Rick's Has Great 2008, but Fails to Provide Guidance

There is a definite slowdown in Rick’s Cabaret International’s (NASDAQ: RICK) business as a result of the overall market forces and economic malaise, but all things being equal, the company still reported fantastic numbers for 2008, but failed to give forward guidance as a result of the down economy finally peeking its head at the company’s strip clubs.

As I wrote about previously, I wanted to see Rick’s results come in where they said they would (they did for the most part), and show continued execution on the cash flow and free cash flow side of the business (which they also did). Finally, I was looking for Rick’s forward guidance to be cautious with respect to the headwinds that they are facing, and that also came to pass.

In fact, Rick’s failed to give forward guidance based on the precipitous slowdown in their business within the last month.

So what does this mean for our investment? Is Rick’s still a good place to put new money to work? Is the business flawed or coming under pressure that would prevent the company from continuing as an ongoing concern? What about Rick’s cash reserves and liquidity?

In this post I’ll be breaking down Rick’s full earnings release, as well as their analyst conference call, and round out my post with what you should do with Rick’s stock.

New to the Rick’s story?

Rick’s Cabaret International, Inc., owns and operates upscale adult nightclubs serving primarily businessmen and professionals.

Rick’s differentiates themselves by providing an atmosphere where they can offer a unique quality entertainment environment that includes highly experienced and well screened entertainers, high quality managers hired from within the adult entertainment industry, and finally, providing an atmosphere and ambiance, including exclusive VIP rooms, that appeal to upscale clientele.

Rick’s also owns and operates several online and offline media properties that produce adult websites as well as cater to owners and operators of intimate apparel and adult retail stores.

Rick’s nightclubs offer live adult entertainment, restaurant, and bar operations in Houston, Austin, San Antonio, Minneapolis, Minnesota, New York, Dallas Fort Worth, Charlotte, and other cities under the names Rick’s Cabaret, XTC, and Club Onyx.

As of September 30, 2008, Rick’s operated 19 adult nightclubs.

Want more?

• Read my last company update here.
• OR: Read my initial company buy recommendation here.

Hit Me With Some Numbers

Sales Higher as A Result of Acquisitions, Same-Club Sales Very Strong

(Growth from previous year’s Q4 or Full Year 2008/analyst’s estimates where applicable [only 2 analysts cover Rick’s]):

• Q4 sales of $17.23 million (up 92% from $8.97 million prior year/vs. $17.29 million projected by analysts)
• Q4 net income of $1.44 million (up 22% from $1.18 million prior year)
• Q4 earnings per share of $0.15 (down 17% from $.18 per share prior year/vs. $.23 per share projected by analysts)
• Q4 net income margin of 8.4% (down from 13.1% in the prior year)
• Full year 2008 sales of $59.93 million (up 87% from $32.01 million prior year/vs. $59.99 million projected by analysts)
• Full year 2008 net income of $7.66 million (up 151% from $3.05 million prior year)
• Full year 2008 earnings per share of $.91 (up 82% from $.50 per share prior year/vs. $1.00 per share projected by analysts)
• Same-club sales increased 14.8% for 2008
• Full year 2008 net income margin of 12.8% (up from 9.5% in prior year)

My Take: These are certainly wonderful results across the board, brought about mostly as a result of Rick’s acquisition spree in 2008.

One note is that earnings per share for the 4th quarter of 2008 were lower than in 2007 mainly because of a much higher share count used to help Rick’s in acquiring new locations.

Total shares outstanding were 9.38 million at the end of 2008, and 6.87 million at the end of 2007.

In addition, the same-club sales growth was tremendous and represents pure organic growth at clubs owned longer than 1 year.

The true test, and where Rick’s is already seeing some problems, is right now in Q1/2009 and beyond. More on that later.

Also, net margins were higher across the board, except for the 4th quarter which is typically Rick’s slowest time of the year, but overall net margins for the entire fiscal year came in at a stellar 12.8%, which is unheard of for a retail/bricks and mortar business.

