RCI Hospitality Holdings Inc (RICK) 2011 Q2 法說會逐字稿

Greetings and welcome to the Rick's Cabaret International second quarter 2011 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, Investor Relations for Rick's Cabaret International. Thank you, you may begin.

Thanks Doug. And welcome everybody to the Rick's Cabaret second quarter 2011 conference call and webcast. In a moment I will turn the call over to Eric Langan and Phil Marshall who will present the results from the quarter ended March 31, and then answer any questions you might have.

Before we begin I would like to call your attention to our Safe Harbor statement which is included on slide two of our PowerPoint presentation available on our website and at PrecisionIR.com. Please take a good look at the statement as this conference call may contain forward-looking information within meaning of the Section 21E of the SEC Act of 1934. I would like to remind you that Rick's Cabaret files reports and other documents with the SEC, and all of them are available on our website www.ricksinvestor.com,which is the discrete Investor Relations website for our investors. A transcript of this call will be available most likely tomorrow at Ricksinvestor.com.

Also I want to invite anybody in the New York City area to attend our due diligence event at Rick's Cabaret tonight at 50 West 33rd Street in Manhattan between 5th Avenue and Broadway. We start at 6 pm and will go through the evening. You will have a chance to meet Eric Langan, and to get a guided tour of the club to see how we conduct our business at the club level.

Now I will turn the call over to Eric Langan. Eric?

I will begin on slide four of the presentation. You can read the definition of adjusted EBITDA at your convenience on slide three.

Starting on slide four, the conference call overview. Begin with a brief summary of our second quarter. Talk about the chief drivers of our revenue increase. How we were impacted at the Super Bowl storms, Texas had a lot of ice during that time, and especially the week leading up to Super Bowl and even on the Friday night, so those numbers were impacted. We will talk about our adjusted EBITDA and how it has continued to grow. I will update you on the Las Vegas situation, and where we are and what our plans are with that market. And then we will talk about the outlook for the second half of 2011, and we will end the conference call with the normal question and answer session.

Begin with a quick snapshot of second quarter 2011 versus 2010. We had total revenues of $22.8 million versus $22.4 million. Now these numbers to meal while they are increasing are a little misleading to how good we actually did in the quarter. To give you an example, Las Vegas did about $2.37 million last year and $1.2 million last year, so we had to make up $1 million of revenue at other locations versus the Vegas location.

On top of that, the Super Bowl ice storm we believe cost us probably around $0.5 million in sales. In addition to that, the NBA All-Star game last year in Dallas which we did not have an NBA All-Star game in one of our cities this year also affected sales by about $0.5 million. So that is another $1 million that we made up. We actually made up about $2 million in sales, so I was very happy that we actually exceeded revenues from last year even with the obstacles that we had to overcome.

The higher revenue were primarily due to our newly acquired clubs, and the increases in some of the clubs we acquired in the last year or the year before. It would have been a really great Super Bowl. We still had a really big weekend, even with the ice on Friday night people still came out, and on Saturday the weather was much better and it was a really big party night on Saturday night, and a lot of people stayed over Sunday so we actually had a decent Sunday.

Our net income was $2.9 million, versus $2.9 million last year. About the same amount of net income revenue. Our EPS of $0.29 versus $0.31 because we have a few more shares outstanding this year, and our second quarter adjusted EBITDA of $6.6 million versus $6.4 million last year. As you can see, even with some of the obstacles that we had to overcome including Vegas we were able to get our other clubs up and running, and putting out more to the bottom line for us.

Talking about the Las Vegas decision, it was driven really by a concern that I don't believe that long-term profitability of that location is feasible any time soon. Our customer base is just not going to Las Vegas right now. Whether they will return to Las Vegas at some time in the future I don't know. The people that are coming out to visit Vegas are spending less. The hotels have gotten very competitive with off the strip businesses, and keeping people in the hotels with comps, with free stays, nightclub passes, drink passes, everything they can do to keep people in their casinos.

