, respectively. As of December 31, 2023 and September 30, 2023, the Company owed TW Mechanical $0 and $0, respectively, in unpaid direct billings.
11. Leases
Total lease expense included in selling, general and administrative expenses in our unaudited condensed consolidated statements of income for the three months ended December 31, 2023 and 2022 is as follows (in thousands):
| | | | | | | | | | | |
| Three Months Ended December 31, |
| 2023 | | 2022 |
Operating lease expense – fixed payments | $ | 1,292 | | | $ | 1,259 | |
Variable lease expense | 450 | | | 427 | |
Short-term and other lease expense (includes $107 and $64 recorded in advertising and marketing for the three months ended December 31, 2023 and 2022, respectively; and $141 and $127 recorded in repairs and maintenance for the three months ended December 31, 2023 and 2022, respectively; see Note 5) | 330 | | | 267 | |
Sublease income | — | | | — | |
Total lease expense, net | $ | 2,072 | | | $ | 1,953 | |
| | | |
Other information: | | | |
Operating cash outflows from operating leases | $ | 2,033 | | | $ | 1,910 | |
Weighted average remaining lease term – operating leases | 10.3 years | | 11.2 years |
Weighted average discount rate – operating leases | 5.8 | % | | 5.6 | % |
Future maturities of operating lease liabilities as of December 31, 2023 are as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Principal Payments | | Interest Payments | | Total Payments |
January - December 2024 | $ | 3,037 | | | $ | 2,014 | | | $ | 5,051 | |
January - December 2025 | 3,296 | | | 1,835 | | | 5,131 | |
January - December 2026 | 3,594 | | | 1,640 | | | 5,234 | |
January - December 2027 | 3,355 | | | 1,438 | | | 4,793 | |
January - December 2028 | 2,996 | | | 1,256 | | | 4,252 | |
Thereafter | 21,151 | | | 4,333 | | | 25,484 | |
| $ | 37,429 | | | $ | 12,516 | | | $ | 49,945 | |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our
unaudited condensed consolidated financial statements and related notes thereto included in this quarterly report, and the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended September 30,
2017.2023.
RCI Hospitality Holdings, Inc.
(“RCIHH”) is a holding company
engagedthat, through its subsidiaries, engages in
a number of activities in the hospitality and related businesses.businesses that offer live adult entertainment and/or high-quality dining experiences to its guests. All services and management operations are conducted by subsidiaries of RCIHH, including RCI Management Services, Inc.
Through our subsidiaries, as of December 31,
2017,2023, we operated a total of
4569 establishments that offer live adult entertainment,
and/or restaurant and bar operations.including one food hall. We also operated a leading business communications company serving the multi-billion-dollar adult nightclubs industry. We have two principal reportable segments: Nightclubs and Bombshells. We combine
other operating segments
not included in Nightclubs and Bombshells into “Other.” In the context of club and restaurant/sports bar operations, the terms the “Company,” “we,” “our,” “us” and similar terms used in this report refer to subsidiaries of RCIHH. RCIHH was incorporated in the State of Texas in 1994. Our corporate offices are located in Houston, Texas.
Critical Accounting Policies and Estimates
The preparation of the unaudited
condensed consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate these
estimates, including investment impairment.estimates. These estimates are based on management’s historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.
For a description of the accounting policies that, in management’s opinion, involve the most significant application of judgment or involve complex estimation and which could, if different judgment or estimates were made, materially affect our reported financial position, results of operations, or cash flows, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended September 30,
20172023 filed with the SEC on
FebruaryDecember 14,
2018.2023.
During the three months ended December 31,
2017,2023, there were no significant changes in our accounting policies and estimates.
Highlights of the Company's operating results during the quarter ended December 31, 2023 are as follows:
•Total revenues were $73.9 million compared to $70.0 million during the comparable prior-year quarter, a 5.6% increase (Nightclubs revenue of $61.0 million compared to $56.3 million, an 8.4% increase; and Bombshells revenue of $12.7 million compared to $13.4 million, a 5.2% decrease)
•Consolidated same-store sales decreased by 9.8% (Nightclubs decreased by 7.2% while Bombshells decreased by 20.3%) (refer to the definition of same-store sales in the discussion of revenues below)
•Basic and diluted earnings per share (“EPS”) of $0.77 compared to $1.11 (non-GAAP diluted EPS* of $0.87 compared to $1.19) during the comparable prior-year quarter
•Net cash provided by operating activities of $13.6 million compared to $14.9 million during the comparable prior-year quarter, an 8.5% decrease (free cash flow* of $12.7 million compared to $13.0 million, a 2.9% decrease)
*Reconciliation and discussion of non-GAAP financial measures are included in the “Non-GAAP Financial Measures” section below.
The following table summarizes our results of operations
for the three months ended December 31, 2017 and 2016 (dollars in thousands): | | For the Three Months Ended | | | |
| | December 31, 2017 | | | December 31, 2016 | | | Change | |
| | Amount | | | % of Revenues | | | Amount | | | % of Revenues | | | Amount | | | % | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | |
Sales of alcoholic beverages | | $ | 17,805 | | | | 43.2 | % | | $ | 14,375 | | | | 42.6 | % | | $ | 3,430 | | | | 23.9 | % |
Sales of food and merchandise | | | 5,307 | | | | 12.9 | % | | | 4,207 | | | | 12.5 | % | | | 1,100 | | | | 26.1 | % |
Service revenues | | | 15,889 | | | | 38.6 | % | | | 13,475 | | | | 39.9 | % | | | 2,414 | | | | 17.9 | % |
Other | | | 2,211 | | | | 5.4 | % | | | 1,682 | | | | 5.0 | % | | | 529 | | | | 31.5 | % |
Total revenues | | | 41,212 | | | | 100.0 | % | | | 33,739 | | | | 100.0 | % | | | 7,473 | | | | 22.1 | % |
Operating expenses | | | | | | | | | | | | | | | | | | | | | | | | |
Cost of goods sold | | | | | | | | | | | | | | | | | | | | | | | | |
Alcoholic beverages sold | | | 3,755 | | | | 21.1 | % | | | 3,168 | | | | 22.0 | % | | | 587 | | | | 18.5 | % |
Food and merchandise sold | | | 2,094 | | | | 39.5 | % | | | 1,653 | | | | 39.3 | % | | | 441 | | | | 26.7 | % |
Service and other | | | 36 | | | | 0.2 | % | | | 60 | | | | 0.4 | % | | | (24 | ) | | | -40.0 | % |
Cost of goods sold (exclusive of items shown separately below) | | | 5,885 | | | | 14.3 | % | | | 4,881 | | | | 14.5 | % | | | 1,004 | | | | 20.6 | % |
Salaries and wages | | | 11,377 | | | | 27.6 | % | | | 9,652 | | | | 28.6 | % | | | 1,725 | | | | 17.9 | % |
Selling, general and administrative | | | 12,812 | | | | 31.1 | % | | | 11,193 | | | | 33.2 | % | | | 1,619 | | | | 14.5 | % |
Depreciation and amortization | | | 1,909 | | | | 4.6 | % | | | 1,618 | | | | 4.8 | % | | | 291 | | | | 18.0 | % |
Other charges, net | | | 89 | | | | 0.2 | % | | | 62 | | | | 0.2 | % | | | 27 | | | | 43.5 | % |
Total operating expenses | | | 32,072 | | | | 77.8 | % | | | 27,406 | | | | 81.2 | % | | | 4,666 | | | | 17.0 | % |
Income from operations | | | 9,140 | | | | 22.2 | % | | | 6,333 | | | | 18.8 | % | | | 2,807 | | | | 44.3 | % |
Other income (expenses) | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense | | | (3,079 | ) | | | -7.5 | % | | | (2,015 | ) | | | -6.0 | % | | | (1,064 | ) | | | 52.8 | % |
Interest income | | | 67 | | | | 0.2 | % | | | 37 | | | | 0.1 | % | | | 30 | | | | 81.1 | % |
Income before income taxes | | | 6,128 | | | | 14.9 | % | | | 4,355 | | | | 12.9 | % | | | 1,773 | | | | 40.7 | % |
Income tax expense (benefit) | | | (8,227 | ) | | | -20.0 | % | | | 1,450 | | | | 4.3 | % | | | (9,677 | ) | | | -667.4 | % |
Net income | | $ | 14,355 | | | | 34.8 | % | | $ | 2,905 | | | | 8.6 | % | | $ | 11,450 | | | | 394.1 | % |
as a percentage of revenue: | | | | | | | | | | | |
| Three Months Ended December 31, |
| 2023 | | 2022 |
Revenues | | | |
Sales of alcoholic beverages | 45.1 | % | | 42.4 | % |
Sales of food and merchandise | 14.6 | % | | 14.8 | % |
Service revenues | 34.0 | % | | 36.5 | % |
Other | 6.3 | % | | 6.3 | % |
Total revenues | 100.0 | % | | 100.0 | % |
Operating expenses | | | |
Cost of goods sold | | | |
Alcoholic beverages sold | 18.9 | % | | 18.1 | % |
Food and merchandise sold | 37.4 | % | | 34.7 | % |
Service and other | 0.1 | % | | 0.2 | % |
Total cost of goods sold (exclusive of items shown separately below) | 14.0 | % | | 12.9 | % |
Salaries and wages | 28.9 | % | | 26.7 | % |
Selling, general and administrative | 34.1 | % | | 32.5 | % |
Depreciation and amortization | 5.2 | % | | 4.7 | % |
Other charges, net | — | % | | (0.9) | % |
Total operating expenses | 82.2 | % | | 75.8 | % |
Income from operations | 17.8 | % | | 24.2 | % |
Other income (expenses) | | | |
Interest expense | (5.7) | % | | (5.3) | % |
Interest income | 0.1 | % | | 0.1 | % |
Income before income taxes | 12.2 | % | | 19.0 | % |
Income tax expense | 2.4 | % | | 4.3 | % |
Net income | 9.8 | % | | 14.7 | % |
*Percentages may not foot due to rounding. Percentage of revenue for individual cost of goods sold items pertains to their respective revenue line.
