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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, August 3, 2000 – Bally Total Fitness Holding Corporation (NYSE: BFT) today reported its financial results for the second quarter of 2000, with diluted earnings per share up more than 70% to $.58. Operating income for the quarter of $31.7 million was up 50% over the prior year. Earnings before interest, taxes, depreciation and amortization (EBITDA) grew to $47.3 million, a 40% improvement.
Lee Hillman, President and CEO of Bally Total Fitness, commented that “The excellent results achieved this quarter are another clear demonstration we are successfully growing the size and improving the quality of both our membership operations and our product and service offerings. Our EBITDA margin continues to improve, growing to 19% during the quarter just ended from 16% in the prior year quarter.” Mr. Hillman concluded, “The strategic changes initiated three years ago have succeeded as we predicted and our profit improvement and revenue growth have been dramatic. As we move forward, the expansion of product and service offerings to our customers and proven ability to grow our club base are expected to help us continue delivering growth and profitability to our shareholders.”
Comparison of the three months ended June 30, 2000 and 1999Operating income for the second quarter of 2000 was $31.7 million compared to $21.1 million in 1999. This increase of $10.6 million (50%) was due to a $41.4 million (20%) increase in net revenue, partially offset by a $27.8 million (16%) increase in operating costs and expenses and an increase in depreciation and amortization of $3.0 million. The operating margin before depreciation and amortization increased to 19% from 16% in the prior year period. Operating income from products and services, net of related development, preopening and start-up costs, increased to $9.0 million from $4.0 million in the 1999 quarter with an operating margin of 34% in the 2000 quarter compared to 31% during the prior year period.
The weighted-average number of fitness centers increased to 375 from 336 in the second quarter of 1999, an increase of 12%, including an increase in the weighted-average number of centers operating under the Company’s four upscale brands, from 16 to 34. Net revenue from comparable fitness centers increased 11%. Full membership units sold during the quarter increased 6% over the prior year period while the weighted-average selling price of membership contracts sold increased 6%. Additionally, during the 2000 quarter, the Company expanded its selection of shorter-term and seasonal memberships which added 5% more membership units and 1% more revenue. As a result, membership fees originated increased $14.7 million (12%). Dues collected increased $15.7 million (28%) 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 second quarter of 2000 increased $1.6 million (11%) 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 $5.3 million for 2000 compared to 1999. This reduction reflects the greater deferral of revenues and lower deferral of expenses reflecting the efficiency of higher membership originations.
Comparison of the six months ended June 30, 2000 and 1999Operating income for the first six months of 2000 was $61.5 million compared to $39.4 million in 1999. This increase of $22.1 million (56%) was due to a $82.2 million (20%) increase in net revenue, partially offset by a $54.2 million (15%) increase in operating costs and expenses and an increase in depreciation and amortization of $5.9 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 $18.3 million from $8.1 million in the first six months of 1999 with an operating margin of 34% in 2000 compared to 33% during the prior year period.
The weighted-average number of fitness centers increased to 371 from 332 in the first six months of 1999, an increase of 12%, including an increase in the weighted-average number of centers operating under the Company’s four upscale brands from 16 to 34. Net revenue from comparable fitness centers increased 11%. Full membership units sold during the six month period increased 5% over the prior year period while the weighted-average selling price of membership contracts sold increased 8%. 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 $32.5 million (13%). Dues collected increased $23.1 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 six months of 2000 increased $4.0 million (14%) compared to the 1999 period 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 $7.4 million for 2000 compared to 1999. This decrease principally reflects the greater deferral of revenues during the 2000 period.
Cash FlowCash flow from operating activities was $22.8 million for the first six months in 2000 compared to $16.5 million in 1999 period. Net contracts receivable grew $57.2 million compared to $41.4 million in the 1999 period and interest paid totaled $29.8 million compared to $22.1 million in the 1999 period resulting in a combined increase in the use of working capital of $23.5 million. Cash provided by operating activities, excluding the growth in net contracts receivable and interest paid, increased $29.8 million period over period. 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 June 30, 2000, the Company had drawn $36.5 million on its $100 million revolving credit line and had outstanding letters of credit totaling $6.1 million.
