For Release on November 11, 2005 | Exhibit 99.l |
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. ANNOUNCES THIRD QUARTER 2005 FINANCIAL RESULTS
New York, NY — November 11, 2005— 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 ended September 30, 2005.
Third quarter 2005 revenue grew 9.5% to $98.2 million from $89.7 million during the same period last year. For the nine months ended September 30, 2005, revenue grew 9.7% to $290.0 million from $264.3 million during the same period last year.
“Our total member count which stands at 410,000 continues to grow. Year-on-year, we have added 32,000 members for an 8.5% increase in the prior twelve months” said Bob Giardina CEO of TSI “In addition, we are excited about the performance of our seven new clubs opened or acquired in the last twelve months. We look forward to the openings of the next six facilities currently under construction and planned to open in the next two quarters.”
Three and Nine Months Ended September 30, 2005, Financial Highlights:
Total revenuefor the third quarter grew 9.5% to $98.2 million and total revenue for the first nine months of 2005 grew 9.7% to $290.0 million from $264.3 million during the same period last year. The increases in revenue were driven by growth in membership revenue and ancillary club revenue.
• | Membership revenue for the third quarter grew 9.3% to $81.0 million from $74.1 million in Q3 2004. Year-to-date membership revenue grew 8.5% to $239.2 million from $220.4 million during the same period last year. | ||
• | Ancillary club revenue for the third quarter grew 15.0% to $16.2 million from $14.1 million in Q3 2004. Year-to-date ancillary club revenue totaled $47.9 million, up 17.6% from $40.7 million during the prior-year period. | ||
• | Same-club revenue increased 6.1% during the third quarter compared to the prior-year period and 6.4% for the first nine months of 2005 compared to the prior period. |
Total operating expensesduring Q3 2005 totaled $89.0 million compared to $78.6 in Q3 2004. Year-to-date operating expenses totaled $260.7 million compared with $238.4 million for the same period last year.
• | Payroll and related expenses totaled $38.4 million in Q3 2005 compared to $33.8 million in Q3 2004. Year-to-date payroll and related expenses totaled $114.0 million compared with $104.3 million during the same period last year. | ||
• | Club operating expenses totaled $34.1 million for Q3 2005 compared to $29.8 for the same period last year. Year-to-date club operating expenses totaled $97.3 million compared with $86.7 million during the prior-year period. | ||
• | General and administrative expenses totaled $6.7 million for the third quarter compared to $6.1 million in the prior-year period. For the nine months ended September 30, 2005, general and administrative expenses totaled $19.8 million compared with $18.2 million in the prior-year period. | ||
• | Depreciation and amortization expenses totaled $9.9 million during Q3 2005 compared to $8.9 million in Q3 2004. Year-to-date depreciation and amortization expenses were $29.7 million compared with $27.3 million in the prior-year period. |
Cash flow from operationsfor the nine months ended September 30, 2005 grew 14.5% to $57.8 from $50.5 million for the same period last year.
Adjusted EBITDAfor Q3 2005 decreased 3.1% to $19.6 million from $20.2 million in Q3 2004.
• | Year-to-date adjusted EBITDA grew 6.3% to $61.4 million from $57.8 million for the same period last year. | ||
• | As a percentage of total revenue, adjusted EBITDA margin was 19.9% in Q3 2005, down from 22.4% in Q3 2004. Year-to-date Adjusted EBITDA margin was 21.2%, down from 21.8% for the same period last year. |
The Company will hold a conference call on, Monday, November 14, 2005 at 2:30 PM (Eastern) to discuss the third quarter 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 atwww.mysportsclubs.com. A replay of the call will be available via the Company’s Website beginning at 5:00 PM (Eastern) on November 14, 2005.
