[February 25, 2015] |
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Town Sports International Holdings, Inc. Announces Fourth Quarter and Full-Year 2014 Financial Results
Town Sports International Holdings, Inc. ("TSI" or the "Company")
(NASDAQ:CLUB), one of the leading owners and operators 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", "Philadelphia Sports
Clubs" and "BFX Studio" announced its results for the fourth quarter and
full-year ended December 31, 2014.
Fourth Quarter Overview:
-
Total member count increased 5,000 to 484,000 during Q4 2014 compared
to a decrease of 10,000 in Q4 2013.
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Membership monthly attrition averaged 3.9% per month in Q4 2014
compared to 3.4% per month in Q4 2013.
-
Revenue was $109.7 million in Q4 2014, a decrease of 3.7% compared to
Q4 2013.
-
Comparable club revenue decreased 3.9% in Q4 2014 compared to 1.3% in
Q4 2013.
-
Adjusted EBITDA was $10.4 million in Q4 2014 compared to $18.4 million
in Q4 2013 (Refer to the reconciliation below). Q4 2014 Adjusted
EBITDA exceeded our previous guidance of $8.8 million by 18%.
-
Net loss for Q4 2014 was $63.7 million, which included a non-cash
charge related to a tax valuation allowance of $60.4 million recorded
against deferred tax assets. This compares to net loss of $695,000 in
Q4 2013, which included an aggregate pre-tax net charge of $1.2
million (approximately $738,000, net of taxes) for certain items as
previously disclosed.
-
Loss per share was $2.62 in Q4 2014, which included loss per share of
$2.48 for a non-cash tax charge related to a tax valuation allowance.
Loss per share in Q4 2013 was $0.03, which included loss per share of
$0.03 of certain items as previously disclosed.
-
We continue to modify pricing at our clubs to a High Value Low Price
("HVLP") strategy. As of December 31, 2014, 71 clubs were operating
under this new pricing strategy. As of today, a total of 98 clubs have
been converted to HVLP and another 19 clubs are operating as
passport-only membership clubs. We expect most of our clubs to be
converted to the HVLP pricing strategy by May 31, 2015, and
approximately 25 clubs to be operating under our higher priced
passport-only membership model.
Robert Giardina commented: "The fourth quarter capped a year of
significant transformation and highlighted positive momentum for our
business. Compelled by industry change, we embarked on a new pricing
strategy which we expect will first result in membership growth and
increased market share followed by renewed positive EBITDA growth
combined with improved cash flow. In addition, to improve the
productivity of our asset base, we closed eight clubs, slowed
development and are focusing most of our efforts on maximizing the
potential of our existing clubs. Everything we are doing leverages the
established team, infrastructure and brand that our company has
developed over many years, and we are energized by the continued focus
on health and fitness in America."
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Fourth Quarter Ended December 31, 2014
Financial Results:
Revenue (in thousands):
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Quarter Ended December 31,
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2014
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2013
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Revenue
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% Revenue
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Revenue
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% Revenue
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% Variance
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Membership dues
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$
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82,614
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75.3
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%
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$
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87,886
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77.1
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%
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(6.0
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)%
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Joining fees
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2,964
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2.7
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%
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3,108
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2.7
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%
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(4.6
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)%
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Membership revenue
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85,578
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78.0
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%
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90,994
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79.8
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%
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(6.0
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)%
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Personal training revenue
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17,481
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15.9
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%
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15,920
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14.0
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%
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9.8
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%
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Other ancillary club revenue
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5,212
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4.8
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%
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4,758
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4.2
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%
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9.5
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%
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Ancillary club revenue
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22,693
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18.2
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%
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20,678
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18.2
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%
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9.7
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%
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Fees and other revenue
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1,450
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1.3
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%
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2,235
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2.0
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%
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(35.1
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)%
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Total revenue
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$
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109,721
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100.0
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%
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$
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113,907
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100.0
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%
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(3.7
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)%
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Total revenue for Q4 2014 decreased $4.2 million, or 3.7%,
compared to Q4 2013. Revenue at clubs operated for over 12 months
("comparable club revenue") decreased 3.9% in Q4 2014. Memberships at
our comparable clubs were down 3.5% and the price of our membership dues
were down 0.8%, which was partially offset by a 0.4% increase in the
combined effect of ancillary club revenue, joining fees and other
revenue.
