EX-99 3 ex99-080503.htm EXHIBIT 99 - 08/05/2003 FORM 8-K EXHIBIT 99 - 08/05/2003 FORM 8K

EXHIBIT 99


   FROM: BALLY TOTAL FITNESS HOLDING CORPORATION
8700 West Bryn Mawr Avenue
Chicago, IL 60631
www.ballyfitness.com
Contact: Jon Harris - Tel. (773) 864-6850
Vice President, Media Development and Communications

For Immediate Release

BALLY TOTAL FITNESS REPORTS
SECOND QUARTER 2003 RESULTS

Second Quarter Highlights

  • Second quarter income from continuing operations exceeds consensus estimates (as adjusted) by $.01 per share.
  • Free cash flow up $26 million over prior year.
  • Recent debt refinancings improve capital structure.
  • Products and services revenue growth of 39%.
  • New marketing chief named to build Bally’s marquee brands.

         Chicago, August 5, 2003 – Bally Total Fitness Holding Corporation (NYSE: BFT) today reported its financial results for the quarter ended June 30, 2003. Second quarter net revenues totaled $251.3 million, a $5.0 million increase over the prior year quarter (2%). Free cash flow, defined as cash flow from operations ($12.1 million) less cash used in investing activities ($10.8 million), was $1.3 million during the quarter bringing the year to date total to $10.8 million compared to deficits during the prior year periods of $24.7 million and $33.9 million, respectively.

         As described in the “Special items” note herein, the Company had a non-operating, non-cash charge totaling $1.7 million ($1.3 million net of taxes) during the second quarter of 2003. Excluding the impact of this item, income from continuing operations for the second quarter would have been $9.9 million, or $.30 per diluted share. Income from continuing operations, including the charge, was $8.6 million ($.26 per diluted share) versus $16.4 million in the prior year quarter ($.49 per diluted share).

         “We made significant progress towards our objectives for 2003 this quarter including refinancing over $400 million of debt which extends maturities and provides additional liquidity,” commented Paul Toback, President, CEO and Chairman of Bally Total Fitness. “In addition, we remain on track to grow free cash flow for 2003.”

         “During the second quarter of 2003 we experienced a continuation of rapid growth in our products and services businesses, with revenues up 39% over 2002. New membership joins rose 7% this quarter company-wide, a 5% increase in same store joins. New membership sales, however, continue to be disappointing as gross committed membership fees originated during the quarter were flat with the prior year company-wide and down 3% same store while membership revenues overall were down 9%. During the quarter we implemented a number of cost reduction initiatives which offset planned increases in rent, utilities, insurance and other fixed costs, which should generate lasting reductions in our overall expense levels through the end of the year and into 2004,” continued Toback.

         “Another positive step towards building our future is the recent addition of Chief Marketing Officer Martin Pazzani. Martin is one of today’s top marketers with expertise in building and growing some of the world’s best known brands and companies in the packaged goods, fast food and personal care product industries. Prior to joining Bally, he was Worldwide Strategic Director of Foote Cone and Belding in New York. I’m confident that Martin, working together with our professional marketing team, will refine Bally’s marketing strategy and message with the goal of growing both the business and the brand,” Toback added.

         “In close, despite the current trends in new membership originations, I remain optimistic as to the future prospects of our company when the economy begins to rebound. With the increased consumer focus and attention on health and fitness, Bally is leading the right industry at the right time,” concluded Toback.

Financial Summary
(in thousands, except per share data)
                                   
  Three months ended         Six months ended      
  June 30         June 30      
 
       
     
    2003     2002     Change     2003     2002     Change
 
 
 
 
 
 
Net revenues $ 251,304    $ 246,299    $ 5,005    $ 505,521    $ 486,659    $ 18,862 
Operating income   8,522      17,585      (9,063)     18,387      34,845      (16,458)
Income from continuing operations before cumulative                                  
    effect of changes in accounting principles   8,634      16,393      (7,759)     19,766      36,236      (16,470)
Net income   6,699      16,075      (9,376)     1,869      35,477      (33,608)
                                   
Diluted earnings per common share:                                  
    Income from continuing operations before cumulative                                  
        effect of changes in accounting principles   0.26      0.49      (0.23)     0.60      1.08      (0.48)
    Discontinued operations   (0.06)     (0.01)     (0.05)     (0.07)     (0.02)     (0.05)
    Cumulative effect of changes in accounting principles                     (0.47)           (0.47)
    Net income   0.20      0.48      (0.28)     0.06      1.06      (1.00)