As you’ll also see in the following section, most of this net income drops straight to the bottom line in the form of free cash flow, and in fact, Rick’s typically generates MORE free cash flow than net income!

Other Business Highlights

Strong Cash Flow, Stock Buy Back Update

• Cash flow from operations for 2008: $14.8 million
• Free cash flow for 2008: $11.66 million
• 2008 marked the first time Rick’s paid a full year of taxes with no left over tax loss carryforward, thus decreasing their earnings per share figure from previous years.
• Stock repurchase program update: up to $5 million total, and of that Rick’s has purchased 48,200 shares from $3.54 - $5.95. They will continue to purchase shares depending on stock price and cash levels. CEO stated that when the stock gets below $4.00 it’s just too cheap to pass up, and they will look to purchase more if that happens, depending on cash flow and their current cash on hand.
• Forward guidance: Due to the economic uncertainty in the coming year, especially in certain markets like Las Vegas, they are not giving forward guidance for 2009, but the CEO did state that they feel they will exceed their 2008 revenues and EPS numbers, but they aren’t yet comfortable giving any guidance for the time being.
• Forward operating cash flow projections: $1 million cash flow per month run rate as of now, still cash flow positive and still gaining cash in their coffers.
• Cash/Debt on hand: $5.6 million vs. $33.6 million in debt due over the next 5+ years, with $2.6 million due in 2009.

My Take: At first glance it may look like Rick’s is carrying way too much debt, but one look at their ability to generate free cash flow ($11.66 million in 2008), in addition to their current cash on hand of $5.6 million, shows that they can easily meet their current debt requirements in 2009 of $2.6 million, even if they generated NO additional free cash flow if the economy and market decline even further from current levels.

Also, as we’ll discuss more below, Rick’s has an obligation of about $13.9 million for all the put options that they gave to the businesses that they bought in 2008 in lieu of cash, if their stock went to $0, and the full amount were due immediately.

I’ll explain this in more detail below, but it seems that the market is having a hard time with this, and understanding that Rick’s is indeed doing fine in terms of liquidity, cash position, and debt financing that is due in the coming year and beyond.

Now, as for the forward guidance, that’s fine with me, as I never like companies giving guidance anyway, so I think it is prudent for Rick’s to suspend guidance especially in these difficult times when they are having a hard time gauging their future sales, especially at certain locations that are struggling mightily.

We’ll go into this in more detail below.

Conference Call Highlights

Cautious outlook backed up by slowing trends at certain club locations, Management addresses liquidity/put options

• Put options and debt: Rick’s used put options to pay for parts of their acquisitions last year. At the time, it seemed like a very good deal as their stock was in the $20 range, and using options as part of the purchase price for their new club locations (in addition to cash, and straight debt) was a nice way to lower the “price” of the purchase by diluting shareholders, but at a reasonable rate considering the jolt to revenue and EPS that the new acquisitions would provide.

On the conference call, the CEO, Eric Langan, stated that the 10-K (which was made available concurrently with the earnings release and conference call) contains a full disclosure of the put options and their expenses that will be currently due.

He also mentioned that they are in negotiations to extend those put options further out that would reduce their potential cash outlay in the next year.

The options have limits in terms of how many can be exercised, how many Rick’s has to purchase, etc., within a certain timeframe, which will reduce the likelihood that the stock will face further pressure of having the puts be sold and the difference reimbursed by Rick’s.

Each dollar movement in Rick’s stock price has an aggregate affect of $611,000 on the total obligation, which is about $13.9 million if Rick’s were at $0 per share.

So at $5.00 per share, the obligation is $3 million less than if it were at $0, so Rick’s is essentially on the hook for about $11 million at that level.

This is because Rick’s guaranteed that they would buy the puts from the club’s owners at predetermined prices, should Rick’s common stock fall below certain thresholds, which it has.

