Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Mar. 31, 2017 | Apr. 30, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | RCI HOSPITALITY HOLDINGS, INC. | |
Entity Central Index Key | 935,419 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 9,718,711 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,017 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2017 | Sep. 30, 2016 |
Current assets | ||
Cash and cash equivalents | $ 13,199 | $ 11,327 |
Accounts receivables, net | 2,526 | 4,365 |
Inventories | 2,060 | 2,019 |
Prepaid expenses and other current assets | 3,195 | 4,005 |
Assets held for sale | 5,472 | 7,671 |
Total current assets | 26,452 | 29,387 |
Property and equipment, net | 144,571 | 142,003 |
Notes receivable | 4,745 | 4,800 |
Goodwill | 45,921 | 45,921 |
Intangibles, net | 52,103 | 52,189 |
Other assets | 2,267 | 2,188 |
Total assets | 276,059 | 276,488 |
Current liabilities | ||
Accounts payable | 2,194 | 1,701 |
Accrued liabilities | 10,402 | 12,806 |
Current portion of long-term debt | 12,197 | 9,950 |
Total current liabilities | 24,793 | 24,457 |
Deferred tax liability | 25,470 | 25,470 |
Long-term debt | 90,103 | 95,936 |
Other long-term liabilities | 593 | 483 |
Total liabilities | 140,959 | 146,346 |
Commitments and contingencies (Note 9) | ||
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 9,808 shares issued and outstanding as of March 31, 2017 and September 30, 2016, respectively | 97 | 97 |
Additional paid-in capital | 63,453 | 64,552 |
Retained earnings | 68,982 | 62,909 |
Total RCIHH stockholders' equity | 132,532 | 127,558 |
Noncontrolling interests | 2,568 | 2,584 |
Total stockholders' equity | 135,100 | 130,142 |
Total liabilities and stockholders' equity | $ 276,059 | $ 276,488 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2017 | Sep. 30, 2016 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.10 | $ 0.10 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares issued | 9,719,000 | 9,808,000 |
Common stock, shares outstanding | 9,719,000 | 9,808,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | ||
Revenues | |||||
Sales of alcoholic beverages | $ 14,235 | $ 14,581 | $ 28,610 | $ 29,178 | |
Sales of food and merchandise | 4,353 | 4,609 | 8,560 | 8,943 | |
Service revenues | 14,170 | 13,205 | 27,645 | 25,846 | |
Other | 1,760 | 2,001 | 3,442 | 3,904 | |
Total revenues | 34,518 | 34,396 | 68,257 | 67,871 | |
Operating expenses | |||||
Cost of goods sold | 4,968 | 5,227 | 9,849 | 10,411 | |
Salaries and wages | 9,717 | 9,257 | 19,369 | 18,614 | |
Selling, general and administrative | 10,609 | 10,601 | 21,802 | 21,461 | |
Depreciation and amortization | 1,608 | 1,826 | 3,226 | 3,643 | |
Other charges, net | 129 | (65) | 191 | 475 | |
Total operating expenses | 27,031 | 26,846 | 54,437 | 54,604 | |
Income from operations | 7,487 | 7,550 | 13,820 | 13,267 | |
Other income (expenses) | |||||
Interest expense | (1,912) | (1,965) | (3,927) | (3,880) | |
Interest income | 89 | 1 | 126 | 5 | |
Income before income taxes | 5,664 | 5,586 | 10,019 | 9,392 | |
Income taxes | 1,908 | 293 | 3,358 | 1,660 | |
Net income | 3,756 | 5,293 | 6,661 | 7,732 | |
Net loss (income) attributable to noncontrolling interests | 3 | 212 | (4) | 325 | |
Net income attributable to RCIHH common shareholders | $ 3,759 | $ 5,505 | $ 6,657 | $ 8,057 | |
Earnings per share attributable to RCIHH common shareholders | |||||
Basic | $ 0.39 | $ 0.55 | $ 0.68 | $ 0.79 | |
Diluted | $ 0.39 | $ 0.54 | $ 0.68 | $ 0.79 | |
Weighted average number of common shares outstanding | |||||
Basic | [1],[2] | 9,719 | 10,013 | 9,744 | 10,154 |
Diluted | [1],[2] | 9,721 | 10,215 | 9,768 | 10,356 |
Dividends per share | $ 0.03 | $ 0.03 | $ 0.06 | $ 0.03 | |
[1] | All outstanding restricted stock, warrants and options were considered for the EPS computation. Potentially dilutive options and warrants of 121,180 for the three and six months ended March 31, 2016 have been excluded from earnings per share due to their being anti-dilutive. No restricted stock or options were outstanding during the three and six months ended March 31, 2017. | ||||
[2] | As of March 31, 2017, the Company has no outstanding restricted stock, stock options, warrants or convertible debt. |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Condensed Consolidated Statements Of Comprehensive Income | ||||
Net income | $ 3,756 | $ 5,293 | $ 6,661 | $ 7,732 |
Amounts reclassified from accumulated other comprehensive income | (109) | (109) | ||
Comprehensive income | 3,756 | 5,184 | 6,661 | 7,623 |
