RCI Hospitality Holdings, Inc.
Q3 2010 Earnings Call Transcript

Published: 17 Aug 2010

[Operator:]

Greetings and welcome to Rick's Cabaret International, Inc. third quarter earnings conference call and webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator instructions) As a reminder this conference is being recorded. It is now my pleasure to introduce your host Allan Priaulx, IR for Rick's Cabaret International, Inc. Thank you. Mr. Priaulx, you may begin.

[Allan Priaulx:]

Thanks, Doug. Good afternoon and welcome to our third quarter 2010 conference call and webcast. In a moment I'll turn the call over to Eric Langan and Phil Marshall, who will present our third quarter results 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 two of our PowerPoint presentation, which is available on our website www.ricksinvestor.com and at precisionir.com. Please take a good look at this statement as this conference call may contain forward-looking information, within the meaning of Section 21E of the Securities and Exchange Act of 1934. 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, which is the new discreet investor relations web address for our investors. You can also get all kinds of information about Rick's Cabaret International on our regular website, ricks.com. I want to invite anybody who is in the New York City area today to attend our due diligence event at the Rick's Cabaret in Manhattan tonight starting at 6 pm. You will get a chance to meet Eric Langan and to get a guided tour of the club and see how we conduct our business at the club level. And now I turn the conference call over to Eric Langan.

[Eric Langan:]

Thank you, Allan. And thanks for your time this afternoon. I’ll begin the conference call with a quick overview of our third quarter for 2010; we’ll be reviewing our third quarter performance. We will be discussing the impact of the non-cash event on the earnings per share and talk about our strong cash flow, update you on our balance sheet, talk about the outlook for the remainder of this year and then conclude a question-and-answer session. Total third quarter revenues were $19.9 million versus $21 million in the previous year. Net income was $857,000 versus $1.8 million last year. And earnings per share were $0.09 versus $0.19. Part of that decline in revenue was same-store sales were off 13.9%. Primary factors of that were the decline in Las Vegas. Las Vegas sales were down about $2.5 million over the previous year due to the difference in marketing expenses and the way we are doing business in Vegas this year versus last year. Our earnings per share were affected by one-time redemption related cost based on the convertible debenture that we called. There was a fee with raising that money that was originally impaired over a three-year life – expected life of the debenture. Because we were able to call that debenture early and covert it earlier, we had to take an immediate write-off of that fee about $275,000. That fee while it’s booked as interest expense was actually part of the fees related to raising that capital. We also had a derivative loss. Due to the stock price decline, the Dallas put options were collateralized and created derivative instruments and due to the decline in the stock price we had a derivative loss of about $400,000. We also had New York legal expenses based on the labor law suit that we have here in New York City that affected us by about $900,000 over what they have been averaging throughout the quarters – through the past few quarters. Like I said, the marketing expenses in Las Vegas have been reduced. Our total marketing expenses reduced to $1.2 million compared to $3.3 million last year. Cash flow from operations continues strong with $4.1 million in the third quarter and $12.2 million in income from operations in the trailing nine months this year. Our third quarter highlights were

[Operator:]

Thank you. (Operator instructions) Our first question comes from the line of Eric Wold from Merriman Curhan Ford. Please proceed with your question.

[Eric Wold:]

Thank you. Good afternoon, Eric.

[Eric Langan:]

Hey, how is it going?

[Eric Wold:]

Good. So, on the sales trend you are seeing in the store – in the clubs right now, you said that – correct me if am wrong – you said that attendance remains healthy but it seem that the people who are there aren’t spending as much as they were in the past?