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Operating expenses (in thousands):
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Quarter Ended December 31,
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2014
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2013
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$ Variance
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% Variance
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Payroll and related
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$
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43,680
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$
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42,908
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$
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772
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1.8
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%
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Club operating
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47,839
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46,067
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1,772
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3.8
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%
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General and administrative
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7,752
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7,446
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306
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4.1
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%
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Depreciation and amortization
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12,018
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11,991
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27
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0.2
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%
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Impairment of fixed assets
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56
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147
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(91
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)
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(61.9
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)%
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Operating expenses
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$
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111,345
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$
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108,559
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$
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2,786
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2.6
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%
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Total operating expenses for Q4 2014 increased $2.8 million, or
2.6%, compared to Q4 2013, primarily reflecting $3.3 million of
operating expenses for our newly opened clubs and BFX Studio, partially
offset by $2.2 million of reduced operating costs at clubs that were
closed. The increase also reflected increased HVLP marketing expense of
approximately $1.6 million. Operating margin was (1.5)% for Q4 2014
compared to 4.7% for Q4 2013.
Payroll and related. Payroll and related expenses
increased $772,000, or 1.8%, to $43.7 million in Q4 2014 compared to Q4
2013, primarily reflecting increases in employment levels relating to
our new BFX Studio, as well as higher wages and hours for membership
consultants and front desk staffing associated with the conversion of
our HVLP clubs.
Club Operating. Club operating expenses increased $1.8
million, or 3.8%, to $47.8 million in Q4 2014 compared to Q4 2013,
primarily reflecting increased advertising spend of $1.6 million, mainly
related to the introduction of our new HVLP pricing strategy at many of
our locations.
General and administrative. General and administrative
expenses increased $306,000 in Q4 2014 when compared to the same
prior-year period. Computer maintenance expenses increased $428,000
related to the implementation of our new club operating system and in Q4
2014, we incurred $136,000 in legal and other expenses related to club
closures. These increases were partially offset by a reversal of
$214,000 in accrued damages related to the Ajilon litigation.
Full-Year Ended December 31, 2014 Financial
Results
For the full-year ended December 31, 2014, total
revenue decreased $16.4 million, or 3.5%, compared to full-year 2013.
Adjusted EBITDA was $53.2 million compared to $90.0 million for 2013
(Refer to the reconciliation below). Operating margin was 0.2% for 2014
compared to 8.6% for 2013. Net loss was $69.0 million in 2014, which
included a non-cash tax charge of $60.4 million related to a tax
valuation allowance, compared to net income of $12.3 million in 2013.
The valuation allowance was recorded based on our projection to be in a
cumulative loss during the three year period ending December 31, 2015 as
a result of the earnings pressure in the near-term and increased
marketing spend due to the conversion to the HVLP pricing strategy.
First Quarter 2015 Financial Outlook:
Based on the current business environment, current trends in the
marketplace and our expectations as we continue the implementation of
our HVLP strategy, and subject to the risks and uncertainties inherent
in forward-looking statements, our outlook for the first quarter of 2015
includes the following:
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Revenue for Q1 2015 is expected to be between $113.0 million and
$114.0 million versus $115.9 million for Q1 2014. As percentages of
revenue, we expect Q1 2015 payroll and related expenses to be
approximately 41.5% and club operating expenses to approximate between
45.3% and 45.5%. We expect general and administrative expenses to
approximate $7.7 million, depreciation and amortization to approximate
$12.0 million and net interest expense to approximate $5.1 million.
