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 fourth
quarter and full-year ended December 31, 2011.
Fourth Quarter Overview:
- Total member count increased 1,000 to
523,000 in Q4 2011 and increased by 30,000, or 6.1%, in full-year
2011.
- Membership monthly attrition averaged
3.4% per month in both Q4 2011 and Q4 2010.
- Revenue of $115.8 million in Q4 2011
increased 1.5% as compared to Q4 2010 and 3.9% as compared to
adjusted Q4 2010. Adjusted Q4 2010 revenue of $111.5 million
excludes $2.6 million of personal training revenue recognized for
expired and unused sessions.
- Comparable club revenue increased 3.4%
in Q4 2011 compared to adjusted Q4 2010.
- Personal training revenue increased
7.7% in Q4 2011 compared to adjusted Q4 2010. Adjusted Q4 2010
revenue excludes $2.6 million of personal training revenue
recognized for expired and unused sessions.
- Diluted earnings per share were $0.14
in Q4 2011 compared to $0.06 in Q4 2010. Q4 2011 results include a
favorable tax credit of approximately $343,000, or $0.01 per share
related to state deferred tax adjustments. Q4 2010 results included
$1.4 million, net of taxes, or approximately $0.06 per share, of
personal training revenue recognized for expired and unused
sessions.
- Adjusted EBITDA increased 19.7% to
$22.9 million in Q4 2011 as compared to Q4 2010 and increased 21.2%
to $89.5 million in full-year 2011 compared to full-year 2010.
Robert Giardina, Chief Executive Officer of TSI,
commented: “Our 19.7% EBITDA margin in Q4 2011 driven by
comparable club revenue growth of 3.4% demonstrated the company’s
ability to execute at every level of the organization. We are
excited about our prospects for additional productivity and
profitability gains in 2012, and are on the cusp of reaching our
20% EBITDA margin goal ahead of schedule. We are also once again
setting our sights on club growth, and see significant opportunity
over the next five years as health and wellness continues to gain
momentum as a major trend in the U.S.”
Fourth Quarter
Ended December 31, 2011 Financial Results:
Revenue (in thousands):
Quarter Ended December 31, 2011 2010
Revenue % Revenue Revenue % Revenue
% Variance Membership dues $ 91,231 78.8 % $ 89,950 78.9 %
1.4 % Joining fees 2,241 1.9 % 1,272 1.1 % 76.2 %
Membership revenue 93,472 80.7 % 91,222 80.0 % 2.5 %
Personal training revenue 15,142 13.1 % 16,657 14.6 % (9.1 ) %
Other ancillary club revenue 5,778 5.0 % 5,010 4.4 %
15.3 % Ancillary club revenue 20,920 18.1 % 21,667 19.0 % (3.4 ) %
Fees and other revenue 1,421 1.2 % 1,176 1.0 % 20.8 %
Total revenue $ 115,813 100.0 % $ 114,065 100.0 % 1.5 %
Total revenue for Q4 2011 increased $1.7 million, or 1.5%
compared to Q4 2010. In Q4 2010, we recognized $2.6 million of
personal training revenue for unused and expired personal training
sessions in three of the jurisdictions in which we operate.
Excluding this revenue from Q4 2010, we experienced an increase in
revenue of $4.3 million, or 3.9% compared to Q4 2010. For Q4 2011,
revenues increased $678,000 at the two clubs opened or acquired
subsequent to December 31, 2009 (both opened in Q4 2011), increased
by $3.8 million at our clubs opened or acquired prior to December
31, 2009 and decreased $511,000 related to the three clubs that
were closed subsequent to December 31, 2009.
Operating expenses:
Quarter EndedDecember
31,
2011 2010 Expense % of Revenue
Expense %Variance
Payroll and related 37.9 % 38.6 % (0.4) % Club operating
37.5 % 37.2 % 2.5 % General and administrative 5.3 % 5.7 % (5.4) %
Depreciation and amortization 11.0 % 10.5 % 6.0 % Operating
expenses 91.7 % 92.0 % 1.2 %
Total operating expenses increased 1.2% for Q4 2011
compared to Q4 2010. Operating margin was 8.3% for Q4 2011 compared
to 8.0% for Q4 2010.
