Delaware | 7997 | 20-0640002 | ||
(State or other jurisdiction of
incorporation or organization) |
(Primary standard industrial
classification code number) |
(I.R.S. employer
identification number) |
Julie M.
Allen, Esq.
|
William M. Hartnett, Esq. | |
James P.
Gerkis, Esq.
|
Cahill Gordon & Reindel llp | |
Proskauer Rose LLP
|
80 Pine Street | |
1585 Broadway
|
New York, New York 10005 | |
New York, New York
10036
|
Telephone: (212) 701-3000 | |
Telephone:
(212) 969-3000
|
Facsimile: (212) 269-5420 | |
Facsimile:
(212) 969-2900
|
Title of Each Class | Proposed Maximum | Proposed Maximum | Amount of | |||||||||
of Securities to be | Amount to be | Offering Price | Aggregate Offering | Registration | ||||||||
Registered | Registered(1) | Per Share(2) | Price(2) | Fee(3) | ||||||||
Common Stock, par value
$0.001 per share
|
10,097,500 | $14.00 | $141,365,000 | $23,994.75 | ||||||||
(1) | Includes 1,300,000 shares for the account of certain selling stockholders. Also includes 1,147,500 shares which may be sold for the account of selling certain other stockholders pursuant to the underwriters over-allotment option. |
(2) | Estimated solely for the purpose of the registration fee for this offering in accordance with Rule 457(a) of the Securities Act. |
(3) | This amount has been paid previously. |
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. |
Proceeds to | ||||||||||||||||
Underwriting | Proceeds to | Selling | ||||||||||||||
Discounts and | Town Sports | Stockholders | ||||||||||||||
Price to Public | Commissions | (before expenses) | (before expenses) | |||||||||||||
Per share
|
$ | $ | $ | $ | ||||||||||||
Total
|
$ | $ | $ | $ |
Credit Suisse | Deutsche Bank Securities |
Piper Jaffray |
RBC Capital Markets |
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F-1 | ||||||||
EX-5.1: OPINION OF PROSKAUER ROSE LLP | ||||||||
EX-10.7: AMENDMENT NO. 2 TO THE STOCKHOLDERS AGREEMENT | ||||||||
EX-10.9.1: AMENDMENT NO. 2 TO THE REGISTRATION RIGHTS AGREEMENT | ||||||||
EX-23.1: CONSENT OF PRICEWATERHOUSECOOPERS LLP | ||||||||
EX-23.2: CONSENT OF SQUIRE, LEMKIN + O'BRIEN LLP |
1
2
3
4
5
6
Table of Contents
Table of Contents
Table of Contents
Table of Contents
we grew our number of clubs from nine to 141;
we grew our revenues at a compound annual growth rate of 25.8%,
from $10.8 million to $388.6 million;
we improved our annual operating income from $0.1 million
to $40.3 million;
we moved from an annual net loss of $0.6 million to net
income of $1.8 million; and
we grew our EBITDA at a compound annual growth rate of 34.3%,
from $0.8 million to $81.6 million.
Table of Contents
Table of Contents
7
consummate the tender offer for up to
$85.0 million aggregate principal amount of TSI,
Inc.s senior notes;
redeem up to 35% of our senior discount notes; and
pay related fees, premiums and expenses.
On a pro forma basis after giving effect to this offering and
our application of the net proceeds therefrom, our consolidated
debt as of March 31, 2006 would have been approximately
$276.9 million.
We will not receive any proceeds from the sale of shares by any
of the selling stockholders.
NASDAQ National Market symbol
CLUB
excludes 1,230,964 shares of common stock issuable upon
exercise of options outstanding as of May 1, 2006 at a
weighted average exercise price of $6.20 per share;
excludes an additional 58,478 shares of common stock
reserved for issuance under our existing stock option plan and
an additional 1,300,000 shares of common stock reserved for
issuance under the stock incentive plan that we will adopt in
connection with this offering;
assumes no exercise of stock options after May 1, 2006;
assumes no exercise of the underwriters over-allotment
option; and
has been adjusted for the 14-for-one stock split of our common
stock and the reclassification of our presently designated
Class A common stock into undesignated common stock that we
will effect prior to the closing of this offering.
Table of Contents
8
9
10
Three Months Ended
Pro Forma
Year Ended December 31,
March 31,
Twelve Months
Twelve Months
Ended
Ended
2003
2004
2005
2005
2006
March 31, 2006
March 31, 2006
$
341,172
$
353,031
$
388,556
$
93,846
$
104,027
$
398,737
$
398,737
298,576
318,739
348,303
84,261
93,614
357,656
357,656
42,596
34,292
40,253
9,585
10,413
41,081
41,081
7,429
(3,905
)
1,769
179
(135
)
1,455
7,970
$
(3,555
)
$
(4,689
)
$
1,769
$
179
$
(135
)
$
1,455
$
7,970
$
(2.85
)
$
(3.61
)
$
1.35
$
0.14
$
(0.10
)
$
1.11
$
0.31
$
(2.85
)
$
(3.61
)
$
1.35
$
0.14
$
(0.10
)
$
1.11
$
0.31
1,247,674
1,299,332
1,309,616
1,312,289
1,309,123
1,309,123
25,977,722
1,247,674
1,299,332
1,312,473
1,314,562
1,309,123
1,313,072
26,033,008
As of March 31, 2006
Actual
Pro Forma
$
69,724
$
15,875
(63,426
)
(56,771
)
445,998
389,207
414,977
276,921
(115,768
)
(27,848
)
Table of Contents
Three Months
Twelve Months
Year Ended December 31,
Ended March 31,
Ended
March 31,
2003
2004
2005
2005
2006
2006
$
71,119
$
72,654
$
81,579
$
19,794
$
21,232
$
83,017
20.8
%
20.6
%
21.0
%
21.1
%
20.4
%
20.8
%
$
59,575
$
64,742
$
71,035
$
17,282
$
19,722
$
73,475
Three Months
Twelve Months
Year Ended December 31,
Ended March 31,
Ended
March 31,
2003
2004
2005
2005
2006
2006
3
5
5
3
5
7
3
2
2
(3
)
(3
)
(1
)
(4
)
127
135
139
138
143
143
129
137
141
140
145
145
342,000
383,000
409,000
398,000
438,000
438,000
3.3
%
2.5
%
6.9
%
6.0
%
7.6
%
7.3
%
1.6
%
2.1
%
5.8
%
4.8
%
5.9
%
6.4
%
$
2,680
$
2,680
$
2,816
$
685
$
733
$
2,869
987
960
968
240
242
971
(1)
After adding accreted dividends on preferred stock for the years
ended December 31, 2003 and 2004.
(2)
The diluted weighted average number of shares used in
calculating earnings (loss) per share is the weighted average
number of shares of common stock plus the weighted average
conversion of any dilutive common stock equivalents, such as the
assumed weighted average exercise of dilutive stock options
using the treasury stock method. For the years ended
December 31, 2003 and 2004, these common stock equivalents
were antidilutive and have been excluded from the diluted
weighted average number of shares. For the year ended
December 31, 2005, the shares issuable upon the exercise of
stock options were dilutive. The number of shares excluded from
the computation of diluted earnings per share was 52,807 and
15,481 for the years ended December 31, 2003 and 2004,
respectively, and 16,542 for the three months ended
March 31, 2006.
The following table summarizes the weighted average number of
shares of common stock outstanding for basic and diluted
earnings per share computations:
Three Months
Pro Forma
Ended
Twelve Months
Twelve Months
Year Ended December 31,
March 31,
Ended
Ended
March 31,
March 31,
2003
2004
2005
2005
2006
2006
2006
1,247,674
1,299,332
1,309,616
1,312,289
1,309,123
1,309,123
25,977,722
2,857
2,273
3,949
55,286
1,247,674
1,299,332
1,312,473
1,314,562
1,309,123
1,313,072
26,033,008
(3)
EBITDA consists of net income (loss) plus interest expense, net
of interest income, provision for corporate income taxes and
depreciation and amortization. This term, as we define 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 generally accepted accounting principles
(GAAP). We use EBITDA as a measure of operating
performance. EBITDA should not be considered as a substitute for
net income, operating income, cash flows provided by operating
activities or other income or cash flow data prepared in
accordance with GAAP. The funds depicted by EBITDA are not
necessarily available for discretionary use if they are reserved
for particular capital purposes, to
Table of Contents
maintain compliance with debt covenants, to service debt or to
pay taxes. Additional details related to EBITDA are provided in
Managements Discussion and Analysis of Financial
Condition and Results of Operations Non-GAAP
Financial Measures.
The following table reconciles net income (loss), the most
directly comparable GAAP measure, to EBITDA:
Three Months
Ended
Pro Forma
Year Ended December 31,
March 31,
Twelve Months
Twelve Months
Ended
Ended
2003
2004
2005
2005
2006
March 31, 2006
March 31, 2006
$
7,429
$
(3,905
)
$
1,769
$
179
$
(135
)
$
1,455
$
7,970
23,226
38,600
39,208
9,750
9,962
39,420
27,860
5,537
1,090
1,020
126
1,019
1,913
6,958
(1,369
)
(1,493
)
(1,744
)
(470
)
(433
)
(1,707
)
(1,707
)
7,773
42,596
34,292
40,253
9,585
10,413
41,081
41,081
1,369
1,493
1,744
470
433
1,707
1,707
(7,773
)
34,927
36,869
39,582
9,739
10,386
40,229
40,229
$
71,119
$
72,654
$
81,579
$
19,794
$
21,232
$
83,017
$
83,017
(4)
EBITDA margin is the ratio of EBITDA to total revenue.
(5)
Includes wholly owned and partly owned clubs. In addition, as of
December 31, 2005 and March 31, 2006, we managed five
university fitness clubs in which we did not have an equity
interest.
(6)
Represents members at wholly owned and partly owned clubs.
(7)
Total revenue for a club is included in comparable club revenue
increase beginning on the first day of the thirteenth full
calendar month of the clubs operation.
(8)
We define mature club revenue as revenue from clubs operated by
us for more than 24 months.
(9)
Revenue per weighted average club is calculated as total revenue
divided by the product of the total number of clubs and their
weighted average months in operation as a percentage of the
period.
(10)
Average revenue per member is total revenue for the period
divided by the average number of memberships for the period,
where average number of memberships for the period is derived by
dividing the sum of the total memberships at the end of each
month during the period by the total number of months in the
period.
Table of Contents
We may be unable to attract and retain members, which could have a negative effect on our business. |
Our geographic concentration heightens our exposure to adverse regional developments. |
The level of competition in the fitness club industry could negatively impact our revenue growth rates and profits. |
11
If we are unable to identify and acquire suitable sites for new clubs, our revenue growth rate and profits may be negatively impacted. |
We may experience prolonged periods of losses in our recently opened clubs. |
We could be subject to claims related to health or safety risks at our clubs. |
Loss of key personnel and/or failure to attract and retain highly qualified personnel could make it more difficult for us to generate cash flow from operations and service our debt. |
We are subject to extensive government regulation and changes in these regulations could have a negative effect on our financial condition. |
12
Terrorism and the uncertainty of armed conflicts may have a material adverse effect on clubs and our operating results. |
Disruptions and failures involving our information systems could cause customer dissatisfaction and adversely affect our billing and other administrative functions. |
13
The opening of new clubs by us in existing locations may negatively impact our comparable club revenue increases and our operating margins. |
Our continued growth could place strains on our management, employees, information systems and internal controls, which may adversely impact our business and the value of your investment. |
Our cash and cash equivalents are concentrated in one bank. |
The requirements of being a company with listed public equity may strain our resources and distract our management. |
14
Insiders will continue to have substantial control over us after this offering, which could limit your ability to influence the outcome of key transactions, including a change of control. |
Our substantial leverage may impair our financial condition and we may incur significant additional debt. |
| making it more difficult for us to satisfy our obligations with respect to our outstanding indebtedness; | |
| increasing our vulnerability to general adverse economic and industry conditions; | |
| limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions of clubs and other general corporate requirements; | |
| requiring a substantial portion of our cash flow from operations for the payment of interest on our debt and reducing our ability to use our cash flow to fund working capital, capital expenditures, acquisitions of new clubs and general corporate requirements; and | |
| limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate. |
15
After giving effect to this offering and our application of the net proceeds therefrom, servicing our debt will require, in aggregate, approximately $476.0 million (comprised of principal and interest) of cash, and our ability to generate sufficient cash flows depends upon many factors, some of which are beyond our control. |
We may not have access to the cash flow and other assets of our subsidiaries that may be needed to make payments on our outstanding senior discount notes. |
Covenant restrictions under our indebtedness may limit our ability to operate our business and, in such an event, we may not have sufficient assets to settle our indebtedness. |
| borrow money; | |
| pay dividends or make distributions; | |
| purchase or redeem stock; | |
| make investments and extend credit; |
16
| engage in transactions with affiliates; | |
| engage in sale-leaseback transactions; | |
| consummate certain asset sales; | |
| effect a consolidation or merger or sell, transfer, lease or otherwise dispose of all or substantially all of our assets; and | |
| create liens on our assets. |
| a ratio not less than ranging from 2.25:1.00 to 3.50:1.00, depending on the period, of EBITDA, as that term is defined in the credit agreement governing our senior secured revolving credit facility, to interest expense; | |
| a ratio not greater than ranging from 4.00:1.00 to 2.75:1.00, depending on the period, of indebtedness to EBITDA; and | |
| a ratio not greater than 1.00:1.00 of senior secured indebtedness to EBITDA. |
We cannot assure you that a market will develop for our common stock or what the market price of our common stock will be. |
17
The price of our common stock may be volatile. |
| price and volume fluctuations in the overall stock market from time to time; | |
| significant volatility in the market price and trading volume of health and fitness companies; | |
| actual or anticipated changes in our earnings or fluctuations in our operating results; | |
| actual or anticipated changes in the expectations of securities analysts; | |
| general economic conditions and trends; | |
| the seasonality of our business; | |
| the opening of new clubs; | |
| major catastrophic events; | |
| loss of external funding sources; | |
| sales of large blocks of our stock or sales by insiders; or | |
| departures of key personnel. |
We do not anticipate paying cash dividends on our shares of common stock in the foreseeable future. |
Sales of outstanding shares of our common stock into the market in the future could cause the market price of our common stock to drop significantly, even if our business is doing well. |
18
If you purchase shares of our common stock in this offering, you will experience immediate dilution. |
19
20
| consummate the tender offer for up to $85.0 million aggregate principal amount of TSI, Inc.s senior notes; | |
| redeem up to 35% of our senior discount notes; and | |
| pay related fees, premiums and expenses. |
21
22
| on an actual basis, which does not give effect to the 14-for-1 stock split of our common stock that we will effect prior to the closing of this offering; and | |
| on a pro forma basis to give effect to our sale of 7,650,000 shares of our common stock in this offering at an expected public offering price of $14.00 per share, after deducting the estimated underwriting discounts and commissions and our estimated offering expenses, and our application of the estimated net proceeds as described in the Use of Proceeds section of this prospectus, and adjusted to give effect to the 14-for-1 stock split of our common stock that we will effect prior to the closing of this offering. | |
As of March 31, 2006 | ||||||||
Actual | Pro Forma | |||||||
(In thousands, except | ||||||||
share and per share data) | ||||||||
Cash and cash equivalents
|
$ | 69,724 | $ | 15,875 | ||||
Senior secured revolving credit facility(1)
|
$ | | $ | | ||||
Long-term debt (senior notes), including current installments
|
255,000 | 170,000 | ||||||
Long-term debt (senior discount notes), including current
installments
|
157,203 | 104,147 | ||||||
Long-term debt (other), including current installments
|
2,774 | 2,774 | ||||||
Total long-term debt, including current installments
|
414,977 | 276,921 | ||||||
Stockholders deficit:
|
||||||||
Common stock, $0.001 par value; 2,500,000 shares
authorized, 1,309,123 shares issued and outstanding,
actual; 100,000,000 shares authorized,
25,977,722 shares issued and outstanding, pro forma
|
1 | 27 | ||||||
Additional paid-in capital
|
(114,053 | ) | (15,728 | ) | ||||
Accumulated other comprehensive income (currency translation
adjustment)
|
392 | 392 | ||||||
Accumulated deficit
|
(2,108 | ) | (12,539 | ) | ||||
Total stockholders deficit
|
(115,768 | ) | (27,848 | ) | ||||
Total capitalization
|
$ | 299,209 | $ | 249,073 | ||||
(1) | $42,114 of available borrowings, net of $7,886 of outstanding letters of credit. |
| 88,366 actual shares and 1,237,124 pro forma shares of common stock issuable upon exercise of options at a weighted average exercise price of $86.24 and $6.16 per share, respectively; | |
| an additional 4,177 actual shares and 58,478 pro forma shares of common stock reserved for issuance under our existing stock option plan; and | |
