February 12, 2002 09:06am
Rick’s Cabaret Reports Income for First Quarter, Club Margins Improve
Source: Rick’s Cabaret International, Inc.
by: Company Press Release
(HOUSTON, TX) -- Rick's Cabaret International, Inc. [Nasdaq: Rick] today reported net income of $247,222 or six cents per share for its first quarter in fiscal 2002 ending Dec. 31, 2001, compared with $250,765 and six cents in the previous year. Consolidated total revenue for the quarter was $4,054,425, compared with $5,051,413, due to a planned cutback in low margin Internet marketing programs. Rick's Cabaret operates a network of adult entertainment nightclubs and Websites.
"Given the economic conditions in our key markets we are very pleased with our results for the quarter, particularly since the restructuring of our Internet marketing system caused a steep drop in revenue for that segment." said Eric Langan, President and CEO of Rick's Cabaret. "Net income at the clubs more than doubled from the previous year to $320,406 from $156,755, even though revenue for our club operations was up by just 12 percent over the same quarter."
Mr. Langan noted that Internet revenue for the first quarter in the previous year was exceptionally high because the company acquired traffic through expensive subscription marketing services in order to build consumer interest in its Websites. "We no longer need the high volume of samplers we did during our launch phase and can now concentrate on recruiting subscribers who will stay with us over a longer period of time. We also are building our adult auction sites." Internet revenues declined by 67 percent from $2 million to $663,720 year on year, but net income from the Internet sites dropped by only 53 percent to $126,739 from $269,464. The drop in Internet revenues is a result of the Company eliminating costly subscription marketing programs that generate high revenues with low margins. The Company is focusing on programs that are expected to yield higher margins on reduced revenues.
Cash provided by operating activities for the period was $428,508, compared with $380,880 in the previous year and the company had cash at the end of the period of $838,103, compared with $359,303 at the end of the period in the previous year.
As a result of overall emphasis in cost reductions the cost of goods sold declined to 21 percent from 36 percent in the first quarter of the previous year. "Operating margins at the clubs should continue to improve as we continue our efforts to reduce costs through improved inventory management," Mr. Langan said.
"We are in excellent shape to resume our growth pattern as the economy turns around in the months ahead, both through improvements at the existing clubs and through acquisitions," Mr. Langan said.
About Rick's Cabaret:
Rick's Cabaret is organized into two business lines: 1) Nightclubs and entertainment, comprising four Rick's Cabaret clubs in Houston and Minneapolis, two XTC Clubs in San Antonio and Austin, and the Encounters club in Houston catering to couples in the swingers' lifestyle and, 2) Internet activities, which encompass adult entertainment sites such as the www.xxxpassword.com membership portal that provides access to 127,000 adult oriented Websites, and six auction sites led by www.naughtybids.com operating on a single proprietary technology platform that earn revenue from commissions on auctions of adult paraphernalia and on Webmaster referral fees.
This press release contains forward-looking statements that involve a number of risks and uncertainties. Important factors that could cause Rick's actual results to differ materially from those indicated in this press release include the risks and uncertainties as to the future operational and financial results of our Web sites, the future operational performance of our partners, the laws governing the operation of adult entertainment businesses, competitive factors, dependence on key personnel and the ability to manage operations. Rick's has no obligation to update or revise the forward-looking statements to reflect the occurrence of future events or circumstances.
[Operating Results redacted]
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