Financial Results Overview
* 2008 revenues up 45.6% to $57.7 million; Q4 2008 revenues increased
13.4% to $14.5 million
* 2008 net loss of $30.7 million, or ($1.69) per diluted share;
Q4 2008 net loss of $35.7 million, or ($2.00) per diluted share
* Net losses for 2008 full year and Q4 included $48.0 million in
primarily non-cash impairment charges recorded in Q4 2008
* Excluding the above impairment charges and related deferred tax
benefits:
* 2008 net income was $5.5 million, or $0.30 per diluted share
* Q4 2008 net income was $0.5 million, or $0.03 per diluted share
* EBITDA (excluding all impairment charges) for 2008 rose 14.2% to
$11.5 million
DENVER, April 13, 2009 (GLOBE NEWSWIRE) -- VCG Holding Corp. (Nasdaq:VCGH), a growing and leading consolidator and operator of adult nightclubs, today provided updated financial results for the fourth quarter and fiscal year ended December 31, 2008. The financial information in this press release supersedes the information in VCGH's March 27, 2009 press release. The financial information contained in the March 27, 2009 press release should not be relied upon. VCGH filed its Form 10-K for the year ended December 31, 2008 on April 13, 2009. As previously disclosed, results for 2007 have been restated to reflect changes in the valuation of certain acquired assets (see Amendment No. 2 to Form 8-K filed April 13, 2009, and Form 10-K filed April 13, 2009 for additional information).
Troy Lowrie, Chairman and Chief Executive Officer, stated, "We are pleased with our performance for the fourth quarter and full year, including revenue growth for both periods during a sluggish economy. During the fourth quarter of 2008 we incurred pre-tax, non-cash impairment charges of $46.0 million, or ($2.58) per share after-tax, related to the write-off of goodwill, licenses and other intangibles, and pre-tax, non-cash impairment charges of $2.0 million, or ($0.11) per share after-tax, related to land and a building we own in Phoenix (collectively, the "non-cash charges"). Prior to the non-cash charges, we were profitable for both the fourth quarter and full year 2008, and recorded a fourth consecutive year of EBITDA growth."
December 31,
------------------
2007
2008 (Restated)
------------------
Net Income (loss) $(30,711) $ 5,419
Add back:
Depreciation 1,678 1,030
Amortization of covenants not-to-compete 21 --
Amortization of leasehold rights and
liabilities, net (192) (100)
Interest expense 3,761 2,440
Total income taxes (11,102) 1,250
-------- --------
EBITDA before non-cash impairment charges $(36,545) $ 10,039
Add back:
Total non-cash impairment charges 48,006 --
-------- --------
EBITDA excluding non-cash impairment charges $ 11,461 $ 10,039
======== ========
He continued, "Cash, cash equivalents and investments at December 31, 2008 totaled $2.3 million, operating cash flow for the twelve months ended December 31, 2008 (exclusive of the non-cash charges) was $11.8 million, and free cash flow for the full year ended December 31, 2008 (exclusive of the non-cash charges) was $4.2 million. We are continuing to reduce debt, primarily through principal prepayments and, where appropriate, extended maturity dates. Our efforts in these areas produced significant improvements in our balance sheet at December 31, 2008 when compared to December 31, 2007, including a $5.7 million reduction in current portion of long-term debt and a $4.0 million improvement in our working capital deficit."
Fourth Quarter 2008 Results
Total revenue for fourth quarter 2008 increased 13.4% to $14.5 million from $12.8 million in 2007, in part due to the acquisitions of two new clubs after December 31, 2007. Same store sales for fourth quarter 2008 increased 2.1% over the same period in 2007.
Cost of goods sold (the cost of alcohol, food and merchandise) declined as a percentage of applicable revenues to 23.9% from 26.5% in 2007, primarily attributable to a higher number of all-nude nightclubs in operation in 2008, which do not serve alcohol. These nightclubs have a lower cost of goods sold and higher profit margins.
Total operating expenses increased to $62.1 million from $11.7 million in 2007, and included $48.0 million of non-cash impairment charges. There were no impairment charges in the prior year period. Without those impairment charges the total operating expenses would have been $14.1 million.