| an additional 1,300,000 pro forma shares of common stock reserved for issuance under the stock incentive plan that we will adopt in connection with this offering. |
23
Expected initial public offering price per share
|
$ | 14.00 | |||||||
Unaudited net tangible book value per share as of March 31,
2006
|
$ | (9.07 | ) | ||||||
Increase per share attributable to new investors
|
6.05 | ||||||||
Pro forma net tangible book value per share after this offering
|
(3.02 | ) | |||||||
Dilution per share to new investors
|
$ | 17.02 | |||||||
Shares Purchased | Total Consideration | |||||||||||||||||||
Average Price | ||||||||||||||||||||
Number | Percent | Amount | Percent | Per Share | ||||||||||||||||
Existing stockholders
|
18,327,722 | 70.6 | % | $ | 1,606,000 | 1.5 | % | $ | 0.09 | |||||||||||
New investors
|
7,650,000 | 29.4 | 107,100,000 | 98.5 | $ | 14.00 | ||||||||||||||
Total
|
25,977,722 | 100.0 | % | $ | 108,706,000 | 100.0 | % | |||||||||||||
| 1,237,124 shares of our common stock issuable upon exercise of options outstanding as of March 31, 2006 at a weighted average exercise price of $6.16 per share; | |
| an additional 58,478 shares of our common stock reserved for issuance under our existing stock option plan; and | |
| an additional 1,300,000 shares of common stock reserved for issuance under the stock incentive plan that we will adopt in connection with this offering. |
24
Three Months Ended | |||||||||||||||||||||||||||||
Year Ended December 31, | March 31, | ||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | 2006 | |||||||||||||||||||||||
Statement of Operations Data:
|
|||||||||||||||||||||||||||||
Revenues
|
$ | 280,382 | $ | 318,055 | $ | 341,172 | $ | 353,031 | $ | 388,556 | $ | 93,846 | $ | 104,027 | |||||||||||||||
Operating expenses:
|
|||||||||||||||||||||||||||||
Payroll and related
|
112,766 | 129,105 | 130,585 | 138,302 | 151,920 | 36,396 | 40,897 | ||||||||||||||||||||||
Club operating
|
88,941 | 99,113 | 111,069 | 116,847 | 130,219 | 31,449 | 34,470 | ||||||||||||||||||||||
General and administrative
|
18,785 | 21,368 | 21,995 | 24,719 | 26,582 | 6,677 | 7,861 | ||||||||||||||||||||||
Depreciation and amortization(1)
|
32,185 | 31,748 | 34,927 | 36,869 | 39,582 | 9,739 | 10,386 | ||||||||||||||||||||||
Goodwill impairment(2)
|
| | | 2,002 | | | | ||||||||||||||||||||||
Operating income
|
27,705 | 36,721 | 42,596 | 34,292 | 40,253 | 9,585 | 10,413 | ||||||||||||||||||||||
Loss on extinguishment of debt(3)
|
| | 7,773 | | | | | ||||||||||||||||||||||
Interest expense, net of interest income
|
14,527 | 16,421 | 23,226 | 38,600 | 39,208 | 9,750 | 9,962 | ||||||||||||||||||||||
Equity in the earnings of investees and rental income
|
(1,251 | ) | (1,372 | ) | (1,369 | ) | (1,493 | ) | (1,744 | ) | (470 | ) | (433 | ) | |||||||||||||||
Income (loss) from continuing operations before provision for
corporate income taxes
|
14,429 | 21,672 | 12,966 | (2,815 | ) | 2,789 | 305 | 884 | |||||||||||||||||||||
Provision for corporate income taxes
|
6,853 | 9,709 | 5,537 | 1,090 | 1,020 | 126 | 1,019 | ||||||||||||||||||||||
Income (loss) from continuing operations
|
7,576 | 11,963 | 7,429 | (3,905 | ) | 1,769 | 179 | (135 | ) | ||||||||||||||||||||
Loss from discontinued operations(4) (including loss on club
closure of $996 in 2002), net of income tax benefit of $551
|
(530 | ) | (767 | ) | | | | | |
25
Three Months Ended
Year Ended December 31,
March 31,
2001
2002
2003
2004
2005
2005
2006
(689
)
7,046
10,507
7,429
(3,905
)
1,769
179
(135
)
(10,201
)
(11,543
)
(10,984
)
(784
)
$
(3,155
)
$
(1,036
)
$
(3,555
)
$
(4,689
)
$
1,769
$
179
$
(135
)
$
6.09
$
9.59
$
5.95
$
(3.01
)
$
1.35
$
0.14
$
(0.10
)
$
(0.43
)
$
(0.61
)
$
$
$
$
$
$
$
(0.55
)
$
$
$
$
$
$
(2.53
)
$
(0.83
)
$
(2.85
)
$
(3.61
)
$
1.35
$
0.14
$
(0.10
)
$
6.09
$
9.15
$
5.95
$
(3.01
)
$
1.35
$
0.14
$
(0.10
)
$
(0.43
)
$
(0.59
)
$
$
$
$
$
$
$
(0.53
)
$
$
$
$
$
$
(2.53
)
$
(0.79
)
$
(2.85
)
$
(3.61
)
$
1.35
$
0.14
$
(0.10
)
1,244,775
1,247,674
1,247,674
1,299,332
1,309,616
1,312,289
1,309,123
1,244,775
1,307,228
1,247,674
1,299,332
1,312,473
1,314,562
1,309,123
As of
As of December 31,
March 31,
2001
2002
2003
2004
2005
2006
$
5,458
$
5,551
$
40,802
$
57,506
$
51,304
$
69,724
(42,565
)
(43,192
)
(9,087
)
7,039
(2,262
)
6,298
296,005
314,250
362,199
390,956
433,771
445,998
163,979
160,943
261,877
396,461
411,162
414,977
54,687
62,125
30,432
34,841
39,890
(32,797
)
(31,740
)
(34,294
)
(117,017
)
(115,683
)
(115,768
)
26
Three Months Ended
Year Ended December 31,
March 31,
2001
2002
2003
2004
2005
2005
2006
$
45,073
$
54,338
$
58,870
$
57,125
$
63,256
$
24,851
$
34,740
(59,083
)
(43,715
)
(43,351
)
(40,686
)
(66,338
)
(10,190
)
(15,023
)
16,103
(10,530
)
19,732
265
(3,120
)
(389
)
(1,297
)
4,224
1,670
1,650
525
1,461
190
(19
)
1,149
1,207
198
64
279
15
43
60,611
68,385
71,119
72,654
81,579
19,794
21,232
21.6
%
21.5
%
20.8
%
20.6
%
21.0
%
21.1
%
20.4
%
Three Months Ended
Year Ended December 31,
March 31,
2001
2002
2003
2004
2005
2005
2006
12
8
3
5
5
3
5
2
4
3
2
(2
)
(3
)
(3
)
(1
)
117
127
127
135
139
138
143
119
129
129
137
141
140
145
317,000
342,000
342,000
383,000
409,000
398,000
438,000
14.5
%
5.8
%
3.3
%
2.5
%
6.9
%
6.0
%
7.6
%
12.3
%
4.1
%
1.6
%
2.1
%
5.8
%
4.8
%
5.9
%
$
2,592
$
2,581
$
2,680
$
2,680
$
2,816
$
685
$
733
937
964
987
960
968
240
242
(1) | Effective January 1, 2002 we implemented Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. In connection with this implementation, we no longer amortize goodwill, but rather test it for impairment when circumstances indicate it is necessary, and at a minimum annually. The following table reconciles reported net income to net income adjusted for the pro forma implementation of SFAS No. 142 for the periods presented: |
Year Ended | |||||
December 31, | |||||
2001 | |||||
Net income as reported
|
$ | 7,046 | |||
Goodwill amortization
|
4,436 | ||||
Deferred tax benefit
|
(1,344 | ) | |||
Accreted dividends on preferred stock
|
(10,201 | ) | |||
Net loss attributable to common stockholders as adjusted
|
$ | (63 | ) | ||
(Loss) per share:
|
|||||
Basic
|
$ | (0.05 | ) | ||
Diluted
|
$ | (0.05 | ) |
(2) | In the quarter ended March 31, 2004, we performed our annual impairment test. Goodwill impairment testing requires a comparison between the carrying value and fair value of reportable goodwill. If the carrying value exceeds the fair value, goodwill is considered impaired. The amount of the impairment loss is measured as the difference between the carrying value and the implied fair |
27
value of goodwill, which is determined using discounted cash flows. As a result of this review, we determined that the goodwill at one of our remote clubs was not recoverable. The goodwill impairment associated with this underperforming club amounted to $2,002. A deferred tax benefit of $881 was recorded in connection with this impairment. Since this club is remote from one of our clusters, it does not benefit from the competitive advantage that our clustered clubs have, and as a result it is more susceptible to competition. We have reduced our projections of future cash flows of this club to take into account the impact of a recent opening of a competitor. | ||
(3) | The $7,773 loss on extinguishment of debt recorded in 2003 is a result of the refinancing of our debt on April 16, 2003. In connection with this refinancing, we wrote off $3,700 of deferred financing costs related to extinguished debt, paid a $3,000 call premium and incurred $1,000 of additional interest on TSI, Inc.s 9 3 / 4 % notes representing interest incurred during the 30-day redemption notification period. | |
(4) | In the quarter ended December 31, 2002, we closed or sold two remote underperforming, wholly owned clubs. In connection with the closure of one of the clubs, we recorded club closure costs of $996 related to the write-off of fixed assets. We have accounted for these two clubs as discontinued operations and, accordingly, the results of their operations have been classified as discontinued in our consolidated statement of operations and prior periods have been reclassified in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. |
Revenues and loss from operations from these discontinued clubs was as follows for the periods presented: |
Year Ended | ||||||||
December 31, | ||||||||
2001 | 2002 | |||||||
Revenues
|
$ | 1,660 | $ | 1,607 | ||||
Loss from operations of discontinued clubs (including loss on
club closure of $996 in 2002)
|
(894 | ) | (1,318 | ) | ||||
Benefit from corporate income tax
|
(364 | ) | (551 | ) | ||||
Loss from discontinued operations
|
$ | (530 | ) | $ | (767 | ) | ||
(5) | Effective January 1, 2002, we implemented SFAS No. 142. In connection with the SFAS No. 142 transitional impairment test, we recorded a $1,300 write-off of goodwill. A deferred tax benefit of $612 was recorded as a result of this goodwill write-off, resulting in a net cumulative effect of change in accounting principle of $689 in 2002. The write-off of goodwill related to four remote underperforming clubs. The impairment test was performed with discounted estimated future cash flows as the criteria for determining fair market value. The impairment loss recorded was measured by comparing the carrying value to the fair value of impaired goodwill. | |
(6) | The diluted weighted average number of shares used in calculating earnings (loss) per share is the weighted average number of shares of common stock plus the weighted average conversion of any dilutive common stock equivalents, such as the assumed weighted average exercise of dilutive stock options using the treasury stock method. For the years ended December 31, 2001, 2003 and 2004, these common stock equivalents were antidilutive and have been excluded from the diluted weighted average number of shares. For the years ended December 31, 2002 and 2005, the shares issuable upon the exercise of stock options were dilutive. The number of shares excluded from the computation of diluted earnings per share was 60,812, 52,807 and 15,481 for the years ended December 31, 2001, 2003 and 2004, respectively, and 16,542 shares for the three months ended March 31, 2006. |
28
The following table summarizes the weighted average number of shares of common stock outstanding for basic and diluted earnings per share computations: |
Three Months Ended | ||||||||||||||||||||||||||||
Year Ended December 31, | March 31, | |||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | 2006 | ||||||||||||||||||||||
Weighted average number of shares outstanding basic
|
1,244,775 | 1,247,674 | 1,247,674 | 1,299,332 | 1,309,616 | 1,312,289 | 1,309,123 | |||||||||||||||||||||
Effect of dilutive stock options
|
| 59,554 | | | 2,857 | 2,273 | | |||||||||||||||||||||
Weighted average number of shares outstanding diluted
|
1,244,775 | 1,307,228 | 1,247,674 | 1,299,332 | 1,312,473 | 1,314,562 | 1,309,123 | |||||||||||||||||||||
(7) | In 2004, we paid a common stock distribution totaling $68,900, or $52.50 per share. | |
(8) | EBITDA consists of net income (loss) plus interest expense, net of interest income, provision for corporate income taxes and depreciation and amortization. This term, as we define 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. We use EBITDA as a measure of operating performance. EBITDA should not be considered as a substitute for net income, operating income, cash flows provided by operating activities or other income or cash flow data prepared in accordance with GAAP. 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. Additional details related to EBITDA are provided in Managements Discussion and Analysis of Financial Condition and Results of Operations Non-GAAP Financial Measures. |
29
The following table reconciles net income (loss), the most directly comparable GAAP measure, to EBITDA: |
Three Months | |||||||||||||||||||||||||||||
Year Ended December 31, | Ended March 31, | ||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | 2006 | |||||||||||||||||||||||
Net income (loss)
|
$ | 7,046 | $ | 10,507 | $ | 7,429 | $ | (3,905 | ) | $ | 1,769 | $ | 179 | $ | (135 | ) | |||||||||||||
Interest expense, net of interest income
|
14,527 | 16,421 | 23,226 | 38,600 | 39,208 | 9,750 | 9,962 | ||||||||||||||||||||||
Provision for corporate income taxes
|
6,853 | 9,709 | 5,537 | 1,090 | 1,020 | 126 | 1,019 | ||||||||||||||||||||||
Cumulative effect of change in accounting principle
|
| 689 | | | | | | ||||||||||||||||||||||
Loss from discontinued operations
|
530 | 767 | | | | | | ||||||||||||||||||||||
Equity in the earnings of investees and rental income
|
(1,251 | ) | (1,372 | ) | (1,369 | ) | (1,493 | ) | (1,744 | ) | (470 | ) | (433 | ) | |||||||||||||||
Loss on extinguishment of debt
|
| | 7,773 | | | | | ||||||||||||||||||||||
Operating income
|
27,705 | 36,721 | 42,596 | 34,292 | 40,253 | 9,585 | 10,413 | ||||||||||||||||||||||
Loss from discontinued operations
|
(530 | ) | (767 | ) | | | | | | ||||||||||||||||||||
Equity in the earnings of investees and rental income
|
1,251 | 1,372 | 1,369 | 1,493 | 1,744 | 470 | 433 | ||||||||||||||||||||||
Cumulative effect of change in accounting principle
|
| (689 | ) | | | | | | |||||||||||||||||||||
Loss on extinguishment of debt
|
| | (7,773 | ) | | | | | |||||||||||||||||||||
Depreciation and amortization
|
32,185 | 31,748 | 34,927 | 36,869 | 39,582 | 9,739 | 10,386 | ||||||||||||||||||||||
EBITDA
|
$ | 60,611 | $ | 68,385 | $ | 71,119 | $ | 72,654 | $ | 81,579 | $ | 19,794 | $ | 21,232 | |||||||||||||||
(9) | EBITDA margin is the ratio of EBITDA to total revenue. |
(10) | Includes wholly owned and partly owned clubs. In addition, as of December 31, 2005 and March 31, 2006, we managed five university fitness clubs in which we did not have an equity interest. |
(11) | Represents members at wholly owned and partly owned clubs. |
(12) | Total revenue for a club is included in comparable club revenue increase beginning on the first day of the thirteenth full calendar month of the clubs operation. |
(13) | We define mature club revenue as revenue from clubs operated by us for more than 24 months. |
(14) | Revenue per weighted average club is calculated as total revenue divided by the product of the total number of clubs and their weighted average months in operation as a percentage of the period. |
(15) | Average revenue per member is total revenue for the period divided by the average number of memberships for the period, where average number of memberships for the period is derived by dividing the sum of the total memberships at the end of each month during the period by the total number of months in the period. |
30
| Our largest sources of revenue are membership revenues consisting of dues and initiation fees paid by our members. This comprises 82.8% and 81.7% of our total revenue for the year ended December 31, 2005 and the three months ended March 31, 2006, respectively. We recognize revenue from membership dues in the month when the services are rendered. Approximately 93% |
31
of our members pay their monthly dues by electronic funds transfer, or EFT, while the remaining 7% of our members pay annually in advance. We recognize revenue from initiation fees over the expected average life of the membership. It is important therefore to operate facilities that are convenient, offer good price/value relationship and have a wide variety of fitness service offerings in order to attract and retain members at each facility. | ||
| We generated 16.1% and 17.2% of our revenue for the year ended December 31, 2005 and the three months ended March 31, 2006, respectively, from ancillary club revenue. Ancillary club revenue consists of personal training, programming for children, group fitness training and other member activities, as well as sales of miscellaneous sports products. This total ancillary club revenue stream has increased as a percentage of total revenue more recently as we have focused on increasing revenue per member from our maturing club base. |
Three Months Ended | |||||||||||||||||||||
Year Ended December 31, | March 31, | ||||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | |||||||||||||||||
(In thousands) | |||||||||||||||||||||
Membership dues
|
$ | 273,334 | $ | 282,716 | $ | 309,811 | $ | 74,577 | $ | 83,139 | |||||||||||
Initiation fees
|
13,892 | 12,439 | 11,916 | 3,078 | 1,932 | ||||||||||||||||
Membership revenue
|
287,226 | 295,155 | 321,727 | 77,655 | 85,071 | ||||||||||||||||
Personal training revenue
|
31,170 | 34,821 | 42,277 | 10,380 | 12,267 | ||||||||||||||||
Other ancillary club revenue
|
17,269 | 18,199 | 20,139 | 4,795 | 5,585 | ||||||||||||||||
Ancillary club revenue
|
48,439 | 53,020 | 62,416 | 15,175 | 17,852 | ||||||||||||||||
Total club revenue
|
335,665 | 348,175 | 384,143 | 92,830 | 102,923 | ||||||||||||||||
Fees and Other revenue
|
2,707 | 4,856 | 4,413 | 1,016 | 1,104 | ||||||||||||||||
Business interruption insurance proceeds
|
2,800 | | | | | ||||||||||||||||
Total revenue
|
$ | 341,172 | $ | 353,031 | $ | 388,556 | $ | 93,846 | $ | 104,027 | |||||||||||
32
Three Months | |||||||||||||||||||||||||||||
Year Ended December 31, | Ended March 31, | ||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | 2006 | |||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||
Operating income
|
$ | 27,705 | $ | 36,721 | $ | 42,596 | $ | 34,292 | $ | 40,253 | $ | 9,585 | $ | 10,413 | |||||||||||||||
