Town Sports International Holdings, Inc. (“TSI” or the
“Company”) (NASDAQ: CLUB), a leading owner and operator 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 second
quarter ended June 30, 2010.
Second Quarter
Overview:
- Revenue decreased 5.2% in Q2
2010 compared to Q2 2009.
- Comparable club revenue
decreased 4.2% in Q2 2010 compared to Q2 2009.
- Total member count, excluding
short-term summer, seasonal and student members, decreased 2.2%
compared to March 31, 2010 and 3.8% compared to June 30, 2009.
- Total number of clubs in
operation decreased to 161 as of June 30, 2010 from 166 as of June
30, 2009.
- Membership attrition averaged
3.3% per month in Q2 2010 compared to 3.5% in Q1 2010 and 3.7% per
month in Q2 2009.
- Loss per share was ($0.04) in Q2
2010.
- Q2 2010 results include fixed
asset impairment and severance charges, net of taxes, of $2.0
million or ($0.09) per share. Q2 2009 results included severance
charges, early lease termination costs and rent expense related to
an anticipated judgment in connection with a lease dispute, net of
taxes, of $879,000 or ($0.04) per share.
Robert Giardina, Chief Executive Officer of TSI, commented:
“After being back at TSI for a few months and visiting almost all
of our clubs, I am very encouraged by the condition of our
facilities and by the experience our members receive from the team
we now have in place. We are also pleased with our improved member
attrition and the favorable response to our recent initiatives. So
while we are still in the very early stages of reinvigorating our
business, we are confident that we are putting the right strategies
in place.”
Quarter and Year to Date June
30, 2010 Financial Results:
Revenue (in $’000s) was comprised of the following:
Quarter Ended June 30,
2010 2009 Revenue
%Revenue
Revenue
%Revenue
%Variance
Membership dues $ 91,987 78.3% $ 98,358 79.4% (6.5)% Initiation
fees 2,432 2.1% 3,343 2.7% (27.3)% Membership revenue 94,419 80.4%
101,701 82.1% (7.2)% Personal training revenue 15,582 13.2% 15,169
12.2% 2.7%
Other Ancillary club revenue
6,171 5.3% 5,750 4.7% 7.3% Ancillary club revenue 21,753 18.5%
20,919 16.9% 4.0% Fees and other revenue 1,264 1.1% 1,292 1.0%
(2.2)% Total revenue $ 117,436 100.0% $ 123,912 100.0% (5.2)%
Total revenue for Q2 2010 decreased $6.5 million, or
5.2%, compared to Q2 2009. For Q2 2010, revenues increased $1.2
million at the eight clubs opened or acquired subsequent to June
30, 2008 offset by decreases in revenue of 5.4% or $6.4 million at
our clubs opened or acquired prior to June 30, 2008 and
$1.3 million related to the 10 clubs that were closed
subsequent to June 30, 2008.
Revenue at clubs operated for over 12 months (“comparable club
revenue”) decreased 4.2% in Q2 2010 compared to Q2 2009.
Operating expenses:
Quarter Ended June 30, 2010
2009
Expense % of Revenue
Expense
%Variance
Payroll and related 41.4% 38.9% 0.7%
Club operating 37.3% 36.4% (2.8)% General and administrative 5.4%
6.0% (16.0)% Depreciation and amortization 11.4% 11.6% (6.5)%
Impairment of fixed assets 2.4%
—%
NA Operating expenses 97.9% 92.9%
(0.1)%
Total operating expenses decreased 0.1% for Q2 2010
compared to Q2 2009. Operating expenses were impacted by a 3.6%
decrease in the total months of clubs in operation. Operating
margin was 2.1% for Q2 2010 compared to 7.1% for Q2 2009.
Payroll and related. Offsetting
the decreases in payroll related to membership consultants and the
effects from the decrease in total club months of operations was an
increase related to personal training payroll.
Club operating. In addition to
the decrease in total months of club operation and total member
club usage, in Q2 2010, operating expenses decreased related to
laundry and towel efficiencies of $413,000 when compared to Q2
2009. Rent and occupancy decreased $687,000 in Q2 2010.
General and administrative.