Consolidated revenues for the first quarter increased by $7.5$3.9 million, or 22.1%5.6%, versus the comparable prior-year quarter due primarily to a 16% increase from new units, 6.9%15.0%, or $10.5 million, increase in sales from newly acquired clubs from last year and new Bombshells openings, partially offset by the $6.7 million impact of the decrease in consolidated same-stores sales.
We calculate same-store sales (contributingby comparing year-over-year revenues from nightclubs and restaurants/sports bars starting in the first full quarter of operations after at least 12 full months for Nightclubs and at least 18 full months for Bombshells. We consider the first six months of operations of a 6.7% increaseBombshells unit to be the “honeymoon period” where sales are significantly higher than normal. We exclude from a particular month’s calculation units previously included in total revenues), and a 0.7% decreasethe same-store sales base that have closed temporarily until its next full quarter of operations. We also exclude from the same-store sales base units that are being reconcepted or are closed units. Nightclubdue to renovations or remodels. Acquired units are included in the same-store sales calculation as long as they qualify based on the definition stated above. Revenues outside of our Nightclubs and Bombshells reportable segments are excluded from same-store sales increased by 7.1% and 5.6%, respectively, due to strong lineupcalculation.
Segment contribution to total revenues was as follows (in
thousands)thousands, except percentages):
| | For the Three Months | |
| | Ended December 31, | |
| | 2017 | | | 2016 | |
Nightclubs | | $ | 35,218 | | | $ | 29,282 | |
Bombshells | | | 5,828 | | | | 4,295 | |
Other | | | 166 | | | | 162 | |
| | $ | 41,212 | | | $ | 33,739 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended December 31, 2023 | | Mix | | Three Months Ended December 31, 2022 | | Mix | | Inc (Dec) $ | | Inc (Dec) % |
Nightclubs | | | | | | | | | | | |
Sales of alcoholic beverages | $ | 26,236 | | | 43.0 | % | | $ | 22,098 | | | 39.2 | % | | $ | 4,138 | | | 18.7 | % |
Sales of food and merchandise | 5,240 | | | 8.6 | % | | 4,594 | | | 8.2 | % | | 646 | | | 14.1 | % |
Service revenues | 25,119 | | | 41.2 | % | | 25,533 | | | 45.3 | % | | (414) | | | (1.6) | % |
Other revenues | 4,438 | | | 7.3 | % | | 4,100 | | | 7.3 | % | | 338 | | | 8.2 | % |
| 61,033 | | | 100.0 | % | | 56,325 | | | 100.0 | % | | 4,708 | | | 8.4 | % |
Bombshells | | | | | | | | | | | |
Sales of alcoholic beverages | 7,080 | | | 55.6 | % | | 7,552 | | | 56.2 | % | | (472) | | | (6.3) | % |
Sales of food and merchandise | 5,562 | | | 43.7 | % | | 5,753 | | | 42.8 | % | | (191) | | | (3.3) | % |
Service revenues | — | | | 0.0 | % | | 30 | | | 0.2 | % | | (30) | | | (100.0) | % |
Other revenues | 89 | | | 0.7 | % | | 96 | | | 0.7 | % | | (7) | | | (7.3) | % |
| 12,731 | | | 100.0 | % | | 13,431 | | | 100.0 | % | | (700) | | | (5.2) | % |
Other | | | | | | | | | | | |
Other revenues | 143 | | | 100.0 | % | | 212 | | | 100.0 | % | | (69) | | | (32.5) | % |
| $ | 73,907 | | | | | $ | 69,968 | | | | | $ | 3,939 | | | 5.6 | % |
Nightclubs revenues increased by 8.4% during the first quarter compared to the same quarter last year primarily due to the $8.9 million contribution of newly acquired clubs, partially offset by the $4.0 million impact of the decrease in same-store sales. For Nightclubs that were open enough days to qualify for same-store sales (refer to the definition of same-store sales in the preceding paragraph), sales decreased by 7.2%. By type of revenue, alcoholic beverage sales increased by 18.7%, food, merchandise and other revenue increased by 11.3%, while service revenues decreased by 1.6%.
Bombshells revenues decreased by 5.2%, of which 20.3% was for same-store sales decrease with the offsetting increase caused by two new locations and a food hall. By type of revenue, food and merchandise sales decreased by 3.3% while alcoholic beverage sales decreased by 6.3%.
Total operating expenses, as a percent of revenues,
decreasedincreased to
77.8%82.2% from
81.2%75.8% from
year-ago although dollar value increased by $4.7last year’s first quarter, with a $7.7 million
increase, or
17.0%14.5%, which was
predominantlymainly caused by
costs and expenses directly related to higher sales in the
22.1% increasecurrent-year first quarter, with the impact of fixed expenses on clubs and restaurants having decreases in
total revenues. Contributorstheir same-stores sales. Significant contributors to the changes in operating expenses are explained below.
Cost of goods sold. Cost of goods sold for the first quarter increased by $1.0$1.4 million, or 20.6%15.0%, primarilymainly due to increase inhigher sales. As a percent of total revenues, cost of goods sold slightly decreasedincreased to 14.3%14.0% from 14.5%12.9% mainly due to the increasesales mix decrease in service revenue. Nightclubs cost of goods sold increased to 12.0% from 10.5%, while Bombshells cost of goods sold increased to 23.7% from 22.9%. Both increases in percent to segment revenue were caused mainly by shift in sales mix of higher margin service revenue from units in the same-store sales base, partially offset by slightlytoward lower margin new restaurant food sales.sales type.
Salaries and wages. Salaries and wages increased by $1.7$2.7 million, or 17.9% mainly14.2%, for the first quarter due to a shift to additional corporate headcount and laborincrease in personnel from newly acquired clubs and opened units.new Bombshells openings, work shifts to accommodate the increase in sales, and the impact of minimum wage increases in certain states and cities. As a percent of total revenues, salaries and wages decreasedincreased to 27.6%28.9% from 28.6% primarily26.7% due to leveragewage inflation. Nightclubs increased to 22.0% from higher sales.20.8% and Bombshells increased to 31.1% from 26.5%, while corporate increased to 5.1% from 4.7%.