Increase (decrease) over prior period
|
24.3 | % | 32.5 | % | 16.0 | % | (19.5 | )% | 17.4 | % | 107.2 | % | 8.6 | % | |||||||||||||||
Net income (loss)
|
$ | 7,046 | $ | 10,507 | $ | 7,429 | $ | (3,905 | ) | $ | 1,769 | $ | 179 | $ | (135 | ) | |||||||||||||
Increase (decrease) over prior period
|
45.8 | % | 49.1 | % | (29.3 | )% | (152.6 | )% | 145.3 | % | 108.7 | % | (175.4 | )% | |||||||||||||||
Cash flows provided by operating activities
|
$ | 45,073 | $ | 54,338 | $ | 58,870 | $ | 57,125 | $ | 63,256 | $ | 24,851 | $ | 34,740 | |||||||||||||||
Increase (decrease) over prior period
|
5.8 | % | 20.6 | % | 8.3 | % | (3.0 | )% | 10.7 | % | 26.2 | % | 39.8 | % | |||||||||||||||
EBITDA
|
$ | 60,611 | $ | 68,385 | $ | 71,119 | $ | 72,654 | $ | 81,579 | $ | 19,794 | $ | 21,232 | |||||||||||||||
Increase over prior period
|
23.1 | % | 12.8 | % | 4.0 | % | 2.2 | % | 12.3 | % | 40.6 | % | 7.3 | % |
Year Ended December 31, | Three Months | |||||||||||||||||||||||
Ended March 31, | ||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2006 | |||||||||||||||||||
Wholly owned clubs operated at beginning of period
|
103 | 117 | 127 | 127 | 135 | 139 | ||||||||||||||||||
New clubs opened
|
12 | 8 | 3 | 5 | 5 | 5 | ||||||||||||||||||
Clubs acquired
|
2 | 4 | | 3 | 2 | | ||||||||||||||||||
Clubs closed, relocated or sold(1)
|
| (2 | ) | (3 | ) | | (3 | ) | (1 | ) | ||||||||||||||
Wholly owned clubs operated at end of period
|
117 | 127 | 127 | 135 | 139 | 143 | ||||||||||||||||||
Total clubs operated at end of period(2)
|
119 | 129 | 129 | 137 | 141 | 145 | ||||||||||||||||||
33
(1) | In 2005, we temporarily closed a club for a renovation and expansion. This club reopened in February 2006. |
(2) | Includes wholly owned and partly owned clubs. In addition, as of March 31, 2006, we managed five university fitness clubs in which we did not have an equity interest. |
Comparable | Mature | ||||||||||||||||
Club Revenue | Club Revenue | ||||||||||||||||
Quarter | Full Year | Quarter | Full Year | ||||||||||||||
2003
|
|||||||||||||||||
Q1
|
6.2 | % | 1.8 | % | |||||||||||||
Q2
|
3.6 | % | (0.2 | )% | |||||||||||||
Q3
|
2.2 | % | (0.5 | )% | |||||||||||||
Q4
|
1.1 | % | 3.3 | % | (0.8 | )% | 1.6 | % | |||||||||
2004
|
|||||||||||||||||
Q1
|
(0.1 | )% | (0.5 | )% | |||||||||||||
Q2
|
1.6 | % | 1.3 | % | |||||||||||||
Q3
|
4.1 | % | 2.8 | % | |||||||||||||
Q4
|
4.6 | % | 2.5 | % | 3.8 | % | 2.1 | % | |||||||||
2005
|
|||||||||||||||||
Q1
|
6.0 | % | 4.8 | % | |||||||||||||
Q2
|
7.0 | % | 5.7 | % | |||||||||||||
Q3
|
6.1 | % | 5.1 | % | |||||||||||||
Q4
|
8.5 | % | 6.9 | % | 7.1 | % | 5.8 | % | |||||||||
2006
|
|||||||||||||||||
Q1
|
7.6 | % | 5.9 | % |
34
| it is a widely accepted financial indicator of a companys ability to service its debt and we are required to comply with certain covenants and borrowing limitations that are based on variations of EBITDA in certain of our financing documents; | |
| it is widely used to measure a companys operating performance without regard to items such as depreciation and amortization, which can vary depending upon accounting methods and the book value of assets, and to present a meaningful measure of corporate performance exclusive of our capital structure and the method by which assets were acquired; and | |
| it helps investors to more meaningfully evaluate and compare the results of our operations from period to period by removing from our operating results the impact of our capital structure, primarily interest expense from our outstanding debt, and asset base, primarily depreciation and amortization of our properties. |
| as a measurement of operating performance because it assists us in comparing our performance on a consistent basis, as it removes from our operating results the impact of our capital structure, which includes interest expense from our outstanding debt, and our asset base, which includes depreciation and amortization of our properties; and | |
| in presentations to the members of our board of directors to enable our board to have the same consistent measurement basis of operating performance used by management. |
35
Three Months
Year Ended December 31,
Ended March 31,
2003
2004
2005
2005
2006
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
38.3
39.2
39.1
38.8
39.3
32.6
33.1
33.5
33.5
33.1
6.4
7.0
6.8
7.1
7.6
10.2
10.4
10.2
10.4
10.0
0.6
12.5
9.7
10.4
10.2
10.0
2.3
6.9
11.1
10.7
10.8
10.3
(0.1
)
(0.2
)
(0.6
)
(0.4
)
(0.7
)
(0.4
)
(0.4
)
(0.4
)
(0.5
)
(0.4
)
3.8
(0.8
)
0.7
0.3
0.8
1.6
0.3
0.3
0.1
0.9
2.2
(1.1
)
0.4
0.2
(0.1
)
(3.2
)
(0.2
)
(1.0
)%
(1.3
)%
0.4
%
0.2
%
(0.1
)%
Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005 |
Revenues |
36
Operating Expenses |
| During the first quarter of 2006 our Chairman and certain executives agreed to severance packages totaling an estimated $1.6 million. The total cost of these severance packages was recorded in the quarter ended March 31, 2006 while no such costs were incurred in the same period of the prior year. | |
| Payroll costs directly related to our personal training, Group Exclusives, and Sports Club for Kids programs increased $1.3 million or 18.5%, due to an increase in demand for these programs. | |
| Offsetting these aforementioned increases in the quarter ended March 31, 2006 was a decrease in amortization of deferred sales related payroll costs. The increase in the estimated average-life of our memberships form 24 months to 30 months resulted in a $1.0 million reduction in amortization of deferred sales related payroll costs in the first quarter of 2006 compared to the first quarter of 2005. |
| Rent and occupancy expenses increased $2.3 million. Rent and occupancy costs at clubs that have opened since January 1, 2005, or that are currently under construction, increased $1.6 million. Also, during the quarter ended March 31, 2006 we closed a club, and merged the membership base at this club into one of our newly opened clubs that opened nearby. This resulted in a $225,000 lease termination expense. The remaining $378,000 increase in rent and occupancy expenses relates to the clubs that were open prior to January 1, 2005. | |
| Utility costs increased $1.5 million. We saw a $350,000 increase at our clubs that we opened or acquired in 2005 and 2006. The balance of the increase is due to an increase in utility rates throughout the remainder of our club base. | |
| These increases in club operating expenses were partially offset by a $590,000 decrease in marketing and advertising costs. We ran a marketing campaign in the first quarter of 2005 and did not schedule a similar program in this first quarter of 2006. |
Interest Expense |
Interest Income |
37
Provision for Income Tax |
Revenues |
Operating Expenses |
| Payroll costs directly related to personal training, Group Exclusives and programming for children increased $5.5 million, or 23.6%, due to an increase in demand for these programs. | |
| An offset to the increases in payroll related to a $1.1 million one-time bonus received by vested option holders in the first quarter of 2004 in connection with a common stock distribution, while no such bonus payment was made in 2005. |
| A $7.6 million increase in rent expense. Rent expense related to our clubs that have been open less than 24 months increased $5.2 million, and rent expense at our clubs open over 24 months increased $2.4 million, or 3.9%. | |
| Gas and electric costs increased by $2.6 million, or 19.9%, from $13.0 million in 2004 to $15.6 million in 2005. While overall square footage under management increased by 4.8% during 2005, a significant portion of the increase in our gas and electric costs was due to the increase in natural gas prices, principally in the fourth quarter, which is the underlying natural resource used for electricity generation in the northeastern United States. | |
| Advertising expense increased $1.3 million. Advertising expense, as a percent of revenue, increased to 2.7% of total revenue for the year ended December 31, 2005 from 2.5% of total revenue during the same period in 2004. |
38
| Accounting and consulting fees and expenses increased by $468,000 principally due to increases in audit and consulting fees with respect to preparedness for compliance with Section 404 of the Sarbanes-Oxley Act. | |
| Legal and related costs increased $1.0 million due to an increase in costs relating to new club leases, as well as increased litigation for both new and existing matters incurred in the normal course of business. | |
| Costs incurred in connection with the examination of financing alternatives totaled $928,000. | |
| These increases were offset by a $372,000 or 8.2% decrease in liability insurance costs. |
Interest Expense |
Interest Income |
Provision for Income Tax |
Accreted Dividends on Preferred Stock |
Revenues |
39
Operating Expenses |
| In connection with the restructuring and distribution to common stockholders of TSI Holdings, vested common stock option holders, who did not exercise their options, were paid a one-time bonus recorded as payroll expense. This one-time payment totaled $1.1 million. See Liquidity and Capital Resources. | |
| In an effort to increase membership satisfaction and improve our membership retention rates, we have increased the level of in-house training and club support personnel and have moved from third-party contracted equipment maintenance and housekeeping services to in-house supplied labor for these services. These customer service efforts resulted in a $2.4 million increase in payroll expense with a commensurate savings in club operating expenses. | |
| Personal training and Sports Clubs for Kids programming payroll expense increased $2.0 million, or 9.3%, to $23.2 million in 2004 from $21.2 million in 2003 to support increases in revenue generated by these programs and services. | |
| Payroll expense related to management in our legal, marketing, training and development and club operations departments increased a total of $486,000. | |
| Payroll taxes and benefits increased $1.5 million due to increases in total payroll and increases in healthcare costs. |
| A $4.1 million increase in rent expense principally resulting from increases related to clubs that have opened since, or expanded after, December 2003. | |
| Facility repairs and maintenance costs increased $1.9 million, or 27.0%. Incremental costs to support our initiatives to increase member satisfaction and improve member retention contributed to this increase. | |
| In addition, we experienced a $611,000 increase in utilities due to increases in utility rates, and a 5.1% increase in square footage in operation. | |
| The aforementioned increases in club operating expense were partially offset by a $789,000 decrease in advertising costs as well as a $314,000 decrease in equipment maintenance costs that were predominately outsourced to third parties in 2003 and moved to in-house labor in 2004. |
| Liability insurance expense increased by $690,000. Premiums increased $327,000 coupled with a favorable adjustment of $363,000 recorded in the first quarter of 2003, where we had adjusted our reserves related to premium audits. | |
| We also experienced an increase of $700,000 in data communication lines costs. This related in part to the correction of our service providers billing errors in the first half of 2004 that amounted to a $429,000 increase. These costs also increased due to data-line redundancies created at our clubs to safeguard against single line outages. Furthermore, data-line traffic increased in 2004 due to the completion of our Club Network systems rollout that began in 2003. | |
| Accounting and tax consulting fees increased $622,000 principally due to an increase in accounting services related to our senior discount note offering in February 2004, and increases in consulting with respect to preparation for compliance with Section 404 of the Sarbanes-Oxley Act. |
40
| Legal fees increased by $447,000 principally due to an increase in the number of new club leases and expansions executed. | |
| In an effort to increase member satisfaction and improve member retention rates, we have increased staff development and recruiting costs. These customer service efforts resulted in an increase of $292,000 over the prior year. |
Goodwill Impairment |
Interest Expense |
Interest Income |
Equity in the earnings of investees and rental income |
Provision for Income Tax |
| A $597,000 increase in the deferred tax valuation allowance to reserve for state net operating losses that may not be utilized in future periods. | |
| Change in the allocation factors used in the computation of our New York State taxes, caused by revenue, payroll and asset growth outside of New York State, resulting in a deferred tax charge of approximately $340,000. | |
| Relief of our deferred tax asset totaling $1.1 million, associated with deferred compensation expense related to exercised stock options. |
Accreted Dividends on Preferred Stock |
41
42
Subsequent Events |
February 4, 2004 Restructuring |
Redemption of Series A and Series B preferred stock
|
$ | 50,635 | ||
Common stock distribution, net of option exercise proceeds
|
68,404 | |||
Underwriting fees and other closing costs
|
4,378 | |||
Bonus paid to employees in lieu of distribution
|
1,144 | |||
Available for general corporate purposes
|
246 | |||
Total use of funds
|
$ | 124,807 | ||
43
April 16, 2003 Refinancing Transaction |
Redemption of senior notes, principal and interest
|
$ | 126,049 | ||
Call premium on senior notes
|
3,048 | |||
Redemption of senior preferred stock, at liquidation value
|
66,977 | |||
Repayment of line of credit principal borrowings and interest
|
4,013 | |||
Repayment of subordinated credit principal borrowings and
interest
|
9,060 | |||
Underwriting fees and other closing costs
|
9,578 | |||
Available for general corporate purposes
|
36,275 | |||
Total use of funds
|
$ | 255,000 | ||
| Making it more difficult to satisfy our obligations; | |
| Increasing our vulnerability to general adverse economic and industry conditions; | |
| Limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions of new clubs and other general corporate requirements; | |
| Requiring cash flow from operations for the annual payment of $24.5 million interest on our Senior Notes and reducing our ability to use our cash flow to fund working capital, capital expenditures, acquisitions of new clubs and general corporate requirements; and | |
| Limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate. |
Senior Credit Facility |
44
Payments Due by Period | |||||||||||||||||||||
Less than | After | ||||||||||||||||||||
Contractual Obligations | Total | 1 Year | 1-3 Years | 4-5 Years | 5 Years | ||||||||||||||||
(In thousands) | |||||||||||||||||||||
Long-term debt(1)
|
$ | 1,126,844 | $ | 25,732 | $ | 50,673 | $ | 95,948 | $ | 954,491 | |||||||||||
Operating lease obligations(2)
|
730,374 | 62,315 | 126,524 | 118,895 | 422,640 | ||||||||||||||||
Total contractual cash obligations
|
$ | 1,857,218 | $ | 88,047 | $ | 177,197 | $ | 214,843 | $ | 1,377,131 | |||||||||||
(1) | The long-term debt contractual cash obligations include principal and interest payment requirements. Interest on TSI, Inc.s senior notes amounts to $24.5 million annually. |
(2) | Operating lease obligations include base rent only. Certain leases provide for additional rent based on real estate taxes, common area maintenance and defined amounts based on the operating results of the lessee. |
45
Three Months Ended | |||||
March 31, 2005 | |||||
($000s) | |||||
Net loss, as reported
|
$ | 179 | |||
Add: Stock-based compensation included in reported net earnings,
net of related tax effects
|
9 | ||||
Less: Stock-based compensation expense determined under the
fair-value-based method for all awards, net of related tax
effects
|
(28 | ) | |||
Pro forma net earnings
|
$ | 160 | |||
Basic earnings (loss) per share:
|
|||||
As reported
|
$ | 0.14 | |||
Pro forma
|
$ | 0.12 | |||
Diluted earnings (loss) per share:
|
|||||
As reported
|
$ | 0.14 | |||
Pro forma
|
$ | 0.12 |
46
47
48
49
50
51
52
53
| the proximity of our clubs to concentrated commercial and residential areas convenient to where target members live and work; | |
| the obligation on the part of the enrollee; |
54
| the price/value relationship of a Town Sports membership; and | |
| access to value-added services. |
| The Passport Membership, ranging in price from $47 to $95 per month, is our higher priced membership and entitles members to use any of our clubs at any time. This membership is held by approximately 43% of our members. In addition, we have introduced a Passport Premium Membership at two select clubs, that includes a greater array of member services and facilities, at a price of $115 per month. | |
| The Gold Membership, ranging in price from $38 to $81 per month based on the market area of enrollment, enables members to use a specific club, or a group of specific clubs, at any time and any of our clubs during off-peak times. This membership is held by approximately 57% of our members. |
55
56
57
58
59
Number of | ||||||
Market | Clubs | Position | ||||
Boston metro
|
20 | Leading operator | ||||
New York metro
|
97 | Leading operator | ||||
Philadelphia metro
|
6 | #3 operator | ||||
Washington, D.C. metro
|
19 | #2 operator, although leader in urban center | ||||
Switzerland
|
3 | Local operator only |
60
61
Location | Address | Date Opened or Management Assumed | ||
New York Sports Clubs:
|
||||
Manhattan
|
151 East 86th Street | January 1977 | ||
Manhattan
|
61 West 62nd Street | July 1983 | ||
Manhattan
|
614 Second Avenue | July 1986 | ||
Manhattan
|
151 Reade Street | January 1990 | ||
Manhattan
|
1601 Broadway | September 1991 | ||
Manhattan
|
50 West 34th Street | August 1992 | ||
Manhattan
|
349 East 76th Street | April 1994 | ||
Manhattan
|
248 West 80th Street | May 1994 | ||
Manhattan
|
502 Park Avenue | February 1995 | ||
Manhattan
|
117 Seventh Avenue South | March 1995 | ||
Manhattan
|
303 Park Avenue South | December 1995 | ||
Manhattan
|
30 Wall Street | May 1996 | ||
Manhattan
|
1635 Third Avenue | October 1996 | ||
Manhattan
|
575 Lexington Avenue | November 1996 | ||
Manhattan
|
278 Eighth Avenue | December 1996 | ||
Manhattan
|
200 Madison Avenue | February 1997 | ||
Manhattan
|
131 East 31st Street | February 1997 | ||
Manhattan
|
2162 Broadway | November 1997 | ||
Manhattan
|
633 Third Avenue | April 1998 | ||
Manhattan
|
1657 Broadway | July 1998 | ||
Manhattan
|
217 Broadway | March 1999 | ||
Manhattan
|
23 West 73rd Street | April 1999 | ||
Manhattan
|
34 West 14th Street | July 1999 | ||
Manhattan
|
503-511 Broadway | July 1999 | ||
Manhattan
|
1372 Broadway | October 1999 | ||
Manhattan
|
300 West 125th Street | May 2000 | ||
Manhattan
|
14 West 44th Street | August 2000 | ||
Manhattan
|
128 Eighth Avenue | December 2000 | ||
Manhattan
|
2521-23 Broadway | August 2001 | ||
Manhattan
|
3 Park Avenue | August 2001 | ||
Manhattan
|
19 Irving Place | November 2001 | ||
Manhattan
|
160 Water Street | November 2001 | ||
Manhattan
|
230 West 41st Street | November 2001 | ||
Manhattan
|
1221 Avenue of the Americas | January 2002 | ||
Manhattan
|
102 North End Avenue | Reopened September 2002 | ||
Manhattan
|
200 Park Avenue | December 2002 | ||
Manhattan
|
232 Mercer Street | September 2004 | ||
Manhattan
|
225 Varick Street | Future Opening | ||
Manhattan
|
885 Second Avenue | Future Opening | ||
Brooklyn, NY
|
110 Boerum Place | October 1985 | ||
Brooklyn, NY
|
1736 Shore Parkway | June 1998 | ||
Brooklyn, NY
|
179 Remsen Street | May 2001 | ||
Brooklyn, NY
|
453 Fifth Avenue | August 2003 | ||
Brooklyn, NY
|
1609 Kings Highway | Future Opening | ||
Brooklyn, NY
|
7118 Third Avenue | May 2004 | ||
Queens, NY
|
69-33 Austin Street | April 1997 |
62
Location
Address
Date Opened or Management Assumed
153-67 A Cross Island Parkway
June 1998
2856-2861 Steinway Street
February 2004
8000 Cooper Avenue
Future Opening
300 West Service Road
June 1998
696 White Plains Road
October 1995
124 Palmer Avenue
January 1997
420 South Riverside Drive
January 1998
15 Madison Avenue
December 1998
58 Demarest Mill Road
May 1998
15 Barstow Road
July 1989
625 Merrick Avenue
January 1999
6136 Jericho Turnpike
January 1999
2909 Lincoln Avenue
May 1999
265 East Park Avenue
July 1999
833 Franklin Avenue
May 2000
350 New York Avenue
February 2001
49 Ira Road
March 2001
3656 Palisades Center Drive
February 2002
158 Irving Street
March 2002
208 E. Hartsdale Avenue
September 2004
Somers Commons, 80 Route 6
February 2005
200 Wilson Street
July 2005
4 City Center
September 2005
24 Saw Mill River Road
January 2006
Lawrence Street
Future Opening
Browns Road
Future Opening
6 Landmark Square
December 1997
16 Commerce Road
Reopened February 2006
38 Mill Plain Road
January 1998
1063 Hope Street
November 1998
250 Westport Avenue
March 1999
6 Liberty Way
May 1999
427 Post Road, East
January 2002
67 Mason Street
February 2004
8 Cornwall Court
January 1990
301 North Harrison Street
May 1997
200 Daniels Way
April 1998
163 Route 34
April 1998
Gaub Road and Route 516
April 1998
34 Route 9 North
April 1998
1355 15th Street
June 1998
1100 Route 17 North
June 1998
7 Leighton Place
June 1998
2651 Route 10
August 1998
215 Morris Avenue
August 1998
1250 Route 27
August 1998
3911 Route 27
August 1998
10 Schalks Crossing
August 1998
63
Location
Address
Date Opened or Management Assumed
120 Cedar Grove Lane
August 1998
221 Washington Street
October 1998
913 Bloomfield Avenue
April 1999
147 Two Harborside Financial Center
June 2002
1 Gateway Center
October 2002
129 S. Broad Street
June 2003
35 Jefferson Avenue
June 2004
39 W. North Field Rd.
February 2005
4250 Route 1 North
April 2005
210 14th Street
Future Opening
56 Church Street
Future Opening
34-36 South Dean Street
Future Opening
1 Bulfinch Place
August 1998
201 Brookline Avenue
June 2000
361 Newbury Street
November 2001
350 Washington Street
February 2002
505 Boylston Street
January 2006
560 Harrison Avenue
February 2006
695 Atlantic Avenue
Future Opening
15 Gorham Street
July 1997
Sherwood Plaza, 124 Worcester Rd
September 1998
553 Washington Street
May 1999
140 Great Plain Avenue
July 2000
307 Lowell Street
July 2000
425 Walnut Street
July 2000
475 Bedford Avenue
July 2000
750 Union Street
July 2000
1657 Worcester Street
July 2000
50 Ferncroft Road
July 2000 (closed April 2006)
625 Massachusetts Avenue
January 2001
1359 Washington Street
November 2001
840 Winter Street
November 2002
311 Arsenal Street
January 2006
214 D Street, S.E.
January 1980
1835 Connecticut Avenue, N.W.
January 1990
1990 M Street, N.W.
February 1993
2251 Wisconsin Avenue, N.W.
May 1994
1211 Connecticut Avenue, N.W.
July 2000
1345 F Street, N.W.
August 2002
5346 Wisconsin Avenue, N.W.
February 2002
1990 K Street, N.W.
February 2004
783 Seventh Street, N.W.
October 2004
3222 M Street, N.W.
February 2005
14th Street, N.W.
Future Opening
4903 Elm Street
May 1994
10400 Old Georgetown Road
June 1998
64
65
Location
Address
Date Opened or Management Assumed
12623 Wisteria Drive
July 1998
8506 Fenton Street
November 2005
6800 Wisconsin Avenue
Future Opening
3654 King Street
June 1999
21800 Town Center Plaza
October 1999
11001 Lee Highway
October 1999
8430 Old Keene Mill
September 2000
2700 Clarendon Boulevard
November 2001
220 South 5th Street
January 1999
2000 Hamilton Street
July 1999
One Highpoint Drive
January 2000
Route 70 and Kings Highway
April 2000
1735 Market Street
October 2000
34 West Lancaster Avenue
March 2002
555 East Lancaster Avenue
Future Opening
St. Johanns-Vorstadt 41
August 1987
Glarnischstrasse 35
August 1987
Gellerstrasse 235
August 2001
Table of Contents
Name | Age | Position | ||||
Robert J. Giardina(2)
|
48 | Chief Executive Officer and Director | ||||
Alexander A. Alimanestianu
|
47 | President and Chief Development Officer | ||||
Richard G. Pyle
|
47 | Chief Financial Officer | ||||
Randall C. Stephen
|
49 | Chief Operating Officer | ||||
Keith E. Alessi(1)
|
51 | Director | ||||
Paul N. Arnold(2)
|
59 | Chairman of the Board of Directors | ||||
Bruce C. Bruckmann(2)
|
52 | Director | ||||
J. Rice Edmonds(1)
|
35 | Director | ||||
Jason M. Fish(1)
|
48 | Director |
(1) | Member of the Audit Committee |
(2) | Member of the Compensation Committee |
66
67
68
69
70
71
72
73
Long-Term
Compensation
Awards
Annual Compensation (1)
Securities
Underlying
Name and Principal Position
Year
Salary ($)
Bonus ($)(2)
Options (#)
2005
452,152
448,565
2004
443,286
429,000
67,200
2003
434,594
511,133
16,800
2005
428,831
354,701
2004
420,423
349,710
67,200
2003
412,179
406,227
16,800
2005
318,643
212,181
2004
312,395
212,474
56,000
2003
306,270
251,746
14,000
2005
318,643
212,181
2004
312,395
212,474
56,000
2003
306,270
251,746
14,000
2005
245,565
97,520
56,000
2004
229,500
116,413
44,800
2003
225,000
95,755
11,200
(1)
The aggregate amount of perquisites and other personal benefits
did not exceed the lesser of $50,000 or 10% of the total annual
salary and bonus reported for each named executive officer and
has therefore been omitted.
(2)
Includes annual bonus payments under our Annual Bonus Plan.
(3)
Effective March 23, 2006, Mr. Smith resigned, and he
is no longer an employee, executive officer or director.
(4)
Mr. Alimanestianu was appointed President in March 2006.
Table of Contents
(1)
Amounts represent hypothetical gains that could be achieved for
the options if exercised at the end of the option term. We
present the 5% and 10% assumed annual rates of compounded stock
price appreciation based on the rules of the Securities and
Exchange Commission. These rates of appreciation do not
represent our estimate or projection of our future common stock
prices. These amounts represent assumed rates of appreciation in
the value of our common stock from the expected initial public
offering price of $14.00 per share. Actual gains, if any, on
stock option exercises are dependent on the future performance
of our common stock. The amounts reflected in the table may not
necessarily be achieved.
(2)
The exercise price exceeds the fair market value of $2.36 per
share on the grant date. Fair market value was based on an
independent valuation.
Number of Securities
Value of Unexercised
Underlying Unexercised
In-the-Money
Options at
Options at
December 31, 2005 (#)
December 31, 2005 ($)
Name
Exercisable
Unexercisable
Exercisable
Unexercisable
16,800
67,200
$
0
$
60,349
16,800
67,200
$
0
$
60,349
14,000
56,000
$
0
$
50,291
14,000
56,000
$
0
$
50,291
22,400
89,600
$
10,058
$
80,466
(1)
Effective March 23, 2006, Mr. Smith resigned, and he is no
longer an employee, executive officer or director of the
Company. See Related Party Transactions
Agreements with Mark N. Smith for further information
about Mr. Smiths options.
Table of Contents
who will receive awards,
the type, size and terms of awards,
the time when awards will be granted, and
vesting criteria, if any, of the awards.
Table of Contents
Number of Shares of
Number of Shares of
Common Stock
Common Stock
Underlying the
Name
Currently Held
Options
1,049,370
(1)
84,000
(1)
832,720
84,000
(2)
719,740
70,000
(3)
711,746
70,000
(3)
112,000
(4)
(1)
Effective March 23, 2006, Mr. Smith resigned, and he
is no longer an employee, executive officer or director of the
Company. Pursuant to the Equity Rights Letter between the
Company and Mr. Smith, we agreed not to exercise our
repurchase rights with respect to his common stock. The exercise
price for 16,800 options, each to purchase one underlying
share of our common stock, is $10.28 and the exercise price for
67,200 options, each to purchase one underlying share of
our common stock, is $7.19.
(2)
The exercise price for 16,800 options, each to purchase one
underlying share of our common stock, is $10.28 and the exercise
price for 67,200 options, each to purchase one underlying share
of our common stock, is $6.53.
(3)
The exercise price for 14,000 options, each to purchase one
underlying share of our common stock, is $10.28 and the exercise
price for 56,000 options, each to purchase one share of
underlying share of our common stock, is $6.53.
(4)
The exercise price for 11,200 options, each to purchase one
underlying share of our common stock, is $10.28 and the exercise
price for 100,800 options, each to purchase one underlying share
of our common stock, is $6.53.
Table of Contents
Table of Contents
| Two members designated by BRS currently, Bruce C. Bruckmann and J. Rice Edmonds; | |
| One member designated by the Farallon Entities currently, Jason M. Fish; | |
| Mark N. Smith (for so long as he is the Chairman of TSI Holdings); and | |
| Two members designated by holders of the common stock of TSI Holdings currently, Keith E. Alessi and Paul N. Arnold. |
74
75
76
| each person or group of affiliated persons whom we know to beneficially own more than five percent of our common stock; | |
| each of our directors; | |
| each named executive officer; | |
| all of our directors and executive officers as a group; and | |
| other stockholders who are selling shares of common stock in this offering. |
Shares Offered | ||||||||||||||||||||||||||||||||||||
to Underwriters | Shares Beneficially | Shares Beneficially | ||||||||||||||||||||||||||||||||||
Owned After the | Owned After the | |||||||||||||||||||||||||||||||||||
Shares Beneficially | If No | If Over- | Offering If No | Offering If Over- | ||||||||||||||||||||||||||||||||
Owned Before the | Exercise | Allotment | Exercise of Over- | Allotment Option is | ||||||||||||||||||||||||||||||||
Offering | of Over- | Option is | Shares Offered | Allotment Option | Exercised in Full | |||||||||||||||||||||||||||||||
Allotment | Exercised | to Farallon | ||||||||||||||||||||||||||||||||||
Name of Beneficial Owner | Number | Percentage | Option | in Full | Entities | Number | Percentage | Number | Percentage | |||||||||||||||||||||||||||
5% Stockholders
|
||||||||||||||||||||||||||||||||||||
Bruckmann, Rosser, Sherrill(1)
|
7,062,384 | 38.5 | % | | | | 7,062,384 | 27.2 | % | 7,062,384 | 27.2 | % | ||||||||||||||||||||||||
The Farallon Entities(2)
|
3,781,279 | 20.6 | % | | | | 5,081,279 | 19.6 | % | 5,081,279 | 19.6 | % | ||||||||||||||||||||||||
The Canterbury Entities(3)
|
1,952,115 | 10.7 | % | | | 1,300,000 | 652,115 | 2.5 | % | 652,115 | 2.5 | % | ||||||||||||||||||||||||
Directors and Named Executive Officers
|
||||||||||||||||||||||||||||||||||||
Mark N. Smith(4)
|
1,066,170 | 5.8 | % | | 268,946 | | 1,066,170 | 4.1 | % | 797,224 | 3.1 | % | ||||||||||||||||||||||||
Robert J. Giardina(5)
|
849,520 | 4.6 | % | | 213,421 | | 849,520 | 3.3 | % | 636,099 | 2.4 | % | ||||||||||||||||||||||||
Richard G. Pyle(5)
|
733,740 | 4.0 | % | | 184,465 | | 733,740 | 2.8 | % | 549,275 | 2.1 | % | ||||||||||||||||||||||||
Alexander A. Alimanestianu(5)
|
725,746 | 4.0 | % | | 182,416 | | 725,746 | 2.8 | % | 543,330 | 2.1 | % | ||||||||||||||||||||||||
Randall C. Stephen(5)
|
22,400 | * | | | | 22,400 | * | 22,400 | * | |||||||||||||||||||||||||||
Bruce C. Bruckmann(6)
|
7,246,982 | 39.5 | % | | | | 7,246,982 | 27.9 | % | 7,246,982 | 27.9 | % | ||||||||||||||||||||||||
J. Rice Edmonds(7)
|
7,062,384 | 38.5 | % | | | | 7,062,384 | 27.2 | % | 7,062,384 | 27.2 | % | ||||||||||||||||||||||||
Jason M. Fish(8)
|
322,000 | 1.8 | % | | 82,527 | | 322,000 | 1.2 | % | 239,473 | * | |||||||||||||||||||||||||
Paul N. Arnold
|
39,998 | * | | | | 39,998 | * | 39,998 | * | |||||||||||||||||||||||||||
Keith E. Alessi
|
39,998 | * | | | | 39,998 | * | 39,998 | * | |||||||||||||||||||||||||||
Directors and executive officers
as a group (9 persons)(9) |
9,980,384 | 54.3 | % | | 662,829 | | 9,980,384 | 38.3 | % | 9,317,555 | 35.8 | % | ||||||||||||||||||||||||
Other Stockholders
|
||||||||||||||||||||||||||||||||||||
CS Equity II, LLC
|
322,000 | 1.8 | % | | 82,527 | | 322,000 | 1.2 | % | 239,473 | * | |||||||||||||||||||||||||
Alexandra Brinsmade(10)
|
3,360 | * | | 861 | | 3,360 | * | 2,499 | * | |||||||||||||||||||||||||||
Bruce E. Buckbee(10)
|
560 | * | | 144 | | 560 | * | 416 | * | |||||||||||||||||||||||||||
Robert P. Calvo
|
88,004 | * | | 3,588 | | 88,004 | * | 84,416 | * | |||||||||||||||||||||||||||
Jill A. Corella
|
2,240 | * | | 574 | | 2,240 | * | 1,666 | * | |||||||||||||||||||||||||||
Carol Cornbill
|
193,592 | 1.1 | % | | 24,808 | | 193,592 | * | 168,784 | * | ||||||||||||||||||||||||||
Matthew S. Daniel(10)
|
8,400 | * | | 2,153 | | 8,400 | * | 6,247 | * | |||||||||||||||||||||||||||
Karl Derleth
|
39,200 | * | | 10,047 | | 39,200 | * | 29,153 | * | |||||||||||||||||||||||||||
Raymond Dewhirst
|
69,916 | * | | 17,919 | | 69,916 | * | 51,997 | * | |||||||||||||||||||||||||||
Daniel Gallagher(10)
|
23,800 | * | | 6,100 | | 23,800 | * | 17,700 | * |
77
Shares Offered | ||||||||||||||||||||||||||||||||||||
to Underwriters | Shares Beneficially | Shares Beneficially | ||||||||||||||||||||||||||||||||||
Owned After the | Owned After the | |||||||||||||||||||||||||||||||||||
Shares Beneficially | If No | If Over- | Offering If No | Offering If Over- | ||||||||||||||||||||||||||||||||
Owned Before the | Exercise | Allotment | Exercise of Over- | Allotment Option is | ||||||||||||||||||||||||||||||||
Offering | of Over- | Option is | Shares Offered | Allotment Option | Exercised in Full | |||||||||||||||||||||||||||||||
Allotment | Exercised | to Farallon | ||||||||||||||||||||||||||||||||||
Name of Beneficial Owner | Number | Percentage | Option | in Full | Entities | Number | Percentage | Number | Percentage | |||||||||||||||||||||||||||
Ann M. Haughey(10)
|
7,560 | * | | 718 | | 7,560 | * | 6,842 | * | |||||||||||||||||||||||||||
Margaret M. Houren(10)
|
12,600 | * | | 3,229 | | 12,600 | * | 9,371 | * | |||||||||||||||||||||||||||
Lisa Hufcut
|
7,000 | * | | 1,794 | | 7,000 | * | 5,206 | * | |||||||||||||||||||||||||||
Cheryl Jones(10)
|
4,200 | * | | 1,076 | | 4,200 | * | 3,124 | * | |||||||||||||||||||||||||||
John Kraemer(10)
|
3,920 | * | | 1,005 | | 3,920 | * | 2,915 | * | |||||||||||||||||||||||||||
