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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 3, 2006
BALLY TOTAL FITNESS HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
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001-13997
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36-3228107 |
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(I.R.S. Employer
Identification No.) |
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8700 West Bryn Mawr Avenue, Chicago, Illinois
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60631 |
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(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code (773) 380-3000
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c)) |
TABLE OF CONTENTS
BALLY TOTAL FITNESS HOLDING CORPORATION
FORM 8-K
Current Report
Item 1.01 Entry into a Material Definitive Agreement.
On October 3, 2006, Bally Total Fitness Holding Corporation
(the Company) entered into a
commitment letter (the Commitment Letter) with JPMorgan Chase Bank, N.A. (JPMorgan), J.P.
Morgan Securities Inc., Morgan Stanley Senior Funding, Inc., Canyon
Capital Advisors LLC and Goldman Sachs Credit Partners L.P.
(collectively, the Lenders), with respect to a new senior credit facility (the New Facility)
that provides for (i) a tranche B term loan facility in the amount of $205,900,000, (ii) a
delayed-draw term loan facility in the amount of $34,100,000, and (iii) a revolving credit facility
in the amount of $40,000,000. The proceeds from the New Facility will be used to refinance the
credit facilities outstanding under the Companys existing credit agreement, fund capital expenditures and
provide for additional liquidity. A copy of the Commitment Letter is filed as Exhibit 10.1 hereto
and incorporated herein by reference.
The closing of the New Facility is expected to occur on
October 16, 2006. The obligations of the
Lenders under the Commitment Letter are subject to customary conditions as more fully described in
the Commitment Letter. The Lenders commitment under the Commitment Letter is not subject to the
New Facility being syndicated by the Lenders.
The final maturity date for the New Facility will be the
earlier of (i) October 1, 2010 and (ii)
the date 14 days prior to the maturity date of the Companys 9-7/8% Senior Subordinated Notes due
2007, including if such Senior Subordinated Notes have been extended (as extended from time to time);
provided, however, that such extended maturity date for the New Facility shall not be later than October
1, 2010. To the extent the Senior Subordinated Notes are not otherwise extended, the Senior
Subordinated Notes shall be repaid, renewed or extended on terms reasonably satisfactory to
JPMorgan by their October 15, 2007 maturity date; provided, however, a refinancing, renewal or other extension on
terms consistent with or better than the existing indenture governing the Senior Subordinated Notes
shall be acceptable to JPMorgan; provided further, that the consent of JPMorgan shall not be
required for (i) the issuance of common equity of the Company to holders of Senior Subordinated
Notes as consideration for amendments and or extension, (ii) increases in interest rates on the
Senior Subordinated Notes which are payable in kind at the Companys option, (iii) other amendments
or revisions which do not require cash payments and which are not adverse to the Lenders and (iv)
reimbursement of out-of-pocket expenses of such holders.
Item 2.02 Results of Operations.
On August 11, 2006, the Company announced that it anticipates the amount of cash contribution for
2006 will be 10 to 20% lower than the $120 million cash contribution previously disclosed for 2005.
The Company reaffirms this guidance. The 2005 cash contribution, without giving effect to the
New Facility, is reconciled to operating income at the end of this Item 2.02.
Cash contribution is not a measurement of our financial performance under GAAP and should not
be considered as an alternative to net income, operating income or any other performance measures
derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a
measure of liquidity. The Company uses cash contribution as a supplemental measure of operating
performance and believes it is a useful measure for management and investors for analytical
purposes in evaluating cash generated by business operations. We calculate cash contribution by
adjusting operating income to eliminate depreciation and amortization, and to adjust for the items
set forth in the reconciliation at the end of this release, which are not indicative of our
on-going operations as considered by management for internal review purposes.
