UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): August 22, 2005
THE SPORTS CLUB COMPANY, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-13290 95-4479735
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
11100 Santa Monica Boulevard, Suite 300, Los Angeles, California 90025
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(310) 479-5200
Not Applicable
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (See General Instructions A-2 below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13 e-4(c))
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Item 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On August 22, 2005, The Sports Club Company, Inc. announced its results of
operations for the quarter and six months ended June 30, 2005. The public
announcement was made by means of a press release attached, the text of which is
being furnished to the U.S. Securities and Exchange Commission in Exhibit 99.1
hereto.
The information contained in this report and the exhibit hereto shall not be
deemed "filed" for purposes of Section 18 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or incorporated by reference in any
filing under the Securities Act of 1933, as amended, or the Exchange Act, except
as shall be expressly set forth by specific reference in such a filing.
The information in this report and the exhibit hereto may contain
"forward-looking statements" that are made pursuant to the safe-harbor
provisions of the Private Securities Litigation Reform Act of 1995 and otherwise
may be protected. Such statements are made based on the current beliefs and
expectations of the Company's management and are subject to significant risks
and uncertainties that could cause actual results to differ materially. Please
refer to the Company's annual report on Form 10-K/A filed on August 18, 2004
with the Securities and Exchange Commission for information concerning risks,
uncertainties, and other factors that may affect future results.
Item 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
99.1 Press Release dated August 22, 2005
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Signatures
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: August 22, 2005 THE SPORTS CLUB COMPANY, INC.
By: /s/ Timothy M. O'Brien
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Timothy M. O'Brien
Chief Financial Officer
INDEX TO EXHIBITS
Exhibit No. Description
99.1 Press Release dated August 22, 2005.
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EXHIBIT 99.1
LOS ANGELES, CA (August 22, 2005) - The Sports Club Company, Inc. (AMEX: SCY)
today announced that it will delay reporting its second quarter and six months
ended June 30, 2005 results due to certain issues relative to the application of
Statement of Financial Accounting Standards No. 13, Accounting for Leases ("FAS
No. 13"), Statement of Financial Accounting Standards No. 144, Accounting for
the Impairment of Disposal of Long-Lived Assets ("FAS No. 144") and EITF No.
00-21, Revenue Arrangements with Multiple Deliverables ("EITF No. 00-21").
Substantially all of the work required to prepare the Company's consolidated
financial statements has been completed, however the complexities associated
with accounting for and reporting of landlord incentives under operating leases,
assets held for sale and initiation fee revenues have precluded the completion
of the final financial statements. As a result, the Company has not filed its
required financial reports with the Securities and Exchange Commission. Further,
these matters will result in several reclassifications of the Company's reported
results for the first and second quarters of 2004. Preliminary operating results
for the second quarter and six months ended June 30, 2005, are included at the
conclusion of this press release.
FAS No. 13 requires that leasehold improvements made by a lessee that are funded
by landlord incentives under an operating lease should be recorded by the lessee
as leasehold improvement assets and amortized over their appropriate life and
the incentives should be recorded as deferred rent and amortized over their
appropriate life and the incentives should be recorded as deferred rent and
amortized to lease expense over the lease term. The Company had previously
recorded landlord allowances as a reduction of the leasehold improvement asset.
The new methodology will be applied to both the 2004 and 2005 financial
statements and will require the Company to increase its depreciation expense and
reduce rent expense. Since the amount of these adjustments will offset, there
will be no material change to the Company's income (loss) from operations.
FAS No. 144 requires that the results of operations of an entity that has been
disposed of or is classified as held for sale shall be reported in discontinued
operations. On February 10, 2005, the Company announced that it had entered into
a letter of intent to sell six of its nine sports and fitness complexes for
$65.0 million. In accordance with FAS No. 144 these assets will be classified as
held for sale and the 2004 and 2005 operating statements will include the
results of these Clubs as discontinued operations.
EITF No. 00-21 addresses certain aspects of the accounting by a vendor for
arrangements under which it will perform multiple revenue generating activities.
The Company implemented EITF No. 00-21 when it became effective on July 1, 2003,
and as of that date began accounting for the initiation fee and private training
revenues as separate units of accounting upon a new member enrollment.
Subsequently, the Securities and Exchange Commission has questioned the Company
regarding the assertion that it has separate and reliable evidence of the fair
value for its membership charges. Therefore, the Company is reviewing its
accounting policy in this area.
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Because of the time required to complete the accounting evaluations required by
FAS No. 13, FAS No. 144 and EITF 00-21, management was not able to finalize the
Company's consolidated financial statements and file the Quarterly Report on
Form 10-Q for the quarter ended June 30, 2005 by the prescribed extended due
date of August 22, 2005.
All statements in this press release other than statements of historical fact
are forward looking statements within the meaning of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. These
statements are based on management's current expectations and beliefs and are
subject to a number of factors and uncertainties that could cause actual results
to differ materially from those described in this press release, and the Company
expressly disclaims any obligations to release publicly any update or revision
to any forward looking statement contained herein if there are changes in the
Company's expectations or if any events, conditions or circumstances on which
any such forward looking statement is based.
The Sports Club Company, based in Los Angeles, California owns and operates
luxury sports and fitness complexes nationwide under the brand name "The Sports
Club/LA."
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THE SPORTS CLUB COMPANY, INC.
PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1)
For The Three Months and Six Months Ended June 30, 2004 and 2005
(Amounts in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2005 2004 2005
---- ---- ---- ----
Revenues:
Membership revenues.......................................... $ 7,291 $ 7,991 $ 14,378 $ 15,728
Products and services........................................ 3,825 4,279 7,616 8,393
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Total revenues............................................. 11,116 12,270 21,994 24,121
Operating expenses:
Club operating costs......................................... 4,327 4,355 8,643 8,798
Cost of products and services................................ 3,224 3,387 6,213 6,605
Selling and marketing........................................ 350 247 787 665
General and administrative................................... 2,146 1,995 4,131 4,043
Pre-opening expenses......................................... -- -- 46 --
Depreciation and amortization................................ 1,061 1,267 2,131 2,479
Non-recurring items.......................................... -- -- 1,104 --
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Total operating expenses................................... 11,108 11,251 23,055 22,590
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Income (loss) from continuing operations................. 8 1,019 (1,061) 1,531
Other income (expense):
Interest, net................................................ (3,650) (3,640) (7,300) (7,283)
Minority interests........................................... (37) (37) (75) (74)
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Loss from continuing operations before income taxes and
income (loss) on discontinued operations................. (3,679) (2,658) (8,436) (5,826)
Provision for income taxes....................................... -- -- -- --
--------- -------- ----------- ---------
Loss from continuing operations before income (loss) on
discontinued operations.................................. (3,679) (2,658) (8,436) (5,826)
Income (loss) from discontinued operations....................... (629) 2,605 (1,786) 3,931
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Net loss................................................. (4,308) (53) (10,222) (1,895)
Dividends on Preferred Stock..................................... 495 495 876 988
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Net loss attributable to common stockholders............. $ (4,803) $ (548) $ (11,098) $ (2,883)
========= ======== =========== =========
Net loss per share attributable to common stockholders:
Basic and diluted............................................ $ (0.26) $ (0.03) $ (0.60) $ (0.15)
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Weighted average number of common shares outstanding:
Basic and diluted............................................ 18,697 19,150 18,631 19,141
========= ======== =========== =========
(1) The preliminary operating results have been prepared in accordance
with the text of this press release. The final operating results may vary
significantly from these preliminary operating results.
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