Nancy Oberg
|
6,160 | * | | 1,579 | | 6,160 | * | 4,581 | * | |||||||||||||||||||||||||||
Sean OHearen(10)
|
8,960 | * | | 2,296 | | 8,960 | * | 6,664 | * | |||||||||||||||||||||||||||
Jennifer H. Prue(10)
|
36,400 | * | | 9,329 | | 36,400 | * | 27,071 | * | |||||||||||||||||||||||||||
Heinz Ritschard
|
38,248 | * | | 9,803 | | 38,248 | * | 28,445 | * | |||||||||||||||||||||||||||
Seth Sherman
|
5,040 | * | | 1,292 | | 5,040 | * | 3,748 | * | |||||||||||||||||||||||||||
Jenny L. Sinert
|
2,800 | * | | 718 | | 2,800 | * | 2,082 | * | |||||||||||||||||||||||||||
Deborah A. Smith
|
303,212 | 1.7 | % | | 77,711 | | 303,212 | 1.2 | % | 225,501 | * | |||||||||||||||||||||||||
Margaret R. Stevens(10)
|
74,956 | * | | 19,211 | | 74,956 | * | 55,745 | * | |||||||||||||||||||||||||||
Frederick H. Talty(10)
|
5,600 | * | | 1,435 | | 5,600 | * | 4,165 | * | |||||||||||||||||||||||||||
Mark Terlitsky(10)
|
3,360 | * | | 786 | | 3,360 | * | 2,574 | * | |||||||||||||||||||||||||||
Edward Trainor
|
118,874 | * | | 16,114 | | 118,874 | * | 102,760 | * | |||||||||||||||||||||||||||
Douglas H. Werner(10)
|
5,600 | * | | 1,435 | | 5,600 | * | 4,165 | * |
* | Less than 1%. |
(1) | Excludes shares held individually by Mr. Bruckmann and other individuals (and affiliates and family members thereof), each of whom are employed by BRS. Mr. Bruckmann, Hal Rosser, Stephen Sherrill and Stephen Edwards, as individuals, are the sole shareholders of BRSE Associates, Inc., which is the General Partner of BRS Partners, LP, which is the General Partner of Bruckmann, Rosser, Sherrill & Co., LP. All major investment and other decisions of Bruckmann, Rosser, Sherrill & Co., LP are vested in BRS Partners, LP. |
(2) | Consists of 1,323,448 shares directly held by Farallon Capital Partners, L.P. (FCP), 1,512,512 shares directly held by Farallon Capital Institutional Partners, L.P. (FCIP), 756,256 shares directly held by Farallon Capital Institutional Partners II, L.P. (FCIP II) and 189,063 shares directly held by RR Capital Partners, L.P. (collectively with FCP, FCIP, and FCIP II, the Farallon Entities). As the general partner of each of the Farallon Entities, Farallon Partners, L.L.C. (FPLLC) may, for purposes of Rule 13d-3 under the Exchange Act, be deemed to own beneficially the shares held by the Farallon Entities. As managing members of FPLLC, Chun R. Ding, William F. Duhamel, Richard B. Fried, Monica R. Landry, William F. Mellin, Stephen L. Millham, Jason E. Moment, Rajiv A. Patel, Derek C. Schrier and Mark C. Wehrly, and as the Senior Managing Member of FPLLC, Thomas F. Steyer, may each, for purposes of Rule 13d-3 under the Exchange Act, be deemed to own beneficially the shares held by the Farallon Entities. FPLLC, each of its managing members and its Senior Managing Member disclaim any beneficial ownership of such shares. All of the above-mentioned entities and individuals disclaim group attribution. The share numbers in this footnote are based on the shares beneficially owned before this offering, and do not include the shares being sold to the Farallon Entities by the Canterbury Entities. |
(3) | Consists of 1,701,409 shares held by Canterbury Mezzanine Capital, L.P. (CMC) and 250,706 shares held by Canterbury Detroit Partners, L.P. (CDP, and together with CMC, the Canterbury Entities). For purposes of Rule 13d-3, Patrick N.W. Turner and Nicholas B. Dunphy may be deemed to own beneficially all shares held by the Canterbury Entities. Messrs. Turner and Dunphy disclaim beneficial ownership of such shares. The share numbers in this footnote are based on the shares beneficially owned before the sale of the offered shares to the Farallon Entities by the Canterbury Entities. |
(4) | Includes 16,800 options to acquire common stock that are exercisable within 60 days. Effective March 23, 2006, Mr. Smith resigned, and he is no longer an employee, executive officer or director of the Company. |
78
(5) | Includes options to acquire common stock that are exercisable within 60 days. Messrs. Giardina, Pyle, Alimanestianu and Stephen each hold such options on 16,800, 14,000, 14,000 and 22,400 shares of common stock, respectively. |
(6) | Includes 7,062,384 shares held by BRS, and 41,589 shares held by certain other family members and partnership investments of Mr. Bruckmann. Mr. Bruckmann disclaims beneficial ownership of such shares held by BRS. |
(7) | Consists of shares held by BRS. Mr. Edmonds disclaims beneficial ownership of such shares. |
(8) | Consists of shares held by CS Equity II, LLC. Mr. Fish is co-founder, vice chairman, chief investment officer and director of CapitalSource Inc., the indirect 100% owner of CS Equity II, LLC. Mr. Fish disclaims beneficial ownership of such shares. |
(9) | Includes 67,200 shares of common stock issuable upon the exercise of options which are currently vested or which vest within 60 days. Includes (i) shares held by BRS, which may be deemed to be owned beneficially by Messrs. Bruckmann and Edmonds, and (ii) shares held by CS Equity II, LLC, which may be deemed to be owned beneficially by Mr. Fish. |
Excluding the shares beneficially owned by BRS and CS Equity II, LLC, the directors and executive officers as a group beneficially own 2,596,000 shares of common stock (which represents approximately 14.1% of the common stock on a fully diluted basis). | |
(10) | Includes or consists of options to acquire common stock that are exercisable within 60 days. Before this offering, the individuals listed below hold options on the following shares of common stock: |
Name | Number of Shares | |||
Alexandra Brinsmade
|
3,360 | |||
Bruce Buckbee
|
560 | |||
Matt Daniel
|
8,400 | |||
Dan Gallagher
|
12,600 | |||
Ann Haughey
|
1,400 | |||
Peggy Houren
|
7,000 | |||
Cheryl Jones
|
4,200 | |||
John Kraemer
|
1,680 | |||
Sean OHearen
|
6,160 | |||
Jenny Prue
|
36,400 | |||
Maggie Stevens
|
2,800 | |||
Fred Talty
|
560 | |||
Mark Terlitsky
|
560 | |||
Doug Werner
|
5,600 |
79
80
81
Number of Shares | Date | |||
8,950,000 | After the date of this prospectus, freely tradable shares sold in this offering and shares saleable under Rule 144(k) that are not subject to the 180-day lock-up | |||
0 | 90 days or more from the date of this prospectus, shares saleable under Rule 144 or Rule 701 that are not subject to the 180-day lock-up | |||
17,026,602 | After 180 days from the date of this prospectus, the 180-day lock-up is released and these shares are saleable under Rule 144 (subject, in some cases, to volume limitations), Rule 144(k) or Rule 701 | |||
0 | After 180 days from the date of this prospectus, restricted securities that are held for less than one year are not yet saleable under Rule 144 |
Lock-up Agreements |
Rule 144 |
Rule 144(k) |
82
Rule 701 |
Registration Rights |
Stock Plans |
83
| a non-resident alien individual; | |
| a foreign corporation; or | |
| a foreign estate or foreign trust. |
| dealers in securities or currencies; | |
| traders in securities; | |
| persons holding shares as part of a conversion, constructive sale, wash sale or other integrated transactions or a hedge, straddle or synthetic security; | |
| persons subject to the alternative minimum tax; | |
| certain United States expatriates; | |
| financial institutions; | |
| insurance companies; | |
| controlled foreign corporations, passive foreign investment companies and regulated investment companies and shareholders of such corporations; | |
| entities that are tax-exempt for United States federal income tax purposes and retirement plans, individual retirement accounts and tax-deferred accounts; and | |
| pass-through entities, including partnerships and entities and arrangements classified as partnerships for United States federal tax purposes and beneficial owners of pass-through entities. |
84
85
86
Number of | |||||
Underwriter | Shares | ||||
Credit Suisse Securities (USA) LLC
|
|||||
Deutsche Bank Securities Inc.
|
|||||
William Blair & Company, L.L.C.
|
|||||
Piper Jaffray & Co.
|
|||||
RBC Capital Markets Corporation
|
|||||
Total
|
7,650,000 | ||||
Per Share | Total | |||||||||||||||
Without | With | Without | With | |||||||||||||
Over- | Over- | Over- | Over- | |||||||||||||
Allotment | Allotment | Allotment | Allotment | |||||||||||||
Underwriting Discounts and Commissions paid by us
|
$ | $ | $ | $ | ||||||||||||
Expenses payable by us
|
$ | $ | $ | $ | ||||||||||||
Underwriting Discounts and Commissions paid by selling
stockholders (other than the Canterbury Entities)
|
$ | $ | $ | $ | ||||||||||||
Expenses payable by the selling stockholders (other than the
Canterbury Entities)
|
$ | $ | $ | $ |
87
| Stabilizing transactions permit bids to purchase the shares so long as the stabilizing bids do not exceed a specified maximum. | |
| Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position |
88
may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option and/or purchasing shares in the open market. | ||
| Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over- allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. | |
| Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions. | |
| In passive market making, market makers in the common stock who are underwriters or prospective underwriters may, subject to limitations, make bids for or purchases of our common stock until the time, if any, at which a stabilizing bid is made. |
89
90
| the purchaser is entitled under applicable provincial securities laws to purchase the shares without the benefit of a prospectus qualified under those securities laws, | |
| where required by law, that the purchaser is purchasing as principal and not as agent, | |
| the purchaser has reviewed the text above under the heading Resale Restrictions, and | |
| the purchaser acknowledges and consents to the provision of specified information concerning its purchase of the shares to the regulatory authority that by law is entitled to collect the information. | |
91
92
93
Page | |||||
AUDITED FINANCIAL STATEMENTS
|
|||||
Consolidated Annual Financial Statements of Town Sports
International Holdings, Inc.:
|
|||||
F-2 | |||||
F-3 | |||||
F-4 | |||||
F-5 | |||||
F-6 | |||||
F-7 | |||||
Consolidated Annual Financial Statements of Kalorama Sports
Management Associates:
|
|||||
F-38 | |||||
F-39 | |||||
F-40 | |||||
F-41 | |||||
F-42 | |||||
F-43 | |||||
UNAUDITED FINANCIAL STATEMENTS
|
|||||
Condensed Consolidated Quarterly Financial Statements of Town
Sports International Holdings, Inc.:
|
|||||
F-47 | |||||
F-48 | |||||
F-49 | |||||
F-50 |
F-1
/s/ PRICEWATERHOUSECOOPERS LLP |
F-2
F-3
F-4
F-5
F-6
Table of Contents
For the Year Ended December 31,
2003
2004
2005
(All figures in $000s)
$
335,665
$
348,175
$
384,143
5,507
4,856
4,413
341,172
353,031
388,556
130,585
138,302
151,920
111,069
116,847
130,219
21,995
24,719
26,582
34,927
36,869
39,582
2,002
298,576
318,739
348,303
42,596
34,292
40,253
7,773
23,670
39,343
41,550
(444
)
(743
)
(2,342
)
(1,369
)
(1,493
)
(1,744
)
12,966
(2,815
)
2,789
5,537
1,090
1,020
7,429
(3,905
)
1,769
(10,984
)
(784
)
$
(3,555
)
$
(4,689
)
$
1,769
$
(2.85
)
$
(3.61
)
$
1.35
$
(2.85
)
$
(3.61
)
$
1.35
$
$
52.50
$
1,247,674
1,299,332
1,309.616
1,247,674
1,299,332
1,312,473
Table of Contents
Preferred Stock
Common Stock
Series B
Class A
Accumulated
Accumulated
($1.00 par)
($.001 par)
Other
(Deficit)/
Total
Paid-in
Unearned
Comprehensive
Retained
Stockholders
Shares
Amount
Shares
Amount
Capital
Compensation
Income
Earnings
Deficit
(All figures in $000s)
3,822
$
303
1,176,043
$
1
$
(32,149
)
$
(278
)
$
293
$
90
$
(31,740
)
106,267
8,618
(8,618
)
(549
)
(43
)
(540
)
(583
)
177
177
21
21
1,083
(305
)
(778
)
(1,219
)
(3,830
)
(5,049
)
(2,888
)
(1,964
)
(4,852
)
(85
)
85
7,429
7,429
303
303
7,732
109,540
9,961
1,176,043
1
(45,627
)
(172
)
596
947
(34,294
)
71,631
65,936
539
539
(68,943
)
(68,943
)
(1,321
)
(53
)
(53
)
184
(184
)
64
64
157
(157
)
(627
)
(627
)
(109,540
)
(10,118
)
(10,118
)
(3,905
)
(3,905
)
320
320
(3,585
)
1,312,289
1
(113,900
)
(292
)
916
(3,742
)
(117,017
)
(3,166
)
(184
)
(184
)
(3
)
282
279
499
(499
)
1,769
1,769
(530
)
(530
)
1,239
$
1,309,123
$
1
$
(113,588
)
$
(509
)
$
386
$
(1,973
)
$
(115,683
)
Table of Contents
For the Year Ended December 31,
2003
2004
2005
(All figures in $000s)
$
7,429
$
(3,905
)
$
1,769
34,927
36,869
39,582
2,002
406
12,758
15,505
1,627
1,584
1,644
7,773
1,650
525
1,461
198
64
279
(227
)
(1,292
)
4,221
3,483
4,036
(11,623
)
1,370
1,021
495
617
2,508
8,590
1,399
1,837
23
(850
)
(504
)
51,441
61,030
61,487
58,870
57,125
63,256
(43,397
)
(36,816
)
(62,393
)
176
7
(130
)
(3,877
)
(3,945
)
(43,351
)
(40,686
)
(66,338
)
2,778
(1,792
)
120,487
(50,635
)
(68,943
)
(53
)
(184
)
539
(5,566
)
(3,908
)
(1,144
)
255,000
(125,000
)
(4,064
)
(66,977
)
(9,578
)
(14,500
)
(9,000
)
(583
)
19,732
265
(3,120
)
35,251
16,704
(6,202
)
5,551
40,802
57,506
$
40,802
$
57,506
$
51,304
$
(136
)
$
(486
)
$
(2,334
)
382
95
230
(137
)
(845
)
(3,774
)
(1,050
)
(1,583
)
1,127
1,036
515
4,920
(322
)
1,012
4,052
$
(227
)
$
(1,292
)
$
4,221
Table of Contents
1. | The Company and Summary of Significant Accounting Policies |
Principles of Consolidation |
Revenue Recognition |
Inventory |
Accounts Receivable and Allowance for Doubtful Accounts |
F-7
Receivables and Allowance for Doubtful Accounts
December 31,
2004
2005
$
3,645
$
4,426
412
3,241
545
1,420
$
4,602
$
9,087
Balance Beginning | Write-offs Net of | Balance at | ||||||||||||||
of the Year | Additions | Recoveries | End of Year | |||||||||||||
December 31, 2005
|
$ | 2,647 | $ | 6,165 | $ | (6,828 | ) | $ | 1,984 | |||||||
December 31, 2004
|
822 | 5,497 | (3,672 | ) | 2,647 | |||||||||||
December 31, 2003
|
120 | 1,537 | (835 | ) | 822 |
Fixed Assets |
Advertising and Club Preopening Costs |
Insurance |
F-8
Use of Estimates |
Corporate Income Taxes |
Statements of Cash Flows |
Cash and Cash Equivalents |
F-9
Deferred Lease Liabilities and Non-cash Rental Expense |
Foreign Currency |
Comprehensive Income |
Investments in Affiliated Companies |
For the Year Ended | ||||||||||||
December 31, | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
Revenue
|
$ | 3,657 | $ | 3,560 | $ | 3,526 | ||||||
Income from operations
|
1,634 | 1,563 | 1,452 | |||||||||
Net income
|
1,526 | 1,459 | 1,373 |
Intangible Assets, Goodwill and Debt Issuance Costs |
F-10
Accounting for the Impairment of Long-Lived Assets |
Concentrations of Credit Risk |
Earnings (Loss) Per Share |
Year Ended December 31, | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
Weighted average number of common shares outstanding
basic
|
1,247,674 | 1,299,332 | 1,309,616 | |||||||||
Effect of dilutive stock options
|
| | 2,857 | |||||||||
Weighted average number of common shares outstanding
diluted
|
1,247,674 | 1,299,332 | 1,312,473 | |||||||||
Stock-Based Employee Compensation |
F-11
For the Year Ended December 31, | |||||||||||||
2003 | 2004 | 2005 | |||||||||||
Net income (loss) attributed to common stockholders, as reported
|
$ | (3,555 | ) | $ | (4,689 | ) | $ | 1,769 | |||||
Add:
|
|||||||||||||
Stock-based employee compensation expense included in reported
net loss attributed to common stockholders, net of related tax
effects
|
12 | 37 | 177 | ||||||||||
Deduct:
|
|||||||||||||
Total stock-based employee compensation expense determined under
fair value based method for all stock option awards, net of
related tax effects
|
(167 | ) | (99 | ) | (128 | ) | |||||||
Pro forma net income (loss) attributed to common stockholders
|
$ | (3,710 | ) | $ | (4,751 | ) | $ | 1,818 | |||||
Basic earnings (loss) per share:
|
|||||||||||||
As reported
|
$ | (2.85 | ) | $ | (3.61 | ) | $ | 1.35 | |||||
Pro forma
|
$ | (2.97 | ) | $ | (3.66 | ) | $ | 1.39 | |||||
Diluted earnings (loss) per share:
|
|||||||||||||
As reported
|
$ | (2.85 | ) | $ | (3.61 | ) | $ | 1.35 | |||||
Pro forma
|
$ | (2.97 | ) | $ | (3.66 | ) | $ | 1.39 |
Weighted | ||||||||||||||||||||
Risk-Free | Average | Expected | Fair Value | |||||||||||||||||
Interest | Expected | Expected | Dividend | at Date of | ||||||||||||||||
Class A Common | Rate | Life | Volatility | Yield | Grant | |||||||||||||||
1999 Grants
|
5.7 | % | 5 years | 60 | % | | $ | 30.10 | ||||||||||||
2000 Grants
|
6.6 | 5 years | 69 | | 47.11 | |||||||||||||||
2001 Grants
|
4.6 | 5 years | 72 | | 111.89 | |||||||||||||||
2003 Grants
|
3.8 | 6 years | 55 | | 14.50 | |||||||||||||||
2005 Grants
|
4.1 | 6 years | 49 | | 8.00 |
F-12
2. | Recent Accounting Pronouncements |
F-13
3.
