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): February 9, 2000
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 February 9, 2000, Bally Total Fitness Holding Corporation
("Company") announced results for the quarter and year ended
December 31, 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.
Item 7. Financial Statements and Exhibits
c. Exhibits
99.1 Press Release dated February 9, 2000
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: February 23, 2000 /s/ John W. Dwyer
-------------------------------------------------
John W. Dwyer
Executive Vice President, Chief Financial Officer
and Treasurer
(principal financial officer)
Page 2 of 2
<PAGE>
Exhibit 99.1
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 FINISHES STRONG IN 1999
Net Income for 4th Quarter Rises to $.53 Per Diluted Share
Compared with $.19 in Prior Year
Net Income for the Year Increases to $1.56 Per Diluted Share
Compared with $.51 in Prior Year
Cash Flow from Operations Grows More than $70 Million for the Year
CHICAGO, IL, February 9, 2000 - Bally Total Fitness Holding Corporation
(NYSE: BFT) today announced results for the fourth quarter and year ended
December 31, 1999 with fully diluted earnings per share for the quarter of $.53,
compared to $.19 for the prior year's quarter. Operating income for the quarter
was $28.8 million - up 87% over the prior year period while operating income
before depreciation and amortization ("EBITDA") improved 59% to $43.3 million.
Strong growth in operating cash flow continued with cash flow from operations
growing $17.6 million versus the prior year's quarter.
For the full year, diluted earnings per share, before the cumulative
effect of a change in accounting principle, was $1.56 compared to $.51 per share
in 1998. Operating income for 1999 was $93.3 million, an improvement of 77% over
the prior year, and EBITDA grew 45% to $146.2 million. Cash flow from operations
increased $71.1 million over 1998. During the first quarter of 1999, the
Company, as required by 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 diluted earnings per share $.01.
Lee Hillman, President and Chief Executive Officer of Bally Total
Fitness, noted, "We are very pleased with our quarterly and full-year results
and, in particular, that we have continued to deliver on our plans for improving
earnings and cash flows. Since 1996, when the Company lost more than $2.00 per
share, we have executed against our business plan with earnings per share now at
$1.56."
Hillman continued, "During 1999 we continued investing to grow our
business - opening 22 new fitness centers, upgrading and expanding dozens of our
existing clubs and acquiring 24 additional fitness centers, ending the year with
363 clubs in total. Also, during the fourth quarter
<PAGE>
we launched our redesigned website and have begun a concerted effort to develop
strategic web-based partnerships, which we expect to become more important in
the years to come. These investments, when coupled with our expanding offerings
of products and services, provide us with a dynamic foundation for continued
growth and profit improvement."
Looking ahead, Hillman concluded, "As we move into the year 2000, Bally
Total Fitness is a far different company than it was just three years ago.
Today, we are developing a wide-range of new products, services and strategic
relationships with top-flight corporate partners that want to reach our valuable
customer base. In doing so, we are serving our customers better and delivering
more value to Bally members than ever before. With plans to build and open up to
25 new fitness centers this year in addition to continuing our selective
acquisition of existing clubs, we are committed to building upon our formula for
success for the long-term."
# # #
Comparison of the years ended December 31, 1999 and 1998
- --------------------------------------------------------
Operating income for 1999 was $93.3 million compared to $52.8 million in
1998. The increase of $40.5 million (77%) was due to a $116.8 million increase
in net revenue (16%), offset, in part, by an increase in operating costs and
expenses of $71.6 million (11%) and a $4.7 million increase in depreciation and
amortization. The operating margin before depreciation and amortization
increased to 17% from 14% for 1998. Operating income from products and services,
net of related development, preopening and start-up costs, increased to $21.0
million from $10.1 million in the prior year with an operating margin of 34% in
1999 compared to 31% in 1998.
The weighted-average number of fitness centers during 1999 increased to
343 from 320 during 1998, a 7% increase, including an increase in the
weighted-average number of centers operating under the Company's four upscale
brands from 11 to 22. Net revenue from comparable fitness centers increased 10%.
