Town Sports International Reports on the Quarter Ended March 31, 2003
NEW YORK, May 6 /PRNewswire/ -- Town Sports International (TSI), a leading owner and operator of 129 health clubs in major cities from Washington, DC north through New England, today announced its results for the quarter ended March 31, 2003. Revenues for the three months ended March 31, 2003 were $86.9 million, an increase of $10.0 million, or 13.0% over the same quarter of 2002. During the quarter, TSI's mature clubs (those in operation for 24 months or longer) experienced revenue growth of $1.3 million an increase of 1.8%. The twenty-three clubs opened or acquired within the last twenty-four months contributed to $7.4 million of the increase in revenue in the quarter ended March 31, 2003. The Company received a $1.3 million on-account business interruption insurance payment in January 2003. These insurance proceeds were received in connection with the Company's four clubs that were temporarily closed due to the events of September 11, 2001, and such proceeds have been recorded with fees and other revenue. The Company's EBITDA (earnings before interest, taxes, and depreciation) increased by 34.0% to $22.4 million this quarter from $16.7 million in last year's first quarter. Operating income for the quarter was $14.2 million compared to $8.9 million in the first quarter of 2002, while net interest expense increased to $4.2 million from $4.1 million. "Over the past year we have decreased the rate of new club openings, focusing instead on the operations of our existing clubs, as well as support functions," said Bob Giardina, CEO of TSI. "Typically, opening new clubs initially has a negative effect on our financial results. Therefore, the decline in the rate of new club openings has had a positive impact on EBITDA and EBITDA margins, when compared to the same quarter last year." The Company recorded net income for the quarter of $5.8 million compared to $1.7 million for the comparable period in the prior year. "I am pleased to report we completed a $255.0 million Senior Note offering on April 16, 2003 as part of an overall refinancing of the Company. The coupon is 9-5/8% and the notes are rated B2/B- and mature April 15, 2011. In addition, we entered into a new senior secured revolving credit facility providing for borrowings of up to $50.0 million," said Richard Pyle, CFO of TSI. Certain statements in this release are forward-looking statements, including without limitation, statements regarding future financial results and performance and potential sales revenue. These statements are subject to various risks and uncertainties, many of which are outside our control, including the level of market demand for our 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 by the Company. The information contained herein represents management's best judgment as of the date hereof based on information currently available. However, we do not intend to update this information to reflect development or information obtained after the date hereof and disclaim any legal obligation to the contrary. Contact: Richard Pyle, Office of the President/CFO of Town Sports International, 1-212-246-6700 Reconciliation of Net Cash Provided by Operations and Net Income to EBITDA Three months ended March 31, 2002 2003 Net cash provided by operating activities $20,569 $23,606 Compensation expense incurred in connection with stock options (281) (187) Depreciation and amortization (7,857) (8,299) Depreciation and amortization of discontinued clubs (108) -- Goodwill impairment and club closure costs (1,301) -- Noncash rental expense, net of noncash rental income (713) (522) Share of net income in affiliated companies 157 211 Amortization of debt issuance costs (471) (597) Net change in certain working capital components (10,573) (5,564) Increase (decrease) in deferred tax asset 1,413 (2,903) Increase in deferred membership costs 856 160 Other (26) (64) Net income 1,665 5,841 Depreciation and amortization 7,857 8,299 Interest expense, net of interest income 4,085 4,210 Provision for corporate income tax 2,387 4,099 Loss from discontinued operations of closed clubs 66 -- Cumulative effect of a change in accounting principle 689 -- EBITDA $16,749 $22,449 EBITDA Margin 21.78% 25.58% EBITDA is defined as earnings before interest, taxes, depreciation, amortization, extraordinary charges, discontinued operations, and a cumulative effect of a change in accounting principle. EBITDA is presented because we believe it provides useful information regarding our operating performance and financial condition. We use EBITDA to determine our ability to incur and service additional debt and as a measure of operating performance. 