And with that in mind, it just didn't seem to make a lot of sense to continue to put close to $2 million a year into that location. Especially with the sale of Vegas or the closing of Vegas if we just decide we are not going to be able to sell that by June 30th, or not get some kind of a transaction done by June 30th, we will probably just lock that location at that time. Because what it does for us is yields us a very significant tax savings in that we will be able to take the entire purchase price off of our earnings.

So I know there is a lot of talk out there about the impairment. We did impair down to a $3 million valuation on September 10. So any impairment will be minor compared to the overall price. I have seen talk out there that we will have to impair it again. We have basically written it off. What this will do is let us write it off for tax purposes. Out of the $3 million that is left on there, some of that will be transferred to other locations and inventory furniture and fixtures, and that type of stuff, and we will have to evaluate whether what our sales price is versus what is left and whether there will be any additional impairment or not. We should have a good idea of that by the end of the June quarter, which is this quarter we are currently in. So just want to let everybody know what that is doing.

The other thing that will do is free up a lot of management time. We put a lot of effort and a lot of energy into that Las Vegas location. We have got three guys general managers for us at other locations that were working that location, plus a regional manager as acting general manager at that location. We put some strong talent in there and really tried to make tried to make that location work, and decided we could put that talent and put it in other markets and do much better. Also if you look in the Q under Note 13 subsequent events, you will see that we settled the DI Foods lawsuit between the sellers of the location to us. We had an outstanding note that had principle and accrued interest of about $2.5 million. We settled that for $1.6 million one-time cash payment.

And we also canceled the lockup lock out/leak out agreement including the put options, which allowed them to put the last 70,000 shares that they owned to us at $20 a share, and they can no longer do that. You will see in the next, in the June quarter we will also take $1.4 million of temporary equity and transfer that to permanent equity. Which basically saved us from buying the stock back for the $20 price, and based on the current stock price basically saves us approximately another $700,000 in cash flow that we would have had to pay to make up the difference in what the current price is and those puts. All-in-all, a pretty good settlement for us and definitely will help increase our cash flow going forward.

Moving to the next slide current update. Our TABC hearing for Rick's Cabaret DFW will be held in mid-June sometime. American Airlines, of course, is our biggest opponent on that. The TABC has been reviewing this, I believe that once we get through all of the rest of the discovery and that, I believe a license about be issued after that hearing. I don't see a reason to deny it. Our people have been looking at it. If they do deny it we will continue to operate as a BYOB, we will probably rebrand and take the Rick's Cabaret name off of it, because the brand is associated with upscale clubs that have food services and alcoholic beverage sales. We are hoping that won't be necessary, and we will know for sure sometime in mid-June.

The Indianapolis transformation has begun. As you know, we closed on the acquisition there. We are converting that into a Rick's Cabaret. We are doing some minor remodeling, some updating to lights and sound and we will begin marketing very heavily in June for a Grand Opening probably around June 16. And we are very excited to be in a new market and having a very good time up there.

I am in the process of obtaining the liquor license in Minneapolis for the new acquisition for BCG of [Chic's] Palace. I expect that license to be approved no later than June, and it actually could come through some time at the end of July, and it could come through some time in June. We definitely don't expect it to be any later than July. So that acquisition will be closed for the July quarter at the latest, and maybe even in the June quarter, so we get the full fourth quarter of that location.

Moving on to our debt. Current debt at $38.3 million. Reduced debt by about $2 million in the last six months. Over the next 12 months we will pay down another $6.2 million of that debt.

And we also currently are exploring restructuring our real estate debt, because we have got some shorter term notes in there that are going to come due in 2013, and we want to try to expand that stuff out for about 20 years on regular real estate debt. We also closed on our Cabaret North property on May 2 for about $2.4 million which will end us paying rent of $33,000 a month. So we will be getting a very nice return on that investment.