Selling, general and administrative expenses. Selling, general and administrative expenses increased by $1.6$2.5 million, or 14.5%10.9%, primarily due to increasesincreased variable expenses related to higher sales during the current-year first quarter. Dollar amounts in charge card fees, advertisingthe tables below are in thousands, except percentages.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended December 31, 2023 | | For the Three Months Ended December 31, 2022 | | Better (Worse) |
| Amount | | % of Revenues | | Amount | | % of Revenues | | Amount | | % |
Taxes and permits | $ | 4,042 | | | 5.5 | % | | $ | 2,684 | | | 3.8 | % | | $ | (1,358) | | | (50.6) | % |
Advertising and marketing | 3,474 | | | 4.7 | % | | 2,670 | | | 3.8 | % | | (804) | | | (30.1) | % |
Supplies and services | 2,695 | | | 3.6 | % | | 2,424 | | | 3.5 | % | | (271) | | | (11.2) | % |
Insurance | 3,315 | | | 4.5 | % | | 2,582 | | | 3.7 | % | | (733) | | | (28.4) | % |
Legal | 733 | | | 1.0 | % | | 985 | | | 1.4 | % | | 252 | | | 25.6 | % |
Lease | 1,824 | | | 2.5 | % | | 1,762 | | | 2.5 | % | | (62) | | | (3.5) | % |
Charge card fees | 1,732 | | | 2.3 | % | | 1,897 | | | 2.7 | % | | 165 | | | 8.7 | % |
Utilities | 1,485 | | | 2.0 | % | | 1,271 | | | 1.8 | % | | (214) | | | (16.8) | % |
Security | 1,411 | | | 1.9 | % | | 1,164 | | | 1.7 | % | | (247) | | | (21.2) | % |
Stock-based compensation | 470 | | | 0.6 | % | | 941 | | | 1.3 | % | | 471 | | | 50.1 | % |
Accounting and professional fees | 1,186 | | | 1.6 | % | | 1,518 | | | 2.2 | % | | 332 | | | 21.9 | % |
Repairs and maintenance | 1,099 | | | 1.5 | % | | 1,164 | | | 1.7 | % | | 65 | | | 5.6 | % |
Other | 1,735 | | | 2.3 | % | | 1,670 | | | 2.4 | % | | (65) | | | (3.9) | % |
Total selling, general and administrative expenses | $ | 25,201 | | | 34.1 | % | | $ | 22,732 | | | 32.5 | % | | $ | (2,469) | | | (10.9) | % |
Taxes and
marketing, audit fee, insurance, rent, supplies, and repairs and maintenance. This is partially offset by decreases in legal costs and taxes and permits. Charge card fees and supplies are directly relatedpermits mainly increased due to the increase in
sales. Rentthe Texas patron tax. Advertising and marketing increased mainly due to higher commissions and promotional expenses. Insurance expense increased due to
the opening of a new Bombshells. As a percent of total revenues, selling, generaladditional clubs and
administrative expenses decreased to 31.1% from 33.2% mainly due sales leverage partially offset by a higher mix of credit card usage.restaurants.
Depreciation and amortization. Depreciation and amortization increased by $291,000,$546,000, or 18.0%16.5%, during the quarter due to the higher unit count anddepreciable base.
Other charges, net. Other charges, net for the additionquarter changed due to one sale of our corporate office duringreal estate property in the middle of theprior-year first quarter of 2017.quarter.
Income
(Loss) from Operations
For the
three monthsquarter ended December 31,
20172023 and
2016,2022, our
consolidated operating margin was
22.2%17.8% and
18.8%24.2%, respectively.
The main drivers for the increase in operating margin is the favorable leverage caused by fixed expenses on increasing sales and the contribution of newly acquired and opened units, aside from the details previously discussed above.Segment contribution to income (loss) from operations is presented in the table below (in thousands):
| | For the Three Months | |
| | Ended December 31, | |
| | 2017 | | | 2016 | |
Nightclubs | | $ | 13,371 | | | $ | 9,508 | |
Bombshells | | | 891 | | | | 638 | |
Other | | | (137 | ) | | | (341 | ) |
General corporate | | | (4,985 | ) | | | (3,180 | ) |
| | $ | 9,140 | | | $ | 6,333 | |
Operating
| | | | | | | | | | | |
| For the Three Months Ended December 31, |
| 2023 | | 2022 |
Nightclubs | $ | 20,369 | | | $ | 22,740 | |
Bombshells | 86 | | | 1,847 | |
Other | (196) | | | (185) | |
Corporate | (7,094) | | | (7,504) | |
| $ | 13,165 | | | $ | 16,898 | |
Excluding certain items, the first quarter ended December 31, 2023 and 2022 non-GAAP operating income (loss) and non-GAAP operating margin are computed in the tables below (dollars in thousands). Refer to the discussion of Non-GAAP Financial Measures on page 26. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended December 31, 2023 |
| Nightclubs | | Bombshells | | Other | | Corporate | | Total |
Income (loss) from operations | $ | 20,369 | | | $ | 86 | | | $ | (196) | | | $ | (7,094) | | | $ | 13,165 | |
Amortization of intangibles | 591 | | | 63 | | | — | | | 5 | | | 659 | |
Gain on sale of businesses and assets | (1) | | | — | | | — | | | (2) | | | (3) | |
Stock-based compensation | — | | | — | | | — | | | 470 | | | 470 | |
Non-GAAP operating income (loss) | $ | 20,959 | | | $ | 149 | | | $ | (196) | | | $ | (6,621) | | | $ | 14,291 | |
| | | | | | | | | |
GAAP operating margin | 33.4 | % | | 0.7 | % | | (137.1) | % | | (9.6) | % | | 17.8 | % |
Non-GAAP operating margin | 34.3 | % | | 1.2 | % | | (137.1) | % | | (9.0) | % | | 19.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended December 31, 2022 |
| Nightclubs | | Bombshells | | Other | | Corporate | | Total |
Income (loss) from operations | $ | 22,740 | | | $ | 1,847 | | | $ | (185) | | | $ | (7,504) | | | $ | 16,898 | |
Amortization of intangibles | 628 | | | 2 | | | 61 | | | 4 | | | 695 | |
Gain on sale of businesses and assets | (569) | | | — | | | — | | | (21) | | | (590) | |
Gain on insurance | (48) | | | — | | | — | | | (16) | | | (64) | |
Stock-based compensation | — | | | — | | | — | | | 941 | | | 941 | |
Non-GAAP operating income (loss) | $ | 22,751 | | | $ | 1,849 | | | $ | (124) | | | $ | (6,596) | | | $ | 17,880 | |
| | | | | | | | | |
GAAP operating margin | 40.4 | % | | 13.8 | % | | (87.3) | % | | (10.7) | % | | 24.2 | % |
Non-GAAP operating margin | 40.4 | % | | 13.8 | % | | (58.5) | % | | (9.4) | % | | 25.6 | % |
Other Income/Expenses
Interest expense increased by $529,000, or 14.3%, primarily caused by a higher average debt balance mostly from seller-financed promissory notes from last years' acquisitions.
Our total occupancy costs, defined as the sum of operating lease expense and interest expense, were $6.0 million and $5.4 million for the Nightclubs segmentquarters ended December 31, 2023 and 2022, respectively. As a percentage of revenue, total occupancy costs were 8.2% and 7.8% during the quarters ended December 31, 2023 and 2022, respectively, primarily due to the interest from higher average debt balance.
Income Taxes
Income tax expense was
38.0%$1.8 million and
31.5%$3.0 million during the three months ended December 31, 2023 and 2022, respectively. The effective income tax expense rate was 19.9% and 22.8% for the three months ended December 31,
20172023 and
2016, respectively, while operating margin for Bombshells was 15.3% and 14.9%,2022, respectively.
The increase in Nightclubs operating margin was mainly due to the favorable leverage caused by fixed expenses on increasing sales and the contribution of newly acquired and opened units. The increase in Bombshells operating margin was primarily due to positive same-stores sales, partially offset by the underperformance of our Austin, Texas location.Non-Operating Items
Interest expense increased to $3.1 million from $2.0 million due to the writeoff of debt issuance costs and prepayment penalties related to our debt refinancing (see Note 4 to our condensed consolidated financial statements) amounting to $827,000 and higher average debt balance quarter over quarter.
Our total occupancy, defined as the sum of rent expense and interest expense, exclusive of refinancing-related costs above, was 7.7% and 8.0% of revenue during the quarter ended December 31, 2017 and 2016, respectively.
Income Taxes
Income taxes were a benefit of $8.1 million for the first quarter of 2018 compared to an expense of $1.5 million for the same quarter of 2017. The effective income tax rate for the first quarter of 2018 was a benefit of 134.3% compared with an expense of 33.3% for the comparable period of 2017. Our effective tax rate is affected by state taxes, permanent differences, and tax credits, including the FICA tip credit, for both years, while the first quarter of 2018 was significantly impacted by a $9.7 million reduction of our deferred tax liability caused by newly enacted tax laws.
