Bally postpones 2Q report and filing, expects $5 million liability
Bally Total Fitness Holding Corporation (NYSE: BFT) has announced the company is postponing the release of its financial information for the second quarter ended June 30, 2004 and it expects to eventually report a net loss for the quarter. The filing of the company's Form 10Q quarterly report with the Securities and Exchange Commission (SEC) will also be postponed due to the inspection of some accounting issues. Bally is being investigated, as previously announced, by the SEC Division of Enforcement and is cooperating with the investigation. The company's independent auditor KPMG LLP, which succeeded Ernst & Young LLP on May 18, 2004, is performing an initial quarterly review of Bally's financial statements. The company expects to report a loss of about $5 million that has accumulated as of June 30, 2004. The liability is related to repayment obligations due in 2015 or later on membership contracts sold by a subsidiary before Bally acquired it in the late 1980s. The company had $65.0 million available on its $100 million revolving credit facility as of June 30, 2004. The revolving credit lenders gave Bally consent to wait until Sept. 30, 2004 to file its Form 10Q for the second quarter with defaulting. "We are working to resolve these matters as quickly as possible and we remain intensely focused on executing our business strategy of growing revenue and lowering costs," Paul Toback, chairman, president and CEO of Bally said in a statement.
Bally released some operating data that has not been reviewed by KPMG, which means it is subject to change. Among the data released was gross committed membership fees, originated during the three months ended June 30, 2004, which increased 15 percent compared with the prior year quarter. The total of new memberships increased 22 percent and the average committed duration of memberships decreased 5 percent due to the continued growth of pay-as-you-go membership programs. Gross committed monthly membership fees and gross committed membership fees remained unchanged from last year. Bally uses gross committed membership revenue as an indicator of the success of its current sales.
This only adds to the company's misery as a class-action lawsuit is simmering (see SNEWS story, June 4). In that, stock owners have claimed in complaints now before the U.S. District Court, Illinois, that they suffered damages by paying an artificially inflated price for their stock because its value was based on the company's false and misleading financial performance numbers.
Cybex raises $8 million through sale of stock
Cybex International (AMEX: CYB) announced it will sell 2.4 million shares of its stock to reap approximately $8 million. The agreement, announced Aug. 3, is with new institutional investors. After commissions and offering expenses, the net proceeds from the offering will be approximately $7.25 million. Oppenheimer & Co. Inc. acted as placement agent for the transaction. Cybex also announced that UM Holdings Ltd., the holder of all outstanding shares of the company's Series B Convertible Cumulative Preferred Stock, has exercised its right to convert such shares into 3,288,600 shares of Common Stock. Cybex CEO John Aglialoro and his wife Joan Carter co-founded UM in 1973; Aglialoro remains chairman of the board and CEO, while Carter is president and COO. The closing of the private placement transaction is subject to customary closing conditions and is expected to be completed by this week. Â
As a result of the private placement and the conversion of the Preferred Stock, Cybex will have approximately 14.6 million shares of Common Stock outstanding, with no shares of Preferred Stock outstanding. As part of the private placement transaction, the Company has agreed to file a registration statement covering the resale of the shares of Common Stock sold in the transaction.
Aglialoro said the actions were a "major step" toward improving the balance sheet. Debt at the end of this transaction, he said, would be approximately $21 million, with a debt-to-equity ratio of about 1.5:1 at the conclusion of the announced actions. Combined with the refinancing announced last month, interest expense and cumulative dividends on an annualized basis by about $2 million." Cybex stock closed on the day of the announcement at 4.75, which was a 52-week high, but then dropped the next day, closing at 4.1 on a volume of 58,000.
