2010 Financial Results Overview
- Q4 revenue of $13.6 million; FY 2010 revenue of $55.3 million
- Q4 operating income of $1.7 million; FY 2010 operating income of $5.6 million
- Q4 net income from continuing operations of $0.8 million, or $0.04 per share; FY 2010 net income from continuing operations of $2.0 million, or $0.09 per share
- FY 2010 EBITDA of $7.4 million
- Reduced debt by $5.8 million during FY 2010
- Cash balance of $2.6 million at December 31, 2010
DENVER, March 30, 2011 (GLOBE NEWSWIRE) -- VCG Holding Corp. (Nasdaq:VCGH), a growing and leading consolidator and operator of adult nightclubs, today announced financial results for the fourth quarter and full year ended December 31, 2010 (see attached tables, including reconciliation tables).
Troy Lowrie, Chairman and Chief Executive Officer, stated, "We are pleased with our results for 2010, which reflect our success in introducing and cultivating new revenue streams, and strengthening our overall financial position. Cash flow from operations at December 31, 2010 was $7.8 million and free cash flow was $3.2 million. At December 31, 2010, we had reduced total debt to $24.9 million from $30.7 million at December 31, 2009, had access to liquidity of approximately $1.6 million, and a cash balance of $2.6 million."
Fourth Quarter 2010 Financial Results
Total revenue for the fourth quarter of 2010 increased to $13.6 million from $13.0 million in the fourth quarter of 2009. Revenue increased due to higher sales of food and merchandise, higher service revenue, and increased other income, which offset a decline in sales of alcohol. The 14.7% increase in service revenue reflected continued patron acceptance of table side services, wristband access to special areas, table dances, and suite fees, all of which were introduced company-wide in 2009.
Cost of goods sold (the cost of alcohol, food and merchandise) was $1.5 million, or 26.6% of attributable revenue, compared to $1.5 million, or 25.1% of attributable revenue, in the fourth quarter of 2009.
Total operating expenses for the fourth quarter of 2010 were $11.8 million compared to total operating expenses of $14.4 million for the 2009 fourth quarter. Operating expenses in the 2009 fourth quarter included $1.8 million or $0.10 per share, in non-cash impairment charges related to licenses and goodwill at certain of VCG's clubs, as well as higher legal and professional fees.
Advisory fees related to change in control were $0.3 million for the fourth quarter 2010, compared to $1.0 million in the fourth quarter 2009.
Operating income for the fourth quarter of 2010 was $1.7 million compared to an operating loss of $1.4 million in the fourth quarter of 2009. This improvement was due primarily to the effect of the above-referenced non-cash charges, change in control costs, and higher legal and professional fees.
Total interest expense declined to $0.7 million in the fourth quarter of 2010 from $0.8 million in the fourth quarter of 2009, reflecting the Company's ongoing efforts to pay down debt.
Income from continuing operations, net of income taxes for the fourth quarter of 2010 was $0.8 million, or $0.04 per share, compared to a loss of $1.3 million, or ($0.08) per share, in the fourth quarter of 2009.
Net income for the fourth quarter of 2010 was $0.7 million, or $0.05 per share, compared to a net loss of $1.3 million, or ($0.08) per share, in the 2009 fourth quarter. Excluding the impairment charges and advisory fees related to change in control, net income for the 2009 fourth quarter was $1.4 million, or $0.08 per share.
2010 Financial Results
Total revenue for 2010 increased to $55.3 million from $53.2 million last year, due to higher sales of food and merchandise, higher service revenues, and increased other income, offsetting a decline in sales of alcohol.
Cost of goods sold (the cost of alcohol, food and merchandise) was $6.0 million, or 26.1% of attributable revenue, compared to $5.9 million, or 23.8% of attributable revenue last year.
Salaries and wages increased by $1.7 million, or 12.5%, compared to the same period in 2009. This increase was due to the additional commission paid to TLC employees, which corresponds to an increase in service revenue, increased supervisor salaries, the fee structure used to compensate entertainers in Minnesota and a severance payment made to a departing executive officer.
