For Release on November 2nd, 2006
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. ANNOUNCES THIRD QUARTER 2006 FINANCIAL RESULTS
New York, NY — November 2nd, 2006— 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 brand names New York Sports Clubs, Boston Sports Clubs, Washington Sports Clubs and Philadelphia Sports Clubs, announced its results for the quarter ended September 30, 2006.
Third quarter 2006 revenue grew 11.4% to $109.4 million from $98.2 million for the same period last year. Total revenue for the first nine months of 2006 grew 11.3% to $322.9 million from $290.0 million during the same period last year. Comparable club revenue increased 7.8% during the third quarter compared to the same period in the prior year.
Robert Giardina, Chief Executive Officer of TSI, commented, “We are very pleased to be able to report our fourth consecutive quarter of double-digit revenue growth, as well as 32.6% EBITDA growth, which is an acceleration from the first half of the year. During the quarter, we continued to post very solid comparable-club revenue growth along with double-digit member and ancillary revenue growth, and we are on track to meet our 2006 expansion goals while having established a pipeline of new clubs for 2007 and 2008.” Mr. Giardina continued, “We are now looking to finish the year in strong fashion and surpass our initial financial objectives for 2006, and we are excited to look to the future with good momentum, a unique strategy within our industry, and with a team of employees throughout our organization that continues to execute at a very high level.”
Quarter ended September 30, 2006, Financial Highlights:
Revenue (in $’000s) is comprised of the following:
Three Months Ended September 30, | ||||||||||||||||
2005 | 2006 | |||||||||||||||
Membership dues | $ | 78,133 | 79.6 | % | $ | 87,257 | 79.7 | % | ||||||||
Initiation fees | 2,896 | 2.9 | % | 2,586 | 2.4 | % | ||||||||||
Membership revenue | 81,029 | 82.5 | % | 89,843 | 82.1 | % | ||||||||||
Personal training revenue | 10,003 | 10.2 | % | 11,564 | 10.6 | % | ||||||||||
Other ancillary club revenue | 6,180 | 6.3 | % | 6,766 | 6.2 | % | ||||||||||
Ancillary club revenue | 16,183 | 16.5 | % | 18,330 | 16.8 | % | ||||||||||
Fees and Other revenue | 988 | 1.0 | % | 1,245 | 1.1 | % | ||||||||||
Total revenue | $ | 98,200 | 100.0 | % | $ | 109,418 | 100.0 | % | ||||||||
Total revenuefor the third quarter grew 11.4% to $109.4 million from $98.2 million for the same period last year. The increase in revenue was driven by growth in membership revenue and ancillary club revenue.
• | Membership revenue for Q3 2006 grew 10.9% to $89.8 million from $81.0 million in Q3 2005. | ||
• | Ancillary club revenue for Q3 2006 grew 13.3% to $18.3 million from $16.2 million in Q3 2005. | ||
• | Comparable club revenue increased by 7.8% during Q3 2006 compared to Q3 2005. This increase in comparable club revenue is due to a 4.8% increase in membership, a 1.9% increase in price, and a 1.5% increase in ancillary revenue offset by a 0.4% decrease in initiation fee revenue recognized as a direct result of our policy to amortize membership initiation fees over a 30 month, rather than a 24 month period, which was implemented in the first quarter of 2006. |
Total operating expensesincreased by 5.8% to $94.2 million in Q3 2006 compared to $89.0 million in Q3 2005.
• | Payroll and related expenses totaled $39.7 million in Q3 2006 compared to $38.4 million in Q3 2005. |
For the quarter:
• | Payroll costs directly related to the Company’s personal training, Group Exclusives, and Sports Clubs for Kids programs increased $0.7 million or 9.2%, due to increased demand for these programs. | ||
• | In Q3 2006, share-based compensation charges totaled $0.4 million. |
• | Club operating expenses totaled $37.7 million for Q3 2006 compared to $34.1 million in Q3 2005. |
• | Rent and occupancy expenses increased $2.4 million. Rent and occupancy costs at clubs that have opened since October 1, 2005 or that are currently under construction increased $1.9 million. | ||
• | Utility costs increased $1.1 million. $0.6 million of the increase in utilities was at clubs that were opened or acquired in 2005 and 2006. The balance of the increase is due to higher utility rates throughout the remainder of the club base. |
• | General and administrative expenses were $6.7 million in Q3 2006 and 2005. | ||
• | Depreciation and amortization expenses totaled $10.1 million during Q3 2006 compared to $9.9 million in Q3 2005. | ||
• | Loss on extinguishment of debt totaled $7.4 million during Q3 2006 due to the early termination fees, deferred financing costs write-off, and associated fees related to the July 7, 2006 redemption of 35% of the 11% Senior Discount Notes. | ||
• | The Company recorded an income tax provision of $0.5 million in the quarter ended September 30, 2006 compared to an income tax benefit of $0.1 million in the quarter ended September 30, 2005. |
Net incomefor Q3 2006 was $0.8 million compared to net loss of $0.1 million in the same period of prior year. The $7.4 million pre-tax loss on extinguishment of debt in Q3 2006 was an offset to the net income during the quarter.
