NEW YORK, Feb. 28 -Town Sports International Holdings, Inc. ("TSI" or "the Company"), a leading owner of health clubs located primarily in major cities from Washington, DC north through New England, operating under the New York Sports Clubs, Boston Sports Clubs, Washington Sports Clubs and Philadelphia Sports Clubs brands, announced its results for the quarter and year ended December 31, 2005.
Fourth quarter 2005 revenue grew 11.0% to $98.5 million from $88.7 million for the same period last year. For the year ended December 31, 2005, revenue grew 10.1% to $388.6 million from $353.0 million for the prior year.
"We're very pleased with the company's fourth quarter and full year financial results," said Bob Giardina, CEO of TSI "Our member growth, revenue performance at our comparable club facilities, and the operating performance of the newest clubs are all very encouraging, and show our sustained attention and implementation of our core strategies. We opened a new multi-recreational facility in Silver Spring, MD in the fourth quarter, bringing the total number of new clubs added to the fold to seven in 2005, prior to three closures for replacement. We owned and operated 139 clubs at December 31st, together with two partly-owned clubs, bringing the overall total clubs in operation to 141. A flurry of construction completion has allowed us to add an additional five new, or completely remodeled, facilities already in 2006, all of which have performed above our expectations for new memberships. Our year-end total member count, which stood at 409,000, grew by 7% in 2005."
Three Months and Year Ended December 31, 2005, Financial Highlights:
Total revenue for the fourth quarter grew 11.0% to $98.5 million from $88.7 million for the same period last year and total revenue for the year ended December 31, 2005 grew 10.1% to $388.6 million from $353.0 million for the prior year. The increases in revenue were driven by growth in membership revenue and ancillary club revenue.
* Membership revenue for the fourth quarter grew 10.3% to $82.5 million
from $74.8 million in Q4 2004. Membership revenue for the year ended
December 31, 2005 grew 9.0% to $321.7 million from $295.2 million for
the prior year.
* Ancillary club revenue for the fourth quarter grew 18.2% to
$14.5 million from $12.3 million in Q4 2004. Ancillary club revenue for
the year ended December 31, 2005 totaled $62.4 million, up 17.7% from
$53.0 million for the prior year.
* Same-club revenue increased 8.5% during the fourth quarter compared to
the prior-year period and 6.9% for the year ended December 31, 2005
compared to the prior year on a twelve month (retail) basis.
Total operating expenses during Q4 2005 totaled $87.6 million compared to $80.3 million in Q4 2004. Operating expenses totaled $348.3 million for the year ended December 31, 2005 compared with $318.7 million for the prior year.
* Payroll and related expenses totaled $38.0 million in Q4 2005 compared
to $34.0 million in Q4 2004. Payroll and related expenses totaled
$151.9 million for the year ended December 31, 2005 compared with
$138.3 million during the prior year.
* Club operating expenses totaled $32.9 million for Q4 2005 compared to
$30.2 million in Q4 2004. Club operating expenses for the year ended
December 31, 2005 totaled $130.2 million compared with $116.8 million
during the prior year.
* General and administrative expenses totaled $6.8 million for Q4 2005
compared to $6.5 million in Q4 2004. For the year ended December 31,
2005, general and administrative expenses totaled $26.6 million compared
with $24.7 million in the prior year.
* Depreciation and amortization expenses totaled $9.9 million during Q4
2005 compared to $9.6 million in Q4 2004. Depreciation and amortization
expenses were $39.6 million for the year ended December 31, 2005
compared with $36.9 million in the prior year.
Cash flow from operations for the twelve months ended December 31, 2005 grew 5.9% to $60.5 million from $57.1 million from the prior year.
Adjusted EBITDA for Q4 2005 increased 20.1% to $22.8 million from $19.0 million in Q4 2004.
* For the year ended December 31, 2005 adjusted EBITDA grew 9.7% to
$84.2 million from $76.8 million for the prior year.
* As a percentage of total revenue, adjusted EBITDA margin was 23.2% in Q4
2005, up from 21.4% in Q4 2004. For the year ended December 31, 2005,
adjusted EBITDA margin was 21.7%, down slightly from 21.8% for the same
period last year.
The Company will hold a conference call on Wednesday, March 1, 2006 at 2:30 PM (Eastern) to discuss the fourth quarter and calendar year 2005 results. Robert Giardina, chief executive officer, and Richard Pyle, chief financial officer, will host the conference call. The conference call will be Web cast and may be accessed via the Company's Investor Relations section in the "About us" section of its Website at http://www.mysportsclubs.com. A replay of the call will be available via the Company's Website beginning at 5:00 PM (Eastern) on March 1, 2006.
