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): April 28, 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 April 28, 1999, Bally Total Fitness Holding Corporation announced
results for the quarter ended March 31, 1999. A copy of the press
release relating to the results for the quarter is attached as
Exhibit 99 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 Press Release dated April 28, 1999
SIGNATURE
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: April 28, 1999 /s/ John W. Dwyer
-------------------------------------------------
John W. Dwyer
Executive Vice President, Chief Financial Officer
and Treasurer
(principal financial officer)
Page 2 of 2
EXHIBIT 99
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: Pete Holmberg - Email: [email protected]
BALLY TOTAL FITNESS BEGINS 1999 WITH ANOTHER STRONG QUARTER -
OPERATING INCOME GROWS 54% TO $18.3 MILLION
Net Income For the Quarter Improves to $.25 Per Fully Diluted Share
Compared to $.09 in Prior Year
Company Generates Significant Positive Cash Flow from Operations
CHICAGO, IL, April 28, 1999 - Bally Total Fitness Holding Corporation
(NYSE: BFT) today announced results for the quarter ended March 31, 1999.
Operating income grew 54% to $18.3 million from the prior year quarter and
operating income before depreciation and amortization ("EBITDA") improved 24% to
$30.7 million. Net income before the cumulative effect of a change in accounting
principle was $6.7 million ($.29 per basic share and $.25 per diluted share) for
1999 compared to $2.1 million ($.10 per basic share and $.09 per diluted share)
for 1998. Cash provided by operating activities for the 1999 quarter totaled
$16.3 million compared to $.1 million in the first quarter of 1998. Revenues
from new service and product offerings grew 79% to $11.8 million. During the
first quarter of 1999, the Company, as required by the recently issued AICPA
Statement of Position 98-5, Reporting Costs of Start-up Activities, wrote off
the net book value of start-up costs, reducing basic and fully diluted earnings
per share $.01.
Lee Hillman, President and CEO of Bally Total Fitness, noted "We are
pleased with the continued strong results from both our core fitness center
operations and new service and product offerings. Margins of our core fitness
center business continued improving, as expected, through a 5% growth in unit
sales of new memberships and a 6% increase in average membership prices.
Further, as projected the Company achieved significant positive operating cash
flows during the 1999 quarter. Our results underscore our continued success in
achieving key benchmarks in the long-term business plan we established in 1997
and we look forward to continuing to achieve similar success in the future."
Hillman added "We continue to believe that there remains much growth
potential to be realized beyond our core membership operations. With
approximately 4 million members and more than 120 million annual visits made by
members and guests to our fitness centers, Bally Total Fitness offers a
tremendous platform for the distribution of a wide range of products and
services to active, fitness-conscious adults." Hillman concluded, "In recent
months, we have announced several initiatives to capitalize on this significant
opportunity, including an
<PAGE>
exclusive e-commerce agreement with top 10 Internet retailer, www.Spree.com. We
are confident that we will continue to generate and grow more incremental
revenue sources as we identify and meet the needs of our active,
fitness-conscious members."
Bally Total Fitness is the largest, and only nationwide, commercial
operator of fitness centers in the United States, with approximately four
million members and 335 facilities in 27 states and Canada.
# # #
Comparison of the three months ended March 31, 1999 and 1998
Operating income for the first quarter of 1999 was $18.3 million compared
to $11.9 million in 1998. The increase of $6.4 million (54%) was due to a $23.7
million increase (13%) in revenues and a $.3 million decline in depreciation and
amortization expense, partially offset by a $17.6 million (11%) increase in
operating costs. Operating costs and expenses, excluding the provision for
doubtful receivables and deferral accounting that are separately discussed
below, increased $10.1 million (8%). This increase was due principally to costs
supporting the growth of new service and product offerings and the incremental
costs of operating additional fitness centers. Operating income from new service
and product offerings grew 73% to $3.8 million on revenue growth of 79% to $11.8
million compared to the prior year period.
Net revenues for the first quarter of 1999 were $208.2 million compared to
$184.5 million in 1998, an increase of $23.7 million (13%). The weighted average
number of fitness centers increased to 329 in the first quarter of 1999 from 313
in the first quarter of 1998, including an increase to 15 from five operating
under three upscale brands. The weighted average selling price of membership
contracts sold increased 6% over the prior year quarter. Net revenue from
comparable fitness centers increased 9%. Initial membership fees originated
increased $10.4 million (8%), consisting of a $13.6 million (12%) increase in
financed memberships originated offset, in part, by a planned $3.2 million (32%)
decrease in paid-in-full memberships originated. Dues collected increased $8.4
million (16%) from the 1998 quarter, reflecting both continued improvements in
retention and pricing strategies implemented during prior periods. Total new
membership units sold during the quarter increased 5% over the prior year
period. This increase was almost entirely attributable to the sale of higher
margin multi-club membership plans.