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 137 clubs and more than 410,000 members in the U.S. In addition, the Company operates three facilities in Switzerland. For more information on TSI visitwww.mysportsclubs.com
Town Sports International Holdings, Inc., New York
Investor Contact:
investor.relations@town-sports.com
Investor Contact:
investor.relations@town-sports.com
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2004 and September 30, 2005
(All figures $’000s except share and per share data)
December 31, 2004 and September 30, 2005
(All figures $’000s except share and per share data)
December 31, | September 30, | |||||||
2004 | 2005 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 57,506 | $ | 68,866 | ||||
Accounts receivable (less allowance for doubtful accounts of $2,647 and $2,689 as of December 31, 2004 and September 30, 2005, respectively) | 1,955 | 4,864 | ||||||
Inventory | 655 | 550 | ||||||
Prepaid corporate income taxes | 5,645 | 1,987 | ||||||
Prepaid expenses and other current assets | 8,971 | 12,015 | ||||||
Total current assets | 74,732 | 88,282 | ||||||
Fixed assets, net | 226,253 | 237,528 | ||||||
Goodwill | 47,494 | 49,967 | ||||||
Intangible assets, net | 931 | 913 | ||||||
Deferred tax asset, net | 12,735 | 23,035 | ||||||
Deferred membership costs | 12,017 | 11,714 | ||||||
Other assets | 16,794 | 15,706 | ||||||
Total assets | $ | 390,956 | $ | 427,145 | ||||
Liabilities and Stockholders’ Deficit | ||||||||
Current Liabilities: | ||||||||
Current portion of long-term debt and capital lease obligations | $ | 1,225 | $ | 1,270 | ||||
Accounts payable | 10,555 | 6,321 | ||||||
Accrued expenses | 22,402 | 29,429 | ||||||
Accrued interest | 5,217 | 11,483 | ||||||
Deferred revenue | 28,294 | 36,363 | ||||||
Total current liabilities | 67,693 | 84,866 | ||||||
Long-term debt and capital lease obligations | 395,236 | 406,067 | ||||||
Deferred lease liabilities | 36,009 | 43,551 | ||||||
Deferred revenue | 3,298 | 2,916 | ||||||
Other liabilities | 5,737 | 6,858 | ||||||
Total liabilities | 507,973 | 544,258 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ deficit: | ||||||||
Class A voting common stock, $.001 par value; issued and outstanding 1,312,289 and 1,309,123 shares at December 31, 2004 and September 30, 2005, respectively | 1 | 1 | ||||||
Paid-in capital | (113,900 | ) | (114,087 | ) | ||||
Unearned compensation | (292 | ) | (254 | ) | ||||
Accumulated other comprehensive income (currency translation adjustment) | 916 | 422 | ||||||
Accumulated deficit | (3,742 | ) | (3,195 | ) | ||||
Total stockholders’ deficit | (117,017 | ) | (117,113 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 390,956 | $ | 427,145 | ||||
TOWN SPORTS INTERNATIONAL HOLDINDS, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
and CONSENDED CONSOLIDATED STATEMENTSOF COMPREHENSIVE INCOME (LOSS)
For the three and nine months ended September 30, 2004 and 2005
(All figures $’000s)
(Unaudited)
and CONSENDED CONSOLIDATED STATEMENTSOF COMPREHENSIVE INCOME (LOSS)
For the three and nine months ended September 30, 2004 and 2005
(All figures $’000s)
(Unaudited)
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2004 | 2005 | 2004 | 2005 | |||||||||||||
Revenues: | ||||||||||||||||
Club Operations | $ | 88,205 | $ | 97,212 | $ | 261,126 | $ | 287,121 | ||||||||
Fees and Other | 1,471 | 988 | 3,184 | 2,921 | ||||||||||||
89,676 | 98,200 | 264,310 | 290,042 | |||||||||||||
Operating Expenses: | ||||||||||||||||
Payroll and related | 33,813 | 38,388 | 104,256 | 113,952 | ||||||||||||
Club operating | 29,848 | 34,146 | 86,665 | 97,314 | ||||||||||||
General and administrative | 6,104 | 6,653 | 18,228 | 19,796 | ||||||||||||
Depreciation and amortization | 8,851 | 9,850 | 27,271 | 29,673 | ||||||||||||
Goodwill impairment | — | — | 2,002 | — | ||||||||||||
78,616 | 89,037 | 238,422 | 260,735 | |||||||||||||
Operating Income | 11,060 | 9,163 | 25,888 | 29,307 | ||||||||||||
Interest expense | 10,311 | 10,485 | 29,174 | 31,113 | ||||||||||||
Interest income | (221 | ) | (618 | ) | (510 | ) | (1,452 | ) | ||||||||
Equity in the earnings of investees and rental income | (407 | ) | (446 | ) | (1,090 | ) | (1,321 | ) | ||||||||
Income (loss) before provision (benefit) for corporate income taxes | 1,377 | (258 | ) | (1,686 | ) | 967 | ||||||||||
Provision (benefit) for corporate income taxes | 687 | (135 | ) | (808 | ) | 420 | ||||||||||
Net income (loss) | $ | 690 | $ | (123 | ) | $ | (878 | ) | $ | 547 | ||||||