EBITDAfor Q3 2006 increased 32.6% to $25.8 million from $19.5 million in Q3 2005. As a percentage of total revenue, EBITDA margin was 23.6% in Q3 2006, compared to 19.8% in Q3 2005.
Adjusted EBITDAfor Q3 2006 increased 34.4% to $26.3 million from $19.6 million in Q3 2005. As a percentage of total revenue, adjusted EBITDA margin was 24.0% in Q3 2006, compared to 19.9% in Q3 2005.
Nine Months ended September 30, 2006, Financial Highlights:
Revenue (in $’000s) is comprised of the following:
Nine Months Ended September 30, | ||||||||||||||||
2005 | 2006 | |||||||||||||||
Membership dues | $ | 230,203 | 79.4 | % | $ | 257,160 | 79.6 | % | ||||||||
Initiation fees | 9,018 | 3.1 | % | 6,839 | 2.1 | % | ||||||||||
Membership revenue | 239,221 | 82.5 | % | 263,999 | 81.7 | % | ||||||||||
Personal training revenue | 31,976 | 11.0 | % | 36,915 | 11.5 | % | ||||||||||
Other ancillary club revenue | 15,924 | 5.5 | % | 17,841 | 5.5 | % | ||||||||||
Ancillary club revenue | 47,900 | 16.5 | % | 54,756 | 17.0 | % | ||||||||||
Fees and Other revenue | 2,921 | 1.0 | % | 4,158 | 1.3 | % | ||||||||||
Total revenue | $ | 290,042 | 100.0 | % | $ | 322,913 | 100.0 | % | ||||||||
Total revenuefor the first nine months ended September 30, 2006 grew 11.3% to $322.9 million from $290.0 million during the same period last year. The increase in revenue was driven by growth in membership revenue and ancillary club revenue.
• | Membership revenue for the nine months ended September 30, 2006 grew 10.4% to $264.0 million from $239.2 million during the same period last year. | ||
• | Ancillary club revenue for the nine months ended September 30, 2006 grew 14.3% to $54.8 million from $47.9 million during the same period last year. | ||
• | Comparable club revenue increased by 7.9% during the nine months ended September 30, 2006 compared to the prior-year period. This increase in comparable club revenue is due to a 5.0% increase in membership, a 2.0% increase in price, and a 1.6% increase in ancillary revenue offset by a 0.7% decrease in initiation fee revenue recognized as a direct |
result of our policy to amortize membership initiation fees over a 30 month, rather than a 24 month period, which was implemented in the first quarter of 2006.. |
Operating expensestotaled $283.7 million, compared with $260.7 million for the same period last year.
• | Total payroll and related expenses for the nine months ended September 30, 2006 increased $7.2 million to $121.2 million from $114.0 million during the same period last year. |
• | Payroll costs directly related to our personal training, Group Exclusive, and Sports Club for Kids programs increased $2.9 million or 12.0%, due to an increase in demand for these programs. | ||
• | In the nine months ended September 30, 2006, share-based compensation charges totaled $1.0 million. |
• | Total club operating expenses for the nine months ended September 30, 2006 grew 11.9% to $108.9 million from $97.3 million during the same period last year. |
• | Rent and occupancy expenses increased $5.7 million. Rent and occupancy costs at clubs that have opened since October 1, 2005 or that are currently under construction increased $4.5 million. | ||
• | Utility costs increased $4.3 million. $1.6 million of the increase in utilities was at clubs that were opened or acquired in 2005 and 2006. The balance of the increase is due to higher utility rates throughout the remainder of the club base. |
• | Total general and administrative expenses for the nine months ended September 30, 2006 increased $2.8 million to $22.6 million from $19.8 million during the same period last year. In the nine months ended September 30, 2006 we incurred expenses of $1.7 million related to the examination of financing alternatives, now completed. | ||
• | In the nine months ended September 30, 2006, depreciation and amortization expenses increased $1.2 million to $30.9 million from $29.7 million during the same period last year. | ||
• | Loss on extinguishment of debt totaled $16.1 million during the nine months ended September 30, 2006. The Company recorded a loss of $7.4 million during the third quarter of 2006 due to the early termination fees, deferred financing costs write-off, and associated fees related to the redemption of 35% of the 11% Senior Discount Notes on July 7, 2006. During the second quarter, the Company incurred a loss of $8.7 million related to the early redemption of $85.0 million of outstanding principal of the 9 5/8% Senior Notes. | ||
• | The Company recorded an income tax benefit of $0.1 million during the nine months ended September 30, 2006 compared to an income tax provision of $0.4 million in the same period last year. |
Net lossfor the nine months ended September 30, 2006 was $2.0 million compared to net income of $0.5 million in the same period of prior year. The $8.7 million and $7.4 million pre-tax charges related to the extinguishment of debt in Q2 2006 and Q3 2006, respectively were contributors to the net loss in the nine months ended September 30, 2006.
