Bally Total Fitness Reports Second Quarter 2003 Results.Business Editors CHICAGO--(BUSINESS WIRE)--Aug. 5, 2003 Bally Total Fitness Bally Total Fitness is an American health club chain with 400 gyms in 70 cities, and claims 4 million customers [1]. The chain has recently opened gyms in South Korea, China & the Bahamas. Holding Corporation (NYSE NYSE See: New York Stock Exchange : BFT (Binary File Transfer) An extension to the fax protocol that allows transmission of raw data. A page of text is transmitted faster than a bitmap of the page and is displayed at normal printer resolution at the receiving side. ): Second Quarter Highlights -- Second quarter income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the exceeds consensus estimates (as adjusted) by $.01 per share. -- Free cash flow up $26 million over prior year. -- Recent debt refinancings improve capital structure. -- Products and services revenue growth of 39%. -- New marketing chief named to build Bally's marquee brands. Bally Total Fitness Holding Corporation (NYSE: BFT) today reported its financial results for the quarter ended June June: see month. 30, 2003. Second quarter net revenues totaled $251.3 million, a $5.0 million increase over the prior year quarter (2%). Free cash flow, defined as cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses ($12.1 million) less cash used in investing activities ($10.8 million), was $1.3 million during the quarter bringing the year to date total to $10.8 million compared to deficits during the prior year periods of $24.7 million and $33.9 million, respectively. As described in the "Special items" note herein, the Company had a non-operating, non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. totaling $1.7 million ($1.3 million net of taxes) during the second quarter of 2003. Excluding the impact of this item, income from continuing operations for the second quarter would have been $9.9 million, or $.30 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. Income from continuing operations, including the charge, was $8.6 million ($.26 per diluted share) versus $16.4 million in the prior year quarter ($.49 per diluted share). "We made significant progress towards our objectives for 2003 this quarter including refinancing Refinancing An extension and/or increase in amount of existing debt. over $400 million of debt which extends maturities and provides additional liquidity," commented Paul Paul, 1901–64, king of the Hellenes (1947–64), brother and successor of George II. He married (1938) Princess Frederika of Brunswick. During Paul's reign Greece followed a pro-Western policy, and the Cyprus question was temporarily resolved. Toback, President, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. and Chairman of Bally Total Fitness. "In addition, we remain on track to grow free cash flow for 2003." "During the second quarter of 2003 we experienced a continuation continuation - continuation passing style of rapid growth in our products and services businesses, with revenues up 39% over 2002. New membership joins rose 7% this quarter company-wide, a 5% increase in same store joins. New membership sales, however, continue to be disappointing as gross committed membership fees originated during the quarter were flat with the prior year company-wide and down 3% same store while membership revenues overall were down 9%. During the quarter we implemented a number of cost reduction initiatives which offset planned increases in rent, utilities, insurance and other fixed costs fixed costs, n.pl the costs that do not change to meet fluctuations in enrollment or in use of services (e.g., salaries, rent, business license fees, and depreciation). , which should generate lasting reductions in our overall expense levels through the end of the year and into 2004," continued Toback. "Another positive step towards building our future is the recent addition of Chief Marketing Officer Martin Pazzani. Martin is one of today's top marketers with expertise in building and growing some of the world's best known brands and companies in the packaged goods Noun 1. packaged goods - groceries that are packaged for sale foodstuff, grocery - (usually plural) consumer goods sold by a grocer plural, plural form - the form of a word that is used to denote more than one , fast food and personal care product industries. Prior to joining Bally bally Adjective, adv Brit old-fashioned, slang extreme or extremely: a bally nuisance, he's too bally charming for his own good Adj. 1. , he was Worldwide Strategic Director of Foote Foote may refer to:
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of . I'm I'm Contraction of I am. Our Living Language Speakers of some scattered varieties of American English sometimes use I'm instead of I've or I have in present perfect constructions, as in confident that Martin, working together with our professional marketing team, will refine Bally's marketing strategy and message with the goal of growing both the business and the brand," Toback added. "In close, despite the current trends in new membership originations, I remain optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op as to the future prospects of our company when the economy begins to rebound rebound (rē´bownd), n/v 1. a recovery from illness. n 2. an outbreak of fresh reflex activity after withdrawal of a stimulus rebound adjective . With the increased consumer focus and attention on health and fitness, Bally is leading the right industry at the right time," concluded Toback. Financial Summary (in thousands, except per share data)
Three months ended
June 30
------------------
2003 2002 Change
-------- -------- -------
Net revenues $251,304 $246,299 $ 5,005
Operating income 8,522 17,585 (9,063)
Income from continuing operations before
cumulative effect of changes in accounting
principles 8,634 16,393 (7,759)
Net income 6,699 16,075 (9,376)
Diluted earnings per common share:
Income from continuing operations before
cumulative effect of changes in
accounting principles 0.26 0.49 (0.23)
Discontinued operations (0.06) (0.01) (0.05)
Net income 0.20 0.48 (0.28)
Six months ended
June 30
------------------
2003 2002 Change
-------- -------- -------
Net revenues $505,521 $486,659 $18,862
Operating income 18,387 34,845 (16,458)
Income from continuing operations before
cumulative effect of changes in accounting
principles 19,766 36,236 (16,470)
Net income 1,869 35,477 (33,608)
Diluted earnings per common share:
Income from continuing operations before
cumulative effect of changes in
accounting principles 0.60 1.08 (0.48)
Discontinued operations (0.07) (0.02) (0.05)
Cumulative effect of changes in accounting
principles (0.47) (0.47)
Net income 0.06 1.06 (1.00)
Bally Total Fitness is the largest and only nationwide, commercial operator of fitness centers, with approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. four million members and 420 facilities located in 29 states, Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of , Asia and the Caribbean under the Bally Total Fitness(R), Crunch (1) To process data. See number crunching. (2) To compress data. See data compression. 1. (jargon) crunch - To process, usually in a time-consuming or complicated way. Fitness(SM), Gorilla gorilla, an ape, Gorilla gorilla, native to the lowland and mountain forests of western and central equatorial Africa. It is the largest of the apes, the males reaching a height of 5 to 6 ft (150–190 cm) with a 9-ft (144–cm) arm spread. Sports(SM), Pinnacle pinnacle (pĭn`ĭkəl), minor architectural motif of vertical tapering shape, usually crowning a pier, buttress, or gable. Although sometimes it appears in Renaissance design, as in the Certosa di Pavia, it is almost exclusively a medieval Fitness(R), Bally Sports Clubs A sports club, athletics club or sports association is an eclectic institution oriented to multiple sports, which fields many teams and has varied sports departments in several sports, working under the same umbrella organization. (R) and Sports Clubs of Canada(R) brands. With an estimated 150 million annual visits to its clubs, Bally offers a unique platform for distribution of a wide range of products and services targeted to active, fitness-conscious adult consumers. The Company will be holding a conference call to further discuss its results and respond to questions on August 5, 2003 at 4:00 p.m. Central Time. Those interested may listen to this conference call via the Company's web site at www.ballyfitness.com. Forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. in this release including, without limitation, statements relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Company's plans, strategies, objectives, expectations, intentions, and adequacy of resources, are made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by such forward-looking statements. These factors include, among others, the following: general economic and business conditions; competition; success of operating initiatives, advertising and promotional efforts; existence of adverse publicity or litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. ; acceptance of new product and service offerings; changes in business strategy or plans; quality of management; availability, terms, and development of capital; business abilities and judgment of personnel; changes in, or the failure to comply with, government regulations; regional weather conditions and other factors described in filings of the Company with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. BALLY TOTAL FITNESS HOLDING CORPORATION CONSOLIDATED con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: INCOME SUMMARY (In thousands, except share data) (Unaudited)