Total operating expenses for 2010 were $49.7 million, up from $48.3 million last year. Total operating expenses for 2010 included a $2.1 million acquisition indemnification claim expense related to the 2007 acquisition of the Raleigh, NC club. For 2009, total operating expenses included $1.8 million, or $0.10 per share, in non-cash impairment charges related to licenses and goodwill at VCG's clubs and $0.3 million in other impairment charges.
Advisory fees related to change in control were $0.4 million for 2010 compared to $1.0 million in 2009.
Operating income for 2010 was $5.6 million compared to $4.9 million in 2009, which included the impact of the above-referenced charges and costs.
Total interest expense declined to $2.8 million for 2010 from $3.4 million in the comparable prior year period, for the reasons cited above.
Income from continuing operations, net of income taxes in 2010 was $2.0 million, or $0.09 per share, compared to $1.1 million, or $0.03 per share, last year.
As previously announced, on July 16, 2010, VCG sold its Jaguar's Gold Club in Fort Worth, Texas to a wholly-owned subsidiary of Rick's Cabaret International, Inc. The operations of Jaguar's are reflected as discontinued operations on VCG's Consolidated Statements of Income. Results for the twelve months ended December 31, 2010 included income from discontinued operations, net of tax, in the amount of $0.5 million, or $0.03 per diluted share. Results for the twelve months ended December 31, 2009 included income from discontinued operations, net of tax, in the amount of $0.1 million, or $0.01 per diluted share, associated with the Jaguar sale. Jaguar's assets and liabilities as of December 31, 2009 have been reclassified to Assets of business held for sale and Liabilities of business held for sale, respectively, in VCG's Consolidated Balance Sheet.
Net income for 2010 was $2.0 million, or $0.12 per share, compared to net income of $0.7 million, or $0.04 per share, last year.
EBITDA for 2010 was $7.4 million as compared to EBITDA of $8.0 million last year.
Potential Sale of the Company
A special meeting of shareholders of VCG will be held on April 11, 2011 at 1:30 p.m. Mountain Time at the Sheraton Denver West Hotel, located at 360 Union Boulevard, Lakewood, Colorado 80228. At the special meeting, shareholders will be asked to consider and vote upon a proposal to approve the Agreement and Plan of Merger that VCG entered into on November 9, 2010, with Family Dog, LLC, a Colorado limited liability company, its wholly-owned subsidiary, FD Acquisition Co., VCG's Chairman of the Board and Chief Executive Officer, Troy Lowrie, and VCG's President and Chief Operating Officer, Micheal Ocello.
Information regarding the matters to be acted on at the special meeting are available in the proxy statement filed by VCG with the Securities and Exchange Commission on March 18, 2011.
VCG will not be hosting a conference call in connection with the issuance of 2010 fourth quarter and full year financial results in light of the proposed merger.
ABOUT VCG HOLDING CORP.
VCG Holding Corp. is an owner, operator, and consolidator of adult nightclubs throughout the United States. The Company currently owns 19 adult nightclubs located in Anaheim, Indianapolis, St. Louis, Denver, Colorado Springs, Dallas, Raleigh, Minneapolis, Louisville, Miami, and Portland, ME.