Comprehensive loss (income) attributable to noncontrolling interests | 3 | 212 | (4) | 325 |
Comprehensive income attributable to RCI Hospitality Holdings, Inc. | $ 3,759 | $ 5,396 | $ 6,657 | $ 7,948 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income | $ 6,661 | $ 7,732 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 3,226 | 3,643 |
Deferred taxes | 786 | |
Amortization of debt issuance costs, note discount and beneficial conversion | 128 | 15 |
Deferred rent | 110 | (446) |
Gain on sale of marketable securities | (127) | |
Stock-based compensation expense | 240 | |
Loss on sale of property and other | 212 | |
Debt prepayment penalty | 75 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | 1,839 | (545) |
Inventories | (41) | (370) |
Prepaid expenses and other assets | 731 | 1,719 |
Accounts payable and accrued liabilities | (1,911) | (1,535) |
Net cash provided by operating activities | 11,030 | 11,112 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Proceeds from sale of property | 2,047 | |
Proceeds from sale of marketable securities | 628 | |
Proceeds from notes receivable | 55 | |
Additions to property and equipment | (5,680) | (13,561) |
Net cash used in investing activities | (3,578) | (12,933) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from long-term debt | 2,564 | 15,517 |
Payments on long-term debt | (6,179) | (7,553) |
Purchase of treasury stock | (1,099) | (4,704) |
Payment of dividends | (584) | (296) |
Payment of loan origination costs | (99) | |
Debt prepayment penalty | (75) | |
Distribution to noncontrolling interests | (108) | (108) |
Net cash provided by (used in) financing activities | (5,580) | 2,856 |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 1,872 | 1,035 |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 11,327 | 8,020 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 13,199 | 9,055 |
CASH PAID DURING PERIOD FOR: | ||
Interest | 3,788 | 3,896 |
Income taxes (net of refund of $1,017 and $0, respectively) | 73 | $ 97 |
Non-cash and other transactions: | ||
Refinancing of long term debt by borrowing | 8,000 | |
Proceeds from borrowing | 9,900 | |
Net cash proceeds from borrowing for refinance | $ 1,900 | |
Number of common shares purchased and retired | 89,685 | 500,902 |
Cost of common shares purchased and retired | $ 1,100 | $ 4,700 |
Debt conversion, converted instrument, amount | $ 750 | |
Debt conversion, converted instrument, shares issued | 75,000 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows (Unaudited) (Parenthetical) - USD ($) $ in Thousands | 6 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Statement of Cash Flows [Abstract] | ||
Income taxes, net of refund | $ 1,017 | $ 0 |
Basis of Presentation
Basis of Presentation | 6 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“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. 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, 2016 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on December 13, 2016. 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 presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three and six months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending September 30, 2017. The September 30, 2016 consolidated balance sheet data were derived from audited financial statements, but does not include all disclosures required by GAAP. |
Recent Accounting Standards and
Recent Accounting Standards and Pronouncements | 6 Months Ended |
Mar. 31, 2017 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Recent Accounting Standards and Pronouncements | 2. Recent Accounting Standards and Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers In February 2015, the FASB issued ASU No. 2015-02, which amends FASB ASU Topic 810, Consolidations In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) In March 2016, the FASB issued amended guidance ASU No. 2016-09, Compensation–Stock Compensation (Topic 718): Improvement to Employee Share-Based Payment Accounting In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) In January 2017, the FASB issued ASU No. 2017-01, Business Combination (Topic 805): Clarifying the Definition of a Business Revenue from Contracts with Customers In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment |
Reclassifications
Reclassifications | 6 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Reclassifications | 3. Reclassifications Certain prior year amounts have been reclassified to conform to the current year financial statement presentation. |
Selected Account Information
Selected Account Information | 6 Months Ended |