[Eric Langan:]

Yes, we – what we are seeing more (inaudible) and in general (inaudible) we are getting a lot of VIP top of the menu ordering. It was very prompt and very exciting and what we are seeing is in April we’ve seen it slow down a little bit and then we (inaudible) April tax time, but then of course we rolled into May and we kept seeing – we continued to see the trend in June. June really started to fall off. And – I mean the first two weeks of July were very scary. The third week we’ve seen some recovery, and then those last 10 days it was like somebody turned on the water spigot full blast, spending increased and customers were coming out and having a great time and we started seeing big spend and VIP sales were up. And so – you know just like I said right now it’s just the consistency of those customer spend are there but if – we have 400 people in the industry and they are all holding back on their spending its’ definitely going to affect our top line.

[Eric Wold:]

So, I guess my question on is that people are coming to the clubs but the way they are spending is the uncertainty. Can you – how can you market around that to get people that are already there to spend more, is it really something to wait and see how it happens?

[Eric Langan:]

Well, what we’ve been doing is we are running more specials. We are running more in-house specials than we typically used to. We are doing more bottle discounting in certain clubs, not all the clubs, but in certain clubs we are doing some bottle discounting, VIP discounting. We have a full main floor and it’s filling up, and our VIP is completely empty, we’ll try to find some customers that are – potentially will spend money and may be try to free up raise [ph] to VIP or those types of things to try to really move that traffic and get that spending starting.

[Eric Wold:]

Okay. And then, switching to Vegas, at current sales trends, I guess right about where they are now and the spend you are doing on the taxi cabs, is the club profitable right here?

[Eric Langan:]

You know, I think we are really, really close. When we were at 20 last time, we actually made some money. I think we are really close right now. It’s really going to depend on – you know the conventions really start next week with the gentlemen’s club owners. So there is couple of small entire this week, the gentlemen’s club owners actually have been magic in that following week and then I think we run – we start rolling into the cycle. Magic, the magic show really is the first big convention of the season and it’s starting runs all the way through about May. We are hearing and of course the scene is put out the bookings are very strong. But, what we need to see if everybody actually shows up. The few (inaudible) show up and then once they show up we get him in the club and get them spend the money.

[Eric Wold:]

So, I guess a followup on that, I mean that given that…

[Eric Langan:]

So, yes, at $20 we will be – if the people come out and the people spend, we will be profitable with that – at that level for sure.

[Eric Wold:]

Admittedly, obviously the purchase timing wasn’t optimal and I think looking at the dynamic of the Vegas market versus other markets, really dependent on visitation, really dependent on a big taxi cab situation that can – ebb and flowed a number of times. Is that a market that may not sense, it makes sense to sell the club, walk away and focus on the other markets with completely different dynamics.

[Eric Langan:]

You know, we are – we’ve been considering it as one of the options. We are really trying to see how the next six months go if we can get the – if the convention business does come back and we can get the customers in and spend and we can hold this taxi down, thing down – a couple of the clubs have been purchased by competitors or have competitors that are not working together as partners. So, there is not as many clubs to really jack around with the rates as they are used to be, so that’s going to be nice and hopefully we can keep those rates controlled and operate on a level like we do in every other market that we operate in and when we get a level playing field we do very, very well. When the playing field becomes unlevel, that’s when we start having the problems. And in that market the only way to keep the playing field level is to outspend your competitors. I think that in the past it escalates – when it escalates there is usually a real gradual escalation, somebody start paying $5 more and then this guy $5 more. Well, we’ve basically taken the stance that if you pay anymore than what everybody aggress to, we are going back to the top. So, instead of letting it take a whole year for the sport to play out like it done two years to play out in the past – we edged out $5 a time, $5 a time to get back up to 60, 70, 80, and an unsustainable number. Basically what we’ve decided to do is anytime somebody tries to take advantage by paying a little extra, we take it back to an unsustainable number immediately. So, instead of trying to out do them by $3 or $4 or $5 or $10, we then take it right back to the unsustainable number and say when everybody wants to pay a fair price, we’ll all go back to making money. And it seems to have worked at this point. And it seems to be holding things in check a little bit out there because we don’t want to pay it, neither does anybody else. Nobody wants to lose money. And so if somebody can advantage for six months or three months because it takes time for it to escalate back up to an unsustainable number, then people tend to play games a little bit. But I think with the new strategy that everybody is using out there, that kind of ended the – because everybody maxes immediately now, if somebody goes up to unsustainable number, and everybody maxes immediately. So, there is no slow, gradual feeling [ph]. Well I think all the club owners have learned that letting another club advantage from that is a problem.