Cash contribution has limitations as an analytical tool, and you should not consider it in
isolation, or as a substitute for analysis of our operating results or cash flow from operations as
reported under GAAP. Some of these limitations are: (i) it does not reflect our cash expenditures
for contractual commitments; (ii) it does not reflect the
cost of our non-cash stock-based compensation which is a regular part of our employee compensation
strategy; (iii) it does not reflect changes in, or cash requirements for, our working capital; (iv)
it does not take into account certain items which are recurring in nature; (v) it does not reflect
the significant interest expense, or the cash requirements necessary to service interest or
principal payments, on our indebtedness; (vi) although depreciation and amortization are non-cash
charges, the assets being depreciated and amortized will often have to be replaced in the future,
and our non-GAAP measure does not reflect cash requirements for such replacements or the related
expense; (vii) it does not reflect the impact of earnings or charges resulting from the significant
costs we have incurred and are likely to continue to incur in audit, legal and professional fees;
and (viii) other companies, including other companies in our industry, may calculate these measures
differently than we do, limiting their usefulness as a comparative measure.
Because of these limitations, cash contribution should not be considered as a measure of
discretionary cash available to us to invest in the growth of our business or reduce our
indebtedness. You are encouraged to evaluate each adjustment and whether you consider it
appropriate. We compensate for these limitations by relying primarily on our GAAP results.
Forward looking statements in this Form 8-K release including, without limitation, statements
relating to the Companys 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: the outcome of the SEC and Department of Justice investigations; the disclosure by the
Companys management and independent auditors of the existence of material weaknesses in internal
controls over financial reporting; competition; success of operating initiatives, advertising and
promotional efforts; the possibility that the Companys common stock could be delisted from the New
York Stock Exchange; existence of adverse publicity or litigation (including various shareholder
litigations and associated insurance rescission actions) and the outcome thereof and the costs and
expenses associated therewith; acceptance of new product and service offerings; changes in business
strategy or plans; availability, terms and development of capital; business abilities and judgment
of personnel; general economic and business conditions; changes in, or the failure to comply with,
government regulations; ability to remain in compliance with, or obtain waivers under, the
Companys loan agreements and indentures; ability to satisfy long-term obligations as they become
due; ability to maintain existing or obtain new sources of financing, on acceptable terms or at
all, to satisfy the Companys cash needs and obligations; changes in terms or other requirements by
vendors; unexpected capital requirements; the amount of cash contribution, including unexpected
variability or recurrence of expenses or income included as adjustments, such as audit, legal and
other professional fees, insurance proceeds, stock based compensation and other restructuring
charges, as well as managements judgment as to each of these other adjustment amounts; and other
factors described in filings of the Company with the SEC.
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Year ended |
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Cash Contribution Reconciliation for year-ended December 31, 2005 ($Millions) |
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December 31, 2005 |
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Operating Income |
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$ |
75.7 |
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Depreciation and amortization |
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62.6 |
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138.3 |
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Asset impairment charges |
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10.1 |
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Impairment of goodwill and other intangibles |
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1.2 |
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149.6 |
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Equipment write-off |
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4.6 |
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Stock based compensation |
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4.9 |
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Insurance reserves |
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3.5 |
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Higher expenses for audit, legal and other professional fees |
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16.1 |
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Insurance proceeds |
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(7.3 |
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Cash based rent over GAAP rent |
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(11.7 |
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Change in deferred revenue |
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(34.8 |
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Crunch Fitness contribution |
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(4.9 |
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Cash Contribution |
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$ |
120.0 |
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Item 9.01 Financial Statements and Exhibits
(d) Exhibits
10.1 Commitment Letter,
dated as of October 3, 2006, among Bally Total Fitness Holding Corporation
and JPMorgan Chase Bank, N.A., J.P. Morgan Securities Inc., Morgan
Stanley Senior Funding, Inc., Canyon Capital Advisors
LLC, and Goldman Sachs Credit Partners L.P.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this Report to be signed on its behalf by the undersigned hereunto duly authorized.
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BALLY TOTAL FITNESS HOLDING CORPORATION
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Registrant |
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Dated: October 3, 2006 |
/s/ Marc D. Bassewitz
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Marc D. Bassewitz |
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Senior Vice President, Secretary and General Counsel |
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