The impact of the $48.0 million in non-cash charges resulted in an operating loss for fourth quarter 2008 of ($47.6) million as compared to operating income of $1.1 million in fourth quarter 2007. Excluding the impairment charges, operating income for fourth quarter 2008 was $0.4 million.
The pre-tax net loss from continuing operations for fourth quarter 2008 was ($48.8) million, including the $48.0 million in non-cash charges, as compared to pre-tax income from continuing operations of $0.4 million in the fourth quarter of 2007. Excluding the non-cash charges, pre-tax income from continuing operations for fourth quarter 2008 was ($0.8) million.
The net loss for fourth quarter 2008 was ($35.6) million, or ($2.00) per fully diluted share, on approximately 17.9 million shares outstanding, as compared to fourth quarter 2007 net loss of ($0.9) million, or ($0.05) per fully diluted share, on approximately 17.5 million shares outstanding. Excluding the $48.0 million of non-cash impairment charges, net income for fourth quarter 2008 was $12.3 million, or $0.69 per diluted share.
EBITDA (excluding the non-cash charges) for fourth quarter 2008 was $0.7 million as compared to $0.9 million for fourth quarter 2007.
Full Year 2008 Results
Total revenue for 2008 increased 45.6% to $57.7 million from $39.6 million in 2007, in part due to the acquisitions of two new clubs after December 31, 2007. Same store sales for the full year 2008 increased 9.1% over the full year 2007.
Cost of goods sold declined as a percentage of applicable revenues to 24.3% from 25.1% in 2007, primarily attributable to a higher number of all-nude nightclubs in operation in 2008, which do not serve alcohol.
Total operating expenses increased to $95.1 million from $30.7 million in 2007, and included $48.0 million of non-cash impairment charges. There were no impairment charges in the prior year. Without those impairment charges the total operating expenses would have been $47.1 million.
The impact of the non-cash charges resulted in an operating loss for 2008 of ($37.4) million as compared to operating income of $9.0 million in 2007. Excluding these charges, operating income for 2008 was $10.6 million.
The pre-tax net loss from continuing operations for 2008 was ($41.4) million, including the non-cash charges, as compared to pre-tax income from continuing operations of $6.9 million in 2007. Excluding the non-cash charges, pre-tax income from continuing operations for 2008 was $6.6 million.
The net loss for 2008 was ($30.7) million, or ($1.69) per fully diluted share, on approximately 18.1 million shares outstanding, as compared to 2007 net income of $5.4 million, or $0.32 per fully diluted share, on approximately 17.0 million shares outstanding. Excluding the non-cash impairment charges, net income for 2008 was $17.3 million, or $0.95 per diluted share.
EBITDA (excluding the non-cash charges) for the full year 2008 was $11.5 million as compared to $10.0 million in 2007.
ABOUT VCG HOLDING CORP.
VCG Holding Corp. is an owner, operator, and consolidator of adult nightclubs throughout the United States. The Company currently owns 20 adult nightclubs. The night clubs are located in Anaheim, Indianapolis, St. Louis, Denver, Colorado Springs, Ft. Worth, Dallas, Raleigh, Minneapolis, Louisville, Miami, and Portland, ME.
The VCG Holding Corp. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5105
FORWARD LOOKING STATEMENT
Certain statements in this release are forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995. Such statements are based on current expectations, estimates and projections about the Company's business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors identified from time to time in the Company's reports with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2008. All forward-looking statements attributable to us or any persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. All guidance and forward-looking statements in this press release are made as of the date hereof and we do not undertake any obligation to update any forecast or forward-looking statements, except as may be required by law.
VCG Holding Corp.
