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NEW YORK--(BUSINESS WIRE)--July 31, 2008--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, 2008.
2nd Quarter Highlights:
-- Revenues increased 8.0% to $129.4 million.
-- Comparable club revenue increased 3.2%.
-- Diluted earnings per share increased 8.3% to $0.26.
-- EBITDA increased 8.1% to $30.9 million.
-- Personal training revenues grew 7.9%, to $16.7 million.
-- Membership attrition averaged 3.2% per month.
Alex Alimanestianu, Chief Executive Officer of TSI, commented: "We are pleased with our 2nd quarter performance, and we are once again reaffirming our guidance for the year. As we have said before, we believe that our core customer base in major northeastern metropolitan areas will remain committed to their health and fitness goals despite any additional economic strains that may arise. Our 3.2% monthly attrition rate in the second quarter was better than the levels experienced in the second quarter of 2007, which we believe reflects the resiliency of our business as well as the focus we are putting on the member experience in our clubs. We are also very pleased that our new club portfolio continues to exceed expectations and generate strong returns."
Quarter Ended June 30, 2008 Financial Highlights:
Revenue (in $'000s) was comprised of the following:
Quarter Ended June 30,
2008 2007
------------------ ------------------
Revenue % Revenue Revenue % Revenue % Growth
-------- --------- -------- --------- --------
Membership dues $101,489 78.4% $ 93,818 78.3% 8.2%
Initiation fees 3,486 2.7% 3,096 2.6% 12.6%
-------- --------- -------- ---------
Membership revenue 104,975 81.1% 96,914 80.9% 8.3%
-------- --------- -------- ---------
Personal training
revenue 16,700 12.9% 15,482 12.9% 7.9%
Other ancillary club
revenue 6,054 4.7% 5,732 4.8% 5.6%
-------- --------- -------- ---------
Ancillary club
revenue 22,754 17.6% 21,214 17.7% 7.3%
Fees and other revenue 1,664 1.3% 1,650 1.4% 0.8%
-------- --------- -------- ---------
Total revenue $129,393 100.0% $119,778 100.0% 8.0%
======== ========= ======== =========
Total revenue for Q2 2008 increased 8.0% compared to Q2 2007 driven by growth in membership and personal training revenue. Revenue at clubs operated by us for over 12 months ("comparable club revenue") increased 3.2% during the three months ended June 30, 2008. Of this 3.2% increase, 1.5% was due to an increase in membership, 1.0% was due to an increase in price and 0.7% was due to an increase in ancillary club revenue and fees and other revenue.
Operating expenses (in $'000s) were comprised of the following:
Quarter Ended June 30,
2008 2007
------------------ -----------------
Expense % Revenue Expense % Revenue % Change
-------- --------- ------- --------- ----------
Payroll and related $ 48,653 37.6% 44,563 37.2% 9.2%
Club operating 41,521 32.1% 37,938 31.7% 9.4%
General and
administrative 8,895 6.9% 9,122 7.6% (2.5)%
Depreciation and
amortization 13,858 10.7% 11,731 9.8% 18.1%
-------- --------- ------- ---------
Operating expenses $112,927 87.3% 103,354 86.3% 9.3%
======== ========= ======= =========
Total operating expenses increased 9.3% to $112.9 million for Q2 2008 compared to Q2 2007. Operating margin was 12.7% for Q2 2008 and 13.7% in Q2 2007.
-- The increases in payroll and related and club operating
expenses were principally attributable to a 7.8% increase in
the total months of club operation from 448 in Q2 2007 to 483
in Q2 2008. There was a net increase of eleven clubs in the
twelve months ended June 30, 2008.
-- The increase in depreciation and amortization expenses was
principally due to clubs opened after April 1, 2007. In
addition, during the six months ended June 30, 2008, we
recorded an impairment loss of $755,000 on fixed assets of a
remote club that did not benefit from being part of a regional
cluster and therefore experienced a decline in asset fair
value, and an impairment loss of $387,000 related to an
agreement to close a club prior to its lease expiration.
Offsetting these increases are insurance proceeds of
approximately $600,000 received for fixed asset damages at two
of our clubs.
Net income for Q2 2008 was $6.8 million compared to a net income of $6.4 million for Q2 2007.
EBITDA for Q2 2008 increased 8.1% to $30.9 million from $28.6 million for Q2 2007. EBITDA as a percentage of total revenue ("EBITDA margin") was 23.9% for Q2 2008 and Q2 2007. Please refer to the reconciliation of net income to EBITDA at the end of this release.