My Take: It is very important that investors understand how these put options work, and how they could potentialy affect Rick’s one way or another.

It seems that the market has been overreacting to the potential that Rick’s might face a liquidity crunch as a result of their obligations to pay these options at predetermined prices, but as we can see from the above calculations and Rick’s total obligation, even if their stock went to $0 per share (highly unlikely!), they would owe $13.9 million, but much less than that as their stock price is obviously higher, currently sitting at about $4.00 per share.

In addition, Rick’s only owes $2.6 million this year in debt obligations, which means that they are very well capitalized not including their usual cash flow generating capabilities.

From Rick’s 10-K:

As part of certain of our acquisition transactions, we have entered into Lock-Up/Leak-Out Agreements with the sellers pursuant to which, on or after a contractual period after the closing date, the seller shall have the right, but not the obligation, to have us purchase from seller a certain number of our shares of common stock issued in the transactions in an amount and at a rate of not more than a contractual number of the shares per month (the “Monthly Shares”) calculated at a price per share equal to a contractual value per share (“Value of the Rick’s Shares”).

At our election during any given month, we may either buy the Monthly Shares or, if we elect not to buy the Monthly Shares from the seller, then the seller shall sell the Monthly Shares in the open market. Any deficiency between the amount which the seller receives from the sale of the Monthly Shares and the value of the shares shall be paid by us within three (3) business days of the date of sale of the Monthly Shares during that particular month.

Our obligation to purchase the Monthly Shares from the Seller shall terminate and cease at such time as the seller has received a contractual amount from the sale of the Rick’s Shares and any deficiency. Under the terms of the Lock-Up/Leak-Out Agreements, the seller may not sell more than a contractual number of our shares per 30-day period, regardless of whether the seller “Puts” the shares to us or sells them in the open market or otherwise.

The maximum obligation that could be owed if our stock were valued at zero is $13,935,020 and is recorded in our balance sheet at September 30, 2008 as Temporary Equity.

We consider this type of financing transaction to be similar to interest-free debt. If we are required to buy back any of these put options, the buy-back transaction will be purely a balance sheet transaction, affecting only Temporary Equity and Stockholders’ Equity and will have no income statement effect.

Following is a schedule of the annual obligation we would have if our stock price remains in the future at the closing market price on December 5, 2008 of $4.87 per share:

For the Year Ended September 30:
2009: $2,541,538
2010: $3,527,683
2011: $2,862,975
2012: $2,023,650
Total: $10,955,846

So as we can see from Rick’s description above, they are well covered for this obligation, but where it concerns us is when those holding the shares decide to dump their shares on the open market either because they need the money, or because they feel that Rick’s share price won’t recover, in which case, Rick’s is liable for the difference between what they sold the shares for on the open market and what Rick’s promised them when the transaction was consummated.

This could explain in part why there has been such a downward drag on Rick’s share price over the last few months, aside of course from the usual stuff pertaining to the overall market declining and small and micro-cap stocks getting slammed with redemptions and hedge fund closures.

At current prices, and with Rick’s liquidity levels being where they are, and cash generation being where it is, I feel that Rick’s is sufficiently buffered from much more downside from here, regardless of what is owed and when.

Since the stock is so low already, even if Rick’s is on the hook for the full amounts listed above, they can cleanly cover those expenses.

That being said, management talked on the call about how they are trying to renegotiate with some of the option holders to extend their selling period so that they wait a longer period of time before being able to redeem their options.

• Slowing Market Trends: When Rick’s announced their October same-club sales rose an astonishing 8%, there were rumblings that perhaps Rick’s and other “sin” stocks could do well even in this downturn.

It turns out that is not the case.

On the conference all, the CEO stated that while October was strong, November turned out to be an average month, and then December is looking like a weak month, so in aggregate, the CEO is hoping for an average quarter in Q1/2009, but that they didn’t have all the data gathered yet.