Included in interest expense is approximately $675,000 related to the
building financing arrangement, of which $475,000 is non-cash.
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We expect net loss for Q1 2015 to be between $4.8 million and $5.3
million, and loss per share to be in the range of $0.20 per share to
$0.22 per share, assuming approximately 24.5 million weighted average
fully diluted shares outstanding and an effective tax rate of 46%.
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We estimate that Adjusted EBITDA will approximate $7.3 million in Q1
2015.
Our Q1 2015 outlook excludes any amounts related to the review of
strategic alternatives previously announced.
Investing Activities Outlook:
For the year ending December 31, 2015, we currently plan to invest $30.0
million to $34.0 million in capital expenditures. This amount includes
approximately $5.4 million to $6.5 million related to planned 2015
openings, including both clubs and BFX Studio units. Total capital
expenditures also includes approximately $17.0 million to $19.0 million
to continue enhancing or upgrading existing clubs and approximately $5.0
million to $6.0 million principally related to major renovations at
certain clubs. We also expect to invest approximately $3.0 million to
continue to enhance our management information and communication
systems. We expect these capital expenditures to be funded by cash flow
from operations and available cash on hand.
Forward-Looking Statements:
This release contains "forward-looking" statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including, without limitation,
statements under the captions "First Quarter 2015 Financial Outlook" and
"Investing Activities Outlook", statements regarding future financial
results and performance, potential sales revenue, potential club
closures, HVLP conversions, our strategic review process, and other
statements that are predictive in nature or depend upon or refer to
events or conditions, or that include words such as "outlook",
"believes", "expects", "potential", "continues", "may", "will",
"should", "seeks", "approximately", "predicts", "intends", "plans",
"estimates", "anticipates", "target", "could" or the negative version of
these words or other comparable words. These 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 success of our HVLP strategy, the geographic concentration
of the Company's clubs, competitive pressure, the ability to achieve
reductions in operating costs and to continue to integrate acquisitions,
outsourcing of certain aspects of our business, environmental matters,
the application of Federal and state tax laws and regulations, any
security and privacy breaches involving customer data, 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 when 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 one of the
leading owners and operators of fitness clubs in the Northeast and
mid-Atlantic regions of the United States and, through its subsidiaries,
operated 158 fitness clubs as of December 31, 2014, comprising 107 New
York Sports Clubs, 30 Boston Sports Clubs, 13 Washington Sports Clubs
(two of which are partly-owned), five Philadelphia Sports Clubs, and
three clubs located in Switzerland, and one BFX Studio. These clubs
collectively served approximately 484,000 members as of December 31,
2014. For more information on TSI, visit http://www.mysportsclubs.com.
The Company will hold a conference call on Wednesday, February 25, 2015
at 4:30 PM (Eastern) to discuss the fourth quarter and full-year
results. 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 26, 2015. Accompanying slides will be posted
to the Company's website shortly before the conference call.
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
Alerts" section at http://www.mysportsclubs.com.
