SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
------------------------------------------------------------
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): October 26, 1999
BALLY TOTAL FITNESS HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
Commission file number: 0-27478
Delaware 36-3228107
(State or other jurisdiction of (I.R.S. Employer
incorporation) Identification No.)
8700 West Bryn Mawr Avenue, Chicago, Illinois 60631
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (773) 380-3000
Page 1 of 2
Exhibit Index on Page 2
<PAGE>
BALLY TOTAL FITNESS HOLDING CORPORATION
FORM 8-K
Current Report
Item 5. Other Events
On October 26, 1999, Bally Total Fitness Holding Corporation
("Company") announced results for the quarter ended September 30,
1999. A copy of the press release relating to the results for the
quarter is attached as Exhibit 99.1 hereto and is incorporated herein
by reference. All adjustments have been recorded which are, in the
opinion of management, necessary for a fair presentation of the
information included in the press release. All such adjustments were
of a normal recurring nature.
Item 7. Financial Statements and Exhibits
c. Exhibits
99.1 Press Release dated October 26, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
BALLY TOTAL FITNESS HOLDING CORPORATION
-----------------------------------------
Registrant
Dated: October 26, 1999 /s/ John W. Dwyer
-----------------------------------------
John W. Dwyer
Executive Vice President, Chief Financial
Officer and Treasurer
(principal financial officer)
Page 2 of 2
FROM: BALLY TOTAL FITNESS HOLDING CORPORATION
8700 West Bryn Mawr Avenue
Chicago, IL 60631
www.BallyFitness.com
Contact: Dave Southern - Tel. (773) 399-7611
Vice President, Public & Investor Relations
THE MWW GROUP
Public Relations - Tel. (201) 507-9500
Contact: Laurie Terry Fern - Email: [email protected]
- --------------------------------------------------------------------------------
BALLY TOTAL FITNESS ANNOUNCES
THIRD QUARTER RESULTS
Operating Income Improves 82% - Earnings Per Share
$.45 Versus $.16 a Year Ago
CHICAGO, IL, October 26, 1999 - Bally Total Fitness Holding Corporation
(NYSE: BFT) today announced third quarter 1999 results - with fully diluted
earnings per share of $.45 versus $.16 in the prior year and operating income of
$25.1 million - an improvement of 82% over the 1998 quarter. Earnings before
interest, taxes, depreciation and amortization for the 1999 quarter grew to
$38.4 million, a 49% improvement over the 1998 quarter. The strong, positive
trend of growth in operating cash flows continued with a $15.8 million increase
in cash flow from operations compared to the same quarter a year ago.
Commenting on the continuing strong performance of the Company, Lee
Hillman, President and Chief Executive Officer of Bally Total Fitness, said,
"Earnings and cash flows continue to grow in-line with our expectations,
consistent with the plan we presented over two years ago. Given the success of
our expansion efforts to date and the many growth opportunities we have
developed, our intention is to continue investing in new clubs, facility
upgrades and expansions, and new product and service offerings to drive
results even higher." Mr. Hillman concluded, "We believe the growth we have
seen during 1999 in new membership sales, coupled with our continued
improvement in member retention, demonstrate our investment and service
initiatives are being well received by those who matter most - our members.
Over the past two years, our results have shown tremendous improvement,
notwithstanding our operating investments in new club
openings and new product introductions. As these aspects of our
<PAGE>
business begin to mature, we believe the Company will enjoy sustainable growth
in long-term value."
###
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Operating income for the third quarter of 1999 was $25.1 million compared
to $13.8 million in 1998. This increase of $11.3 million (82%) was due to a
$29.2 million (15%) increase in revenues partially offset by a $16.7 million
(10%) increase in operating costs and an increase in depreciation and
amortization of $1.2 million (10%). The operating margin before depreciation and
amortization increased to 17% from 14% in the prior year period. Operating
income from new product and service offerings, reported net of development,
pre-opening and startup costs related to such offerings, grew to $6.5 million
from $2.5 million in the 1998 quarter on a more than doubling of revenues to
$17.4 million from $8.6 million during the prior year period.
Net revenue for the third quarter of 1999 was $219.5 million compared to
$190.3 million in 1998, an increase of $29.2 million (15%). The weighted average
number of fitness centers increased to 348 from 323 in the third quarter of
1998, including an increase to a weighted average of 27 centers from 13
operating under the Company's four upscale brands. Net revenue from comparable
fitness centers increased 9%. New membership units sold during the quarter
increased 1% over the prior year period while the weighted average selling price
of membership contracts sold increased 10%. This increase was attributable to
the sale of higher margin, multi-club membership plans coupled with a
significant strategic reduction in the scope of summer discount programs that,
historically, resulted in slightly higher unit sales at significantly lower
prices and yields. As a result, membership fees originated increased $11.4
million (10%) despite the loss of more than 1% of club sales days (over 300 club
days) during the quarter due to inclement weather and other unusual conditions.
