BERY BERY important post!
Time to edit run out on previous post.
The company continues to capitalize commissions paid on memberships
sold instead of expensing them. This asset is now worth 99 million.
This is the source of the so called improvement in profitability. The
change in revenue recognition produced a loss in pass periods and
inflates earnings now that most memberships are financed. Nice
trick but the cash flows still look like shit.
Do you want to see some magic? See the sudden appearance of the
asset in question in a amended 10Q previous to the summer 97 stock
offering. This is one of the most important findings on BFT's
fraudulent accounting which will become part of history.
10Q 3/97
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BALLY TOTAL FITNESS HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
March 31 December 31
1997 1996
----------- ----------- ----------- -----------
ASSETSCurrent assets:
Cash and equivalents......................... $ 9,924 $ 16,534
Installment contracts receivable, less allowance for doubtful receivables
and cancellations of $45,291 and
$48,471.................................... 136,710 153,235
Retained interest in sold installment
contracts receivable....................... 16,872
Other current assets......................... 28,314 24,075
----------- -----------
Total current assets....................... 191,820 193,844
Installment contracts receivable, less allowance for doubtful receivables
and cancellations of $28,238 and
$37,624...................................... 89,901 146,972
Retained interest in sold installment
contracts receivable......................... 43,528
Property and equipment, less accumulated
depreciation and amortization of $312,628
and $304,865................................. 320,666 325,459
Intangible assets, less accumulated
amortization of $50,745 and $49,619.......... 104,599 105,725
Deferred income taxes.......................... 19,321 15,974
Other assets................................... 24,988 25,506
----------- -----------
$ 794,823 $ 813,480
and 10Q/A 3/97
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CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(In thousands)
(As restated)
March 31 December 31
1997 1996
----------- -----------
ASSETSCurrent assets:
Cash and equivalents......................... $ 9,924 $ 16,534
Installment contracts receivable, less
unearned finance charges of $26,887 and
$24,467 and allowance for doubtful
receivables and cancellations of $51,587
and $48,471................................ 161,962 153,235
Other current assets......................... 28,314 24,075
----------- -----------
Total current assets....................... 200,200 193,844
Installment contracts receivable, less unearned finance charges of $12,508 and
$11,382 and allowance for doubtful receivables and cancellations of $40,042
and $37,624 ................................. 155,049 146,972
Property and equipment, less accumulated
depreciation and amortization of $312,628
and $304,865................................. 320,666 325,459
Intangible assets, less accumulated
amortization of $50,745 and $49,619.......... 104,599 105,725
Deferred income taxes ......................... 17,003 13,656
Deferred membership origination costs.......... 82,442 82,140
Other assets................................... 24,988 25,506
----------- -----------
$ 904,947 $ 893,302
=========== ===========
RESTATEMENT
As more fully described in the "Summary of significant accounting policies
Restatement and Membership revenue recognition" notes to the consolidated
financial statements included in the Company's Annual Report on Form 10-K/A for
the year ended December 31, 1996, following a series of extensive discussions
with the Staff of the Securities and Exchange Commission (the "SEC Staff"), the
Company has agreed to restate its condensed consolidated financial statements
for all periods presented to reflect a change in the method of recognizing
membership revenue. Summarized financial information illustrating the effect of
the restatement on the Company's condensed consolidated financial statements is
as follows:
March 31, 1997 March 31, 1996
---------------------- ---------------------
As As
originally As originally As
reported restated reported restated
---------- --------- ---------- ---------
Financial position - Deferred membership origination
costs............................. $ -- $ 82,442
Current deferred revenues........... 54,005 267,456
Long-term deferred revenues......... 25,529 101,706
Stockholders' equity................ 219,036 18,479
Results of operations -
Net revenues........................ $177,321 $168,033 $171,081 $163,892
Operating income.................... 14,001 5,799 9,592 43
Net income (loss).................... 2,522 (5,680) (2,457) (11,956)
Net income (loss) per common
share.............................. .19 (.46) (.20) (.98RESTATEMENT
As more fully described in the "Summary of significant accounting policies
Restatement and Membership revenue recognition" notes to the consolidated
financial statements included in the Company's Annual Report on Form 10-K/A for
the year ended December 31, 1996, following a series of extensive discussions
with the Staff of the Securities and Exchange Commission (the "SEC Staff"), the
Company has agreed to restate its condensed consolidated financial statements
for all periods presented to reflect a change in the method of recognizing
membership revenue. Summarized financial information illustrating the effect of
the restatement on the Company's condensed consolidated financial statements is
as follows:
March 31, 1997 March 31, 1996
---------------------- ---------------------
As As
originally As originally As
reported restated reported restated
---------- --------- ---------- ---------
Financial position - Deferred membership origination
costs............................. $ -- $ 82,442
Current deferred revenues........... 54,005 267,456
Long-term deferred revenues......... 25,529 101,706
Stockholders' equity................ 219,036 18,479
Results of operations -
Net revenues........................ $177,321 $168,033 $171,081 $163,892
Operating income.................... 14,001 5,799 9,592 43
Net income (loss).................... 2,522 (5,680) (2,457) (11,956)
Net income (loss) per common
share.............................. .19 (.46) (.20) (.98)
6
BALLY TOTAL FITNESS HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
In addition, the Company changed its first quarter 1997 application of Statement
of Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities", which
provides new accounting and reporting standards for sales, securitizations, and
servicing of receivables and other financial assets, secured borrowing and
collateral transactions, and extinguishments of liabilities occurring after
December 31, 1996. SFAS No. 125 addresses whether a transfer of financial assets
constitutes a sale and, if so, the determination of any resulting gain or loss.
SFAS No. 125 is based on a "financial- components approach" that focuses on
control. Under this approach, following a transfer of financial assets
(including portions of financial assets), an entity recognizes the assets it
controls and liabilities it has incurred, and derecognizes financial assets for
which control has been surrendered and financial liabilities that have been
extinguished. The Company, based upon a series of consultations with its
independent auditors, initially believed that under the Company's securitization
facility, installment contracts receivable originating and being sold to a
special purpose entity after December 31, 1996 qualified for "sale treatment"
under SFAS No. 125. However, based upon Emerging Issues Task Force Issue 96-20
guidance, the Company and its independent auditors now believe that sales of
installment contracts receivable after December 31, 1996 do not qualify for
"sale treatment" under SFAS No. 125. As a result of this additional restatement
of the Company's first quarter 1997 condensed consolidated financial statements,
assets relating to installment contracts receivable and long-term debt each
increased by approximately $30,000 at March 31, 1997, and finance charges earned
and interest expense each increased by approximately $500 for the three months
ended March 31, 1997. |