The VCG Holding Corp. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5105
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements in this press release are forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995, as amended. All statements, other than statements of historical fact, included in this press release that address activities, events or developments that we believe or anticipate will or may occur in the future are forward-looking statements. 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, including, without limitation, future financial performance and whether the parties to the merger agreement will successfully complete the merger. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous risks, uncertainties and 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, 2010, which was filed on March 30, 2011, and other filings. All forward-looking statements attributable to us or any persons acting on our behalf are expressly qualified in their entirety by these risks, uncertainties and factors. 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 | ||
| December 31, | ||
| 2010 | 2009 | |
| Assets | ||
| Current Assets | ||
| Cash | $ 2,653,878 | $ 2,677,440 |
| Other receivables | 198,035 | 254,333 |
| Income taxes receivable | 61,935 | 594,720 |
| Inventories | 855,419 | 920,192 |
| Prepaid expenses | 456,655 | 354,730 |
| Current portion of deferred income tax asset | 837,628 | 76,920 |
| Assets of business held for sale | -- | 2,519,962 |
| Total Current Assets | 5,063,550 | 7,398,297 |
| Property and equipment, net | 20,742,386 | 21,016,179 |
| Licenses, net | 34,103,622 | 34,252,018 |
| Goodwill, net | 2,279,045 | 2,279,045 |
| Trade names | 452,000 | 452,000 |
| Favorable lease rights, net | 1,576,100 | 1,647,968 |
| Non-compete agreements, net | 8,000 | 22,000 |
| Other long-term assets | 197,592 | 241,993 |
| Non-current portion of deferred income tax asset | 2,464,817 | 3,841,673 |
| Total Assets | $ 66,887,112 | $ 71,151,173 |
| Liabilities and Equity | ||
| Current Liabilities | ||
| Accounts payable — trade | $ 1,362,430 | $ 1,750,940 |
| Accrued expenses | 4,576,654 | 1,930,049 |
| Income taxes payable | 27,395 | 67,917 |
| Deferred revenue | 139,851 | 110,010 |
| Current portion of capitalized lease | 16,664 | -- |
| Current portion of long-term debt | 10,258,057 | 3,805,277 |
| Current portion of long-term debt, related party | 76,267 | 62,067 |
| Current portion of unfavorable lease rights | 217,116 | 217,116 |
| Liabilities of business held for sale | -- | 1,488,157 |
| Total Current Liabilities | 16,674,434 | 9,431,533 |
| Long-Term Liabilities | ||
| Deferred rent | 2,154,158 | 1,521,140 |
| Unfavorable lease rights, net of current portion | 4,618,815 | 4,835,931 |
| Capital lease, net of current portion | 87,845 | -- |
| Long-term debt, net of current portion | 7,439,373 | 19,751,021 |
| Long-term debt, related party, net of current portion | 7,044,504 | 7,129,018 |
| Total Long-Term Liabilities | 21,344,695 | 33,237,110 |
| Equity | ||
|
Common stock $.0001 par value; 50,000,000 shares authorized;16,292,071 (2010) and 17,310,723 (2009) shares issued and outstanding |
1,629 | 1,731 |
| Additional paid-in capital | 50,275,118 | 51,932,082 |
| Accumulated deficit | (24,948,814) | (26,996,863) |
| Total VCG Stockholders' Equity | 25,327,933 | 24,936,950 |
| Noncontrolling interests in consolidated partnerships | 3,540,050 | 3,545,580 |
| Total Equity | 28,867,983 | 28,482,530 |
| Total Liabilities and Equity | $ 66,887,112 | $ 71,151,173 |
| VCG Holding Corp. | ||||
| Consolidated Statements of Income | ||||
| Three Months Ended | Twelve Months Ended | |||
| December 31, | ||||
| 2010 | 2009 | 2010 | 2009 | |
| Revenue | ||||
| Sales of alcoholic beverages | $ 4,982,118 | $ 5,373,856 | $ 21,009,283 | $ 22,808,436 |
| Sales of food and merchandise | 496,727 | 474,032 | 2,006,147 | 1,844,738 |