[Eric Wold:]

Okay. And final question, on the – you obviously have (inaudible) – but you spend about classified in the cash flow statement $4.9 million of purchase of property and equipment. How much of that was actual capital equipment purchase for the clubs versus I guess may be with – thrown in there as well.

[Eric Langan:]

I believe it’s all club purchase – no, we purchased $3 million – we purchased $3 million of land in Austin, correct, Phil?

[Phil Marshall:]

No, it was $2.5 million.

[Eric Langan:]

Yes, somewhere in that range. So most of it. There is a big chunk of land in there.

[Eric Wold:]

So, if you take out the $2.5 million of pure CapEx spending, this is a pretty big tick up from where it’s been in the past 18…

[Eric Langan:]

Well, it’s not all CapEx, I am sorry, that is purchase of those – of the assets of those clubs, of those three clubs as well. (inaudible) we added the (inaudible) Austin location – I am sorry, well two clubs in this time period. The Austin location was added in December and in June we added the Fort Worth Gentleman’s Club acquisition, which became XTC Fort Worth.

[Eric Wold:]

Okay. And just we can probably take it offline but there is two line items, there is acquisition of businesses and there is also addition to the property and equipment. So, just wondering which concern to which category.

[Eric Langan:]

Okay.

[Phil Marshall:]

This is Phil. The acquisition of property and equipment is – includes the property at those clubs that we acquired.

[Eric Wold:]

Okay.

[Phil Marshall:]

So my guess is that maintenance CapEx over the nine months is probably about $1 million.

[Eric Wold:]

$1 million cumulative?

[Phil Marshall:]

Yes.

[Eric Wold:]

Okay, perfect. Thanks, guys.

[Operator:]

Our next question comes from the line of Eric Beder from Brean Murray. Please proceed with your question.

[Jennifer:]

Hi, this is Jennifer [ph] filling in for Eric today. At this time what’s – what do you think is the real mindset of the customer is, and could you talk about spending, has it been selling consistent, how are you looking at the balance of the year, and what is (inaudible)?

[Phil Marshall:]

You know, when I talk to people, they just think there is confusion. It’s really the same – it’s the same place we are really at in our acquisitions right now and that we have decent acquisitions out there we would pay up a little bit more. We’ve been trying to stick right around that three times. If we pay up a little more we can probably close some other acquisitions right now. But the problem you have is you don’t know where the customer is going, where the spending is going and so you are not really sure. I think people in the same place they don’t – they don’t know where their business is going, they don’t know where their income or earnings are going to be. And so they are being more conservative in their spending. And that’s really what we are seeing is it’s more of a – it’s market confusion. The market is confused on where the – which way the economy is going to go. You get half who are saying it’s getting better, half who say it’s getting worse. So, is it getting better or is it getting worse? There’s not really a consensus right now.

[Jennifer:]

Right. So, I mean as you are looking ahead, I mean in the last conference call you talked about passing on slight prices increases or doing some cut backs on the happy hours and (inaudible) promotions and now that things are weakening you are doing a little bit more of the in-house specials. I mean what are you anticipating doing for–?

[Eric Langan:]

We are hoping to get (inaudible) season. We actually have – we actually instituted the price increases that we talked about. We actually cut happy hours down a little bit. And we stuck with that. We haven’t really pushed that back out yet. What we chose to do instead of throwing out across the board to everyone price increases, what we’ve done is because the customers are still coming into the building, so it’s not like we need go give cheap prices to pull people into the building. What we’ve done is actually more on-the-spot discount where we’ve given our management team in certain locations where we are it from, the ability to discount a VIP membership or to discount a bottle during certain times or running certain brand at a discount on certain nights to try to boost spending that way.