Mar. 31, 2017 | |
Quarterly Financial Data [Abstract] | |
Selected Account Information | 4. Selected Account Information The components of accrued liabilities are as follows (in thousands): March 31, 2017 September 30, 2016 Payroll and related costs $ 1,872 $ 1,506 Lawsuit settlement 1,871 2,704 Insurance 1,310 2,303 Sales and liquor taxes 974 889 Patron tax 810 1,559 Unearned revenues 685 256 Property taxes 602 1,017 Other 2,278 2,572 $ 10,402 $ 12,806 The components of selling, general and administrative expenses are as follows (in thousands): For the Three Months For the Six Months Ended March 31, Ended March 31, 2017 2016 2017 2016 Taxes and permits $ 1,840 $ 2,054 $ 4,129 $ 4,179 Advertising and marketing 1,355 1,225 3,012 2,530 Supplies and services 1,142 1,155 2,288 2,417 Insurance 952 907 1,887 1,781 Rent 750 859 1,440 1,807 Legal 709 562 1,412 1,397 Utilities 656 694 1,326 1,404 Charge card fees 617 557 1,187 1,170 Accounting and professional fees 560 420 1,057 690 Repairs and maintenance 533 526 999 1,023 Security 512 479 1,053 1,018 Other 983 1,163 2,012 2,045 $ 10,609 $ 10,601 $ 21,802 $ 21,461 |
Long-Term Debt
Long-Term Debt | 6 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | 5. Long-Term Debt On October 5, 2016, the Company refinanced $8.0 million of long-term debt by borrowing $9.9 million. The new unsecured debt is payable $118,817 per month, including interest at 12%, and matures in five years with a balloon payment for the remaining balance at maturity. The refinanced debt was comprised of interest-only notes that were scheduled to mature with full principal payments in October 2017. On January 4, 2017, the Company paid off $392,000 of convertible 6% notes, which would have matured on March 4, 2023. On March 13, 2017, the Company entered into a promissory note with a bank, which provides for a $1.0 million revolving line of credit maturing on March 13, 2018. The interest rate under this revolving line of credit is at 6.5% per annum payable every 13th of each month starting April 13, 2017 for all outstanding borrowings. In an event of a default, as defined in the agreement, the interest rate shall be increased to 17% per annum. As of March 31, 2017, the Company had available borrowing capacity of $1.0 million under the revolving line of credit. |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Mar. 31, 2017 | |
Stockholders' Equity Note [Abstract] | |
Stockholders' Equity | 6. Stockholders’ Equity During the six months ended March 31, 2017, the Company purchased and retired 89,685 common shares at a cost of $1.1 million. The Company also paid a $0.06 per share cash dividend totaling approximately $584,000. During the six months ended March 31, 2016, the Company purchased and retired 500,902 common shares at a cost of $4.7 million. The Company also paid a $0.03 per share cash dividend totaling approximately $296,000. During the six months ended March 31, 2016, a related party creditor converted $750,000 of debt to 75,000 shares of the Company’s common stock. |
Earnings Per Share
Earnings Per Share | 6 Months Ended |
Mar. 31, 2017 | |
Earnings per share attributable to RCIHH common shareholders | |
Earnings Per Share | 7. 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 number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution 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 be incurred 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 For the Six Months Ended March 31, Ended March 31, 2017 2016 2017 2016 Numerator - Net income attributable to RCIHH common shareholders - basic $ 3,759 $ 5,505 $ 6,657 $ 8,057 Adjustment to net income from assumed conversion of debentures(2) - 50 5 100 Adjusted net income attributable to RCIHH common shareholders - diluted $ 3,759 $ 5,555 $ 6,662 $ 8,157 Denominator(1)(3)- Weighted average number of common shares outstanding - basic 9,719 10,013 9,744 10,154 Effect of potentially dilutive restricted stock, warrants and options - - - - Effect of potentially dilutive convertible debentures(2) 2 202 24 202 Adjusted weighted average number of common shares outstanding - diluted 9,721 10,215 9,768 10,356 Basic earnings per share $ 0.39 $ 0.55 $ 0.68 $ 0.79 Diluted earnings per share $ 0.39 $ 0.54 $ 0.68 $ 0.79 (1) All outstanding restricted stock, warrants and options were considered for the EPS computation. Potentially dilutive options and warrants of 121,180 for the three and six months ended March 31, 2016 have been excluded from earnings per share due to their being anti-dilutive. No restricted stock or options were outstanding during the three and six months ended March 31, 2017. (2) Convertible debentures (principal and accrued interest) outstanding at the beginning of the three and six months ended March 31, 2017 and 2016 totaling $859,000 and $2.3 million, respectively, were convertible into common stock at a price of $10.25 and $12.50 per share in fiscal 2017, and $10.00, $10.25 and $12.50 per share in fiscal 2016. (3) As of March 31, 2017, the Company has no outstanding restricted stock, stock options, warrants or convertible debt. |