On our put options, as of the March 31 close, the value of those put options from a cash flow standpoint of about $2.6 million in addition that would be needed to be paid out based on the stock prices on March 31. If the stock price were zero the total put option valuation over the next three years is $4.8 million. That will give you an idea of where we are sitting there. We are still sitting at the end of the quarter on about $17 million in cash. We have started to put some of that cash to work in April as I said with the purchase of the Indy club and the property on Cabaret North. We will continue to look for acquisitions and other properties that we can buy.

Our growth strategy going forward we will continue to emphasize our organic growth and I think as we see the consumers coming back and starting to spend more money, and we have seen that really across-the-board at our locations in this quarter, and as well in April, it still remaining strong. Not quite as strong as the January/February but not as weak as last year, which is what we were really worried about. Last year as everyone knows the April through June quarter really kind of fell apart, and really started falling apart in early April. This year, April has been very strong. So we are very happy with that.

We are also working on another acquisition that we hope to wrap up shortly, and get announced here within the next 60 days, and we also continue to seek those accretive acquisitions and we are especially paying attention to areas where we currently operate, just because it is easier for us to operate. We get a lot more cost benefits as far as purchasing powers with radio, marketing, newspaper marketing, those types of things.

Going forward to the outlook on the next slide. April 2011 was much better than April 2010. If our current trends continue, this will be one of our best overall years ever, and we are very pleased with that. We have been working very hard in an economy that hasn't been real cooperative, and as the economy starts to be more cooperative with us, we believe that we will continue to capitalize on that. We were going to continue to start deploying more of our capital and sitting on less cash. I think that our proper cash would probably be brought down to about a $6 million or $8 million cash on hand range. Try to get the rest of the capital working by the end of this fiscal year.

We are not issuing any formal guidance at this time. However, I think that once we get the Las Vegas cleaned up off the books, and we know exactly where we are at that point, I think the rest of our business is steady enough that we will be able to get back to giving some type of guidance going forward. Definitely by the end of this fiscal year for fiscal 2012.

This will wrap up the formal presentation of the conference call, and I will be happy to take any questions at this time.

Thank you. (Operator Instructions). Our first question comes from the line of Eric Beder from Brean Murray. Please proceed with your question.

Good afternoon, guys. Congratulations on a solid quarter.

Thanks. That is what we have been working for is to get nice and steady for you guys.

Could you talk a little bit about how does the Minneapolis acquisition fit into your strategy? And in terms of Indianapolis, how big a market should we think about that compared to some of your other markets in terms of potential?

Well, Minneapolis is a great market. There is only three locations that serve alcohol there. There are other totally nude what I call juice bars up there, but as far as places that sell alcohol there are really only three major clubs. We own two out of the three which is 75% of the total square footage. That is very exciting for us.

The other thing we will be able to do in that market, BCG didn't really make any money there because they have a different pay schedule, and a different pay plan that they used for the entertainers. We developed a system back in 1998 that we use to pay the entertainers, which really lowers our costs compared to the costs they had. When we did an EBIT analysis of that location we didn't use their payment scheme. We used our payment scheme. Not really a scheme, but our payment plan on how we deal with the entertainers versus how they dealt with the entertainers, and it makes the location much more profitable for us.

I have gotten a lot of people asking me, well gee BCG is reporting this and they say it is not worth any money. How come you are paying $3 million for it. We were able to view the way they do business versus the way we do business and we are getting a very, very solid deal on this location. Back when they bought the location for $10 million we had actually valued it at $8 million at that time and had made an offer of $8 million for that location back then. So to us we are getting it a little bit later but for much discounted, a much lower price than we originally intended on paying for that location. We are very happy with the deal we have made with them, and I think our shareholders will be too, once we get in there and change it to our method of operation over there.

Indianapolis?