*     *     *     *     *

         Bally Total Fitness is the largest and only nationwide, commercial operator of fitness centers, with approximately four million members and 420 facilities located in 29 states, Canada, Asia and the Caribbean under the Bally Total Fitness®, Crunch FitnessSM, Gorilla SportsSM, Pinnacle Fitness®, Bally Sports Clubs® and Sports Clubs of Canada® brands. With an estimated 150 million annual visits to its clubs, Bally offers a unique platform for distribution of a wide range of products and services targeted to active, fitness-conscious adult consumers.

         The Company will be holding a conference call to further discuss its results and respond to questions on August 5, 2003 at 4:00 p.m. Central Time. Those interested may listen to this conference call via the Company’s web site at www.ballyfitness.com.


         Forward-looking statements in this release including, without limitation, statements relating to the Company’s plans, strategies, objectives, expectations, intentions, and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors include, among others, the following: general economic and business conditions; competition; success of operating initiatives, advertising and promotional efforts; existence of adverse publicity or litigation; acceptance of new product and service offerings; changes in business strategy or plans; quality of management; availability, terms, and development of capital; business abilities and judgment of personnel; changes in, or the failure to comply with, government regulations; regional weather conditions and other factors described in filings of the Company with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.



BALLY TOTAL FITNESS HOLDING CORPORATION
CONSOLIDATED INCOME SUMMARY
(In thousands, except share data)
(Unaudited)
                     
  Three months ended          
  June 30          
 
         
    2003     2002     Change   % change
 
 
 
 
Net revenues:                    
        Membership revenue $ 172,194    $ 188,330    $ (16,136)   -9%
        Products and services   74,292      53,318      20,974    39%
        Miscellaneous revenue   4,818      4,651      167    4%
 
 
 
   
    251,304      246,299      5,005    2%
Operating costs and expenses:                    
        Fitness center operations   140,786      140,098      688    0%
        Products and services   47,538      33,752      13,786    41%
        Member processing and collection centers   12,611      11,041      1,570    14%
        Advertising   14,131      16,413      (2,282)   -14%
        General and administrative   8,630      8,460      170    2%
        Depreciation and amortization   19,086      18,950      136    1%
 
 
 
   
    242,782      228,714      14,068    6%
 
 
 
   
Operating income   8,522      17,585      (9,063)   -52%
                     
Finance charges earned   18,479      17,442      1,037    6%
Interest expense   (13,936)     (13,547)     (389)   3%
Other, net   (1,704)     89      (1,793)   *    
 
 
 
   
    2,839      3,984      (1,145)   -29%
 
 
 
   
Income from continuing operations before income taxes   11,361      21,569      (10,208)   -47%
Income tax provision   (2,727)     (5,176)     2,449    -47%
 
 
 
   
Income from continuing operations   8,634      16,393      (7,759)   -47%
Discontinued operations                    
        Loss from discontinued operations (net of tax benefit                    
            of $74 and $100, in 2003 and 2002, respectively)   (236)     (318)     82    -26%
        Loss on disposal   (1,699)           (1,699)   *    
 
 
 
   
Loss from discontinued operations   (1,935)     (318)     (1,617)   508%
 
 
 
   
Net income $ 6,699    $ 16,075    $ (9,376)   -58%
 
 
 
   
Basic earnings per common share:                    
        Income from continuing operations $ 0.27    $ 0.51           
        Discontinued operations   (0.06)     (0.01)          
 
 
         
        Net income per common share $ 0.21    $ 0.50           
 
 
         
Average common shares outstanding   32,658,994      32,079,795           
                     
Dilued earnings per common share:                    
        Income from continuing operations $ 0.26    $ 0.49           
        Discontinued operations   (0.06)     (0.01)          
 
 
         
        Net income per common share $ 0.20    $ 0.48           
 
 
         
Average diluted common shares outstanding   33,093,718      33,564,276           
                     
  *Not meaningful                    


BALLY TOTAL FITNESS HOLDING CORPORATION
CONSOLIDATED INCOME SUMMARY
(In thousands, except share data)
(Unaudited)
                     
  Six months ended          
  June 30          
 
         
    2003     2002     Change   % change
 
 
 