Dues collected increased $6.9 million (13%) from the 1998 quarter, reflecting
continued improvements in member retention and pricing from strategies
implemented during prior periods and the increase in the number of fitness
centers operating under the Company's four upscale brands which charge higher
dues.
<PAGE>
Finance charges earned during the third quarter of 1999 increased $1.5
million (11%) compared to the 1998 quarter, due to the growth in size and
consistent higher quality of the receivables portfolio. Average interest rates
for these finance charges were substantially unchanged between the periods.
The total provision rate, inclusive of the provision for doubtful
receivables and the provision for cancellations, which is reflected in the
financial statements as a direct reduction of initial membership fees on
financed memberships originated, was 41% of the gross financed portion of
originations during each of the periods.
Deferral accounting was less favorable to earnings by $1.9 million for
1999 compared to 1998, reflecting the combined impact of a decrease in revenues
and a decrease in the expense offset.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Operating income for the first nine months of 1999 was $64.6 million
compared to $37.4 million in 1998. This increase of $27.2 million (73%) was due
to a $81.9 million (15%) increase in revenues, offset, in part, by a $52.9
million (11%) increase in operating costs and expenses and an increase in
depreciation and amortization of $1.8 million (5%). The operating margin before
depreciation and amortization increased to 16% from 13% in the prior year
period. Operating income from new product and service offerings, reported net of
development, preopening and startup costs related to such offerings, totaled
$14.8 million on revenues of $42.3 million, a substantial increase from the
prior year totals of $7.9 million and $23.8 million, respectively.
Net revenue for 1999 was $638.1 million compared to $556.2 million in
1998, an increase of $81.9 million (15%). The weighted average number of fitness
centers during 1999 increased to 338 from 319 during 1998, including an increase
to a weighted average of 19 centers from 9 operating under the Company's four
upscale brands. Net revenue from comparable fitness centers increased 10%. New
membership units sold increased 5% over the prior year period while the weighted
average selling price of membership contracts sold increased 6%. This increase
was attributable to the sale of higher margin, multi-club membership plans
coupled with a significant strategic reduction in the scope of summer discount
programs that, historically, resulted in slightly higher unit sales at
significantly lower
<PAGE>
prices and yields. As a result, membership fees originated increased $37.2
million (11%). Dues collected increased $24.0 million (16%) from the 1998
period, reflecting continued improvements in member retention and pricing from
strategies implemented in prior periods and the increase in the number of
fitness centers operating under the Company's four upscale brands.
Finance charges earned increased $7.6 million (21%) in 1999 due to the
growth in size and consistent higher quality of the receivables portfolio.
Average interest rates for these finance charges were substantially unchanged
during the periods.
The total provision rate, inclusive of the provision for doubtful
receivables and the provision for cancellations, which is reflected in the
financial statements as a direct reduction of initial membership fees on
financed memberships originated, was 41% of the gross financed portion of
originations during each of the two periods.
Deferral accounting reduced earnings by $13.8 million for 1999 compared to
1998, reflecting the combined impact of a decrease in revenues and decrease in
the expense offset.
CASH FLOW
Cash provided by operating activities for the nine months of 1999 was a
positive $27.2 million compared to a use of $26.2 million in the 1998 period.
The period over period improvement of $53.4 million ($15.8 million for the third
quarter) principally reflects the continued growth in overall collections from
installment contracts receivable and monthly dues and is net of the timing of
other working capital changes which were seasonally low at September 30, 1999.
Additionally, during August, inventories of the Company's private-labeled
nutritional line were grown by nearly $3 million to support rapid sales growth
in view of the nearly tripling of the number of products offered and to support
the rollout of new membership programs that include these products. Net
installment contracts receivable grew $58.2 million during the nine-month
period. Excluding the growth in receivables, cash provided by operating
activities grew to $85.4 million, a $39.8 million improvement ($10.8 million in
the third quarter) over the 1998 period. Consistent with the Company's plan,
during the first nine months of 1999, $82.7 million was invested in property and
equipment, including approximately $58.0 million related to new fitness centers
and major upgrades and
<PAGE>
expansions of existing facilities and $7.5 million to purchase existing
leaseholds. As of September 30, 1999, the Company has drawn $28.5 million on its
$90.0 million revolving credit facility. The Company has used the credit line to
facilitate growth through both the acquisition and construction of new fitness
centers.
Bally Total Fitness is the largest commercial operator of fitness centers
in North America, with approximately four million members and 360 facilities
located in 27 states and Canada. With more than 120 million annual visits by
members to its fitness centers, Bally Total Fitness provides a unique platform
for distribution of products and services to active, fitness-conscious adult
consumers.