Income Taxes
Income Taxes | 6 Months Ended |
Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 8. Income Taxes Income tax expense was $1.9 million and $3.4 million for the three and six months ended March 31, 2017, respectively, compared with a $293,000 and $1.7 million for the three and six months ended March 31, 2016, respectively. The effective income tax rate for the six months ended March 31, 2017 was 33.5% compared with 17.7% for the comparable period year-ago. Our effective tax rate is affected by state taxes, permanent differences, and tax credits, including the FICA tip credit. Beginning in the quarter ended December 31, 2016, the Company began utilizing the effective rate method to calculate income taxes during interim periods instead of the full deferred calculation method. The Company or one of its subsidiaries files income tax returns for U.S. federal, and various state and local jurisdictions. 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 years ended September 30, 2015, 2014 and 2013 are currently under examination by the Internal Revenue Service. The Company accounts for uncertain tax positions pursuant to ASC Topic 740, Income Taxes |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 9. Commitments and Contingencies Legal Matters New York Settlement Filed in 2009, the case claimed Rick’s Cabaret New York misclassified entertainers as independent contractors. Plaintiffs sought minimum wage for the hours they danced and return of certain fees. RCI Entertainment (New York), Inc. and Peregrine Enterprises, Inc. maintained the dancers were properly classified, and alternatively, amounts earned were well in excess of the minimum wage and should satisfy any obligations. On April 1, 2015, we 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. The Company expensed $11.1 million during the year ended September 30, 2015 as the final liability for its obligations under the settlement, which was included as settlement of lawsuits and other one-time costs in the consolidated statement of income. Of this amount, $5.6 million was paid to entertainers and $5.5 million has been or will be paid to the lawyers. As of March 31, 2017 and September 30, 2016, the Company has a total amount of $1.9 million and $2.7 million, respectively, recorded in accrued liabilities on the Company’s consolidated balance sheets for future payments to the lawyers. 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 be filed with the Receiver before the close of business on January 16, 2015 and that all pending lawsuits involving IIC as the insurer are further stayed or abated until October 7, 2014. As a result, the Company and its subsidiaries no longer have 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; 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. General The Company is involved in various suits and claims arising in the normal course of business. The ultimate outcome of these items is not anticipated to have a material adverse effect on the Company’s consolidated statements of income or financial position. The Company has been sued by a landlord in the 33rd Judicial District Court of Harris County, Texas for a Houston Bombshells which was under renovation in 2015. The plaintiff alleges RCI Hospitality Holdings, Inc.’s subsidiary, BMB Dining Services (Willowbrook), Inc., breached a lease agreement by constructing an outdoor patio, which allegedly interfered with the common areas of 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 of the lease. 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 assert 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 constructed 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 uncertainty will have a material effect on the Company’s financial condition. Settlements of lawsuits for the three and six months ended March 31, 2017 totaled $8,000 and $81,000, respectively, while settlements of lawsuits for the three and six months ended March 31, 2016 totaled $62,000 and $602,000, respectively. As of March 31, 2017 and September 30, 2016, the Company has accrued $1.9 million and $2.7 million in accrued liabilities, respectively, related to settlement of lawsuits all of which pertain to the New York Settlement discussed above. |
