[July 24, 2014] |
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Life Time Fitness Announces Second Quarter 2014 Financial Results and New Share Repurchase Program
CHANHASSEN, Minn. --(Business Wire)--
Life Time Fitness, Inc. (NYSE:LTM), The Healthy Way of Life Company,
today reported its financial results for the second quarter ended
June 30, 2014.
Second quarter 2014 revenue grew 6.0% to $326.6 million from $308.1
million during the same period last year. Revenue for the first six
months of 2014 grew 6.6% to $638.5 million from $598.9 million during
the same period last year.
Net income for the quarter was $29.8 million, or $0.76 per diluted
share, compared to net income of $33.2 million, or $0.80 per diluted
share, for 2Q 2013. Net income for the first six months of 2014 was
$58.1 million, or $1.45 per diluted share, compared to net income of
$61.3 million, or $1.47 per diluted share for the prior-year period.
The Company also announced that its board of directors has authorized a
share repurchase program under which the Company may repurchase up to
$200.0 million of its outstanding common stock.
"The second quarter was a challenging one for our company as we faced
unexpected erosion of membership levels at some centers," said Bahram
Akradi, Life Time chairman, president and chief executive officer. "We
believe the retention-focused initiatives we have previously introduced
will positively affect membership levels over time. At the same time, I
am pleased to report that, as a group, the five Life Time Athletic
centers we have opened in 2014 have outperformed our financial
expectations. Our current plans call for one additional Life Time
Athletic center opening this year, and six new Life Time Athletic center
openings in 2015. These openings, along with the expansion and
improvement of our member-focused health, fitness, family recreation and
sports programs, serve as the foundation of long-term growth for our
Healthy Way of Life Company."
During the quarter, the Company opened its first center in Des Moines,
Iowa, and the sixth center in the Detroit market, located in Bloomfield
Township, Michigan. Since the beginning of the year, the Company has
opened five of the six planned new centers for 2014, the last of which
will be in the Las Vegas market during the fourth quarter.
Share Repurchase Program:
The new program replaces a $200.0 million share repurchase program that
was introduced in August 2013. Under the former program, from its
inception through June 30, 2014, the Company repurchased approximately
3.6 million shares at a total cost of approximately $171.0 million.
Under the new program, share repurchases may be made from time to time
through open market or privately negotiated transactions. The timing of
such transactions depends on a variety of factors, including market
conditions, blackout periods, and the terms of trading plans, if any,
established in accordance with Securities and Exchange Commission rules.
The authorization to repurchase shares terminates when the aggregate
repurchase amount totals $200.0 million or at the close of business on
June 30, 2016, whichever comes earlier. The share repurchase program
does not obligate the company to repurchase any dollar amount or number
of shares of its common stock and the program may be extended, modified,
suspended or discontinued at any time.
Three and Six Months Ended June 30, 2014, Financial Highlights:
Total revenue for the second quarter grew 6.0% to $326.6 million
from $308.1 million in 2Q 2013. Total revenue for the first six months
of 2014 grew 6.6% to $638.5 million from $598.9 million during the
prior-year period.
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2Q 2014 vs. 2Q 2013
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(in millions except revenue per membership data)
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Membership dues
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$205.2 vs. $194.8 (up 5.3%)
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In-center revenue
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$104.4 vs. $97.3 (up 7.3%)
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Other revenue
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$14.0 vs. $12.4 (up 12.7%)
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Average center revenue per Access membership
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$442 vs. $416 (up 6.3%)
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Average in-center revenue per Access membership
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$150 vs. $139 (up 7.9%)
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Same-center revenue (open 13 months or longer)
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Down 0.6%
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Same-center revenue (open 37 months or longer)
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Down 0.9%
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YTD 2014 vs. YTD 2013
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(in millions except revenue per membership data)
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Membership dues
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$402.0 vs. $381.2 (up 5.5%)
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In-center revenue
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$202.8 vs. $189.2 (up 7.1%)
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Other revenue
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$27.6 vs. $21.5 (up 28.8%)
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Average center revenue per Access membership
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$872 vs. $821 (up 6.2%)
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Average in-center revenue per Access membership
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$294 vs. $272 (up 7.8%)
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Same-center revenue (open 13 months or longer)
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Up 0.4%
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Same-center revenue (open 37 months or longer)
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Up 0.1%
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Total memberships grew 1.2% to 823,021 at June 30, 2014, from
812,866 at June 30, 2013.
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Access memberships were 712,296 at June 30, 2014 compared to 713,138
at June 30, 2013.
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Non-Access memberships were 110,725 at June 30, 2014 compared to
99,728 at June 30, 2013.