# # #
Forward-looking statements in this release including, without limitation,
statements relating to the Company's plans, strategies, objectives,
expectations, intentions, and adequacy of resources, are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act 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 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; 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; failure of entities that
provide goods and services to us to be year 2000 compliant 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.
<PAGE>
<TABLE>
BALLY TOTAL FITNESS HOLDING CORPORATION
CONSOLIDATED OPERATING SUMMARY
(In thousands, except share data)
(Unaudited)
<CAPTION>
Three months ended September 30
-------------------------------
1999 1998
---- ----
<S> <C> <C>
Net revenues:
Membership revenues -
Initial membership fees on financed
memberships originated................. $ 119,968 $ 107,053
Initial membership fees on paid-in-full
memberships originated................. 5,566 7,086
Dues collected................................ 58,922 52,016
Changes in deferred revenues.................. (303) (183)
------------ ------------
184,153 165,972
Finance charges earned........................ 15,086 13,573
Products and services......................... 20,290 10,728
------------ ------------
219,529 190,273
Operating costs and expenses:
Fitness center operations...................... 117,705 108,809
Member processing and collection centers....... 9,962 10,357
Advertising.................................... 12,217 10,897
General and administrative..................... 6,975 6,775
Provision for doubtful receivables............. 35,719 30,857
Change in deferred membership origination costs (1,421) (3,229)
------------ ------------
181,157 164,466
Operating income before depreciation and
amortization ("EBITDA")........................ 38,372 25,807
Depreciation and amortization.................... 13,232 11,997
------------ ------------
Operating income................................. 25,140 13,810
Interest income.................................. 415 942
Interest expense................................. (13,062) (10,216)
------------ ------------
Income before income taxes ...................... 12,493 4,536
Income tax provision............................. (250) (275)
------------ ------------
Net income....................................... $ 12,243 $ 4,261
============ ============
Basic earnings per common share.................. $ .52 $ .18
============ ============
Average common shares outstanding.............. 23,417,395 23,491,719
Diluted earnings per common share................ $ .45 $ .16
============ ============
Average diluted common shares outstanding
(includes 3,930,773 and 3,642,942 common
equivalent shares in 1999 and 1998,
respectively)................................ 27,348,168 27,134,661
</TABLE>
<PAGE>
<TABLE>
BALLY TOTAL FITNESS HOLDING CORPORATION
CONSOLIDATED OPERATING SUMMARY
(In thousands, except share data)
(Unaudited)
<CAPTION>
Nine months ended September 30
------------------------------
1999 1998
---- ----
<S> <C> <C>
Net revenues:
Membership revenues -
Initial membership fees on financed
memberships originated................. $ 365,589 $ 321,663
Initial membership fees on paid-in-full
memberships originated................. 17,671 24,387
Dues collected................................ 174,244 150,218
Changes in deferred revenues.................. (14,579) (6,497)
------------ ------------
542,925 489,771
Finance charges earned........................ 44,546 36,904
Products and services......................... 50,587 29,528
------------ ------------
638,058 556,203
Operating costs and expenses:
Fitness center operations...................... 346,387 316,397
Member processing and collection centers....... 30,310 30,615
Advertising.................................... 38,096 35,986
General and administrative..................... 19,866 19,399
Provision for doubtful receivables............. 107,410 92,555
Change in deferred membership origination costs (6,872) (12,613)
------------ ------------
535,197 482,339
Operating income before depreciation and
amortization ("EBITDA")........................ 102,861 73,864
Depreciation and amortization.................... 38,276 36,492
------------ ------------
Operating income................................. 64,585 37,372
Interest income.................................. 1,829 2,213
Interest expense................................. (37,805) (30,723)
------------ ------------
Income before income taxes and cumulative effect
of a change in accounting principle............ 28,609 8,862
Income tax provision............................. (580) (525)
------------ ------------
Income before cumulative effect of a change in
accounting principle........................... 28,029 8,337
Cumulative effect of a change in accounting
principle, net of income tax................... (262)
------------ ------------
Net income....................................... $ 27,767 $ 8,337
============ ============
Basic earnings per common share:
Income before cumulative effect of a change in
accounting principle......................... $ 1.20 $ .38
Cumulative effect of a change in accounting
principle.................................... (.01)
------------ ------------
Net income per common share.................... $ 1.19 $ .38
============ ============
Average common shares outstanding.............. 23,316,082 22,177,815
Diluted earnings per common share:
Income before cumulative effect of a change in
accounting principle......................... $ 1.03 $ .32
Cumulative effect of a change in accounting
principle.................................... (.01)
------------ ------------
Net income per common share - assuming dilution $ 1.02 $ .32