New membership units sold increased 5% over the prior year while the
weighted-average selling price of membership contracts sold increased 6%. Total
individual memberships grew 2%, in line with expectations. As a result,
membership fees originated increased $44.7 million (10%). Dues collected
increased $37.8 million (18%) from 1998, reflecting continued improvements in
member retention and pricing strategies and an increase attributable to fitness
centers operating under the Company's four upscale brands, which charge higher
dues.
Finance charges earned increased $9.3 million (19%) 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 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 years.
Deferral accounting reduced earnings by $12.9 million for 1999 compared
to 1998, reflecting the combined impact of a decrease to revenues and a decrease
to the expense offset.
<PAGE>
Comparison of the three months ended December 31, 1999 and 1998
- ---------------------------------------------------------------
Operating income for the fourth quarter of 1999 was $28.8 million
compared to $15.4 million in 1998. This increase of $13.4 million (87%) was due
to a $36.0 million (19%) increase in net revenue, partially offset by a $19.8
million (12%) increase in operating costs and expenses and an increase in
depreciation and amortization of $2.8 million. The operating margin before
depreciation and amortization increased to 19% from 15% in the prior year
period. Operating income from products and services, net of related development,
preopening and start-up costs, increased to $6.5 million from $2.2 million in
the 1998 quarter with an operating margin of 32% in the 1999 quarter compared to
26% during the prior year period.
The weighted-average number of fitness centers increased to 360 from 323
in the fourth quarter of 1998, an increase of 11%, including an increase in the
weighted-average number of centers operating under the Company's four upscale
brands from 14 to 32. Net revenue from comparable fitness centers increased 12%.
New membership units sold during the quarter increased 3% over the prior year
period while the weighted-average selling price of membership contracts sold
increased 7%. As a result, membership fees originated increased $8.4 million
(9%). Dues collected increased $14.1 million (26%) from 1998 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 fourth quarter of 1999 increased $1.6
million (12%) 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 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.
The net effect of the deferral accounting for revenues and expenses
between the two periods was comparable.
Cash Flow
- ---------
Cash flow from operating activities for 1999 was a positive $39.1
million compared to a use of $32.0 million in 1998. The $71.1 million
improvement ($17.6 million improvement for the fourth quarter) principally
reflects the continued growth in overall collections from installment contracts
receivable and monthly dues. This growth in collections was partially offset by
growth in inventories of $6.6 million ($3.0 million during the fourth quarter of
1999) supporting increased nutritional and other retail sales, including the
expansion of product offerings and the more than doubling of retail outlets to a
total of 211 stores by the end of 1999. Net installment contracts receivable
grew $64.0 million during 1999. Excluding this growth in receivables, cash
provided by operating activities totaled $103.1 million for 1999, a $56.6
million improvement over 1998.
<PAGE>
During 1999, the Company expanded its capacity to attract new members
and better serve existing members by investing $77 million to construct new
clubs (22 were opened during 1999), acquire 24 additional clubs, and upgrade and
expand over 60 existing clubs. In addition, the Company is in the later stages
of its general refurbishment program begun two years ago, which has included the
updating of equipment and decor in the majority of its fitness centers. During
1999, approximately $19 million was spent to support this program. An additional
$2 million was spent to add additional retail outlets to the fitness centers and
$10 million was spent to acquire real estate including existing leaseholds and
their property. Finally, approximately $24 million was spent during 1999 for
normal capitalized maintenance.
As of December 31, 1999, the Company's $100 million revolving credit
line was unused except for outstanding letters of credit totaling $6.0 million.