Club Operating. The increase in club
operating expenses in Q4 2011 was primarily due to increases in
occupancy-related expenses and, to a lesser degree, laundry- and
towel-related expenses.
General and administrative. The
decrease in general and administrative expenses in Q4 2011 was
primarily related to decreases in legal expenses.
Depreciation and amortization. The
increase in depreciation and amortization in Q4 2011 was partly
related to the two club openings in Q4 2011.
Net income for Q4 2011 was $3.3 million compared to
$1.3 million for Q4 2010.
Full-Year Ended December 31, 2011
Financial Results
For the full-year ended December 31, 2011, total revenue
increased $4.6 million, or 1.0%, compared to full-year 2010.
Operating margin was 7.6% for 2011 compared to 4.0% for 2010. In
2010, we recorded fixed asset impairment charges of $3.3 million.
There were no such charges in 2011. Net income for 2011 was $6.3
million compared to net loss of $290,000 in 2010.
Cash flow from operating activities for full-year 2011
totaled $74.9 million, an increase of $23.6 million from full-year
2010. This increase was driven by an increase in earnings before
the effects of depreciation and fixed asset impairments. The
increase in deferred revenue in 2011 generated a $6.5 million
increase in cash flow as compared to 2010, which was driven by an
increase in joining fees collected. The decrease in prepaid
expenses and other current assets generated a $6.0 million
favorable cash flow variance to 2010 principally due to timing
differences in rent payments at the end of 2011. The effect of
income taxes increased cash flow by $6.6 million in 2011, as we had
more income tax refunds, net of cash paid for taxes, in 2011
compared to 2010. These increases in cash flow were partially
offset by an $8.8 million increase in cash paid for interest, and a
$4.2 million increase in deferred membership costs compared to
2010.
First Quarter 2012 Financial Outlook:
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 first quarter of 2012 includes the following:
- Revenue for Q1 2012 is expected to be
between $121.3 million and $122.3 million versus $116.7 million for
Q1 2011. As percentages of revenue, we expect Q1 2012 payroll and
related expenses to approximate 39.0% and club operating expenses
to approximate 37.0%. We expect general and administrative expenses
to approximate $6.8 million, depreciation and amortization to
approximate $12.8 million and net interest expense to approximate
$6.0 million.
- We expect net income for Q1 2012 to be
between $2.75 million and $3.25 million, and diluted earnings per
share to be in the range of $0.12 per share to $0.14 per share,
assuming a 41.0% effective tax rate and 23.75 million weighted
average fully diluted shares outstanding.
- We estimate that Adjusted EBITDA will
approximate $23.75 million in Q1 2012.
Investing Activities Outlook:
For the year ending December 31, 2012, we currently plan to
invest $25.0 million to $28.0 million in capital expenditures
compared to $30.9 million of capital expenditures in 2011. This
amount includes approximately $2.5 million to $3.0 million related
to potential 2012 and 2013 club openings, approximately
$16.0 million to $17.0 million to continue upgrading existing
clubs and approximately $4.0 million to $5.0 million principally
related to major renovations at clubs with recent lease renewals
and to upgrade our in-club entertainment system network. We also
expect to invest approximately $2.5 million to $3.0 million to
enhance our management information systems. These capital
expenditures will be funded by cash flow provided by operations and
available cash on hand.
Forward-Looking Statements:
Statements in this release that do not constitute historical
facts, including, without limitation, statements under the captions
“First Quarter 2012 Financial 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 160 fitness clubs as of December 31, 2011,
comprising 108 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 523,000 members. For
more information on TSI, visit http://www.mysportsclubs.com.
The Company will hold a conference call on Wednesday February
15, 2012 at 4:30 PM (Eastern) to discuss the fourth quarter and
full-year 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 February 16,
2012.