[Jennifer:]

So, do you think there is general weakness, I mean more so in the high end customer than say your B club customer or–?

[Eric Langan:]

Yes, absolutely. I think our B club customers we think they – the increases that we do every summer. Summers are good time for that because that blue collar worker is working hard, the construction guys are out working hard right now if the weather is great. The lawn guys are all out working, all that type of stuff. So, those customers are all out there working and making money. And they are coming in and spending it. What we are really seeing insurance the high end customer who is working harder, working more hours, has less free time, and really is uncertain of the future. And as we see – as I think as we the recovery roll out more that that will stabilize and then we’ll have a much better feel and we’ll be able to know when to discount, what to discount, that type of stuff. Sometimes even a discount doesn’t help at this point. So, I don’t know if it’s what that was on CNN that morning or what came out on The Wall Street Journal that morning certainly affecting people’s thinking when they go out that night. But there is definitely some effect of people on – of the economy on people and their spending right now.

[Jennifer:]

Okay. And then just one last question, can you just call out specifics about both stronger versus weaker markets, how is Tootsie's doing or how is the market doing in Philadelphia.

[Eric Langan:]

Yes. It’s Philly has been really tough. It is getting better now; we’ve changed out our management tem there. And we’re doing some new promotions stuff. We are actually seeing some increase this last month and hopefully it will continue as we roll forward. Tootsie's is doing very well. It is off a little bit year-over-year and the New York Club continues to be really one of our strongest markets. Now, where we are really seeing the strength right now is in the Dallas Fort Worth Metroplex. The Dallas Fort Worth Clubs, the new locations that we bought and of course the two clubs in Dallas and Fort Worth area are doing very well. The other thing about Philly is it’s coming up in September. They are going to open the first casino and there is other casinos planned to open. So, we think once those casinos get opened then there will be more traffic. Because those casinos are on Columbus Boulevard where the club is located, they will bring more traffic to that part of town as well. So it will good for us.

[Jennifer:]

Okay, great. Thank you and best of luck.

[Eric Langan:]

Thank you.

[Operator:]

Our next question comes from the line of Steven Gart with John Locke Capital. Please proceed with your question.

[Steven Gart:]

Most of my questions got answered or asked and answered already, but just generally speaking, what are you looking for to signal a turnaround sustainable as far as – would you like to make an acquisitions or thinking if the economy has turned [ph] as the investors people we’ve got a lot of red face lately (inaudible) is it give consecutive good months, three, six, is there some kind of things you are really looking for that makes you guys I think we are out of the woods for real?

[Eric Langan:]

You know, I think really it’s going to be the consumers. I mean we’ve seen it in January and February, well actually really more February and March, but January is pretty decent as well. We’ve seen it in February and March. If we would have seen that same strength running into April and May, we probably would have been willing to pay a little more on at least two acquisitions that now I’ve been looking at recently, said, okay, we are going to like close in these markets. They are new markets for us. So, we’d be looking at 10 new markets a little more. It’s not really a whole lot more money because I just don’t see us spinning a whole a lot more in the multiple at this point. But I’d be more ready to more risk outside of our existing market. But when we start seeing it, we’ve seen it slightly off in April. We kind of held our own and then we said, well, let’s see what happens in May and by the third week of May we knew, okay, well we are going to track back down. Let’s go ahead and move on these acquisitions in Forth Worth and close this up and get back on so that we – basically we own at this point – when the new club opens we’ll own – well we actually do already, but with the new club, we’ll have five locations. Every location is over 4500 square feet in Fort Worth. So, we own all of the major clubs in the City of Fort Worth right now. And that clustering gives us a great benefit because we do – is we have – none of our major clubs compete with each other. They all have a different demographic or a different feel to them and so therefore different customers will prefer the different locations and we don’t have as much cross over of customer base as we do if we compete with someone directly. And also know the customer base they (inaudible) because basically we have something – one of our clubs is exactly what different demographics of customer base looks for. So, it’s not we are not buying stuff. We are out buying stuff. We’ve raised the cash that we do intend on continuing to try to buy something an acquisition every quarter. We are looking at a couple of larger locations and if we can come to the right terms on them and (inaudible).

