Bally Total Fitness Reports Third Quarter Results; Operating Income Up 29% Over Prior Year Quarter.Business Editors CHICAGO--(BUSINESS WIRE)--Nov. 7, 2000 Net income 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 of $1.30, including $.72 tax benefit, versus $.45 in prior year quarter 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. ) today reported third quarter 2000 results - with diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $.58 (before the effects of a $20 million, $.72 per diluted share, benefit from the reduction of tax valuation allowances) versus $.45 in the prior year quarter. Net income, inclusive of inclusive of prep. Taking into consideration or account; including. the effect of this tax benefit totaled $35.9 million, $1.30 per diluted share, for the current quarter. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the quarter improved 29% to $32.4 million in the current quarter from $25.1 million in the 1999 quarter. Earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. of $12.4 million over the year ago quarter. Other liquidity measures continue to be positive as well - with key receivable portfolio measures of quality continuing to strengthen year over year. In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Financial Accounting Standard No. 109, Accounting for Income Taxes, the Company reviewed the likelihood of realizing the future benefit of tax loss carryforwards tax loss carryforward See carryforward. . Based upon consistent and growing profitability over the past three years and reasonably expected continuation continuation - continuation passing style of these trends, the Company reduced its tax valuation allowance against net operating losses Net operating losses Losses that a firm can take advantage of to reduce taxes. realized in prior periods by $20 million. Valuation allowances totaling over $100 million remain and may be reversed in future periods. Lee Hillman Hillman was a famous British automobile marque, manufactured by the Rootes Group. It was based in Ryton-on-Dunsmore, near Coventry, England, from 1907 to 1976. Before 1907 the company had built bicycles. , Chairman of the Board of Directors, 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 President of Bally Total Fitness, noted that "Our third quarter results demonstrate yet again the power of our business model. We are pleased with the growth and margin expansion we continue to achieve, and believe the investments we have been making in our business will lead to further improvements in operating results going forward." Mr. Hillman continued, "We are pleased to have reached another key objective during the quarter - generating free cash flow while at the same time continuing to expand and grow our operations." Comparison of the three months ended September September: see month. 30, 2000 and 1999 Operating income for the third quarter of 2000 was $32.4 million compared to $25.1 million in 1999. This increase of $7.3 million (29%) was due to a $35.8 million (16%) increase in net revenue, partially offset by a $24.8 million (14%) increase in operating costs operating costs npl → gastos mpl operacionales and expenses and an increase in depreciation and amortization of $3.7 million. The operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: before depreciation and amortization increased to 19% from 18% in the prior year period. Operating income from products and services increased to $10.4 million from $6.4 million in the 1999 quarter with an operating margin of 36% in the 2000 quarter compared to 37% during the prior year period. The weighted-average number of fitness centers increased to 380 from 348 in the third quarter of 1999, an increase of 9%, including an increase in the weighted-average number of centers operating under the Company's four upscale brands, from 25 to 34. Net revenue from comparable fitness centers increased 9%. Full membership units sold during the quarter increased 7% over the prior year period while the weighted-average selling price of these membership contracts sold increased 5%. During the 2000 quarter, shorter-term and seasonal memberships added 1% more membership units and less than 1% more revenue. As a result, membership fees originated increased $14.5 million (12%). Dues collected increased $11.8 million (20%) from the 1999 quarter, reflecting continued improvements in member retention and pricing strategies There are many ways in which the price of a product can be determined. The following are the foremost strategies that businesses are likely to use. Competition-based pricing Setting the price based upon prices of the similar competitor products. and an