EX-99.1 2 y14469exv99w1.htm EX-99.1: PRESS RELEASE EXHIBIT 99.1
 

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 revenue for 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 expenses during 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 operations for the nine months ended September 30, 2005 grew 14.5% to $57.8 from $50.5 million for the same period last year.
Adjusted EBITDA for 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 at www.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 visit www.mysportsclubs.com
Town Sports International Holdings, Inc., New York
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,     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)
                                 
    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)
                 
    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)
                                                 
    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.