Transcript
of
Rick’s
Cabaret International (RICK)
2nd Quarter 2012 Earnings Conference Call and Webcast
May
10, 2012
Eric S. Langan,
President and Chief Executive Officer
Phillip
Marshall, Chief Financial Officer
Allan
Priaulx, Corporate Communications and Investor Relations Officer
Operator
Greetings and welcome
to the Rick’s Cabaret International 2nd Quarter 2012 Earnings Conference Call
and Webcast. At this time, all participants are on a listen-only mode. A
question-and-answer session will follow the formal presentation. If anyone
should require operator assistance during the conference, please press *0 on
your telephone keypad. As a reminder, this conference is being recorded.
It is now my pleasure
to introduce your host, Allan Priaulx, Investor Relations for Rick’s Cabaret. Thank
you, Mr. Priaulx, you may begin.
Allan Priaulx – Rick’s Cabaret International – Corporate
Communications and Investor Relations Officer
Thanks, Doug. Good
afternoon everyone. I’m Allan Priaulx, Investor Relations Officer for Rick’s
Cabaret and welcome to our 2nd Quarter 2012 Conference Call and Webcast. In a
moment, I’ll turn the call over to Eric Langan and Phil Marshall, our CFO, who
will present results from the quarter ended March 31 and then answer any
questions you might have.
Before we begin, I’d
like to call your attention to our Safe Harbor Statement which is included on
slide 2 of our PowerPoint presentation available on our website and at www.ricksinvestor.com and at the PrecisionIR
or Investor Calendar website. Please take a good look at that statement as
this conference call may contain forward-looking information within the meaning
of Section 21E of SEC Act of 1934.
In addition, I want
to call your attention to Adjusted EBITDA, it’s a term you will hear during
this call and, for your convenience, we have included a definition of Adjusted
EBITDA in our PowerPoint.
I’d also like to
remind you that Rick’s Cabaret files reports and other documents with the SEC
and all of them are available on our IR website, www.ricksinvestor.com. It’s our discrete
investor relations web address. A transcript of this call will be available later
in the week at ricksinvestor.com.
For those of you in
the New York area, I invite you to our popular Due Diligence Ball this evening at
Rick’s Cabaret from 6 p.m. to 8 p.m. We hope you’ll come to the club and meet
Eric and myself and perform your own due diligence on Rick’s Cabaret. You’ll
have a great time doing so.
And now, I’m turning
the call over to Eric Langan and Phil Marshall.
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
Thank you, Allan.
I’ll begin with a
quick overview. We will discuss the summary of our second quarter; talk about
the drivers increasing revenues, earnings, and EBITDA; and talk about our cash
flow for the quarter. I wanted to discuss our acquisition program and our
plans to move forward on that. We’ll take a look at some of our debt and some
of our plans there and then discuss the outlook for the remainder of 2012 and
end the call with a question-and-answer session.
Beginning: Q2 2012
revenue was a record $25.4 million versus $21.6 million in 2011, a 17.8%
increase. We had a very nice increase in same-store sales of 8.1% to $22.6
million. Net income without our legal settlement would have been $3.3 million
versus $2.9 million in 2011. Q2 2012 Adjusted EBITDA, $7.5 million without the
legal settlements versus $6.9 million. Net cash provided by operating
activities in the six months ended March 31, 2012 was $12 million compared to
$8.5 million. Expenses include a one-time $1.8 million reserve to settle a
shareholder lawsuit. Exclusive of the legal settlement, operating margins
improved to 22.2%versus 19.8% in the previous quarter.
To give a quick
update of where we’re at with some of our existing acquisitions, the Rick’s
Cabaret DFW location near the airport there in Dallas/Fort Worth, got its
liquor license in February. We’ll be having a grand opening party this weekend
to really kick things off. We had a nice soft opening through February. We
had very good months in March and in April and we think that having a grand
opening at this time will further push those sales up at that location and help
cement this location as a premier location in the Dallas/Fort Worth market. We
also purchased Silver City Cabaret around that same time in February and have
been doing very, very well with that, adding to our very strong presence in the
Dallas market now with that location.