Six Months Ended June 30, 2008 Financial Highlights:
Revenue (in $'000s) was comprised of the following:
Six Months Ended June 30,
2008 2007
------------------ ------------------
Revenue % Revenue Revenue % Revenue % Growth
-------- --------- -------- --------- --------
Membership dues $200,672 78.5% $184,802 78.6% 8.6%
Initiation fees 6,888 2.7% 5,979 2.5% 15.2%
-------- --------- -------- ---------
Membership revenue 207,560 81.2% 190,781 81.1% 8.8%
-------- --------- -------- ---------
Personal training
revenue 32,841 12.8% 29,403 12.5% 11.7%
Other ancillary club
revenue 12,236 4.8% 12,284 5.2% (0.4)%
-------- --------- -------- ---------
Ancillary club
revenue 45,077 17.6% 41,687 17.7% 8.1%
Fees and other revenue 3,076 1.2% 2,687 1.2% 14.5%
-------- --------- -------- ---------
Total revenue $255,713 100.0% $235,155 100.0% 8.7%
-------- ========= ======== =========
Total revenue for the six months ended June 30, 2008 increased 8.7% compared to the six months ended June 30, 2007 driven by growth in membership and personal training revenue. Comparable club revenue increased 3.8% during the six months ended June 30, 2008. Of this 3.8% increase, 1.6% was due to an increase in membership, 1.2% was due to an increase in price and 1.0% was due to an increase in ancillary club revenue and fees and other revenue.
Operating expenses (in $'000s) were comprised of the following:
Six Months Ended June 30,
2008 2007
------------------ ------------------
Expense % Revenue Expense % Revenue % Change
-------- --------- -------- --------- ---------
Payroll and related $ 97,057 38.0% $ 89,314 38.0% 8.7%
Club operating 84,401 33.0% 77,302 32.9% 9.2%
General and
administrative 17,201 6.7% 16,880 7.2% 1.9%
Depreciation and
amortization 26,507 10.4% 22,822 9.7% 16.1%
-------- --------- -------- ---------
Operating expenses $225,166 88.1% $206,318 87.8% 9.1%
======== ========= ======== =========
Total operating expenses increased 9.1% for the six months ended June 30, 2008 compared to the six months ended June 30, 2007. Operating margin was 11.9% for the six months ended June 30, 2008 and 12.2% for the six months ended June 30, 2007.
-- The increases in payroll and related and club operating
expenses were attributed to a 7.9% increase in the total
months of club operation to 960 for the six months ended June
30, 2008 from 890 for the same period last year. There was a
net increase of eleven clubs in the last twelve months.
-- The increase in depreciation and amortization expenses was
principally due to clubs opened after April 1, 2007. In
addition, during the six months ended June 30, 2008, we
recorded an impairment loss of $755,000 on fixed assets of a
remote club that did not benefit from being part of a regional
cluster and therefore experienced a decline in asset fair
value, and an impairment loss of $387,000 related to the
agreement to close a club prior to the lease expiration.
Offsetting these increases are insurance proceeds of
approximately $600,000 received for fixed asset damages at two
of our clubs.
Net income for the six months ended June 30, 2008 was $11.6 million compared to $2.6 million for the six months ended June 30, 2007. This $9.0 million increase in net income was primarily due to the loss on extinguishment of debt of $7.4 million, net of taxes recorded in the six months ended June 30, 2007.
EBITDA for the six months ended June 30, 2008 increased 10.6% to $58.1 million from $52.6 million for the six months ended June 30, 2007. EBITDA margin was 22.7% for the six months ended June 30, 2008, compared to 22.4% for the six months ended June 30, 2007. Please refer to the reconciliation of net income to EBITDA at the end of this release.
Cash flow from operating activities for the six months ended June 30, 2008 increased $9.1 million, or 19.0% from the same period last year. Contributing to the cash flow increase was the increase in earnings before interest, taxes and depreciation and amortization of $5.6 million. In addition, the net changes in certain operating assets and liabilities increased $4.5 million primarily due to decreases in pre-payments made to landlords and the timing of other vendor payments. Cash paid for interest decreased $4.3 million, while cash paid for taxes increased $5.0 million.
2008 Business Outlook:
Based upon the current business environment and current trends in the market, the Company is reaffirming its previous guidance, and expects the following results for 2008:
-- Total revenue for 2008 will be in the range of $510.0 million
to $520.0 million, representing 8% to 10% growth over 2007.
-- Net income will be between $21.3 million and $22.3 million
compared to net income of $13.6 million or $20.5 million in
2007 before the net effect of the loss on extinguishment of
$7.4 million and favorable tax adjustments of $538,000.
-- Earnings per share on a fully diluted basis will be between
$0.80 and $0.84 for 2008 compared to earnings per share on a
fully diluted basis of $0.51 per share in 2007, or $0.77 per
share before the net effect of the loss on extinguishment of
debt of $0.28 per share and favorable tax adjustments of $0.02
per share.
