FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 for the period ended June 30,
1996
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Commission file number 33-99844
BALLY TOTAL FITNESS HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3228107
(State or other jurisdiction of (IRS Employer
of incorporation) Identification No.)
8700 West Bryn Mawr Avenue
Chicago, IL 60631
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (312) 380-3000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
As of August 9, 1996, 12,495,161 shares of the registrant's common
stock were outstanding.
BALLY TOTAL FITNESS HOLDING CORPORATION
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial statements:
Condensed consolidated balance sheet (unaudited)
June 30, 1996 and December 31, 1995 1
Consolidated statement of operations (unaudited)
Six months ended June 30, 1996 and 1995 2
Consolidated statement of operations (unaudited)
Three months ended June 30, 1996 and 1995 3
Consolidated statement of stockholders' equity (unaudited)
Six months ended June 30, 1996 4
Consolidated statement of cash flows (unaudited)
Six months ended June 30, 1996 and 1995 5
Notes to condensed consolidated financial statements
(unaudited) 7
Item 2. Management's discussion and analysis of financial
condition and results of operations 10
PART II. OTHER INFORMATION
Item 1. Legal proceedings 16
Item 6. Exhibits and reports on Form 8-K 16
SIGNATURE PAGE 17
BALLY TOTAL FITNESS HOLDING CORPORATION
Condensed Consolidated Balance Sheet
(In thousands)
(Unaudited)
June 30, December 31,
1996 1995
---------- -----------
ASSETS
Current assets:
Cash and equivalents $ 11,662 $ 21,263
Installment contracts receivable, net 155,775 155,504
Other current assets 23,955 20,216
---------- ----------
Total current assets 191,392 196,983
Long-term installment contracts
receivable, net 156,515 147,856
Property and equipment, less accumulated
depreciation and amortization of
$300,574 and $293,698 337,300 348,468
Intangible assets, less accumulated
amortization of $47,369 and $45,117 107,975 110,227
Deferred income taxes 3,205 2,989
Other assets 37,880 39,771
---------- ----------
$ 834,267 $ 846,294
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 33,338 $ 43,740
Income taxes payable 50 2,241
Deferred income taxes 11,915 11,112
Deferred revenues 58,315 61,881
Accrued liabilities 70,702 64,978
Current maturities of long-term debt 34,745 1,481
---------- ----------
Total current liabilities 209,065 185,433
Long-term debt, less current maturities 337,920 368,032
Tax obligation to Bally Entertainment
Corporation 15,200 15,200
Other liabilities and deferred credits 34,061 37,282
Stockholders' equity 238,021 240,347
---------- ----------
$ 834,267 $ 846,294
========== ==========
See accompanying notes.
1
BALLY TOTAL FITNESS HOLDING CORPORATION
Consolidated Statement of Operations
(In thousands, except per share data)
(Unaudited)
Six months ended
June 30,
-------------------------
1996 1995
---------- ----------
Net revenues:
Membership revenues -
New $ 211,957 $ 221,117
Dues 91,832 90,822
Finance charges earned 18,556 18,074
Fees and other 7,296 9,229
---------- ----------
329,641 339,242
Operating costs and expenses:
Fitness center operations 186,481 199,226
Member processing and collection
centers 22,543 25,528
Advertising 25,810 22,642
General and administrative 13,028 12,481
Provision for doubtful receivables 39,359 38,355
Depreciation and amortization 27,672 28,668
---------- ----------
314,893 326,900
---------- ----------
Operating income 14,748 12,342
Interest expense 23,900 20,772
---------- ----------
Loss before income taxes (9,152) (8,430)
Income tax provision (benefit) 300 (2,445)
---------- ----------
Net loss $ (9,452) $ (5,985)
========== ==========
Per common share:
Net loss - proforma for 1995 $ (.78) $ (.72)
========== ==========
See accompanying notes.
2
BALLY TOTAL FITNESS HOLDING CORPORATION
Consolidated Statement of Operations
(In thousands, except per share data)
(Unaudited)
Three months ended
June 30,
-------------------------
1996 1995
---------- ----------
Net revenues:
Membership revenues -
New $ 99,153 $ 103,911
Dues 46,444 45,678
Finance charges earned 8,961 9,155
Fees and other 4,002 4,003
---------- ----------
158,560 162,747
Operating costs and expenses:
Fitness center operations 91,576 98,230
Member processing and collection
centers 10,331 12,737
Advertising 13,199 11,673
General and administrative 5,845 5,978
Provision for doubtful receivables 18,457 17,730
Depreciation and amortization 13,996 14,273
---------- ----------
153,404 160,621
---------- ----------
Operating income 5,156 2,126
Interest expense 12,051 10,723
---------- ----------
Loss before income taxes (6,895) (8,597)
Income tax provision (benefit) 100 (2,495)
---------- ----------
Net loss $ (6,995) $ (6,102)
========== ==========
Per common share:
Net loss - proforma for 1995 $ (.57) $ (.73)
========== ==========
See accompanying notes.
