CHICAGO – Revenue for 2006 increased by 6 percent for Bally Total Fitness, according to its 2006 financials and annual report, but that won’t be enough to stave off the company’s planned Chapter 11 filing.
The Chicago-based company had delayed its financial filing for 2006 from March until June 29, partially due to issues related to accounting for deferred revenue and errors in prior year member data related to how membership revenue is recognized. However, those issues were resolved in the financial statement filed with the Security and Exchange Commission (SEC) and did not require any restatements of the prior year financials, the company said in a release.
Bally’s 2006 net revenue was $1.059 billion compared to $1.003 billion in 2005. Its consolidated debt stands at more than $811 million. To provide working capital during its planned bankruptcy and to refinance its existing senior credit facility, Bally has arranged $292 million of super-priority secured debtor-in-possession and senior secured exit credit facilities from unidentified lenders, the company announced earlier this week.
Bally’s SEC filing shows that total membership cash collections continued to decline in each quarter of 2006 when compared to the prior year levels. Total 2006 membership cash collections were $757.6 million, down $25.4 million from 2005 collections of $783 million. Approximately $10.9 million, or 43 percent, of the year-over-year decline in total membership cash collections occurred in the fourth quarter of 2006. The 2006 quarterly trend has continued through the first half of 2007; total membership cash collections in the first quarter of 2007 were $12 million, or 6 percent, below the first quarter of 2006.
The average number of members during 2006 declined 2 percent to 3.559 million, from 3.622 million in the prior year. The average monthly cash received per member also declined 2 percent to $17.74, down from $18.02 in 2005. The total number of members as of December 31, 2006 was 3.485 million, down 1 percent from the prior year.
The company has begun the formal process of soliciting approvals for a prepackaged Chapter 11 plan of reorganization from holders of the company's 10-1/2 percent senior notes due 2011 and senior subordinated notes. The solicitation process is ongoing, and the voting agent must receive votes on the plan no later than 4:00 p.m. ET on July 27, 2007, unless this deadline is extended.
If Bally receives the required noteholder approvals, it will file for Chapter 11 reorganization. Bally plans to continue normal club operations during the restructuring process, obtaining the necessary relief from the bankruptcy court to pay the majority of its employees, trade and certain other creditors, the company’s release says. If Bally does not receive the necessary votes, the release says the company will evaluate other options, including filing a traditional, non-prepackaged Chapter 11 case.