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2004 and 2005
(All figures $’000s)
(Unaudited)
For the nine months ended September 30, 2004 and 2005
(All figures $’000s)
(Unaudited)
Nine months ended | ||||||||
September 30, | ||||||||
2004 | 2005 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | (878 | ) | $ | 547 | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 27,271 | 29,673 | ||||||
Interest expense on Senior Discount Notes | 9,146 | 11,495 | ||||||
Goodwill impairment | 2,002 | — | ||||||
Compensation expense incurred in connection with stock options | 29 | 35 | ||||||
Noncash rental expense, net of noncash rental income | 363 | 1,079 | ||||||
Amortization of debt issuance costs | 1,178 | 1,227 | ||||||
Net changes in certain operating assets and liabilities | 6,617 | 16,391 | ||||||
(Increase) decrease in deferred tax asset | 1,839 | (10,300 | ) | |||||
Decrease in deferred membership costs | 643 | 303 | ||||||
Increase in reserve for self-insured liability claims | 845 | 1,496 | ||||||
Landlord contributions to tenant improvements | 2,112 | 6,389 | ||||||
Other | (661 | ) | (513 | ) | ||||
Total adjustments | 51,384 | 57,275 | ||||||
Net cash provided by operating activities | 50,506 | 57,822 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures, net of effect of acquired businesses | (23,754 | ) | (40,773 | ) | ||||
Acquisition of businesses | (3,726 | ) | (3,861 | ) | ||||
Net cash used in investing activities | (27,480 | ) | (44,634 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from 11.0% Senior Discount Note offering | 120,729 | — | ||||||
Proceeds from stock option exercises | 539 | — | ||||||
Redemption of Series A and Series B preferred stock | (50,635 | ) | — | |||||
Common stock distribution | (68,943 | ) | — | |||||
Repurchase of common stock | (53 | ) | (184 | ) | ||||
Repayment of borrowings | (3,055 | ) | (959 | ) | ||||
Costs related to a planned equity offer | — | (685 | ) | |||||
Net cash used in financing activities | (1,418 | ) | (1,828 | ) | ||||
Net increase in cash and cash equivalents | 21,608 | 11,360 | ||||||
Cash and cash equivalents at beginning of period | 40,802 | 57,506 | ||||||
Cash and cash equivalents at end of period | $ | 62,410 | $ | 68,866 | ||||
Summary of change in certain operating assets and liabilities; net of effects of acquired businesses: | ||||||||
Increase in accounts receivable | $ | (1,111 | ) | $ | (2,803 | ) | ||
Decrease in inventory | 43 | 109 | ||||||
Decrease (increase) in prepaid expenses, prepaid income taxes, and other current assets | (3,590 | ) | 155 | |||||
Increase in accounts payable, accrued expenses and accrued interest | 8,448 | 11,532 | ||||||
Increase in deferred revenue | 2,827 | 7,398 | ||||||
Net changes in certain operating assets and liabilities | $ | 6,617 | $ | 16,391 | ||||
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. and SUBSIDIARIES
Reconciliation of Net Income (Loss) to Adjusted EBITDA
For the three and nine months ended September 30, 2004 and 2005
(All figures $’000s)
(Unaudited)
Reconciliation of Net Income (Loss) to Adjusted EBITDA
For the three and nine months ended September 30, 2004 and 2005
(All figures $’000s)
(Unaudited)
Three months ended | Nine months ended | |||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||
2004 | 2005 | % Chg. | 2004 | 2005 | % Chg. | |||||||||||||||||||
Net income (loss) | $ | 690 | $ | (123 | ) | $ | (878 | ) | $ | 547 | ||||||||||||||
Provision (benefit) for corporate income taxes | 687 | (135 | ) | (808 | ) | 420 | ||||||||||||||||||
Interest expense, net of interest income | 10,090 | 9,867 | 28,664 | 29,661 | ||||||||||||||||||||
Goodwill impairment | — | — | 2,002 | — | ||||||||||||||||||||
Depreciation and amortization | 8,851 | 9,850 | 27,271 | 29,673 | ||||||||||||||||||||
Noncash rental expense, net of noncash rental income | (117 | ) | 111 | 363 | 1,079 | |||||||||||||||||||
Noncash compensation expense incurred in in connection with stock options | 10 | 10 | 29 | 35 | ||||||||||||||||||||
Distribution to option holders classified as payroll | — | — | 1,144 | — | ||||||||||||||||||||
Adjusted EBITDA | $ | 20,211 | $ | 19,580 | (3.1 | %) | $ | 57,787 | $ | 61,415 | 6.3 | % | ||||||||||||
Adjusted EBITDA Margin | 22.4 | % | 19.9 | % | 21.8 | % | 21.2 | % |
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 and (iv) goodwill impairment charges. 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.