About Town Sports International Holdings, Inc.:
New York-based Town Sports International Holdings, Inc. (TSI) is a leading owner and operator of fitness clubs in the Northeast and mid-Atlantic regions of the United States. In addition to New York Sports Clubs, TSI operates under the brand names of Boston Sports Clubs, Washington Sports Clubs and Philadelphia Sports Clubs, with 138 clubs and more than 400,000 members in the U.S. In addition, the Company operates three facilities in Switzerland. For more information on TSI visit http://www.mysportsclubs.com
Richard Pyle, CFO, ph: 212-246-6700 x209,
email: investor.relations@town-sports.com
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2004 and 2005
(All figures $'000s except share data)
(Unaudited)
December 31, December 31,
2004 2005
Assets
Current assets:
Cash and cash equivalents $57,506 $51,304
Accounts receivable (net) 1,955 7,103
Inventory 655 421
Prepaid corporate income taxes 5,645 4,518
Prepaid expenses and other current assets 8,971 13,907
Total current assets 74,732 77,253
Fixed assets, net 226,253 253,131
Goodwill 47,494 49,974
Intangible assets, net 931 741
Deferred tax assets, net 12,735 24,378
Deferred membership costs 12,017 11,522
Other assets 16,794 16,772
Total assets $390,956 $433,771
Liabilities and Stockholders' Deficit
Current liabilities:
Current portion of long-term debt
and capital lease obligations $1,225 $1,267
Accounts payable 10,555 8,333
Accrued expenses 22,402 31,620
Accrued interest 5,217 5,267
Deferred revenue 28,294 33,028
Total current liabilities 67,693 79,515
Long-term debt and capital lease obligations 395,236 409,895
Deferred lease liabilities 36,009 48,898
Deferred revenue 3,298 2,905
Other liabilities 5,737 8,241
Total liabilities 507,973 549,454
Commitments and contingencies
Stockholders' deficit:
Class A voting common stock 1 1
Paid-in capital (113,900) (113,588)
Unearned compensation (292) (509)
Accumulated other comprehensive income
(currency translation adjustment) 916 386
Retained earnings accumulated (deficit) (3,742) (1,973)
Total stockholders' deficit (117,017) (115,683)
Total liabilities and stockholders' deficit $390,956 $433,771
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months and years ended December 31, 2004 and 2005
(All figures $'000s)
(Unaudited)
Three months ended Year ended
December 31, December 31,
2004 2005 2004 2005
Revenues:
Club Operations $87,049 $97,022 $ 348,175 $384,143
Fees and Other 1,672 1,492 4,856 4,413
88,721 98,514 353,031 388,556
Operating Expenses:
Payroll and related 34,046 37,968 138,302 151,920
Club operating 30,182 32,905 116,847 130,219
General and
administrative 6,491 6,786 24,719 26,582
Depreciation and
amortization 9,598 9,909 36,869 39,582
Goodwill impairment - - 2,002 -
80,317 87,568 318,739 348,303
Operating Income 8,404 10,946 34,292 40,253
Interest expense 10,169 10,437 39,343 41,550
Interest income (233) (890) (743) (2,342)
Equity in the earnings
of investees and
rental income (403) (423) (1,493) (1,744)
Income (loss) before
provision (benefit)
for corporate income
taxes (1,129) 1,822 (2,815) 2,789
Provision for corporate
income taxes 1,898 600 1,090 1,020
Net income (loss) $ (3,027) $ 1,222 $ (3,905) $ 1,769
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the twelve months ended December 31, 2004 and 2005
(All figures $'000s)
(Unaudited)
December 31, December 31,
2004 2005
Cash flows from operating activities:
Net income (loss) $(3,905) $1,769
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and amortization 36,869 39,582
Goodwill impairment 2,002 -
Fixed asset impairment charge 406 -
Noncash interest expense on Senior
Discount Notes 12,758 15,505
Amortization of debt issuance costs 1,584 1,644
Noncash rental expense, net of noncash
rental income 525 1,461
Compensation expense incurred in connection
with stock options 64 279
Net change in certain working capital
components (1,292) 1,443
Decrease (increase) in deferred tax asset 4,036 (11,643)
Decrease in deferred membership costs 1,021 495
Landlord contributions to tenant
improvements 2,508 8,590
Increase in insurance reserves 1,399 1,837
Other (850) (484)
Total adjustments 61,030 58,709
Net cash provided by operating activities 57,125 60,478
Cash flows from investing activities:
Capital expenditures, net of effect
of acquired businesses (36,816) (62,393)
Proceeds from sale of equipment 7 -
Acquisition of businesses, net of cash
acquired (3,877) (3,945)
Net cash used in investing activities (40,686) (66,338)
Cash flows from financing activities:
Book overdraft 2,778 986
Proceeds from 11.0% Senior Discount Note
Offering 120,487 -
Redemption of Series A and Series B
preferred stock (50,635) -
Common stock distribution (68,943) -
Repurchase of common stock (53) (184)