| Service revenue | 7,354,549 | 6,413,091 | 29,176,688 | 25,560,047 |
| Other income | 742,661 | 728,614 | 3,077,843 | 2,988,684 |
| Total Revenue | 13,576,055 | 12,989,593 | 55,269,961 | 53,201,905 |
| Operating Expenses | ||||
| Cost of goods sold | 1,458,891 | 1,466,681 | 5,999,135 | 5,877,337 |
| Salaries and wages | 3,835,699 | 3,575,486 | 15,615,313 | 13,874,720 |
| Acquisition indemnification claim | (134) | -- | 2,134,866 | -- |
| Other general and administrative: | ||||
| Taxes, permits and licenses | 726,902 | 550,696 | 3,072,768 | 3,250,176 |
| Charge card and bank fees | 199,255 | 193,351 | 736,566 | 787,087 |
| Rent | 1,486,059 | 1,457,820 | 5,855,941 | 5,611,343 |
| Legal fees | 203,847 | 587,292 | 1,440,466 | 1,456,463 |
| Other professional fees | 440,279 | 552,940 | 2,385,983 | 2,614,981 |
| Advisory fees related to change in control proposals | 270,972 | 953,517 | 407,737 | 953,517 |
| Advertising and marketing | 817,820 | 692,746 | 2,772,839 | 2,627,948 |
| Insurance | 449,853 | 376,325 | 1,774,048 | 1,595,043 |
| Utilities | 234,111 | 217,283 | 982,760 | 971,962 |
| Repairs and maintenance | 290,754 | 423,257 | 1,105,656 | 1,229,399 |
| Other | 993,783 | 1,148,600 | 3,736,109 | 3,824,695 |
| Impairment of building and land | -- | -- | -- | 268,000 |
| Impairment of indefinite-lived intangible assets | -- | 1,741,000 | -- | 1,741,000 |
| Impairment of goodwill | -- | 17,000 | -- | 17,000 |
| Depreciation and amortization | 420,639 | 399,278 | 1,685,610 | 1,593,655 |
| Total Operating Expenses | 11,828,730 | 14,353,272 | 49,705,797 | 48,294,326 |
| Income (loss) from Operations | 1,747,325 | (1,363,679) | 5,564,164 | 4,907,579 |
| Other Income (Expenses) | ||||
| Interest expense | (518,805) | (594,804) | (2,098,431) | (2,746,503) |
| Interest expense, related party | (177,879) | (180,046) | (719,579) | (710,113) |
| Interest income | 1,520 | 2,810 | 6,927 | 7,382 |
| Gain (loss) on sale of assets | (57) | (17,306) | 968 | (74,669) |
| Total Other Expenses | (695,221) | (789,346) | (2,810,115) | (3,523,903) |
| Income Before Income Taxes | 1,052,104 | (2,153,025) | 2,754,049 | 1,383,676 |
| Income tax expense (benefit) — current | 71,354 | (214,862) | 171,454 | (133,808) |
| Income tax expense (benefit) — deferred | 167,546 | (674,293) | 578,546 | 435,808 |
| Total Income Tax Expense (benefit) | 238,900 | (889,155) | 750,000 | 302,000 |
| Income From Continuing Operations, net of Income Taxes | 813,204 | (1,263,870) | 2,004,049 | 1,081,676 |
| Income From Discontinued Operations, net of Income Taxes | 47,577 | 33,758 | 520,389 | 130,732 |
| Profit of Consolidated and Affiliated Companies | 860,781 | (1,230,112) | 2,524,438 | 1,212,408 |
| Net Income Attributable to Noncontrolling Interests | (119,068) | (81,875) | (476,389) | (476,717) |
| Net Income Attributable to VCG | $ 741,713 | $ (1,311,987) | $ 2,048,049 | $ 735,691 |
| Earnings Per Share | ||||
| Continuing Operations: | ||||
| Basic and fully diluted income per share attributable to VCG's stockholders | $ 0.04 | $ (0.08) | $ 0.09 | $ 0.03 |
| Discontinued Operations: | ||||
| Basic and fully diluted earnings per share attributable to VCG's stockholders | $ 0.00 | $ 0.00 | $ 0.03 | $ 0.01 |
| Net Income Attributable to VCG Stockholders: | $ 0.05 | $ (0.08) | $ 0.12 | $ 0.04 |
| Basic and fully diluted weighted average shares outstanding | 16,292,071 | 17,321,213 | 16,805,951 | 17,541,376 |
| VCG Holding Corp. | ||
| Consolidated Statements of Cash Flows | ||
| For the years ended | ||
| December 31, | ||
| 2010 | 2009 | |
| Operating Activities | ||
| Profit of consolidated and affiliated companies | $ 2,524,438 | $ 1,212,408 |
| Adjustments to reconcile profit of consolidated and affiliated companies to net cash provided by operating activities: | ||
| Impairment of building and land | -- | 268,000 |