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TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
As of December 31, 2014 and 2013
(All figures in thousands)
(Unaudited)
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December 31, 2014
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December 31, 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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93,452
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$
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73,598
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Accounts receivable, net
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3,656
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3,704
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Inventory
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573
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473
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Deferred tax assets, net
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724
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17,010
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Prepaid corporate income taxes
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11,588
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6
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Prepaid expenses and other current assets
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12,893
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10,850
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Total current assets
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122,886
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105,641
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Fixed assets, net
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233,644
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243,992
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Goodwill
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32,593
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32,870
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Intangible assets, net
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394
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908
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Deferred tax assets, net
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-
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11,340
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Deferred membership costs
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7,396
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8,725
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Other assets
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12,920
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10,316
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Total assets
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$
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409,833
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$
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413,792
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LIABILITIES AND STOCKHOLDERS' DEFICIT
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Current liabilities:
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Current portion of long-term debt
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$
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3,114
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$
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3,250
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Accounts payable
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2,873
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8,116
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Accrued expenses
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26,702
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31,536
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Accrued interest
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376
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|
737
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Dividends payable
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291
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259
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Deferred revenue
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36,950
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33,913
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Deferred tax liabilities
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300
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-
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Total current liabilities
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70,606
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77,811
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Long-term debt
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296,757
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311,659
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Building financing arrangement
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83,400
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-
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Dividends payable
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211
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407
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Deferred lease liabilities
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53,847
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56,882
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Deferred tax liabilities
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11,999
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-
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Deferred revenue
