Bally grows '02 revenues 14 percent, tightens belt for '03

In 2002, Bally Total Fitness Holding Corp. (NYSE: BFT) increased net revenues by 14 percent to $968.1 million from $852.0 million in the prior year, but the club says growth and expansion will be tempered in 2003.

In 2002, Bally Total Fitness Holding Corp. (NYSE: BFT) increased net revenues by 14 percent to $968.1 million from $852.0 million in the prior year, including 9 percent attributable to the Crunch Fitness acquisition completed at the end of 2001.

Same club net revenues grew 3 percent, driven by increases in monthly membership dues and products and services, offset by a decline in new member initiation fees. Earnings before interest, taxes, depreciation and amortization, including finance charges earned ("EBITDA") before special charges were $201.7 million for 2002, a decline of 2 percent from the prior year.

Net income before special charges was $58.4 million or $1.77 per diluted share, versus net income before the net benefit of unusual items of $72.4 million in 2001, or $2.43 per diluted share.

"The past year produced strong growth in our personal training business and our membership dues, which were offset by a disappointing decrease in new member sign-ups at our same clubs," said Paul Toback, president and CEO, in a statement. "We believe the softness in membership originations was due, in large part, to the challenging economy and increased competition. We have already aggressively begun to address these issues for 2003 through enhanced marketing and advertising strategies. These strategies are designed to make Bally more competitive and highlight our key service strengths, such as providing personal training with more memberships, while focusing on our new Weight Management Program and the expanded offering of more flexible membership options. We intend to leverage these new ideas to grow our core business with improved new membership sales."

In a statement, Bally said it has no commitments to acquire clubs or real estate during 2003, and spending on club remodels and expansions is expected to significantly decline. New club spending is not expected to exceed $25 million for 2003, and club improvements should be less than or equal to the 2002 level. Administrative and systems spending will also decline significantly resulting from the completion of the new club management system.

"We have a tough job ahead of us," Toback said, "but much of the groundwork has already been laid and we are confident that the results of this plan will be strong."

SNEWS View: Not that the outlook is dim. It isn't. But things aren't as rosy either as belt-tightening hits the expanding Bally empire. Perhaps there was too much expansion, too quickly.


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