GAL and all this is an important post: A recent post at Rogers made
me look carefully at the Zacks estimates, annual and quarter:
1. 1998 estimate: $0.40/share:
Let's start with the 0.40/shr 98 estimate: from the 10K we see that,
leaving the extraordinary charges out, their 97 loss was 23 million.
Their interest expense in 98 will be roughly 40 million, vs 45 in 97
(this assume they do not use the credit line). So based on 20
million shares outstanding (we will ignore the coming 2.5 million),
their net income (we will ignore taxes, assume they have enough tax
credits from past losses which is conservative) should be:
$0.40/share*20 million shares = 8 million.
This means that their operating income would have to be:
8 million + 40 million = 48 million since we need to cover interest
payments (i.e, 48 million - 40 million = 8 million). Operating
income in 97 was 19 million. So we see that reaching the 98 estimate
requires a 150% increase in operating income! No further comment.
No amount of business building/cost savings will achieve this!here
are the 10K 97 income statement numbers for reference:
CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share data)<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net revenues: Membership revenues-- Initial membership fees on financed
memberships originated $ 352,661 $ 290,378 $ 309,974
Initial membership fees on
paid-in-full memberships originated 58,117 85,624 95,695
Dues collected 194,084 182,909 177,783
Change in deferred revenues 961 29,791 16,813
---------- ---------- ----------
605,823 588,702 600,265
Finance charges earned 39,218 36,405 36,889
Fees and other 15,996 14,092 16,220
---------- ---------- ----------
661,037 639,199 653,374
Operating costs and expenses:
Fitness center operations 384,120 366,466 396,564
Member processing and collection centers 38,627 42,257 50,255
Advertising 45,042 47,428 50,037
General and administrative 28,952 23,586 21,603
Provision for doubtful receivables 96,078 80,350 72,145
Depreciation and amortization 52,878 55,940 57,359
Change in deferred membership
origination costs (4,597) 4,113 428
---------- ---------- ----------
641,100 620,140 648,391
---------- ---------- ----------
Operating income 19,937 19,059 4,983
Interest income 1,928 988 179
Interest expense (45,021) (47,644) (43,750)
---------- ---------- ----------
Loss before income taxes and
extraordinary item (23,156) (27,597) (38,588)
Income tax benefit (provision) (300) 2,700 7,188
---------- ---------- ----------
Loss before extraordinary item (23,456) (24,897) (31,400)
Extraordinary gain (loss) on
extinguishment of debt (21,414) 5,655
---------- ---------- ----------
Net loss $ (44,870) $ (19,242) $ (31,400)
========== ========== ==========
Basic and diluted earnings (loss) per common share (pro forma for 1995):
Loss before extraordinary item $ (1.51) $ (2.04) $ (3.25)
Extraordinary gain (loss) on
extinguishment of debt (1.37) .46
---------- ---------- ----------
Net loss $ (2.88) $ (1.58) $ (3.25)
2. Q1 98 Zacks estimate: -0.01/share
Here is where the problem is. Q1 is BFT's strongest revenue
quarter. for a 0.40/share year, this estimate should have been
higher! This means they expect the company to make .41/share during
the other 3 quarters (I guess assuming all the new initiatives will
result in much greater revenues later). What I am trying to say is
that BFT will come to a bottleneck later in the year but IMO will
meet easily, probably even blow away Q198. In 97, they had
Q1 income of 2.5 million. Even though some expense categories will be
higher in 98, interest expense will be about 1.5 million lower, with
a 3% increase in revenues vs. Q197 (just guessing) it should not be
difficult to perhaps show a profit of a couple of a couple million
for a 0.10/share profit! What do you guys think? Following is the Q1
96 income statement for reference:
) Three months
ended March 31
----------------------
1997 1996
---------- ----------
Net revenues:
Membership revenues -
New............................................. $ 114,854 $ 112,424
Dues............................................ 49,600 45,768
Finance charges earned............................ 9,269 9,595
Fees and other.................................... 3,598 3,294
---------- ----------
177,321 171,081
Operating costs and expenses:
Fitness center operations......................... 96,450 96,299
Member processing and collection centers.......... 9,661 12,212
Advertising....................................... 12,686 12,611
General and administrative........................ 5,921 5,789
Provision for doubtful receivables................ 25,537 20,902
Depreciation and amortization..................... 13,065 13,676
---------- ----------
163,320 161,489
---------- ----------
Operating income.................................... 14,001 9,592
Interest expense.................................... 11,379 11,849
---------- ----------
Income (loss) before income taxes................... 2,622 (2,257)
Income tax provision ............................... 100 200
---------- ----------
Net income (loss)................................... $ 2,522 $ (2,457)
========== ==========
Net income (loss) per common share.................. $ .19 $ (.20)
========== ========== |
