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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, November 7, 2000 - Bally Total Fitness Holding Corporation (NYSE: BFT) today reported third quarter 2000 results - with diluted earnings per share of $.58 (before the effects of a $20 million, $.72 per diluted share, benefit from the reduction of tax valuation allowances) versus $.45 in the prior year quarter. Net income, inclusive of the effect of this tax benefit totaled $35.9 million, $1.30 per diluted share, for the current quarter.
Operating income for the quarter improved 29% to $32.4 million in the current quarter from $25.1 million in the 1999 quarter. Earnings before interest, taxes, depreciation and amortization (EBITDA) grew to $49.3 million, a 29% improvement over the prior year quarter - while the Company's EBITDA margin continued to expand to over 19% for the quarter. Cash flows from operations continued to build as well, with a net improvement in operating cash flow of $12.4 million over the year ago quarter. Other liquidity measures continue to be positive as well - with key receivable portfolio measures of quality continuing to strengthen year over year.
In accordance with Financial Accounting Standard No. 109, Accounting for Income Taxes, the Company reviewed the likelihood of realizing the future benefit of tax loss carryforwards. Based upon consistent and growing profitability over the past three years and reasonably expected continuation of these trends, the Company reduced its tax valuation allowance against net operating losses realized in prior periods by $20 million. Valuation allowances totaling over $100 million remain and may be reversed in future periods.
Lee Hillman, Chairman of the Board of Directors, CEO and President of Bally Total Fitness, noted that "Our third quarter results demonstrate yet again the power of our business model. We are pleased with the growth and margin expansion we continue to achieve, and believe the investments we have been making in our business will lead to further improvements in operating results going forward." Mr. Hillman continued, "We are pleased to have reached another key objective during the quarter - generating free cash flow while at the same time continuing to expand and grow our operations."
Comparison of the three months ended September 30, 2000 and 1999Operating income for the third quarter of 2000 was $32.4 million compared to $25.1 million in 1999. This increase of $7.3 million (29%) was due to a $35.8 million (16%) increase in net revenue, partially offset by a $24.8 million (14%) increase in operating costs and expenses and an increase in depreciation and amortization of $3.7 million. The operating margin before depreciation and amortization increased to 19% from 18% in the prior year period. Operating income from products and services increased to $10.4 million from $6.4 million in the 1999 quarter with an operating margin of 36% in the 2000 quarter compared to 37% during the prior year period.
The weighted-average number of fitness centers increased to 380 from 348 in the third quarter of 1999, an increase of 9%, including an increase in the weighted-average number of centers operating under the Company's four upscale brands, from 25 to 34. Net revenue from comparable fitness centers increased 9%. Full membership units sold during the quarter increased 7% over the prior year period while the weighted-average selling price of these membership contracts sold increased 5%. During the 2000 quarter, shorter-term and seasonal memberships added 1% more membership units and less than 1% more revenue. As a result, membership fees originated increased $14.5 million (12%). Dues collected increased $11.8 million (20%) 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 third quarter of 2000 increased $2.2 million (15%) compared to the 1999 quarter due to the growth in size and consistent 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 $4.5 million for 2000 compared to 1999. This reduction reflects principally the greater deferral of revenues during the 2000 period.
Comparison of the nine months ended September 30, 2000 and 1999Operating income for the first nine months of 2000 was $93.9 million compared to $64.6 million in 1999. This increase of $29.3 million (45%) was due to a $118.0 million (19%) increase in net revenue, partially offset by a $79.0 million (15%) increase in operating costs and expenses and an increase in depreciation and amortization of $9.6 million. The operating margin before depreciation and amortization increased to 19% from 16% in the prior year period. Operating income from products and services increased to $28.7 million from $14.6 million in the first nine months of 1999 with an operating margin of 35% in 2000 compared to 34% during the prior year period.
The weighted-average number of fitness centers increased to 374 from 338 in the first nine months of 1999, an increase of 11%, including an increase in the weighted-average number of centers operating under the Company's four upscale brands from 20 to 34. Net revenue from comparable fitness centers increased 10%. Full membership units sold during the nine month period increased 5% over the prior year period while the weighted-average selling price of these membership contracts sold increased 7%. 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 $47.0 million (12%). Dues collected increased $34.9 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 nine months of 2000 increased $6.2 million (14%) compared to the 1999 period due to the growth in size and consistent 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 $11.9 million for 2000 compared to 1999. This decrease reflects principally the greater deferral of revenues during the 2000 period.