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Attrition in 2Q 2014 was 8.3% compared to 8.2% in the prior-year
period. Attrition for the 12-month period ended June 30, 2014, was
35.8% compared to attrition of 34.5% during the 12-month period ended
June 30, 2013.
Total operating expenses during 2Q 2014 were $269.1 million
compared to $247.4 million for 2Q 2013. Total operating expenses for the
first six months of 2014 were $527.0 million compared to $485.8 million
for the first six months of 2013.
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Income from operations margin was 17.6% for 2Q 2014 compared to 19.8%
in the prior-year period.
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Income from operations margin was 17.5% for the first six months of
2014 compared to 18.9% for the first six months of 2013.
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2Q 2014 vs. 2Q 2013
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(expense as a percent of total revenue)
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Center operations
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59.4% vs. 57.4%
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Advertising and marketing
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3.0% vs. 3.1%
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General and administrative
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4.4% vs. 5.1%
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Other operating
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5.0% vs. 4.9%
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Depreciation and amortization
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10.6% vs. 9.7%
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YTD 2014 vs. YTD 2013
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(expense as a percent of total revenue)
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Center operations
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59.0% vs. 57.9%
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Advertising and marketing
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3.5% vs. 3.4%
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General and administrative
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4.8% vs. 5.2%
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Other operating
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4.8% vs. 4.7%
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Depreciation and amortization
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10.4% vs. 9.9%
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Net income for 2Q 2014 was $29.8 million, or $0.76 per
diluted share, compared to net income of $33.2 million, or $0.80 per
diluted share, for 2Q 2013. Net income for the first six months of 2014
was $58.1 million, or $1.45 per diluted share, compared to net income of
$61.3 million, or $1.47 per diluted share, for the prior-year period.
EBITDA for 2Q 2014 was $92.2 million compared to $91.1
million in 2Q 2013. For the first six months of 2014, EBITDA was $178.7
million compared with $173.1 million in the prior-year period.
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As a percentage of total revenue, EBITDA in 2Q 2014 was 28.3% and
29.6% in 2Q 2013.
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For the first six months of 2014, EBITDA, as a percentage of total
revenue, was 28.0% compared to 28.9% in the prior-year period.
Cash flows from operating activities for the first six months of
2014 totaled $133.7 million compared to $124.5 million in the prior-year
period.
Weighted average fully diluted shares for 2Q 2014 totaled 39.3
million compared to 41.7 million in 2Q 2013. For the first six months of
2014, weighted average fully diluted shares totaled 40.1 million
compared to 41.6 million for the prior-year period.
Updated 2014 Business Outlook:
The following statements are based on the Company's current expectations
for fiscal year 2014. These 2014 expectations are subject to the risks
and uncertainties further described in the Company's forward-looking
statements:
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Revenue is expected to be $1.290-1.310 billion (revised from
$1.300-1.320 billion).
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Net income is expected to be $120.0-125.0 million (revised
from $125.0-130.0 million).
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Diluted earnings per common share is expected to be
$3.00-3.10 (revised from $3.05-3.15).
As announced on July 17, 2014, the Company will hold a conference call
today at 10:00 a.m. ET to discuss its second quarter 2014 results.
Akradi, Eric Buss, executive vice president and chief financial officer,
and John Heller, vice president, Finance and Investor Relations, will
host the conference call. The conference call will be webcast and may be
accessed via the Company's Investor Relations section of its website at
lifetimefitness.com. A replay of the call will be available the same day
via the Company's website beginning at approximately 2:00 p.m. ET.
As announced on February 20, 2014, Buss assumed the additional role of
interim chief financial officer, effective March 2, 2014. The Company's
board of directors has confirmed Buss' appointment as chief financial
officer, effective July 21, 2014. Buss joined Life Time in September
1999 as vice president of Finance and general counsel. Prior to joining
the Company, Buss was an associate with the law firm of Faegre & Benson
LLP (now Faegre Baker Daniels LLP) and, before that, he served as an
auditor with Arthur Andersen LLP.
About Life Time Fitness, Inc.:
As The Healthy Way of Life Company, Life Time Fitness (NYSE:LTM) helps
organizations, communities and individuals achieve their total health
objectives, athletic aspirations and fitness goals by engaging in their
areas of interest - or discovering new passions - both inside and
outside of Life Time's distinctive and large sports, professional
fitness, family recreation and spa destinations, most of which operate
24 hours a day, seven days a week. The Company's Healthy Way of Life
approach enables customers to achieve this by providing the best
programs, people and places of uncompromising quality and value. As of
July 24, 2014, the Company operated 112 centers under the LIFE TIME
FITNESS® and LIFE TIME ATHLETIC® brands in the
United States and Canada. Additional information about Life Time
centers, programs and services is available at lifetimefitness.com.