With Indianapolis, Indianapolis was a great deal in that, it was a sad tragedy in that the owner had a motorcycle accident and died, and his wife ended up in the location. She really didn't have any experience in operating. Their sales had come way down in the six months that she had it, it was up for sale. It was a small market, we looked at the numbers and thought this was crazy, what would we want to buy this for? Too small. We found out those were after she operated it for six months and were considerably down from when her husband operated the location. so we got farther back in the numbers, and looked back and realized, so we made an offer on the location of based on the current numbers which was accepted, which is about 2.9 times, or 2.8 times EBITDA I believe, and then we were able to buy the real estate. They had an appraisal on the real estate of $1 million, we offer the $825,000 for it in connection with an $800,000 purchase price for the club, and they accepted our offer.

So, it was a very good deal for us in that aspect, and going forward, we believe that we will be able to not only get that location back to where her husband operated it, but actually with the Rick's brand and the great location we will actually be able to increase, and do numbers much more than that, and we estimate that our purchase price will probably be about maybe 0.3 to 0.5 times revenue which will probably be one of our best acquisitions we have made in an long time.

You talked before about how you get really aggressive with some of the discounting and promotions to keep people in the clubs, to keep the best performers. Have you been able to lighten up on the discounting, and do you think you will be able to lighten up--?

We are probably able to. We just chose not to at this point. point. We are dominating certain nights of the week in our markets. Some of our competitors picked up some of that pricing trying to compete which really has we felt no effect from it. And we just haven't been in a hurry to raise pricing in this market.

With gas prices going up the way they are and everything else the consumer is being squeezed on every front, and we are making money, so we have kind of just held our own right here, and said we will ride it out a little bit longer. We don't need to be in a hurry. I believe there is a market where we definitely could look at raising some prices here and there, but at this time in this market with this economy we just want to be sure. If everything stays strong through the summer, sure by next October, going into the next fiscal year, yes we will probably be definitely looking at price in increases at some of theclubs.

Great, thank you.

Thank you.

Our next question comes from the line of Richard Kein from Kensington Management. Please proceed with your question.

Thank you, hi, Eric.

How are you doing.

Good, good. You?

Not too bad.

A couple of quick questions. I might have missed this did you talk about internal growth.

We didn't really talk about internal growth. I think our same store sales were about 2% with Vegas in there. If you take Vegas out and add the fact that we had a huge Super Bowl and an NBA All-Star game last year which took about $2 million off there, I think our same store sales growth probably is getting close to around 8% or 9% right now.

But you really can't take off --?

It is hard to tell. You are going have go you can't take out the one-time event. We look at locations that weren't affected by these one-time events.

Let's forget about that for a second and just take it for stores that you had a year ago. What does it look like?

About 1.9% for the quarter.

Okay.

Because we had a huge Super Bowl last year. We did have the NBA All-Star game last year and, of course Vegas did $1 million more than this year.

Second question. If you took Vegas as a noncontinuing operation, and reported like that, what would the numbers look like?

Well, Vegas lost about $480,000 for the quarter. So you would basically put that $480,000, take that $480,000 out and add it back into continuing operations. Tax it so you are probably looking at about $0.03 more after tax.

Okay. Okay. And what would you expect it because you are winding it down, what would you expect it--?

The other thing is keep in mind when Vegas is actually gone and into discontinued operations there will be no income tax expense for a little while, so that will really add a considerable amount of earnings as well.

Take the current quarter we are in what would you expect that $480,000 will be?

For June.

Yes.

We have closed the location, we are not paying the rent right now. We are in negotiation with the landlord on a settlement to basically help the next people move in and get their license much quicker, because as long as our license is in there and we stay good and operate a minimum amount of time then our license stays good and they will be able to go in and apply for a temporary license to operate.

So they will be able to get open rather quickly versus going through a whole new licensing process in exchange for doing that for the landlord we want full release from the lease, and those types of things. We are in the process of negotiating all of that right now. We really won't know until June 30 exactly where we will be sitting with all of that.

Give me a guess.