Bally Total Fitness is the largest commercial operator of fitness centers in North America, with approximately 4 million members and more than 385 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 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.
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 June 30
---------------------------
2000 1999
------------ ------------
Net revenues:
Membership revenues -
Initial membership fees on financed
memberships originated $ 133,426 $ 118,891
Initial membership fees on paid-in-full
memberships originated 5,624 5,435
Dues collected 71,083 55,354
Change in deferred revenues (5,882) (839)
------------ ------------
204,251 178,841
Finance charges earned 17,103 15,477
Products and services 26,763 12,943
Miscellaneous revenue 2,752 2,216
------------ ------------
250,869 209,477
Operating costs and expenses:
Fitness center operations 115,901 106,675
Products and services 17,745 8,894
Member processing collection centers 11,053 9,710
Advertising 14,077 11,884
General and administrative 6,674 6,203
Provision for doubtful receivables 40,352 34,876
Change in deferred membership origination costs (2,279) (2,562)
------------ ------------
203,523 175,680
------------ ------------
Operating income before depreciation and
amortization ("EBITDA") 47,346 33,797
Depreciation and amortization 15,662 12,649
------------ ------------
Operating income 31,684 21,148
Interest income 445 553
Interest expense (16,009) (12,446)
------------ ------------
Income before income taxes 16,120 9,255
Income tax provision (250) (180)
------------ ------------
Net income $ 15,870 $ 9,075
============ ============
Basic earnings per common share: $ .67 $ .39
============ ============
Average common shares outstanding 23,816,907 23,325,783
Diluted earnings per common share: $ .58 $ .34
============ ============
Average diluted common shares outstanding
(includes 3,738,812 and 3,683,768 common
equivalent shares in 2000 and 1999,
respectively) 27,555,719 27,009,551
BALLY TOTAL FITNESS HOLDING CORPORATION
CONSOLIDATED OPERATING SUMMARY
(In thousands, except share data)
(Unaudited)
Six months ended June 30
---------------------------
2000 1999
------------ ------------
Net revenues:
Membership revenues -
Initial membership fees on financed
memberships originated $ 277,888 $ 245,621
Initial membership fees on paid-in-full
memberships originated 12,341 12,105
Dues collected 138,444 115,322
Change in deferred revenues (22,183) (14,276)
------------ ------------
406,490 358,772
Finance charges earned 33,477 29,460
Products and services 53,376 24,933
Miscellaneous revenue 6,778 4,748
------------ ------------
500,121 417,913
Operating costs and expenses:
Fitness center operations 230,106 211,566
Products and services 35,114 16,794
Member processing collection centers 21,881 20,348
Advertising 28,910 25,585
General and administrative 13,819 12,891
Provision for doubtful receivables 83,759 71,691
Change in deferred membership origination costs (5,912) (5,451)
------------ ------------
407,677 353,424
------------ ------------
Operating income before depreciation and
amortization ("EBITDA") 92,444 64,489
Depreciation and amortization 30,947 25,044
------------ ------------
Operating income 61,497 39,445
Interest income 935 1,414
Interest expense (30,820) (24,743)
------------ ------------
Income before income taxes and cumulative effect
of a change in accounting principle 31,612 16,116
Income tax provision (475) (330)
------------ ------------
Income before cumulative effect of a change in
accounting principle 31,137 15,786
Cumulative effect of a change in accounting
principle, net of income tax (262)
------------ ------------
Net income $ 31,137 $ 15,524
============ ============
Basic earnings per common share:
Income before cumulative effect of a change in
accounting principle $ 1.31 $ .68
Cumulative effect of a change in accounting
principle (.01)
------------ ------------
Net income per common share $ 1.31 $ .67
============ ============
Average common shares outstanding 23,693,687 23,264,586
Diluted earnings per common share:
Income before cumulative effect of a change in
accounting principle $ 1.13 $ .59
Cumulative effect of a change in accounting
principle (.01)
------------ ------------
Net income per common share - assuming dilution $ 1.13 $ .58
============ ============
Average diluted common shares outstanding