Decreases in Q2 2010 general and administrative expenses compared
to Q2 2009 were principally attributable to decreases in general
liability insurance expense due to a reduction in claims activity
and therefore a reduction of claims reserves.
Depreciation and amortization.
Depreciation and amortization decreased in Q2 2010 due to the
closing of five clubs subsequent to June 30, 2009, the accelerated
depreciation related to clubs closed prior to lease expiration
dates in Q2 2009 and the effect of the fixed asset impairment
write-offs in the year ended December 31, 2009 and Q1 2010.
Impairment of fixed assets. In
Q2 2010, we recorded fixed asset impairment charges of $2.9
million, $1.2 million representing the write-off of fixed assets at
an underperforming club and $1.7 million related to the planned
closure of another club prior to the lease expiration date. There
were no fixed asset impairment charges in Q2 2009.
Net Loss for Q2 2010 was $815,000 compared to net income
of $2.5 million for Q2 2009.
For the six months ended June 30, 2010, total revenue
decreased $15.4 million or 6.2% compared to the same period in 2009
and operating margin was 2.2% compared to 5.7% for the six months
ended June 30, 2009. For the six months ended June 30, 2010, we
recorded fixed asset impairment charges of $3.3 million compared to
$1.1 million in the same period in 2009. Net loss was
$1.5 million compared to net income of $3.2 million for
the six months ended June 30, 2009.
Cash flow from operating activities for the six months
ended June 30, 2010 totaled $29.5 million, a decrease of $21.5
million from the six months ended June 30, 2009, which was
primarily related to the decrease in earnings and increases in cash
paid for interest and taxes of $7.3 million and $4.9 million,
respectively.
Third Quarter 2010 Business Outlook:
We are limiting our guidance to the third quarter of 2010. Based
on the current business environment, recent performance and current
trends in the marketplace and subject to the risks and
uncertainties inherent in forward-looking statements, our outlook
for the third quarter of 2010 includes the following:
- Revenue for Q3 2010 is expected
to be between $113.5 million and $114.5 million versus $120.4
million for Q3 2009. As percentages of revenue, we expect Q3 2010
payroll and related expenses to approximate 40.0%, club operating
expenses to approximate 39.5% and general and administrative
expenses to approximate 7.0%.
- We expect a net loss for Q3 2010
of between $1.0 million and $1.5 million, and loss per share to be
in the range of ($0.04) per share to ($0.07) per share, assuming a
60% effective tax rate and 22.6 million weighted average fully
diluted shares outstanding.
Investing Activities Outlook:
For the year ending December 31, 2010, we currently plan to
invest $26.0 million to $28.0 million in capital expenditures.
This is down from $49.3 million of capital expenditures in 2009. We
expect that the 2010 amount will include approximately
$20.0 million to continue to upgrade existing clubs and $4.0
million principally related to major renovations at clubs with
recent lease renewals and upgrading our in-club entertainment
system network. We also expect to invest $1.5 million to enhance
our management information systems. The remainder of our 2010
capital expenditures will be committed to building or expanding
clubs.
Forward-Looking Statements:
Statements in this release that do not constitute historical
facts, including, without limitation, statements under the captions
“Third Quarter 2010 Business Outlook” and “Investing Activities
Outlook”, other statements regarding future financial results and
performance and potential sales revenue and other statements that
are predictive in nature or depend upon or refer to events or
conditions, or that include words such as “expects,” “anticipated,”
“intends,” “plans,” “believes,” “estimates” or “could”, are
“forward-looking” statements made pursuant to the safe harbor
provision of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to various risks and
uncertainties, many of which are outside the Company’s control,
including, among others, the level of market demand for the
Company’s services, economic conditions affecting the Company’s
business, the geographic concentration of the Company’s clubs,
competitive pressures, the ability to achieve reductions in
operating costs and to continue to integrate acquisitions,
environmental initiatives, any security and privacy breaches
involving customer data, the application of Federal and state tax
laws and regulations, the levels and terms of the Company’s
indebtedness, and other specific factors discussed herein and in
other releases and public filings made by the Company (including
the Company’s reports on Forms 10-K and 10-Q filed with the
Securities and Exchange Commission). The Company believes that all
forward-looking statements are based on reasonable assumptions when
made; however, the Company cautions that it is impossible to
predict actual results or outcomes or the effects of risks,
uncertainties or other factors on anticipated results or outcomes
and that, accordingly, one should not place undue reliance on these
statements. Forward-looking statements speak only as of the date
they were made, and the Company undertakes no obligation to update
these statements in light of subsequent events or developments.