Across the board, our
basketball crowds are back, not only on an NBA level but on the college levels
with very good tournaments in New York. The tournament in Charlotte was very
big this year for us as well as some of our other markets. We’ve been very
happy with that turnout.
We also were able to
implement minor price increases in recent weeks that are also helping to drive
our top line and hopefully cover some of the margin creep that we have lost in
previous quarters and trying to get our margins back up.
Our current debt is
sitting at $47 million; $27.9 million which is real estate related debt, which
we look at as basically a rent expense on some of our night clubs, leaving our
actual debt at around $19 million, which we believe is very manageable based on
our free cash flow right now generated from our operations of almost $2 million
a month. We have $9.4 million debt at 14% from the Tootsie’s transaction.
This month we have decided that we are going to accelerate some of those
payments. We’re making additional principal payments on that. We have looked
at cash we’ve been setting aside to put into our stock repurchase plan and with
the stock between $9 and $10, we’ve decided that we will pay off this 14% debt
at this point with cash we’ve been setting aside for that. So we’re going to
start paying that down a little bit quicker.
Also, we had several
balloon payments that were scheduled to come due on 2013 including one that we
extended to this quarter that had $1 million due that we’ve pushed now till
February 2014; and we’re in the process of also pushing about $9 million in
additional balloon payments that will come due to 2013 through negotiations and
extending most of those notes out anywhere from an additional three to five
years on those notes. So that should help free up cash flow going through
2013.
We reduced our debt
by $2.9 million in the three months ended March 31, 2013 and we currently have
about $4.5 million left on the convertible debentures that we issued back in
June of 2011 or 2010, I can’t remember when we actually issued those – yes, in
2010. So that will be about four more payments, I believe, on those and that
debt will be taken care of. So basically, we’ll pay off about $6 million in
additional debt over the next 12 months.
Our going forward
growth strategy, we’re starting to focus on searching for multi-club operators
and multi-club operations. We want to buy a group of clubs rather than a
single mega club that will give us an additional $10 million to $20 million in
additional revenues but spread the risk over multiple locations instead of a
single location like we did in Las Vegas. We do believe the economy is getting
better. We’re seeing a return of customers. Our customer counts are up. Our
entertainer counts are strong. And so we are gaining the confidence to make
these larger acquisitions; but I’m just not sure that a single market
acquisition is the right move. Because as we’ve seen in Vegas if the market
does turn negative again, how quickly a single location can be affected.
We’re going to
continue emphasis on organic growth and cash generation. As you can see from
our cash flow statements, we are doing a very good job at creating cash. We’re
trying to eliminate our taxes as much as possible and generate and keep as much
of our cash as we can so we can reinvest or pay down debt with that cash. Our
goal is accretive acquisitions, adding quickly to our bottom line performance.
We’ve done very well with that with the Silver City acquisition and we’re
looking for other similar type of single one-off acquisitions we can do where
we believe we can get very quick results like that.
And now we’re going
forward. As you can see, our idea and plan is to produce solid and consistent
numbers. With that in mind, we had a very good quarter at $25.4 million, which
was helped by Super Bowl and several college basketball tournaments that increased
revenues. I think our going forward number for the next quarter, for April,
May, and June, will fall somewhere between $23.4 million and $24.1 million in
night club revenues. You see our legal costs were still a little high in this
quarter due to the acquisitions that we made – two different acquisitions; one,
a land acquisition and the land and club acquisition on Silver City. Some of our legal costs will be going down. We still have some high legal costs due to
the New York labor dispute. We are doing several depositions in that case as
part of the class members and so, therefore, the legal costs will probably
remain high through the end of May; but I think after May, a lot of the – we’re
getting close to the end of the discovery period there and so those costs will
drop considerably moving forward into June, July and going forward until we
actually get to a trial date.
We will watch our
expenses closely, with really a lot more attention to the bottom line now that
we got the top line under control and we’re not as worried about new customer
spending. So we’re really starting to manage with price increases, negotiations
on national purchasing through different liquor distributors, and trying to keep
our costs down.
We’re currently
examining several opportunities out there, from multi-club to single club
operations, and partnerships where we can use our capital and other multi-club
operators to operate the clubs for us. And we would also look at purchasing the
real estate on those transactions and being the landlord as well as owning a
percentage of the clubs.