Segment Information
Segment Information | 6 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
Segment Information | 10. 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 division and rental income in both years, and the energy drink division in the prior year, 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 For the Six Months Ended March 31, Ended March 31, 2017 2016 2017 2016 Revenues Nightclubs $ 29,967 $ 29,344 $ 59,249 $ 57,514 Bombshells 4,375 4,629 8,670 9,008 Other 176 423 338 1,349 $ 34,518 $ 34,396 $ 68,257 $ 67,871 Income (loss) from operations Nightclubs $ 10,498 $ 9,687 $ 19,714 $ 18,195 Bombshells 801 758 1,439 1,245 Other (222 ) (856 ) (563 ) (1,504 ) General corporate (3,590 ) (2,039 ) (6,770 ) (4,669 ) $ 7,487 $ 7,550 $ 13,820 $ 13,267 Depreciation and amortization Nightclubs $ 1,225 $ 1,420 $ 2,467 $ 2,562 Bombshells 223 231 441 462 Other 4 171 9 342 General corporate 156 4 309 277 $ 1,608 $ 1,826 $ 3,226 $ 3,643 Capital expenditures Nightclubs $ 545 $ 12,435 $ 1,340 $ 12,826 Bombshells 1,614 104 2,718 144 Other 10 - 11 2 General corporate 503 133 1,611 589 $ 2,672 $ 12,672 $ 5,680 $ 13,561 March 31, 2017 September 30, 2016 Total assets Nightclubs $ 243,180 $ 244,464 Bombshells 10,714 8,673 Other 1,117 896 General corporate 21,048 22,455 $ 276,059 $ 276,488 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. |
Disposition
Disposition | 6 Months Ended |
Mar. 31, 2017 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Disposition | 11. Disposition On January 13, 2017, we closed the sale on one of our non-income producing properties, included in assets held for sale on our condensed consolidated balance sheets, for $2.2 million in cash, recognizing approximately $116,000 loss on the sale. Proceeds were used to pay off the remaining $1.5 million of a related 11% balloon note, which was due in 2018. The Company paid a $75,000 prepayment penalty to pay off the debt. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Mar. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | 12. Subsequent Events On April 26, 2017, subsidiaries of the Company acquired the assets of the Hollywood Showclub in the Greater St. Louis area, as well as the club’s building and land, adjacent land, and a nearby building and land that can be used for another gentlemen’s club. The total purchase price for all the acquired assets and real properties was $4.2 million, paid in cash at closing. The Company plans to apply for mortgage financing for the acquired properties. On May 1, 2017, the Company raised $5.4 million through the issuance of 12% unsecured promissory notes to certain investors, which notes mature on May 1, 2020. The notes pay interest-only in equal monthly installments, with a lump sum principal payment at maturity. On May 8, 2017, a subsidiary of the Company acquired the company that owns Scarlett’s Cabaret Miami in Pembroke Park, Florida along with certain related intellectual property for total consideration of $25.952 million, payable $5.4 million at closing, $5.0 million after six months through a short-term 5% note, and $15.552 million through a 12-year amortizing 8% note. |
Selected Account Information (T
Selected Account Information (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Quarterly Financial Data [Abstract] | |
Schedule of Accrued Liabilities | The components of accrued liabilities are as follows (in thousands): March 31, 2017 September 30, 2016 Payroll and related costs $ 1,872 $ 1,506 Lawsuit settlement 1,871 2,704 Insurance 1,310 2,303 Sales and liquor taxes 974 889 Patron tax 810 1,559 Unearned revenues 685 256 Property taxes 602 1,017 Other 2,278 2,572 $ 10,402 $ 12,806 |
Schedule of Selling, General and Administrative Expenses | The components of selling, general and administrative expenses are as follows (in thousands): For the Three Months For the Six Months Ended March 31, Ended March 31, 2017 2016 2017 2016 Taxes and permits $ 1,840 $ 2,054 $ 4,129 $ 4,179 Advertising and marketing 1,355 1,225 3,012 2,530 Supplies and services 1,142 1,155 2,288 2,417 Insurance 952 907 1,887 1,781 Rent 750 859 1,440 1,807 Legal 709 562 1,412 1,397 Utilities 656 694 1,326 1,404 Charge card fees 617 557 1,187 1,170 Accounting and professional fees 560 420 1,057 690 Repairs and maintenance 533 526 999 1,023 Security 512 479 1,053 1,018 Other 983 1,163 2,012 2,045 $ 10,609 $ 10,601 $ 21,802 $ 21,461 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Earnings per share attributable to RCIHH common shareholders | |