Proceeds from stock option exercises 539 -
Repayments of other borrowings (3,908) (1,144)
Net cash provided by (used in) financing
activities 265 (342)
Net increase (decrease) in cash and cash
equivalents 16,704 (6,202)
Cash and cash equivalents
Beginning of period 40,802 57,506
Cash and cash equivalents
End of period $57,506 51,304
Summary of the change in certain working
capital components, net of effects of
acquired businesses
Increase in accounts receivable $(486) $(2,334)
Decrease in inventory 95 230
Increase in prepaid expenses and other current
assets (845) (3,774)
Increase in accounts payable and accrued
expenses 515 2,142
Increase in prepaid corporate income taxes (1,583) 1,127
Increase in deferred revenue 1,012 4,052
Net change in certain working capital
components $(1,292) $1,443
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Net Income (Loss) to Adjusted EBITDA
For the three months and years ended December 31, 2004 and 2005
(All figures $'000s)
(Unaudited)
Three months ended Year ended
December 31, Decembr 31,
2004 2005 %Chg. 2004 2005 %Chg.
Net income (loss) $(3,027) $1,222 $(3,905) $1,769
Provision for corporate
income taxes 1,898 600 1,090 1,020
Interest expense, net of
interest income 9,936 9,547 38,600 39,208
Depreciation and
amortization 9,598 9,909 36,869 39,582
Noncash rental expense,
net of noncash rental
income 162 382 525 1,461
Noncash compensation
expense incurred in
in connection with stock
options 35 244 64 279
Costs incurred in
connection with the
examination of
financing alternatives - 928 - 928
Goodwill and fixed asset
impairment charges 406 - 2,408 -
Distribution to option
holders classified as
payroll - - 1,144 -
Adjusted EBITDA $19,008 $22,832 20.1% $76,795 $84,247 9.7%
Adjusted EBITDA Margin 21.4% 23.2% 21.8% 21.7%
Non GAAP Financial Measures:
EBITDA is defined as earnings before interest, taxes, depreciation and amortization. EBITDA provides useful information regarding our operating performance and financial condition. EBITDA should not be considered in isolation or as a substitute for net income, cash flows or other consolidated income (loss) or cash flow data prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") or as a measure of our profitability or liquidity. Additionally, investors should be aware that EBITDA may not be comparable to similarly titled measures presented by other companies.
Adjusted EBITDA is calculated by adding to or deducting from EBITDA (as defined above) certain items of income and expense consisting of: (i) noncash deferred rental expense, net of noncash deferred rental income, (ii) noncash compensation expense incurred in connection with stock options, (iii) distribution to option holders classified as payroll, (iv) goodwill impairment charges and (v) costs incurred in connection with potential financing and business combination transactions that have not been consummated. We believe that the adjustment for these items is appropriate for such periods in order to provide an appropriate analysis of recent historical results. Adjusted EBITDA is presented because we believe it provides useful information regarding our operating performance and financial condition. Adjusted EBITDA is substantially similar to a metric used by our lenders when assessing our compliance with debt covenants. Adjusted EBITDA should not be considered in isolation or as a substitute for net income (loss), cash flows or other consolidated income (loss) or cash flow data prepared in accordance with GAAP or as a measure of our profitability or liquidity. Additionally, investors should be aware that Adjusted EBITDA may not be comparable to similarly titled measures presented by other companies. Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of consolidated revenue.
Forward-Looking Statements:
Statements in this release that do not constitute historical facts, including, without limitation, statements regarding future financial results and performance and potential sales revenue are "forward-looking" statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties, many of which are outside our control, including the level of market demand for our services, competitive pressures, the ability to achieve reductions in operating costs and to continue to integrate acquisitions, the application of federal and state tax laws and regulations, and other specific factors discussed herein and in other releases and public filings made by the Company. The information contained herein represents management's best judgment as of the date hereof based on information currently available. However, we do not intend to update this information to reflect development or information obtained after the date hereof and we disclaim any legal obligation to the contrary.