 
Net revenues:                    
        Membership revenue $ 346,422    $ 371,024    $ (24,602)   -7%
        Products and services   149,430      105,735      43,695    41%
        Miscellaneous revenue   9,669      9,900      (231)   -2%
 
 
 
   
    505,521      486,659      18,862    4%
Operating costs and expenses:                    
        Fitness center operations   281,575      277,902      3,673    1%
        Products and services   94,559      66,785      27,774    42%
        Member processing and collection centers   23,611      21,993      1,618    7%
        Advertising   32,064      32,922      (858)   -3%
        General and administrative   16,683      15,842      841    5%
        Depreciation and amortization   38,642      36,370      2,272    6%
 
 
 
   
    487,134      451,814      35,320    8%
 
 
 
   
Operating income   18,387      34,845      (16,458)   -47%
                     
Finance charges earned   37,362      35,122      2,240    6%
Interest expense   (27,921)     (28,190)     269    -1%
Other, net   (1,820)     163      (1,983)   *    
 
 
 
   
    7,621      7,095      526    7%
 
 
 
   
Income from continuing operations before income taxes and                    
    cumulative effect of changes in accounting principles   26,008      41,940      (15,932)   -38%
Income tax provision   (6,242)     (5,704)     (538)   9%
 
 
 
   
Income from continuing operations before cumulative                    
    effect of changes in accounting principles   19,766      36,236      (16,470)   -45%
Discontinued operations                    
        Loss from discontinued operations (net of tax benefit                    
            of $196 and $130, in 2003 and 2002, respectively)   (619)     (759)     140    -18%
        Loss on disposal   (1,699)           (1,699)   *    
 
 
 
   
Loss from discontinued operations   (2,318)     (759)     (1,559)   205%
 
 
 
   
Income before cumulative effect of changes in accounting                    
    principles   17,448      35,477      (18,029)   -51%
Cumulative effect of changes in accounting principles   (15,579)           (15,579)   -100%
 
 
 
   
Net income $ 1,869    $ 35,477    $ (33,608)   -95%
 
 
 
   
Basic earnings per common share:                    
        Income from continuing operations before cumulative                    
            effect of changes in accounting principles $ 0.61    $ 1.13           
        Discontinued operations   (0.07)     (0.02)          
        Cumulative effect of changes in accounting principles   (0.48)                
 
 
         
        Net income per common share $ 0.06    $ 1.11           
 
 
         
Average common shares outstanding   32,617,224      31,911,543           
                     
Dilued earnings per common share:                    
        Income from continuing operations before cumulative                    
            effect of changes in accounting principles $ 0.60    $ 1.08           
        Discontinued operations   (0.07)     (0.02)          
        Cumulative effect of changes in accounting principles   (0.47)                
 
 
         
        Net income per common share $ 0.06    $ 1.06           
 
 
         
Average diluted common shares outstanding   32,997,872      33,348,331           
                     
  *Not meaningful                    


BALLY TOTAL FITNESS HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
           
  June 30   December 31
    2003     2002
 
 
ASSETS          
Current assets:          
        Cash and equivalents $ 16,482    $ 12,907 
        Installment contracts receivable, net   288,062      271,531 
        Other current assets   72,618      92,764 
 
 
                Total current assets   377,162      377,202 
           
Installment contracts receivable, net   249,813      251,074 
Property and equipment, less accumulated depreciation          
    and amortization of $570,768 and $538,613   643,054      657,539 
Goodwill   242,126      242,854 
Trademarks   6,969      6,969 
Intangible assets, less accumulated amortization          
    of $9,731 and $9,453   2,508      2,786 
Deferred income taxes   81,431      81,314 
Deferred membership origination costs   118,481      119,484 
Other assets   31,036      32,652 
 
 
  $ 1,752,580    $ 1,771,874 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current liabilities:          
        Accounts payable $ 56,018    $ 51,752 
        Income taxes payable   2,349      1,497 
        Deferred income taxes   28,450      29,303 
        Accrued liabilities   90,562      87,683 
        Current maturities of long-term debt   27,978      28,904 
        Deferred revenues   253,267      271,031 
 
 
                Total current liabilities   458,624      470,170 
           
Long-term debt, less current maturities   695,672      697,850 
Other liabilities   10,923      10,689 
Deferred revenues   55,499      63,689 
Stockholders' equity   531,862      529,476 
 
 
  $ 1,752,580    $ 1,771,874 
 
 