* * * * *
Bally Total Fitness is the largest commercial operator of fitness
centers in North America, with approximately four million members and 370
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)
<CAPTION>
Year ended December 31
---------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net revenues:
Membership revenues -
Initial membership fees on financed memberships originated $ 465,443 $ 414,190
Initial memberships fees on paid-in-full memberships originated 23,721 30,318
Dues collected 242,952 205,104
Changes in deferred revenues (4,078) 3,122
---------- ----------
728,038 652,734
Finance charges earned 59,449 50,160
Products and services 62,616 32,474
Miscellaneous revenue 10,995 8,976
---------- ----------
861,098 744,344
Operating costs and expenses:
Fitness center operations 423,001 401,282
Products and services 41,570 22,409
Member processing collection centers 41,213 41,024
Advertising 47,766 45,035
General and administrative 27,169 26,097
Provision for doubtful receivables 139,627 118,604
Change in deferred membership origination costs (5,444) (11,164)
---------- ----------
714,902 643,287
---------- ----------
Operating income before depreciation and amortization ("EBITDA") 146,196 101,057
Depreciation and amortization 52,857 48,255
---------- ----------
Operating income 93,339 52,802
Interest income 2,369 2,514
Interest expense (52,394) (41,494)
---------- ----------
Income before income taxes and cumulative effect of a change in accounting principle 43,314 13,822
Income tax provision (870) (525)
---------- ----------
Income before cumulative effect of a change in accounting principle 42,444 13,297
Cumulative effect of a change in accounting principle, net of income tax (262) -
---------- ----------
Net income $ 42,182 $ 13,297
========== ==========
Basic earnings per common share:
Income before cumulative effect of a change in accounting principle $ 1.81 $ .59
Cumulative effect of a change in accounting principle (.01) -
---------- ----------
Net income per common share $ 1.80 $ .59
========== ==========
Average common shares outstanding 23,382,288 22,424,172
Diluted earnings per common share:
Income before cumulative effect of a change in accounting principle $ 1.56 $ .51
Cumulative effect of a change in accounting principle (.01) -
---------- ----------
Net income per common share - assuming dilution $ 1.55 $ .51
========== ==========
Average diluted common shares outstanding (includes 3,853,543 and
3,747,232 common equivalent shares in 1999 and 1998, respectively) 27,235,831 26,171,404
</TABLE>
<PAGE>
<TABLE>
BALLY TOTAL FITNESS HOLDING CORPORATION
CONSOLIDATED OPERATING SUMMARY
(In thousands, except share data)
(Unaudited)
<CAPTION>
Three months ended December 31
------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net revenues:
Membership revenues -
Initial membership fees on financed memberships originated $ 101,054 $ 92,527
Initial memberships fees on paid-in-full memberships originated 5,800 5,931
Dues collected 68,959 54,886
Changes in deferred revenues 9,301 9,619
---------- ----------
185,114 162,963
Financed charges earned 14,903 13,256
Products and services 20,298 8,723
Miscellaneous revenue 3,814 3,219
---------- ----------
224,129 188,161
Operating costs and expenses:
Fitness center operations 104,884 100,696
Products and services 13,819 6,476
Member processing collection centers 10,903 10,409
Advertising 10,240 9,191
General and administrative 7,303 6,698
Provision for doubtful receivables 32,217 26,049
Change in deferred membership origination costs 1,428 1,449
---------- ----------
180,794 160,968
---------- ----------
Operating income before depreciation and amortization ("EBITDA") 43,335 27,193
Depreciation and amortization 14,581 11,763
---------- ----------
Operating income 28,754 15,430
Interest income 540 301
Interest expense (14,589) (10,771)
---------- ----------
Income before income taxes 14,705 4,960
Income tax provision (290) -
---------- ----------
Net income $ 14,415 $ 4,960
========== ==========
Basic earnings per common share $ .61 $ .21
========== ==========
Average common shares outstanding 23,578,748 23,155,209
Diluted earnings per common share $ .53 $ .19
========== ==========
Average diluted common shares outstanding (includes 3,869,650 and
3,409,016 common equivalent shares in 1999 and 1998, respectively) 27,448,398 26,564,225
