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| 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] |
CHICAGO, IL, May 3, 2000 – Bally Total Fitness Holding Corporation (NYSE: BFT) today reported its financial results for the first quarter of 2000, with diluted earnings per share for the quarter of $.56, more than double the $.25 earnings per share reported in the prior year quarter. Operating income grew 63% to $29.8 million and operating income before depreciation and amortization (“EBITDA”) improved 47% to $45.1 million. Net revenues for the period reached $249.3 million, a 20% increase over the prior year quarter. Cash provided by operating activities increased to $18.0 million for the quarter.
Lee Hillman, President and CEO of Bally Total Fitness, noted, “We are pleased with our continuing growth and increasing profitability. Our core fitness center business has become stronger with each passing quarter. We continue to generate growing revenue opportunities by leveraging the value of our brand and membership portfolios as a unique distribution platform from which to target active, fitness-conscious adults.”
Hillman continued, “During the first quarter of this year, we entered into a number of very promising income-generating relationships, including partnerships with Pepsi-Cola Company and NetPulse Communications, Inc., a leading Internet media network and appliance provider. We expect these agreements, along with a growing list of others we should soon complete, to significantly benefit the Company over the coming months and years.” Hillman concluded, “We remain committed to completing the transformation of Bally Total Fitness into one of the premier platforms for reaching the active, fitness-conscious adult consumer market.”
Comparison of the three months ended March 31, 2000 and 1999Operating income for the first quarter of 2000 was $29.8 million compared to $18.3 million in 1999. This increase of $11.5 million (63%) was due to a $40.8 million (20%) increase in net revenue, partially offset by a $26.4 million (15%) increase in operating costs and expenses and an increase in depreciation and amortization of $2.9 million. The operating margin before depreciation and amortization increased to 18% from 15% in the prior year period. Operating income from products and services, net of related development, preopening and start-up costs, increased to $9.2 million from $4.1 million in the 1999 quarter with an operating margin of 35% in the 2000 quarter compared to 34% during the prior year period.
The weighted-average number of fitness centers increased to 366 from 329 in the first quarter of 1999, an increase of 11%, including an increase in the weighted-average number of centers operating under the Company’s four upscale brands, which have smaller membership volume strategies, from 15 to 34. Net revenue from comparable fitness centers increased 12%. New membership units sold during the quarter increased 4% over the prior year period while the weighted-average selling price of membership contracts sold increased 9%. As a result, membership fees originated increased $17.8 million (13%). Dues collected increased $7.4 million (12%) from the 1999 quarter, 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 quarter of 2000 increased $2.4 million (17%) compared to the 1999 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 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 $2.1 million for 2000 compared to 1999. This decrease reflects the net impact of incremental decreases of $2.9 million in revenues and $.8 million in the expense offset.
Cash FlowCash flow from operating activities was $18.0 million in the 2000 quarter compared to $16.3 million in the 1999 quarter. Net contracts receivable grew $31.5 million compared to $25.0 million in the 1999 quarter and interest paid totaled $7.1 million compared to $4.5 million in the 1999 quarter resulting in a combined increase in the use of working capital of $9.1 million. Cash provided by operating activities, excluding the growth in net contracts receivable and interest paid, increased $10.8 million (24%) quarter over quarter. The improvement principally reflects the continued growth in overall collections from installment contracts receivable and monthly dues and the continued increase in operating margins.
As of March 31, 2000, the Company has drawn $4.5 million on its $100 million revolving credit line and had outstanding letters of credit totaling $6.9 million.
Bally Total Fitness is the largest commercial operator of fitness centers in North America, with approximately 4 million members and more than 370 facilities located in 27 states and Canada. Bally operates fitness centers under the Bally Total Fitness®, Bally Sports ClubsSM, The Sports Clubs of Canada™, Pinnacle Fitness®, and Gorilla SportsSM 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. Bally’s co-marketing partners include Pepsi-Cola Company, Household International, Time Warner, MBNA America, NetPulse Communications, Inc., Novartis, Procter & Gamble Corporation and Sunkist Growers, among others.