BALLY TOTAL FITNESS HOLDING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
           
  Six months ended
  June 30
 
    2003     2002
 
 
Operating:          
        Income before cumulative effect of changes in accounting principles $ 17,448    $ 35,477 
        Adjustments to reconcile to cash provided –          
              Depreciation and amortization, including amortization          
                  included in interest expense   40,667      38,440 
              Change in operating assets and liabilities   (28,559)     (47,001)
              Loss on disposal of discontinued operation   1,699       
              Stock-based compensation   122       
 
 
        Cash provided by operating activities   31,377      26,916 
Investing:          
        Purchases and construction of property and equipment   (20,199)     (43,165)
        Purchases of real estate         (11,510)
        Acquisitions of businesses and other   (412)     (6,092)
 
 
        Cash used in investing activities   (20,611)     (60,767)
Financing:          
        Debt transactions –          
              Net borrowings under revolving credit agreement   5,000      25,000 
              Net borrowings (repayments) of other long-term debt   (12,128)     9,850 
              Debt issuance and refinancing costs   (458)      
 
 
        Cash provided by (used in) debt transactions   (7,586)     34,850 
           
        Equity transactions –          
              Proceeds from exercise of warrants         2,513 
              Proceeds from issuance of common stock under stock          
                  purchase and option plans   395      1,324 
              Purchases of common stock for treasury         (860)
 
 
        Cash provided by (used in) financing transactions   (7,191)     37,827 
 
 
           
Increase in cash and equivalents   3,575      3,976 
Cash and equivalents, beginning of period   12,907      9,310 
 
 
Cash and equivalents, end of period $ 16,482    $ 13,286 
 
 
Supplemental Cash Flows Information:          
           
Cash payments for interest and income taxes were as follows –            
                Interest paid $ 26,112    $ 28,141 
                Interest capitalized   (453)     (1,840)
                Income taxes paid, net   1,245      736 
           
Investing and financing activities exclude the following            
        non-cash transactions –            
                Acquisitions of property and equipment          
                    through capital leases/borrowings $ 4,144    $ 7,716 
                Acquisitions of businesses with common stock         8,855 
                Common stock issued under          
                    long-term incentive plan   4,281      4,619 
                Debt, including assumed debt related to acquisitions of business         2,846 


NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(in thousands)(unaudited):


Special items

         During the quarter the Company sold a portion of its non-performing, previously written down installment accounts receivable to a third party for $2.2 million. Based on the carrying value of these accounts, determined using estimates of recoveries expected through routine collection processes, a non-cash charge of $1.7 million ($1.3 million net of taxes) was recorded in the quarter as “Other, net” in the Consolidated Income Summary.

         The Company is reporting as discontinued operations an internet-based start-up company which was liquidated. As a result, the Company recorded a loss from discontinued operations of $1.9 million, net of taxes, during the second quarter of 2003.

         In the second quarter of 2003, the Company changed its accounting method (effective January 1, 2003) for the recognition of recoveries of unpaid dues on inactive membership contracts from accrual-based estimations to a cash basis of recognition, which is considered a preferable method of accounting for such past due amounts. The effect of this change was a cumulative non-cash charge of $15.4 million (net of tax effect of $4.9 million) or $.47 per diluted share. As a result of recording the cumulative effect adjustment as of the beginning of the year, membership revenue increased during the first quarter of 2003 by $1.1 million. As reported in the first quarter, the Company additionally implemented the provisions of newly issued Statement of Financial Accounting Standards No. 143 Accounting for Asset Retirement Obligations at the beginning of the year. As a result, a non-cash cumulative adjustment of $.2 million was recorded during the first quarter of 2003 to provide for estimated future restoration obligations on the Company’s leaseholds.

         At the end of the second quarter the Company announced the completion of the refinancing of its existing $132.5 million term loan and $63.5 million outstanding on its revolving credit agreement by issuing $235 million in aggregate principal of 10 1/2% Senior Notes due 2011 in an offering under Rule 144A and Regulation S under the Securities Act of 1933, as amended, and entered into a new $90 million Senior Secured Revolving Credit Facility due 2008. These transactions were funded in July 2003. As a result, the Company will write off unamortized issuance costs from the extinguished debt in the third quarter.




NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(in thousands)(unaudited)
(continued):


Installment contracts receivable          
  June 30   December 31
    2003     2002
 
 
Current:          
        Installment contracts receivable $ 417,165    $ 404,707 
                Unearned finance charges   (36,642)     (36,015)
                Allowance for doubtful receivables and cancellations   (92,461)     (97,161)
 
 
  $ 288,062    $ 271,531 
 
 
           
Long-term:          
        Installment contracts receivable $ 344,186    $ 343,749 
                Unearned finance charges   (24,143)     (22,396)
                Allowance for doubtful receivables and cancellations   (70,230)     (70,279)
 
 
  $ 249,813    $ 251,074 
 
 


A summary of the allowance for doubtful receivables and cancellations activity is as follows:

                       
  Three months ended   Six months ended
  June 30   June 30
 
 
    2003     2002     2003     2002
 
 
 
 
Balance at beginning of period $ 167,445    $ 134,032    $ 167,440    $ 130,504 
                       
Contract cancellations and                      
    write-offs of uncollectible                      
    amounts, net of recoveries   (83,287)     (86,387)     (173,904)     (177,220)
Provision for cancellations and                      
    doubtful receivables   78,533      83,215      169,155      177,576 
 
 
 
 
Balance at end of period $ 162,691    $ 130,860    $ 162,691    $ 130,860 
 
 
 
 


NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(in thousands)(unaudited)
(continued):


Reconcilation of net income to EBITDA and EBITDA as adjusted
                       
  Three months ended   Six months ended
  June 30   June 30
 
 
    2003     2002     2003     2002
 
 
 
 
Net income $ 6,699    $ 16,075    $ 1,869    $ 35,477 
Add:                      
          Depreciation and amortization   19,086      18,950      38,642      36,370 
          Interest expense   13,936      13,547      27,921      28,190 
          Income tax provision   2,727      5,176      6,242      5,704 
          Loss from discontinued operations   1,935      318      2,318      759 
          Cumulative effect of accounting changes               15,579       
 
 
 
 
EBITDA   44,383      54,066      92,571      106,500 
Add (deduct):                      
          Stock-based compensation   122            122       
          Other, net   1,704      (89)     1,820      (163)
 
 
 
 
EBITDA as adjusted $ 46,209    $ 53,977    $ 94,513    $ 106,337 
 
 
 
 


Membership statistics

New membership originations and other key data:
                       
  Three months ended   Six months ended
  June 30   June 30
 
 
    2003     2002     2003     2002
 
 
 
 
New joining members   237      221      481      456 
Average committed monthly fee (dollars) $ 38.76    $ 43.45    $ 40.76    $ 44.19 
Average committed duration (in months)   30.7      29.8      30.6      30.5 
Gross committed membership fees $ 279,737    $ 279,981    $ 591,102    $ 600,728 
    Same club   259,692      267,975      542,183      567,240 
                       
Supplemental operating data:                      
Weighted average fitness centers (locations)   414      412      412      409 
Members (end of period)   3,978      3,978      3,978      3,978 


NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(in thousands)(unaudited)
(continued):

         Gross committed membership fees reflect the total collection potential during the initial financing term of initiation fees, dues, finance charges and membership-related products and services from new members joining during a period and are an important measure used by management to evaluate membership sales trends. The following table reconciles gross committed membership fees to net initial membership fees originated for each of the periods:

                       
  Three months ended   Six months ended
  June 30   June 30
 
 
    2003     2002     2003     2002
 
 
 
 
Gross committed membership fees $ 279,737    $ 279,981    $ 591,102    $ 600,728 
Less: Committed monthly dues (65,440)   (56,875)   (132,911)   (121,215)
  Provision for doubtful receivables              
      and cancellations (78,533)   (83,215)   (169,155)   (177,576)
  Unearned finance charges and other (44,752)   (37,716)   (93,787)   (80,232)
  Products and services revenues              
      included in membership programs (32,859)   (17,658)   (65,320)   (36,999)
 
 
 
 
Initial membership fees originated, net $ 58,153    $ 84,517    $ 129,929    $ 184,706 
 
 
 
 


Components of membership revenue are as follows:                      
  Three months ended   Six months ended
  June 30   June 30
 
 
    2003     2002     2003     2002
 
 
 
 
Initial membership fees:                      
        Originated, net $ 58,153    $ 84,517    $ 129,929    $ 184,706 
        Decrease (increase) in deferral   18,411      6,507      24,644      (1,963)
 
 
 