EBITDAfor the nine months ended September 30, 2006 grew 18.6% to $71.5 million from $60.3 million during the same period last year. As a percentage of total revenue, Year-to-date EBITDA margin was 22.1% compared to 20.8% in 2005.
Adjusted EBITDAfor the nine months ended September 30, 2006 increased 23.9% to $76.1 million from $61.4 million during the same period last year. As a percentage of total revenue, adjusted EBITDA margin was 23.6% in the first nine months of 2006, compared to 21.2% in 2005.
Cash flow from operationsfor the nine months ended September 30, 2006 grew 3.1% to $59.6 million from $57.8 million from the prior year. Cash flow from operations has increased due to the increase in operating income excluding the effects of depreciation and amortization, net changes in operating assets and liabilities, including the increase in deferred revenue and the decrease in prepaid taxes. For the nine months ended September 30, 2006, cash flows from operations were decreased by $13.0 related to payment of interest on Payment-in-Kind Notes.
Cash used in financing activitiesfor the nine months ended September 30, 2006 totaled $54.2 million. On June 2, 2006, the Company completed an IPO of 8,950,000 shares of common stock at a price to the public of $13.00 per share, 7,650,000 of which were sold by the Company and the remainder of which were sold by certain selling stockholders to certain specified
purchasers. Upon completing the offering, the Company received approximately $91.8 million of proceeds net of underwriting discounts and expenses. The IPO proceeds were used for the redemption of 35% of the aggregate principal amount of its outstanding 11% Senior Discount Notes due 2014 and the remainder of the proceeds together with cash on hand was used to consummate the tender offer for $85.0 million of the 9 5/8% Senior Notes due 2011. The tender offer for the 9 5/8% Senior Notes was consummated on June 8, 2006 and the redemption of the 11% Senior Discount Notes occurred July 7, 2006. In connection with the IPO the Board of Directors approved a 14 for 1 common stock split.
The Company will hold a conference call on Thursday, November 2, 2006 at 5:00 PM (Eastern) to discuss the third quarter 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 of its Website atwww.mysportsclubs.com. A replay and transcript of the call will be available via the Company’s Website beginning November 3, 2006.
2006 Business Outlook:
Based upon the current business environment, year-to-date performance and current trends in our marketplace, the Company currently expects the following updated results for calendar year 2006, subject to risks and uncertainties in any forward looking statements:
Total revenue is expected to be between $431.0 and $433.0 million, an 11.0% to 11.5% growth over 2005 — driven by club membership and ancillary revenue growth, the maturation of recently opened clubs as well as new clubs opened during the year. This is an increase from our previous guidance of between $428.0 and $433.0 million.
EBITDA is expected to be between $96.5 and $98.0 million, an 18.0% to 20.0 % growth over 2005. This is an increase from our previous guidance of $92.5 to $95.0 million. When adjusted for the effects of financing and severance expenses written-off during the year as well as deferred rental expense and stock option compensation expense, we expect such Adjusted EBITDA to be between $100.0 and $102.0 million, a 19 — 21% increase over 2005’s results. This is an increase from our previous guidance of $95.5 and $98.0 million.