Forward-Looking Statements:
This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements can usually be identified by the use of
terminology such as "anticipate," "believe," "continue," "could,"
"estimate," "evolve," "expect," "forecast," "intend," "looking ahead,"
"may," "opinion," "plan," "possible," "potential," "project," "should,"
"will" and similar words or expressions. Forward-looking statements are
subject to certain risks and uncertainties that could cause the
Company's actual results in the future to differ materially from its
historical results and those presently anticipated or projected. Among
these factors are attracting and retaining members, risks related to our
debt levels and debt covenants, the ability to access our existing
credit facility and obtain additional financing, strains on our business
from continued and future growth, including potential acquisitions and
other strategic initiatives, risks related to maintenance and security
of our data, potential recognition of compensation expense related to
performance-based stock grants, competition from other health and
fitness centers, identifying and acquiring suitable sites for new
centers, delays in opening new centers, unanticipated expenses relating
to regulatory matters or litigation, and other factors set forth in the
risk factor section of the Company's annual report on Form 10-K filed
with the Securities and Exchange Commission. The Company cautions
investors not to place undue reliance on any such forward-looking
statements, which speak only as of the date on which such statements
were made. The Company undertakes no obligation to update such
statements to reflect events or circumstances arising after such date.
All remarks made during the Company's preliminary financial results
webcast will be current at the time of the webcast and the Company is
under no obligation to update the recording.
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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
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(In thousands)
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(Unaudited)
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June 30,
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December 31,
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2014
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2013
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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15,850
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$
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8,334
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Accounts receivable, net
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11,091
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8,298
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Center operating supplies and inventories
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36,660
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32,778
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Prepaid expenses and other current assets
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28,942
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25,802
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Deferred membership origination costs
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9,455
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9,945
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Deferred income taxes
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4,526
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6,881
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Income tax receivable
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7,614
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6,698
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Total current assets
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114,138
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98,736
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Property and equipment, net
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2,289,876
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2,105,077
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Restricted cash
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588
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850
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Deferred membership origination costs
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6,433
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5,210
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Goodwill
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57,478
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49,195
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Intangible assets, net
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35,175
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29,299
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Other assets
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43,675
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42,684
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Total assets
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$
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2,547,363
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$
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2,331,051
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
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Current maturities of long-term debt
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$
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27,366
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$
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24,505
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Accounts payable
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37,688
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|
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28,645
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Construction accounts payable
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43,436
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|