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2,455
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2,460
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Other liabilities
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8,642
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8,089
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Total liabilities
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527,917
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457,308
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Stockholders' deficit:
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Common stock
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24
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24
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Additional paid-in capital
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(10,055
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)
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(13,846
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)
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Accumulated other comprehensive income
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|
395
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|
2,052
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Accumulated deficit
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(108,448
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)
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(31,746
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)
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Total stockholders' deficit
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(118,084
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)
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(43,516
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)
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Total liabilities and stockholders' deficit
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$
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409,833
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$
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413,792
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TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the quarters and years ended December 31, 2014 and 2013
(All figures in thousands except share and per share data)
(Unaudited)
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Quarter Ended December 31,
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Year Ended December 31,
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2014
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2013
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2014
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2013
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Revenues:
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Club operations
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$
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108,271
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$
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111,672
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$
|
447,871
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|
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$
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464,240
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Fees and other
|
|
|
1,450
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|
|
2,235
|
|
|
|
5,971
|
|
|
5,985
|
|
|
|
|
109,721
|
|
|
113,907
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|
|
|
453,842
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|
|
470,225
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|
Operating Expenses
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|
|
|
|
|
|
|
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|
|
|
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Payroll and related
|
|
|
43,680
|
|
|
42,908
|
|
|
|
177,009
|
|
|
174,894
|
|
Club operating
|
|
|
47,839
|
|
|
46,067
|
|
|
|
192,716
|
|
|
179,683
|
|
General and administrative
|
|
|
7,752
|
|
|
7,446
|
|
|
|
31,352
|
|
|
28,431
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|
Depreciation and amortization
|
|
|
12,018
|
|
|
11,991
|
|
|
|
47,307
|
|
|
49,099
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|
Insurance recovery related to damaged property
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|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
(3,194
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)
|
Impairment of fixed assets
|
|
|
56
|
|
|
147
|
|
|
|
4,569
|
|
|
714
|
|
Impairment of goodwill
|
|
|
-
|
|
|
-
|
|
|
|
137
|
|
|
-
|
|
|
|
|
111,345
|
|
|
108,559
|
|
|
|
453,090
|
|
|
429,627
|
|
Operating (loss) income
|
|
|
(1,624
|
)
|
|
5,348
|
|
|
|
752
|
|
|
40,598
|
|
Loss on extinguishment of debt
|
|
|
493
|
|
|
750
|
|
|
|
493
|
|
|
750
|
|
Interest expense
|
|
|
5,112
|
|
|
6,309
|
|
|
|
19,039
|
|
|
22,617
|
|
Interest income
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
(1
|
)
|
Equity in the earnings of investees and rental income
|
|
|
(582
|
)
|
|
(616
|
)
|
|
|
(2,402
|
)
|
|
(2,459
|
)
|
(Loss) income before (benefit) provision for corporate income taxes
|
|
|
(6,647
|
)
|
|
(1,095
|
)
|
|
|
(16,378
|
)
|
|
19,691
|
|
Provision (benefit) for corporate income taxes
|
|
|
57,041
|
|
|
(400
|
)
|
|
|
52,611
|
|
|
7,367
|
|
Net (loss) income
|
|
|
$
|
(63,688
|
)
|
|
$
|
(695
|
)
|
|
|
$
|
(68,989
|
)
|
|
$
|
12,324
|
|
(Loss) earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
(2.62
|
)
|
|
$
|
(0.03
|
)
|
|
|
$
|
(2.84
|
)
|
|
$
|
0.51
|
|
Diluted
|
|
|
$
|
(2.62
|
)
|
|
$
|
(0.03
|
)
|
|
|
$
|
(2.84
|
)
|
|
$
|
0.50
|
|
Weighted average number of shares used in calculating (loss)
earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