Cash FlowCash flow from operating activities was $45.8 million for the first nine months of 2000 compared to $27.2 million in the 1999 period. Net contracts receivable grew $71.6 million compared to $58.2 million in the 1999 period and interest paid totaled $38.2 million compared to $28.8 million in the 1999 period resulting in a combined increase in the use of working capital of $22.8 million. Cash provided by operating activities, excluding the growth in net contracts receivable and interest paid during each of the periods, increased $41.4 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 September 30, 2000, the Company has drawn $36.5 million on its $100 million revolving credit line and had outstanding letters of credit totaling $6.0 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 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.
The Company will be holding a conference call to discuss its results further and respond to questions on the morning of November 7, 2000 at 10:00am Central Time. Those interested may listen to this conference call via vcall.com, streetfusion.com or the Company's website at ballyfitness.com.
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 STATEMENT OF OPERATIONS
(In thousands, except share data)
(Unaudited)
Three months ended Septmeber 30
-------------------------------
2000 1999
------------ ------------
Net revenues:
Membership revenues -
Initial membership fees on financed
memberships originated $ 133,014 $ 118,768
Initial membership fees on paid-in-full
memberships originated 6,084 5,816
Dues collected 70,422 58,672
Change in deferred revenues (4,585) 897
------------ ------------
204,935 184,153
Finance charges earned 17,285 15,086
Products and services 29,209 17,384
Miscellaneous revenue 3,383 2,434
------------ ------------
254,812 219,057
Operating costs and expenses:
Fitness center operations 119,859 106,552
Products and services 18,831 10,957
Member processing collection centers 10,638 9,962
Advertising 11,339 11,941
General and administrative 6,854 6,975
Provision for doubtful receivables 40,368 35,719
Change in deferred membership origination costs (2,425) (1,421)
------------ ------------
205,464 180,685
------------ ------------
Operating income before depreciation and
amortization ("EBITDA") 49,348 38,372
Depreciation and amortization 16,954 13,232
------------ ------------
Operating income 32,394 25,140
Interest income 474 415
Interest expense (16,680) (13,062)
------------ ------------
Income before income taxes 16,188 12,493
Income tax benefit (provision) 19,750 (250)
------------ ------------
Net income $ 35,938 $ 12,243
============ ============
Basic earnings per common share: $ 1.50 $ .52
============ ============
Average common shares outstanding 24,001,923 23,417,395
Diluted earnings per common share: $ 1.30 $ .45
============ ============
Average diluted common shares outstanding (includes
3,674,307 and 3,930,773 common equivalent shares
in 2000 and 1999, respectively) 27,676,230 27,348,168
BALLY TOTAL FITNESS HOLDING CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share data)
(Unaudited)
Nine months ended September 30
------------------------------
2000 1999
------------ ------------
Net revenues:
Membership revenues -
Initial membership fees on financed
memberships originated $ 410,902 $ 364,389
Initial membership fees on paid-in-full
memberships originated 18,425 17,921
Dues collected 208,866 173,994
Change in deferred revenues (26,768) (13,379)
------------ ------------
611,425 542,925
Finance charges earned 50,762 44,546
Products and services 82,585 42,317
Miscellaneous revenue 10,161 7,182
------------ ------------
754,933 636,970
Operating costs and expenses:
Fitness center operations 350,045 318,118
Products and services 53,865 27,751
Member processing collection centers 32,519 30,310
Advertising 40,249 37,526
General and administrative 20,673 19,866
Provision for doubtful receivables 124,127 107,410
Change in deferred membership origination costs (8,337) (6,872)
------------ ------------
613,141 534,109
------------ ------------
Operating income before depreciation and
amortization ("EBITDA") 141,792 102,861
Depreciation and amortization 47,901 38,276
------------ ------------
Operating income 93,891 64,585
Interest income 1,409 1,829
Interest expense (47,500) (37,805)
------------ ------------
Income before income taxes and cumulative effect
of a change in accounting principle 47,800 28,609
Income tax benefit (provision) 19,275 (580)
------------ ------------
Income before cumulative effect of a change in
accounting principle 67,075 28,029
Cumulative effect of a change in accounting
principle, net of income tax (262)
------------ ------------
Net income $ 67,075 $ 27,767
============ ============
Basic earnings per common share:
Income before cumulative effect of a change in
accounting principle $ 2.82 $ 1.20
