Fitness financials: Court dismisses Bally class action lawsuit, plus Life Time Fitness, Brunswick, Winmark, Sara Lee

A court dismissed Bally's class action lawsuit for alleged securities fraud, an analyst upgrade sent Life Time Fitness stock up, Brunswick sold $250 million in floaters, Winmark reported Q2 income results, and a Sara Lee spinoff is expected in the fall.

Court dismisses Bally's class action lawsuit for alleged securities fraud
Bally Total Fitness (NYSE: BFT) said the U.S. District Court, Northern District of Illinois, dismissed a consolidated class action against the company and certain of its current and former officers for alleged securities fraud. Bally added in a statement that the federal court had previously consolidated 10 separate actions into the consolidated class action complaint. The court dismissed the complaint without prejudice, allowing the plaintiffs until Aug. 14 to file an amended complaint, the company said in a statement.

Analyst upgrade sends Life Time Fitness stock up
Shares of Life Time Fitness (NYSE: LTM) jumped in afternoon trading on July 20 after a Merrill Lynch analyst issued a positive research note, saying there is growth ahead for the company.

Shares rose $1.52, or 3.6 percent, to $44.20 on the New York Stock Exchange. The stock has traded in a 52-week range of $30.93 to $49.82 and is up 12 percent since the beginning of the year.

Analyst Michael Keara lifted his rating to "Buy" from "Neutral" in a client note, citing valuation. Although he noted that shares are down about 14 percent since May, he set a $52 target price.

"This has created a buying opportunity for investors to own one of the few unit growth equity stories remaining," wrote Keara. "The more uncertain the near-term outlook for discretionary consumer spending becomes, the more we like Life Time Fitness."

The Merrill analyst added that should consumer slowdown become very pronounced in the second half of the year, Life Time could offset any sales decrease with lowered general and administrative expenses. He also said he expects inline or higher-than-expected earnings from Life Time, which could drive shares higher. In-center revenue should lift returns, and the company could benefit from sustained or accelerated new store growth, he wrote.

Life Time closed at $43.41 on July 20.

Brunswick sells $250 million in floaters
Brunswick Corp. (NYSE: BC), parent of Life Fitness, sold $250 million in three-year floating-rate notes, said joint lead manager Merrill Lunch & Co. J.P. Morgan was the other joint lead manager for the sale.

Winmark reports Q2 income results
Winmark Corp. (Nasdaq: WINA), parent of the Play It Again Sports franchise, reported net income for the second quarter of $650,400, or $.11 per share diluted, compared to net income of $542,600, or $.08 per share diluted, in 2005.

"During the second quarter, the franchising business continued its modest growth, and our leasing businesses added assets at an acceptable level," said John Morgan, Winmark's CEO and chairman, in a statement. "We launched a $50 million subordinated debt offering which, when combined with our bank line of credit and cash flow from operations, will allow us to finance our growth for the foreseeable future."

Sara Lee spinoff expected in fall
Sara Lee (NYSE:SLE) said its apparel business will borrow $2.6 billion to establish itself as a separate, publicly traded company. Sara Lee will, in turn, receive a one-time payment of $2.4 billion from the new entity, to be called Hanesbrands Inc. The new business will include brands such as Champion, which has a licensing agreement for Champion-branded equipment with Lamar Fitness, and will most likely be spun off to Sara Lee shareholders in early September, Sara Lee said. Sara Lee has been divesting businesses in an attempt to rebound from a long stretch of sluggish results. It will not retain any ownership in Hanesbrands following the spinoff.

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