Finance charges earned during the first quarter of 1999 increased $2.8
million (25%) compared to the 1998 quarter, due to the growth in size and
quality of the receivables portfolio. The average interest rate for finance
charges to members was substantially unchanged between the periods. The
percentage of accounts current with all contractual payments as of March 31,
1999 was 88% compared to 87% as of March 31, 1998. The amount of receivables
written off in the 1999 period, 11% of average receivables, was comparable to
the first quarter of 1998.
The provision for doubtful receivables, included in operating costs and
expenses, for the first quarter of 1999 was $36.8 million compared to $32.4
million in 1998, an increase of $4.4 million due to the increase in initial
membership fees on financed memberships originated. The total provision rate,
inclusive of provisions for cancellations which are reflected in the financial
statements as a direct reduction of initial membership fees on financed
memberships originated, was 41% of gross financed originations during each of
the periods.
<PAGE>
Deferral accounting reduced earnings by $6.5 million for 1999 compared to
1998. This decrease reflects the combined impact of a decrease in revenues of
$3.3 million and an increase in expenses of $3.2 million.
Cash Flow
Cash provided by operating activities for the first quarter of 1999 was
$16.3 million compared to $.1 million in 1998. The quarter over quarter
improvement of $16.2 million principally reflects the continued growth in
overall collections from installment contracts receivable and monthly dues. Net
installment contracts receivable grew $24.9 million during the quarter compared
to $28.5 million in 1998. Excluding the growth in receivables, operating
activities for the 1999 quarter provided cash of $41.2 million compared to $28.6
million for 1998. As of March 31, 1999, the Company's $90 million revolving
credit line was unused except for outstanding letters of credit totaling $3.7
million.
# # #
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 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.
<PAGE>
<TABLE>
BALLY TOTAL FITNESS HOLDING CORPORATION
CONSOLIDATED OPERATING SUMMARY
(in thousands, except share data)
(unaudited)
<CAPTION>
Three months ended March 31
---------------------------
1999 1998
---- ----
<S> <C> <C>
Net revenues:
Membership revenues -
Initial membership fees on financed
memberships originated..................... $ 126,730 $ 113,188
Initial membership fees on paid-in-full
memberships originated..................... 6,670 9,858
Dues collected.................................. 59,968 51,573
Changes in deferred revenues.................... (13,437) (10,147)
------------ ------------
179,931 164,472
Finance charges earned.......................... 13,983 11,147
Fees and other.................................. 14,281 8,869
------------ ------------
208,195 184,488
Operating costs and expenses:
Fitness center operations........................ 112,989 103,122
Member processing and collection centers......... 10,127 10,591
Advertising...................................... 13,773 13,500
General and administrative....................... 6,688 6,305
Provision for doubtful receivables............... 36,815 32,392
Change in deferred membership origination costs.. (2,889) (6,092)
------------ ------------
177,503 159,818
------------ ------------
Operating income before depreciation and
amortization ("EBITDA")........................... 30,692 24,670
Depreciation and amortization...................... 12,395 12,743
------------ ------------
Operating income................................... 18,297 11,927
Interest income.................................... 861 551
Interest expense................................... (12,297) (10,206)
------------ ------------
Income before income taxes and cumulative effect
of a change in accounting principle.............. 6,861 2,272
Income tax provision............................... (150) (200)
------------ ------------
Income before cumulative effect of a change in
accounting principle............................. 6,711 2,072
Cumulative effect of a change in accounting
principle, net of income tax..................... (262)
------------ ------------
Net income......................................... $ 6,449 $ 2,072
============ ============
Earnings Per Common Share:
Income before cumulative effect of a change in
accounting principle........................... $ .29 $ .10
Cumulative effect of a change in accounting
principle...................................... (.01)
------------ ------------
Net income per common share...................... $ .28 $ .10
============ ============
Average common shares outstanding.................. 23,202,709 20,579,571
Earnings per Common Share - Assuming Dilution:
Income before cumulative effect of a change in
accounting principle........................... $ .25 $ .09
Cumulative effect of a change in accounting
principle...................................... (.01)
------------ ------------
Net income per common share - assuming dilution.. $ .24 $ .09
============ ============
Average diluted common shares outstanding
(includes 3,589,750 and 3,685,457 common
equivalent shares in 1999 and 1998, respectively) 26,792,459 24,265,028
</TABLE>
<PAGE>
<TABLE>
BALLY TOTAL FITNESS HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
(unaudited)