[Steven Gart:]

There is always (inaudible) double-edged circus. You are cash rich. The companies you are buying, you are looking to buy might be a little more persuaded so (inaudible) which is long term beneficial for (inaudible) obviously waiting for economic recovery for the overall club performance. But can we come back to Vegas for a second and I am curious, so – because I’ve covered casinos as well, for actually about 10 years. From what I am generally hearing from those CFOs or CEOs is that weekends are very strong still all summer long, so your Thursday night, Friday, Saturday, they are largely running at pretty good occupancy and pretty good rates this Sunday through Wednesday where they are still seeing a lot of pain when they (inaudible).

[Eric Langan:]

Yes, and that’s what we are seeing. The customer spend on the weekends is decent, it’s not great, but it’s decent and we are busy. There is lots of people in the club, Friday, Saturday, even Thursdays. We move our local authorities. We (inaudible) our local parties up. We are now doing our local parties – even our Thursdays are very, very – we’ll go busy Thursday, Friday, Saturday, and then Sunday is hitting this depending on what convention is on Monday.

[Steven Gart:]

Sure. All right.

[Eric Langan:]

If there is no convention on Monday, there is Sunday. And if there is no conventions on Tuesday, Wednesday, you can be pretty – it can be pretty thin out there. You get a decent convention in Tuesday, Wednesdays fitting it. Now, we expect all that to change and I think the casinos are probably are saying the same thing as we move into this convention time, these conventions they jack rate booking. The room rates are – were down, so a lot of people booked. Not all of those people showing up and the rates – the room rates are actually during the next summer actually coming up a little bit. They are not high but they are…

[Steven Gart:]

Correct.

[Eric Langan:]

They are better than they were.

[Steven Gart:]

It’s not like a six or seven, we may consider efforts to keep the business going and – but you’ll see it’s still similar to what you are experiencing.

[Eric Langan:]

Well basically you can stay at Mandalay Bay on Sunday through Wednesday for about – the equivalent of about $39 because what they do, they are charging you 100 and some dollars, but they are giving you a $75 Mandalay Bay credit.

[Steven Gart:]

Correct. Right.

[Eric Langan:]

You can spend anyway, you go buy cigarettes at the gift shop – any place in the Mandalay Bay you can spend it.

[Steven Gart:]

Sound right. It’s the promotions that are hurting them. They are getting people in (inaudible) RevPAR till hurting (inaudible).

[Eric Langan:]

And that’s what is hurting the clubs and we get a guy in and that guy comes in to Vegas and he is coming on one of these sort of (inaudible) airfare (inaudible) have that for 100 some bucks, a hotel 100 some bucks for three days, and he’s got 400 bucks in his pocket. How much money is he going to come to the club and really spend?

[Steven Gart:]

You know, let’s say (inaudible) those are just the general macro problem (inaudible).

[Eric Langan:]

We are experience exactly in line with the rest of the Vegas economy right now.

[Steven Gart:]

Yes, Vegas economy is tough just in generally speaking (inaudible) job market also isn’t helping.

[Eric Langan:]

Yes.

[Steven Gart:]

And you still working through.

[Eric Langan:]

Yes, when I say – we are bringing a lot of locals out, but like – you got keep playing. They basically don’t have a lot of money. They are coming out, they are hanging out, they are spending – but the good new is if the economy comes back…

[Steven Gart:]

Right I mean the (inaudible).

[Eric Langan:]

We’ve built the brand now. We are working on this few years ago – how you were.