Everlast revenues up for first six months of 2004
Everlast Worldwide (Nasdaq: EVST) has reported an increase in net revenues of 8 percent for the six months ended June 2004. Net revenues were $30.7 million and licensing revenues increased 38 percent. The period's net revenues would have been 11 percent higher than 2003's numbers, after reflecting a change in revenue sources, because certain customers became licensees during the second half of fiscal 2003. The company also reported a 72-percent increase to $1.7 million in operating income. EBITDA increased 38 percent to $2.4 million. Net income available to common stockholders increased 113 percent to $267,000, $0.09 per basic share. Net revenues for the second quarter were $14.5 million. The number would have been 4 percent higher than 2003, which was also $14.5 million, after reflecting a change in revenue sources as mentioned. Net licensing revenues for the second quarter increased 51 percent to $2.4 million and EBITDA increased 11 percent to $1.0 million. Net income available to common stockholders for the second quarter was $0.03 per basic share or $79,318 compared with $111,159 or $0.04 per basic share in the second quarter 2003.
adidas-Salomon announces surge in net profits -- sales guidance increased
Sports clothing and equipment maker adidas-Salomon AG (ADS.XE) has announced its net profit rose to Euro 44 million (USD $54.054 million) in the second quarter, up from Euro 32 million a year earlier. In a preliminary earnings statement, the firm said it now expected net profit to grow 20 percent this year, up from a previous 10 percent to 15 percent target, with worldwide sales likely to grow by 5 percent, up from a previous target of between 3 percent to 5 percent on a currency-neutral basis. The company said second-quarter sales for the group increased 7 percent on a currency-neutral basis with improvements coming from all brands and regions. Currency-neutral sales in North America grew 4 percent, marking the first positive performance in four quarters.
Gross margin increased 3.7 percentage points to 48.4 percent of sales from 44.8 percent in the prior year. Second-quarter operating profit increased 49 percent to Euro 92 million (USD $113.022 million) in 2004 from Euro 62 million (USD $76.167 million)Â in the prior year. Net income was up 36 percent, reaching Euro 44 million (USD $54.054 million) versus Euro 32 million (USD $39.312 million) in 2003. This equates to basic earnings per share of Euro 0.96 and represents an increase of 36 percent versus the prior year. As a result of the strong operational improvements during the first half of 2004, the group's income before taxes grew 36 percent to Euro 202 million (USD $248.2 million) from Euro 148 million (USD $181.8 million) in 2003. Currency-neutral order backlogs for adidas grew 10 percent (+8 percent in Euros) at the end of the second quarter of 2004, reflecting sequential improvement in all regions.
The company increased sales guidance and again is raising the group's earnings target. Group gross margin is projected to clearly exceed 45 percent for the first time ever and operating margin will improve by at least one percentage point versus the prior year's level of 7.8 percent. As a result of the strong first half year performance, group earnings for the full year are now expected to grow by around 20 percent. adidas-Salomon outperformed other key European stocks in trading at a time when most tracked lower with continuing strong oil price stoked fears about the impact on the global economy. "The investment outlook for equities has weakened," said a London-based equity strategist. "Oil prices are now looking very dangerous. Middle East instability and uncertainty about government intervention in Russia's oil industry have instilled an unwelcome risk premium to the oil market."
(Conversion of Euros into U.S. dollars is for information only, is not necessarily relative to earnings, and is based on the currency rate as of Aug. 9.)
Sears comp stores' sales down in July
Sears, Roebuck and Co.'s (NYSE:S) comparable domestic store revenues decreased 2.6 percent for the four weeks ended July 31, 2004, the company recently announced. For the four-week period in July 2004, total domestic store revenues were $1.84 billion, down 4 percent compared with the four weeks ended Aug. 2, 2003. "July comparable store sales tracked in line with expectations," Sears Chairman and CEO Alan J. Lacy said in a statement. The company's specialty store revenues were down and Orchard Supply Hardware and Dealer Stores reported off-mall sales increases.
Town Sports International reports revenue increase
Town Sports International, the owner and operator of 134 health clubs in cities from Washington, D.C., north through New England, has announced revenues for the three months ended June 30, 2004, were $88.9 million, an increase of $2.8 million, or 3.2 percent over the same quarter of 2003. During the quarter, TSI's mature clubs (those in operation for 24 months or longer) experienced a slight increase in revenue of 1.0 percent or $0.8 million when compared to the prior year's second quarter. Revenue at clubs open over 12 months increased 1.3 percent when compared to the prior year's second quarter. Operating income for the second quarter of 2004 was $10.6 million compared to $12.5 million in the second quarter of 2003, while net interest expense increased to $6.5 million from $5.9 million. The company's EBITDA decreased by 5.0 percent to $19.9 million this quarter from $20.9 million in last year's quarter. TSI said it planned to file its Form 10Q on or before Aug. 16, the normal SEC filing deadline.