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 SHEETS As of December 31, 2011 and 2010 (All
figures in thousands) (Unaudited) December
31, December 31, 2011 2010
ASSETS Current assets: Cash and cash equivalents $ 47,880 $
38,803 Accounts receivable, net 5,857 5,258 Inventory 290 217
Prepaid corporate income taxes 73 7,342 Prepaid expenses and other
current assets 10,599 13,213 Total
current assets 64,699 64,833 Fixed assets, net 286,041 309,371
Goodwill 32,799 32,794 Intangible assets, net ― 44 Deferred tax
assets, net 40,000 41,883 Deferred membership costs 10,117 5,934
Other assets 15,886 9,307 Total assets
$ 449,542 $ 464,166
LIABILITIES AND
STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Current
portion of long-term debt $ 25,507 $ 14,550 Accounts payable 9,180
4,008 Accrued expenses 26,575 27,477 Accrued interest 950 6,579
Deferred revenue 40,822 35,106 Total
current liabilities 103,034 87,720 Long-term debt 263,487 301,963
Deferred lease liabilities 65,119 67,180 Deferred revenue 5,338
3,166 Other liabilities 12,210 11,082
Total liabilities 449,188 471,111 Stockholders’ equity (deficit) :
Common stock 23 23 Paid-in capital (19,934 ) (21,788 ) Accumulated
other comprehensive income 1,251 2,121 Retained earnings
19,014 12,699 Total stockholders’ equity
(deficit) 354 (6,945 ) Total liabilities and
stockholders’ equity (deficit) $ 449,542 $ 464,166
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the
quarters and years ended December 31, 2011 and 2010 (All
figures in thousands except share and per share data)
(Unaudited) Quarter Ended December 31, Year
Ended December 31, 2011 2010
2011 2010 Revenues: Club operations $
114,392 $ 112,889 $ 462,051 $ 457,626 Fees and other 1,421
1,176 4,890 4,761
115,813 114,065 466,941
462,387
Operating Expenses Payroll and related
43,889 44,058 177,528 185,583 Club operating 43,480 42,412 176,463
174,135 General and administrative 6,144 6,493 25,799 28,773
Depreciation and amortization 12,707 11,990 51,536 52,202
Impairment of fixed assets ― ― ―
3,254 106,220 104,953
431,326 443,947 Operating income
9,593 9,112 35,615 18,440 Loss on extinguishment of debt ― ― 4,865
― Interest expense 6,009 5,490 24,274 21,158 Interest income (12 )
(69 ) (147 ) (145 ) Equity in the earnings of investees and rental
income (558 ) (586 ) (2,391 )
(2,139 ) Income (loss) before provision (benefit) for corporate
income taxes
4,154 4,277 9,014 (434 ) Provision (benefit) for corporate income
taxes 904 3,002 2,699
(144 ) Net income (loss) $ 3,250 $ 1,275 $
6,315 $ (290 ) Earnings (loss) per share: Basic $ 0.14 $
0.06 $ 0.28 $ (0.01 ) Diluted $ 0.14 $ 0.06 $ 0.27 $ (0.01 )
Weighted average number of shares used in
calculating (loss) earnings per share:
Basic 22,964,254 22,659,361 22,828,031 22,634,233 Diluted
23,578,768 22,858,573 23,423,797 22,634,233
TOWN
SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS For the years ended December 31,
2011 and 2010 (All figures in thousands)
(Unaudited) Year Ended December 31,
2011 2010 Cash flows from operating
activities: Net income (loss) $ 6,315 $ (290 ) Adjustments to
reconcile net income (loss) to net cash provided by operating
activities Depreciation and amortization 51,536 52,202 Impairment
of fixed assets — 3,254 Loss on extinguishment of debt 4,865 — Call
premium on redemption of Senior Discount Notes (2,538 ) —
Amortization of debt discount 244 — Amortization of debt issuance
costs 1,127 1,011 Non-cash rental expense, net of non-cash rental
income (3,663 ) (5,552 ) Compensation expense incurred in
connection with stock options and common stock grants 1,412 1,336
