Bally Posts Gain in 2005 Revenues and Reports Decline in 2006 Operating Costs
CHICAGO—Bally Total Fitness, which experienced a net loss of $30.3 million in 2004, reduced its net loss by 70 percent to $9.6 million in 2005 and posted 2005 revenues of $1.071 billion. While the company posted record numbers in 2005, Bally reported a $4.8 million decline in operating income during the first quarter of 2006 due to higher general and administrative and advertising costs. The disposition of Crunch Fitness in the first quarter of 2006 drove a net income of $32.7 million, and revenue increased 1 percent to $255.2 million, according to the company.
On a June 28 conference call, CEO Paul Toback said Bally did what it set out to do by changing its operating model while continuing to grow its business. Bally overhauled its membership model by offering long-term contracts with a low monthly fee and a minimal downpayment as well as month-to-month memberships with a higher monthly fee but more flexibility. After 36 months, the company traditionally gave the members deep discounts to renew their membership dues, but to increase its profitability and stay competitive, the fitness operator will eliminate these discounts for an additional earnings of $10 million over a three-year-period, Toback said.
Regarding the strategic process, Toback said several parties are interested in Bally, but the company has opted to keep the sales process under wraps until a buyer is announced. When an investor asked when the sale would be finalized, Toback said he wouldn’t speculate on the timeline of the strategic process.