As you see, the clubs
that we have acquired in the past years are meeting and exceeding our
expectations. We always thought that the Silver City location would be a $5
million plus location, we just thought it would take us 6 to 18 months to get
there, and the management team that we’ve put in there and because of our
strength and power in the DFW market with bring in entertainers and staff, we
were able to take that location to nearly a $5 million run rate in about four
weeks. So we’ve been very, very happy with that location.
We remain highly
confident in our management and our business model and we think that sticking
with the program that we’ve put in place is our best bet. So we’re not going
to look a whole lot outside the box. We’re going to keep doing what we’re
doing and continue to grow the top line and manage our expenses to keep our
margins growing as well at the bottom line.
So that concludes the
formal presentation. If anyone has any questions, we’ll be happy to take those
questions and answer them at this time.
Operator
We are ready to begin
the question-and-answer session. If you would like to ask a question, you may press
*1 on your telephone keypad. A confirmation tone will indicate your line is in
the question queue. You may press *2 if you would like to remove your question
from the queue. For participants using speaker equipment, it may be necessary
to pick up your handset before pressing the * key.
Our first question
comes from the line of David Mau from Montgomery Street Research. Please
proceed with your questions.
David Mau – Montgomery Street Research
Good afternoon,
Eric. Congratulations on a great quarter.
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
Thank you. We had a
very strong quarter. We’re very pleased with the results.
David Mau – Montgomery Street Research
I was curious what
EPS would have been including the tax ramifications from excluding the legal
costs…
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
It would have added
$0.12 basically, so instead of $0.22, we would have been at $0.34.
David Mau – Montgomery Street Research
$0.34 so that’s put
you on track for the $1.22 that’s in the consensus estimate?
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
Would put us at about
$0.58 on an income from operations and about $0.56 on a net income…
David Mau – Montgomery Street Research
Okay. Very good.
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
…on an annualized
basis. So – and we figure we’ll do exactly the same for the next two
quarters. Of course, we had acquisitions that we’ve added that will add
earnings going forward, so I think we’re pretty close, $1.12 to $1.20.
David Mau – Montgomery Street Research
Very good. Very
good. Thank you.
Operator
Our next question
comes from the line of Danielle McCoy from Brean Murray. Please proceed with
your question.
Danielle McCoy –
Brean Murray & Co.
Hi, guys.
Congratulations on a great quarter.
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
Thank you.
Danielle McCoy –
Brean Murray & Co.
I was wondering if
you can explain a little bit more about the different pricing strategies and
marketing programs that you guys have been doing.
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
Sure. We take our
locations, especially our high volume locations -- we have some very large
clubs -- and at the larger clubs what we’ve done is we’ve gone to a much lower
pricing of specials like $2 Tuesdays, $1 Beer on Wednesdays, and those types of
things. What we’ve been able to do now with the markets actually improving is
going to instead of $1 beer, were doing $1.75, which doesn’t seem like a lot,
but when you have that extra $0.75, you’re really helping to lower your cost
basis and dramatically increasing revenues when you’re selling 300 cases of
beer in a single night at a location. So that’s helping. We’re also been able
to increase certain shot specials where we’ve been at $3.75 and now, maybe
doing $5 premium shot specials instead of $3.75 non-premium shot specials. So
we’re generating more revenues in those ways. We’re also been able to pass
along $0.25 to $0.75 overall price increases in a lot of our markets. And that
does help to increase our revenues and what we’re hoping to do is get cost of
goods margin improvement.
Another reason – there’s
two reasons the cost of goods have actually increased a percentage point or so
-- when we buy liquor for clubs like Silver City and the DFW Air location and
put liquor in there -- the liquor locations have a much higher cost of goods
sold than what we call our BYOB clubs. When we add BYOB clubs that helps bring
the cost of goods down because there’s a lot less cost associated with them.
