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
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 |
CONTACT: VCG Holding Corp.
Troy Lowrie
Chief Executive Officer
(303) 934-2424
tlowrie@vcgh.com
The Equity Group Inc.
Devin Sullivan
Senior Vice President
(212) 836-9608
dsullivan@equityny.com
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