Category Archives: Entertainment

CFO of Houston-based restaurant group departs

Scott Gray, the CFO of Luby’s, has left his role with immediate effect. No successor has yet been named.

Luby’s operates 119 restaurants in the US, including 41 Fuddruckers locations. They are also the franchisor for 97 Fuddruckers franchise locations. Not surprisingly, they have been hard hit by the coronavirus pandemic.



Mr Gray joined the company in 2001 and became the CFO in 2007. He had a base salary of $342,000 before it was reduced, temporarily, last month to $171,000. He will receive a severance of $105,231 to be paid over 6 months.

Mr Gray will also receive the immediate vesting of 31,028 restricted stock units and the vesting of 83,666 stock options at a strike price of $2.82 per share. Those options are out of the money as the current share price is $0.81.

In fact, last week, the company received a delisting notice from the NYSE as its share price had been below $1 for at least 30 consecutive trading days. To regain compliance, the company has to bring its average share price back above $1.00 within six months.

The company was also in the news last week as it was a recipient of a $10 million Paycheck Protection Program (PPP) loan under the CARES Act. Luby’s is one of seven Houston-area public companies that received a PPP loan. The others are Applied Optoelectronics, EnGlobal, Flotek, Gulf Island Fabrication, RiceBran and Sharps Compliance.

SEC filing – Lubys CFO departure

 

 

Houston hospitality company releases findings prompted by anonymous bloggers

RCI Hospitality has announced its findings following an SEC inquiry and allegations by certain anonymous internet bloggers. These involve related party transactions and undisclosed perks enjoyed by senior management. The company had delayed its quarterly filings due to the investigation.

RCI operates 39 adult nightclubs (including Rick’s Cabaret) and 8 restaurant/bars under the Bombshells brand name.

In short, Big Rick Invest & Detroit Bear, the anonymous bloggers, were substantially vindicated!



You can read Detroit Bear’s extensive article here.

Special Committee

An international law firm was hired to conduct a review and found the following;

  • RCI paid Ed Anakar, Director of Operations, between $471,154, $450,000 and $375,000 for the three years ended September 2018. Ed Anakar, his brother is a director and supposedly an independent one. (That wasn’t too difficult to figure out as company stated this in its 10-K!)
  • A company (Sherwood Forest Creations) owned by the brother of Eric Langan, the CEO, was hired to make furniture for the Bombshells locations. The company was paid $633,000 over 3 years.  (Big Rick made no mention of this company. Instead he alleged that the construction company (Tannos Construction) hired to build the Bombshell bars was part owned by the CEO. This is not mentioned in the review).
  • Personal use of aircraft by the CEO and CTO Travis Reese was incorrectly calculated for 2018 and not included in the 2017 and 2016 annual statements. The correct amounts for the CEO are $96,797, $79,748 and $55,101 respectively. (Big Rick nailed this one – he also stated that the CTO, the number 2 executive in the company, happens to be a pilot).
  • Not disclosed in the annual reports was that Steve Jenkins, a director, filed for Chapter 13 bankruptcy in Aug 2010 and October 2015 (the bloggers missed this one).

There was no mention of the allegations by Big Rick that another of the independent directors is an attorney who has represented the company in previous lawsuits. Nor did they cover the alleged loans to the CEO from the company, Ed Anakar ($90,000) or from an independent lawyer that does work for RCI ($38,500). (It could be that the scope of the independent investigation was somewhat limited).

Proposed Actions

The audit committee and the Board of Directors anticipate taking the following actions

  • Appoint at least one new independent director
  • Appoint a Chief Compliance Officer will report to the audit committee
  • Strengthen the related party transaction policy
  • Adopt an enhanced code of conduct policy
  • Adopt an airplane policy outlining personal use by employees
  • Sell three residential houses that the company owns in Houston (the bloggers got this one right).



Auditors resign

In addition, last week, the company also disclosed that the external auditors, BDO, were resigning as the company’s auditors as BDO believes that

” the company has not performed sufficient investigatory procedures and has not taken timely and appropriate remedial action in response to certain deficiencies that BDO thinks exist in the way the internal review has been conducted, including:

  1. undue restriction on the scope of the internal review;
  2. failure to initiate certain forensic procedures;
  3. refusal to provide BDO access to pertinent interview summaries and other documents;
  4. lack of assessment as to the impact of the matters identified to date on existing and future regulatory filings, including financial statements related footnotes;
  5. restrictions, based on privilege, hindering BDO’s ability to properly shadow and evaluate the adequacy of the internal review.”

The company disagrees with BDO’s assessment.

Personal guarantees from CEO

Eric Langan has been the CEO since 1999. He has a base salary of $1 million and owns 7% of the company. Unusually for a public company, he also personally guarantees all of the commercial bank indebtedness of the company. That probably makes it harder for an activist investor to get involved.

Big Rick vindicated!

Back in June 2018, when Big Rick Invest started publishing the allegations, the share price of RCI was $30.  He believed it was worth between $14.32 and $17.41 a share. The current share price is …$16.07.

SEC filing – RCI Hospitality

 

Houston CFO moves – week ending May 12

John Vollmer, CFO of Patterson-UTI Energy (PTEN) announced that he plans to retire by the end of the year. His retirement will become effective after a transition period following the employment of his successor. Patterson-UTI operates one of the largest fleets of US land-based drilling rigs and pressure pumping equipment. The company recently acquired Seventy Seven Energy for $1.8 billion.

Dave Hiscocks has been appointed Corporate Controller and Corporate Secretary at Synthesis Energy Systems, a publicly-traded clean energy company with its head office in the Galleria area. Mr Hiscocks was formerly the Regional Controller-Eastern Hemisphere at Noble Corporation. Scott Davis, the Chief Accounting Officer of Synthesis, has resigned from the company.

Ty Lawrence has been promoted to the position of VP, Treasury and Investor Relations at McDermott International. He joined the company in 2013 and was previously the Senior Director of Finance for Americas, Europe and Africa. McDermott is a publicly-traded Engineering an Construction company with its head office in West Houston. Mr Lawrence replaces Kathy Murray who has been appointed VP of Finance for Project Execution and Delivery.

Craig Bourgeois has been named CFO of The Center for the Performing Arts at The Woodlands, home of the Cynthia Woods Mitchell Pavilion. The Pavilion consistently ranks in the top 5 venues in the world for outdoor concert ticket sales. Previously, Mr Bourgeois served as the VP and Treasurer, North America at Trimac Transportation. Prior to joining Trimac in North Houston, he worked at Shell Oil. Mr Bourgeois replaces Brian Pate, who left after less than two years as CFO.