On December 22, 2017, the Tax Cuts and Jobs Act was enacted into law, which provides for significant changesas presented below.
| | | | | | | | | | | |
| For the Three Months Ended December 31, |
| 2023 | | 2022 |
Federal statutory income tax expense | 21.0 | % | | 21.0 | % |
State income taxes, net of federal benefit | 3.4 | % | | 4.0 | % |
Permanent differences | 0.5 | % | | 0.5 | % |
Tax credit | (5.0) | % | | (2.8) | % |
Other | — | % | | 0.1 | % |
Total income tax expense | 19.9 | % | | 22.8 | % |
Income taxes decreased in dollar amount due to the
U.S. Internal Revenue Code of 1986, as amended, such as a reductionlower pretax income in the
statutory federal corporatecurrent first quarter. Effective income tax rate
from 35%decreased due to
21% effective from January 1, 2018 forward and changes or limitations to certain tax deductions. The Company has a fiscal yearthe acquisition of Texas-based clubs at the end of
September 30, solast year's second quarter and the
change to the statutory corporateadditional tax
rate results in a blended federal statutory tax rate of 24.5% for its fiscal year 2018. The financial statements for the first fiscal quarter 2018 were also impacted by a one-time revaluation of the Company’s deferred tax assets and liabilities and this was recognized as a discrete income tax benefit in the period. The Company estimates that its annual effective tax rate for fiscal 2018 (blended rate year) will be approximately 26.5%. The effective tax rate for the current quarter was lower than the new 2018 statutory rate due to discrete tax benefits of $9.7 million recognized related to the revaluation of deferred tax assets and liabilities expected to be utilized in 2018.credits from those acquisitions.
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 exclude fromcalculate 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) gains or losses on sale of businesses and assets, gain(c) gains or losses on insurance, and settlement of lawsuits.(d) stock-based compensation. 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.
Non-GAAP Net Income and Non-GAAP Net Income per Diluted Share. We exclude fromcalculate 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 stockholders and diluted earnings per share. Adjustment items are: (a) amortization of intangibles, costs and charges related to debt refinancing, income tax expense (benefit),(b) gains or losses on sale of businesses and assets, gain(c) gains or losses on insurance, (d) stock-based compensation, and settlement(e) the income tax effect of lawsuits, and includethe above-described adjustments. Included in the income tax effect of the above adjustments is the net effect of the non-GAAP provision for current and deferred income taxes, calculated at 26.5%19.9% and 33%22.7% effective tax rate of the pre-tax non-GAAP income before taxes for the quarterthree months ended December 31, 20172023 and 2016,2022, respectively, because weand the GAAP income tax expense (benefit). We believe that excluding and including such items help management and investors better understand our operating activities.
Adjusted EBITDA. We exclude fromcalculate adjusted EBITDA by excluding the following items from net income attributable to RCIHH common stockholders: (a) depreciation expense,and amortization, of intangibles,(b) income tax expense (benefit), (c) net interest expense, (d) gains or losses on sale of businesses and assets, gain(e) gains or losses on insurance, and settlement of lawsuits because we(f) stock-based compensation. 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 our unleveraged performance return on our investments. Adjusted EBITDA is also the target benchmark for our acquisitions of nightclubs. We also use certain non-GAAP cash flow measures such as free cash flow. See “Liquidity and Capital Resources” section for further discussion.
The following tables present our non-GAAP performance measures for the quartersthree months ended December 31, 20172023 and 20162022 (in thousands, except per share, amountsnumber of shares and percentages):
| | For the Three Months | |
| | Ended December 31, | |
| | 2017 | | | 2016 | |
Reconciliation of GAAP net income to Adjusted EBITDA | | | | | |
Net income attributable to RCIHH common shareholders | | $ | 14,311 | | | $ | 2,898 | |
Income tax expense (benefit) | | | (8,227 | ) | | | 1,450 | |
Interest expense, net | | | 3,012 | | | | 1,978 | |
Settlement of lawsuits | | | 27 | | | | 73 | |
Loss (gain) on sale of assets | | | 82 | | | | (11 | ) |
Gain on insurance | | | (20 | ) | | | - | |
Depreciation and amortization | | | 1,909 | | | | 1,618 | |
Adjusted EBITDA | | $ | 11,094 | | | $ | 8,006 | |
| | | | | | | | |
Reconciliation of GAAP net income to non-GAAP net income | | | | | | | | |
Net income attributable to RCIHH common shareholders | | $ | 14,311 | | | $ | 2,898 | |
Amortization of intangibles | | | 48 | | | | 46 | |
Costs and charges related to debt refinancing | | | 827 | | | | - | |
Settlement of lawsuits | | | 27 | | | | 73 | |
Income tax expense (benefit) | | | (8,227 | ) | | | 1,450 | |
Loss (gain) on sale of assets | | | 82 | | | | (11 | ) |
Gain on insurance | | | (20 | ) | | | - | |
Non-GAAP benefit (expense) for income taxes | | | | | | | | |
Current | | | 45 | | | | (1,455 | ) |
Deferred | | | (1,913 | ) | | | (15 | ) |
Non-GAAP net income | | $ | 5,180 | | | $ | 2,986 | |
| | | | | | | | |
Reconciliation of GAAP diluted net income per share to non-GAAP diluted net income per share | | | | | | | | |
Fully diluted shares | | | 9,719 | | | | 9,814 | |
GAAP diluted net income per share | | $ | 1.47 | | | $ | 0.30 | |
Amortization of intangibles | | | 0.00 | | | | 0.00 | |
Costs and charges related to debt refinancing | | | 0.09 | | | | - | |
Settlement of lawsuits | | | 0.00 | | | | 0.01 | |
Income tax expense (benefit) | | | (0.85 | ) | | | 0.15 | |
Loss (gain) on sale of assets | | | 0.01 | | | | (0.00 | ) |
Gain on insurance | | | (0.00 | ) | | | - | |
Non-GAAP benefit (expense) for income taxes | | | | | | | | |
Current | | | 0.00 | | | | (0.15 | ) |
Deferred | | | (0.19 | ) | | | (0.00 | ) |
Non-GAAP diluted net income per share | | $ | 0.53 | | | $ | 0.31 | |
| | | | | | | | |
Reconciliation of GAAP operating income to non-GAAP operating income | | | | | | | | |
Income from operations | | $ | 9,140 | | | $ | 6,333 | |
Amortization of intangibles | | | 48 | | | | 46 | |
Settlement of lawsuits | | | 27 | | | | 73 | |
Loss (gain) on sale of assets | | | 82 | | | | (11 | ) |
Gain on insurance | | | (20 | ) | | | - | |
Non-GAAP operating income | | $ | 9,277 | | | $ | 6,441 | |
| | | | | | | | |
Reconciliation of GAAP operating margin to non-GAAP operating margin | | | | | | | | |
GAAP operating margin | | | 22.2 | % | | | 18.8 | % |
Amortization of intangibles | | | 0.1 | % | | | 0.1 | % |
Settlement of lawsuits | | | 0.0 | % | | | 0.2 | % |
Loss (gain) on sale of assets | | | 0.2 | % | | | -0.0 | % |
Gain on insurance | | | -0.0 | % | | | - | |
Non-GAAP operating margin | | | 22.5 | % | | | 19.1 | % |
| | | | | | | | | | | |
| Three Months Ended December 31, |
| 2023 | | 2022 |
Reconciliation of GAAP net income to Adjusted EBITDA | | | |
Net income attributable to RCIHH common stockholders | $ | 7,226 | | | $ | 10,238 | |
Income tax expense | 1,799 | | | 3,031 | |
Interest expense, net | 4,122 | | | 3,596 | |
Depreciation and amortization | 3,853 | | | 3,307 | |
Stock-based compensation | 470 | | | 941 | |
Gain on sale of businesses and assets | (3) | | | (590) | |
Gain on insurance | — | | | (64) | |
Adjusted EBITDA | $ | 17,467 | | | $ | 20,459 | |
| | | | | | | | | | | |
| Three Months Ended December 31, |
| 2023 | | 2022 |
Reconciliation of GAAP net income to non-GAAP net income | | | |
Net income attributable to RCIHH common stockholders | $ | 7,226 | | | $ | 10,238 | |
Amortization of intangibles | 659 | | | 695 | |
Stock-based compensation | 470 | | | 941 | |
Gain on sale of businesses and assets | (3) | | | (590) | |
Gain on insurance | — | | | (64) | |
Net income tax effect | (220) | | | (200) | |
Non-GAAP net income | $ | 8,132 | | | $ | 11,020 | |
| | | | | | | | | | | |
| Three Months Ended December 31, |
| 2023 | | 2022 |
Reconciliation of GAAP diluted earnings per share to non-GAAP diluted earnings per share | | | |
Diluted shares | 9,367,151 | | | 9,230,258 | |
GAAP diluted earnings per share | $ | 0.77 | | | $ | 1.11 | |
Amortization of intangibles | 0.07 | | | 0.08 | |
Stock-based compensation | 0.05 | | | 0.10 | |
Gain on sale of businesses and assets | 0.00 | | | (0.06) | |
Gain on insurance | 0.00 | | | (0.01) | |
Net income tax effect | (0.02) | | | (0.02) | |
Non-GAAP net income | $ | 0.87 | | | $ | 1.19 | |
| | | | | | | | | | | |
| Three Months Ended December 31, |
| 2023 | | 2022 |
Reconciliation of GAAP operating income to non-GAAP operating income | | | |
Income from operations | $ | 13,165 | | | $ | 16,898 | |
Amortization of intangibles | 659 | | | 695 | |
Stock-based compensation | 470 | | | 941 | |
Gain on sale of businesses and assets | (3) | | | (590) | |
Gain on insurance | — | | | (64) | |
Non-GAAP operating income | $ | 14,291 | | | $ | 17,880 | |
| | | | | | | | | | | |
| Three Months Ended December 31, |
| 2023 | | 2022 |
Reconciliation of GAAP operating margin to non-GAAP operating margin | | | |
Income from operations | 17.8 | % | | 24.2 | % |
Amortization of intangibles | 0.9 | % | | 1.0 | % |
Stock-based compensation | 0.6 | % | | 1.3 | % |
Gain on sale of businesses and assets | 0.0 | % | | (0.8) | % |
Gain on insurance | 0.0 | % | | (0.1) | % |
Non-GAAP operating income | 19.3 | % | | 25.6 | % |
* Per share amounts and percentages may not foot due to rounding.