Give you a guess on what we will lose this quarter?

Yes.

Well, based on what I am hoping for the settlement to be I am going to guess probably somewhere closer to a $250,000 for this quarter, and then zero going forward from there.

Did you say the operation is now closed?

It is not really, it is what we call restricted. We are calling it restricted. Basically, yes, we are closed. We are closed as operating as a full-time strip club, yes, we are closed. We will open, special-event type deals, where we have to open every so many days for a certain period of time to keep the licenses active, and those types of things. We will be complying with those requirements but for all intents and purposes, yes the location is basically not doing business as it was before.

So if I have friends that are planning ongoing to Las Vegas I don't send them to your place?

No, there is nobody there.

Okay.

There may be a bartender in there selling bottles of beer, but there are really not going to be any dancers, and they are not going to have a lot of fun, they would definitely want to go to a different location.

I will tell them that. Thank you Eric.

You bet, thanks a lot.

Our next question comes from the line of David Mau from Montgomery Street Research. Please proceed with your question.

Hi, Eric. How are you?

Good, how are you?

Good, thank you. Did I miss anything on this call about the Texas pole tax, and what is going on with that?

No, because there hasn't been any change yet. As you know, we are still expensing it. I believe our liability is up to about $5.4 million. We believe that, it will be ruled unconstitutional once the Supreme Court rules, but they are the Supreme Court so they get to decide when they want to rule. There are a couple of Bills in the house I believe right now the legislature is in session. But I don't think there has been much movement on either of those bills. I think one would repeal it. One would change it to try to make it more constitutional, and make them some kind of collection deal or something, I don't even know that it makes it constitutional.

Obviously if they pass there would be additional challenges more than likely, unless all of the parties involved agreed to the terms of the new Bill, and settled on some type of, basically with what we believe would be legal would be some type of percentage based tax on all sexually oriented businesses. But what is going happen with that is unknown. We would like to see the Supreme Court rule. Both lower courts have ruled it unconstitutional. Even if the Supreme Court rules on the claims that are in front of it, there are other claims that would be made especially in the tax protest suits, that still makes the law unconstitutional. We believe the legislature knows that, which is why you are seeing other bills, three or four other versions of this Bill in the house being different committees or what not, And I think that is why we are seeing that is they do realize there is problems with this existing Bill. Hopefully at some point they will rule and this will be ruled unconstitutional, and we the get the $5.4 million one-time back, income back in, as well as the $2.6 million that we paid, either in a credit, or in a payment back to us from the State. So if you total it all up it is about $8 million now, that we have expensed for this pole tax.

Very good. And then my other question is just about the business environment in general. And in your view has the environment improved to let's say pre-recession levels at this point, or are you still on the way to that point?

I think overall, no, I don't think we are back at pre-recession levels. As an industry, I don't know how long that will take. I do think that some of our top locations are back. In other words, if you are number one in a market, you are seeing sales that are equal to or better than pre-recession numbers. Because you are the leader in the market and people are going out and starting to spend a little bit, but they are still going out to that known place, they are not really trying a lot of new stuff right now. So it really helps to be number one in the market. The other clubs are seeing an increase in revenues though. We are seeing more visits, and seeing better spending at locations across the board. These oil prices currently and the gas really has me concerned. We are look at it, I was really concerned with April but we did not, we have seen a little dip in April like we are supposed to see, but didn't see a falloff like we did last year, which is very exciting. This April was a very solid April, and May is continuing to be good, the first week of May was good. So we will watch and see as we progress through May as long as the numbers stay solid, I think we are going be in pretty good shape.

There is talk now about maybe gas prices will start coming back down again, which will definitely help our B clubs and C clubs to, when those guys only have a certain amount of disposable income every week, and if they have to put it in their gas tank they don't pay a visit to the club. Hopefully those clubs will do much better. Definitely seeing the high end clubs are doing very, very well.

The New York club and the Florida club are probably the top clubs in those markets?