[Steven Gart:]

You got to get the best you can in the (inaudible) you build the plan, you get them in the door and then you launch, and then you hope that the recovery is in two years, whether it’s six months or nine months and spend goes up. And then just, I am just curious – last – this are my last questions out of curiosity. Do you see any correlation on your high end spend like when you – obviously you pay very close attention to April, May, the months on the high end whatever the stock market is doing. I am wondering if there is actually a correlation (inaudible) given that (inaudible) in that thing where you look at your kind (inaudible) nicely ringing, you are a lot more just whether it’s your place or Amazon whatever I find myself, oh, yeah, what’s $500 (inaudible) we are not spending any money (inaudible).

[Eric Langan:]

We do see that in the New York VIPs for sure. The nice thing about New York is we are very, very steady and lots and lots of business. So, we are…

[Steven Gart:]

Well, you got such a pretty location right by the path on the main (inaudible) I think that club is a great club…

[Eric Langan:]

And really a lot of our higher end clubs are probably generally affected but not like the – New York is probably the most, but the nice thing about New York is (inaudible) so what we see is one group of customers coming in and spending, another one comes in and spends. What’s really been lagging is the market just kind of staying here in this range right now. (inaudible) short or long and so that’s what we are really seeing the effect of the market I think on that. But overall I don’t think our – expecting our (inaudible) clubs, I don’t even say the stock market exists, had a lot of (inaudible) that doesn’t really affect our lives one way or the other as long as they are working and making money there, we are pretty happy.

[Steven Gart:]

Thanks so much for your time.

[Eric Langan:]

You bet.

[Operator:]

Our next question comes from the line Greg Finny [ph] who is a private investor. Please proceed with your question.

[Greg Finny:]

Hi, thanks a lot. I just had a question regarding the interactive media division to find out whether or not there has been an upside performance there, whether or not there are, A, opportunities for potential acquisition there that might be either accretive or help you substantially with marketing?

[Eric Langan:]

Actually, really all the above – all of our Internet stuff that we actually do and generate money on is stuff that wrote ourselves and created ourselves basically now. So, we haven’t really looked to acquire anything. Our Internet revenues are down, as you’ve seen from the Q. And that is because there is a lot of – our CouplesTouch website and our NaughtyBids are – have a huge base of middle class Americans, but – they are the customers there, and they are the ones that are really been affected by this downturn. So they are cutting corners everywhere they can and it’s one of the ways they can save on. So, hopefully as we see the rebound, hopefully we’ll get some of those customers back and continue to add to that. But to answer your question simply, no, we really aren’t looking at acquisitions in that field right now. We are really sticking with our brick and mortar business.

[Greg Finny:]

Okay, thanks.

[Operator:]

(Operator instructions) Our next question comes from the line of William Stepaker [ph] who is a private investor. Please proceed with your question. Mr. Stepaker, your line is live.

[Eric Langan:]

I think we lost him.

[Operator:]

Mr. Stepaker, your line is live.

[William Stepaker:]

I am here.

[Operator:]

Okay. Now we can hear now.

[William Stepaker:]

You can hear me now.

[Eric Langan:]

I can here you now, how are you doing?

[William Stepaker:]

Hi. Actually a couple of months ago at the Noble actually we were looking at two Mega clubs. Do you anticipate Mega club as the next acquisition or smaller type club and when do you see that happening?