Saucony income up, considers sale
Saucony (Nasdaq: SCNYA and SCNYB) has announced financial net income increased 36 percent to $3.0 million in the second quarter of 2004, compared to $2.2 million in the second quarter of 2003. At the same time, the company said it has retained the services of Chestnut Securities Inc. of Boston, Mass., to assist the company in its analysis and consideration of various strategic alternatives that may be available to it, including a possible sale of the company, although it said it has not determined whether to pursue a sale.
For the six months ended July 2, 2004, net income increased 50 percent to $7.3 million, compared to $4.8 million in the comparable period of 2003. Net income for the second quarter and for the six months ended July 4, 2003, included a pre-tax benefit of $566,000 recorded in general and administrative expenses as a result of a litigation settlement agreement between the company and the trustee appointed to oversee the liquidation of assets of a former customer. Net sales for the second quarter of 2004 increased 28 percent to $44.0 million, compared to $34.5 million in the second quarter of 2003. Domestic net sales increased 31 percent to $35.5 million in the second quarter of 2004, compared to $27.2 million in the second quarter of 2003. The increase in domestic sales was attributed primarily to increased footwear unit volume and, to a lesser extent, increased sales at factory outlet stores and increased Hind apparel sales. Saucony brand footwear and apparel accounted for approximately 87 percent of total second quarter 2004 net sales, while a combination of Hind apparel and factory outlet stores net sales accounted for the balance. For the third quarter, the company said it now expected net sales to range from $40 million to $41 million, with net sales for the year to range from $162 million to $164 million.
Wal-Mart net sales up 10+ percent for July
Wal-Mart Stores Inc. (NYSE:WMT) reported an increase in net sales of 10.9 percent to $20.610 billion for the four-week period ending July 30, 2004. Sales for the 26-week period were up 12.1 percent to $135.065 billion from last year's $120.517 billion. Its division's sales for the four-week period were up 9.3 percent to $13.764 billion and sales for the 26-week period were up 10.8 percent to $90.593 billion. The international division's sales were up 17.8 percent to $4.139 billion for the four-week period. Sales for the 26 weeks were up 18.7 percent to $26.386 billion.
HF Corp. revenue jumps a whopping 69.8 percent
Health Fitness Corp. (OTC: HFIT) announced that its revenue increased 69.8 percent to $13.1 million for the second quarter and six months ended June 30, 2004. Gross profit increased 117 percent to $3.4 million, and, as a percentage of revenue, gross profit increased 26.2 percent compared with 20.4 percent from the same quarter last year. Net earnings per diluted share of $0.03 increased 50 percent and earnings applicable to common shareholders increased 116.6 percent to $470,754. Revenue increased 69.1 percent to $25.8 million for the six months. Gross profit went up 101.8 percent to $6.5 million. Gross profit as a percentage of revenue increased 25.3 percent and net earnings applicable to common shareholders increased 66.4 percent to $807,461. Net earnings per diluted share of $0.05 increased 25 percent. "Our recent acquisition of the Johnson & Johnson health and fitness business has clearly strengthened our financial position," Jerry Noyce, Health Fitness' CEO and president said in a statement. "We are also encouraged by the progress being made in selling HEP services at our managed fitness centers." The company, in business since 1975, manages more than 400 sites in the United States and Canada.
Lifestyle Family Fitness receives $8 million equity investment
Lifestyle Family Fitness recently received an equity investment of $8 million for future expansion of the business. Ballast Point Ventures, L.P. led the financing, which included existing investor Quantum Capital Partners Inc. and new investor The Burton Partnerships. "This capital infusion, coupled with additional debt financing, will enable us to add 30 to 35 new fitness facilities over the next five years," Geoff Dyer, president and CEO of Lifestyle, said in a statement. Managing partner of Ballast Point Ventures Drew Graham will join Lifestyle's board of directors. Quantum Capital Partners gave Lifestyle $6.25 million in expansion capital during 2000 and 2001. Lifestyle owns and operates 19 fitness centers in west and central Florida. The company plans on adding several new facilities in Florida in the next year. Â
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