CHICAGO — In light of recent trading activity of the company's stock and various rumors as to it s financial strength, Bally Total Fitness elected to comment on its business outlook for the remainder of 2002.
“We decided to have this press conference in order to address some of the concerns surrounding the company's projected earnings for the remainder of 2002,” said chairman and CEO, Lee Hillman during a conference call. “We are often the subject of wild rumors that have been proven time and time again to be untrue. We usually don't comment but felt this time we needed to. In spite of the difficult retail climate we, as a company, are performing well.”
The company believes after-tax fully diluted earnings per share before non-recurring items, will range from $.35 to $2.45 for each of the third and fourth quarters of 2002. Additionally, the third quarter will be impacted by a non-recurring after-tax charge of $.15 per fully diluted share resulting from the settlement of litigation arising in the early 1990s.
The company also believes it has sufficient cash and available credit resources to meet its operating and committed obligations.
Part of that cash has come in the form of a third sale of a random cross-section of the company's membership receivables portfolio at net book value to a major financial institution.
The sale resulted in $24 million of initial cash proceeds which, combined with future profit participation, is expected to result in total yields similar to the two membership receivables sales reported in 2001.
“This sale is a continuation of our strategy to monetize our membership contract receivables,” said Hillman “This move confirms the continuing strength and value of Bally's membership receivables which, even in a challenging economic climate, continue to demonstrate very stable credit performance.”
“In 2003, we plan to reduce capital spending to nearly half the levels spent on average over the last three years, while still completing 12 to 14 new clubs already in development. We expect to stay at these lower capital-spending levels until economic indicators improve and incremental projects can be funded with free cash flow. Our expectation of free cash flows in 2003, coupled with lower capital expenditures and over $50 million of current bank line availability, provide a more conservative path suitable for current economic conditions,” concluded Hillman.