So it brings the overall cost of goods down a little bit. But as we add more
liquor clubs, we get higher. Most of our liquor clubs run about a 14% cost of
goods where our BYOB clubs cost of goods will be closer to the 9% or 10%
range. And when you get the mix in there, you’re getting 12%, 13%, which is
where we’ve been coming in at. Also the liquor club costs are up a little bit
because of increased bottle sales. And we’ve been doing a lot of bottle
promotions and a lot of bottle specials to anchor people into our clubs. If
you sell a bottle of vodka by the drink at $8 a piece and you’re pouring out of
liter bottles that cost you $27, you’re ringing up $250, $260 out of one bottle,
versus selling that bottle itself to someone in a fifth size -- which actually
has 6 less ounces of liquor in it but it costs us about $3 or $4 less -- but we’re
selling it for $175. So you can see here, we’re getting $175 against a $23 cost
versus $256 against a $27 cost. So your percentages are fudged a little there
for that 1% to 2% based on how many more bottles you’re selling versus how many
single shot drinks you’re selling.
Danielle McCoy –
Brean Murray & Co.
Okay. Great. Do you
have any update on the Texas patron tax?
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
Well, we’re currently
waiting. The legislature’s out of session, so nothing’s going on with the
legislature. The courts were basically back to square one with the state court
issue on state constitutionality issues. I don’t even – I’m not even sure when
the hearing’s going to be set. I know that the judges had been selected and
they’re moving forward on it, but it’s really just a matter of – the way we it’s
been explained to ius -- we’re back at square one. So we’re looking at an
entire process of another three plus years to go from this court to the Appeals Court to the Supreme Court again, and we’ll just have to wait that out. In the
meantime, there’s talk with certain legislators and making changes and trying
to make it constitutional – maybe working out a compromise between all the
parties to come up with something that’s affordable for the clubs to pay and a is
constitutional tax ,such as more of a percentage-based tax, and calling it a tax
and making it an occupational tax versus what they tried to do in this last one
and make it an actual fee. And so, basically, I think we’re just kind of in
limbo, at least, till the legislature is back in session in January and may be
even for three years still. We just don’t know where that’s going to go at
this point. We do believe that it’s an unconstitutional tax and not a fee as
they explained it in the ordinance.
Danielle McCoy –
Brean Murray & Co.
Okay. With regards
to the acquisitions, is there any particular market you guys are looking in?
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
We were looking
everywhere, of course. I mean, obviously, Texas is home base for us so we’re
always looking to increase our presence in Texas; and we’re also looking at Florida very hard; New York, we’d love to get additional presence in New York. But
basically, any major metropolitan area with sports teams is where we’re looking
right now. And we’re starting to look maybe for a more West Coast presence as
well, expanding out towards the west.
Danielle McCoy –
Brean Murray & Co.
Okay. Great. Well, thanks
so much.
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
Yeah. Thank you.
Operator
Our next question
comes from the line of Dan Smith, a private investor. Please proceed with your
questions.
Dan Smith – Private
Investor
Hi, guys. Great
quarter. Thanks for taking the call. A few questions for you, first, on the Hart
case in New York, it seems like clubs all over the country keep losing these
cases or end up settling. Can you talk about why we haven’t just converted all
the independent contractors over to employees and made the economics work?
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
Technically – well, I
mean, no --other clubs around the country have not necessarily lost these
cases. There’s been a lot of settlement in these cases but there haven’t been
very many of these cases actually tried. A lot of people have taken the easy route
out and settling with their current base and putting in new contracts that Rick’s,
of course, put in that all of our clubs except for New York location shortly
after the lawsuit was filed here. That basically stopped the class actions and
forced arbitration if an independent contractor decides that she should be an
employee. It’s our belief they are independent contractors. We treat them as
such. They file their taxes based as such. It remains to be seen. We have
not really considered settling this case. We want to see what happens as we
move this case forward and I really can’t talk about a lot of the fundamentals of
course because its ongoing litigation, which makes it very difficult in a
public realm to discuss all of our beliefs. But at this time, we believe that
we are right. We believe we will prevail. And at some point, that may change,
it may not. We’re watching. We’re watching what other clubs are doing. We’re
watching what other – what else is going on out there in the country. I’m on
the ACE National Boards so I’m very in tune with a lot of other club owners,
talked to them a lot. And, like I said, we’re watching it and we’ll just have
to wait and see exactly where this goes. But I could tell you, the
entertainers don’t want to be employees.