24,310,103
|
|
|
24,103,411
|
|
|
|
24,266,407
|
|
|
24,031,533
|
|
Diluted
|
|
|
24,310,103
|
|
|
24,103,411
|
|
|
|
24,266,407
|
|
|
24,736,961
|
|
Dividends declared per common share
|
|
|
$
|
-
|
|
|
$
|
0.16
|
|
|
|
$
|
0.32
|
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2014 and 2013
(All figures in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2014
|
|
2013
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
$
|
(68,989
|
)
|
|
$
|
12,324
|
|
Adjustments to reconcile net (loss) income to net cash provided by
operating activities
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
47,307
|
|
|
49,099
|
|
Insurance recovery related to damaged property
|
|
|
-
|
|
|
(3,194
|
)
|
Impairment of fixed assets
|
|
|
4,569
|
|
|
714
|
|
Impairment of goodwill
|
|
|
137
|
|
|
-
|
|
Loss on extinguishment of debt
|
|
|
493
|
|
|
750
|
|
Amortization of debt discount
|
|
|
1,304
|
|
|
996
|
|
Amortization of debt issuance costs
|
|
|
627
|
|
|
1,153
|
|
Amortization of building financing costs
|
|
|
31
|
|
|
-
|
|
Noncash rental income, net of non-cash rental expense
|
|
|
(5,399
|
)
|
|
(5,692
|
)
|
Share-based compensation expense
|
|
|
1,911
|
|
|
2,204
|
|
Net change in deferred taxes
|
|
|
40,129
|
|
|
6,120
|
|
Net change in certain operating assets and liabilities, net of
acquisitions
|
|
|
(20,994
|
)
|
|
898
|
|
Decrease in deferred membership costs
|
|
|
1,329
|
|
|
2,086
|
|
Landlord contributions to tenant improvements
|
|
|
1,684
|
|
|
1,472
|
|
Increase (decrease) in insurance reserves
|
|
|
482
|
|
|
(929
|
)
|
Other
|
|
|
137
|
|
|
(613
|
)
|
Total adjustments
|
|
|
73,747
|
|
|
55,064
|
|
Net cash provided by operating activities
|
|
|
4,758
|
|
|
67,388
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(42,054
|
)
|
|
(30,861
|
)
|
Acquisition of businesses
|
|
|
-
|
|
|
(2,939
|
)
|
Insurance recovery related to damaged property
|
|
|
-
|
|
|
3,194
|
|
Net cash used in investing activities
|
|
|
(42,054
|
)
|
|
(30,606
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
Proceeds from building financing arrangement
|
|
|
83,400
|
|
|
-
|
|
Building financing arrangement costs
|
|
|
(3,160
|
)
|
|
-
|
|
Principal payments on 2013 Term Loan Facility
|
|
|
(16,716
|
)
|
|
-
|
|
Proceeds from 2013 Senior Credit Facility, net of original issue
discount
|
|
|
-
|
|
|
323,375
|
|
Repayment of 2011 Senior Credit Facility
|
|
|
-
|
|
|
(315,743
|
)
|
Term loan issuance and amendment related financing costs
|
|
|
-
|
|
|
(4,356
|
)
|
Debt issuance costs
|
|
|
-
|
|
|
(763
|
)
|
Cash dividends paid
|
|
|
(7,877
|
)
|
|
(4,088
|
)
|
Proceeds from stock option exercises
|
|
|
133
|
|
|
600
|
|
Tax benefit from restricted stock vesting
|
|
|
1,723
|
|
|
-
|
|
Net cash provided by (used in) financing activities
|
|
|
57,503
|
|
|
(975
|
)
|
Effect of exchange rate changes on cash
|
|
|
(353
|
)
|
|
33
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
19,854
|
|
|
35,840
|
|
Cash and cash equivalents beginning of period
|
|
|
73,598
|
|
|
37,758
|
|
Cash and cash equivalents end of period
|
|
|
$
|
93,452
|
|
|
$
|
73,598
|
|
Summary of the change in certain operating assets and liabilities:
|
|
|
|
|
|
|
|
Decrease (increase) in accounts receivable
|
|
|
$
|
25
|
|
|
$
|
2,859
|
|
Increase in inventory
|
|
|
(101
|
)
|
|
(36
|
)
|
Increase in prepaid expenses and other current assets
|
|
|
(1,549
|
)
|
|
(1,278
|
)
|
(Decrease) increase in accounts payable, accrued expenses and
accrued interest
|
|
|
(9,856
|
)
|
|
3,089
|
|
Change in prepaid corporate income taxes and corporate income taxes
payable
|
|
|
(12,773
|
)
|
|
1,604
|
|
Increase (decrease) in deferred revenue
|
|
|
3,260
|
|
|
(5,340
|
)
|
Net change in certain working capital components
|
|
|
$
|
(20,994
|
)
|
|
$
|
898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
Reconciliation of Net (Loss) Income to EBITDA and Adjusted
EBITDA
For the Quarters and Full Years Ended December 31, 2014 and 2013
(All figures in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
December 31,
|
|
|
Full-Year Ended
December 31,
|
|
|
|
2014
|
|
2013
|
|
|
2014
|
|
2013
|
Net (loss) income
|
|
|
$
|
(63,688
|
)
|
|
$
|
(695
|
)
|
|
|
$
|
(68,989
|
)
|
|
$
|
12,324
|
|
Interest expense, net of interest income
|
|
|
5,112
|
|
|
6,309
|
|
|
|
19,039
|
|
|
22,616
|
|
Provision (benefit) for corporate income taxes
|
|
|
57,041
|
|
|
(400
|
)
|
|
|
52,611
|
|
|
7,367
|
|
Depreciation and amortization
|
|
|
12,018
|
|
|
11,991
|
|
|
|
47,307
|
|
|
49,099
|
|
EBITDA
|
|
|
10,483
|
|
|
17,205
|
|
|
|
49,968
|
|
|
91,406
|
|
Net occupancy loss (gain) related to club closure
|
|
|
170
|
|
|
-
|
|
|
|
(1,442
|
)
|
|
-
|
|
Legal and other expenses related to club closure
|
|
|
136
|
|
|
-
|
|
|
|
262
|
|
|
-
|
|
Legal judgment
|
|
|
(214
|
)
|
|
-
|
|
|
|
-
|
|
|
-
|
|
Non-cash rental income from former tenant (1)
|
|
|
(492
|
)
|
|
-
|
|
|
|
(596
|
)
|
|
-
|
|
Rent related to building financing arrangement (2)
|
|
|
(187
|
)
|
|
-
|
|
|
|
(229
|
)
|
|
-
|
|
Insurance recovery related to damaged property
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
(3,194
|
)
|
Deferred rental income
|
|
|
-
|
|
|
(424
|
)
|
|
|
-
|
|
|
(424
|
)
|
Impairment of fixed assets
|
|
|
56
|
|
|
147
|
|
|
|
4,569
|
|
|
714
|
|
Impairment of goodwill
|
|
|
-
|
|
|
-
|
|
|
|
137
|
|
|
-
|
|
Payroll bonus payment in connection with dividend (3)
|
|
|
-
|
|
|
126
|
|
|
|
-
|
|
|
126
|
|
Expenses related to the East 86th Street building financing
arrangement (4)
|
|
|
-
|
|
|
223
|
|
|
|
-
|
|
|
223
|
|
Severance
|
|
|
-
|
|
|
388
|
|
|
|
-
|
|
|
388
|
|
Loss on extinguishment of debt
|
|
|
493
|
|
|
750
|
|
|
|
493
|
|
|
750
|
|
Adjusted EBITDA
|
|
|
$
|
10,445
|
|
|
$
|
18,415
|
|
|
|
$
|
53,162
|
|
|
$
|
89,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
In connection with the East 86th Street building financing
arrangement, we continue to record non-cash rental income from our
former tenant.