Fixed Assets
December 31,
2004
2005
$
257,552
$
287,171
62,172
68,420
39,912
45,338
9,893
11,261
4,995
4,995
986
986
14,479
29,045
389,989
447,216
163,736
(194,085
)
$
226,253
$
253,131
4. | Goodwill and Intangible Assets |
Balance at January 1, 2004
|
$ | 45,864 | |||
Goodwill impairment
|
(2,002 | ) | |||
Currency translation adjustments
|
69 | ||||
Acquisitions
|
3,563 | ||||
Balance at December 31, 2004
|
$ | 47,494 | |||
Other
|
(15 | ) | |||
Currency translation adjustments
|
(114 | ) | |||
Acquisitions
|
2,609 | ||||
Balance at December 31, 2005
|
$ | 49,974 | |||
F-14
December 31, 2004
Gross
Carrying
Accumulated
Net
Amount
Amortization
Intangibles
$
11,008
$
(10,372
)
$
636
1,151
(895
)
256
223
(184
)
39
$
12,382
$
(11,451
)
$
931
December 31, 2005
Gross
Carrying
Accumulated
Net
Amount
Amortization
Intangibles
11,450
(10,939
)
511
1,151
(949
)
202
223
(195
)
28
$
12,824
$
(12,083
)
$
741
Amortization | ||||
Year Ending December 31, | Expense | |||
2006
|
$ | 521 | ||
2007
|
120 | |||
2008
|
64 | |||
2009
|
36 | |||
2010
|
| |||
$ | 741 | |||
F-15
5.
Accrued Expenses
December 31,
2004
2005
$
5,472
$
6,447
3,200
7,848
4,621
5,783
2,319
4,091
6,790
7,451
$
22,402
$
31,620
6. | Long-Term Debt and Capital Lease Obligations |
December 31, | |||||||||
2004 | 2005 | ||||||||
Senior
Notes 9
5
/
8
%
|
$ | 255,000 | $ | 255,000 | |||||
Senior Discount Notes 11%
|
137,572 | 153,077 | |||||||
Notes payable for acquired businesses
|
3,874 | 3,085 | |||||||
Capital lease obligations
|
15 | | |||||||
396,461 | 411,162 | ||||||||
Less: Current portion due within one year
|
1,225 | 1,267 | |||||||
Long-term portion
|
$ | 395,236 | $ | 409,895 | |||||
Year Ending December 31, | Amount Due | |||
2006
|
$ | 1,267 | ||
2007
|
775 | |||
2008
|
732 | |||
2009
|
311 | |||
2010
|
| |||
Thereafter
|
408,077 | |||
$ | 411,162 | |||
F-16
April 16, 2003 Refinancing Transactions |
Senior Credit Facility |
February 4, 2004 Restructuring |
F-17
Fair Market Value |
Interest Expense |
Year Ended December 31, | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
Interest costs expensed
|
$ | 23,670 | $ | 39,343 | $ | 41,550 | ||||||
Interest costs capitalized
|
322 | 429 | 899 | |||||||||
Total interest expense and amounts capitalized
|
$ | 23,992 | $ | 39,772 | $ | 42,449 | ||||||
7. | Related Party Transactions |
8. | Leases |
F-18
Minimum
Year Ending December 31,
Annual Rental
$
61,695
63,279
62,355
60,373
57,404
422,027
Minimum | ||||
Year Ending December 31, | Annual Rental | |||
2006
|
$ | 3,308 | ||
2007
|
3,056 | |||
2008
|
2,324 | |||
2009
|
2,028 | |||
2010
|
1,909 | |||
Aggregate thereafter
|
9,998 |
9. | Redeemable Preferred Stock |
Redeemable Senior Preferred Stock |
F-19
Series A Redeemable Preferred Stock |
10. | Stockholders Deficit |
a. Capitalization |
Common Stock |
Series B Preferred Stock |
F-20
Restructuring |
b. Stock Options |
Series B Preferred Stock Options |
F-21
Class A Common Stock Options |
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Class A | Exercise | Series B | Exercise | |||||||||||||
Common | Price | Preferred | Price | |||||||||||||
Balance at January 31, 2003
|
93,482 | $ | 28.23 | 158,306 | $ | 10.00 | ||||||||||
Granted
|
46,400 | 144.00 | (i) | | ||||||||||||
Exercised
|
(1,740 | ) | 36.14 | (158,306 | ) | 10.00 | ||||||||||
Forfeited
|
(7,610 | ) | 24.48 | | ||||||||||||
Balance at December 31, 2003
|
130,532 | 69.49 | | | ||||||||||||
Reinstated(ii)
|
5,750 | 2.15 | ||||||||||||||
Exercised
|
(65,936 | ) | 8.22 | |||||||||||||
Forfeited
|
(1,460 | ) | 48.22 | |||||||||||||
Balance at December 31, 2004(iii)
|
68,886 | 84.42 | ||||||||||||||
Granted
|
20,000 | 91.50 | (i) | |||||||||||||
Exercised(iv)
|
(240 | ) | 75.00 | |||||||||||||
Forfeited
|
(280 | ) | 19.36 | |||||||||||||
Balance at December 31, 2005
|
88,366 | 86.26 | ||||||||||||||
(i) | Option exercise price was greater than market price on the grant date. | |
(ii) | Option reinstated as a result of inadvertent forfeiture on behalf on TSI. |
F-22
(iii) | In connection with the restructuring of the Companys capitalization, a total of 50,238 vested common stock options with a weighted average exercise price of $127.42 were amended to decrease the exercise price by $52.50, equivalent to the distribution that common stock holders received in March 2004. As of December 31, 2004, the 50,238 outstanding common stock options have a weighted average exercise price of $74.92. | |
(iv) | The shares related to the exercise of these options were immediately repurchased and retired by the company. |
Options Outstanding | Options Exercisable | ||||||||||||||||||||
Weighted- | |||||||||||||||||||||
Average | Weighted- | Weighted- | |||||||||||||||||||
Remaining | Average | Average | |||||||||||||||||||
Number | Contractual | Exercise | Number | Exercise | |||||||||||||||||
Outstanding | Life | Price | Exercisable | Price | |||||||||||||||||
Class A Common
|
|||||||||||||||||||||
1999 grants
|
880 | 36 months | $ | 53.00 | 880 | $ | 53.00 | ||||||||||||||
2000 grants
|
9,148 | 48 months | $ | 75.00 | 9,148 | $ | 75.00 | ||||||||||||||
2003 grants
|
9,240 | 84 months | $ | 144.00 | 9,240 | $ | 144.00 | ||||||||||||||
2004 amended and repriced 1999 grants
|
1,640 | 36 months | $ | 0.50 | | $ | 0.50 | ||||||||||||||
2004 amended and repriced 2000 grants
|
6,098 | 48 months | $ | 22.50 | | $ | 22.50 | ||||||||||||||
2004 amended and repriced 2001 grants
|
4,400 | 77 months | $ | 47.50 | | $ | 47.50 | ||||||||||||||
2004 amended and repriced 2003 grants
|
36,960 | 84 months | $ | 91.50 | | $ | 91.50 | ||||||||||||||
2005 grants
|
20,000 | 108 months | $ | 91.50 | 4,000 | $ | 91.50 | ||||||||||||||
Total Grants
|
88,366 | $ | 86.26 | 23,268 | $ | 104.41 | |||||||||||||||
F-23
11. | Asset Acquisitions |
Years Ended | |||||||||
December 31, | |||||||||
2004 | 2005 | ||||||||
Number of clubs acquired
|
3 | 2 | |||||||
Purchase prices payable in cash at closing
|
$ | 3,877 | $ | 3,945 | |||||
Issuance and assumption of notes payable
|
920 | 340 | |||||||
Total purchase prices
|
$ | 4,797 | $ | 4,285 | |||||
Years Ended | ||||||||||
December 31, | ||||||||||
2004 | 2005 | |||||||||
Allocation of purchase prices
|
||||||||||
Goodwill
|
$ | 3,563 | $ | 2,609 | ||||||
Fixed assets
|
1,155 | 1,483 | ||||||||
Membership lists
|
803 | 442 | ||||||||
Non-compete agreement
|
275 | | ||||||||
Other net liabilities acquired
|
(42 | ) | | |||||||
Other net assets acquired
|
| 40 | ||||||||
Deferred revenue
|
(957 | ) | (289 | ) | ||||||
Total allocation of purchase prices
|
$ | 4,797 | $ | 4,285 | ||||||
F-24
12.
Revenue from Club Operations
Years Ended December 31,
2003
2004
2005
$
273,334
$
282,716
$
309,811
13,892
12,439
11,916
31,170
34,821
42,277
17,269
18,199
20,139
335,665
348,175
384,143
2,707
4,856
4,413
2,800
$
341,172
$
353,031
$
388,556
13. | Corporate Income Taxes |
Year Ended December 31, 2003 | ||||||||||||
State and | ||||||||||||
Federal | Local | Total | ||||||||||
Current
|
$ | 463 | $ | 1,591 | $ | 2,054 | ||||||
Deferred
|
3,017 | 466 | 3,483 | |||||||||
$ | 3,480 | $ | 2,057 | $ | 5,537 | |||||||
Year Ended December 31, 2004 | ||||||||||||||||
State and | ||||||||||||||||
Federal | Foreign | Local | Total | |||||||||||||
Current
|
$ | (5,468 | ) | $ | 247 | $ | 2,275 | $ | (2,946 | ) | ||||||
Deferred
|
4,956 | | (920 | ) | 4,036 | |||||||||||
$ | (512 | ) | $ | 247 | $ | 1,355 | $ | 1,090 | ||||||||
Year Ended December 31, 2005 | ||||||||||||||||
State and | ||||||||||||||||
Federal | Foreign | Local | Total | |||||||||||||
Current
|
$ | 9,761 | $ | 318 | $ | 2,584 | $ | 12,663 | ||||||||
Deferred
|
(8,557 | ) | | (3,086 | ) | (11,643 | ) | |||||||||
$ | 1,204 | $ | 318 | $ | (502 | ) | $ | 1,020 | ||||||||
F-25
December 31,
2004
2005
$
8,781
$
10,973
4,367
5,697
42
149
1,684
1,835
4,051
10,198
1,766
2,277
20,691
31,129
(2,735
)
(496
)
(4,240
)
(4,548
)
(6,975
)
(5,044
)
13,716
26,085
(981
)
(1,707
)
$
12,735
$
24,378
Years Ended | ||||||||||||
December 31, | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
Federal statutory tax rate
|
35 | % | (35 | )% | 35 | % | ||||||
State and local income taxes, net of federal tax benefit
|
8 | 7 | 17 | |||||||||
Change in state effective income tax rate
|
| 12 | (11 | ) | ||||||||
Deferred compensation
|
| 41 | | |||||||||
State tax benefit related to self insurance
|
| (8 | ) | (22 | ) | |||||||
Foreign rate differential
|
| (3 | ) | (3 | ) | |||||||
Valuation allowance
|
| 21 | 13 | |||||||||
Swiss repatriation cost
|
| | 4 | |||||||||
Other permanent differences
|
| 4 | 4 | |||||||||
43 | % | 39 | % | 37 | % | |||||||
F-26
The American Jobs Creation Act of 2004 |
14. | Contingencies |
15. | Employee Benefit Plan |
F-27
16. | Subsequent Event |
17. | Guarantors |
F-28
F-29
F-30
F-31
F-32
F-33
F-34
F-35
F-36
F-37
Table of Contents
Table of Contents
Non-
Subsidiary
Guarantor
TSI Holdings
TSI
Guarantors
Subsidiary
Eliminations
Consolidated
(All figures in $000s)
$
$
427
$
330,627
$
4,611
$
$
335,665
3,376
6,306
(4,175
)
5,507
3,803
336,933
4,611
(4,175
)
341,172
21,439
107,364
1,782
130,585
772
112,800
1,112
(3,615
)
111,069
(123
)
22,291
387
(560
)
21,995
3,890
30,661
376
34,927
25,978
273,116
3,657
(4,175
)
298,576
(22,175
)
63,817
954
42,596
7,773
7,773
23,891
130
(1
)
(350
)
23,670
(794
)
350
(444
)
(614
)
(755
)
(1,369
)
(52,431
)
64,442
955
12,966
(24,100
)
29,401
236
5,537
(28,331
)
35,041
719
7,429
35,760
(35,760
)
$
$
7,429
$
35,041
$
719
$
(35,760
)
$
7,429
Table of Contents
Non-
Subsidiary
Guarantor
TSI Holdings
TSI
Guarantors
Subsidiary
Eliminations
Consolidated
(All figures in $000s)
$
$
19
$
343,244
$
4,912
$
$
348,175
1,710
6,901
8
(3,763
)
4,856
1,729
350,145
4,920
(3,763
)
353,031
21,709
114,649
1,944
138,302
1,368
117,546
1,136
(3,203
)
116,847
50
609
24,210
410
(560
)
24,719
3,994
32,478
397
36,869
2,002
2,002
50
27,680
290,885
3,887
(3,763
)
318,739
(50
)
(25,951
)
59,260
1,033
34,292
13,037
27,629
(969
)
(4
)
(350
)
39,343
(60
)
(1,031
)
(2
)
350
(743
)
(788
)
(705
)
(1,493
)
(13,027
)
(51,761
)
60,936
1,037
(2,815
)
(6,267
)
(18,140
)
25,250
247
1,090
(6,760
)
(33,621
)
35,686
790
(3,905
)
2,855
36,476
(39,331
)
$
(3,905
)
$
2,855
$
35,686
$
790
$
(39,331
)
$
(3,905
)
Table of Contents
Non-
Subsidiary
Guarantor
TSI Holdings
TSI
Guarantors
Subsidiary
Eliminations
Consolidated
(All figures in $000s)
$
$
$
379,539
$
4,604
$
$
384,143
1,009
8,509
(5,105
)
4,413
1,009
388,048
4,604
(5,105
)
388,556
22,780
127,624
1,879
(363
)
151,920
1,304
131,944
1,153
(4,182
)
130,219
22
1,335
25,442
343
(560
)
26,582
4,334
34,876
372
39,582
22
29,753
319,886
3,747
(5,105
)
348,303
(22
)
(28,744
)
68,162
857
40,253
15,836
22,742
3,299
(326
)
41,550
(6
)
(2,652
)
(10
)
326
(2,342
)
(1,059
)
(685
)
(1,744
)
(15,852
)
(47,775
)
65,558
857
2,789
(7,828
)
(15,719
)
24,256
311
1,020
(8,024
)
(32,055
)
41,302
546
1,769
9,793
41,848
(51,641
)
$
1,769
$
9,793
$
41,302
$
546
$
(51,641
)
$
1,769
Table of Contents
Non-
Subsidiary
Guarantor
TSI Holdings
TSI
Guarantors
Subsidiaries
Eliminations
Consolidated
(All figures in $000s)
$
$
7,429
$
35,041
$
719
$
(35,760
)
$
7,429
3,890
30,661
376
34,927
198
198
(84
)
1,734
1,650
7,773
7,773
1,627
1,627
617
617
4,011
1,166
66
5,243
(36,277
)
(132
)
55
35,760
(594
)
(18,862
)
34,046
497
35,760
51,441
(11,433
)
69,087
1,216
58,870
(4,288
)
(38,737
)
(326
)
(43,351
)
14,566
5,021
145
19,732
(1,155
)
35,371
1,035
35,251
1,575
3,635
341
5,551
$
$
420
$
39,006
$
1,376
$
$
40,802
Table of Contents
Non-
Subsidiary
Guarantor
TSI Holdings
TSI
Guarantors
Subsidiaries
Eliminations
Consolidated
(All figures in $000s)
$
(3,905
)
$
2,855
$
35,686
$
790
$
(39,331
)
$
(3,905
)
3,994
32,478
397
36,869
2,002
2,002
406
406
64
64
(99
)
624
525
12,758
12,758
272
1,312
1,584
2,508
2,508
(7,340
)
9,412
4,270
(69
)
6,273
(2,885
)
(37,590
)
(956
)
141
39,331
(1,959
)
2,805
(22,501
)
40,926
469
39,331
61,030
(1,100
)
(19,646
)
76,612
1,259
57,125
(3,800
)
(36,731
)
(155
)
(40,686
)
1,374
26,451
(27,560
)
265
274
3,005
12,321
1,104
16,704
420
39,006
1,376
40,802
$
274
$
3,425
$
51,327
$
2,480
$
$
57,506
Table of Contents
Non-
Subsidiary
Guarantor
TSI Holdings
TSI
Guarantors
Subsidiary
Eliminations
Consolidated
(All figures in $000s)
$
1,769
$
9,793
$
41,302
$
546
$
(51,641
)
$
1,769
4,334
34,876
372
39,582
279
279
(162
)
1,623
1,461
15,505
15,505
331
1,313
1,644
1,837
1,837
8,590
8,590
(93
)
4,314
4,221
(17,601
)
45,500
(89,036
)
(2,136
)
51,641
(11,632
)
(1,858
)
57,415
(43,947
)
(1,764
)
51,641
61,487
(89
)
67,208
(2,645
)
(1,218
)
63,256
(66,338
)
(66,338
)
(184
)
(2,936
)
(3,120
)
(273
)
(2,066
)
(2,645
)
(1,218
)
(6,202
)
274
3,425
51,327
2,480
57,506
$
1
$
1,359
$
48,682
$
1,262
$
$
51,304
Table of Contents
Page
F-38
F-39
F-40
F-41
F-42
F-43
Table of Contents
/s/ Squire, Lemkin & OBrien LLP |
F-38
F-39
F-40
F-41
F-42
F-43
F-44
F-45
F-46
F-47
F-48
F-49
F-50
F-51
F-52
F-53
F-54
F-55
F-56
F-57
F-58
F-59
F-60
F-61
F-62
Table of Contents
For the Years Ended
December 31,
2005
2004
2003
(In thousands of dollars)
$
3,508
$
3,527
$
3,634
8
15
23
10
18
4
3,526
3,560
3,661
779
794
857
683
410
384
367
377
340
156
319
323
84
94
108
6
3
12
2,075
1,997
2,024
1,451
1,563
1,637
(78
)
(104
)
(111
)
$
1,373
$
1,459
$
1,526
Table of Contents
General
Partners
and
Class I
Class II
Class III
Limited
Limited
Limited
Totals
Partners
Partners
Partners
(In thousands of dollars)
$
428
$
8
$
372
$
48
1,526
175
266
1,085
(1,700
)
(192
)
(293
)
(1,215
)
254
(9
)
345
(82
)
1,459
169
256
1,034
(1,550
)
(178
)
(269
)
(1,103
)
163
(18
)
332
(151
)
1,373
160
243
970
(1,750
)
(198
)
(300
)
(1,252
)
$
(214
)
$
(56
)
$
275
$
(433
)
Table of Contents
Table of Contents
Note 1.