| Impairment of goodwill | -- | 17,000 |
| Impairment of indefinite lived intangible assets | -- | 1,741,000 |
| Depreciation | 1,737,248 | 1,695,277 |
| Amortization of non-compete agreements | 14,518 | 17,035 |
| Amortization of leasehold rights and liabilities, net | (178,102) | (212,342) |
| Amortization of loan fees | 65,661 | 216,205 |
| Stock-based compensation expense | 72,922 | 244,383 |
| Deferred income taxes | 764,543 | 465,896 |
| (Gain) Loss on disposition of assets | (817,002) | 74,669 |
| Accrued interest added to long-term debt | 160,605 | 243,901 |
| Write-off uncollectible deposits | -- | 7,151 |
| Changes in operating assets and liabilities: | ||
| Income taxes and other receivables | 589,082 | (287,894) |
| Inventories | 60,322 | 22,767 |
| Prepaid expenses | (101,925) | (72,245) |
| Accounts payable - trade and accrued expenses | 2,258,095 | 576,380 |
| Income taxes payable | (40,522) | 67,917 |
| Deferred revenue | 9,841 | 555 |
| Deferred rent | 661,969 | 783,165 |
| Net cash provided by operating activities | 7,781,693 | 7,081,228 |
| Investing Activities | ||
| Proceeds from divestiture of a club | 1,000,000 | -- |
| Additions to property and equipment | (1,200,772) | (1,454,478) |
| Deposits | 18,740 | (19,444) |
| Proceeds from sale of assets | 4,200 | 238,241 |
| Net cash used in investing activities | (177,832) | (1,235,681) |
| Financing Activities | ||
| Proceeds from debt | 100,000 | 1,212,115 |
| Payments on debt | (5,757,891) | (4,152,700) |
| Proceeds from related party debt | 200,000 | 25,099 |
| Payments on related party debt | (355,958) | (912,843) |
| Net borrowing (payments) on revolving line of credit | (370,000) | (90,000) |
| Payment on capitalized leases | (6,412) | (19,111) |
| Loan fees paid | (40,000) | (78,724) |
| Repurchase of stock | (935,243) | (869,392) |
| Distributions to noncontrolling interests | (481,919) | (491,611) |
| Net cash used in financing activities | (7,647,423) | (5,377,167) |
| Net increase (decrease) in cash | (43,562) | 468,380 |
| Cash beginning of period | 2,677,440 | 2,209,060 |
| Cash end of period | $ 2,633,878 | $ 2,677,440 |
| Supplemental cash flow information: | ||
| Income taxes paid in cash | $ 319,788 | $ 225,972 |
| Interest paid in cash | $ 2,529,453 | $ 3,067,195 |
| Non-cash divestiture activities: | ||
| Common stock received as partial consideration for Golden | $ 794,745 | |
| Fair value of liabilities transferred to buyer | $ 1,771,854 | |
| Issuance of note receivable to buyer | $ 322,963 | |
| Non-cash investing and financing activities: | ||
| Acquisition of vehicles through capital leases and loans | $ 204,984 | |
| VCG Holding Corp. | ||
| EBITDA Reconciliation | ||
| For The Year Ended | ||
| December 31, | ||
| 2010 | 2009 | |
| Net Income attributable to VCG stockholders | $ 2,048,049 | $ 735,691 |
| Add back: | ||
| Depreciation | 1,737,248 | 1,695,277 |
| Amortization of non-compete agreements | 14,518 | 17,035 |
| Amortization of leasehold rights and liabilities, net | (178,102) | (212,342) |
| Interest expense | 2,818,010 | 3,456,616 |
| Total income tax expense | 944,345 | 339,000 |
| EBITDA before non-cash impairment charges | $ 7,384,068 | $ 6,031,277 |
| Add back: | ||
| Total non-cash impairment charges | -- | 2,026,000 |
| Total excluding non-cash impairment charges | $ 7,384,068 | $ 8,057,277 |
| Total revenue (excluding discontinued operations) | $ 55,269,961 | $ 53,201,905 |
| EBITDA as a percentage of revenue | 13.4% | 15.1% |
| Calculation of Free Cash Flow | ||
| For The Year Ended | ||
| December 31, | ||
| 2010 | 2009 | |
| EBITDA (excluding non-cash impairment charges) | $ 7,384,068 | $ 8,057,277 |
| Less: | ||
| Interest expense | 2,818,010 | 3,456,616 |
| Current income tax | 179,803 | (126,896) |
| Capital expenditures | 1,200,772 | 1,454,478 |
| Free Cash Flow | $ 3,185,483 | $ 3,273,079 |