The CEO commented that what they are seeing is a flight to quality; if you are #1 in a certain market, the business is increasing such as in N.Y. and Miami, and to a lesser extent Charlotte and Minnesota.

In markets where Rick’s is not the established “quality” brand, they are seeing weakness and much tougher times.

Rick’s will try to take advantage of the flight to quality by leveraging their market strengths and building their market share.

They are going to take steps in 2009 to stop losses at certain clubs such as closing underperforming clubs and/or selling them.

They are also going to save money by not making as many acquisitions in 2009 as they did in 2008.

My Take: I was waiting for some negativity in this market, and it looks like that huge consumer drop-off that we saw in late October and November has affected Rick’s just like it has every single other business out there that relies on the consumer. More color on specifics below.

• Specifically, several clubs underperforming, Vegas club results “brutal”: The CEO stated that new clubs are underperforming from their original projections, specifically: Rick’s Cabaret in Philadelphia has been converted into a Club Onyx; the Rick’s in Dallas is also underperforming and they are looking at ways to increase revenue, as well as other locations, not the least of which is their newest and most expensive club in Las Vegas that is getting crushed.

The CEO went on to say that their biggest issue so far in fiscal 2009 has been their Las Vegas location which is not doing so well, and the CEO stated that he takes full responsibility for that.

They closed the transaction recently, and he stated that perhaps they “shouldn’t have.”

He also stated that he believed that their timing was a little off, and it was a difficult environment to predict.

When Rick’s took the club over, they were doing about $250,000 per week in sales for the first couple of weeks, but December has been much weaker than that.

He stated that they are going to have problems with their Las Vegas club and market and they are addressing it and hopefully with the convention season ramping up, this location will also pick up.

The CEO further stated later on in the call that “it’s pretty brutal in Vegas” right now.

Some clubs according to an analyst, are down 50% or more in revenue from last year, and many others are closing their doors.

When talking about Vegas specifically, the CEO then admitted that their Las Vegas club is actually down 50-70% in revenue from last year as well in what is shaping up to be one of the most detrimental and difficult discretionary spending environments in history, especially when it comes to Sin City.

In addition, the CEO stated that their Philadelphia club was converted to a Club Onyx (that caters to the upscale African American community), and they are trying to tailor their current clubs to the local environment and demand and cater to that, rather than the other way around. This location was a clear example of that.

Finally, when asked by an analyst how many and which clubs were underperforming and/or losing money (aside from Vegas), the CEO stated that there were 3 clubs: Austin, Houston and San Antonio are the major problems.

When asked to elaborate by another analyst about what they can do with these clubs, the CEO fleshed out various plans to keep costs down, renegotiate leases, and in the worst case scenario, close the locations down, and get out of the leases, or give the landlord some kind of cash buyout, and be done with the expenses.

Now for a little good news.

Rick’s N.Y., Miami, and Dallas, Fort-Worth locations continue to drive revenue and same-club sales growth and margin expansion.

In fact their N.Y. location continues to be their crown jewel and Rick’s is taking steps to keep it that way with new marketing initiatives (they purchased 2 local billboards in the N.Y. metro area), and increased attention to driving market awareness for this club.

My Take: It’s clear that Rick’s bought their Las Vegas club at the top of the market. Good for the ex-owners, bad for Rick’s.

The question will be, what are they doing about it, and how can they salvage, what usually is, a wonderful market when times are good.

In addition, it’s clear that Rick’s has a pragmatic approach to their current operations and they will not hesitate, and are in fact looking into, closing underperforming clubs or ratcheting down leases or other expenses at those clubs to bring them in line with their other locations.

Put it this way: It would be much better for Rick’s to exit 1-2 underperforming markets and have lower revenue for 2009, BUT have a much higher net income, EPS and cash flow figures because it doesn’t matter how much higher the revenue figure would be from the addition of these clubs if everything they make is heading straight out the back door.