Organization and Significant Accounting Policies
Table of Contents
Note 2.
Concentration of Credit Risk
Note 3.
Property, Plant and Equipment
December 31,
2005
2004
$
1,792
$
1,777
979
954
$
2,771
$
2,731
2,613
2,476
$
158
$
255
Note 4.
Income Taxes
2005
2004
2003
$
120
$
119
$
128
(42
)
(15
)
(17
)
$
78
$
104
$
111
Table of Contents
2005
2004
$
110
$
71
$
110
$
71
(5
)
(7
)
$
105
$
64
Note 5.
Commitments and Contingencies
Table of Contents
Year
Amount
$
551
564
576
590
627
6,868
$
9,776
Note 6.
Related Party Transactions
Note 7.
Partners Allocations
Table of Contents
Table of Contents
Three Months Ended
March 31,
2005
2006
$
92,830
$
102,923
1,016
1,104
93,846
104,027
36,396
40,897
31,449
34,470
6,677
7,861
9,739
10,386
84,261
93,614
9,585
10,413
10,119
10,687
(369
)
(725
)
(470
)
(433
)
305
884
126
1,019
$
179
$
(135
)
$
0.14
$
(0.10
)
$
0.14
$
(0.10
)
1,312,289
1,309,123
1,314,562
1,309,123
STATEMENTS OF COMPREHENSIVE LOSS
$
179
$
(135
)
(185
)
6
$
(6
)
$
(129
)
Table of Contents
Three Months Ended
March 31,
2005
2006
$
179
$
(135
)
9,739
10,386
3,707
4,126
408
417
190
(19
)
15
43
13,734
22,331
(3,500
)
(2,315
)
(700
)
(2,221
)
786
1,610
466
495
(173
)
22
24,672
34,875
24,851
34,740
(10,190
)
(15,023
)
(10,190
)
(15,023
)
(986
)
(205
)
(311
)
(184
)
(389
)
(1,297
)
14,272
18,420
57,506
51,304
$
71,778
$
69,724
$
(1,542
)
$
(2,083
)
81
(71
)
975
4,887
7,296
10,110
6,924
9,488
$
13,734
$
22,331
Table of Contents
1.
Basis of Presentation
2.
Long-Term Debt and Capital Lease Obligations
December 31,
March 31,
2005
2006
($000s)
($000s)
$
255,000
$
255,000
153,077
157,203
3,085
2,774
411,162
414,977
1,267
1,189
$
409,895
$
413,788
Table of Contents
3.
Earnings (Loss) Per Share
Three Months Ended
March 31,
2005
2006
(Unaudited)
1,312,289
1,309,123
2,273
1,314,562
1,309,123
4.
Stock-Based Compensation
Table of Contents
Three Months Ended
March 31, 2005
($000s)
$
179
9
(28
)
$
160
$
0.14
$
0.12
$
0.14
$
0.12
Table of Contents
Weighted-
Weighted-
Average
Average
Remaining
Aggregate
Exercise
Contractual
Intrinsic
Shares
Price
Term
Value
(In thousands)
(In years)
($000s)
88,366
$
86.26
6.5
$
4,913
23,268
104.41
5.8
888
23,268
$
104.41
5.8
$
888
6.
Goodwill and Other Intangibles
Table of Contents
$
49,974
7
$
49,981
As of December 31, 2005
Gross
Carrying
Accumulated
Net
Amount
Amortization
Intangibles
$
11,450
$
(10,939
)
$
511
1,151
(949
)
202
223
(195
)
28
$
12,824
$
(12,083
)
$
741
As of March 31, 2006
Gross
Carrying
Accumulated
Net
Amount
Amortization
Intangibles
$
11,450
$
(11,095
)
$
355
1,151
(963
)
188
223
(197
)
26
$
12,824
$
(12,255
)
$
569
Aggregate Amortization Expenses for the year ended December 31, ($000s)
$
521
120
64
36
$
741
7.
Commitments and Contingencies
Table of Contents
8.
Investments in Affiliated Companies
Three Months
Ended
March 31,
2005
2006
($000s)
$
889
$
906
412
367
391
347
9.
Subsequent Events
Table of Contents
10.
Guarantors
Table of Contents
Non-
TSI
Subsidiary
Guarantor
Holdings
TSI
Guarantors
Subsidiary
Eliminations
Consolidated
ASSETS
$
1
1,359
$
48,682
$
1,262
$
$
51,304
3,664
6,144
133
(2,838
)
7,103
395
26
421
4,550
(32
)
4,518
1,137
(1,137
)
5,425
10,195
(1,713
)
13,907
1,138
13,861
65,384
(292
)
(2,838
)
77,253
18,941
253,702
(272,643
)
10,114
242,149
868
253,131
49,215
759
49,974
741
741
13,560
11,354
(492
)
(44
)
24,378
94
11,428
11,522
3,755
11,833
1,184
16,772
$
37,394
$
300,958
$
369,609
$
1,291
$
(275,481
)
$
433,771
LIABILITIES AND STOCKHOLDERS DEFICIT
$
$
$
1,267
$
$
1,267
(82
)
8,415
8,333
13,364
17,864
392
31,620
5,264
2,841
(2,838
)
5,267
32,940
88
33,028
18,546
63,327
480
(2,838
)
79,515
153,077
255,000
1,818
409,895
452
48,446
48,898
2,905
2,905
8,019
222
8,241
153,077
282,017
116,718
480
(2,838
)
549,454
(116,069
)
18,941
252,881
435
(272,257
)
(116,069
)
386
10
376
(386
)
386
(115,683
)
18,941
252,891
811
(272,643
)
(115,683
)
$
37,394
$
300,958
$
369,609
$
1,291
$
(275,481
)
$
433,771
Table of Contents
Non-
Subsidiary
Guarantor
TSI Holdings
TSI
Guarantors
Subsidiary
Eliminations
Consolidated
ASSETS
$
$
536
$
67,877
$
1,311
$
$
69,724
3,095
4,245
235
7,575
465
27
492
1,129
(1,129
)
5,984
8,212
(1,580
)
12,616
1,129
8,486
80,799
(7
)
90,407
21,222
265,475
(286,697
)
8,972
240,245
827
250,044
49,215
766
49,981
569
569
15,418
11,811
(491
)
(45
)
26,693
78
13,665
13,743
3,666
9,719
1,176
14,561
$
41,435
$
304,541
$
385,178
$
1,541
$
(286,697
)
$
445,998
LIABILITIES AND STOCKHOLDERS DEFICIT
1,189
1,189
(1,505
)
6,559
5,054
11,257
17,489
294
29,040
11,357
3
11,360
37,378
88
37,466
21,109
62,618
382
84,109
157,203
255,000
1,585
413,788
412
48,494
48,906
7,955
7,955
6,798
210
7,008
157,203
283,319
120,862
382
561,766
(116,160
)
21,222
264,306
1,169
(286,697
)
(116,160
)
392
10
(10
)
392
(115,768
)
21,222
264,316
1,159
(286,697
)
(115,768
)
$
41,435
$
304,541
$
385,178
$
1,541
$
(286,697
)
$
445,998
Table of Contents
Non-
Subsidiary
Guarantor
TSI Holdings
TSI
Guarantors
Subsidiary
Eliminations
Consolidated
$
$
12
$
91,542
$
1,276
$
$
92,830
146
2,018
(1,148
)
1,016
158
93,560
1,276
(1,148
)
93,846
5,442
30,479
475
36,396
346
31,810
301
(1,008
)
31,449
13
431
6,264
109
(140
)
6,677
1,137
8,498
104
9,739
13
7,356
77,051
989
(1,148
)
84,261
(13
)
(7,198
)
16,509
287
9,585
3,787
6,333
89
(90
)
10,119
(1
)
(457
)
(1
)
90
(369
)
(268
)
(202
)
(470
)
(3,799
)
(12,806
)
16,623
287
305
(1,637
)
(5,224
)
6,906
81
126
2,341
9,923
(12,264
)
$
179
$
2,341
$
9,717
$
206
$
(12,264
)
$
179
Table of Contents
Non-
Subsidiary
Guarantor
TSI Holdings
TSI
Guarantors
Subsidiary
Eliminations
Consolidated
$
$
$
101,673
$
1,250
$
$
102,923
261
843
1,104
261
102,516
1,250
104,027
8,043
32,372
482
40,897
438
33,724
308
34,470
1,420
6,302
139
7,861
1,281
9,010
95
10,386
11,182
81,408
1,024
93,614
(10,921
)
21,108
226
10,413
4,224
5,267
1,196
10,687
(725
)
(725
)
(261
)
(172
)
(433
)
(4,224
)
(15,202
)
20,084
226
884
(1,858
)
(4,554
)
7,431
1,019
2,231
12,879
(15,110
)
$
(135
)
$
2,231
$
12,653
$
226
$
(15,110
)
$
(135
)
Table of Contents
Non-
Subsidiary
Guarantor
TSI Holdings
TSI
Guarantors
Subsidiary
Eliminations
Consolidated
$
179
$
2,341
$
9,717
$
206
$
(12,264
)
$
179
1,137
8,498
104
9,739
15
15
(40
)
230
190
3,707
3,707
80
328
408
(1,624
)
3,336
8,979
(370
)
(1
)
10,320
(2,350
)
(9,465
)
22
(179
)
12,265
293
(187
)
(4,689
)
17,729
(445
)
12,264
24,672
(8
)
(2,348
)
27,446
(239
)
24,851
(468
)
(9,832
)
110
(10,190
)
(27
)
(280
)
(82
)
(389
)
(35
)
(3,096
)
17,532
(129
)
14,272
274
3,425
51,327
2,480
57,506
$
239
$
329
$
68,859
$
2,351
$
$
71,778
Table of Contents
Non-
Subsidiary
Guarantor
TSI Holdings
TSI
Guarantors
Subsidiary
Eliminations
Consolidated
$
(135
)
$
2,231
$
12,653
$
226
$
(15,110
)
$
(135
)
1,281
9,010
95
10,386
43
43
(40
)
21
(19
)
4,126
4,126
89
328
417
495
495
(5
)
1,615
1,610
8
22,323
22,331
(4,089
)
(11,159
)
(4,104
)
(272
)
15,110
(4,514
)
134
13,266
6,542
(177
)
15,110
34,875
(1
)
15,497
19,195
49
34,740
(15,023
)
(15,023
)
(1,297
)
(1,297
)
(1
)
(823
)
19,195
49
18,420
1
1,359
48,682
1,262
51,304
$
$
536
$
67,877
$
1,311
$
$
69,724
Table of Contents
Table of Contents
Table of Contents
II-1
II-2
II-3
II-4
II-5
Item 13.
Other Expenses of Issuance and Distribution
Amount to
be Paid
$
23,995
21,200
100,000
1,100,000
150,000
300,000
50,000
20,000
785,000
$
2,550,195
Item 14.
Indemnification of Directors and Officers
Table of Contents
Item 15.
Recent Sales of Unregistered Securities
Item 16.
Exhibits and Financial Statement Schedules
Exhibit Number
Description of Exhibit
1
.1**
Form of Underwriting Agreement
3
.1
Amended and Restated Certificate of Incorporation of Town Sports
International Holdings, Inc. (incorporated by reference to
Exhibit 3.2 of the Companys Registration Statement on
Form S-4, File. No. 333-114210 (the S-4
Registration Statement))
3
.2**
Form of Certificate of Incorporation to be in effect upon
closing of this offering
3
.3
Bylaws of Town Sports International Holdings, Inc. (incorporated
by reference to Exhibit 3.3 of the S-4 Registration
Statement)
3
.4**
Form of Bylaws to be in effect upon closing of this offering
Table of Contents
Exhibit Number
Description of Exhibit
4
.1
Indenture dated as of April 16, 2003 by and among Town
Sports International, Inc., the guarantors party thereto and The
Bank of New York (incorporated by reference to Exhibit 4.1
of the Registration Statement on Form S-4, File
No. 333-105881, of Town Sports International, Inc. (the
TSI S-4 Registration Statement))
4
.2
Supplemental Indenture dated as of May 12, 2006 by and
between Town Sports International, Inc. and The Bank of New York
(incorporated by reference to Exhibit 4.1 of the Companys
Current Report on Form 8-K filed May 15, 2006)
4
.3
Indenture dated as of February 4, 2004 by and among Town
Sports International Holdings, Inc. and The Bank of New York
(incorporated by reference to Exhibit 4.1 of the S-4
Registration Statement)
4
.4
Registration Rights Agreement, dated as of February 4,
2004, by and between Town Sports International Holdings, Inc.
and Deutsche Bank Securities Inc. (incorporated by reference to
Exhibit 4.3 of the S-4 Registration Statement)
4
.5**
Form of Common Stock Certificate
4
.6
See Exhibits 3.1 and 3.2 for provisions defining the rights
of holders of common stock
5
.1*
Opinion of Proskauer Rose LLP
10
.1
Credit Agreement dated as of April 16, 2003 by and among
Town Sports International, Inc., the financial institutions
referred to therein and Deutsche Bank Trust Company Americas
(incorporated by reference to Exhibit 10.1 of the TSI S-4
Registration Statement)
10
.2
First Amendment, dated as of January 27, 2004, to the
Credit Agreement by and among Town Sports International, Inc.,
the financial institutions referred to therein and Deutsche Bank
Trust Company Americas (incorporated by reference to
Exhibit 10.2 of the S-4 Registration Statement)
10
.3
Second Amendment and Consent, dated as of May 18, 2006, to
the Credit Agreement by and among Town Sports International,
Inc., Town Sports International Holdings, Inc., the financial
institutions referred to therein and Deutsche Bank Trust Company
Americas, as administrative agent (incorporated by reference to
Exhibit 10.1 of the Companys Current Report on
Form 8-K filed May 19, 2006)
10
.4
Restructuring Agreement, dated as of February 4, 2004, by
and among Town Sports International, Inc., Town Sports
International Holdings, Inc., Bruckmann, Rosser,
Sherrill & Co., L.P., the individuals and entities
listed on the BRS Co-Investor Signature Pages thereto, Farallon
Capital Partners, L.P., Farallon Capital Institutional Partners,
L.P., RR Capital Partners, L.P., and Farallon Capital
Institutional Partners II, L.P., Canterbury Detroit
Partners, L.P., Canterbury Mezzanine Capital, L.P., Rosewood
Capital, L.P., Rosewood Capital IV, L.P., Rosewood
Capital IV Associates, L.P., CapitalSource Holdings LLC,
Keith E. Alessi, Paul N. Arnold, and certain stockholders of the
Company listed on the Executive Signature Pages thereto
(incorporated by reference to Exhibit 10.3 of the S-4
Registration Statement)
10
.5
Stockholders Agreement, dated as of February 4, 2004, by
and among Town Sports International Holdings, Inc., Town Sports
International, Inc., Bruckmann, Rosser, Sherrill & Co.,
L.P. the individuals and entities listed on the BRS Co-Investor
Signature Pages thereto, Farallon Capital Partners, L.P.,
Farallon Capital Institutional Partners, L.P., RR Capital
Partners, L.P., and Farallon Capital Institutional
Partners II, L.P., Canterbury Detroit Partners, L.P.,
Canterbury Mezzanine Capital, L.P., Rosewood Capital, L.P.,
Rosewood Capital IV, L.P., Rosewood Capital IV Associates,
L.P., CapitalSource Holdings LLC, Keith E. Alessi, Paul N.