** The adjustments to reconcile net income attributable to RCIHH common shareholdersstockholders to non-GAAP net income exclude the impact of adjustments related to noncontrolling interests, which is immaterial. In the calculation
Liquidity and Capital Resources
At December 31,
2017,2023, our cash and cash equivalents were
$12.0approximately $21.2 million compared to
$9.9$21.0 million at September 30,
2017.2023. Because of the large volume of cash we handle, we have very stringent cash controls. As of December 31,
2017,2023, we had negative working capital of
$6.2$9.0 million compared to negative working capital of
$10.6$10.5 million as of September 30,
2017, both figures excluding assets held for sale of $5.6 million as of December 31, 2017 and $5.8 million as of September 30, 2017.2023. We believe
our ability to generate cash from operating activities is one of our fundamental financial strengths. Our net cash provided by operating activities increased to $8.1 million during the quarter ended December 31, 2017 from $5.5 million during the quarter ended December 31, 2016. The near-term outlook for our business remains strong, andthat we
expect to generate substantial cash flows from operations for the entire fiscal 2018. As a result of our expected cash flows from operations,can borrow capital if needed but currently we
do not have
significant flexibility to meet our financial commitments.unused credit facilities so there can be no guarantee that additional liquidity will be readily available or available on favorable terms. We have not recently raised capital through the issuance of equity securities.securities although we have used equity recently in our acquisitions. Instead, we use debt financing to lower our overall cost of capital and increase our return on stockholders’ equity. We have a history of borrowing funds in private transactions and from sellers in acquisition transactions and recently have secured a significanttraditional bank financing on our new development projects and refinancing of several of our existing notes payable. We continue to have the ability to borrow fundsThere can be no assurance though that any of these financing options would be presently available on favorable terms, if at reasonable interest rates in that manner.all. We also have historically utilized these cash flows to invest in property and equipment, adult nightclubs, and restaurants/sports bars.
We expect to generate adequate cash flows from operations for the next 12 months from the issuance of this report.
The following table presents a summary of our cash flows from operating, investing, and financing activities (in thousands):
| | For the Three Months Ended December 31, | |
| | 2017 | | | 2016 | |
Operating activities | | $ | 8,145 | | | $ | 5,521 | |
Investing activities | | | (2,089 | ) | | | (2,988 | ) |
Financing activities | | | (4,024 | ) | | | (1,796 | ) |
Net increase in cash and cash equivalents | | $ | 2,032 | | | $ | 737 | |
| | | | | | | | | | | |
| For the Three Months Ended December 31, |
| 2023 | | 2022 |
Operating activities | $ | 13,633 | | | $ | 14,895 | |
Investing activities | (5,080) | | | (13,650) | |
Financing activities | (8,421) | | | (3,117) | |
Net increase (decrease) in cash and cash equivalents | $ | 132 | | | $ | (1,872) | |
Cash Flows from Operating Activities
Following are our summarized cash flows from operating activities (in thousands):
| | For the Three Months Ended December 31, | |
| | 2017 | | | 2016 | |
Net income | | $ | 14,355 | | | $ | 2,905 | |
Depreciation and amortization | | | 1,909 | | | | 1,618 | |
Deferred tax benefit | | | (9,697 | ) | | | - | |
Debt prepayment penalty | | | 543 | | | | - | |
Net change in operating assets and liabilities | | | 516 | | | | 873 | |
Other | | | 519 | | | | 125 | |
Net cash provided by operating activities | | $ | 8,145 | | | $ | 5,521 | |
| | | | | | | | | | | |
| For the Three Months Ended December 31, |
| 2023 | | 2022 |
Net income | $ | 7,244 | | | $ | 10,271 | |
Depreciation and amortization | 3,853 | | | 3,307 | |
Stock-based compensation | 470 | | | 941 | |
Net change in operating assets and liabilities | 1,122 | | | 263 | |
Other | 944 | | | 113 | |
Net cash provided by operating activities | $ | 13,633 | | | $ | 14,895 | |
Net cash provided by operating activities
increasedthis current quarter decreased from
year-to-yearlast year's comparable quarter primarily due
primarily to
the increase inlower income from operations and
lower income taxes paid, partially offset by higher interest expense
paid, which included debt prepayment penalty, and an unfavorable net change in operating assets and liabilities.paid.
Cash Flows from Investing Activities
Following are our cash flows from investing activities (in thousands):
| | For the Three Months Ended December 31, | |
| | 2017 | | | 2016 | |
Additions to property and equipment | | $ | (2,769 | ) | | $ | (3,008 | ) |
Proceeds from sale of assets | | | 632 | | | | - | |
Proceeds from insurance | | | 20 | | | | - | |
Proceeds from notes receivable | | | 28 | | | | 20 | |
Net cash used in investing activities | | $ | (2,089 | ) | | $ | (2,988 | ) |
| | | | | | | | | | | |
| For the Three Months Ended December 31, |
| 2023 | | 2022 |
Payments for property and equipment and intangible assets | $ | (5,135) | | | $ | (12,553) | |
Acquisition of businesses | — | | | (4,000) | |
Proceeds from sale of businesses and assets | — | | | 2,784 | |
Proceeds from insurance | — | | | 64 | |
Proceeds from notes receivable | 55 | | | 55 | |
Net cash used in investing activities | $ | (5,080) | | | $ | (13,650) | |
Following is a breakdown of our
additions topayments for property and equipment
and intangible assets for the
quartersquarter ended December 31,
20172023 and
20162022 (in thousands):
| | For the Three Months Ended December 31, | |
| | 2017 | | | 2016 | |
New facilities capital expenditures | | $ | 2,161 | | | $ | 2,614 | |
Maintenance capital expenditures | | | 608 | | | | 394 | |
Total capital expenditures | | $ | 2,769 | | | $ | 3,008 | |
| | | | | | | | | | | |
| For the Three Months Ended December 31, |
| 2023 | | 2022 |
New facilities, equipment, and intangible assets | $ | 4,152 | | | $ | 10,689 | |
Maintenance capital expenditures | 983 | | | 1,864 | |
Total capital expenditures | $ | 5,135 | | | $ | 12,553 | |
The capital expenditures during the quarter ended December 31,
2017 is2023 were composed
primarilymostly of construction
and development costs for one new location,projects in-progress, while
the capital expendituresthose during the quarter ended December 31,
2016 is2022 were composed primarily of
constructionreal estate and
development costsnew equipment and furniture purchases for
three new locations and our new corporate office.the newly acquired clubs. Maintenance capital expenditures refer mainly to capitalized replacement of productive assets in already existing locations. Variances in capital expenditures are primarily due to the number and timing of new, remodeled, or reconcepted locations under construction.