Dan Smith – Private
Investor
Right.
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
You’ve got a handful
of old entertainers who do not entertain in the industry anymore who think they’re
going to get a big payday, and these claimants’ lawyers have convinced them of
that and the only one that’s gotten a big payday in any of these settlements
that I’ve seen are the lawyers. In most of the cases, the girls are getting
tip credit so they’re getting free house fee credits. They’re getting food and
beverage certificates. They’re getting very, very small amounts of cash,
nothing, you know. But then the lawyers are getting millions of dollars in
fees. So it’s just a typical class action deal where the attorneys don’t care
really what’s best for the client. They care how to get the biggest paycheck
they can get. We care about our entertainers. We’ve always taken very well and
good care of our entertainers, and the majority that works for us right now are
very happy and prefer the arrangement that we currently have with them. They
don’t want to see the arrangement changed so that’s one of the reasons we’re
not really interested in changing.
Dan Smith – Private
Investor
Okay. That makes
sense. And then on the pole tax again, that $8 million liability is getting
pretty big. Do you have any plans to set aside cash for it or are you going to
wait and see and then secondly, can you talk about how it would play out?
Would it put our competitors out of business if they went after them for these
back taxes? I can’t imagine they’re setting aside the money.
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
We just really don’t
know. We don’t really believe that the controller has any plans on how they
would turn around and collect this tax. Obviously if they said all of a sudden
we all owe all this money, and nobody has it, they’re going to have to work out
some type of payment plans. There’s going to be some type of settlement deal.
If they just come in and take all the clubs, then what are they going to do? Go
seize a bunch of operating assets that they can’t operate ? So, we don’t see
that happening. Putting a bunch of people out of work in this economy is not
going to be a good idea for them. And that’s all assuming they win, which they’ve
only won in one court so far on an issue that wasn’t their main issue. When we
originally filed this case, the issue that we won on was the U.S. constitutionality issue; this is a state court, we were in state courts. We never
expected the courts to even rule on the U.S. constitutionality issue. That was
there for the appeals if we lost on a state court level. The same thing
happens, we won on the U.S. Supreme Court issues and the judge didn’t make any
rulings on the state court issues because he said they were moot because it was
unconstitutional under the U.S. Constitution. So as it moved up through the
courts through the years, then the Texas Supreme Court came back and said,
well, maybe it’s not unconstitutional and, of course, because you get this and
this and this and they really kind of stretched and, of course, the U.S.
Supreme Court didn’t want to hear the case because they’re still state court
issues. So it will go back to the State courts, it will run back up and it’ll
go to the Texas Supreme Court and then if, for some chance, whichever party
loses, it will go back to the U.S. Supreme Court. At that point, when there’s
no other issues, then maybe U.S. Supreme Court will hear the issue -- and we’re
looking at three to five years.
So we’re not really
setting that money aside because it doesn’t make any sense to at this point.
We’re using it; we’re growing the company. If they come in and decide that we
owe it, they’re going to try to collect it or they’re going to do certain
things, then we’ll deal with it at that time. There was legislation that was
tried to be pushed through in the last session that would have basically fixed
the ordinance and gotten rid of all taxes owed under the old deal. We expect
to see bills put through the legislature again this session that will do those
same things that will try to fix the tax, take the constitutionality issues out
of it, and basically eliminate all past liabilities and create an occupational
tax going forward. While we can’t guarantee any of those things will happen,
those are the talks and all we can do is basically wait – play the wait-and-see
game. But its three to five years. I think if they try to collect it, yes,
there are not very many operators who are going to have the money to pay all of
these taxes at one time for sure.
Dan Smith – Private
Investor
Okay. And then, in
the K you guys disclosed a $750,000 loan from an employee. It didn’t seem like
there’s all that cheap a money from us. I think it’s 10% plus options. Can
you guys talk about the rationale on that?
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
Well, it was a 10%
loan to our – from our Director of Operations. We needed some cash for
something at the time, he had it, and we grabbed it from him. And it tied him
to the company more. I was in favor of it at that point; 10% money is not
cheap money, but it’s not expensive money for us either. It’s about in line
with where we are on unsecured debt that we borrow. So that’s basically the
thought of it at the time.