 
    76,564      91,024      154,573      182,743 
Dues:                
        Dues collected   94,332      95,393      190,004      185,908 
        Decrease in deferral   1,298      1,913      1,845      2,373 
 
 
 
 
    95,630      97,306      191,849      188,281 
 
 
 
 
Membership revenue $ 172,194    $ 188,330    $ 346,422    $ 371,024 
 
 
 
 


NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(in thousands)(unaudited)
(continued):


                       
Products and services Three months ended   Six months ended
  June 30   June 30
 
 
    2003     2002     2003     2002
 
 
 
 
Net revenues:                      
        Retail and nutritional supplements–                      
                Membership programs $ 5,387    $ 6,725    $ 11,377    $ 15,510 
                Other sales   14,550      14,409      29,615      28,233 
        Personal training–                      
                Membership programs   27,472      10,933      53,943      21,489 
                Other sales   26,883      19,695      53,255      37,396 
        Financial services         1,556      1,240      3,107 
 
 
 
 
    74,292      53,318      149,430      105,735 
Direct operating costs and expenses:                      
        Retail and nutritional supplements   17,129      15,699      34,675      32,045 
        Personal training   30,409      18,053      59,884      34,740 
 
 
 
 
    47,538      33,752      94,559      66,785 
 
 
 
 
Direct operating margin $ 26,754    $ 19,566    $ 54,871    $ 38,950 
 
 
 
 
Margin percentage   36%     37%     37%     37%

Analysis of cash flows and liquidity

         The Company has provided disclosure of free cash flow in this release because management believes that it is an important measure of liquidity and investors are focused on the Company’s ability to reduce overall debt. The following table summarizes free cash flow for each of the periods:

                       
  Three months ended   Six months ended
  June 30   June 30
 
 
    2003     2002     2003     2002
 
 
 
 
Cash provided by (used in) operating activities $ 12,076    $ (1,029)   $ 31,377    $ 26,916 
Less: Cash used in investing activities   (10,781)     (23,710)     (20,611)     (60,767)
 
 
 
 
Free cash flow (deficit) $ 1,295    $ (24,739)   $ 10,766    $ (33,851)
 
 
 
 

         Cash flows from operating activities were $31.4 million in the first six months of 2003, compared to $26.9 million in the 2002 period. Over the past two years, the Company sold a portion of its installment contracts receivable portfolio to a major financial institution in three bulk sales at net book value, with combined proceeds of approximately $128 million. Excluding the impact of the sales of receivables and net of the change in dues prepayments during the periods, cash flows from operating activities were $50.3 million in first six months of 2003, compared to $55.3 million in 2002.




NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(in thousands)(unaudited)
(continued):

         The following table sets forth cash flows from operating activities on a comparable basis to add back actual cash collections on the sold portfolios and to reflect the impact of changes in dues prepayments during each of the periods:

                       
  Three months ended   Six months ended
  June 30   June 30
 
 
    2003     2002     2003     2002
 
 
 
 
Cash flows from (used in) operating activities, as reported $ 12,076    $ (1,029)   $ 31,377    $ 26,916 
        Collections on installment contracts receivable sold   6,415      14,143      19,553      31,100 
        Changes in dues prepayments   (773)     (1,437)     (634)     (2,762)
 
 
 
 
Cash flows from operating activities                      
    on a comparable basis $ 17,718    $ 11,677    $ 50,296    $ 55,254 
 
 
 
 


         Capital expenditures totaled $20.6 million in the first six months of 2003 compared to $60.8 million in the first six months of 2002. Capital expenditures for 2003 are not expected to exceed $50 million. The following table details cash used in investing activities for each of the periods:

                       
  Three months ended   Six months ended
  June 30   June 30
 
 
    2003     2002     2003     2002
 
 
 
 
Club improvements $ 1,935    $ 4,981    $ 6,945    $ 11,449 
New clubs   5,098      9,437      7,950      20,343 
Club remodels and expansions   1,913      4,767      3,356      9,023 
Administrative and systems   1,826      948      1,948      2,350 
Real estate purchases and other   9      3,577      412      17,602 
 
 
 
 
  $ 10,781    $ 23,710    $ 20,611    $ 60,767 
 
 
 
 

         The Company paid down $7.1 million in debt during the first six months of 2003.

         As of July 31, 2003, the Company had $6.0 million of letters of credit outstanding and $84.0 million available on its $90 million revolving credit line.


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