Cash Flows from Financing Activities
Following are our cash flows from financing activities (in thousands):
| | For the Three Months Ended December 31, | |
| | 2017 | | | 2016 | |
Proceeds from long-term debt | | $ | 58,920 | | | $ | 1,900 | |
Payments on long-term debt | | | (61,256 | ) | | | (2,152 | ) |
Debt prepayment penalty | | | (543 | ) | | | - | |
Purchase of treasury stock | | | - | | | | (1,101 | ) |
Payment of loan origination costs | | | (799 | ) | | | (99 | ) |
Payment of dividends | | | (292 | ) | | | (290 | ) |
Distribution to noncontrolling interests | | | (54 | ) | | | (54 | ) |
Net cash used in financing activities | | $ | (4,024 | ) | | $ | (1,796 | ) |
| | | | | | | | | | | |
| For the Three Months Ended December 31, |
| 2023 | | 2022 |
Proceeds from debt obligations | $ | 701 | | | $ | 1,500 | |
Payments on debt obligations | (6,352) | | | (3,361) | |
Purchase of treasury stock | (2,072) | | | (98) | |
Payment of dividends | (562) | | | (462) | |
Payment of loan origination costs | (136) | | | (96) | |
Share in return of investment by noncontrolling partner | — | | | (600) | |
Net cash used in financing activities | $ | (8,421) | | | $ | (3,117) | |
We did not purchasepurchased 37,954 shares of our Company’s common stock at an average price of $54.59 during the quarter ended December 31, 2017,2023, while we purchased 89,685 treasury1,500 shares of our common stock at an average price of $12.25 per share$65.02 during the quarter ended December 31, 2016. 2022. As of December 31, 2023, we have approximately $14.6 million authorization remaining to purchase additional shares.
We paid
quarterly$0.06 per share for dividends
of $0.03during the first quarter ended December 31, 2023, while we paid $0.05 per share during
both current and prior year quarters.Onthe first quarter ended December 14, 2017, we refinanced several31, 2022.
See Note 46 to our unaudited condensed consolidated financial statements for details of the refinancing.Subsequent to quarter-end, we borrowed $3.0 million from a bank for the purchase of land worth $4.0 million, and refinanced onefuture maturities of our bank notes with a construction loan amounting to $4.7 million. See Note 4 todebt obligations. We have paid all our condensed consolidated financial statements for detailsdebts on time and have not defaulted nor requested forbearance on any of these transactions.
our debts during the three months ended December 31, 2023 and 2022.
Management also uses certain non-GAAP cash flow measures such as free cash flow.
FreeWe calculate free cash flow
is derived fromas 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.
| | For the Three Months | |
| | Ended December 31, | |
| | 2017 | | | 2016 | |
Net cash provided by operating activities | | $ | 8,145 | | | $ | 5,521 | |
Less: Maintenance capital expenditures | | | 608 | | | | 394 | |
Free cash flow | | $ | 7,537 | | | $ | 5,127 | |
Below is a table reconciling free cash flow to its most directly comparable GAAP measure (in thousands): | | | | | | | | | | | |
| For the Three Months Ended December 31, |
| 2023 | | 2022 |
Net cash provided by operating activities | $ | 13,633 | | | $ | 14,895 | |
Less: Maintenance capital expenditures | 983 | | | 1,864 | |
Free cash flow | $ | 12,650 | | | $ | 13,031 | |
Our free cash flow for the quarter decreased by 2.9% compared to the comparable prior-year quarter primarily due to lower income from operations and higher interest expense paid, partially offset lower maintenance capital expenditures paid.
We do not include capital expenditures related to new facilities construction, equipment and intangible assets as a reduction from net cash flow from operating activities to arrive at free cash flow. This is because, based on our capital allocation strategy, acquisitions and development of our own clubs and restaurants are our primary uses of free cash flow.
Other than the
impact of uncertainties caused by near-term macro environment, including commodity and labor inflation and the lingering effect of the COVID-19 pandemic, and our contractual debt
refinancing described above,and lease obligations, we are not aware of any event or trend that would
potentially significantly affectadversely impact our liquidity.
In the event such a trend develops, we believe our working capital and capital expenditure requirements will be adequately met by cash flows from operations. In our opinion, working capital is not a true indicator of our financial status. Typically, businesses in our industry carry current liabilities in excess of current assets because businesses in our industry receive substantially immediate payment for sales, with nominal receivables, while inventories and other current liabilities normally carry longer payment terms. Vendors and purveyors often remain flexible with payment terms, providing businesses in our industry with opportunities to adjust to short-term business
down turns.downturns. We consider the primary indicators of financial status to be the long-term trend of revenue growth, the mix of sales revenues, overall cash flow, profitability from operations and the level of long-term debt.
We continue to monitor the macro environment and will adjust our overall approach to capital allocation as events and trends unfold.
The following table presents a summary of such indicators for the
quartersthree months ended December
31: | | | | | Increase | | | | | | Increase | | | | |
| | 2017 | | | (Decrease) | | | 2016 | | | (Decrease) | | | 2015 | |
Sales of alcoholic beverages | | $ | 17,805 | | | | 23.9 | % | | $ | 14,375 | | | | -1.5 | % | | $ | 14,597 | |
Sales of food and merchandise | | | 5,307 | | | | 26.1 | % | | | 4,207 | | | | -2.9 | % | | | 4,334 | |
Service revenues | | | 15,889 | | | | 17.9 | % | | | 13,475 | | | | 6.6 | % | | | 12,641 | |
Other | | | 2,211 | | | | 31.5 | % | | | 1,682 | | | | -11.6 | % | | | 1,903 | |
Total revenues | | | 41,212 | | | | 22.1 | % | | | 33,739 | | | | 0.8 | % | | | 33,475 | |
Net cash provided by operating activities | | $ | 8,145 | | | | 47.5 | % | | $ | 5,521 | | | | 31.4 | % | | $ | 4,202 | |
Adjusted EBITDA | | $ | 11,094 | | | | 38.6 | % | | $ | 8,006 | | | | -2.2 | % | | $ | 8,187 | |
Long-term debt | | $ | 125,992 | | | | 19.3 | % | | $ | 105,620 | | | | 11.9 | % | | $ | 94,356 | |
31 (in thousands, except percentages):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2023 | | Increase (Decrease) | | 2022 | | Increase (Decrease) | | 2021 |
Sales of alcoholic beverages | $ | 33,316 | | | 12.4 | % | | $ | 29,650 | | | 12.2 | % | | $ | 26,431 | |
Sales of food and merchandise | 10,802 | | | 4.4 | % | | 10,347 | | | (5.0) | % | | 10,894 | |
Service revenues | 25,119 | | | (1.7) | % | | 25,563 | | | 22.5 | % | | 20,876 | |
Other | 4,670 | | | 5.9 | % | | 4,408 | | | 21.3 | % | | 3,635 | |
Total revenues | $ | 73,907 | | | 5.6 | % | | $ | 69,968 | | | 13.2 | % | | $ | 61,836 | |
Net income attributable to RCIHH common stockholders | $ | 7,226 | | | (29.4) | % | | $ | 10,238 | | | (3.2) | % | | $ | 10,575 | |
Net cash provided by operating activities | $ | 13,633 | | | (8.5) | % | | $ | 14,895 | | | (8.4) | % | | $ | 16,264 | |
Adjusted EBITDA* | $ | 17,467 | | | (14.6) | % | | $ | 20,459 | | | 13.9 | % | | $ | 17,965 | |
Free cash flow* | $ | 12,650 | | | (2.9) | % | | $ | 13,031 | | | (14.6) | % | | $ | 15,266 | |
Debt (end of period) | $ | 234,113 | | | 10.8 | % | | $ | 211,234 | | | 30.5 | % | | $ | 161,850 | |
*See definition and calculation of Adjusted EBITDA and Free Cash Flow above underin the Non-GAAP Financial Measures subsection of Results of Operations.Share Repurchase
We did not purchase shares
Table of our common stock during the quarter ended December 31, 2017, while we purchased 89,685 shares of our stock at an average price of $12.25 per share during the quarter ended December 31, 2016. As of December 31, 2017, we have $3.1 million remaining to purchase additional shares under our share repurchase program.Other Liquidity and Capital Resources
We have not established financing other than the notes payable, including the New Loan discussed in Note 4 to the consolidated financial statements and our existing $1.0 million line of credit facility. There can be no assurance that we will be able to obtain additional financing on reasonable terms in the future, if at all, should the need arise.