3
BALLY TOTAL FITNESS HOLDING CORPORATION
Consolidated Statement of Stockholders' Equity
(In thousands, except share data)
(Unaudited)
Common Stock Unearned
------------------- compensation Total
Number Stated Contributed Accumulated -restricted stockholders'
of shares value capital deficit stock equity
-------- --------- --------- ----------- ----------- ------------
Balance at December 31,
1995
11,845,161 $ 118 $ 293,062 $ (52,833) $ $ 240,347
Net loss
(9,452) (9,452)
Stock awards under
long-term incentive plan
650,000 7 4,389 (4,396) -
Capital contribution by
Bally Entertainment Corporation
6,760 6,760
Amortization of unearned
compensation
366 366
---------- ------- --------- --------- ---------- ----------
Balance at June 30, 1996
12,495,161 $ 125 $ 304,211 $(62,285) $ (4,030) $ 238,021
========== ======= ========= ========= ========== ==========
See accompanying notes.
4
BALLY TOTAL FITNESS HOLDING CORPORATION
Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
Six months ended
June 30,
-----------------------
1996 1995
--------- ---------
OPERATING:
Net loss $ (9,452) $ (5,985)
Adjustments to reconcile to cash used -
Depreciation and amortization,
including amortization included
in interest expense 29,274 30,504
Provision for doubtful receivables 39,359 38,355
Deferred income taxes 587 1,901
Change in operating assets and
liabilities (65,610) (71,521)
--------- ---------
Cash used in operating activities (5,842) (6,746)
INVESTING:
Purchases of property and equipment (11,450) (11,578)
Other, net 472 (342)
--------- ---------
Cash used in investing activities (10,978) (11,920)
FINANCING:
Debt transactions -
Proceeds from securitization facility 150,000
Net repayments under revolving credit
agreement (77,000)
Net borrowings (repayments) of other
long-term debt 603 (2,420)
Debt issuance costs (144) (5,137)
--------- ---------
Cash provided by debt transactions 459 65,443
Equity transaction -
Capital contribution by Bally
Entertainment Corporation 6,760
--------- ---------
Cash provided by financing activities 7,219 65,443
--------- ---------
Increase (decrease) in cash and
equivalents (9,601) 46,777
Cash and equivalents, beginning
of period 21,263 12,804
--------- ---------
Cash and equivalents, end of period $ 11,662 $ 59,581
========= =========
See accompanying notes.
5
BALLY TOTAL FITNESS HOLDING CORPORATION
Consolidated Statement of Cash Flows-(Continued)
(In thousands)
(Unaudited)
Six months ended
June 30,
------------------------
1996 1995
---------- ----------
SUPPLEMENTAL CASH FLOWS INFORMATION:
Changes in operating assets and
liabilities were as follows -
Increase in installment contracts
receivable $ (48,289) $ (51,118)
Increase in other current and
other assets (3,471) (2,824)
Increase (decrease) in accounts
payable (10,706) 5,610
Decrease in due to Bally
Entertainment Corporation (6,220)
Increase (decrease) in income taxes
payable (2,191) 162
Increase (decrease) in accrued and
other liabilities 5,396 (2,694)
Decrease in deferred revenues (6,349) (14,437)
---------- ----------
$ (65,610) $ (71,521)
========== ==========
Cash payments for interest and income
taxes were as follows-
Interest paid $ 21,818 $ 20,344
Interest capitalized (163) (189)
Income taxes paid (refunded), net 1,904 (4,508)
Investing and financing activities exclude
the following non-cash transaction -
Acquisition of equipment through
capital leases $ 2,853 $
See accompanying notes.