Dan Smith – Private
Investor
Okay. And just last
one really quick. In the Q just filed now, it says we received $6.2 million in
seller financing from real estate and an aircraft. Does that mean we bought
them from the same person?
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
No. No, the aircraft
was brought from Cessna.
Dan Smith – Private
Investor
Okay. All right.
Thanks a lot you for taking the questions.
Operator
Our next question
comes from the line of Harry Burns, a private investor. Please proceed with
your questions.
Harry Burns – Private
Investor
My question is kind
of like a maybe a philosophical question, Eric, for you, both wearing all your
hats, in terms of President, Board Member, but also as a significant
shareholder. I’ve been a shareholder since probably around 2007. And it’s
obviously – it’s frustrating to all of us in terms of sometimes seeing the
growth that we have and how the company is doing and yet the multiples still on
the stock is – it seems like is much less than any type of comparable companies
in our industry. And I was wondering just in terms of thought of, you know, we’ve
been going through the strategy obviously of generating increasing cash flow
through organic growth and acquisitions and we’re buying more earnings and yet –
obviously, if you get more earnings, you would hope to have increase stock
price, looking it from an owner’s standpoint, right? We’re not getting that,
at least we haven’t at this point. And so the question I guess is, is that has
there been any thought to maybe saying, well, if we’re not getting as much of a
pop in terms from an owner’s standpoint from essentially buying more earnings,
would we consider taking some of our increasing cash flow and just paying it
out in terms of starting a dividend then maybe individual owners can do better with
the money in terms of that or maybe we attract a different type of investor. I
mean we’re getting such nice cash flow. We certainly have – we could cover
certain things. I just wonder in terms of – if that’s been broached at all.
And, again, I know – like I say, you have a management hat and a Board hat but,
obviously, you’re a significant shareholder yourself.
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
Well, the way I look
at it is I’m not big on double taxation, number one. At the end of this year,
the dividend tax benefit goes away unless Congress acts. I’m not holding my breath,
I hope you aren’t, to see what happens there. And second, we’re a growing company.
I mean, we need our capital to grow. We have a significant amount of 14% debt
that we can do and when our stock is cheap, we buy it back which is basically
dividend tax free to all of our existing shareholders, a larger percentage of
the company. I think those are the best uses for our cash right now: continue
to grow, reduce high interest debt, and, at opportune times, make purchases of
the company’s stock back. A dividend, I don’t think is really the answer in
returning – and the best way to return cash back to our shareholders at this
point. I’m not saying it’ll never be, I’m just saying at this time, I just don’t
think it’s the best move.
Harry Burns – Private
Investor
Okay. And lastly, I’m
sorry, did you have any – I appreciate in terms of the guidance for the quarter
and the revenue for the fiscal year, do you have a range in terms of thinking –
in terms of income numbers? Profits per share?
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
I mean, we’re trying
to think – we’re trying to think without, of course – without the one-time, but
I think we’re going to stay pretty close to that $1.20 range. We’ll have to
see how this quarter goes and we’ll have a much better idea, of course, but we
just really haven’t been giving out any guidance at this point. We’re seeing
what the economy does. We’re seeing where things are going. We’re happy with
the way things are going and we’ve got analysts that their expertise is to
judge and guess how we’re going to do going forward and we’re kind of just sticking
with them right now.
Harry Burns – Private
Investor
Thanks.
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
Thank you.
Operator
Our next question
comes from the line of Jim Lewis, a private investor. Please proceed with your
questions.
Jim Lewis – Private
Investor
Eric, congratulations
on a good quarter. We were excited about the grand opening here at Rick’s DFW
at the south end of the airport. I was just wondering what do you feel like the
projected run rate on that facility will be now that the club has a liquor license.
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
Well, we’re currently
a little over $50,000 – between about $50,000 and $60,000 –
Jim Lewis – Private
Investor
A week?