Three months ended
June 30 %
------------------------
2003 2002 Change Change
----------- ----------- ------ --------
Net revenues:
Membership revenue $ 172,194 $ 188,330 $ (16,136) -9%
Products and services 74,292 53,318 20,974 39%
Miscellaneous revenue 4,818 4,651 167 4%
----------- ----------- -----------
251,304 246,299 5,005 2%
Operating costs and
expenses:
Fitness center
operations 140,786 140,098 688 0%
Products and services 47,538 33,752 13,786 41%
Member processing and
collection centers 12,611 11,041 1,570 14%
Advertising 14,131 16,413 (2,282) -14%
General and
administrative 8,630 8,460 170 2%
Depreciation and
amortization 19,086 18,950 136 1%
----------- ----------- -----------
242,782 228,714 14,068 6%
----------- ----------- -----------
Operating income 8,522 17,585 (9,063) -52%
Finance charges earned 18,479 17,442 1,037 6%
Interest expense (13,936) (13,547) (389) 3%
Other, net (1,704) 89 (1,793) (*)
----------- ----------- -----------
2,839 3,984 (1,145) -29%
----------- ----------- -----------
Income from continuing
operations before
income taxes 11,361 21,569 (10,208) -47%
Income tax provision (2,727) (5,176) 2,449 -47%
----------- ----------- -----------
Income from continuing
operations 8,634 16,393 (7,759) -47%
Discontinued operations
Loss from discontinued
operations (net of tax
benefit of $74 and
$100, in 2003 and
2002, respectively) (236) (318) 82 -26%
Loss on disposal (1,699) (1,699) (*)
----------- ----------- -----------
Loss from discontinued
operations (1,935) (318) (1,617) 508%
----------- ----------- -----------
Net income $ 6,699 $ 16,075 $ (9,376) -58%
=========== =========== ===========
Basic earnings per
common share:
Income from continuing
operations $ 0.27 $ 0.51
Discontinued operations (0.06) (0.01)
----------- -----------
Net income per common
share $ 0.21 $ 0.50
=========== ===========
Average common shares
outstanding 32,658,994 32,079,795
Diluted earnings per
common share:
Income from continuing
operations $ 0.26 $ 0.49
Discontinued operations (0.06) (0.01)
----------- -----------
Net income per common
share $ 0.20 $ 0.48
=========== ===========
Average diluted common
shares outstanding 33,093,718 33,564,276
(*) Not meaningful
BALLY TOTAL FITNESS HOLDING CORPORATION CONSOLIDATED INCOME SUMMARY (In thousands, except share data) (Unaudited)
Six months ended
June 30 %
------------------------
2003 2002 Change Change
----------- ----------- ------ --------
Net revenues:
Membership revenue $ 346,422 $ 371,024 $ (24,602) -7%
Products and services 149,430 105,735 43,695 41%
Miscellaneous revenue 9,669 9,900 (231) -2%
----------- ----------- -----------
505,521 486,659 18,862 4%
Operating costs and
expenses:
Fitness center
operations 281,575 277,902 3,673 1%
Products and services 94,559 66,785 27,774 42%
Member processing and
collection centers 23,611 21,993 1,618 7%
Advertising 32,064 32,922 (858) -3%
General and
administrative 16,683 15,842 841 5%
Depreciation and
amortization 38,642 36,370 2,272 6%
----------- ----------- -----------
487,134 451,814 35,320 8%
----------- ----------- -----------
Operating income 18,387 34,845 (16,458) -47%
Finance charges earned 37,362 35,122 2,240 6%
Interest expense (27,921) (28,190) 269 -1%
Other, net (1,820) 163 (1,983) (*)
----------- ----------- -----------
7,621 7,095 526 7%
----------- ----------- -----------
Income from continuing
operations before
income taxes and
cumulative effect of
changes in accounting
principles 26,008 41,940 (15,932) -38%
Income tax provision (6,242) (5,704) (538) 9%
----------- ----------- -----------
Income from continuing
operations before
cumulative effect of
changes in accounting
principles 19,766 36,236 (16,470) -45%
Discontinued operations
Loss from discontined
operations (net of tax
benefit of $196 and
$130, in 2003 and
2002, respectively) (619) (759) 140 -18%
Loss on disposal (1,699) (1,699) (*)
----------- ------------ -----------
Loss from discontinued
operations (2,318) (759) (1,559) 205%
----------- ----------- -----------
Income before cumulative
effect of changes in
accounting principles 17,448 35,477 (18,029) -51%
Cumulative effect of
changes in accounting