Decrease in deferred tax asset 1,886 8,643 Net change in certain
operating assets and liabilities 19,129 (8,243 ) (Increase)
decrease in deferred membership costs (4,183 ) 145 Landlord
contributions to tenant improvements 711 100 Decrease in insurance
reserves (1,679 ) (1,119 ) Other (277 ) (249 ) Total
adjustments 68,570 51,528 Net
cash provided by operating activities 74,885
51,238
Cash flows from investing activities:
Capital expenditures (30,907 ) (22,035 )
Net cash used in investing activities (30,907 )
(22,035 )
Cash flows from financing
activities: Proceeds from 2011 Senior Credit Facility, net of
original issue discount 297,000 — Debt issuance costs (8,065 ) —
Repayment of 2007 Term Loan Facility (178,063 ) (1,850 ) Repayment
of Senior Discount Notes (138,450 ) — Principal payments on 2011
Term Loan Facility (8,250 ) — Proceeds from stock option exercises
479 85 Net cash used in financing
activities (35,349 ) (1,765 ) Effect of
exchange rate changes on cash 448 607
Net increase in cash and cash equivalents 9,077 28,045
Cash and cash equivalents beginning of period 38,803
10,758 Cash and cash equivalents end of
period $ 47,880 $ 38,803
Summary of the
change in certain operating assets and liabilities: Increase in
accounts receivable $ (591 ) $ (951 ) (Increase) decrease in
inventory (74 ) 9 Decrease (increase) in prepaid expenses and other
current assets 3,493 (2,532 ) Increase (decrease) in accounts
payable, accrued expenses and accrued interest 864 (419 ) Change in
prepaid corporate income taxes and corporate income taxes payable
7,320 (6,016 ) Increase in deferred revenue 8,117
1,666 Net change in certain working capital
components $ 19,129 $ (8,243 )
TOWN SPORTS
INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Net Cash Provided by Operating Activities to
EBITDA and Adjusted EBITDA For the Quarters and Full Years
Ended December 31, 2011 and 2010 (All figures in
thousands) (Unaudited) Quarter Ended
Full-Year Ended December 31, December 31,
2011 2010 2011 2010 Net cash provided
by operating activities: $ 21,645 $ 13,199 $ 74,885 $ 51,238
Interest expense, net of interest income 5,997 5,421 24,127 21,013
Provision (benefit) for corporate income taxes 904 3,002 2,699 (144
) Changes in operating assets and liabilities (7,587 ) 1,069
(19,129 ) 8,243 Impairment of fixed assets - - - (3,254 ) Loss on
extinguishment of debt - - (4,865 ) - Call premium on the
redemption of Senior Discount Notes - - 2,538 - Amortization of
debt discount (95 ) - (244 ) - Amortization of debt issuance costs
(287 ) (252 ) (1,127 ) (1,011 ) Compensation expense incurred in
connection with stock options and common stock grants (487 ) (197 )
(1,412 ) (1,336 ) Landlord contributions to tenant improvements - -
(711 ) (100 ) Non-cash rental expense, net of non-cash rental
income 646 2,034 3,663 5,552 Decrease (increase) in insurance
reserves 168 66 1,679 1,119 Decrease in deferred tax asset 1,375
(3,110 ) (1,886 ) (8,643 ) Increase in deferred membership costs
625 575 4,183 (145 ) Other (46 ) (119 ) 277
249 EBITDA 22,858 21,688 84,677 72,781 Unused
and expired personal training sessions (1) - (2,593 ) - (2,127 )
Impairment of fixed assets - - - 3,254 Loss on extinguishment of
debt - - 4,865 -
Adjusted EBITDA $ 22,858 $ 19,095 $ 89,542
$ 73,908
(1)
In Q4 2010, we recognized a total of $2,697 of revenue
related to unused and expired personal training sessions of which
approximately $570 and $104 relates to expired sessions that would
have been recognized in full-year 2010 and Q4 2010, respectively.
Accordingly, these 2010 amounts are excluded from the adjustments
represented in the table.