And they have done solid through the entire, through the recession. You wouldn't really know there was a recession at the New York club. We have seen, we have had only had one month I think since that club opened that we didn't have an increase in same store sales year-over-year, and we had a big customer the year before. That is hard to make up for. Miami has been very steady. We are seeing a definite, solid business in Minnesota now. We are seeing solid business in the Dallas/Ft. Worth clubs.

Our Austin location has been an unbelievable success story for us. We bought the club rights, we put a management team in there that has just done phenomenal for us. I spent some time in the San Antonio Rick's location and we turned that location around, it is starting to do very well for us, and those are the types of things, we have really been focused on existing operations, and really bringing in customers and building up sales in our existing operations. And at the same time slowly adding a club here and a club there, that fits in and it is easy to manage and easy to operate for us.

Indianapolis was the first club where we have gone where it was and it wasn't a market that we were already in, and we are going to try to hopefully find other clubs in that market, or around that area that we can grow off of. We are moving our regional manager that we had out in Las Vegas back to Minneapolis. He is going to oversee the Indianapolis club and the two Minnesota clubs and we are going to try to expand off of there, because we have strong management in that area again, and we believe that is a good growth strategy for us. We are looking along the East Coast and in Florida real heavily still as well.

Very good. I appreciate the answer.

Yes, no problem. Thanks, David.

(Operator Instructions). Our next question comes from the line of Danish Kapoor, a private investor. Please proceed with your question.

How are you?

Good, how are you?

When are you thinking about expanding in New York?

Expanding in New York, we have looked obviously in the city itself it is very difficult, clubs are very expensive, and they are really not for sale. None of the current owners want to sell. As far as building something new here, it is very, very difficult in this market.

Do you think that you have a customer big base over here, so it will be like, not so difficult to attract customers?

We definitely believe we could operate more than one location in New York City. But like I said the problem is actually finding a legal location, and/or an existing location that someone would want to sell.

Okay. Thanks a lot.

Yes.

Our next question comes from the line of Mike Rindos from Rodman & Renshaw. Please proceed with your question.

Hi, guys, how are you?

Good, how are you?

Good. Most of my questions have been answered but can you just expand a little bit more on customer traffic in your clubs, and especially as it relates to the pricing at the bar?

I mean obviously, people are very price conscious right now on what they are spending. People are still really watching what they are spending, especially when I consider kind of our B clubs, the 25 or 35-year-old crowd. They have got good jobs, got have got solid jobs, they are working, but they are still very conscious of what they are spending. They are stretching their money a lot farther than they were before. Even what I call the trendy crowd, the party crowd that used to go out and spend all of their money all the time, is really watching what they are spending, and so discount nights are doing very, very well for us. The Tuesday nights, we do $2 Tuesday, and really what we have done is really kind of transform some of clubs, where they are a gentleman's club, an adult club, but they are also just a regular nightclub, too.

When we first started trying the concept, we weren't real sure how it was going to work, but we figured $2 drinks would bring a lot of people in. What we didn't realize when we first started it, was how much it was going transform the club. It really becomes more of a nightclub with a bunch of naked girls running around. You have 200 or 300 people standing up in the building so the head counts have really gone high on those clubs on those nights, and you really dominate. We have taken a market that we didn't really have, or had no access to, and we are actually coming in and really dominating on those nights because the regular nightclub scene on a Tuesday night is nothing. A lot of clubs are the closed on Tuesday. Some of the smaller ones that stay open on Tuesdays did a little bit of business, but we are really drawing and making it a big party place, so that everybody wants to come to the busy place. It has done real well for us.

That is interesting. How many clubs are you doing that at?

I want to, I would say probably about 7 or 8 of the clubs we are doing that now. We do a Tuesday night special and then we do a Wednesday night. We do cheap liquor on Tuesday nights and cheap beer on Wednesdays night, so we get the liquor drinking crowd on Tuesdays and then we go for the beer drinking crowd on Wednesdays.