We believe that the adult entertainment industry standard of treating entertainers as independent contractors provides us with safe harbor protection to preclude payroll tax assessment for prior years. We have prepared plans that we believe will protect our profitability in the event that the sexually oriented business industry is required in all states to convert dancers who are now independent contractors into employees.
The sexually-oriented business industry is highly competitive with respect to price, service and location, as well as the professionalism of the entertainment. Although management believes that we are well-positioned to compete successfully in the future, there can be no assurance that we will be able to maintain our high level of name recognition and prestige within the marketplace.
Impact of Inflation
We have not experienced a material overall impact from inflation in our operations during the past several years.
To the extent permitted by competition, we have managed to recover increased costs through price increases and may continue to do so. However, there can be no assurance that we will be able to do so in the future.
Our nightclub operations are affected by seasonal factors. Historically, we have experienced reduced revenues from April through September (our fiscal third and fourth quarters) with the strongest operating results occurring during October through March (our fiscal first and second quarters).
Our revenues in certain markets are also affected by sporting events that cause unusual changes in sales from year to year.
Capital Allocation Strategy
Our capital allocation strategy provides us with disciplined guidelines on how we should use our free cash flows; provided however, that we may deviate from this strategy if other strategic rationale warrants. We calculate free cash flow as net cash flows from operating activities minus maintenance capital expenditures. Using the after-tax yield of buying our own stock as baseline, management believes that we are able to make better investment decisions.
Based on our current capital allocation strategy:
•We consider acquiring or developing our own clubs or restaurants that we believe have the potential to provide a minimum cash on cash return of 25%-33%, absent an otherwise strategic rationale;
•We consider disposing of underperforming units to free up capital for more productive use;
•We consider buying back our own stock if the after-tax yield on free cash flow is above 10%;
•We consider paying down our most expensive debt if it makes sense on a tax adjusted basis, or there is an otherwise strategic rationale.
We believe that
our nightclub operationswe can continue to grow organically and through careful entry into markets
and demographic segments with high growth potential. Our growth strategy
involves the following: (i) to acquireincludes acquiring existing units,
in locations that are consistent with our growth and income targets and which appear receptive to the upscale club formula we have developed; (ii) to openopening new units after market
analysis; (iii) to franchise our Bombshells brand; (iv) to form joint ventures or partnerships to reduce start-up and operating costs, with us contributing equity in the form of our brand name and management expertise; (v) to developanalysis, developing new club concepts that are consistent with our management and marketing
skills; (vi) to developskills, franchising our Bombshells brand, and
opendeveloping and opening our
restaurant conceptsBombshells concept as our capital and manpower
allow; and (vii) to control the real estate in connection with club operations, although some units may be in leased premises.We believe that Bombshells can grow organically and through careful entry into markets and demographic segments with high growth potential. allow.
All
fivethirteen of the
currently existing Bombshells
areas of December 31, 2023 were located in Texas. Our growth strategy is to diversify our operations with these units which do not require SOB licenses, which are sometimes difficult to obtain. While we are searching for adult nightclubs to acquire, we are able to also search for restaurant/sports bar locations that are consistent with our income targets.
We plan to open two Bombshells in fiscal 2018.
We continue to evaluate opportunities to acquire new nightclubs and anticipate acquiring new locations that fit our business model as we have done in the past. The acquisition of additional clubs may require us to take on additional debt or issue our common stock, or both. There can be no assurance that we will be able to obtain additional financing on reasonable terms in the future, if at all, should the need arise. An inability to obtain such additional financing could have an adverse effect on our growth strategy.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As of December 31, 2017,2023, there were no material changes to the information provided in Item 7A of the Company’s Annual Report on Form 10-K for fiscal year ended September 30, 2017.2023.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures, defined in Rule 13a-15(e) under the Exchange Act, that are designed to ensure that the information required to be filed or submitted with the SEC under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management of the company with the participation of its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding
required.In connection with the preparation of this Quarterly Report on Form 10-Q for the quarter ended December 31, 2017,2023, an evaluation was performed under the supervision and with the participation of management, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on their evaluation, they have concluded that our disclosure controls and procedures were not effective as of December 31, 2017.2023. This determination is based on the previously reported material weaknesses management previously identified in our internal control over financial reporting, as described below. We are in the process of remediating the material weaknesses in our internal control, as described below, whichbelow. We believe the completion of these processes should remedy our disclosure controls and procedures, but weprocedures. We will continue to monitor this issue.
these issues.
Previously Reported Material
WeaknessesWeakness in Internal Control Over Financial Reporting
In our Annual Report for the year ended September 30,
2017,2023, filed with the SEC on
FebruaryDecember 14,
2018,2023, management concluded that our internal control over financial reporting was not effective as of September 30,
2017.2023. In
management’sthe evaluation,
management identified material weaknesses in internal control related (1) proper design and implementation of controls over management's review of the
followingCompany's accounting for business combinations, specifically related to the identification of and accounting for intangible assets acquired in a business combination, and over the precision of management's review of certain valuation assumptions; (2) the impairment of goodwill, indefinite-lived intangibles, and long-lived assets, specifically over the precision of management's review of certain assumptions; and (3) ineffective information technology general controls ("ITGCs") in the areas of user access and program change-management over certain information technology ("IT") systems that support the Company's financial reporting processes. Our business process controls (automated and manual) that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted. We believe that these control deficiencies were
identified as material weaknesses: | ● | Lack of effective control environment, which was primarily attributable to not having a sufficient complement of accounting and financial reporting personnel with an appropriate level of knowledge to address our financial reporting requirements which contributed to the following material weaknesses: |
| ● | Lack of sufficient complement to design and maintain effective controls over complex accounting and management estimatesa result of inadequate IT controls over the review of user access and imprecise documentation of procedures related to assets held for sale, business combinations, cost method investments, income taxes, and the impairment analyses for indefinite lived intangible assets, goodwill, and property and equipment; |
| ● | Lack of effective controls to support accurate accounting, reporting, and disclosures within our Form 10-K; and |
| ● | Lack of effective controls to prevent unauthorized access to certain systems, programs and data, and provide for periodic review and monitoring of access including review of security logs and analysis of segregation of duties conflicts. |
Remediation Efforts to Address Material Weaknesses
As disclosed inprogram change management. Additionally, we rely upon a variety of outsourced IT service providers for key elements of the technology infrastructure impacting our most recent Annual Reportfinancial reporting process. Certain outsourced IT service providers could not provide System and Organization Controls ("SOC") reports for periods that closely align with our fiscal year end. Given that management did not effectively assess the design and operation of these outsourced IT service providers’ internal controls, some of our controls over IT systems and business processes were also deemed ineffective, but only to the extent that we rely upon information that was subject to the outsourced IT service providers’ control environment. These deficiencies may have an impact on Form 10-K, we have,our financial statements, account balances, and continue to, identifydisclosures. Based on our evaluation, our management, with the participation of our chief executive officer and implement actions to improvechief financial officer, concluded that our internal control over financial reporting was not effective as of September 30, 2023.
Remediation Efforts to Address Material Weakness
Review of Accounting for Business Combinations
Management is committed to the remediation of the material weakness described above. As such, controls will be added to both increase precision of management’s review of each component of business combinations, and disclosureif necessary, retain the services of a third-party consultant to assist in the valuation and accounting for intangible assets acquired in a business combination.
Review of Accounting for Impairment of Goodwill and Intangible Assets
As most of the assumptions used in the valuation models employed in impairment analyses are subjective in nature, Management will employ additional controls to validate these assumptions, including the engagement of a third-party consultant to assist developing valuation models and establishing sound and reasonable assumptions.