Schedule of Earnings Per Share Basic and Diluted | 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 For the Six Months Ended March 31, Ended March 31, 2017 2016 2017 2016 Numerator - Net income attributable to RCIHH common shareholders - basic $ 3,759 $ 5,505 $ 6,657 $ 8,057 Adjustment to net income from assumed conversion of debentures(2) - 50 5 100 Adjusted net income attributable to RCIHH common shareholders - diluted $ 3,759 $ 5,555 $ 6,662 $ 8,157 Denominator(1)(3)- Weighted average number of common shares outstanding - basic 9,719 10,013 9,744 10,154 Effect of potentially dilutive restricted stock, warrants and options - - - - Effect of potentially dilutive convertible debentures(2) 2 202 24 202 Adjusted weighted average number of common shares outstanding - diluted 9,721 10,215 9,768 10,356 Basic earnings per share $ 0.39 $ 0.55 $ 0.68 $ 0.79 Diluted earnings per share $ 0.39 $ 0.54 $ 0.68 $ 0.79 (1) All outstanding restricted stock, warrants and options were considered for the EPS computation. Potentially dilutive options and warrants of 121,180 for the three and six months ended March 31, 2016 have been excluded from earnings per share due to their being anti-dilutive. No restricted stock or options were outstanding during the three and six months ended March 31, 2017. (2) Convertible debentures (principal and accrued interest) outstanding at the beginning of the three and six months ended March 31, 2017 and 2016 totaling $859,000 and $2.3 million, respectively, were convertible into common stock at a price of $10.25 and $12.50 per share in fiscal 2017, and $10.00, $10.25 and $12.50 per share in fiscal 2016. (3) As of March 31, 2017, the Company has no outstanding restricted stock, stock options, warrants or convertible debt. |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information | Below is the financial information related to the Company’s segments (in thousands): For the Three Months For the Six Months Ended March 31, Ended March 31, 2017 2016 2017 2016 Revenues Nightclubs $ 29,967 $ 29,344 $ 59,249 $ 57,514 Bombshells 4,375 4,629 8,670 9,008 Other 176 423 338 1,349 $ 34,518 $ 34,396 $ 68,257 $ 67,871 Income (loss) from operations Nightclubs $ 10,498 $ 9,687 $ 19,714 $ 18,195 Bombshells 801 758 1,439 1,245 Other (222 ) (856 ) (563 ) (1,504 ) General corporate (3,590 ) (2,039 ) (6,770 ) (4,669 ) $ 7,487 $ 7,550 $ 13,820 $ 13,267 Depreciation and amortization Nightclubs $ 1,225 $ 1,420 $ 2,467 $ 2,562 Bombshells 223 231 441 462 Other 4 171 9 342 General corporate 156 4 309 277 $ 1,608 $ 1,826 $ 3,226 $ 3,643 Capital expenditures Nightclubs $ 545 $ 12,435 $ 1,340 $ 12,826 Bombshells 1,614 104 2,718 144 Other 10 - 11 2 General corporate 503 133 1,611 589 $ 2,672 $ 12,672 $ 5,680 $ 13,561 March 31, 2017 September 30, 2016 Total assets Nightclubs $ 243,180 $ 244,464 Bombshells 10,714 8,673 Other 1,117 896 General corporate 21,048 22,455 $ 276,059 $ 276,488 |
Selected Account Information -
Selected Account Information - Schedule of Accrued Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Sep. 30, 2016 |
Quarterly Financial Data [Abstract] | ||
Payroll and related costs | $ 1,872 | $ 1,506 |
Lawsuit settlement | 1,871 | 2,704 |
Insurance | 1,310 | 2,303 |
Sales and liquor taxes | 974 | 889 |
Patron tax | 810 | 1,559 |
Unearned revenues | 685 | 256 |
Property taxes | 602 | 1,017 |
Other | 2,278 | 2,572 |
Accrued liabilities | $ 10,402 | $ 12,806 |
Selected Account Information 24
Selected Account Information - Schedule of Selling, General and Administrative Expenses (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Quarterly Financial Data [Abstract] | ||||
Taxes and permits | $ 1,840 | $ 2,054 | $ 4,129 | $ 4,179 |
Advertising and marketing | 1,355 | 1,225 | 3,012 | 2,530 |
Supplies and services | 1,142 | 1,155 | 2,288 | 2,417 |
Insurance | 952 | 907 | 1,887 | 1,781 |
Rent | 750 | 859 | 1,440 | 1,807 |
Legal | 709 | 562 | 1,412 | 1,397 |
Utilities | 656 | 694 | 1,326 | 1,404 |
Charge card fees | 617 | 557 | 1,187 | 1,170 |
Accounting and professional fees | 560 | 420 | 1,057 | 690 |
Repairs and maintenance | 533 | 526 | 999 | 1,023 |
Security | 512 | 479 | 1,053 | 1,018 |
Other | 983 | 1,163 | 2,012 | 2,045 |
Selling, general and administrative | $ 10,609 | $ 10,601 | $ 21,802 | $ 21,461 |
Long-Term Debt (Details Narrati
Long-Term Debt (Details Narrative) - USD ($) | Mar. 13, 2017 | Jan. 04, 2017 | Oct. 05, 2016 | Mar. 31, 2017 |