principles (15,579) (15,579) -100%
----------- ------------ -----------
Net income $ 1,869 $ 35,477 $ (33,608) -95%
=========== =========== ===========
Basic earnings per
common share:
Income from continuing
operations before
cumulative effect
of changes in
accounting principles $ 0.61 $ 1.13
Discontinued operations (0.07) (0.02)
Cumulative effect of
changes in accounting
principles (0.48)
----------- ------------
Net income per common
share $ 0.06 $ 1.11
=========== ===========
Average common shares
outstanding 32,617,224 31,911,543
Diluted earnings per
common share:
Income from continuing
operations before
cumulative effect
of changes in
accounting principles $ 0.60 $ 1.08
Discontinued operations (0.07) (0.02)
Cumulative effect of
changes in accounting
principles (0.47)
----------- ------------
Net income per common
share $ 0.06 $ 1.06
=========== ===========
Average diluted common
shares outstanding 32,997,872 33,348,331
(*) Not meaningful
BALLY TOTAL FITNESS HOLDING CORPORATION CONDENSED con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. CONSOLIDATED BALANCE SHEET consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. (In thousands) (Unaudited)
June 30 December 31
2003 2002
---------- ----------
ASSETS
Current assets:
Cash and equivalents $ 16,482 $ 12,907
Installment contracts receivable, net 288,062 271,531
Other current assets 72,618 92,764
---------- ----------
Total current assets 377,162 377,202
Installment contracts receivable, net 249,813 251,074
Property and equipment, less accumulated
depreciation and amortization of $570,768 and
$538,613 643,054 657,539
Goodwill 242,126 242,854
Trademarks 6,969 6,969
Intangible assets, less accumulated
amortization of $9,731 and $9,453 2,508 2,786
Deferred income taxes 81,431 81,314
Deferred membership origination costs 118,481 119,484
Other assets 31,036 32,652
---------- ----------
$1,752,580 $1,771,874
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 56,018 $ 51,752
Income taxes payable 2,349 1,497
Deferred income taxes 28,450 29,303
Accrued liabilities 90,562 87,683
Current maturities of long-term debt 27,978 28,904
Deferred revenues 253,267 271,031
---------- ----------
Total current liabilities 458,624 470,170
Long-term debt, less current maturities 695,672 697,850
Other liabilities 10,923 10,689
Deferred revenues 55,499 63,689
Stockholders' equity 531,862 529,476
---------- ----------
$1,752,580 $1,771,874
========== ==========
BALLY TOTAL FITNESS HOLDING CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands) (Unaudited)
Six months ended
June 30
----------------------
2003 2002
---------- ----------
Operating:
Income before cumulative effect of changes in
accounting principles $ 17,448 $ 35,477
Adjustments to reconcile to cash provided -
Depreciation and amortization, including
amortization included in interest expense 40,667 38,440
Change in operating assets and liabilities (28,559) (47,001)
Loss on disposal of discontinued operation 1,699
Stock-based compensation 122
---------- ----------
Cash provided by operating activities 31,377 26,916
Investing:
Purchases and construction of property and
equipment (20,199) (43,165)
Purchases of real estate (11,510)
Acquisitions of businesses and other (412) (6,092)
---------- ----------
Cash used in investing activities (20,611) (60,767)
Financing:
Debt transactions -
Net borrowings under revolving credit
agreement 5,000 25,000
Net borrowings (repayments) of other
long-term debt (12,128) 9,850
Debt issuance and refinancing costs (458)
---------- ----------
Cash provided by (used in) debt transactions (7,586) 34,850
Equity transactions -
Proceeds from exercise of warrants 2,513
Proceeds from issuance of common stock
under stock purchase and options plans 395 1,324
Purchases of common stock for treasury (860)
---------- ----------
Cash provided by (used in) financing
transactions (7,191) 37,827
---------- ----------
Increase in cash and equivalents 3,575 3,976
Cash and equivalents, beginning of period 12,907 9,310
---------- ----------
Cash and equivalents, end of period $ 16,482 $ 13,286
========== ==========
Supplemental Cash Flows Information:
Cash payments for interest and income taxes
were as follows --
Interest paid $ 26,112 $ 28,141
Interest capitalized (453) (1,840)
Income taxes paid, net 1,245 736
Investing and financing activities exclude the
following non-cash transactions --
Acquisitions of property and equipment
through capital leases/borrowings $ 4,144 $ 7,716
Acquisitions of businesses with common
stock 8,855
Common stock issued under long-term
incentive plan 4,281 4,619
Debt, including assumed debt related to