Net income is expected to be between $1.5 and $2.5 million — when compared with 2005’s net income of $1.7 million. The net income for 2006 will be arrived at after a total charge of approximately $16.1 million for early extinguishment of debt before corporate income taxes. On an adjusted basis, net income would have been between $11.0 and $12.0 million without the post tax effects of our recent debt extinguishment costs. We expect EPS of between $0.06 and $0.11 per share for the year, or between $0.47 and $0.52 per share when adjusted for the early debt extinguishment charges on a post-tax basis, increased from $0.44 and $0.49 included in our previous guidance.
About Town Sports International Holdings, Inc.:
New York-based Town Sports International Holdings, Inc. 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 144 clubs and more than 446,000 members in the U.S. In addition, the Company operates three facilities in Switzerland. For more information on TSI visithttp://www.mysportsclubs.com.
Town Sports International Holdings, Inc., New York
Contact Information:
Contact Information:
Investor Contact:
(212) 246-6700 extension 710
Investor.relations@town-sports.com or
(212) 246-6700 extension 710
Investor.relations@town-sports.com or
Joseph Teklits
Integrated Corporate Relations
joseph.teklits@icrinc.com
Integrated Corporate Relations
joseph.teklits@icrinc.com
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2005 and September 30, 2006
(All figures in $’000s, except share data)
(Unaudited)
December 31, 2005 and September 30, 2006
(All figures in $’000s, except share data)
(Unaudited)
December 31, | September 30, | |||||||
2005 | 2006 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 51,304 | $ | 14,531 | ||||
Accounts receivable, net | 7,103 | 9,094 | ||||||
Inventory | 421 | 492 | ||||||
Prepaid corporate income taxes | 4,518 | — | ||||||
Prepaid expenses and other current assets | 13,907 | 13,603 | ||||||
Total current assets | 77,253 | 37,720 | ||||||
Fixed assets, net | 253,131 | 269,360 | ||||||
Goodwill | 49,974 | 50,064 | ||||||
Intangible assets, net | 741 | 1,047 | ||||||
Deferred tax asset, net | 24,378 | 30,265 | ||||||
Deferred membership costs | 11,522 | 15,274 | ||||||
Other assets | 16,772 | 13,171 | ||||||
Total assets | $ | 433,771 | $ | 416,901 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 1,267 | $ | 252 | ||||
Accounts payable | 8,333 | 7,354 | ||||||
Accrued expenses | 31,620 | 37,675 | ||||||
Accrued interest | 5,267 | 7,800 | ||||||
Deferred revenue | 33,028 | 39,248 | ||||||
Total current liabilities | 79,515 | 92,329 | ||||||
Long-term debt | 409,895 | 278,012 | ||||||
Deferred lease liabilities | 48,898 | 52,549 | ||||||
Deferred revenue | 2,905 | 8,139 | ||||||
Other liabilities | 8,241 | 11,039 | ||||||
Total liabilities | 549,454 | 442,068 | ||||||
Stockholders’ deficit: | ||||||||
Class A voting common stock, $.001 par value; issued and outstanding 18,327,722 and 25,936,148 shares at December 31, 2005 and September 30, 2006, respectively | 1 | 26 | ||||||
Paid-in capital | (113,588 | ) | (21,719 | ) | ||||
Unearned compensation | (509 | ) | — | |||||
Accumulated other comprehensive income (currency translation adjustment) | 386 | 501 | ||||||
Accumulated deficit | (1,973 | ) | (3,975 | ) | ||||
Total stockholders’ deficit | (115,683 | ) | (25,167 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 433,771 | $ | 416,901 | ||||
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and nine months ended September 30, 2005 and 2006
(All figures in $’000s except share and per share data)
(Unaudited)
For the three and nine months ended September 30, 2005 and 2006
(All figures in $’000s except share and per share data)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2005 | 2006 | 2005 | 2006 | |||||||||||||
Revenues: | ||||||||||||||||
Club Operations | $ | 97,212 | $ | 108,173 | $ | 287,121 | $ | 318,755 | ||||||||
Fees and Other | 988 | 1,245 | 2,921 | 4,158 | ||||||||||||
98,200 | 109,418 | 290,042 | 322,913 | |||||||||||||
Operating Expenses: | ||||||||||||||||
Payroll and related | 38,388 | 39,724 | 113,952 | 121,211 | ||||||||||||
Club operating | 34,146 | 37,677 | 97,314 | 108,928 | ||||||||||||
General and administrative | 6,653 | 6,668 | 19,796 | 22,635 | ||||||||||||
Depreciation and amortization | 9,850 | 10,125 | 29,673 | 30,911 | ||||||||||||