increase attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to fitness centers operating under the Company's four upscale brands. Finance charges earned during the third quarter of 2000 increased $2.2 million (15%) compared to the 1999 quarter due to the growth in size and consistent quality of the 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 portfolio. Average interest rates for these finance charges were substantially unchanged between the periods. The provision for doubtful receivables combined with the provision for cancellations, which is reported in the financial statements as a direct reduction of initial membership fees on financed memberships originated, totaled 41% of the gross financed portion of originations for both periods. Deferral deferral - Waiting for quiet on the Ethernet. accounting reduced earnings by $4.5 million for 2000 compared to 1999. This reduction reflects principally the greater deferral of revenues during the 2000 period. Comparison of the nine months ended September 30, 2000 and 1999 Operating income for the first nine months of 2000 was $93.9 million compared to $64.6 million in 1999. This increase of $29.3 million (45%) was due to a $118.0 million (19%) increase in net revenue, partially offset by a $79.0 million (15%) increase in operating costs and expenses and an increase in depreciation and amortization of $9.6 million. The operating margin before depreciation and amortization increased to 19% from 16% in the prior year period. Operating income from products and services increased to $28.7 million from $14.6 million in the first nine months of 1999 with an operating margin of 35% in 2000 compared to 34% during the prior year period. The weighted-average number of fitness centers increased to 374 from 338 in the first nine months of 1999, an increase of 11%, including an increase in the weighted-average number of centers operating under the Company's four upscale brands from 20 to 34. Net revenue from comparable fitness centers increased 10%. Full membership units sold during the nine month period increased 5% over the prior year period while the weighted-average selling price of these membership contracts sold increased 7%. Additionally, during the 2000 period, the Company expanded its selection of shorter-term and seasonal memberships which added 2% more membership units and less than 1% more revenue. As a result, membership fees originated increased $47.0 million (12%). Dues collected increased $34.9 million (20%) from the 1999 period, reflecting continued improvements in member retention and pricing strategies and an increase attributable to fitness centers operating under the Company's four upscale brands. Finance charges earned during the first nine months of 2000 increased $6.2 million (14%) compared to the 1999 period due to the growth in size and consistent quality of the receivables portfolio. Average interest rates for these finance charges were substantially unchanged between the periods. The provision for doubtful receivables combined with the provision for cancellations, which is reported in the financial statements as a direct reduction of initial membership fees on financed memberships originated, totaled 41% of the gross financed portion of originations for both periods. Deferral accounting reduced earnings by $11.9 million for 2000 compared to 1999. This decrease reflects principally the greater deferral of revenues during the 2000 period. Cash Flow Cash flow from operating activities was $45.8 million for the first nine months of 2000 compared to $27.2 million in the 1999 period. Net contracts receivable grew $71.6 million compared to $58.2 million in the 1999 period and interest paid totaled $38.2 million compared to $28.8 million in the 1999 period resulting in a combined increase in the use of working capital of $22.8 million. Cash provided by operating activities, excluding the growth in net contracts receivable and interest paid during each of the periods, increased $41.4 million period over period. The improvement principally reflects the continued growth in overall collections from 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 and monthly dues and the continued increase in operating margins. As of September 30, 2000, the Company has drawn $36.5 million on its $100 million 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. line and had outstanding letters of credit totaling $6.0 million. Bally Total Fitness is the largest commercial operator of fitness centers in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , with approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 4 million members and more than 385 facilities located in 27 states and 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 . 