acquisitions of business 2,846
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (in thousands) (unaudited): Special items During the quarter the Company sold a portion of its non-performing, previously written down installment Regular, partial portion of the same debt, paid at successive periods as agreed by a debtor and creditor. An installment loan is designed to be repaid in certain specified, ordinarily equal amounts over a designated period, such as a year or a number of months. accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying to a third party for $2.2 million. Based on the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of these accounts, determined using estimates of recoveries expected through routine collection processes, a non-cash charge of $1.7 million ($1.3 million net of taxes) was recorded in the quarter as "Other, net" in the Consolidated Income Summary. The Company is reporting as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. an internet-based start-up company start-up company A new business. which was liquidated DAMAGES, LIQUIDATED, contracts. When the parties to a contract stipulate for the payment of a certain sum, as a satisfaction fixed and agreed upon by them, for the not doing of certain things particularly mentioned in the agreement, the sum so fixed upon is called liquidated damages. (q.v. . As a result, the Company recorded a loss from discontinued operations of $1.9 million, net of taxes, during the second quarter of 2003. In the second quarter of 2003, the Company changed its accounting method (effective January January: see month. 1, 2003) for the recognition of recoveries of unpaid dues on inactive in·ac·tive adj. 1. Not active or tending to be active. 2. a. Not functioning or operating; out of use: inactive machinery. b. membership contracts from accrual-based estimations to a cash basis of recognition, which is considered a preferable method of accounting for such past due amounts. The effect of this change was a cumulative non-cash charge of $15.4 million (net of tax effect of $4.9 million) or $.47 per diluted share. As a result of recording the cumulative effect adjustment as of the beginning of the year, membership revenue increased during the first quarter of 2003 by $1.1 million. As reported in the first quarter, the Company additionally implemented the provisions of newly issued Statement of Financial Accounting Standards No. 143 Accounting for Asset Retirement Obligations Asset Retirement Obligations provide for future disposal of assets as required by SFAS 143 [1]. Firms must recognize the ARO liability in the period it was acquired, generally acquisition. at the beginning of the year. As a result, a non-cash cumulative adjustment of $.2 million was recorded during the first quarter of 2003 to provide for estimated future restoration obligations on the Company's leaseholds. At the end of the second quarter the Company announced the completion of the refinancing of its existing $132.5 million term loan and $63.5 million outstanding on its revolving credit agreement Revolving credit agreement A legal commitment in which a bank promises to lend a customer up to a specified maximum amount during a specified period. revolving credit agreement See line of credit. by issuing $235 million in aggregate principal of 10 1/2% Senior Notes due 2011 in an offering under Rule 144A Rule 144A A Securities & Exchange Commission rule modifying a two-year holding period requirement on privately placed securities to permit qualified institutional buyers to trade these positions among themselves. and Regulation S under the Securities Act of 1933, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , and entered into a new $90 million Senior Secured Revolving Credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. Facility due 2008. These transactions were funded in July July: see month. 2003. As a result, the Company will write off unamortized issuance costs from the extinguished ex·tin·guish tr.v. ex·tin·guished, ex·tin·guish·ing, ex·tin·guish·es 1. To put out (a fire, for example); quench. 2. To put an end to (hopes, for example); destroy. See Synonyms at abolish. 3. debt in the third quarter. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge (in thousands) (unaudited) (continued)
Installment contracts receivable
June 30 December 31
2003 2002
---------- ----------
Current:
Installment contracts receivable $ 417,165 $ 404,707
Unearned finance charges (36,642) (36,015)
Allowance for doubtful receivables and
cancellations (92,461) (97,161)
---------- ----------
$ 288,062 $ 271,531
========== ==========
Long-term:
Installment contracts receivable $ 344,186 $ 343,749
Unearned finance charges (24,143) (22,396)
Allowance for doubtful receivables and
cancellations (70,230) (70,279)
---------- ----------
$ 249,813 $ 251,074
========== ==========
A summary of the allowance for doubtful receivables and cancellations
activity is as follows:
Three months ended Six months ended
June 30 June 30
---------------------- ----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Balance at beginning of
period $ 167,445 $ 134,032 $ 167,440 $ 130,504
Contract cancellations
and write-offs of
uncollectible amounts,
net of recoveries (83,287) (86,387) (173,904) (177,220)
Provision for
cancellations and
doubtful receivables 78,533 83,215 169,155 177,576
---------- ---------- ---------- ----------
Balance at end of
period $ 162,691 $ 130,860 $ 162,691 $ 130,860
========== ========== ========== ==========
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in
thousands) (unaudited) (continued)
Reconciliation of net income to EBITDA and EBITDA
as adjusted
Three months ended Six months ended
June 30 June 30
---------------------- ----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net income $ 6,699 $ 16,075 $ 1,869 $ 35,477
Add:
Depreciation and
amortization 19,086 18,950 38,642 36,370
Interest expense 13,936 13,547 27,921 28,190
Income tax
provision 2,727 5,176 6,242 5,704
Loss from
discontinued
operations 1,935 318 2,318 759
Cumulative effect
of accounting
changes 15,579
---------- ---------- ---------- ----------
EBITDA 44,383 54,066 92,571 106,500
Add (deduct):
Stock-based
compensation 122 122
Other, net 1,704 (89) 1,820 (163)
---------- ---------- ---------- ----------
EBITDA as adjusted $ 46,209 $ 53,977 $ 94,513 $ 106,337
========== ========== ========== ==========
Membership statistics New membership originations and other key data:
Three months ended Six months ended
June 30 June 30
---------------------- ----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
New joining members 237 221 481 456
Average committed
monthly fee (dollars) $ 38.76 $ 43.45 $ 40.76 $ 44.19
Average committed
duration (in months) 30.7 29.8 30.6 30.5
Gross committed
membership fees $ 279,737 $ 279,981 $ 591,102 $ 600,728
Same club 259,692 267,975 542,183 567,240
Supplemental operating
data:
Weighted average
fitness centers
(locations) 414 412 412 409
Members (end of period) 3,978 3,978 3,978 3,978
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands) (unaudited) (continued) Gross committed membership fees reflect the total collection potential during the initial financing term of initiation initiation, the transition and attendant ceremonies, such as ordeals and rites, involved in passing from one state or status to another, often from childhood to adulthood. It was among the most important social institutions of early humans. fees, dues, finance charges and membership-related products and services from new members joining during a period and are an important measure used by management to evaluate membership sales trends. The following table reconciles gross committed membership fees to net initial membership fees originated for each of the periods:
Three months ended Six months ended
June 30 June 30
---------------------- ----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Gross committed
membership fees $ 279,737 $ 279,981 $ 591,102 $ 600,728
Less: Committed
monthly dues (65,440) (56,875) (132,911) (121,215)
Provision for
doubtful
receivables and
cancellations (78,533) (83,215) (169,155) (177,576)
Unearned finance
charges and other (44,752) (37,716) (93,787) (80,232)
Products and
services revenues
included in
membership
programs (32,859) (17,658) (65,320) (36,999)
---------- ---------- ---------- ----------
Initial membership fees
originated, net $ 58,153 $ 84,517 $ 129,929 $ 184,706
========== ========== ========== ==========
Components of membership revenue are as follows:
Three months ended Six months ended
June 30 June 30
---------------------- ----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Initial membership
fees:
Originated, net $ 58,153 $ 84,517 $ 129,929 $ 184,706
Decrease (increase)
in deferral 18,411 6,507 24,644 (1,963)
---------- ---------- ---------- ----------
76,564 91,024 154,573 182,743
Dues:
Dues collected 94,332 95,393 190,004 185,908
Decrease in
deferral 1,298 1,913 1,845 2,373
---------- ---------- ---------- ----------
95,630 97,306 191,849 188,281
---------- ---------- ---------- ----------
Membership revenue $ 172,194 $ 188,330 $ 346,422 $ 371,024
========== ========== ========== ==========
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in