(includes 3,777,161 and 3,654,937 common
equivalent shares in 2000 and 1999,
respectively) 27,470,848 26,919,523
BALLY TOTAL FITNESS HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30 December 31
2000 1999
------------ ------------
(In thousands)
ASSETS
Current assets:
Cash and equivalents $ 14,308 $ 23,450
Installment contracts receivable, net 270,164 241,450
Other current assets 45,777 46,185
------------ ------------
Total current assets 330,249 311,085
Installment contracts receivable, net 273,536 244,693
Property and equipment, less accumulated
depreciation and amortization of $407,124
and $382,897 521,196 473,111
Intangible assets, less accumulated amortization
of $67,868 and $64,554 142,937 137,156
Deferred income taxes 38,437 39,444
Deferred membership origination costs 112,107 106,195
Other assets 38,971 36,873
------------ ------------
$ 1,457,433 $ 1,348,557
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 48,578 $ 49,629
Income taxes payable 3,023 3,063
Deferred income taxes 39,521 40,933
Accrued liabilities 62,399 59,197
Current maturities of long-term debt 13,381 9,505
Deferred revenues 306,841 290,123
------------ ------------
Total current liabilities 473,743 452,450
Long-term debt, less current maturities 634,275 593,903
Other liabilities 6,509 6,531
Deferred revenues 91,981 83,214
Stockholders' equity 250,925 212,459
------------ ------------
$ 1,457,433 $ 1,348,557
============ ============
Note to the Condensed Consolidated Balance Sheet:
Installment Contracts Receivable
June 30 December 31
2000 1999
------------ ------------
Current:
Installment contracts receivable $ 407,170 $ 355,029
Unearned finance charges (49,728) (41,515)
Allowance for doubtful receivables and
cancellations (87,278) (72,064)
------------ ------------
$ 270,164 $ 241,450
============ ============
Long-term:
Installment contracts receivable $ 362,625 $ 319,034
Unearned finance charges (24,410) (20,367)
Allowance for doubtful receivables and
cancellations (64,679) (53,974)
------------ ------------
$ 273,536 $ 244,693
============ ============
A summary of the allowance for doubtful receivables and cancellations activity
is as follows:
Three months ended June 30 Six months ended June 30
-------------------------- -------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
Balance at beginning of period $ 143,236 $ 121,109 $ 126,038 $ 106,301
Contract cancellations and
write-offs of uncollectible
amounts, net of recoveries (77,983) (63,710) (154,187) (127,517)
Provision for cancellations
(classified as a direct
reduction of revenues) 46,352 40,022 96,347 81,822
Provision for doubtful
receivables 40,352 34,876 83,759 71,691
--------- --------- --------- ---------
Balance at end of period $ 151,957 $ 132,297 $ 151,957 $ 132,297
========= ========= ========= =========
BALLY TOTAL FITNESS HOLDING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six months ended June 30
---------------------------
2000 1999
------------ ------------
(In thousands)
Operating:
Income before cumulative effect of a change in
accounting principle $ 31,137 $ 15,786
Adjustments to reconcile -
Depreciation and amortization, including
amortization included in interest expense 33,122 26,603
Provision for doubtful receivables 83,759 71,691
Change in operating assets and liabilities (125,264) (97,550)
------------ ------------
Cash provided by operating activities 22,754 16,530
Investing:
Purchases and construction of property and
equipment (57,245) (54,199)
Acquisitions of businesses and other (3,327) (7,027)
------------ ------------
Cash used in investing activities (60,572) (61,226)
Financing:
Debt transactions -
Net borrowings (repayments) under revolving
credit agreement 36,500
Repayments of other long-term debt (9,379) (3,605)
Debt issuance and refinancing costs (4,225)
------------ ------------
Cash provided by (used in) debt transactions 27,121 (7,830)
Equity transactions -
Proceeds from issuance of common stock under
stock purchase and options plans 1,555 1,164
------------ ------------
Cash provided by (used in) financing activities 28,676 (6,666)
Decrease in cash and equivalents (9,142) (51,362)
Cash and equivalents, beginning of period 23,450 64,382
------------ ------------
Cash and equivalents, end of period $ 14,308 $ 13,020
============ ============
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