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47,342
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Accrued expenses
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67,327
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|
|
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67,435
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Deferred revenue
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46,037
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|
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35,032
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Total current liabilities
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|
221,854
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|
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|
|
202,959
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Long-term debt, net of current portion
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1,097,716
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|
|
|
|
824,093
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Deferred rent liability
|
|
|
|
|
29,149
|
|
|
|
|
28,933
|
|
Deferred income taxes
|
|
|
|
|
94,496
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|
|
|
|
100,504
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Deferred revenue
|
|
|
|
|
6,499
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|
|
|
|
5,246
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Other liabilities
|
|
|
|
|
20,938
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|
|
|
|
21,287
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Total liabilities
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1,470,652
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|
|
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|
1,183,022
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Shareholders' equity:
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Common stock
|
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|
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|
794
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|
|
|
843
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Additional paid-in capital
|
|
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|
272,921
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|
|
|
|
402,147
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Retained earnings
|
|
|
|
|
808,774
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|
|
|
|
750,654
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Accumulated other comprehensive loss
|
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(5,778
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)
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|
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(5,615
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)
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Total shareholders' equity
|
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|
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|
1,076,711
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|
|
|
|
1,148,029
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Total liabilities and shareholders' equity
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|
$
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2,547,363
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$
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2,331,051
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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS
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(In thousands except per share data)
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(Unaudited)
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For the Three Months Ended
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For the Six Months Ended
|
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|
June 30,
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June 30,
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|
2014
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|
2013
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2014
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|
2013
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Revenue:
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Membership dues
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$
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205,164
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|
|
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$
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194,816
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|
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$
|
401,979
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|
|
|
$
|
381,190
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Enrollment fees
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|
3,019
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|
|
|
|
3,573
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|
|
|
|
6,142
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|
|
|
|
6,969
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In-center revenue
|
|
|
|
|
104,359
|
|
|
|
|
97,275
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|
|
|
|
202,764
|
|
|
|
|
189,246
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Total center revenue
|
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|
|
|
312,542
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|
|
|
|
295,664
|
|
|
|
|
610,885
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|
|
|
|
577,405
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Other revenue
|
|
|
|
|
14,022
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|
|
|
|
12,444
|
|
|
|
|
27,634
|
|
|
|
|
21,450
|
|
Total revenue
|
|
|
|
|
326,564
|
|
|
|
|
308,108
|
|
|
|
|
638,519
|
|
|
|
|
598,855
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Center operations
|
|
|
|
|
194,005
|
|
|
|
|
176,798
|
|
|
|
|
377,123
|
|
|
|
|
346,760
|
|
Advertising and marketing
|
|
|
|
|
9,733
|
|
|
|
|
9,629
|
|
|
|
|
22,072
|
|
|
|
|
20,588
|
|
General and administrative
|
|
|
|
|
14,496
|
|
|
|
|
15,713
|
|
|
|
|
30,360
|
|
|
|
|
31,069
|
|
Other operating