6
BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements
(All dollar amounts in thousands, except share data)
(Unaudited)
Basis of presentation
The accompanying condensed consolidated financial statements include
the accounts of Bally Total Fitness Holding Corporation (_the
Company_) and the subsidiaries which it controls. The Company,
through its subsidiaries, is a nationwide commercial operator of
fitness centers with 323 facilities concentrated in 27 states and
Canada. The Company operates in one industry segment, and all
significant revenues arise from the commercial operation of fitness
centers, primarily in major metropolitan markets in the United States.
Unless otherwise specified in the text, references to the Company
include the Company and its subsidiaries. These condensed
consolidated financial statements should be read in conjunction with
the consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
The Company was a wholly owned subsidiary of Bally Entertainment
Corporation (_Bally_) until the consummation of Bally's spin-off (the
_Spin-off_) of the Company on January 9, 1996. On that date,
11,845,161 shares of Company common stock were distributed to holders
of record of Bally's common stock as of November 15, 1995. For
financial accounting purposes, the Company has reflected the effect of
the Spin-off as of December 31, 1995.
All adjustments have been recorded which are, in the opinion of
management, necessary for a fair presentation of the condensed
consolidated balance sheet of the Company at June 30, 1996, its
consolidated statements of operations for the three and six months
ended June 30, 1996 and 1995, its consolidated statement of
stockholders' equity for the six months ended June 30, 1996 and its
consolidated statement of cash flows for the six months ended June 30,
1996 and 1995. All such adjustments were of a normal recurring
nature.
The accompanying condensed consolidated financial statements have been
prepared in conformity with generally accepted accounting principles
which require the Company's management to make estimates and
assumptions that affect the amounts reported therein. Actual results
could vary from such estimates. In addition, certain
reclassifications have been made to prior period financial statements
to conform with the 1996 presentation.
Seasonal factors
The Company's operations are subject to seasonal factors and,
therefore, the results of operations for the three and six months
ended June 30, 1996 and 1995 are not necessarily indicative of the
results of operations for the full year.
7
BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements-(Continued)
(All dollar amounts in thousands, except share data)
(Unaudited)
Installment contracts receivable
June 30, December 31,
1996 1995
---------- -----------
Current:
Installment contracts $ 238,167 $ 244,522
Less --
Unearned finance charges 27,567 27,128
Allowance for doubtful receivables
and cancellations 54,825 61,890
---------- -----------
$ 155,775 $ 155,504
========== ===========
Long-term:
Installment contracts $ 215,761 $ 211,549
Less --
Unearned finance charges 13,658 13,055
Allowance for doubtful receivables
and cancellations 45,588 50,638
---------- -----------
$ 156,515 $ 147,856
========== ===========
Long-term debt
The Company is restricted from paying cash dividends by the terms of
its 13% Senior Subordinated Notes due 2003 and its revolving credit
agreement. The covenants also limit amounts available for capital
expenditures and additional borrowings, and require maintenance of
certain financial ratios. The Company's revolving credit agreement
provides for a $15,000 line of credit, which is reduced by the amount
of any outstanding letters of credit in excess of $15,000 (which
excess may not exceed $5,000). The maximum amount available under
this revolving credit agreement, including letters of credit, is
$30,000. At June 30, 1996, outstanding letters of credit totaled
approximately $13,300 and the entire line of credit was unused.
Income taxes
Taxable income or loss of the Company is included in the consolidated
federal income tax return of Bally through January 9, 1996. The
Company is required to file its own separate consolidated federal
income tax return for periods after January 9, 1996. The income tax
provision for the three and six months ended June 30, 1996 reflects
state income taxes only, as no federal benefit has been provided due
to the uncertainty of its realization.
8
BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements-(Continued)
(All dollar amounts in thousands, except share data)
(Unaudited)
Income taxes (continued)
The tax allocation and Indemnity Agreement between the Company and
Bally was amended in the second quarter of 1996 to include a portion
of the Company's 1996 losses in Bally's consolidated federal income
tax return. A contribution was received by the Company representing
an advance on a portion of the estimated benefit that Bally will
receive from the utilization of the Company's loss carry backs.
Earnings (loss) per common share
Loss per common share was computed by dividing net loss by the
weighted average number of shares of common stock outstanding during
each period, which totalled 12,170,161 shares for both the three and
six months ended June 30, 1996. Restricted stock (325,000 shares) was
issued subject to forfeiture unless certain conditions are met. These
contingent shares are considered common stock equivalents and are
excluded from the loss per share computation because their effect
would be anti-dilutive. Proforma loss per common share for the three
and six months ended June 30, 1995, giving effect to (i) adjustments
made to reflect the income tax provision/benefit as if the Company had
filed its own separate consolidated income tax returns for each period
and (ii) the distribution of 11,845,161 shares of Company common stock
to Bally shareholders as if such distribution had taken place as of
the beginning of each period, was $.73 per share and $.72 per share,
respectively.