Consolidated Balance Sheets
(Dollar amounts in thousands)
December 31,
------------------
2008 2007
-------- --------
Assets (Restated)
Current Assets
Cash and cash equivalents (including $250,000 of
restricted cash in 2007) $ 2,210 $ 2,979
Assets held for sale 107 373
Other receivables 25 182
Income taxes receivable 276 272
Inventories 949 965
Prepaid expenses 282 276
Current portion of deferred tax assets 171 --
-------- --------
Total Current Assets 4,020 5,047
-------- --------
Property and equipment, net 25,738 24,717
Deferred tax assets (non-current) 4,069 --
Non-compete agreements 41 52
Licenses 36,413 53,317
Goodwill 2,453 17,622
Favorable lease rights 1,705 1,533
Trade names 619 578
Other long-term assets 568 854
-------- --------
Total Assets 75,626 103,720
======== ========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable--trade 848 764
Accrued expenses 2,257 1,647
Deferred revenue 109 150
Unfavorable lease liabilities- current portion 278 262
Current portion of capitalized lease 10 9
Current portion of long-term debt 2,602 8,386
Current portion of long-term debt, related party 1,024 948
-------- --------
Total current liabilities 7,128 12,166
-------- --------
Long-term Liabilities
Deferred income taxes -- 7,076
Deferred rent 845 --
Unfavorable lease liabilities 6,426 5,322
Capital lease, net of current portion 9 19
Long-term debt, net of current portion 25,749 15,695
Long-term debt, related party 7,083 5,791
-------- --------
Total long-term liabilities 40,112 33,903
-------- --------
Commitments and contingent liabilities -- --
Minority Interest 3,560 3,663
-------- --------
Stockholders' Equity
Redeemable Preferred Stock, none issued and
outstanding -- --
Common Stock
Common stock $.0001 par value; 50,000,000
shares authorized; 17,755,378 (2008) and
17,723,975 (2007) shares issued and
outstanding 2 2
Paid-in capital 52,557 51,008
Retained earnings (accumulated deficit) (27,733) 2,978
-------- --------
Total stockholders' equity 24,826 53,988
-------- --------
Total Liabilities and Stockholders' Equity $ 75,626 $103,720
======== ========
VCG Holding Corp.
Consolidated Statements of Income
(Dollar amounts in thousands except earnings per share)
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------- ----------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
(Restated) (Restated)
Revenue
Sales of alcoholic
beverages $ 6,405 $ 6,051 $ 26,242 $ 19,248
Sales of food and
merchandise 498 745 2,503 2,282
Service revenue 6,874 4,595 25,568 13,997
Other income 754 1,422 3,380 4,090
---------- ---------- ---------- ----------
Total revenue 14,531 12,813 57,693 39,617
---------- ---------- ---------- ----------
Operating expenses
Cost of goods sold 1,650 1,801 6,980 5,414
Salaries and wages 3,605 3,312 13,461 8,899
Other general and
administrative
Taxes and permits 1,196 502 2,894 1,527
Charge card and
bank fees 236 172 869 480
Rent 2,013 1,187 5,798 3,764
Legal fees 367 1,693 1,101 673
Professional
fees 1,371 -- 2,788 1,495
Advertising and
marketing 657 725 2,921 1,859
Insurance 479 1,042 1,712 1,042
Utilities 265 -- 1,104 652
Repairs and
maintenance 269 -- 1,022 631
Other 1,554 1,095 4,778 3,193
Impairment of
building and land 1,961 -- 1,961 --
Impairment of
indefinite-lived
intangible assets 27,324 -- 27,324 --
Impairment of
goodwill 18,721 -- 18,721 --
Depreciation and
amortization 466 184 1,699 1,030
---------- ---------- ---------- ----------
Total operating
expenses 62,134 11,713 95,133 30,659
---------- ---------- ---------- ----------
Income (loss) from
operations (47,603) 1,100 (37,440) 8,958
---------- ---------- ---------- ----------
Other income
(expenses)
Interest expense (1,147) (614) (3,761) (2,440)
Interest income 3 5 23 326
(loss) / gain on
sale of assets (72) 190 (206) 190
Realized loss on
sale of marketable
securities -- (281) -- (91)
---------- ---------- ---------- ----------
Total other
income
