Fitness financials: Bally debt holders OK waiver, plus Cybex, Gaiam, adidas/Reebok, Crocs, Nautilus, Wal-Mart, Costco

Bally debt holders OK waiver
Bally Total Fitness (NYSE: BFT) said it has received approval from a majority of holders of its senior notes to waive financial reporting covenant defaults until July 10 after the company failed to file its 2005 financials on time.

Majority approval was given by holders of the company’s 10-1/2 percent senior notes due 2011 and 9-7/8 percent senior subordinated notes due 2007. It extends the reporting deadline for the company’s financial reports for the first quarter of 2006 until July 10 and the second quarter until Sept. 11.

The company had earlier said lenders under Bally’s $275 million senior secured credit facility agreed to extend financial reporting deadlines for the same periods. Consenting shareholders receive $10 cash or 4.44 unregistered shares of Bally common stock for each $1,000 amount in notes at the consenting party’s option.

Bally will sell unregistered stock to Wattles Capital Management and another large shareholder to finance payment of the consent fees and other expenses. The company has about 38.5 million outstanding shares and expects to issue about 2.75 shares relating to the lender and note holder consent process.

Cybex shares tumble on stock offering announcement
Following the news of its secondary offering of common stock, shares of Cybex (AMEX: CYB) plummeted on the American Stock Exchange on April 4. Shares were down $0.35, or 5.8 percent, to $5.64 during afternoon trading, after earlier trading as low as $5.28.

Cybex said it would offer 3.5 million shares of its common stock, including 1.75 million by common stockholders and 1.75 by UM Holdings, which is owned by Cybex CEO John Aglialoro and his wife and business partner Joan Carter. The company said proceeds from the offering would be used to pay down debt, as well as to expand product offerings and manufacturing capacity.

B. Riley said it is maintaining Cybex’s “Buy” rating and a price target of $7.50 per share set just days before the offering.Â

“We anticipate that the offering will be dilutive to earnings by a few pennies per share on an annual basis in the near term, depending on the timing of the deal and the ultimate use of proceeds and timing of potential legal payments and capital expenditures for the new manufacturing facility,” said B. Riley analyst Ian Corydon in a research note on April 4.

“We are not surprised to see Aglialoro sell stock, we believe the sale will contribute to better liquidity, and we believe Aglialoro remains very much committed to the company and confident in its prospects,” Corydon added. “We are somewhat surprised to see (Cybex) offer stock, as the company’s balance sheet has improved significantly over the past few years and (Cybex) is generating strong cash flow, including $7.2 million in cash flow from operations and $2 million in free cash flow in (fiscal 2005).”

Cybex ended April 4’s trading at $5.71, down $0.28 from the previous day. In the last 52 weeks, the stock has traded as low as $2.71 and as high as $6.81.

Gaiam hires several senior management, files registration request with SEC
Gaiam (Nasdaq: GAIA) said it has hired Vilia Vamentine as chief financial officer, Rob Sussman as president of new media and Jane Pemberton as president of its worldwide distribution. Janet Mathews, Gaiam’s current CFO, has been promoted to chief administrative officer.

Valentine joins Gaiam from Internet provider Verio where as the acting CFO she managed all financial matters for domestic and international operations. Sussman joins Gaiam as president of New Media from Sundance Channel where he was a founding member of the channel, and its executive vice president and CFO. Pemberton has served in senior management roles at The Walt Disney Company, 20th Century Fox Home Entertainment and Mommy & Me, and in her new role, she will oversee Gaiam’s development of original programming, content acquisition, and distribution to worldwide retail. Mathews has been CFO and vice president of business development since joining Gaiam in 1996.

In other news, Gaiam said it has filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission to expand its business. Once approved, Gaiam will be able to issue up to an aggregate of $100 million of its Class A common stock under the registration statement – although it said it has no immediate plans to issue any shares. When it does, the net proceeds will be used for general corporate purposes, including expansion of Gaiam’s business.

Lastly, Target awarded Gaiam with 2005 Vendor of the Year honors, which recognizes and honors vendors for their business practices, commitment to Target’s success, support of Target’s differentiation strategies and brand character, value and reliability. This is the second time that Gaiam has received this honor.

adidas to meet with investors about Reebok’s future
adidas CEO Herbert Hainer is meeting investors in London April 11 to unveil a new strategy for its newly acquired Reebok brand. adidas (ADSG.DE)Â had a rocky time last month when it reported a sharp fall in orders at Reebok at the end of 2005, raising worries that it might have to launch an expensive revamp. This would stretch its capacities at a crucial time when it is tackling a sales campaign for soccer products for the World Cup.

Analyst expectations are mixed. Some are skeptical that adidas will succeed in convincing markets of Reebok’s potential, while others are hoping that the company will reveal improved prospects for savings from the deal with Reebok.

Analysts at Credit Suisse said they expect Reebok to focus in the future on women’s wear, U.S. team sports and black suburban consumers with mid- to high-priced fashion and sports gear. “From a regional point of view we expect Reebok to build on its stronghold markets U.S., UK and India and to improve its position in Central and Eastern Europe with the help of Adidas,” it said.

adidas has forecast that Reebok’s sales would fall at a mid single-digit percentage rate over the February-December period. Costs for the takeover have hit adidas’ earnings, forcing it to post a loss in the fourth quarter, an unusual event for a firm that has seen enormous profit growth rates in the past. adidas bought Reebok for $3.8 billion earlier this year.

Crocs names new CFO
At Crocs (Nasdaq: CROX), Peter Case, currently senior vice president of finance, has assumed the additional title of chief financial officer, replacing Caryn Ellison, who will continue to serve as vice president of finance. Prior to joining Crocs, Case served as executive vice president, CFO and treasurer for Ashworth Inc.

Nautilus downgraded
Nautilus (NYSE: NLS) was downgraded by DA Davidson from “Buy” to “Neutral” on April 7. It ended the day on the New York Stock Exchange down $0.23 at $16.72. In the last six months analysts have had mixed responses to Nautilus stock, with some downgrading and others upgrading.

Wal-Mart and Costco report March same-store sales
The month of March took a chunk out of Wal-Mart Stores (NYSE: WMT), but left Costco (Nasdaq: COST) unscathed. Most retailers attributed to their sub-par sales to the seasonal shift of Easter and uncooperative spring weather.

For the entire company, Wal-Mart delivered a 1.4 percent increase in same-store sales — near the bottom of its 1 percent to 3 percent forecast and just a touch above the 1.2 percent analysts were expecting. Sales were up 9.4 percent: $30.6 billion versus $27.9 billion in 2005. For the Wal-Mart division alone, it fell short of the 1.2 percent estimate with a same-store-sales gain of 0.8 percent. The previous year it reported a 4.8 percent increase.

Costco, on the other hand, reported a 7 percent rise in same-store sales, beating analysts’ 5 percent forecast. It also announced it would raise its annual membership fees by $5.

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