89,037 | 94,194 | 260,735 | 283,685 | |||||||||||||
Operating Income | 9,163 | 15,224 | 29,307 | 39,228 | ||||||||||||
Loss on extinguishment of debt | — | 7,446 | — | 16,113 | ||||||||||||
Interest expense | 10,485 | 7,388 | 31,113 | 28,471 | ||||||||||||
Interest income | (618 | ) | (475 | ) | (1,452 | ) | (1,862 | ) | ||||||||
Equity in the earnings of investees and rental income | (446 | ) | (463 | ) | (1,321 | ) | (1,371 | ) | ||||||||
Income (loss) before provision (benefit) for corporate income taxes | (258 | ) | 1,328 | 967 | (2,123 | ) | ||||||||||
Provision (benefit) for corporate income taxes | (135 | ) | 543 | 420 | (121 | ) | ||||||||||
Net income (loss) | $ | (123 | ) | $ | 785 | $ | 547 | $ | (2,002 | ) | ||||||
Earnings (loss) per share: | ||||||||||||||||
Basic | $ | (0.01 | ) | $ | 0.03 | $ | 0.03 | $ | (0.09 | ) | ||||||
Diluted | $ | (0.01 | ) | $ | 0.03 | $ | 0.03 | $ | (0.09 | ) | ||||||
Weighted average number of shares used in calculating earnings (loss) per share: | ||||||||||||||||
Basic | 18,327,722 | 25,933,506 | 18,336,812 | 21,669,090 | ||||||||||||
Diluted | 18,327,722 | 26,345,601 | 18,350,365 | 21,669,090 | ||||||||||||
Statements of Comprehensive Income (Loss) | ||||||||||||||||
Net income (loss) | $ | (123 | ) | $ | 785 | $ | 547 | $ | (2,002 | ) | ||||||
Foreign currency translation adjustments | 21 | (53 | ) | 494 | 115 | |||||||||||
Comprehensive income (loss) | $ | (102 | ) | $ | 732 | $ | 1,041 | $ | (1,887 | ) | ||||||
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2005 and 2006
(All figures in $’000s)
(Unaudited)
For the nine months ended September 30, 2005 and 2006
(All figures in $’000s)
(Unaudited)
Nine Months | ||||||||
Ended September 30, | ||||||||
2005 | 2006 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 547 | $ | (2,002 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 29,673 | 30,911 | ||||||
Interest expense on Senior Discount Notes | 11,495 | 11,480 | ||||||
Loss on extinguishment of debt | — | 16,113 | ||||||
Payment of interest on Payment-in-Kind Notes | — | (12,961 | ) | |||||
Amortization of debt issuance costs | 1,227 | 1,117 | ||||||
Noncash rental expense, net of noncash rental income | 1,079 | 65 | ||||||
Compensation expense incurred in connection with stock options | 35 | 961 | ||||||
Net changes in certain operating assets and liabilities | 16,391 | 15,228 | ||||||
Increase in deferred tax asset | (10,300 | ) | (5,887 | ) | ||||
Landlord contributions to tenant improvements | 6,389 | 6,413 | ||||||
Increase in reserve for self-insured liability claims | 1,496 | 2,025 | ||||||
Decrease (increase) in deferred membership costs | 303 | (3,752 | ) | |||||
Other | (513 | ) | (76 | ) | ||||
Total adjustments | 57,275 | 61,637 | ||||||
Net cash provided by operating activities | 57,822 | 59,635 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures, net of effect of acquired businesses | (40,773 | ) | (41,354 | ) | ||||
Acquisition of businesses | (3,861 | ) | (819 | ) | ||||
Net cash used in investing activities | (44,634 | ) | (42,173 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from initial public equity offering, net of underwriting discounts and offering costs | — | 91,750 | ||||||
Repayment of Senior Notes | — | (128,684 | ) | |||||
Premium paid on extinguishment of debt and related costs | — | (13,273 | ) | |||||
Repayment of long term borrowings | (959 | ) | (2,733 | ) | ||||
Costs related to a planned equity offering | (685 | ) | — | |||||
Change in book overdraft | — | (986 | ) | |||||
Repurchase of common stock | (184 | ) | (433 | ) | ||||
Proceeds from exercise of stock options | — | 124 | ||||||
Net cash used in financing activities | (1,828 | ) | (54,235 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 11,360 | (36,773 | ) | |||||
Cash and cash equivalents at beginning of period | 57,506 | 51,304 | ||||||
Cash and cash equivalents at end of period | $ | 68,866 | $ | 14,531 | ||||
�� | ||||||||
Summary of change in certain operating assets and liabilities; net of effects of acquired businesses: | ||||||||
Increase in accounts receivable | $ | (2,803 | ) | $ | (4,870 | ) | ||
Decrease (increase) in inventory | 109 | (70 | ) | |||||
Decrease in prepaid expenses, prepaid income taxes, and other current assets | 155 | 3,533 | ||||||
Increase in accounts payable, accrued expenses and accrued interest | 11,532 | 5,358 | ||||||