============ ============
Average diluted common shares outstanding
(includes 3,779,647 and 3,790,714 common
equivalent shares in 1999 and 1998,
respectively)................................ 27,095,729 25,968,529
</TABLE>
<PAGE>
<TABLE>
BALLY TOTAL FITNESS HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
<CAPTION>
September 30 December 31
1999 1998
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents................................ $ 12,517 $ 64,382
Installment contracts receivable, net............... 225,308 199,979
Other current assets................................ 42,695 34,212
---------- ----------
Total current assets.............................. 280,520 298,573
Installment contracts receivable, net................. 255,030 222,147
Property and equipment, less accumulated
depreciation and amortization of $379,492
and $340,702........................................ 447,040 361,300
Intangible assets, less accumulated
amortization of $63,047 and $58,844................. 133,456 101,815
Deferred income taxes................................. 29,570 17,430
Deferred membership origination costs................. 105,335 97,901
Other assets.......................................... 35,669 29,679
---------- ----------
$1,286,620 $1,128,845
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................... $ 42,902 $ 40,957
Income taxes payable................................ 3,211 2,608
Deferred income taxes............................... 31,059 18,919
Accrued liabilities................................. 65,449 48,596
Current maturities of long-term debt................ 9,316 5,799
Deferred revenues................................... 296,794 282,806
---------- ----------
Total current liabilities......................... 448,731 399,685
Long-term debt, less current maturities............... 548,676 482,199
Other liabilities..................................... 6,075 6,226
Deferred revenues..................................... 84,059 78,952
Stockholders' equity.................................. 199,079 161,783
---------- ----------
$1,286,620 $1,128,845
========== ==========
</TABLE>
<PAGE>
Note to the Condensed Consolidated Balance Sheet:
<TABLE>
INSTALLMENT CONTRACTS RECEIVABLE
<CAPTION>
September 30 December 31
1999 1998
------------ -----------
<S> <C> <C>
Current:
Installment contracts receivable................ $ 343,619 $ 294,880
Unearned finance charges...................... (42,453) (35,792)
Allowance for doubtful receivables
and cancellations........................... (75,858) (59,109)
---------- ---------
$ 225,308 $ 199,979
========== =========
Long-term:
Installment contracts receivable................ $ 337,081 $ 287,443
Unearned finance charges...................... (21,473) (18,104)
Allowance for doubtful receivables
and cancellations........................... (60,578) (47,192)
---------- ---------
$ 255,030 $ 222,147
========== =========
</TABLE>
A summary of the allowance for doubtful receivables and cancellations activity
is as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
--------------------- ---------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance at beginning of period... $ 132,297 $ 107,536 $ 106,301 $ 80,531
Contract cancellations and
write-offs of uncollectible
amounts, net of recoveries..... (70,123) (56,546) (197,640) (161,263)
Provision for cancellations
(classified as a direct
reduction of revenues)........ 38,543 34,725 120,365 104,749
Provision for doubtful
receivables.................... 35,719 30,857 107,410 92,555
--------- --------- --------- ---------
Balance at end of period......... $ 136,436 $ 116,572 $ 136,436 $ 116,572
========= ========= ========= =========
</TABLE>
<PAGE>
<TABLE>
BALLY TOTAL FITNESS HOLDING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<CAPTION>
Nine months ended September 30
------------------------------
1999 1998
---- ----
<S> <C> <C>
Operating:
Income before cumulative effect of a change in
accounting principle........................ $ 28,029 $ 8,337
Adjustments to reconcile -
Depreciation and amortization, including
amortization included in interest expense. 40,714 38,162
Provision for doubtful receivables.......... 107,410 92,555
Change in operating assets and liabilities.. (148,920) (165,302)
------------ ------------
Cash provided by (used in) operating
activities............................ 27,233 (26,248)
Investing:
Purchases and construction of property and
equipment................................... (82,736) (47,690)
Acquisitions of businesses and other.......... (16,783) (2,117)
------------ ------------
Cash used in investing activities....... (99,519) (49,807)
Financing:
Debt transactions -
Net borrowings under revolving credit
agreement................................. 28,500
Redemption of 13% Senior Subordinated Notes
due 2003.................................. (24,021)
Repayments of other long-term debt.......... (5,584) (5,344)
Debt issuance and refinancing costs......... (4,225) (317)
------------ ------------
Cash provided by (used in) debt
transactions.......................... 18,691 (29,682)
Equity transactions -
Proceeds from issuance of common stock
through public offering................... 82,744
Proceeds from issuance of common stock under
stock purchase and options plans.......... 1,730 423
Purchases of common stock for treasury...... (8,183)
------------ ------------
Cash provided by financing activities... 20,421 45,302
------------ ------------
Decrease in cash and equivalents................ (51,865) (30,753)
Cash and equivalents, beginning of period....... 64,382 61,679
------------ ------------
Cash and equivalents, end of period............. $ 12,517 $ 30,926
============ ============
</TABLE>
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