2008 Investing Activities Outlook:
For the year ending December 31, 2008, the Company estimates it will invest between $90.0 and $95.0 million in capital expenditures. This amount includes approximately $21.0 million to continue to upgrade existing clubs, $9.0 million to support and enhance our management information systems and $6.0 million for the construction of a new regional laundry facility in our New York Sports Clubs market. The remainder of our 2008 capital expenditures will be committed to building or expanding clubs. The Company expects to open 11 new clubs and close four clubs in 2008. As of June 30, 2008 we have opened five clubs and closed three clubs.
Forward-Looking Statements:
Statements in this release that do not constitute historical facts, including, without limitation, statements under the caption "2008 Business Outlook" and "2008 Investing Activities 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. Such forward-looking statements include, without limitation, statements under the captions "2008 Business Outlook" and "2008 Investing Activities Outlook," other statements regarding future financial results and performance and potential sales revenue, 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". These forward-looking 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 (including Forms 10-K and 10-Q filed with the Securities and Exchange Commission); accordingly, actual results could differ materially from any such forward-looking statement. The forward-looking statements speak only as of the date hereof and the Company does not intend to update this information, except as required by law, to reflect developments or information obtained after the date hereof, and the Company disclaims any legal obligation to the contrary.
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 163 fitness clubs as of June 30, 2008, comprising 112 New York Sports Clubs, 22 Boston Sports Clubs, 19 Washington Sports Clubs (two of which are partly-owned), seven Philadelphia Sports Clubs, and three clubs located in Switzerland. These clubs collectively served approximately 517,000 members, excluding pre-sold, short-term and seasonal memberships. For more information on TSI visit http://www.mysportsclubs.com.
The Company will hold a conference call on Thursday, July 31, 2008 at 4:30 PM (Eastern) to discuss the second quarter 2008 results. Alex Alimanestianu, 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 Website at www.mysportsclubs.com. A replay and transcript of the call will be available via the Company's Website beginning August 1, 2008.
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2008 and December 31, 2007
(All figures in $'000s)
(Unaudited)
June 30, December 31,
2008 2007
--------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 10,506 $ 5,463
Accounts receivable, net 10,346 8,815
Inventory 302 230
Prepaid expenses and other current assets 8,084 11,334
--------- ------------
Total current assets 29,238 25,842
Fixed assets, net 345,618 337,152
Goodwill 50,262 50,165
Intangible assets, net 663 477
Deferred tax assets, net 47,945 44,345
Deferred membership costs 17,250 17,974
Other assets 12,458 12,808
--------- ------------
Total assets $503,434 $ 488,763
========= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,902 $ 10,898
Accounts payable 5,666 10,891
Accrued expenses 35,650 34,186
Accrued interest 458 738
Corporate income taxes payable 1,510 811
Deferred revenue 47,130 41,798
--------- ------------
Total current liabilities 92,316 99,322
Long-term debt 310,929 305,124
Deferred lease liabilities 65,393 61,221
Deferred revenue 6,137 7,300
Other liabilities 14,548 15,613
--------- ------------
Total liabilities 489,323 488,580
Stockholders' equity:
Common stock 26 26
Paid-in capital (15,118) (16,977)
Accumulated other comprehensive income
(currency translation adjustment) 1,271 814
Retained earnings 27,932 16,320
--------- ------------
Total stockholders' equity 14,111 183
--------- ------------
Total liabilities and stockholders' equity $503,434 $ 488,763
========= ============
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
For the quarters and six months ended June 30, 2008 and 2007
(All figures in $'000s except share and per share data)
(Unaudited)
Quarter Ended June 30, Six Months Ended June 30,
------------------------- -------------------------
2008 2007 2008 2007
------------ ------------ ------------ ------------
Revenues:
Club operations $ 127,729 $ 118,128 $ 252,636 $ 232,468
Fees and other 1,664 1,650 3,077 2,687
------------ ------------ ------------ ------------
129,393 119,778 255,713 235,155
------------ ------------ ------------ ------------
Operating
Expenses:
Payroll and
related 48,653 44,563 97,057 89,314
Club operating 41,521 37,938 84,401 77,302
General and
administrative 8,895 9,122 17,201 16,880
Depreciation and
amortization 13,858 11,731 26,507 22,822
------------ ------------ ------------ ------------
112,927 103,354 225,166 206,318
------------ ------------ ------------ ------------
Operating income 16,466 16,424 30,547 28,837
Loss on
extinguishment of
debt -- -- -- 12,521