Okay. And which of the clubs, excluding Las Vegas, are the most troubled, aside from Las Vegas at this oint? What are your other slowest ones that have bounced back? Philly?

We have a couple of small clubs that are doing bad. Philly has come back quite a bit. Philly used to be a real big drain on us. I think the unemployment, first of all, it is a Club Onyx, that was after the African American market. I think the unemployment rate for the African American male in that town was about 37% at one point. It has come back and as the employment market has come back so has our business. We are doing much better there. We are hoping that by the end of this summer that location will actually, we turned a profit in the quarter and then we don't turn a profit. Hopefully overall for the year we will actually turn a profit there this year. We just have to wait and see how this summer goes. Other than that, a couple of clubs in the Houston market, they are smaller clubs and they have some minor loss, but nothing significant.

Okay. And I just wanted to clarify some points that you made earlier. Regarding same store sales. With Las Vegas, same store sales were up 1.9%, excluding Las Vegas the number would be between 8% and 9%, is that correct?

Not just excluding Las Vegas. It is Las Vegas and if you take out the, like the NBA All-Star game. If you take out the locations that were affected by one-time events.

Is there a chance that you could give us the number just excluding Las Vegas?

I don't have that off the top of my head here. I really wasn't prepared for that today I am sorry. I should have been. If you want to give Phil a call, he can get you all if that, if you want to talk to him.

Give me a call Mike.

Yes, thanks for your time.

You bet.

Our next question comes from the line of William Stepbecker, a private investor. Please proceed with your question.

Eric, you kind of touched on it a little bit earlier, but can you give us an idea of the type of acquisitions that you are looking at in the near future?

We are looking at stuff that is probably in the $2 million to $5 million in revenue range, something that we can, that is affordable for us. We are trying to stay in the 3 times EBITDA. We have started looking at a couple of larger acquisitions but, one of them being in the Texas market. We are really not in a big hurry on that until we know exactly what that pole tax issue, how that is going to work out. We believe that the Supreme Court will rule it unconstitutional, it doesn't make sense to make a huge investment market in the Texas market until we know for sure. No sense in creating a liability that we don't need at this point. We are also looking at a couple of other major acquisitions, when I say major acquisitions I am talking between $15 million and $30 million investment.

Would that be a chain, if you are up to $30 million or are you talking one location?

Maybe. We have looked at chains. I can't be too specific obviously, but we are looking at stuff. There is stuff out there and we are looking at it. We are stating to consider some of that again, what we consider the mega club or a mega transaction type deal. And really it is just a matter of getting A, comfortable with the acquisition itself, as well as comfortable with the economy is strong enough to support an acquisition like that.

If you were to do one of those larger transactions, would it likely be in a market where you already have a number of clubs or--?

That doesn't really matter to us. If we can find a mega transaction like that, obviously we are either going be if we are doing a small chain we are obviously going to be buying a market. If we are doing a single club, then it is obviously the dominating club in that market, and if we can buy a dominating club in a market, we are more than happy to do that even if we are aren't in the market. We like adding to markets that are very easy for us to manage and add, because you are going in there adding, $2 million, $3 million, $4 million to the revenue, and it is super easy, we already have our regional set up, we already have our people set up, we can interchange employees if we need to. We have if a DJ doesn't show up, it is easy to get somebody to show up. You get consistency. And that is one thing in this market that I think is very, very critical with the economy where it is right now, is just being consistent. You just cannot afford not to have a consistent customer experience right now.

Alright, thank you.

Thank you.

(Operator Instructions).

I think we can, I don't think we have any questions left.

I want to remind everybody that we have a Due Diligence Ball tonight at the Rick's Cabaret in New York City 50 West 33rd Street between 5th Avenue and Broadway. We look forward to seeing a lot of you down there tonight.

There are no further questions in the queue. This does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.

Great, thank you.