I’m all for closing a couple of clubs, reigning in expenses, and cleaning house.

This is a perfect time for that, and with Rick’s cash flow generating capabilities, they will come out leaner and stronger on the other side, ready to indeed acquire more clubs and further expand with much better multiples as other owners look for exit strategies.

• Management’s plan for the next year: Rick’s CEO talked about their strategy for 2009 in this environment and how they would look to make it through in one piece.

Specifically, Rick’s is going to focus 2009 on: strong organic growth and to continue to build same-club sales.

The CEO stated that it is “difficult out there” and that they are getting an increase in customer counts at some clubs, but that people are spending less money and that there is indeed concern about the economy.

In addition, they are going to continue to pay down debt and build their cash position.

Finally, Rick’s acquisition strategy will remain the same in that they are looking for clubs in major metropolitan locations with high business, convention traffic and tourism.

They are looking at paying 3-5 times earnings for these clubs, and will purchase them with a mix of cash and debt, and will NOT be using stock for acquisitions because of the low value of their stock currently.

My Take: This all sounds good to me, and is the prudent course of action.

It’s obvious that Rick’s is encountering some tough times, and wasted some of their and shareholder’s money in acquiring some clubs at the very top of the market.

That’s fine, mistakes happen, and no one could have predicted what has transpired in the last year and a half, and specifically, in the last 6 months, in which the slowdown in the economy has literally obliterated many companies, both large and small.

I think Rick’s is trying to regroup, make sure they have the cash on hand to pay off their debts and other obligations, and then focus on streamlining and improving operations until things turn around.

Bottom Line

Patient investors come on in, the rest of us wait and see

Rick’s presents an interesting case for investors.

Looking at the past is surely no way to make sound investing decisions for the future, but even if we assume that Rick’s falls flat on its face this year, and sales and earnings are flat (even though management expects them to increase), with it will come the usual bucket-loads of cash flow and free cash flow that we have come to expect.

Looking back on 2008, Rick’s earned $11.66 million in free cash.

Couple that with today’s closing price of about $4.00 per share, which coincidentally is where CEO Eric Langan said the company’s shares look to good to pass up and where Rick’s will look to purchase more shares on the open market, and you get a company that is trading at a mere 3.1 times 12-month trailing FREE cash flow!

I’ll put this in perspective for you:

• Rick’s trades at a Price to Cash Flow (P/CF) of 2.5, the industry average is 10.7
• Rick’s trades at a Price to Free Cash Flow (P/FCF) of 3.1, the industry average is 40.9
• Rick’s trades at a Price to Earnings ratio (P/E) ratio of 4.2, the industry average is 15.6
• My estimates using a Discounted Cash Flow model (DCF), assuming (-10%) growth next year, and only 10% growth the following year, with a 3 Beta, and 4% terminal growth, yield a fair value of $5.00 per share. I want to remind you that these inputs are horrible, and assume almost no growth at all.

O.K., Chris, you say, but that’s the past, what about the future? Isn’t Rick’s business slowing down, and potentially contracting as a result of the slowing economy and the fact that several of their locations are weighing down the company’s comps and same-club sales, not to mention eating at their cash flow?

Well then my friend, let’s ratchet things down a few notches.

Let’s assume that Rick’s sales decline next year, and their net income declines to 2007 levels of $3.05 million. I’ll also remind you that in 2007 Rick’s top line was only $32 million vs. $60 million this year, but let’s go with that.

We’ll assume that margins decline this year, and force profit to those levels.

In 2007, and in 2006 as well but we won’t go back that far, Rick’s was cash flow and free cash flow positive, so even with a lower base of sales, the company can still churn out the cash and meet its obligations.

So, going back to my hypothetical, let’s take the $3.0 million run rate in cash flow for this year, and say Rick’s spends about $1.5 million on capital expenditures yielding only $1.5 million in free cash flow.