9
BALLY TOTAL FITNESS HOLDING CORPORATION
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Six months versus six months
Net revenues for the first six months of 1996 were $329.6 million
compared to $339.2 million in the 1995 period. New membership revenue
decreased $9.2 million (4%) primarily due to a 7% decline in the
number of contracts sold offset, in part, by a 5% increase in the
average selling price. Net revenues for the same fitness centers
selling memberships throughout both periods decreased $5.6 million
(2%), with the remaining decrease resulting from the closure of older,
less profitable facilities that were not replaced and the sale of the
Vertical club in New York City to Bally. The number of fitness
centers decreased from 334 at June 30, 1995 to 323 at June 30, 1996,
representing the closure of fourteen older, typically smaller
facilities and the sale of the Vertical Club to Bally offset, in part,
by the opening of four new, larger facilities. Dues revenue increased
$1.0 million (1%) over 1995 despite the 3% reduction in the number of
facilities operated. Finance charges earned increased $.5 million
(3%) in the 1996 period compared to 1995. Fees and other revenues
decreased $1.9 million (21%) primarily due to non-recurring income in
the first six months of 1995 pertaining to insurance recoveries and a
reduction of personal trainer revenue in the 1996 period as a result
of outsourcing the service.
Operating income for the first six months of 1996 was $14.7 million
compared to $12.3 million in 1995. The increase of $2.4 million (20%)
is primarily due to a $12.0 million (4%) decrease in operating costs
and expenses offset, in part, by the aforementioned decrease in
revenues. Excluding the provision for doubtful receivables, operating
costs and expenses decreased $13.0 million (5%) in the first six
months of 1996 compared to 1995. The decrease was primarily due to i)
the continuing cost reduction program which includes reductions in
payroll and other variable costs (including consolidations of member
processing and collection centers and reductions in personal trainer
salaries), ii) commissions as a result of the aforementioned decline
in new membership sales and iii) the 3% reduction in the number of
facilities operated.
Fitness center operating expenses for the first six months of 1996
decreased $12.7 million (6%) from 1995 primarily due to a reduction in
payroll and related costs ($7.5 million) and other variable costs as a
result of the continuing cost reduction program. As a percentage of
net revenues, fitness center operating expenses decreased from 59% in
the 1995 period to 57% in 1996.
10
BALLY TOTAL FITNESS HOLDING CORPORATION
Management's Discussion and Analysis of Financial Condition and
Results of Operations-(Continued)
Member processing and collection center expenses decreased $3.0
million (12%) primarily due to the completion in late 1995 of the
consolidation of three regional service centers (_RSCs_) into two and
the completion of a computer conversion project. With the addition of
new hardware and software, the Company has streamlined its processing
procedures and developed efficiencies that enable the RSCs to better
service membership accounts while reducing costs. Member processing
and collection center expenses as a percentage of net revenues
decreased from 8% in the 1995 period to 7% in 1996.
Advertising costs for the first six months of 1996 increased $3.2
million (14%) over 1995 primarily due to increased media and club
marketing costs. This is consistent with the Company's belief that
strong marketing support is critical to attracting new members both at
existing and new fitness centers. Advertising expenses as a
percentage of net revenues increased from 7% in the 1995 period to 8%
in 1996.
General and administrative expenses increased $.5 million (4%) and, as
a percentage of net revenues, were 4% for each period.
The provision for doubtful receivables for the first six months of
1996 was $39.4 million compared to $38.4 million for 1995, an increase
of $1.0 million (3%). The provision for doubtful receivables as a
percentage of net financed sales was 26% in both periods.
Depreciation and amortization expenses decreased $1.0 million (3%)
from 1995.
Interest expense, net of capitalized interest, was $23.9 million for
the first six months of 1996 compared to $20.8 million in 1995, an
increase of $3.1 million (15%) principally reflecting a higher average
level of debt offset, in part, by lower average interest rates.
For periods commencing after the Spin-off, the Company is required to
file its own separate consolidated federal income tax return. The
income tax provision for the first six months of 1996 reflects state
income taxes only, as no federal benefit has been provided due to the
uncertainty of its realization.
