Town Sports International Holdings, Inc. (“TSI” or the
“Company”) (NASDAQ: CLUB) today reported results for the first
quarter of 2020.
TSI’s earnings for the first quarter of 2020 are summarized
below. To become fully apprised of our results, shareholders are
urged to read our Form 10-Q for the quarterly period ended March
31, 2020 posted at https://www.townsportsinternational.com.
COVID-19 Impact
On March 11, 2020, the World Health Organization declared a
global pandemic related to the COVID-19 outbreak. The pandemic has
caused unprecedented economic volatility and uncertainty which has
negatively impacted our recent operating results. In response to
the COVID-19 pandemic, we proactively closed all of our clubs
system wide by March 22, 2020, the majority of which remain closed
through the date of this filing.
We have not recognized first quarter revenue related to monthly
membership dues collected in March before clubs closed, we plan to
re-open clubs once local authorities issue guidelines authorizing
the reopening of fitness centers and we determine it is safe to do
so. The March deferrals have had a significant impact on our first
quarter financial results. Due to the outbreak of COVID-19, we have
taken measures to protect the health and safety of our employees,
including having employees work remotely, where possible. The
extent of the impact of the COVID-19 pandemic on our operational
and financial performance will depend on future developments,
including the duration and spread of the pandemic and related
restrictions put in place by the “United States”, (U.S.) and
international governments, all of which are uncertain and cannot be
predicted. We plan to re-open clubs once state and local
governments issue guidelines authorizing the re-opening of fitness
centers and we determine it is safe to do so. The current outbreak
of the novel coronavirus (COVID-19) has severely disrupted the
global economy and may have, and the emergence of other epidemic or
pandemic crises could have, material adverse effects on our
business, results of operations or financial condition.
The duration of the COVID-19 pandemic and the extent of its
impact on our business cannot be reasonably estimated at this time.
We anticipate that the COVID-19 pandemic will continue to
negatively impact our operating results in future periods.
The limited information that follows in this press release is
not adequate for making informed investment decisions. The
unaudited condensed consolidated Statements of Operations are
included below.
Dollar amounts in this release are in thousands, except for
share and per share amounts. Amounts are unaudited.
Condensed Consolidated Statements of
Operations
First Quarter
2020
2019
Revenues:
Club operations
$
96,809
$
115,140
Fees and other
1,270
1,458
98,079
116,598
Operating Expenses:
Payroll and related
41,285
45,323
Club operating
54,201
53,576
General and administrative
9,177
6,870
Depreciation and amortization
8,704
9,585
Impairment of fixed assets
46,822
—
Impairment of right-of-use assets
62,865
—
Impairment of intangible assets
17,408
—
240,462
115,354
Operating loss
(142,383
)
1,244
Interest expense
3,016
3,452
Interest income
(8
)
(28
)
Equity in the earnings of investees
(30
)
(55
)
Loss before provision for corporate income
taxes
(145,361
)
(2,125
)
(Benefit) provision for corporate income
taxes
(8,598
)
74
Net loss including non-controlling
interests
(136,763
)
(2,199
)
Less: net (loss) income attributable to
non-controlling interests
(440
)
(150
)
Net loss attributable to Town Sports
International Holdings, Inc. and subsidiaries
$
(136,323
)
$
(2,049
)
Loss per share:
Basic
$
(4.98
)
$
(0.08
)
Diluted
$
(4.98
)
$
(0.08
)
Weighted average number of shares used in
calculating loss per share:
Basic
27,381,231
26,443,946
Diluted
27,381,231
26,443,946
Reconciliation of Net Loss to EBITDA
and Adjusted EBITDA
First Quarter
2020
2019
Net loss including non-controlling
interests
$
(136,763
)
$
(2,199
)
Less: net (loss) income attributable to
non-controlling interests
(440
)
(150
)
Net loss attributable to TSI and
subsidiaries
(136,323
)
(2,049
)
Interest expense, net of interest
income
3,009
3,424
(Benefit) provision for corporate income
taxes
(8,598
)
74
Depreciation and amortization
8,704
9,585
EBITDA(1)
(133,208
)
11,034
Non-cash deferred base rent
—
519
Impairment of fixed assets
46,822
—
Impairment of right-of-use assets
62,865
—
Impairment of intangible assets
17,408
—
Net costs related to closing clubs and
other cost-savings initiatives
1,763
(613
)
Incremental expense related to the
adoption of ASC 606(2)
—
410
Separation expense related to headcount
reductions and former executive officers
327
—
Adjusted EBITDA(1)
$
(4,023
)
$
11,350
(1)
EBITDA and Adjusted EBITDA for the first
quarters of 2020 and 2019 include costs related to acquisitions of
$102 and $149, respectively.
(2)
On January 1, 2018, the Company adopted
FASB Accounting Standards Codification Topic 606 and all the
related amendments (“ASC 606”) which requires the Company to defer
costs related to obtaining members and expense those costs over the
estimated membership life. Under previous guidance, these
membership costs were expensed at the time of the respective
sale.
Non-GAAP Financial Measures - EBITDA and Adjusted
EBITDA
EBITDA consists of net income (loss) attributable to TSI and
subsidiaries plus interest expense (net of interest income),
provision for corporate income taxes, and depreciation and
amortization. Adjusted EBITDA is TSI’s EBITDA excluding certain
items, such as any fixed asset or goodwill impairments, incremental
expense related to the adoption of ASC 606, separation expense
related to headcount reductions and former executive officers, as
well as net costs related to closing clubs and other cost-savings
initiatives. 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) attributable to TSI and subsidiaries, 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
attributable to TSI and subsidiaries and operating income, are
significant and must be considered in performing a comprehensive
assessment of our performance.
Investors or prospective investors in TSI 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 TSI’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.
Adjusted EBITDA has similar uses and limitations as EBITDA. We
have excluded additional items in the calculation of Adjusted
EBITDA because management believes that this metric is useful in
making period to period comparisons of our performance. We do not,
and investors should not, place undue reliance on EBITDA or
Adjusted EBITDA as a measure of our performance.
Forward-Looking Statements
This release may contain “forward-looking” statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
including, without limitation, statements regarding future
financial results and performance, potential club closures, results
of cost-savings initiatives, and other statements that are
predictive in nature or depend upon or refer to events or
conditions, or that include words such as “may,” “should,” or the
negative version of these words or other comparable words.
Forward-looking statements speak only as of the date when made, and
TSI 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.
Town Sports International Holdings, Inc. is a diversified
holding company with subsidiaries engaged in a number of business
and investment activities. The Company’s largest operating
subsidiary has been involved in the fitness industry since 1973 and
has grown to become one of the largest owners and operators of
fitness clubs in the Northeast region of the United States. TSI’s
corporate structure provides flexibility to make investments across
a broad spectrum of industries in order to create long-term value
for shareholders.
Until further notice, TSI will not be hosting conference calls
to discuss quarterly results. TSI intends to continue to issue
press releases reporting quarterly earnings.
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version on businesswire.com: https://www.businesswire.com/news/home/20200904005488/en/
Investor Contact: (917) 765-9974
Investor.relations@town-sports.com
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