Interest expense 5,633 6,393 12,147 13,409
Interest income (74) (279) (215) (538)
Equity in the
earnings of
investees and
rental income (620) (482) (1,067) (904)
------------ ------------ ------------ ------------
Income before
provision for
corporate income
taxes 11,527 10,792 19,682 4,349
Provision for
corporate income
taxes 4,726 4,426 8,070 1,784
------------ ------------ ------------ ------------
Net income $ 6,801 $ 6,366 $ 11,612 $ 2,565
============ ============ ============ ============
Earnings per
share:
Basic $ 0.26 $ 0.24 $ 0.44 $ 0.10
Diluted $ 0.26 $ 0.24 $ 0.44 $ 0.10
Weighted average
number of shares
used in
calculating
earnings per
share:
Basic 26,417,859 26,142,383 26,361,758 26,070,219
Diluted 26,488,634 26,656,341 26,422,359 26,572,355
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2008 and 2007
(All figures in $'000s)
(Unaudited)
Six Months
Ended June 30,
--------------------
2008 2007
--------- ----------
Cash flows from operating activities:
Net income $ 11,612 $ 2,565
--------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 26,507 22,822
Non-cash interest expense on Senior Discount
Notes 6,782 6,029
Loss on extinguishment of debt -- 12,521
Amortization of debt issuance costs 387 443
Noncash rental expense, net of noncash rental
income 741 886
Compensation expense incurred in connection with
stock options and common stock grants 500 355
Net changes in certain operating assets and
liabilities 9,363 4,860
Increase in deferred tax asset (3,600) (6,271)
Landlord contributions to tenant improvements 3,338 3,686
Change in reserve for self-insured liability
claims 1,056 1,304
Decrease (increase) in deferred membership costs 724 (1,051)
Other (97) 20
--------- ----------
Total adjustments 45,701 45,604
--------- ----------
Net cash provided by operating activities 57,313 48,169
--------- ----------
Cash flows from investing activities:
Capital expenditures (44,542) (42,142)
Insurance proceeds 1,074 --
--------- ----------
Net cash used in investing activities (43,468) (42,142)
--------- ----------
Cash flows from financing activities:
Proceeds from New Credit Facility -- 185,000
Costs related to issuance of New Credit Facility -- (2,634)
Repayment of Senior Notes -- (169,999)
Premium paid on extinguishment of debt and
related costs -- (9,309)
Repayment of long term borrowings (973) (575)
Repayment of borrowings on Revolving Loan
Facility (9,000) --
Change in book overdraft (583) (1,230)
Proceeds from exercise of stock options 1,187 1,740
Excess tax benefit from stock option exercises 173 1,036
--------- ----------
Net cash (used in) provided by financing
activities (9,196) 4,029
--------- ----------
Effect of exchange rate changes on cash 394 (10)
--------- ----------
Net increase in cash and cash equivalents 5,043 10,046
Cash and cash equivalents at beginning of period 5,463 6,810
--------- ----------
Cash and cash equivalents at end of period $ 10,506 $ 16,856
========= ==========
Summary of change in certain operating assets and
liabilities:
(Increase) in accounts receivable $ (2,932) $ (2,322)
(Increase) decrease in inventory (68) 41
Decrease (increase) in prepaid expenses and
other current assets 3,486 (1,207)
Increase in accounts payable, accrued expenses
and accrued interest 4,026 1,396
Increase in corporate income taxes payable 699 1,050
Increase in deferred revenue 4,152 5,902
--------- ----------
Net changes in certain operating assets and
liabilities $ 9,363 $ 4,860
========= ==========
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Net Income to EBITDA
For the quarters and six months ended June 30, 2008 and 2007
(All figures in $'000s)
(Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2008 2007 % Chg. 2008 2007 % Chg.
-------- -------- -------- --------
Net income $ 6,801 $ 6,366 $11,612 $ 2,565
Provision for
corporate income
taxes 4,726 4,426 8,070 1,784
Loss on
extinguishment of
debt - - - 12,521
Interest expense,
net of interest
income 5,558 6,114 11,932 12,871
Depreciation and
amortization 13,858 11,731 26,507 22,822
-------- -------- -------- --------
EBITDA $30,943 $28,637 8.1 % $58,121 $52,563 10.6 %
-------- -------- -------- --------
-------- -------- -------- --------
EBITDA margin 23.9% 23.9% 22.7% 22.4%
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 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.
The Company believes that EBITDA is used by some investors, analysts and other parties to measure the Company's performance over time. Management believes that providing this additional information is useful to understanding the Company's ability to meet capital expenditures and working capital requirements and to better assess and understand operating performance. The measure allows investors, analysts and other parties to better evaluate the Company's financial performance and prospects in the same manner as management.
CONTACT: Town Sports International Holdings, Inc., New York
Investor:
212-246-6700 extension 1650
Investor.relations@town-sports.com
or
Integrated Corporate Relations
Joseph Teklits, 203-682-8258
joseph.teklits@icrinc.com
SOURCE: Town Sports International Holdings, Inc.