(expenses) (1,216) (700) (3,944) (2,015)
---------- ---------- ---------- ----------
Income from
continuing
operations before
income taxes (48,819) 400 (41,384) 6,943
Income tax expense
(benefit) - current (722) -- 730 --
Income tax expense
(benefit) - deferred (12,507) 1,006 (11,832) 1,250
---------- ---------- ---------- ----------
Total income
taxes (13,229) 1,006 (11,102) 1,250
---------- ---------- ---------- ----------
Minority interest
expense (67) (263) (429) (251)
---------- ---------- ---------- ----------
Income from
continuing
operations $ (35,657) $ (869) $ (30,711) $ 5,442
---------- ---------- ---------- ----------
(Loss) from
discontinued
operations,
net of tax -- -- -- (23)
---------- ---------- ---------- ----------
Net income
applicable to
common stockholders (35,657) (869) (30,711) $ 5,419
========== ========== ========== ==========
Earnings per share:
Basic income per
common share $ (2.00) $ (0.05) $ (1.71) $ 0.33
Fully diluted
income per common
share $ (2.00) $ (0.05) $ (1.69) $ 0.32
Weighted average
shares outstanding 17,854,636 17,180,029 17,925,132 16,623,213
Fully diluted
weighted average
shares outstanding 17,854,636 17,527,748 18,146,949 17,012,983
VCG Holding Corp.
Consolidated Statements of Cash Flows (1)
For the years ended
(In thousands)
-------- --------
2008 2007
-------- --------
(Restated)
Operating Activities
Net income (loss) $(30,711) $ 5,419
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Impairment of goodwill 18,721 --
Impairment of indefinite life intangible
assets 27,324 --
Impairment of building and land 1,961 --
Depreciation and amortization 1,678 1,030
Amortization of lease rights and lease
liabilities (192) (100)
Amortization of covenant not to compete
agreements 21 --
Amortization of loan fees 448 132
Stock-based compensation expense 421 150
Issuance of common stock for services 1,422 339
Deferred income taxes (benefit) (11,831) 1,250
Minority interest expense 427 251
(Gain) loss on disposition of assets 216 (99)
Accrued interest added to long-term debt 181 --
Changes in operating assets and liabilities:
Income taxes and other receivables 152 69
Inventories 20 (76)
Prepaid expenses (6) (2)
Accounts payable and accrued expenses 694 825
Deferred revenue (41) 109
Deferred rent 845 --
-------- --------
Net cash provided by operating activities 11,750 9,297
-------- --------
Investing Activities
Investments -- 259
Acquisitions of businesses, net of cash
acquired (9,670) (40,639)
Additions to property and equipment (1,321) (998)
Deposits (206) 56
Purchase of assets held for resale (128) (930)
Proceeds from sale of assets 243 763
-------- --------
Net cash used by investing activities (11,082) (41,489)
-------- --------
Financing Activities
Loan fees paid (268) (392)
Payment on capitalized leases (9) (950)
Proceeds from debt 16,149 25,225
Payments on debt (16,486) (11,300)
Offering costs -- (129)
Proceeds from stock issuances -- 20,400
Distributions to minority interests (529) (445)
Purchase of treasury stock (753) (257)
Proceeds from warrants conversion to stock 459 1,008
-------- --------
Net cash provided by financing activities (1,437) 33,160
-------- --------
Net increase (decrease) in cash (769) 969
Cash beginning of period 2,979 2,011
-------- --------
Cash end of period $ 2,210 $ 2,979
======== ========
(1) For additional cash flow disclosure please refer to the
Form 10-K filed with the SEC on April 13, 2009
Calculation of Free Cash Flow
-----------------------------
(In thousands)
2008 2007
-------- --------
(Restated)
EBITDA, exclusive of non-cash charges $(36,545) $ 10,039
Less:
Non-cash impairment charges $(48,006) --
Interest expense $ 3,761 2,440
Minority interest expense $ 429 251
Cash income tax expense $ 730 --
Maintenance Cap-Ex $ 1,022 631
Capital Expenditures $ 1,321 998
------------------
$(40,743) (4,320)
------------------
Free cash flow $ 4,198 5,719
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