Actual results may differ materially from anticipated results or
outcomes discussed in any forward-looking statement.
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 and, through its
subsidiaries, operated 161 fitness clubs as of June 30, 2010,
comprising 109 New York Sports Clubs, 25 Boston Sports Clubs, 18
Washington Sports Clubs (two of which are partly-owned), six
Philadelphia Sports Clubs, and three clubs located in Switzerland.
These clubs collectively served approximately 484,000 members,
excluding short-term, seasonal and student members, and 12,000
student members. For more information on TSI, visit
http://www.mysportsclubs.com.
The Company will hold a conference call on Thursday, July 29,
2010 at 4:30 PM (Eastern) to discuss the second quarter 2010
results. Robert Giardina, Chief Executive Officer, and Dan
Gallagher, 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 Web site at
www.mysportsclubs.com. A replay and transcript of the call will be
available via the Company's Web site beginning July 30, 2010.
From time to time we may use our Web site as a channel of
distribution of material company information. Financial and other
material information regarding the Company is routinely posted on
and accessible at http://www.mysportsclubs.com. In addition, you
may automatically receive email alerts and other information about
us by enrolling your email by visiting the “Email Alert” section at
http://www.mysportsclubs.com.
TOWN SPORTS INTERNATIONAL
HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETSJune 30, 2010 and December 31, 2009(All figures
in $’000s)(Unaudited)
June 30,
2010
December 31,
2009
ASSETS Current assets: Cash and cash equivalents $
32,938 $ 10,758 Accounts receivable, net 5,366 4,295
Inventory 220 224 Prepaid corporate income taxes 2,616 1,274
Prepaid expenses and other current assets
9,013 10,264 Total current assets
50,153 26,815 Fixed assets, net 315,408 340,277 Goodwill 32,627
32,636 Intangible assets, net 78 149 Deferred tax assets, net
54,752 50,581 Deferred membership costs 4,189 6,079 Other assets
9,789 10,929 Total
assets $ 466,996 $ 467,466
LIABILITIES AND STOCKHOLDERS’ DEFICIT Current
liabilities: Current portion of long-term debt $ 1,850 $ 1,850
Accounts payable 5,546 6,011 Accrued expenses 25,830 23,656 Accrued
interest 6,586 6,573 Deferred revenue
38,297 35,346 Total current liabilities 78,109
73,436 Long-term debt 315,587 316,513 Deferred lease liabilities
69,538 71,438 Deferred revenue 1,939 1,488 Other liabilities
11,019 12,824
Total liabilities
476,192 475,699 Stockholders’ deficit: Common stock 23 23 Paid-in
capital (21,774 ) (22,572 ) Accumulated other comprehensive income
(currency translation adjustment) 1,113 1,327 Retained earnings
11,442 12,989
Total stockholders’ deficit (9,196 )
(8,233 ) Total liabilities and stockholders’ deficit $
466,996 $ 467,466
Preliminary, Subject to
Change
TOWN SPORTS INTERNATIONAL
HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONSFor the quarters and six months
ended June 30, 2010 and 2009(All figures in $’000s except
share and per share data)(Unaudited)
Quarter Ended June 30,
Six Ended June 30,
2010 2009
2010 2009
Revenues: Club operations $ 116,172 $ 122,620 $ 232,767 $
248,088 Fees and other 1,264 1,292
2,428 2,533 117,436
123,912 235,195 250,621
Operating Expenses: Payroll and related 48,605 48,246 97,116
98,993 Club operating 43,804 45,054 87,272 91,664 General and
administrative 6,292 7,488 15,231 15,835 Depreciation and