11
BALLY TOTAL FITNESS HOLDING CORPORATION
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Quarter versus quarter
Net revenues for the second quarter of 1996 were $158.6 million
compared to $162.7 million in the 1995 period. New membership revenue
decreased $4.8 million (5%) primarily due to a 3% decline in the
number of contracts sold. A significant portion of the net decrease
resulted from the closure of older, less profitable facilities that
were not replaced and the sale of the Vertical club in New York City
to Bally, while net revenues for the same fitness centers selling
memberships throughout both quarters decreased $1.4 million (1%).
Dues revenue increased $.8 million (2%) over 1995 despite the
aforementioned reduction in the number of facilities operated.
Finance charges earned decreased $.2 million (2%) in the 1996 quarter
compared to 1995. Fees and other revenues remained unchanged.
Operating income for the second quarter of 1996 was $5.2 million
compared to $2.1 million in 1995. The increase of $3.0 million (143%)
is primarily due to a $7.2 million (4%) decrease in operating costs
and expenses offset, in part, by the aforementioned decrease in
revenues. Excluding the provision for doubtful receivables, operating
costs and expenses decreased $7.9 million (6%) in the second quarter
of 1996 compared to 1995. The decrease was primarily due to i) the
continuing cost reduction program which includes reductions in payroll
and other variable costs (including consolidations of member
processing and collection costs and reductions in personal trainer
salaries), ii) commissions as a result of the aforementioned decline
in new membership sales and iii) the 3% reduction in the number of
facilities operated.
Fitness center operating expenses for the second quarter of 1996
decreased $6.7 million (7%) from 1995 primarily due to a reduction in
payroll and related costs ($4.1 million) and other variable costs as a
result of the continuing cost reduction program. As a percentage of
net revenues, fitness center operating expenses decreased from 60% in
the 1995 quarter to 58% in 1996.
Member processing and collection center expenses decreased $2.4
million (19%) primarily due to the previously discussed RSC
consolidation and computer conversion project. Member processing and
collection center expenses as a percentage of net revenues decreased
from 8% in the 1995 quarter to 7% in 1996.
Advertising costs for the second quarter of 1996 increased $1.5
million (13%) over 1995 primarily due to increased media costs. As
previously noted, this is consistent with the Company's belief that
strong marketing support is critical to attracting new members both at
existing and new fitness centers. Advertising expenses as a
percentage of net revenues increased from 7% in the 1995 quarter to 8%
in 1996.
12
BALLY TOTAL FITNESS HOLDING CORPORATION
Management's Discussion and Analysis of Financial Condition and
Results of Operations-(Continued)
General and administrative expenses decreased $.1 million (2%) and, as
a percentage of net revenues, were 4% for each quarter.
The provision for doubtful receivables for the second quarter of 1996
was $18.5 million compared to $17.7 million for 1995, an increase of
$.8 million (4%). The provision for doubtful receivables as a
percentage of net financed sales increased from 26% in the 1995 period
to 27% in 1996.
Depreciation and amortization expenses decreased $.3 million (2%) from
1995.
Interest expense, net of capitalized interest, was $12.1 million for
the second quarter of 1996 compared to $10.7 million in 1995, an
increase of $1.4 million (13%) principally reflecting a higher average
level of debt offset, in part, by lower average interest rates.
For periods commencing after the Spin-off, the Company is required to
file its own separate consolidated federal income tax return. The
income tax provision for the second quarter of 1996 reflects state
income taxes only, as no federal benefit has been provided due to the
uncertainty of its realization.
Liquidity and capital resources
The Company has no scheduled principal payments under its subordinated
indebtedness until 2003, no scheduled principal payments under its
securitization facility until January 1997 and its scheduled principal
payments under other indebtedness outstanding at June 30, 1996 are not
significant. Approximately $31 million principal amount of the $150
million securitization facility will be amortized unless the financing
is renewed or replaced. The Company plans to offer a new series of
securitization certificates to replace the current issue during the
last quarter of 1996. However, there can be no assurance that such a
replacement series will be sold or that the terms of such series will
be as favorable as the existing series. In addition, the Company's
debt service payments for the next twelve months, principally for
interest, are expected to be approximately $43 million.
The Company's recent losses and the terms of its revolving credit
agreement limit the Company's ability to borrow significant amounts of
additional funds. Consequently, the Company is dependent on its
operations and availability under its revolving credit agreement for
its cash needs. As of August 9, 1996, approximately $5 million was
outstanding on the borrowing portion of the line of credit.
