Fitness financials: Bally emerges from Ch. 11 as private company, plus Brunswick, Collective Brands, Forzani Group, Finish Line, Crocs
Fitness financials: Bally emerges from Ch. 11 as private company, Moody's downgraded Brunswick's outlook to 'negative' , Collective Brands said the Stride Rite acquisition would not add to 2008 earnings, Forzani improved sales for the back-to-school selling period, Finish Line posted a 2Q loss, and the Crocs CEO exercised options ans sold stock.
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Bally emerges from Ch. 11 as private company
Bally Total Fitness (Pink Sheets: BFTH) has emerged from Chapter 11 bankruptcy as a private company just two months after filing for bankruptcy protection at the end of July. The restructuring arrangements funded by Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund L.P. became effective on Oct. 1.
Harbinger invested approximately $233.6 million in exchange for 100 percent of the common equity of the reorganized company.
In conjunction with its emergence from Chapter 11, Bally converted its debtor-in-possession facility to an exit credit facility. Morgan Stanley Senior Funding is the sole lead arranger and sole bookrunner for the $292 million super-priority secured DIP and senior secured exit credit facilities.
Bally added that funds that had been deposited for notes which were to be issued in the rights offering associated with a noteholder sponsored restructuring plan, which was not consummated, will be returned promptly.
Moody’s downgrades Brunswick’s outlook to ‘negative’
Credit ratings agency Moody’s Investors Service revised Brunswick Co.’s (NYSE: BC) outlook to “Negative” from “Stable,” due to increased uncertainty about consumer spending and the cyclical downturn of the marine industry. Brunswick is also the parent of Life Fitness, Parabody and Hammer Strength.
A “Negative” outlook means a downgrade could occur, though it is not inevitable.
“While Moody’s expects a certain amount of volatility for a cyclical company such as Brunswick, the combination of high gas prices, which don’t show any signs of materially abating, the soft housing market, and the risk of sub prime contagion may prolong the marine industry downturn,” Moody’s Senior Credit Officer Kevin Cassidy said in a statement.
Moody’s said the outlook is unrelated to Brunswick’s cash flow, which Moody’s said continues to be strong.
Collective Brands says Stride Rite acquisition not to add to 2008 earnings
Collective Brands (NYSE: PSS) said at an investor conference that it expects the August acquisition of The Stride Rite Corp. to result in cost efficiencies but no earnings gains in 2008. Saucony and Hind are now under the wing of Collective Brands as part of the Stride Rite acquisition.
The conference was the company’s first since its $800 million takeover of the rival shoe store chain and its name change to Collective Brands from Payless ShoeSource.
Collective Brands said the impact of purchase accounting will prevent the Stride Rite acquisition from contributing to earnings per share in 2008. Excluding purchase accounting, the company said Stride Rite’s earnings contribution is expected to exceed interest expense.
The company expects the acquisition to result in cost efficiencies of about $5 million in 2008. The company predicts efficiencies of $12 million to $15 million in 2009 and between $25 million and $30 million in 2010.
Collective Brands said its new business model, which combines retail, wholesale and licensing units, is expected to drive improvement in sales, gross margin, liquidity and cash flow. The company also operates Collective Licensing International, a brand development and licensing company.
The company cited its portfolio of brands, international growth opportunities, efficient supply chain and strong marketplace positioning among other competitive strengths.
Collective Brands shares jumped as high as $1.85 to $22.69 in trading on Sept. 27 and closed at $22.04. The stock has traded between $20.38 and $37.20 during the past 52 weeks.
Forzani improves sales for back-to-school selling period
For the fiscal 2008 back-to-school selling season, the Forzani Group’s (TSX: FGL) report card showed improved sales and flat margins. Retail system sales for the seven-week period ended Sept. 16 increased 4.9 percent over the same period last year.
Overall same store sales for the seven-week period increased 1.5 percent versus a 4-percent increase in fiscal 2007. Corporate same-store sales were flat, against an increase of 1.8 percent in the prior year. Softgoods sales outpaced hardgoods and footwear, it said. Franchise stores continued their trend of the first half of the year as same-store sales increased 5.4 percent, compared to a 9.2 percent increase in fiscal 2007, for the seven-week period.
The Forzani Group is Canada’s largest national retailer of sporting goods, offering an assortment of brand-name and private-brand products under the corporate banners Sport Chek, Coast Mountain Sports, Sport Mart, National Sports and Hockey Experts. The Forzani Group is also a franchisor of The Fitness Source.
Finish Line swings to 2Q loss
Finish Line (Nasdaq: FINL) swung to a loss in the fiscal second quarter, hurt by charges from closing its 15 Paiva stores.
Loss for the quarter ended Sept. 1 totaled $1.8 million, or $0.04 per share, versus profit of $9.9 million, or $0.21 per share in the prior-year quarter. Results include $0.17 per share in charges for the impairment of assets, write down of inventory and lease costs related to closing the Paiva stores.
Revenue rose about 1 percent to $343 million, from $338.6 million last year.
In other company news: Finish Line said it has been working to complete its $1.5 billion takeover of Genesco, but that Genesco has refused to release additional information under the buyout agreement. Now the company has asked a Tennessee court to force Genesco to provide information related to their proposed merger or else rule that a materially adverse event has occurred.
Finish Line said in a release that it has complied with its obligations, but that the deal has stalled because of Genesco’s failure to release financial documents or provide access to financial officials. It notified Geneseco these failures constitute a breach of the merger agreement.
Finish Line said it filed an answer, counter-claim and a third-party claim for declaratory judgment in connection with litigation pending in Nashville Chancery Court.
Previously, Genesco accused Finish Line of developing “buyer’s remorse” over the $54.50-per-share deal and filed a lawsuit seeking an order to complete the deal. UBS AG, which had agreed to finance most of Finish Line’s offer, announced earlier that it had stopped processing the closing documents for the deal because of concerns about Genesco’s financial performance.
Crocs CEO exercises options, sells stock
The president and CEO of Crocs (Nasdaq: CROX) has exercised options for 77,874 shares of common stock and then sold 92,474 shares, according to an SEC filing.
In a Form 4 filed with the SEC, Ronald R. Snyder reported he exercised options for the shares Sept. 25 for $0.51 to $10.50 apiece, and then sold the shares for $64.60 to $64.81 apiece the same day.
Insiders file Form 4s with the SEC to report transactions in their companies’ shares. Open market purchases and sales must be reported within two business days of the transaction.
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