</TABLE>
<PAGE>
<TABLE>
BALLY TOTAL FITNESS HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
<CAPTION>
December 31
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 23,450 $ 64,382
Installment contracts receivable, net 241,450 199,979
Other current assets 46,185 34,212
---------- ----------
Total current assets 311,085 298,573
Installment contracts receivable, net 244,693 222,147
Property and equipment, less accumulated depreciation
and amortization of $382,897 and $340,702 473,111 361,300
Intangible assets, less accumulated amortization
of $64,554 and $58,844 137,156 101,815
Deferred income taxes 39,444 17,430
Deferred membership origination costs 106,195 97,901
Other assets 36,873 29,679
---------- ----------
$1,348,557 $1,128,845
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 49,629 $ 40,957
Income taxes payable 3,063 2,608
Deferred income taxes 40,933 18,919
Accrued liabilities 59,197 48,596
Current maturities of long-term debt 9,505 5,799
Deferred revenues 290,123 282,806
---------- ----------
Total current liabilities 452,450 399,685
Long-term debt, less current maturities 593,903 482,199
Other liabilities 6,531 6,226
Deferred revenues 83,214 78,952
Stockholders' equity 212,459 161,783
---------- ----------
$1,348,557 $1,128,845
========== ==========
</TABLE>
<PAGE>
<TABLE>
Note to the Condensed Consolidated Balance Sheet:
INSTALLMENT CONTRACTS RECEIVABLE
<CAPTION>
December 31
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Current:
Installment contracts receivable $ 355,029 $ 294,880
Unearned finance charges (41,515) (35,792)
Allowance for doubtful receivables and cancellations (72,064) (59,109)
--------- ---------
$ 241,450 $ 199,979
========= =========
Long-term:
Installment contracts receivable $ 319,034 $ 287,443
Unearned finance charges (20,367) (18,104)
Allowance for doubtful receivables and cancellations (53,974) (47,192)
--------- ---------
$ 244,693 $ 222,147
========= =========
</TABLE>
<TABLE>
A summary of the allowance for doubtful receivables and cancellations activity
is as follows:
<CAPTION>
Three months ended December 31 Year ended December 31
------------------------------ ------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance at beginning of period $ 136,436 $ 116,572 $ 106,301 $ 80,531
Contract cancellations and
write-offs of uncollectible
amounts, net of recoveries (74,946) (66,161) (272,586) (227,424)
Provision for cancellations
(classified as a direct
reduction of revenues) 32,331 29,841 152,696 134,590
Provision for doubtful
receivables 32,217 26,049 139,627 118,604
--------- --------- --------- ---------
Balance at end of period $ 126,038 $ 106,301 $ 126,038 $ 106,301
========= ========= ========= =========
</TABLE>
<PAGE>
<TABLE>
BALLY TOTAL FITNESS HOLDING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<CAPTION>
Year ended December 31
---------------------------
1999 1998
----------- -----------
<S> <C> <C>
Operating:
Income before cumulative effect of a change in accounting principle $ 42,444 $ 13,297
Adjustments to reconcile -
Depreciation and amortization, including amortization included
in interest expense 56,175 50,585
Provision for doubtful receivables 139,627 118,604
Change in operating assets and liabilities (199,164) (214,486)
---------- ----------
Cash provided by (used in) operating activities 39,082 (32,000)
Investing:
Purchases and construction of property and equipment (119,089) (76,432)
Acquisitions of businesses and other (13,241) (2,521)
Other (5,680) -
---------- ----------
Cash used in investing activities (138,010) (78,953)
Financing:
Debt transactions -
Proceeds from long-term borrowings 75,000 73,501
Redemption of 13% Senior Subordinated Notes due 2003 - (24,021)
Repayments of other long-term debt (11,274) (6,850)
Debt issuance and refinancing costs (6,425) (3,362)
---------- ----------
Cash provided by debt transactions 57,301 39,268
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 2,252 1,172
Purchases of common stock for treasury (1,557) (9,528)
---------- ----------
Cash provided by financing activities 57,996 113,656
---------- ----------
(Decrease) Increase in cash and equivalents (40,932) 2,703
Cash and equivalents, beginning of period 64,382 61,679
---------- ----------
Cash and equivalents, end of period $ 23,450 $ 64,382
========== ==========
</TABLE>
###