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
A week, yes, a week,
weekly. Our weekly run rate. I’ve always said that it’s a $5 million a year
location which is just under $100,000 a week and I believe that if we can get
the popularity and the proper entertainers at the location and draw the locals
from the north down there instead of having them go and hit 114 and hit Northwest
Highway over there and they can come to the airport and visit our location
instead -- that $125 is probably a very, very reasonable number for that
location on a weekly run rate, which would put it about $6.25 million.
Jim Lewis – Private
Investor
You are also
developing into a late or after-hours club like some of the other clubs in the
DFW area?
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
Well, I mean on
Friday and Saturday, we’ll stay open until 4 a.m. but keep in mind that
location is in the city limits of Fort Worth, not the city limits of Dallas. And Dallas has different operating terms. In the city of Fort Worth, we can only
be open till 2, Sunday through Thursday, and until 4 on Fridays and Saturdays.
Jim Lewis – Private
Investor
Okay. Management
seems to be a pretty good – doing a very good job in that location, what are
you going to do to deal with what could turn into perhaps a taxi cab bounty on
the taxi guys coming out of the DFW airport?
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
Well, we’re the
closest to the hotels. Really guys coming out of the airport in cabs typically
go to their hotel first and then go out. We don’t get too many people –because
they’re not going show up with their luggage and whatnot. So that hasn’t been
a real issue as far as coming out of the airport. We are working with some of
the rental car operators over there trying to do some (inaudible) promotion
with them. We do a lot of stuff with the – obviously, the hotels there in Center
Point, the hotels in the North Arlington area, and, of course, in Irving there, and as well as Las Colinas. And we’re seeing significance there. As well
as in the down town Dallas area, of course, we’re doing a similar thing with
the Silver City location. And it’s been very, very good for us. As well as
working with the limo drivers and those types of guys. Mainly they know the
difference is all the clubs pay the same amount, none of the clubs are paying
different amounts. I don’t see a cab war starting in Dallas/Fort Worth, there’s
just no reason for it. And it’s just not enough – biggest enough part of your
business that people are going to get into a big spend war on that like they
did in Vegas. But it is definitely with the limo companies, we work with them.
They want their guests to have a good time. That’s their biggest concern is that
they’re bringing their guests and their guests are having a good time. And when
they leave, their guests isn’t going to feel that they were taken advantage of
and that’s one of the things that Rick’s has -- a reputation of taking care of
our guests -- and I think that will continue and that definitely helps us with
the limo companies and the hotel companies and those type of things as far as
recommending our location.
Jim Lewis – Private
Investor
Any plans on the
horizon for the Inwood property?
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
Not at this time. At
this time, we have not – we haven’t purchased that property at this time. We’ve
been in talks with them still. In fact, I need to get back with them shortly
and make a plan on what we’re actually going to do down there. We’ve just been
so busy with everything else, we just haven’t got around to it and it’s going
to be a ground up. It’s an 18- to 24-month project for us and so we haven’t
really put a lot of high pressure on it because we’ve been – we have two
locations in that market that we’re currently building with the DFW location
and the Silver City location -- that we just haven’t really pursued at this
point. I’m sure we will at some point in the future.
Jim Lewis – Private
Investor
Well, good. We hope
to see you both come to the DFW location this weekend.
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
Yeah, I’ll probably
be up on Sunday. I won’t make it for Saturday. We have some – I’m in New York right now and be heading back but I’m definitely going to try to get up there on
Sunday.
Jim Lewis – Private
Investor
Good. Thanks for
taking my call.
Eric S. Langan – Rick’s
Cabaret International – President and Chief Executive Officer
Yes, thank you.
Operator
As a reminder, ladies
and gentlemen, it is *1 to ask your question.
It appears there are
no other questions in the queue. I’d like to hand the call back over to
management for closing comments.
Allan Priaulx – Rick’s Cabaret International – Corporate
Communications and Investor Relations Officer
Thank you, Doug, and
thank you everyone for participating in the call and I want to remind everyone
once again, in the New York City area, to please visit Rick’s Cabaret on West 33rd Street this afternoon – this evening for our Due Diligence event. You’ll
have a great time. Again, thank you very much.
Operator
Ladies and gentlemen,
this does conclude today’s teleconference. Thank you for your participation.
You may disconnect your lines at this time and have a wonderful day.