TOWN SPORTS
INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Net Cash Provided by
Operating Activities to EBITDA and Adjusted EBITDA For the
Quarter Ending March 31, 2012 and the Quarter Ended March 31,
2011 (All figures in thousands) (Unaudited)
Estimated Q1 2012 Q1 2011 Net cash provided by
operating activities $ 18,400 $ 25,408 Interest expense, net of
interest income 6,000 5,511 Provision for corporate income taxes
2,000 529 Changes in operating assets and liabilities (1,600 )
(12,594 ) Amortization of debt issuance costs (290 ) (282 )
Compensation expense incurred in connection with stock options and
common stock grants (380 ) (348 ) Landlord contributions to tenant
improvements (300 ) (149 ) Non-cash rental expense, net of non-cash
rental income 850 1,120 Decrease in insurance reserves 100 330
Decrease in deferred tax asset (1,450 ) (518 ) Increase in deferred
member costs 500 1,200 Other (80 ) 368 EBITDA
23,750 20,575
Non-GAAP Financial Measures – EBITDA and Adjusted
EBITDA
EBITDA consists of net income (loss) plus interest expense
(net of interest income), provision for corporate income taxes, and
depreciation and amortization. Adjusted EBITDA is the Company’s
EBITDA excluding loss on extinguishment of debt, any fixed asset or
goodwill impairments and, in the case of Q4 2010 and full year
2010, revenue recognized for unused and expired personal training
sessions. EBITDA is not a measure of liquidity or financial
performance presented in accordance with GAAP. EBITDA, as we define
it, may not be identical to similarly titled measures used by some
other companies.
EBITDA has material limitations as an analytical tool and should
not be considered in isolation or as a substitute for cash flows
from operating activities, operating income or other cash flow or
income data prepared in accordance with GAAP. The items excluded
from EBITDA, but included in the calculation of reported net
income, are significant components of the consolidated statements
of cash flows and income, and must be considered in performing a
comprehensive assessment of our liquidity.
EBITDA excludes, among other items, the effect of depreciation
and amortization, which is a significant component of our reported
GAAP data. Depreciation and amortization, which is a non-cash item,
totaled $12.7 million in the quarter ended December 31, 2011.
Although a premise underlying depreciation and amortization is that
it will be reinvested in our business to restore, replenish or
purchase property, equipment and other related assets, the funds
represented by depreciation and amortization could, in the
Company’s discretion, be utilized for other purposes (e.g., debt
service). Accordingly, EBITDA may be useful as a supplemental
measure to GAAP financial data for demonstrating our ability to
satisfy our liquidity and capital resource requirements.
Investors or prospective investors in the Company regularly
request EBITDA as a supplemental analytical measure to, and in
conjunction with, our GAAP financial data. We understand that these
investors use EBITDA, among other things, to assess our ability to
service our existing debt and to incur debt in the future, to
evaluate our executive compensation programs, to assess our ability
to fund our capital expenditure program, and to gain insight into
the manner in which the Company’s management and board of directors
analyze our liquidity. We believe that investors find the inclusion
of EBITDA in our press releases to be useful and helpful to
them.
Our management and board of directors also use EBITDA as a
supplemental measure to our GAAP financial data for purposes
broadly similar to those used by investors.
The purposes to which EBITDA may be used by investors, and is
used by our management and board of directors, include the
following:
• The Company is required to comply with
financial covenants and borrowing limitations that are based on
variations of EBITDA as defined in our 2011 Senior Credit Facility.
• Our discussions with prospective lenders and
investors in recent years, including in relation to our 2011 Senior
Credit Facility, have confirmed the importance of EBITDA in their
decision-making processes relating to the making of loans to us or
investing in our debt securities.
• The Company uses
EBITDA as a key factor in determining annual incentive bonuses for
executive officers (as discussed in our proxy statement).
• The Company considers EBITDA to be a useful supplemental
measure to GAAP financial data because it indicates our ability to
generate funds sufficient to make capital expenditures (including
for the opening of new clubs and the upgrading of existing clubs)
as well as to undertake initiatives to enhance our business by
offering new products and services in accordance with our strategy.
• Quarterly, equity analysts who follow our company
often report on our EBITDA with respect to valuation commentary.
We do not, and investors should not, place undue reliance on
EBITDA or Adjusted EBITDA as a measure of our liquidity.
Town Sports (NASDAQ:CLUB)
Historical Stock Chart
From Apr 2024 to May 2024
Town Sports (NASDAQ:CLUB)
Historical Stock Chart
From May 2023 to May 2024