Arnold, and certain stockholders of the Company listed on the
Executive Signature Pages thereto (incorporated by reference to
Exhibit 10.4 of the S-4 Registration Statement)
10
.6
Amendment No. 1 to the Stockholders Agreement and Consent
Agreement dated March 23, 2006 (incorporated by reference
to Exhibit 10.20 of the 2005 10-K)
10
.7*
Amendment No. 2 to the Stockholders Agreement dated
May 30, 2006
Table of Contents
Exhibit Number
Description of Exhibit
10
.8
Registration Rights Agreement, dated as of February 4,
2004, by and among Town Sports International Holdings, Inc.,
Town Sports International, Inc., Bruckmann, Rosser,
Sherrill & Co., L.P., the individuals and entities
listed on the BRS Co-Investor Signature Pages thereto, Farallon
Capital Partners, L.P., Farallon Capital Institutional Partners,
L.P., RR Capital Partners, L.P., and Farallon Capital
Institutional Partners II, L.P., Canterbury Detroit
Partners, L.P., Canterbury Mezzanine Capital, L.P., Rosewood
Capital, L.P., Rosewood Capital IV, L.P., Rosewood
Capital IV Associates, L.P., CapitalSource Holdings LLC,
Keith E. Alessi, Paul N. Arnold, and certain stockholders of the
Company listed on the Executive Signature Pages thereto
(incorporated by reference to Exhibit 10.5 of the S-4
Registration Statement)
10
.9
Amendment No. 1 to the Registration Rights Agreement dated
as of March 23, 2006 (incorporated by reference to
Exhibit 10.21 of the 2005 10K)
10
.9.1*
Amendment No. 2 to the Registration Rights Agreement dated as of
May 30, 2006
10
.10
Tax Sharing Agreement, dated as of February 4, 2004, by and
among Town Sports International Holdings, Inc., Town Sports
International, Inc., and the other signatories thereto
(incorporated by reference to Exhibit 10.6 of the S-4
Registration Statement)
10
.11
Pledge Agreement, dated as of February 4, 2004, between
Town Sports International Holdings, Inc. and Deutsche Bank Trust
Company Americas, as collateral agent, for the benefit of the
Secured Creditors (as defined therein) (incorporated by
reference to Exhibit 10.8 of the S-4 Registration Statement)
10
.12
Security Agreement, dated as of February 4, 2004, made by
Town Sports International Holdings, Inc., in favor of Deutsche
Bank Trust Company Americas, as collateral agent, for the
benefit of the Secured Creditors (as defined therein)
(incorporated by reference to Exhibit 10.9 of the S-4
Registration Statement)
10
.13
Holdco Guaranty, dated as of February 4, 2004, made by Town
Sports International Holdings, Inc (incorporated by reference to
Exhibit 10.10 of the S-4 Registration Statement)
10
.14
Guaranty of
9
5
/
8
% Senior Notes due 2011 issued by Town Sports
International, Inc. made by Town Sports International Holdings,
Inc. dated September 21, 2004 (incorporated by reference to
Exhibit 99.1 of the Current Report on Form 8-K of Town
Sports International, Inc. filed September 22, 2004)
10
.15
Professional Services Agreement, dated as of December 10,
1996, by and among TSI, Inc. and Bruckmann, Rosser,
Sherrill & Co., L.P. (BRS) (incorporated by
reference to Exhibit 10.11 of the S-4 Registration
Statement)
10
.16
First Amendment to Professional Services Agreement, dated
June 1, 2004, by and between Town Sports International
Inc., and Bruckmann, Rosser, Sherrill and Co. (incorporated by
reference to Exhibit 10.12 of the Companys Annual
Report on Form 10-K for the year ended December 31,
2004)
10
.17
Purchase Agreement dated as of January 28, 2004 by and
among Town Sports International Holdings, Inc. and Deutsche Bank
Securities Inc. (incorporated by reference to Exhibit 10.17
of the S-4 Registration Statement)
10
.18
2003 Executive Stock Agreement, dated July 23, 2003, among
TSI, Inc., BRS, the Farallon Entities and Randall C. Stephen
(incorporated by reference to Exhibit 10.12 of the S-4
Registration Statement)
10
.19
Form of Executive Stock Agreement, dated as of February 4,
2004, between Town Sports International Holdings, Inc., BRS, the
Farallon Entities and each of Mark Smith, Robert Giardina,
Richard Pyle, Alex Alimanestianu, and Randall Stephen,
respectively (incorporated by reference to Exhibit 10.17 of
the Companys Annual Report on Form 10-K for the year
ended December 31, 2005 (the 2005 10-K))
10
.20
2004 Common Stock Option Plan (incorporated by reference to
Exhibit 10.7 of the S-4 Registration Statement)
10
.21**
2006 Stock Incentive Plan
10
.22**
2006 Annual Performance Bonus Plan
Table of Contents
Exhibit Number
Description of Exhibit
10
.23
Separation Agreement and General Release between Mark Smith and
Town Sports International Holdings, Inc. dated March 23,
2006 (incorporated by reference to Exhibit 10.18 of the
2005 10-K)
10
.24
Equity Agreement between Mark Smith and Town Sports
International Holdings, Inc. dated March 23, 2006
(incorporated by reference to Exhibit 10.19 of the 2005 10-K)
10
.25**
Form of Director and Officer Indemnification Agreement
21
Subsidiaries (incorporated by reference to Exhibit 21 of the
2005 10-K)
23
.1*
Consent of PricewaterhouseCoopers LLP
23
.2*
Consent of Squire, Lemkin + OBrien LLP
23
.3*
Consent of Proskauer Rose LLP (contained in the opinion filed as
Exhibit Number 5.1 to this registration statement)
24
.1**
Powers of Attorney
*
Filed herewith.
**
Previously filed.
(b)
Financial Statement Schedules. None.
Item 17.
Undertakings
Table of Contents
TOWN SPORTS INTERNATIONAL
HOLDINGS, INC.
By:
/s/
ROBERT J. GIARDINA
Robert J. Giardina
Chief Executive Officer
Signature
Title
/s/
ROBERT J.
GIARDINA
Chief Executive Officer and Director
(Principal Executive Officer)
/s/
RICHARD G. PYLE
Chief Financial Officer (Principal Financial and Accounting
Officer)
*
Director
*
Chairman of the Board of Directors
*
Director
*
Director
*
Director
*By:
/s/ RICHARD G. PYLE
Attorney-in-fact
Table of Contents
Exhibit Number
Description of Exhibit
1
.1**
Form of Underwriting Agreement
3
.1
Amended and Restated Certificate of Incorporation of Town Sports
International Holdings, Inc. (incorporated by reference to
Exhibit 3.2 of the Companys Registration Statement on
Form S-4, File. No. 333-114210 (the S-4
Registration Statement))
3
.2**
Form of Certificate of Incorporation to be in effect upon
closing of this offering
3
.3
Bylaws of Town Sports International Holdings, Inc. (incorporated
by reference to Exhibit 3.3 of the S-4 Registration
Statement)
3
.4**
Form of Bylaws to be in effect upon closing of this offering
4
.1
Indenture dated as of April 16, 2003 by and among Town
Sports International, Inc., the guarantors party thereto and The
Bank of New York (incorporated by reference to Exhibit 4.1
of the Registration Statement on Form S-4, File
No. 333-105881, of Town Sports International, Inc. (the
TSI S-4 Registration Statement))
4
.2
Supplemental Indenture dated as of May 12, 2006 by and
between Town Sports International, Inc. and The Bank of New York
(incorporated by reference to Exhibit 4.1 of the Companys
Current Report on Form 8-K filed May 15, 2006)
4
.3
Indenture dated as of February 4, 2004 by and among Town
Sports International Holdings, Inc. and The Bank of New York
(incorporated by reference to Exhibit 4.1 of the S-4
Registration Statement)
4
.4
Registration Rights Agreement, dated as of February 4,
2004, by and between Town Sports International Holdings, Inc.
and Deutsche Bank Securities Inc. (incorporated by reference to
Exhibit 4.3 of the S-4 Registration Statement)
4
.5**
Form of Common Stock Certificate
4
.6
See Exhibits 3.1 and 3.2 for provisions defining the rights
of holders of common stock
5
.1*
Opinion of Proskauer Rose LLP
10
.1
Credit Agreement dated as of April 16, 2003 by and among
Town Sports International, Inc., the financial institutions
referred to therein and Deutsche Bank Trust Company Americas
(incorporated by reference to Exhibit 10.1 of the TSI S-4
Registration Statement)
10
.2
First Amendment, dated as of January 27, 2004, to the
Credit Agreement by and among Town Sports International, Inc.,
the financial institutions referred to therein and Deutsche Bank
Trust Company Americas (incorporated by reference to
Exhibit 10.2 of the S-4 Registration Statement)
10
.3
Second Amendment and Consent, dated as of May 18, 2006, to
the Credit Agreement by and among Town Sports International,
Inc., Town Sports International Holdings, Inc., the financial
institutions referred to therein and Deutsche Bank Trust Company
Americas, as administrative agent (incorporated by reference to
Exhibit 10.1 of the Companys Current Report on
Form 8-K filed May 19, 2006)
10
.4
Restructuring Agreement, dated as of February 4, 2004, by
and among Town Sports International, Inc., Town Sports
International Holdings, Inc., Bruckmann, Rosser,
Sherrill & Co., L.P., the individuals and entities
listed on the BRS Co-Investor Signature Pages thereto, Farallon
Capital Partners, L.P., Farallon Capital Institutional Partners,
L.P., RR Capital Partners, L.P., and Farallon Capital
Institutional Partners II, L.P., Canterbury Detroit
Partners, L.P., Canterbury Mezzanine Capital, L.P., Rosewood
Capital, L.P., Rosewood Capital IV, L.P., Rosewood
Capital IV Associates, L.P., CapitalSource Holdings LLC,
Keith E. Alessi, Paul N. Arnold, and certain stockholders of the
Company listed on the Executive Signature Pages thereto
(incorporated by reference to Exhibit 10.3 of the S-4
Registration Statement)
Table of Contents
Exhibit Number
Description of Exhibit
10
.5
Stockholders Agreement, dated as of February 4, 2004, by
and among Town Sports International Holdings, Inc., Town Sports
International, Inc., Bruckmann, Rosser, Sherrill & Co.,
L.P. the individuals and entities listed on the BRS Co-Investor
Signature Pages thereto, Farallon Capital Partners, L.P.,
Farallon Capital Institutional Partners, L.P., RR Capital
Partners, L.P., and Farallon Capital Institutional
Partners II, L.P., Canterbury Detroit Partners, L.P.,
Canterbury Mezzanine Capital, L.P., Rosewood Capital, L.P.,
Rosewood Capital IV, L.P., Rosewood Capital IV Associates,
L.P., CapitalSource Holdings LLC, Keith E. Alessi, Paul N.
Arnold, and certain stockholders of the Company listed on the
Executive Signature Pages thereto (incorporated by reference to
Exhibit 10.4 of the S-4 Registration Statement)
10
.6
Amendment No. 1 to the Stockholders Agreement and Consent
Agreement dated March 23, 2006 (incorporated by reference
to Exhibit 10.20 of the 2005 10-K)
10
.7*
Amendment No. 2 to the Stockholders Agreement dated
May 30, 2006
10
.8
Registration Rights Agreement, dated as of February 4,
2004, by and among Town Sports International Holdings, Inc.,
Town Sports International, Inc., Bruckmann, Rosser,
Sherrill & Co., L.P., the individuals and entities
listed on the BRS Co-Investor Signature Pages thereto, Farallon
Capital Partners, L.P., Farallon Capital Institutional Partners,
L.P., RR Capital Partners, L.P., and Farallon Capital
Institutional Partners II, L.P., Canterbury Detroit
Partners, L.P., Canterbury Mezzanine Capital, L.P., Rosewood
Capital, L.P., Rosewood Capital IV, L.P., Rosewood
Capital IV Associates, L.P., CapitalSource Holdings LLC,
Keith E. Alessi, Paul N. Arnold, and certain stockholders of the
Company listed on the Executive Signature Pages thereto
(incorporated by reference to Exhibit 10.5 of the S-4
Registration Statement)
10
.9
Amendment No. 1 to the Registration Rights Agreement dated
as of March 23, 2006 (incorporated by reference to
Exhibit 10.21 of the 2005 10K)
10
.9.1*
Amendment No. 2 to the Registration Rights Agreement dated as of
May 30, 2006
10
.10
Tax Sharing Agreement, dated as of February 4, 2004, by and
among Town Sports International Holdings, Inc., Town Sports
International, Inc., and the other signatories thereto
(incorporated by reference to Exhibit 10.6 of the S-4
Registration Statement)
10
.11
Pledge Agreement, dated as of February 4, 2004, between
Town Sports International Holdings, Inc. and Deutsche Bank Trust
Company Americas, as collateral agent, for the benefit of the
Secured Creditors (as defined therein) (incorporated by
reference to Exhibit 10.8 of the S-4 Registration Statement)
10
.12
Security Agreement, dated as of February 4, 2004, made by
Town Sports International Holdings, Inc., in favor of Deutsche
Bank Trust Company Americas, as collateral agent, for the
benefit of the Secured Creditors (as defined therein)
(incorporated by reference to Exhibit 10.9 of the S-4
Registration Statement)
10
.13
Holdco Guaranty, dated as of February 4, 2004, made by Town
Sports International Holdings, Inc (incorporated by reference to
Exhibit 10.10 of the S-4 Registration Statement)
10
.14
Guaranty of
9
5
/
8
% Senior Notes due 2011 issued by Town Sports
International, Inc. made by Town Sports International Holdings,
Inc. dated September 21, 2004 (incorporated by reference to
Exhibit 99.1 of the Current Report on Form 8-K of Town
Sports International, Inc. filed September 22, 2004)
10
.15
Professional Services Agreement, dated as of December 10,
1996, by and among TSI, Inc. and Bruckmann, Rosser,
Sherrill & Co., L.P. (BRS) (incorporated by
reference to Exhibit 10.11 of the S-4 Registration
Statement)
10
.16
First Amendment to Professional Services Agreement, dated
June 1, 2004, by and between Town Sports International
Inc., and Bruckmann, Rosser, Sherrill and Co. (incorporated by
reference to Exhibit 10.12 of the Companys Annual
Report on Form 10-K for the year ended December 31,
2004)
10
.17
Purchase Agreement dated as of January 28, 2004 by and
among Town Sports International Holdings, Inc. and Deutsche Bank
Securities Inc. (incorporated by reference to Exhibit 10.17
of the S-4 Registration Statement)
Table of Contents
Exhibit Number
Description of Exhibit
10
.18
2003 Executive Stock Agreement, dated July 23, 2003, among
TSI, Inc., BRS, the Farallon Entities and Randall C. Stephen
(incorporated by reference to Exhibit 10.12 of the S-4
Registration Statement)
10
.19
Form of Executive Stock Agreement, dated as of February 4,
2004, between Town Sports International Holdings, Inc., BRS, the
Farallon Entities and each of Mark Smith, Robert Giardina,
Richard Pyle, Alex Alimanestianu, and Randall Stephen,
respectively (incorporated by reference to Exhibit 10.17 of
the Companys Annual Report on Form 10-K for the year
ended December 31, 2005 (the 2005 10-K))
10
.20
2004 Common Stock Option Plan (incorporated by reference to
Exhibit 10.7 of the S-4 Registration Statement)
10
.21**
2006 Stock Incentive Plan
10
.22**
2006 Annual Performance Bonus Plan
10
.23
Separation Agreement and General Release between Mark Smith and
Town Sports International Holdings, Inc. dated March 23,
2006 (incorporated by reference to Exhibit 10.18 of the
2005 10-K)
10
.24
Equity Agreement between Mark Smith and Town Sports
International Holdings, Inc. dated March 23, 2006
(incorporated by reference to Exhibit 10.19 of the 2005 10-K)
10
.25**
Form of Director and Officer Indemnification Agreement
21
Subsidiaries (incorporated by reference to Exhibit 21 of the
2005 10-K)
23
.1*
Consent of PricewaterhouseCoopers LLP
23
.2*
Consent of Squire, Lemkin + OBrien LLP
23
.3*
Consent of Proskauer Rose LLP (contained in the opinion filed as
Exhibit Number 5.1 to this registration statement)
24
.1**
Powers of Attorney
*
Filed herewith.
**
Previously filed.
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TOWN SPORTS INTERNATIONAL HOLDINGS, INC.
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By: | /s/ Richard Pyle | |||
Name: | Richard Pyle | |||
Title: | Chief Financial Officer | |||
TOWN SPORTS INTERNATIONAL, INC.
|
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By: | /s/ Richard Pyle | |||
Name: | Richard Pyle | |||
Title: | Chief Financial Officer | |||
-2-
-3-
TOWN SPORTS INTERNATIONAL HOLDINGS, INC.
|
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By: | /s/ Richard Pyle | |||
Name: |
Richard Pyle
|
|||
Title: | Chief Financial Officer | |||
TOWN SPORTS INTERNATIONAL, INC.
|
||||
By: | /s/ Richard Pyle | |||
Name: |
Richard Pyle
|
|||
Title: | Chief Financial Officer | |||