At today’s levels that still gives us a price to free cash flow (P/FCF) of 24.19 at today’s $4.00 share price.

That’s still way below the industry average of 40.9, and assumed horrific business trends at Rick’s with almost no free cash flow generation.

But even with all that, Rick’s would still be undervalued by about 60% using a metric that many experts believe is the only thing that matters: free cash generation.

So all that being said, there is some definite risk here, or else the stock would never be this cheap.

We have all the usual risk factors regarding the economy, consumer spending, etc., and then a layer on top of that of Rick’s being a micro-cap stock that is severely out of favor now, and the general malaise that surrounds “sin” stocks like Rick’s.

So, with all that being said, I believe that a position should be started here by those that are risk tolerant, have super long time frames (as Rick’s might be battling this malaise for 1-2 years), but see value in a solid company that is just on the outskirts of acceptability both for what it does, as well as the actual stock itself, to mainstream investors.

The economy could sour further, Rick’s could fail to meet its debt obligations as a result of an absolute collapse in its business, and we could be looking at a stock going to $0 fast.

That’s the beauty of investing.

You use the information available to you, find information that not too many others know about, and then make an informed, calculated decision, basing your decision on facts, and the percentages in and out of your favor.

In this case, I see that we have about a 60+% chance of Rick’s doubling in value from $4.00 per share, and about a 10-20% chance of the company going out of business.

Those are damn good odds.

Bottom Line: If you already own 1/4, or 1/2 position in Rick’s, that should suffice. Look to add on weakness if you have 1/4 or less, but continue to diversify your portfolio with other names on my list before adding to Rick’s. If you don’t own Rick’s, consider starting your initial position right here, but make sure it is within a balanced portfolio to protect you against continued consumer slowdowns, and a potentially deteriorating market. Either way, owning a little Rick’s can go a long way for a long term holder.

Comments

[Paul Price:]

No matter what Rick's stock does it's sure to have a "double top" lol.

2008 Dec 31 11:24 AM

[long_on_oil:]

Great article, author really knows Ricks.
Ricks was in a great bargaining position when it came to buying the Las Vegas location but apparently they blew it. I thought the club was to guarantee Ricks a certain level of profit before Ricks was to finalize the deal. What happened there?
I have bought and sold this stock several times to where I turned my initial 100 shares into 400 shares at the same total cost but the stock just sits there.
I don't blame Eric for not providing guidance because the guidance provided in the past has not moved the stock and they have constantly met or exceeded past guidance. If I were him I would say to hell with guidance too and then surprise on the upside. Then maybe the stock would move.
This is a good stock with a great business model of consolidating upscale gentlemens clubs. Every year we have a new crop of customers coming of age, you can't beat that.
When gas was high everyone said the stock is going to tank so now that gas prices have fallen why aren't they saying this stock is going to benefit?
The debt load of 33.6 million due over the next 5 years is only $3.58 a share based on 9.38 million outstanding shares. That's no big deal.
If I were one of the people that had the guaranteed puts, I would wait to exercise my option until the stock met close to the option price. That way Ricks balance sheet would be stronger and the stock would go up. Why exercise the put at $20 when holding it might bring $30? Doesn't make sense to me unless the holder has no faith in the success of the company.

Booze, steaks and bare breasts how can it get any better?

2008 Dec 31 01:48 PM

[Diego Stend...:]

Great article Chris. I have opened a small position in Rick, taking advantage of the current stock price. Rick is a company i have been following for some time, but it only makes up a small portion of my current portfolio. My two cents:

1. I've run a DCF model like you did with similar numbers this summer, and i came to the conclusion that when it was trading around 15 it was overvalued. Even if we don't factor horrible numbers like yours, the stock's intrinsic value is, as of now, not higher than $8 - 9 per share IMHO. Moreover, the put options lingering, reckless acquisitions and the coming recession are pushing down the price even further.
Also, i didn't like some of Eric's answers during the CC; he gave me the impression he was too vague and insecure, too many 'i don't know how we're going to deal with that' and 'we'll figure that out'. JMHO.