Information Technology General Controls
As a result of the material weakness, we have initiated and will continue to implement remediation measures to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include: (i) strengthening and enhancing the review and documentation procedures
including actions to enhancein our
resourcescontrols over user access review; (ii) define and
training with respect to financialcommunicate clear and concise program change management policy and procedures; (iii) enhancing the reporting
and disclosure responsibilities, and increase utilizationrequirements of accounting system
functionality, with continued oversight from the Audit Committee.We have taken,audit logs; (vi) continuous improvement over our ITGC controls related to third party applications; and continue to take, the actions described below to remediate the identified material weaknesses. As we continue to evaluate and work to improve our internal controls over financial(vi) enhanced quarterly reporting our senior management may determine to take additional measures to address control deficiencies or determine to modifyon the remediation efforts described in this section. Whilemeasures to the Audit Committee and senior management are closely monitoringof the implementation,board of directors.
It is our belief that these added controls will effectively remediate the existing material weaknesses.
We believe that these actions will remediate the material weaknesses. The material weaknesses will not be considered remediated, however, until the
applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation
efforts discussed in this section, including any additional remediation efforts that our senior management identifies as necessary, are completed, tested and determined effective, theof these material weaknesses
described above will continue to exist.Control Environment
Our Board of Directors has directed senior management to ensure that a proper, consistent tone is communicated throughout the organization, which emphasizes the expectation that previously existing deficiencies will be rectified through implementation of processes and controls to ensure strict compliance with US GAAP and regulatory requirements. We also have taken steps to effect a proper tone through our policies and personnel.
Control Activities
Strengthening internal controls over complex accounting and management estimates –Subsequent to September 30, 2017, we have committed to resolve the controls over complex accounting and estimates and prevent instances of incorrect accounting and improper valuation decisions, by hiring valuation experts to assist us with our goodwill, indefinite-lived intangible assets, and property and equipment impairment analyses whenever necessary and with the analysis and accounting for business combinations, income taxes, and other complex accounting matters.
Strengthening internal controls over financial reporting and disclosures -We believe the new Enterprise Resource Planning (“ERP”) system described below will assist us in strengthening the controls over financial reporting, and we are committed to also add an overlay of review of our financial statements during our financial reporting process. We have also upgraded our accounting staff with certain newly hired accountants.
We have also committed to hiring an outsourced internal audit group to assist with the controls over these processes and other internal control functions.
With the oversight of our Board of Directors and Audit Committee, the Company has also begun taking steps and plans to take additional measures to remediate the underlying causes of the material weaknesses.
Strengthening the information technology application and related segregation of duties issues –We were previously aware of the limitations of our accounting software and had been in the planning/implementation process of replacing the software for many monthscompleted prior to September 30, 2017. In October 2017, we completed the conversion to a new ERP system which, along with changes to our manual internal controls, we believe will resolve the issues detailed above relating to the information systems and segregationend of duties. The new ERP system has features that prevent unauthorized access to certain programs and data, and provides for periodic review and monitoring of access including review of security logs and analysis of segregation of duties conflicts. These features include proper segregation of duties within our journal entry process. We have also hired a Director of ERP & Business Intelligence.
fiscal 2024.
Changes in Internal Control Over Financial Reporting
Other than as described above,
there were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31,
20172023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
See the “Legal Matters” section within Note 89 of the unaudited condensed consolidated financial statements within this Quarterly Report on Form 10-Q, which information is incorporated herein by reference. There were no material changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017.2023, except for such risks and uncertainties that may result from the additional disclosure in the “Legal Matters” section within Note 9 of the unaudited condensed consolidated financial statements within this Quarterly Report on Form 10-Q, which information is incorporated herein by reference. The risks described in the Annual Report on Form 10-K and in this Form 10-Q are not the only risks the Company faces. Additional risks and uncertainties not currently known to the Company, or that the Company deems to be immaterial, also may have a material adverse impact on the Company’s business, financial condition or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.In September 2008, our Board of Directors authorized us to
Our share repurchase up to $5.0 million worth of our common stock inactivity during the open market or in privately negotiated transactions. As of April 2013, we completed the repurchase of all $5.0 million in stock authorized under this plan. In April 2013, our Board of Directors authorized us to repurchase up to an additional $3.0 million worth of our common stock, and in May 2014, our Board of Directors increased the repurchase authorization by another $7.0 million. In May 2016, the Board of Directors increased the repurchase authorization by an additional $5.0 million. During the quarterthree months ended December 31, 2017, we did not2023 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number of Shares (or Units) Purchased | | Average Price Paid per Share (or Unit)(1) | | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs(2) | | Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet be Purchased Under the Plans or Programs |
October 1-31, 2023 | | 32,704 | | | $ | 54.55 | | | 32,704 | | | $ | 14,857,259 | |
November 1-30, 2023 | | 5,250 | | | $ | 54.84 | | | 5,250 | | | $ | 14,569,372 | |
December 1-31, 2023 | | — | | | | | — | | | $ | 14,569,372 | |
| | 37,954 | | | $ | 54.59 | | | 37,954 | | | |
(1) Prices include any commissions and transaction costs, but exclude a 1% excise tax.
(2) All shares were purchased pursuant to the repurchase sharesplans approved by the board of the Company’s common stock. Asdirectors as disclosed in our most recent Annual Report on Form 10-K.
| | | | | | | | |
Exhibit No. | | Description |
| 3.1 | | Articles of Incorporation dated December 9, 1994. (Incorporated by reference from Form SB-2 filed with the SEC on January 11, 1995.) *
31.1 | | |
3.2 | | Certificate of Amendment to Articles of Incorporation dated September 9, 2008. (Incorporated by reference from Definitive Schedule 14A filed with the SEC on July 21, 2008.) * |
| | |
3.3 | | Certificate of Amendment to Articles of Incorporation dated August 6, 2014. (Incorporated by reference from Definitive Schedule 14A filed with the SEC on June 24, 2014.) * |
| | |
3.4 | | Amended and Restated Bylaws. (Incorporated by reference from Form 8-K filed with the SEC on March 16, 2016.) * |
| | |
4.1 | | Consolidated, Amended and Restated Promissory Note for $62,539,366.08 with Centennial Bank (Incorporated by reference from Form 8-K filed with the SEC on December 19, 2017) * |
| | |
4.2 | | Amended and Restated Promissory Note for $10,558,311.35 with Centennial Bank (Incorporated by reference from Form 8-K filed with the SEC on December 19, 2017) * |
| | |
4.3 | | Amended and Restated Promissory Note for $8,147,572.57 with Centennial Bank (Incorporated by reference from Form 8-K filed with the SEC on December 19, 2017) * |
| | |
10.1 | | Employment Agreement with Eric S. Langan. (Incorporated by reference from Form 8-K filed with the SEC on July 27, 2015.) * |
| | |
10.2 | | Employment Agreement with Travis Reese. (Incorporated by reference from Form 8-K filed with the SEC on September 19, 2014.) * |
| | |
10.3 | | Employment Agreement with Phillip K. Marshall. (Incorporated by reference from Form 8-K filed with the SEC on August 5, 2016.) * |
| | |
10.4 | | Loan Agreement between RCI Holdings, Inc. and Centennial Bank (Incorporated by reference from Form 8-K filed with the SEC on December 19, 2017) * |
| | |
10.5 | | Absolute Unconditional and Continuing Guaranty of RCI Hospitality Holdings, Inc. to Centennial Bank (Incorporated by reference from Form 8-K filed with the SEC on December 19, 2017) * |
| | |
10.6 | | Absolute Unconditional and Continuing Guaranty of Eric S. Langan to Centennial Bank (Incorporated by reference from Form 8-K filed with the SEC on December 19, 2017) * |
| | |
31.1 | | |
| | |
31.2 | | |
| | |
32 | | |
| | |
101 | | The following financial information from RCI Hospitality Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2023 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Changes in Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to the Condensed Consolidated Financial Statements. |
| 101.INS | | XBRL Instance Document.
101.SCH 104 | | Cover Page Interactive Data File (formatted as Inline XBRL Taxonomy Extension Schema Document. |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB | | XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document. |
* Incorporated by reference from our previous filings with the SEC.
| 28 | and contained in Exhibit 101) |
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: March 7, 2018February 8, 2024 | By: | /s/ Eric S. Langan |
| | Eric S. Langan |
| | Chief Executive Officer and President |
| | |
Date: March 7, 2018February 8, 2024 | By: | /s/ Phillip K. MarshallBradley Chhay |
| | Phillip K. MarshallBradley Chhay |
| | Chief Financial Officer and Principal Accounting Officer |