|
|
|
|
(2)
|
|
Rent paid in connection with our club at the East 86th Street
property is recorded as interest expense on the consolidated
statement of operations.
|
|
|
|
(3)
|
|
In connection with the dividend payments in Q4 2013, certain
option holders holding vested in-the-money options were paid a
cash bonus equivalent.
|
|
|
|
(4)
|
|
In connection with the East 86th Street building financing
arrangement, legal fees totaling $223 were incurred in Q4 2013.
|
|
|
|
|
|
|
|
|
|
TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
Reconciliation of Net Loss to EBITDA and Adjusted EBITDA
For the Quarter Ending March 31, 2015 and the Quarter Ended
March 31, 2014
(All figures in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Estimated
Q1 2015
|
|
Q1 2014
|
Net loss
|
|
|
$
|
(4,900
|
)
|
|
$
|
(3,515
|
)
|
Interest expense, net of interest income
|
|
|
5,100
|
|
|
4,711
|
|
Benefit for corporate income taxes
|
|
|
(4,200
|
)
|
|
(2,699
|
)
|
Depreciation and amortization
|
|
|
12,000
|
|
|
11,798
|
|
EBITDA
|
|
|
8,000
|
|
|
10,295
|
|
Rental income from former tenant
|
|
|
(500
|
)
|
|
-
|
|
Rent related to building financing arrangement
|
|
|
(200
|
)
|
|
-
|
|
Impairment of fixed assets
|
|
|
-
|
|
|
3,623
|
|
Impairment of goodwill
|
|
|
-
|
|
|
137
|
|
Adjusted EBITDA
|
|
|
$
|
7,300
|
|
|
$
|
14,055
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures - EBITDA and Adjusted EBITDA
EBITDA consists of net income (loss) plus interest expense (net of
interest income), provision (benefit) for corporate income taxes, and
depreciation and amortization. Adjusted EBITDA is the Company's EBITDA
excluding certain items, such as any fixed asset or goodwill
impairments, rental income from former tenant, rent related to building
financing arrangement costs and loss on extinguishment of debt. In the
case of Q4 2013 and full-year 2013, Adjusted EBITDA also excludes
executive severance costs, expenses related to the sale of our East 86th Street
property, a payroll bonus in connection with the quarterly dividend paid
and a correction of an immaterial prior period error related to the
accounting for deferred rental income, and in the full-year 2013,
excludes an insurance recovery received related to damaged property.
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 net income (loss),
operating income (loss), cash flows from operating activities or other
cash flow data prepared in accordance with GAAP. The items excluded from
EBITDA, but included in the calculation of reported net income and
operating income, are significant and must be considered in performing a
comprehensive assessment of our performance.
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
$12.0 million in the quarter ended December 31, 2014. 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 assessing our
performance.
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 performance. 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 2013 Senior Credit Facility, as amended.
-
Our discussions with prospective lenders and investors in recent
years, including in relation to our 2013 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 provides a performance measure to
assess results without regard to capital structure and taxes.
-
Quarterly, equity analysts who follow our company often report on our
EBITDA with respect to valuation commentary.
Adjusted EBITDA has similar uses and limitations as EBITDA. We do not,
and investors should not, place undue reliance on EBITDA or Adjusted
EBITDA as a measure of our performance.
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