13
BALLY TOTAL FITNESS HOLDING CORPORATION
Management's Discussion and Analysis of Financial Condition and
Results of Operations-(Continued)
The Company has managed in recent years and expects to continue to
manage near-term liquidity requirements utilizing, in addition to the
occasional sale of non-strategic assets, a variety of techniques to
increase the cash sales and down payments and to accelerate
collections and dues payments to increase available cash reserves.
For example, during late 1995 the Company initiated a program which
allowed members to transfer the balance of their installment contracts
to a credit card sponsored by a third party bank which results in the
payment of the full principal amount of the installment contract
without the need for a discount to the member. For the six months
ended June 30, 1996, approximately $11 million of such payment
accelerations were generated.
Management plans to make capital expenditures of approximately $10
million to $15 million over the next twelve months to maintain, and in
many cases upgrade, its existing facilities as funds are available.
In recent years, the Company has also spent $10 million to $15 million
annually, as funds were available, to build new or replacement
facilities. The Company expects to continue those expenditures if
operations generate sufficient cash flow. The Company believes it
will be able to satisfy its cash needs over the next twelve months.
Cash Earnings Before Interest, Taxes, Depreciation And Amortization
(_Cash EBITDA_)
The indenture governing the Company's 13% Senior Subordinated Notes
due 2003 (the _13% Notes_) requires the disclosure of information with
respect to Cash EBITDA (as calculated using accounting principles in
effect in January 1993, when the 13% Notes were issued). Cash EBITDA
should not be considered as an alternative to any measure of
performance or liquidity as promulgated under generally accepted
accounting principles (such as net income/loss or cash provided
by/used in operating, investing and financing activities) nor should
it be considered as an indicator of the Company's overall financial
performance.
14
BALLY TOTAL FITNESS HOLDING CORPORATION
Management's Discussion and Analysis of Financial Condition and
Results of Operations-(Continued)
Cash EBITDA is calculated as follows (in millions):
Six months ended
June 30,
------------------------
1996 1995
---------- ---------
Loss before income taxes $ (9.2) $ (8.4)
Adjustments to reconcile to Cash EBITDA:
Interest expense (excluding $7.4
million of interest on the
securitization certificates in 1996) 16.5 20.8
Depreciation and amortization 27.7 28.7
Provision for doubtful receivables 39.4 38.4
Increase in installment contracts
receivable (48.3) (51.1)
Decrease in deferred revenues (6.3) (14.4)
Proforma decrease in installment contracts
receivable 150.0
Other non-cash expenses .8 .8
--------- ---------
Cash EBITDA $ 20.6 $ 164.8
========= =========
Cash EBITDA was $20.6 million for the first six months of 1996
compared to $164.8 million for 1995, a decrease of $144.2 million,
primarily attributed to the effect of the securitization facility.
Accounting principles in January 1993 treated this type of financing
as a sale, and therefore a $150.0 million reduction in receivables,
rather than as indebtedness with related interest expense. Excluding
the $150.0 million reduction in receivables in the 1995 period and
adding back $7.4 million of related interest expense in the 1996
period, Cash EBITDA increased $13.2 million, from $14.8 million during
the first six months of 1995 to $28.0 million for 1996. This increase
is principally due to an $11.0 million decrease in cash expenses and a
$2.2 million increase in cash revenue (primarily collections on
contracts receivable). The decrease in cash expenses (primarily
payroll and commissions) was principally due to the aforementioned
cost reduction program. The increase in collections was primarily due
to the aforementioned credit card acceleration program.
15
BALLY TOTAL FITNESS HOLDING CORPORATION
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits:
10.26 First Amendment dated as of May 20, 1996 to the
Tax Allocation and Indemnity Agreement dated as of
January 9, 1996 between the Company and Bally.
10.27 Employment Agreement dated as of April 16, 1996
and effective as of January 1, 1996, between the
Company, Bally and John W. Dwyer.
10.28 Employment Agreement dated as of April 16, 1996
and effective as of January 1, 1996, between the
Company, Bally and Harold Morgan.
27 Financial Data Schedule (filed electronically
only).
(b) Reports on Form 8-K:
None.
16
SIGNATURE PAGE
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, thereunto duly authorized.
BALLY TOTAL FITNESS HOLDING CORPORATION
---------------------------------------
Registrant
/s/ Julie Adams
-----------------------------
Julie Adams
Vice President and Controller
(Principal Accounting Officer)
Dated: August 14, 1996
17