[Eric Langan:]

Well, we are – we are definitely looking. We haven’t been real, real serious. Once we’ve seen the numbers, we were getting pretty serious there, especially on the time of Noble. We are having a little trouble getting to numbers that we could all agree upon. And on one acquisition. On the other acquisition, we’ve kind of taken a – we’re going to wait and see what happens in that – in the economy a little bit on it. You know, I don’t really know exactly what we are going to buy next. We are looking; we are trying to judge everything. What we don’t want to do is – now we don’t want to sit on the sidelines and sitting on this cash for a very long time but at the same time we don’t want to run out and just buy something because we have cash. So, well, we have the cash. It’s not burning a hole in our pocket we got to run out and buy something we can afford the interest right now. We are generating strong cash flow. We have earnings, so it’s not like we are losing money where we have to panic. In fact, I think we’ve got the only real clubs that are (inaudible) a bit of concern right now are basically Philadelphia and Las Vegas. The Austin location we are currently in negotiations on a joint venture. And I think that that joint venture will probably be consummated here soon. And what will stop us – part of the agreement will be that they are responsible for any losses and we are going to basically lease our property and licenses to (inaudible) contribution in the joint venture and hopefully we can get that consummated here shortly. And that will start when we go of that location. We did close locations that was really an insignificant loss again. But the reality is it’s just so hard to tell right now. If you asked me two weeks ago or three weeks ago, probably about, you asked me (inaudible) probably say we weren’t buying anything. Now, we are seeing – we are going to sit – wait till we find the bottom. Well we – I think we found the bottom about the second week of July. And we’ve seen a nice upturn and then in the last 10 days is where we got a real sharp upturn. And first weeks of August are holding, are holding decent. I mean we are not where I want to be, but we are not – we are headed in the right direction right now. And I really thought that we’d be around $0.25 a quarter. If you did – you add back – you add the add-backs back in to the $0.09 after tax we would have been around $0.15 for this quarter. So, we are still off, we are not running on eight cylinders as far as we’d like to be. But it’s not horrible either. So, for the next quarter we’ll have an idea.

[William Stepaker:]

Certainly don’t want to raise buyback stock but…

[Eric Langan:]

I am sorry.

[William Stepaker:]

Certainly think (inaudible) intention of buying back stock (inaudible).

[Eric Langan:]

You know, what we’ve always said is we are in the – we buy clubs and we are out there looking to buy the cheapest clubs we could buy and if our clubs become the cheapest clubs we can buy and that’s what we’ll do with our cash. We definitely did not raise that money to buy back our stock. In fact, we were – I was really hoping things will continue to roll and the stock price is holding, and we would actually convert out of this – making a couple of acquisitions in the next six months and convert out of it. And I still hope that that’s what will happen and that we’ll find the right acquisitions in the next six months and two quarters or so and make those acquisitions and the stock will rebound back up and we’ll convert out of it. You know, this quarter for me was a miss. I think the analysts were a little ahead of us. But even with the – seems they brought down to about the $0.19 – I think they are around $0.19 consensus, and we really thought we’d be in that range ourselves. In fact, we were really hoping to do up to $0.20 this quarter. I guess that with the add-back we are at about $0.15, so we look at number is about $0.15, because the non-cash is a non-cash. We actually generate that money from our operations. The cash came in. In fact we generated $4.2 million in cash in nine months. So, nine months we’ve generated about $1.20 a share in cash or from operations. So the cash flow is there. I think once the stock finds its spot, and this derivative stuff goes away, that will be gone. The $275,000 nothing we could do about that, we had to take that, we had to write that up once we converted it. And that was a – I’d rather take a 4275,000 on non-cash expense in a quarter rather than pay 10% interest on $8.2 million – $7.2 million for the next two and a half years. As a company, long term we came out ahead on that. And our shareholders benefit from that. So, we are looking at the long term right now. We are really trying to not focus on short term this quarter, next quarter type deal and really say okay, if we did everything right, we’ll get everything, we’ll get through October, November, December. The new club will be open. And hope we will make another acquisition in that quarter. And we are ready to move forward and 2011 will be our year.

[William Stepaker:]

Okay. Thank you.

[Eric Langan:]

Yes.

[Operator:]

There are no further questions in the queue. I would like to hand the call back over to management for closing comments.

[Eric Langan:]

All right. Well, thank you for your time this afternoon and I will be at the New York City location tonight from about 6

[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.