Cumulative effect of a change in accounting
principle (.01)
------------ ------------
Net income per common share $ 2.82 $ 1.19
============ ============
Average common shares outstanding 23,797,183 23,316,082
Diluted earnings per common share:
Income before cumulative effect of a change in
accounting principle $ 2.44 $ 1.03
Cumulative effect of a change in accounting
principle (.01)
------------ ------------
Net income per common share - assuming dilution $ 2.44 $ 1.02
============ ============
Average diluted common shares outstanding (includes
3,746,601 and 3,779,647 common equivalent shares
in 2000 and 1999, respectively) 27,543,784 27,095,729
BALLY TOTAL FITNESS HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
September 30 December 31
2000 1999
------------ ------------
(In thousands)
ASSETS
Current assets:
Cash and equivalents $ 12,401 $ 23,450
Installment contracts receivable, net 275,327 241,450
Other current assets 53,824 46,185
------------ ------------
Total current assets 341,552 311,085
Installment contracts receivable, net 282,461 244,693
Property and equipment, less accumulated
depreciation and amortization of $421,318
and $382,897 535,837 473,111
Intangible assets, less accumulated amortization
of $69,497 and $64,554 153,368 137,156
Deferred income taxes 56,607 39,444
Deferred membership origination costs 114,532 106,195
Other assets 40,546 36,873
------------ ------------
$ 1,524,903 $ 1,348,557
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 55,926 $ 49,629
Income taxes payable 3,051 3,063
Deferred income taxes 37,704 40,933
Accrued liabilities 75,435 59,197
Current maturities of long-term debt 16,327 9,505
Deferred revenues 311,398 290,123
------------ ------------
Total current liabilities 499,841 452,450
Long-term debt, less current maturities 639,585 593,903
Other liabilities 7,502 6,531
Deferred revenues 92,025 83,214
Stockholders' equity 285,950 212,459
------------ ------------
$ 1,524,903 $ 1,348,557
============ ============
BALLY TOTAL FITNESS HOLDING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine months ended September 30
------------------------------
2000 1999
------------ ------------
(In thousands)
Operating:
Income before cumulative effect of a change in
accounting principle $ 67,075 $ 28,029
Adjustments to reconcile -
Depreciation and amortization, including
amortization included in interest expense 51,174 40,714
Provision for doubtful receivables 124,127 107,410
Change in operating assets and liabilities (196,567) (148,920)
------------ ------------
Cash provided by operating activities 45,809 27,233
Investing:
Purchases and construction of property and
equipment (77,851) (82,736)
Acquisitions of businesses and other (3,816) (16,783)
------------ ------------
Cash used in investing activities (81,667) (99,519)
Financing:
Debt transactions -
Net borrowings (repayments) under revolving
credit agreement 36,500 28,500
Repayments of other long-term debt (13,412) (5,584)
Debt issuance and refinancing costs (4,225)
------------ ------------
Cash provided by debt transactions 23,088 18,691
Equity transactions -
Proceeds from issuance of common stock under
stock purchase and options plans 1,721 1,730
------------ ------------
Cash provided by financing activities 24,809 20,421
Decrease in cash and equivalents (11,049) (51,865)
Cash and equivalents, beginning of period 23,450 64,382
------------ ------------
Cash and equivalents, end of period $ 12,401 $ 12,517
============ ============
Notes to Condensed Financial Statements:
(In thousands)
Installment contracts receivable:
September 30 December 31
2000 1999
------------ ------------
Current:
Installment contracts receivable $ 416,868 $ 355,029
Unearned finance charges (51,946) (41,515)
Allowance for doubtful receivables and
cancellations (89,595) (72,064)
------------ ------------
$ 275,327 $ 241,450
============ ============
Long-term:
Installment contracts receivable $ 372,410 $ 319,034
Unearned finance charges (25,501) (20,367)
Allowance for doubtful receivables and
cancellations (64,448) (53,974)
------------ ------------
$ 282,461 $ 244,693
============ ============
A summary of the allowance for doubtful receivables and cancellations activity
is as follows:
Three months ended Nine months ended
September 30 September 30
-------------------- --------------------
2000 1999 2000 1999
--------- --------- --------- ---------
Balance at beginning of period $ 151,957 $ 132,297 $ 126,038 $ 106,301
Contract cancellations and
write-offs of uncollectible
amounts, net of recoveries (84,485) (70,123) (238,672) (197,640)
Provision for cancellations
(classified as a direct
reduction of revenues) 46,203 38,543 142,550 120,365
Provision for doubtful
receivables 40,368 35,719 124,127 107,410
--------- --------- --------- ---------
Balance at end of period $ 154,043 $ 136,436 $ 154,043 $ 136,436
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