NEW YORK—Revenue was up in the fourth quarter 2006 and for the year for Town Sports International Holdings Inc. (TSI), according to the company’s earnings released yesterday.
The company plans for continued growth this year with the addition of a planned 15 clubs. The company also raised its 2007 earnings guidance based on a recent refinancing of its debt, which will save the company approximately $3.1 million on a pre-tax basis in reduced interest expense. TSI now expects net income to be between $13.8 million and $14.8 million for 2007, when compared with 2006's net income of $4.6 million.
It also expects revenues for 2007 to be in the range of $475.0 million to $480.0 million, representing 10 percent to 11 percent growth over 2006, driven by club membership and ancillary revenue growth, the maturation of recently opened clubs as well as new clubs to be opened during the year.
Fourth quarter 2006 revenue grew 11.8 percent to $110.2 million from $98.5 million for the same period last year. For the year ended December 31, 2006, revenue grew 11.5 percent to $433.1 million from $388.6 million for the prior year. Comparable club revenue increased 7.9 percent during the fourth quarter compared to the same period in the prior year.
“We finished our first year as a publicly traded company with accelerated sales growth and with average annual club revenue surpassing the $3.0 million mark for the first time in the company's history,” Robert Giardina, chief executive officer, says. “We also opened the 100th New York Sports Clubs facility in early 2007, further solidifying our number-one position in the region, and have a pipeline that is set to deliver 10 percent club growth in 2007. With all of these achievements, plus the strong comparable-club revenue growth, ancillary revenue growth, and performance of our multi-recreational facilities in the fourth quarter, we are confident that our overall fundamentals are as sound as they have ever been."
The increase in revenue was driven by growth in membership revenue and ancillary club revenue, Giardina says.
Membership revenue for fourth quarter 2006 grew 11.2 percent to $91.8 million from $82.5 million in fourth quarter 2005. Ancillary club revenue for fourth quarter 2006 grew 21.4 percent to $17.6 million from $14.5 million during the same period last year.
Comparable club revenue increased by 7.9 percent during fourth quarter 2006 compared to fourth quarter 2005. This increase in comparable club revenue is due to a 4.4 percent increase in membership, a 1.7 percent increase in price, and a 2.0 percent increase in ancillary revenue offset by a 0.2 percent decrease in initiation fee revenue recognized as a direct result of the company’s policy to amortize membership initiation fees over a 30-month rather than a 24-month period, which was implemented in the first quarter 2006. Operating expenses increased by 10.0 percent to $96.4 million in fourth quarter 2006 compared to $87.6 million in the same period the prior year.
TSI owns health clubs located primarily in major cities from Washington, DC north through New England, operating under the brand names New York Sports Clubs, Boston Sports Clubs, Washington Sports Clubs and Philadelphia Sports Clubs. For more details about TSI’s earnings, click here.