Long-term debt refinancing amount | $ 8,000,000 | |||
Long-term debt | 9,900,000 | |||
Unsecured debt payable | $ 118,817 | |||
Debt interest rate percentage | 6.00% | 12.00% | ||
Debt maturity term | 5 years | |||
Debt maturity description | The refinanced debt was comprised of interest-only notes that were scheduled to mature with full principal payments in October 2017. | |||
Convertible notes payable | $ 392,000 | |||
Debt maturity date | Mar. 4, 2023 | |||
Available borrowing capacity | $ 1,000,000 | |||
Revolving Credit Facility [Member] | ||||
Long-term line of credit | $ 1,000,000 | |||
Line of credit maturity date | Mar. 13, 2018 | |||
Line of credit borrowing outstanding | The interest rate under this revolving line of credit is at 6.5% per annum payable every 13th of each month starting April 13, 2017 for all outstanding borrowings. | |||
Maximum [Member] | Revolving Credit Facility [Member] | ||||
Debt interest rate percentage | 17.00% |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Stockholders' Equity Note [Abstract] | ||||
Common stock purchase and retired, shares | 89,685 | 500,902 | ||
Common stock purchase and retired, value | $ 1,100 | $ 4,700 | ||
Cash dividend paid per share | $ 0.03 | $ 0.03 | $ 0.06 | $ 0.03 |
Total dividend | $ 584 | $ 296 | ||
Common stock debt converted, amount | $ 750 | |||
Common stock debt converted, shares | 75,000 |
Earnings Per Share - Schedule o
Earnings Per Share - Schedule of Earnings Per Share Basic and Diluted (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | ||
Earnings per share attributable to RCIHH common shareholders | |||||
Net income attributable to RCIHH common shareholders - basic | $ 3,759 | $ 5,505 | $ 6,657 | $ 8,057 | |
Adjustment to net income from assumed conversion of debentures(2) | [1] | 50 | 5 | 100 | |
Adjusted net income attributable to RCIHH common shareholders - diluted | $ 3,759 | $ 5,555 | $ 6,662 | $ 8,157 | |
Weighted average number of common shares outstanding - basic (1) (3) | [2],[3] | 9,719 | 10,013 | 9,744 | 10,154 |
Effect of potentially dilutive restricted stock, warrants and options (1) (3) | [2],[3] | ||||
Effect of potentially dilutive convertible debentures(1) (2) (3) | [1],[2],[3] | 2 | 202 | 24 | 202 |
Adjusted weighted average number of common shares outstanding - diluted | [2],[3] | 9,721 | 10,215 | 9,768 | 10,356 |
Basic earnings per share | $ 0.39 | $ 0.55 | $ 0.68 | $ 0.79 | |
Diluted earnings per share | $ 0.39 | $ 0.54 | $ 0.68 | $ 0.79 | |
[1] | Convertible debentures (principal and accrued interest) outstanding at the beginning of the three and six months ended March 31, 2017 and 2016 totaling $859,000 and $2.3 million, respectively, were convertible into common stock at a price of $10.25 and $12.50 per share in fiscal 2017, and $10.00, $10.25 and $12.50 per share in fiscal 2016. | ||||
[2] | All outstanding restricted stock, warrants and options were considered for the EPS computation. Potentially dilutive options and warrants of 121,180 for the three and six months ended March 31, 2016 have been excluded from earnings per share due to their being anti-dilutive. No restricted stock or options were outstanding during the three and six months ended March 31, 2017. | ||||
[3] | As of March 31, 2017, the Company has no outstanding restricted stock, stock options, warrants or convertible debt. |
Earnings Per Share - Schedule28
Earnings Per Share - Schedule of Earnings Per Share Basic and Diluted (Details) (Parenthetical) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2016 | Mar. 31, 2017 | |
Antidilutive securities excluded from computation of earnings per share | 121,180 | 121,180 | |
Convertible debenture outstanding | $ 2,300 | $ 2,300 | $ 859 |
Fiscal 2017 [Member] | Minimum [Member] | |||
Common stock conversion price | $ 10.25 | ||
Fiscal 2017 [Member] | Maximum [Member] | |||
Common stock conversion price | 12.50 | ||
Fiscal 2016 [Member] | |||
Common stock conversion price | 10.25 | ||
Fiscal 2016 [Member] | Minimum [Member] | |||
Common stock conversion price | 10 | ||
Fiscal 2016 [Member] | Maximum [Member] | |||
Common stock conversion price | $ 12.50 | ||
Restricted Stock [Member] | |||
Number of options outstanding during period |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Sep. 30, 2016 | |
Income tax expense | $ 1,908 | $ 293 | $ 3,358 | $ 1,660 | |
Liability for uncertain tax positions | 231 | 231 | $ 1,000 | ||
Interest and penalties for unrecognized tax benefits | $ 600 | $ 600 | |||
Minimum [Member] | |||||
Effective income tax rate percentage | 17.70% | ||||
Maximum [Member] | |||||
