RCI HOSPITALITY HOLDINGS, INC.RICK

RCI HOSPITALITY HOLDINGS, INC. Leases Disclosure

10-KFiled Mar 19, 20263 min read
Leases
The Company leases certain facilities and equipment under operating leases per ASC 842. These leases include renewal or termination options for varying periods which we deemed reasonably certain to exercise. This determination is based on our consideration of certain economic, strategic and other factors that we evaluate at lease commencement date and reevaluate throughout the lease term.
Some leasing arrangements require variable payments that are dependent on usage or may vary for other reasons, such as payments for insurance and tax payments and additional lease payments contingent on sales. The variable portion of lease payments is not included in our right-of-use assets or lease liabilities. Rather, variable payments, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred and are included in lease expenses recorded in selling, general and administrative expenses in our consolidated statement of income.
We have elected to apply the short-term lease exception for all underlying asset classes, which mainly includes equipment leases. That is, leases with a term of 12 months or less are not recognized on the balance sheet, but rather expensed on a straight-line basis over the lease term. We do not include significant restrictions or covenants in our lease agreements, and residual value guarantees are generally not included within our operating leases.
Future maturities of operating lease liabilities as of September 30, 2025 are as follows (in thousands):
Principal
Portion		Interest
Portion		Total
Payments
October 2025 - September 2026$3,314 $1,613 $4,927 
October 2026 - September 20273,320 1,418 4,738 
October 2027 - September 20282,765 1,239 4,004 
October 2028 - September 20292,859 1,068 3,927 
October 2029 - September 20302,438 911 3,349 
Thereafter 15,938 2,470 18,408 
$30,634 $8,719 $39,353 
Total lease expense under ASC 842 is included in selling, general and administrative expenses in our consolidated statement of income, except for sublease income which is included in other revenue, for the years ended September 30, 2025, 2024, and 2023 as follows (in thousands, except years and percentages):
202520242023
Operating lease expense – fixed payments$4,423 $5,029 $5,166 
Variable lease expense1,612 1,707 1,629 
Short-term equipment and other lease expense (includes $390, $448 and $357 recorded in advertising and marketing for fiscal 2025, 2024, and 2023, respectively, and $568, $605 and $557 recorded in repairs and maintenance, respectively; see Note 6)
1,329 1,416 1,325 
Total lease expense, net$7,364 $8,152 $8,120 
Other information:
Operating cash outflows from operating leases$7,665 $8,154 $7,949 
Weighted average remaining lease term8.9 years9.4 years10.5 years
Weighted average discount rate5.8 %5.7 %5.8 %
In relation to certain rent concessions that we received from certain of our lessors in view of the COVID-19 pandemic, we accounted for those rent concessions as deferral of payments as if the lease is unchanged. Any reduction in total lease expense during the period caused by either an extension of the lease term or a forgiveness of certain lease payments is accounted for as variable lease payment adjustments.
We recorded impairment charges of operating lease right-of-use assets amounting to $0, $6.5 million, and $1.0 million during fiscal years 2025, 2024, and 2023, respectively.
We recorded third-party operating lease revenue under ASC 842 amounting to $1.7 million, $1.7 million, and $1.8 million for fiscal 2025, 2024, and 2023, respectively. Minimum future base rentals are as follows: $1.5 million for 2026, $1.2 million for 2027, $1.0 million for 2028, $1.0 million for 2029, $423,000 for 2030, and $240,000 thereafter.

Historical Timeline

Fiscal YearFiled
2025Mar 19, 2026Showing above
2024Dec 16, 2024
2023Dec 14, 2023
2022Dec 14, 2022
2021Dec 14, 2021
2020Dec 14, 2020

About Leases Disclosures

Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.

Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.

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