2. I was expecting some acquisitions abroad in 2008, considering the company is called Rick's Cabaret International, but i see no international business. In hindsight, it was much better if they used the cash to buy a couple of clubs in growing markets like Brazil, in the financial capital Sao Paulo, Mexico or China, maybe in Shanghai. Diversifying outside of the US could have been a great move, but maybe Rick's is still too small to handle international business.

Jan 01 05:47 AM

[Mysteryman161:]

Eric has made some very bad moves: Lots of new clubs purchased at very high prices, Bad management teams, closing clubs, and leaning on earnings of three clubs out of 19 to stay a float.

Acquisitions of The Executive Club in Dallas which was turned into a Ricks. Who did the background on this club for Ricks? This club was fighting a 4 year long legal battle all the way to the supreme court about being in a dry county. It is now understood from TABC that Ricks will not be allowed to have a liquor license. SO Eric is trying to spin this as "Oh well it will become a XTC and be a BYOB." People thats probably going to be the biggest and most expensive BYOB in Texas, at almost 20,000sqft and costing well over $9.5 million.

Closing 2-3 clubs due to the economy? No its due to bad management. When your talking about closing locations of which you have had established of years, or clubs you have taken over this year, you have a management infrastructure problem. Failure to command and control you stores/clubs means profits go away. Austin Ricks just finished that deal this year and now your talking about closing it? Eric is correct you will take a one time hit on the books from closing those clubs, but reality is that a major blemish on Ricks record after sitting here and spending $70 million in one year buying up clubs.

Ricks just purchased this Year Crazy Horse Too in Philly. Now its being converted to a Onyx? This club was purchased for over $7 Million.

How did the Las Vegas deal get messed up? Ricks had an agreement with Dennis Degori, previous partner of Scores Las Vegas about consulting the operations of this club. Ricks came in and completely messed this club up. Yes you can blame some on the economy but a lot falls on Ricks shoulders. When you have a drop from an established club from 250K a week to losing 50-70%, more towards 70% something is very wrong.

This brings me to ask why Dennis Degori is suing Ricks for breach of contract? This was not bought up in the phone conference, not disclosed in the 10K under legal.

Chris (author) brought up in a previous article about the lawsuit ricks is currently involved with about a wrongful death suit. This can be very damaging to Ricks. especially since it brings into question the sales of alcohol and how it is done involving entertainers.

A lawsuit that will affect Ricks in Houstons new tactics for getting rid of Adult Clubs. The Mayor of Houston is planning to shutdown 30-40 clubs in the city by using its nuisance law which just closed the Penthouse Club permanently. www.chron.com/disp/sto...

So out of 19 clubs operating under RCI, only NYC, Miami, and Ft.Worth locations are propping this company up???

I sat through the call and I can tell you now that Eric was failing to give direct answers, when he had the data right here in front of him. Eric got very flustered a few times when he could not find a good way to deliver info that people would want to hear. At one point an open microphone was allowing someone from RCI state" F@cking great now he has opened a can of worms". This was after Eric spoke about closing clubs.

1Q and 2Q of 2009 are not going to be pretty.

Jan 05 01:58 PM

[Robert Wein...:]

Very good article.

I just made two trips to Vegas in as many months to look at RICK, LVS, and BYD and it does appear that the Vegas club is going to be a financial drain for some time to come.

I keep wondering if Eric is a better club owner than CEO. Some of the actions just do not pass the smell test for this investor. For example I can not think of a reason why a company with a market cap of less than $60 million borrows money so that they can buy an airplane? The Vegas club is not as easy to criticize but its in a poor location relative to others so it should be easy to spot that it will be the first to have lower revenue in a down turn.

RICK is a stock that I have owned and want to own again but without a change in the attitude of management or financial results I will have to wait it out.

Jan 12 01:59 AM