amortization 13,407 14,346 27,061 28,642 Impairment of fixed assets
2,865 — 3,254
1,131 114,973 115,134
229,934 236,265 Operating income 2,463 8,778
5,261 14,356 Interest expense 5,179 5,289 10,363 10,566 Interest
income (17 ) — (35 ) (1 ) Equity in the earnings of investees and
rental income (518 ) (398 ) (1,054 )
(1,009 ) (Loss) income before (benefit) provision for corporate
income taxes (2,181 ) 3,887 (4,013 ) 4,800 (Benefit) provision for
corporate income taxes (1,366 ) 1,363
(2,466 ) 1,637 Net (loss) income $ (815 ) $ 2,524
$ (1,547 ) $ 3,163 (Loss) earnings per share:
Basic $ (0.04 ) $ 0.11 $ (0.07 ) $ 0.14 Diluted $ (0.04 ) $ 0.11 $
(0.07 ) $ 0.14 Weighted average number of shares used in
calculating (loss) earnings per share: Basic 22,625,137 22,546,449
22,615,241 22,875,107 Diluted 22,625,137 22,592,436 22,615,241
22,924,421
Preliminary, Subject to
Change
TOWN SPORTS INTERNATIONAL
HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWSFor the six months ended June 30,
2010 and 2009(All figures in
$’000s)(Unaudited)
Six Months Ended June 30, 2010
2009 Cash flows from operating activities: Net (loss)
income $ (1,547 ) $ 3,163 Adjustments to reconcile net income to
net cash provided by operating activities Depreciation and
amortization 27,061 28,642 Impairment of fixed assets 3,254 1,131
Non-cash interest expense on Senior Discount Notes — 1,203
Amortization of debt issuance costs 506 406 Non-cash rental
expense, net of non-cash rental income (2,171 ) (667 ) Compensation
expense incurred in connection with stock options and common stock
grants 737 841 Increase in deferred tax asset (4,171 ) (2,474 ) Net
change in certain operating assets and liabilities 4,409 10,945
Decrease in deferred membership costs 1,890 4,660 Landlord
contributions to tenant improvements 100 2,993 (Decrease) increase
in insurance reserves (1,081 ) 301 Other 485
(134 ) Total adjustments 31,019 47,847
Net cash provided by operating activities 29,472
51,010
Cash flows from investing
activities: Capital expenditures (6,262 ) (28,485
) Net cash used in investing activities (6,262 )
(28,485 )
Cash flows from financing activities:
Proceeds from borrowings on Revolving Loan Facility — 5,000
Repayment of borrowings on Revolving Loan Facility — (19,000 )
Repayment of long term borrowings (925 ) (925 ) Change in book
overdraft — 126 Repurchase of common stock — (5,355 ) Proceeds from
exercise of stock options 76 36 Tax benefit from stock option
exercises — 21 Net cash used in
financing activities (849 ) (20,097 ) Effect of
exchange rate changes on cash (181 ) (68 ) Net
increase in cash and cash equivalents 22,180 2,360 Cash and cash
equivalents beginning of period 10,758 10,399
Cash and cash equivalents end of period $ 32,938 $
12,759
Summary of the change in certain operating
assets and liabilities: Increase in accounts receivable $
(1,090 ) $ (1,035 ) Decrease (increase) in inventory 3 (103 )
Decrease in prepaid expenses and other current assets 1,084 1,581
Increase in accounts payable, accrued expenses and accrued interest
2,352 452 Increase in accrued interest on Senior Discount Notes —
6,346 Change in prepaid corporate income taxes and corporate income
taxes payable (1,342 ) 5,648 Increase (decrease) in deferred
revenue 3,402 (1,944 ) Net change in certain
working capital components $ 4,409 $ 10,945
Preliminary, Subject to
Change
Town Sports (NASDAQ:CLUB)
Historical Stock Chart
From May 2024 to Jun 2024
Town Sports (NASDAQ:CLUB)
Historical Stock Chart
From Jun 2023 to Jun 2024