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. operates fitness centers under the Bally Total 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. (SM), The Sports Clubs of Canada(TM), 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), and 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) brands. With more than 120 million annual member visits to its fitness centers, Bally is 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 discuss its results further and respond to questions on the morning of November November: see month. 7, 2000 at 10:00am Central Time. Those interested may listen to this conference call via vcall.com, streetfusion.com or the Company's website at 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 STATEMENT OF OPERATIONS
(In thousands, except share data)
(Unaudited)
Three months ended September 30
-------------------------------
2000 1999
----------- -----------
Net revenues:
Membership revenues -
Initial membership fees on
financed memberships originated $ 133,014 $ 118,768
Initial membership fees on
paid-in-full memberships originated 6,084 5,816
Dues collected 70,422 58,672
Change in deferred revenues (4,585) 897
----------- -----------
204,935 184,153
Finance charges earned 17,285 15,086
Products and services 29,209 17,384
Miscellaneous revenue 3,383 2,434
----------- -----------
254,812 219,057
Operating costs and expenses:
Fitness center operations 119,859 106,552
Products and services 18,831 10,957
Member processing collection centers 10,638 9,962
Advertising 11,339 11,941
General and administrative 6,854 6,975
Provision for doubtful receivables 40,368 35,719
Change in deferred membership
origination costs (2,425) (1,421)
----------- -----------
205,464 180,685
----------- -----------
Operating income before depreciation
and amortization ("EBITDA") 49,348 38,372
Depreciation and amortization 16,954 13,232
----------- -----------
Operating income 32,394 25,140
Interest income 474 415
Interest expense (16,680) (13,062)
----------- -----------
Income before income taxes 16,188 12,493
Income tax benefit (provision) 19,750 (250)
----------- -----------
Net income $ 35,938 $ 12,243
=========== ===========
Basic earnings per common share: $ 1.50 $ .52
=========== ===========
Average common shares outstanding 24,001,923 23,417,395
Diluted earnings per common share: $ 1.30 $ .45
=========== ===========
Average diluted common shares outstanding
(includes 3,674,307 and 3,930,773
common equivalent shares in 2000
and 1999, respectively) 27,676,230 27,348,168
BALLY TOTAL FITNESS HOLDING CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share data)
(Unaudited)
Nine months ended September 30
------------------------------
2000 1999
----------- -----------
Net revenues:
Membership revenues -
Initial membership fees on
financed memberships originated $ 410,902 $ 364,389
Initial membership fees on
paid-in-full memberships originated 18,425 17,921
Dues collected 208,866 173,994
Change in deferred revenues (26,768) (13,379)
----------- -----------
611,425 542,925
Finance charges earned 50,762 44,546
Products and services 82,585 42,317
Miscellaneous revenue 10,161 7,182
----------- -----------
754,933 636,970
Operating costs and expenses:
Fitness center operations 350,045 318,118
Products and services 53,865 27,751
Member processing collection centers 32,519 30,310
Advertising 40,249 37,526
General and administrative 20,673 19,866
Provision for doubtful receivables 124,127 107,410
Change in deferred membership
origination costs (8,337) (6,872)
----------- -----------
613,141 534,109
----------- -----------
Operating income before depreciation
and amortization ("EBITDA") 141,792 102,861
Depreciation and amortization 47,901 38,276
----------- -----------
Operating income 93,891 64,585
Interest income 1,409 1,829
Interest expense (47,500) (37,805)
----------- -----------
Income before income taxes and cumulative
effect of a change in accounting principle 47,800 28,609
Income tax benefit (provision) 19,275 (580)
----------- -----------
Income before cumulative effect of a
change in accounting principle 67,075 28,029
Cumulative effect of a change in
accounting principle, net of income tax (262)
----------- -----------
Net income $ 67,075 $ 27,767
=========== ===========
Basic earnings per common share:
Income before cumulative effect of a
change in accounting principle $ 2.82 $ 1.20
Cumulative effect of a change
in accounting principle (.01)
----------- -----------
Net income per common share $ 2.82 $ 1.19
=========== ===========
Average common shares outstanding 23,797,183 23,316,082
Diluted earnings per common share:
Income before cumulative effect of a
change in accounting principle $ 2.44 $ 1.03
Cumulative effect of a change
in accounting principle (.01)
----------- -----------
Net income per common share
- assuming dilution $ 2.44 $ 1.02
=========== ===========
Average diluted common shares outstanding
(includes 3,746,601 and 3,779,647
common equivalent shares in 2000
and 1999, respectively) 27,543,784 27,095,729
BALLY TOTAL FITNESS HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
September 30 December 31
2000 1999
------------ ------------
(In thousands)
ASSETS
Current assets:
Cash and equivalents $ 12,401 $ 23,450
Installment contracts receivable, net 275,327 241,450
Other current assets 53,824 46,185
----------- -----------
Total current assets 341,552 311,085
Installment contracts receivable, net 282,461 244,693
Property and equipment, less accumulated
depreciation and amortization
of $421,318 and $382,897 535,837 473,111
Intangible assets, less accumulated
amortization of $69,497 and $64,554 153,368 137,156
Deferred income taxes 56,607 39,444
Deferred membership origination costs 114,532 106,195
Other assets 40,546 36,873
----------- -----------
$ 1,524,903 $ 1,348,557
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 55,926 $ 49,629
Income taxes payable 3,051 3,063
Deferred income taxes 37,704 40,933
Accrued liabilities 75,435 59,197
Current maturities of long-term debt 16,327 9,505
Deferred revenues 311,398 290,123
----------- -----------
Total current liabilities 499,841 452,450
Long-term debt, less current maturities 639,585 593,903
Other liabilities 7,502 6,531
Deferred revenues 92,025 83,214
Stockholders' equity 285,950 212,459
----------- -----------
$ 1,524,903 $ 1,348,557
=========== ===========
BALLY TOTAL FITNESS HOLDING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine months ended September 30
------------------------------
2000 1999
----------- -----------
(In thousands)
Operating:
Income before cumulative effect of a
change in accounting principle $ 67,075 $ 28,029
Adjustments to reconcile -
Depreciation and amortization,
including amortization included
in interest expense 51,174 40,714
Provision for doubtful receivables 124,127 107,410
Change in operating assets
and liabilities (196,567) (148,920)
----------- -----------
Cash provided by operating activities 45,809 27,233
Investing:
Purchases and construction of
property and equipment (77,851) (82,736)
Acquisitions of businesses and other (3,816) (16,783)
----------- -----------
Cash used in investing activities (81,667) (99,519)
Financing:
Debt transactions -
Net borrowings (repayments) under
revolving credit agreement 36,500 28,500
Repayments of other long-term debt (13,412) (5,584)
Debt issuance and refinancing costs (4,225)
----------- -----------
Cash provided by debt transactions 23,088 18,691
Equity transactions -
Proceeds from issuance of common stock
under stock purchase and options plans 1,721 1,730
----------- -----------
Cash provided by financing activities 24,809 20,421
Decrease in cash and equivalents (11,049) (51,865)
Cash and equivalents, beginning of period 23,450 64,382
----------- -----------
Cash and equivalents, end of period $ 12,401 $ 12,517
=========== ===========
Notes to Condensed Financial Statements:
(In thousands)
Installment contracts receivable:
September 30 December 31
2000 1999
------------ -----------
Current:
Installment contracts receivable $ 416,868 $ 355,029
Unearned finance charges (51,946) (41,515)
Allowance for doubtful receivables
and cancellations (89,595) (72,064)
----------- -----------
$ 275,327 $ 241,450
=========== ===========
Long-term:
Installment contracts receivable $ 372,410 $ 319,034
Unearned finance charges (25,501) (20,367)
Allowance for doubtful receivables
and cancellations (64,448) (53,974)
----------- -----------
$ 282,461 $ 244,693
=========== ===========
A summary of the allowance for doubtful receivables and cancellations
activity is as follows:
Three months ended Nine months ended
September 30 September 30
-------------------- --------------------
2000 1999 2000 1999
--------- --------- --------- ---------
Balance at beginning
of period $ 151,957 $ 132,297 $ 126,038 $ 106,301
Contract cancellations
and write-offs of
uncollectible amounts,
net of recoveries (84,485) (70,123) (238,672) (197,640)
Provision for cancellations
(classified as a direct
reduction of revenues) 46,203 38,543 142,550 120,365
Provision for doubtful
receivables 40,368 35,719 124,127 107,410
--------- --------- --------- ---------
Balance at end of period $ 154,043 $ 136,436 $ 154,043 $ 136,436
========= ========= ========= =========
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