thousands) (unaudited) (continued)
Products and services Three months ended Six months ended
June 30 June 30
---------------------- ----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net revenues:
Retail and
nutritional
supplements--
Membership
programs $ 5,387 $ 6,725 $ 11,377 $ 15,510
Other sales 14,550 14,409 29,615 28,233
Personal training--
Membership programs 27,472 10,933 53,943 21,489
Other sales 26,883 19,695 53,255 37,396
Financial services 1,556 1,240 3,107
---------- ---------- ---------- ----------
74,292 53,318 149,430 105,735
Direct operating costs
and expenses:
Retail and
nutritional
supplements 17,129 15,699 34,675 32,045
Personal training 30,409 18,053 59,884 34,740
---------- ---------- ---------- ----------
47,538 33,752 94,559 66,785
---------- ---------- ---------- ----------
Direct operating
margin $ 26,754 $ 19,566 $ 54,871 $ 38,950
========== ========== ========== ==========
Margin percentage 36% 37% 37% 37%
Analysis of cash flows and liquidity The Company has provided disclosure of free cash flow in this release because management believes that it is an important measure of liquidity and investors are focused on the Company's ability to reduce overall debt. The following table summarizes free cash flow for each of the periods:
Three months ended Six months ended
June 30 June 30
---------------------- ----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Cash provided by
(used in) operating
activities $ 12,076 $ (1,029) $ 31,377 $ 26,916
Less: Cash used in
investing activities (10,781) (23,710) (20,611) (60,767)
---------- ---------- ---------- ----------
Free cash flow
(deficit) $ 1,295 $ (24,739) $ 10,766 $ (33,851)
========== ========== ========== ==========
Cash flows from operating activities were $31.4 million in the first six months of 2003, compared to $26.9 million in the 2002 period. Over the past two years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time Company sold a portion of its installment contracts installment contract n. an agreement in which payments of money, delivery of goods or performance of services are to be made in a series of payments, deliveries or performances, usually on specific dates or upon certain happenings. receivable portfolio to a major financial institution in three bulk sales at net book value, with combined proceeds of approximately $128 million. Excluding the impact of the sales of receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed and net of the change in dues prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. during the periods, cash flows from operating activities were $50.3 million in the first six months of 2003, compared to $55.3 million in 2002. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands) (unaudited) (continued) The following table sets forth cash flows from operating activities on a comparable basis to add back actual cash collections on the sold portfolios and to reflect the impact of changes in dues prepayments during each of the periods:
Three months ended Six months ended
June 30 June 30
---------------------- ----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Cash flows from (used
in) operating
activities, as
reported $ 12,076 $ (1,029) $ 31,377 $ 26,916
Collections on
installment
contracts receivable
sold 6,415 14,143 19,553 31,100
Change in dues
prepayments (773) (1,437) (634) (2,762)
---------- ---------- ---------- ----------
Cash flows from
operating activities
on a comparable basis $ 17,718 $ 11,677 $ 50,296 $ 55,254
========== ========== ========== ==========
Capital expenditures totaled $20.6 million in the first six months of 2003 compared to $60.8 million in the first six months of 2002. Capital expenditures for 2003 are not expected to exceed $50 million. The following table details cash used in investing activities for each of the periods:
Three months ended Six months ended
June 30 June 30
---------------------- ----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Club improvements $ 1,935 $ 4,981 $ 6,945 $ 11,449
New clubs 5,098 9,437 7,950 20,343
Club remodels and
expansions 1,913 4,767 3,356 9,023
Administrative and
systems 1,826 948 1,948 2,350
Real estate purchases
and other 9 3,577 412 17,602
---------- ---------- ---------- ----------
$ 10,781 $ 23,710 $ 20,611 $ 60,767
========== ========== ========== ==========
The Company paid down $7.1 million in debt during the first six months of 2003. As of July 31, 2003, the Company had $6.0 million of letters of credit outstanding and $84.0 million available on its $90 million revolving credit line. |
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