|
|
|
|
|
16,377
|
|
|
|
|
15,225
|
|
|
|
|
30,799
|
|
|
|
|
28,059
|
|
Depreciation and amortization
|
|
|
|
|
34,460
|
|
|
|
|
30,017
|
|
|
|
|
66,598
|
|
|
|
|
59,279
|
|
Total operating expenses
|
|
|
|
|
269,071
|
|
|
|
|
247,382
|
|
|
|
|
526,952
|
|
|
|
|
485,755
|
|
Income from operations
|
|
|
|
|
57,493
|
|
|
|
|
60,726
|
|
|
|
|
111,567
|
|
|
|
|
113,100
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
(8,652
|
)
|
|
|
|
(6,434
|
)
|
|
|
|
(16,503
|
)
|
|
|
|
(12,563
|
)
|
Equity in earnings of affiliate
|
|
|
|
|
270
|
|
|
|
|
378
|
|
|
|
|
568
|
|
|
|
|
724
|
|
Total other income (expense)
|
|
|
|
|
(8,382
|
)
|
|
|
|
(6,056
|
)
|
|
|
|
(15,935
|
)
|
|
|
|
(11,839
|
)
|
Income before income taxes
|
|
|
|
|
49,111
|
|
|
|
|
54,670
|
|
|
|
|
95,632
|
|
|
|
|
101,261
|
|
Provision for income taxes
|
|
|
|
|
19,307
|
|
|
|
|
21,483
|
|
|
|
|
37,512
|
|
|
|
|
39,973
|
|
Net income
|
|
|
|
$
|
29,804
|
|
|
|
$
|
33,187
|
|
|
|
$
|
58,120
|
|
|
|
$
|
61,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
|
|
$
|
0.76
|
|
|
|
$
|
0.80
|
|
|
|
$
|
1.46
|
|
|
|
$
|
1.48
|
|
Diluted earnings per common share
|
|
|
|
$
|
0.76
|
|
|
|
$
|
0.80
|
|
|
|
$
|
1.45
|
|
|
|
$
|
1.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding - basic
|
|
|
|
|
39,128
|
|
|
|
|
41,456
|
|
|
|
|
39,870
|
|
|
|
|
41,376
|
|
Weighted average number of common shares outstanding - diluted
|
|
|
|
|
39,255
|
|
|
|
|
41,659
|
|
|
|
|
40,123
|
|
|
|
|
41,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIFE TIME FITNESS, INC. AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
For the Six Months Ended
|
|
|
|
|
June 30,
|
|
|
|
|
|
2014
|
|
|
|
|
2013
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
58,120
|
|
|
|
$
|
61,288
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
66,598
|
|
|
|
|
59,279
|
|
Deferred income taxes
|
|
|
|
|
(3,715
|
)
|
|
|
|
671
|
|
Gain on disposal of property and equipment, net
|
|
|
|
|
(459
|
)
|
|
|
|
(216
|
)
|
Gain on sale of land held for sale
|
|
|
|
|
(17
|
)
|
|
|
|
-
|
|
Amortization of deferred financing costs
|
|
|
|
|
1,245
|
|
|
|
|
1,100
|
|
Share-based compensation
|
|
|
|
|
6,777
|
|
|
|
|
6,286
|
|
Excess tax benefit related to share-based compensation
|
|
|
|
|
(917
|
)
|
|
|
|
(4,564
|
)
|
Changes in operating assets and liabilities
|
|
|
|
|
6,508
|
|
|
|
|
1,726
|
|
Other
|
|
|
|
|
(478
|
)
|
|
|
|
(1,116
|
)
|
Net cash provided by operating activities
|
|
|
|
|
133,662
|
|
|
|
|
124,454
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
|
|
(253,411
|
)
|
|
|
|
(137,433
|
)
|
Acquisitions, net of cash acquired
|
|
|
|
|
(12,400
|
)
|
|
|
|
(437
|
)
|
Proceeds from sale of property and equipment
|
|
|
|
|
691
|
|
|
|
|
763
|
|
Proceeds from sale of land held for sale
|
|
|
|
|
785
|
|
|
|
|
-
|
|
Proceeds from property insurance settlements
|
|
|
|
|
-
|
|
|
|
|
175
|
|
Decrease (increase) in other assets
|
|
|
|
|
2,333
|
|
|
|
|
(736
|
)
|
Decrease in restricted cash
|
|
|
|
|
262
|
|
|
|
|
1,640
|
|
Net cash used in investing activities
|
|
|
|
|
(261,740
|
)
|
|
|
|
(136,028
|
)
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
Proceeds from long-term borrowings
|
|
|
|
|
83,750
|
|
|
|
|
75,000
|
|
Repayments of long-term borrowings
|
|
|
|
|
(10,772
|
)
|
|
|
|
(28,272
|
)
|
Proceeds from (repayments of) revolving credit facility, net
|
|
|
|
|
203,400
|
|
|
|
|
(13,500
|
)
|
Increase in deferred financing costs
|
|
|
|
|
(4,470
|
)
|
|
|
|
(976
|
)
|
Excess tax benefit related to share-based compensation
|
|
|
|
|
917
|
|
|
|
|
4,564
|
|
Proceeds from stock option exercises
|
|
|
|
|
2,662
|
|
|
|
|
1,108
|
|
Proceeds from employee stock purchase plan
|
|
|
|
|
775
|
|
|
|
|
607
|
|
Stock purchased for employee stock purchase plan
|
|
|
|
|
(701
|
)
|
|
|
|
(569
|
)
|
Repurchases of common stock
|
|
|
|
|
(139,994
|
)
|
|
|
|
(28,157
|
)
|
Net cash provided by financing activities
|
|
|
|
|
135,567
|
|
|
|
|
9,805
|
|
|
|
|
|
|
|
|
|
Effect of exchange rates on cash and cash equivalents
|
|
|
|
|
27
|
|
|
|
|
(1,604
|
)
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
|
|
7,516
|
|
|
|
|
(3,373
|
)
|
Cash and cash equivalents - beginning of period
|
|
|
|
|
8,334
|
|
|
|
|
16,499
|
|
Cash and cash equivalents - end of period
|
|
|
|
$
|
15,850
|
|
|
|
$
|
13,126
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measure
This release and the related conference call disclose EBITDA, a non-GAAP
financial measure.
EBITDA. Earnings Before Interest, Income Taxes and Depreciation
and Amortization (EBITDA) is a non-GAAP measure consisting of net income
plus interest expense, net, provision for income taxes and depreciation
and amortization. This term, as the Company defines it, may not be
comparable to a similarly titled measure used by other companies and is
not a measure of performance presented in accordance with GAAP. The
Company uses EBITDA as a measure of operating performance. The funds
depicted by EBITDA are not necessarily available for discretionary use
if they are reserved for particular capital purposes, to maintain
compliance with debt covenants, to service debt or to pay taxes. EBITDA
should not be considered as a substitute for net income, net cash
provided by operating activities or other income or cash flow data
prepared in accordance with GAAP. Additional details related to EBITDA
are provided in the Form 8-K that the Company filed with the Securities
and Exchange Commission on the date of this press release. The following
table provides a reconciliation of net income, the most directly
comparable GAAP measure, to EBITDA:
|
|
|
|
|
|
|
RECONCILIATION OF NET INCOME TO EBITDA
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
For the Six Months Ended
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
Net income
|
|
|
|
$
|
29,804
|
|
|
$
|
33,187
|
|
|
$
|
58,120
|
|
|
$
|
61,288
|
Interest expense, net
|
|
|
|
|
8,652
|
|
|
|
6,434
|
|
|
|
16,503
|
|
|
|
12,563
|
Provision for income taxes
|
|
|
|
|
19,307
|
|
|
|
21,483
|
|
|
|
37,512
|
|
|
|
39,973
|
Depreciation and amortization
|
|
|
|
|
34,460
|
|
|
|
30,017
|
|
|
|
66,598
|
|
|
|
59,279
|
EBITDA
|
|
|
|
$
|
92,223
|
|
|
$
|
91,121
|
|
|
$
|
178,733
|
|
|
$
|
173,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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