Increase in deferred revenue | 7,398 | 11,277 | ||||||
Net changes in certain operating assets and liabilities | $ | 16,391 | $ | 15,228 | ||||
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Net Income (loss) to EBITDA and Adjusted EBITDA
For the three and nine months ended September 30, 2005 and 2006
(All figures in $’000s)
(Unaudited)
Reconciliation of Net Income (loss) to EBITDA and Adjusted EBITDA
For the three and nine months ended September 30, 2005 and 2006
(All figures in $’000s)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||
2005 | 2006 | % Chg. | 2005 | 2006 | % Chg. | |||||||||||||||||||
Net income (loss) | $ | (123 | ) | $ | 785 | $ | 547 | $ | (2,002 | ) | ||||||||||||||
Provision (benefit) for corporate income taxes | (135 | ) | 543 | 420 | (121 | ) | ||||||||||||||||||
Loss on extinguishment of debt | — | 7,446 | — | 16,113 | ||||||||||||||||||||
Interest expense, net of interest income | 9,867 | 6,913 | 29,661 | 26,609 | ||||||||||||||||||||
Depreciation and amortization | 9,850 | 10,125 | 29,673 | 30,911 | ||||||||||||||||||||
EBITDA | $ | 19,459 | $ | 25,812 | 32.6 | % | $ | 60,301 | $ | 71,510 | 18.6 | % | ||||||||||||
Noncash rental expense, net of noncash rental income | 111 | 107 | 1,079 | 65 | ||||||||||||||||||||
Noncash compensation expense incurred in in connection with stock options | 10 | 387 | 35 | 961 | ||||||||||||||||||||
Costs incurred in connection with the examination of financing alternatives | — | — | — | 1,717 | ||||||||||||||||||||
Severance Costs | — | — | — | 1,630 | ||||||||||||||||||||
Lease termination expense | — | — | — | 225 | ||||||||||||||||||||
Adjusted EBITDA | $ | 19,580 | $ | 26,306 | 34.4 | % | $ | 61,415 | $ | 76,108 | 23.9 | % | ||||||||||||
EBITDA Margin | 19.8 | % | 23.6 | % | 20.8 | % | 22.1 | % | ||||||||||||||||
Adjusted EBITDA Margin | 19.9 | % | 24.0 | % | 21.2 | % | 23.6 | % |
Non GAAP Financial Measures:
EBITDA is defined as earnings before interest, taxes, depreciation and amortization and loss on extinguishment of debt. EBITDA provides useful information regarding the Company’s operating performance and financial condition, subject to the limitations described below. 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 the Company’s profitability or liquidity. Additionally, investors should be aware that EBITDA may not be comparable to similarly titled measures presented by other companies. EBITDA margin is defined as EBITDA as a percentage of consolidated revenue.
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) costs incurred in connection with potential financing and business combination transactions that have not been consummated, (iv) severance and related costs and (v) lease termination expenses. 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 the Company’s 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.
Adjusted EBITDA helps the Company’s investors to more meaningfully evaluate overall operating performance, and compare results from period to period, by removing those items that are generally of a non-operating nature. This measure also enables investors to assess the Company’s performance on the same basis applied by the Company’s management and Board of Directors, and to ease comparisons with peer companies that present Adjusted EBITDA. Adjusted EBITDA is substantially similar to a metric used by the Company’s lenders when assessing our compliance with debt covenants and is therefore useful to the Company’s investors so that they may also assess debt covenants compliance. Also, Adjusted EBITDA is substantially similar to criteria that the Company has historically used for performance-based components of employee compensation.
Forward-Looking Statements:
Statements in this release that do not constitute historical facts, including, without limitation, statements under the caption “2006 Business Outlook” and other 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 the Company’s control, including the level of market demand for the Company’s 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; accordingly, actual results could differ materially from any such forward-looking statement. The forward-looking statements speak only as of the date and hereof and the Company does not intend to update this information to reflect developments or information obtained after the date hereof and the Company disclaims any legal obligation to the contrary.