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 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 OPERATING SUMMARY
(In thousands, except share data)
(Unaudited)
Three months ended March 31
---------------------------
2000 1999
------------ ------------
Net revenues:
Membership revenues -
Initial membership fees on financed
memberships originated $ 144,462 $ 126,730
Initial membership fees on paid-in-full
memberships originated 6,717 6,670
Dues collected 67,361 59,968
Change in deferred revenues (16,301) (13,437)
------------ ------------
202,239 179,931
Finance charges earned 16,374 13,983
Products and services 26,613 11,990
Miscellaneous revenue 4,026 2,532
------------ ------------
249,252 208,436
Operating costs and expenses:
Fitness center operations 114,205 104,891
Products and services 17,369 7,900
Member processing collection centers 10,828 10,638
Advertising 14,833 13,701
General and administrative 7,145 6,688
Provision for doubtful receivables 43,407 36,815
Change in deferred membership origination costs (3,633) (2,889)
------------ ------------
204,154 177,744
------------ ------------
Operating income before depreciation and
amortization ("EBITDA") 45,098 30,692
Depreciation and amortization 15,285 12,395
------------ ------------
Operating income 29,813 18,297
Interest income 490 861
Interest expense 14,811 12,297
------------ ------------
Income before income taxes and cumulative effect
of a change in accounting principle 15,492 6,861
Income tax provision (225) (150)
------------ ------------
Income before cumulative effect of a change in
accounting principle 15,267 6,711
Cumulative effect of a change in accounting
principle, net of income tax (262)
------------ ------------
Net income $ 15,267 $ 6,449
============ ============
Basic earnings per common share:
Income before cumulative effect of a change in
accounting principle $ .65 $ .29
Cumulative effect of a change in accounting
principle (.01)
------------ ------------
Net income per common share $ .65 $ .28
============ ============
Average common shares outstanding 23,570,467 23,202,709
Diluted earnings per common share:
Income before cumulative effect of a change in
accounting principle $ .56 $ .25
Cumulative effect of a change in accounting
principle (.01)
------------ ------------
Net income per common share - assuming dilution $ .56 $ .24
============ ============
Average diluted common shares outstanding
(includes 3,794,965 and 3,589,750 common
equivalent shares in 2000 and 1999, respectively) 27,365,432 26,792,459
BALLY TOTAL FITNESS HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31 December 31
2000 1999
------------ ------------
(In thousands)
ASSETS
Current assets:
Cash and equivalents $ 9,511 $ 23,450
Installment contracts receivable, net 255,890 241,450
Other current assets 47,201 46,185
------------ ------------
Total current assets 312,602 311,085
Installment contracts receivable, net 261,289 244,693
Property and equipment, less accumulated
depreciation and amortization of $395,300
and $382,897 499,114 473,111
Intangible assets, less accumulated amortization
of $66,237 and $64,554 135,823 137,156
Deferred income taxes 39,401 39,444
Deferred membership origination costs 109,828 106,195
Other assets 38,542 36,873
------------ ------------
$ 1,396,599 $ 1,348,557
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 50,003 $ 49,629
Income taxes payable 3,127 3,063
Deferred income taxes 40,802 40,933
Accrued liabilities 67,454 59,197
Current maturities of long-term debt 12,406 9,505
Deferred revenues 299,613 290,123
------------ ------------
Total current liabilities 473,405 452,450
Long-term debt, less current maturities 598,005 593,903
Other liabilities 6,515 6,531
Deferred revenues 90,112 83,214
Stockholders' equity 228,562 212,459
------------ ------------
$ 1,396,599 $ 1,348,557
============ ============
Installment contracts receivable
March 31 December 31
2000 1999
------------ ------------
Current:
Installment contracts receivable $ 384,337 $ 355,029
Unearned finance charges (46,832) (41,515)
Allowance for doubtful receivables and
cancellations (81,615) (72,064)
------------ ------------
$ 255,890 $ 241,450
============ ============
Long-term:
Installment contracts receivable $ 345,942 $ 319,034
Unearned finance charges (23,032) (20,367)
Allowance for doubtful receivables and
cancellations (61,621) (53,974)
------------ ------------
$ 261,289 $ 244,693
============ ============
Three months ended March 31
---------------------------
2000 1999
------------ ------------
Balance at beginning of period $ 126,038 $ 106,301
Contract cancellations and write-offs of
uncollectible amounts, net of recoveries (76,204) (63,807)
Provision for cancellations (classified as
a direct reduction of revenues) 49,995 41,800
Provision for doubtful receivables 43,407 36,815
------------ ------------
Balance at end of period $ 143,236 $ 121,109
============ ============
BALLY TOTAL FITNESS HOLDING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three months ended March 31
---------------------------
2000 1999
------------ ------------
(In thousands)
Operating:
Income before cumulative effect of a change in
accounting principle $ 15,267 $ 6,711
Adjustments to reconcile -
Depreciation and amortization, including
amortization included in interest expense 16,372 13,122
Provision for doubtful receivables 43,407 36,815
Change in operating assets and liabilities (57,078) (40,340)
------------ ------------
Cash provided by operating activities 17,968 16,308
Investing:
Purchases and construction of property and
equipment (32,071) (24,964)
Acquisitions of businesses and other (1,900) (819)
Other (3,000)
------------ ------------
Cash used in investing activities (33,971) (28,783)
Financing:
Debt transactions -
Net borrowings (repayments) under revolving
credit agreement 4,500
Repayments of other long-term debt (3,272) (1,856)
------------ ------------
Cash provided by (used in) debt transactions 1,228 (1,856)
Equity transactions -
Proceeds from issuance of common stock under
stock purchase and options plans 836 637
------------ ------------
Cash provided by (used in) financing activities 2,064 (1,219)
Decrease in cash and equivalents (13,939) (13,694)
Cash and equivalents, beginning of period 23,450 64,382
------------ ------------
Cash and equivalents, end of period $ 9,511 $ 50,688
============ ============
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