<CAPTION>
March 31 December 31
1999 1998
---------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents.................................. $ 50,688 $ 64,382
Installment contracts receivable, less unearned
finance charges of $40,323 and $35,792 and
allowance for doubtful receivables and
cancellations of $67,337 and $59,109................ 210,659 199,979
Other current assets.................................. 32,606 34,212
---------- ----------
Total current assets................................ 293,953 298,573
Installment contracts receivable, less unearned finance
charges of $20,395 and $18,104 and allowance for
doubtful receivables and cancellations of $53,772 and
$47,192............................................... 236,413 222,147
Property and equipment, less accumulated depreciation
and amortization of $351,157 and $340,702............. 380,738 361,300
Intangible assets, less accumulated
amortization of $60,052 and $58,844................... 104,248 101,815
Deferred income taxes................................... 21,191 17,430
Deferred membership origination costs................... 100,977 97,901
Other assets............................................ 32,466 29,679
---------- ----------
$1,169,986 $1,128,845
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................... $ 38,763 $ 40,957
Income taxes payable.................................. 2,752 2,608
Deferred income taxes................................. 22,679 18,919
Accrued liabilities................................... 61,347 48,596
Other current maturities of long-term debt............ 6,916 5,799
Deferred revenues..................................... 291,460 282,806
---------- ----------
Total current liabilities........................... 423,917 399,685
Long-term debt, less current maturities................. 485,569 482,199
Other liabilities....................................... 6,177 6,226
Deferred revenues....................................... 85,454 78,952
Stockholders' equity.................................... 168,869 161,783
---------- ----------
$1,169,986 $1,128,845
========== ==========
</TABLE>
<PAGE>
Note to the Condensed Consolidated Balance Sheet:
<TABLE>
INSTALLMENT CONTRACTS RECEIVABLE
<CAPTION>
March 31 December 31
1999 1998
---------- -----------
<S> <C> <C>
Current:
Installment contracts receivable................. $ 318,319 $ 294,880
Unearned finance charges....................... (40,323) (35,792)
Allowance for doubtful receivables
and cancellations............................ (67,337) (59,109)
---------- ---------
$ 210,659 $ 199,979
========== =========
Long-term:
Installment contracts receivable................. $ 310,580 $ 287,443
Unearned finance charges....................... (20,395) (18,104)
Allowance for doubtful receivables
and cancellations............................ (53,772) (47,192)
---------- ---------
$ 236,413 $ 222,147
========== =========
</TABLE>
A summary of the allowance for doubtful receivables and cancellations activity
is as follows:
<TABLE>
Quarter ended
March 31
-------------------
1999 1998
---- ----
<S> <C> <C>
Balance at beginning of period......................... $106,301 $ 80,531
Contract cancellations and write-offs of uncollectible
amounts, net of recoveries........................... (63,807) (54,767)
Provision for cancellations (classified as a direct
reduction of revenues).............................. 41,800 37,315
Provision for doubtful receivables..................... 36,815 32,392
-------- --------
Balance at end of period............................... $121,109 $ 95,471
======== ========
</TABLE>
<PAGE>
<TABLE>
BALLY TOTAL FITNESS HOLDING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<CAPTION>
Three months ended March 31
---------------------------
1999 1998
---- ----
<S> <C> <C>
Operating:
Income before cumulative effect of a change in
accounting principle........................... $ 6,711 $ 2,072
Adjustments to reconcile to cash used -
Depreciation and amortization, including
amortization included in interest expense.... 13,122 13,284
Provision for doubtful receivables............. 36,815 32,392
Change in operating assets and liabilities..... (40,340) (47,670)
------------ ------------
Cash provided by operating activities...... 16,308 78
Investing:
Purchases and construction of property and
equipment...................................... (24,964) (13,423)
Acquisitions of businesses....................... (819)
Other............................................ (3,000)
------------ ------------
Cash used in investing activities.......... (28,783) (13,423)
Financing:
Debt transactions -
Redemption of 13% Senior Subordinated Notes
due 2003..................................... (24,021)
Repayments of long-term debt................... (1,856) (1,939)
------------ ------------
Cash used in debt transactions............. (1,856) (25,960)
Equity transactions -
Proceeds from issuance of common stock under
stock purchase and options plans............. 637 269
------------ ------------
Cash used in financing activities.......... (1,219) (25,691)
------------ ------------
Decrease in cash and equivalents................... (13,694) (39,036)
Cash and equivalents, beginning of period.......... 64,382 61,679
------------ ------------
Cash and equivalents, end of period................ $ 50,688 $ 22,643
============ ============
</TABLE>
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