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 ("GAAP") or as a measure of our profitability or liquidity. Additionally, investors should be aware that EBITDA may not be comparable to similarly titled measures presented by other companies. TOWN SPORTS INTERNATIONAL, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS All figures $'000, except share data December 31, 2002 and March 31, 2003 December 31, March 31, 2002 2003 ASSETS (Unaudited) Current assets: Cash and cash equivalents $5,551 $9,052 Accounts receivable, net 1,333 636 Inventory 1,132 1,021 Prepaid corporate income taxes 3,012 2,404 Prepaid expenses and other current assets 4,430 4,247 Total current assets 15,458 17,360 Fixed assets, net 210,823 210,606 Goodwill, net 45,531 45,676 Intangible assets, net 1,675 1,315 Deferred tax assets, net 20,254 17,350 Deferred membership costs 14,408 14,569 Other assets 6,101 5,641 Total assets $314,250 $312,517 LIABILITIES, REDEEMABLE PREFERRED STOCK, and STOCKHOLDERS' DEFICIT Current liabilities: Current portion of long-term debt and capital lease obligations $5,178 $4,991 Accounts payable 5,328 4,540 Accrued expenses 21,634 22,581 Deferred revenue 26,510 30,532 Total current liabilities 58,650 62,644 Long-term debt and capital lease obligations 155,765 143,847 Deferred lease liabilities 23,644 24,295 Deferred revenue 3,435 3,623 Other liabilities 7,530 7,395 Total liabilities 249,024 241,804 REDEEMABLE PREFERRED STOCK Redeemable senior preferred stock 62,125 64,089 Series A preferred stock 34,841 36,061 96,966 100,150 Stockholders' deficit Series B preferred stock 303 9,005 Class A voting common stock 1 1 Paid-in capital (32,149) (41,130) Unearned compensation (278) (268) Accumulated other comprehensive income 293 338 Retained earnings 90 2,617 Total stockholders' deficit (31,740) (29,437) Total liabilities, redeemable preferred stock and stockholders' deficit: $314,250 $312,517 TOWN SPORTS INTERNATIONAL, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the three months ended March 31, 2002 and 2003 All figures $'000 (Unaudited) Three months ended March 31, 2002 2003 Revenues: Club operations $75,940 $84,690 Fees and other 934 2,212 76,874 86,902 Operating expenses: Payroll and related 31,034 32,770 Club operating 24,150 26,662 General and administrative 4,941 5,021 Depreciation and amortization 7,857 8,299 67,982 72,752 Operating income 8,892 14,150 Interest expense 4,124 4,232 Interest income (39) (22) Income from continuing operations before provision for corporate income taxes 4,807 9,940 Provision for corporate income taxes 2,387 4,099 Income from continuing operations 2,420 5,841 Loss on discontinued operations, net of income tax benefit of $48 (66) -- Cumulative effect of a change in accounting principle, net of income tax benefit of $612 (689) -- Net income $1,665 $5,841 TOWN SPORTS INTERNATIONAL, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended March 31, 2002 and 2003 All figures $'000 (Unaudited) Three months ended March 31, 2002 2003 Cash flows from operating activities: Net income $1,665 $5,841 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,965 8,299 Goodwill impairment write-off 1,301 -- Compensation expense in connection with stock options 281 187 Noncash rental expense, net of noncash rental income 713 522 Share of net income in affiliated companies (157) (211) Amortization of debt issuance costs 471 597 Change in certain working capital components 10,573 5,564 Decrease (increase) in deferred tax asset (1,413) 2,903 Increase in deferred membership costs (856) (160) Other 26 64 Total adjustments 18,904 17,765 Net cash provided by operating activities 20,569 23,606 Cash flows from investing activities: Capital expenditures, net of effects of acquired businesses (20,101) (7,418) Acquisition of businesses (275) -- Landlord contributions 1,283 -- Net cash used in investing activities (19,093) (7,418) Cash flows from financing activities: Net line of credit repayment -- (10,500) Repurchase of preferred stock -- (583) Repayment of borrowings (1,105) (1,604) Net cash used in financing activities (1,105) (12,687) Net decrease in cash and cash equivalents 371 3,501 Cash and cash equivalents at beginning of period 5,458 5,551 Cash and cash equivalents at end of period $5,829 $9,052
SOURCE Town Sports International
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