Effective income tax rate percentage | 33.50% |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - USD ($) | Apr. 02, 2015 | Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Oct. 31, 2015 |
Commitments And Contingencies [Line Items] | ||||||||
Litigation settlement, expense | $ 11,100,000 | |||||||
Accrued liabilities | $ 10,402,000 | $ 10,402,000 | $ 12,806,000 | |||||
Payments for legal settlements | $ 8,000 | $ 62,000 | $ 81,000 | $ 602,000 | ||||
Lawyers [Member] | ||||||||
Commitments And Contingencies [Line Items] | ||||||||
Accrued liabilities | $ 2,700,000 | |||||||
New York Settlement [Member] | ||||||||
Commitments And Contingencies [Line Items] | ||||||||
Loss contingency, estimate of possible loss | $ 15,000,000 | |||||||
Accrued professional fees | 5,500,000 | $ 1,833,333 | ||||||
Loss contingency accrual, payments | $ 1,833,333 | |||||||
Accrued entertainers fees | $ 5,600,000 | |||||||
Indemnity Insurance Corporation [Member] | ||||||||
Commitments And Contingencies [Line Items] | ||||||||
Costs of litigation percentage | 100.00% |
Segment Information - Schedule
Segment Information - Schedule of Segment Reporting Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Sep. 30, 2016 | |
Revenues | $ 34,518 | $ 34,396 | $ 68,257 | $ 67,871 | |
Income (loss) from operations | 7,487 | 7,550 | 13,820 | 13,267 | |
Depreciation and amortization | 1,608 | 1,826 | 3,226 | 3,643 | |
Capital expenditures | 2,672 | 12,672 | 5,680 | 13,561 | |
Total assets | 276,059 | 276,059 | $ 276,488 | ||
Nightclubs [Member] | |||||
Revenues | 29,967 | 29,344 | 59,249 | 57,514 | |
Income (loss) from operations | 10,498 | 9,687 | 19,714 | 18,195 | |
Depreciation and amortization | 1,225 | 1,420 | 2,467 | 2,562 | |
Capital expenditures | 545 | 12,435 | 1,340 | 12,826 | |
Total assets | 243,180 | 243,180 | 244,464 | ||
Bombshells [Member] | |||||
Revenues | 4,375 | 4,629 | 8,670 | 9,008 | |
Income (loss) from operations | 801 | 758 | 1,439 | 1,245 | |
Depreciation and amortization | 223 | 231 | 441 | 462 | |
Capital expenditures | 1,614 | 104 | 2,718 | 144 | |
Total assets | 10,714 | 10,714 | 8,673 | ||
Other [Member] | |||||
Revenues | 176 | 423 | 338 | 1,349 | |
Income (loss) from operations | (222) | (856) | (563) | (1,504) | |
Depreciation and amortization | 4 | 171 | 9 | 342 | |
Capital expenditures | 10 | 11 | 2 | ||
Total assets | 1,117 | 1,117 | 896 | ||
General Corporate [Member] | |||||
Income (loss) from operations | (3,590) | (2,039) | (6,770) | (4,669) | |
Depreciation and amortization | 156 | 4 | 309 | 277 | |
Capital expenditures | 503 | $ 133 | 1,611 | $ 589 | |
Total assets | $ 21,048 | $ 21,048 | $ 22,455 |
Disposition (Details Narrative)
Disposition (Details Narrative) - USD ($) $ in Thousands | Jan. 13, 2017 | Oct. 05, 2016 | Mar. 31, 2017 | Mar. 31, 2016 |
Proceeds from sale of properties | $ 2,200 | $ 2,047 | ||
Loss on sale of properties | 116 | |||
Debt maturity date, descripton | The refinanced debt was comprised of interest-only notes that were scheduled to mature with full principal payments in October 2017. | |||
Debt prepayment penalty | $ (75) | |||
Balloon Note [Member] | ||||
Proceeds used to repayment of debt | $ 1,500 | |||
Debt instrument interest rate | 11.00% | |||
Debt maturity date, descripton | due in 2018 | |||
Debt prepayment penalty | $ 75 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) $ in Thousands | May 08, 2017 | May 01, 2017 | Apr. 26, 2017 | Jan. 04, 2017 | Oct. 05, 2016 | Mar. 31, 2017 | Mar. 31, 2016 |
Purchase price of assets acquired | $ 5,680 | $ 13,561 | |||||
Convertible notes maturity date | Mar. 4, 2023 | ||||||
Seller financed note, terms | 5 years | ||||||
Subsequent Event [Member] | |||||||
Proceeds from unsecured promissory notes | $ 5,400 | ||||||
Debt instrument interest rate | 8.00% | 12.00% | |||||
Convertible notes maturity date | May 1, 2020 | ||||||
Purchase price of business acquired | $ 15,552 | ||||||
Seller financed note, terms | 12 years | ||||||
Subsequent Event [Member] | Hollywood Showclub [Member] | |||||||
Purchase price of assets acquired | $ 4,200 | ||||||
Subsequent Event [Member] | Scarlett's Cabaret Miami [Member] | |||||||
Purchase price of business acquired | $ 25,952 | ||||||
Subsequent Event [Member] | Scarlett's Cabaret Miami [Member] | Closing [Member] | |||||||
Purchase price of business acquired | $ 5,400 | ||||||
Subsequent Event [Member] | Scarlett's Cabaret Miami [Member] | After Six Months [Member] | |||||||
Debt instrument interest rate | 5.00% | ||||||
Purchase price of business acquired | $ 5,000 |