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Fitness financials: Bally gets forbearance extensions from lenders, plus Brunswick, Nautilus, Winmark, GSI Commerce

Bally got a forbearance extensions from lenders, Brunswick cut its full-year profit forecast, Nautilus shares hit a low on weak Q2 earnings, Q2 sales for Winmark rose, and GSI Commerce opened a new fulfillment center.

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Bally gets forbearance extensions from lenders
Bally Total Fitness (Pink Sheets: BFTH) said it received forbearance extensions until July 31 from a majority of holders of its 9-7/8 percent senior subordinated notes due 2007 and its 10-1/2 percent senior notes due 2011 and from the lenders of its $284 million senior secured credit facility.

The extension agreements prohibit any enforcement action by the parties but permit the senior noteholders to declare the senior notes due and payable so long as no other enforcement action is taken. The company will not pay any fees in connection with these extensions.

Separately, Bally continues to solicit votes for approval from its noteholders for the previously proposed prepackaged chapter 11 plan of reorganization. Holders of 63 percent of its senior notes and more than 80 percent of its senior subordinated notes have agreed to vote for the plan. The voting deadline is July 27.

Bally said it also entered into confidentiality agreements with Liberation Investments and Harbinger Capital Partners, which had proposed a restructuring plan for the company, and has begun due diligence discussions with them. These shareholders have agreed to complete their due diligence by July 20, and the company has asked that proposed definitive documentation be negotiated by that date. There are no assurances that any agreement will be reached with the shareholders.

Brunswick cuts full-year profit forecast
Brunswick Corp. (NYSE: BC) slashed its full-year earnings estimate, and said it plans to cut production of marine products for the rest of the year. In addition to producing boats, Brunswick is the parent of Life Fitness, Parabody and Hammer Strength.

Brunswick warned that its full-year earnings would be lower than expected due to “anemic” sales. For the full year, Brunswick now predicts earnings of $1.20 to $1.35 per share, down from the $1.65 to $2 forecast previously.

Brunswick also said it now expects to report second-quarter earnings of $0.64 or $0.65 per share from continuing operations. Analysts had projected earnings of $0.58 per share.

The company said wholesale shipments and retail sales for both boats and engines are significantly below last year’s levels and that there is no reason to believe retail trends will pick up in the second half when sales historically are slow.

Brunswick shares fell $2.48, or 7.6 percent, to $30.32 on July 20. Its shares have traded in a range of $28.86 to $34.99 over the past year.

The company releases second-quarter earnings on July 26.

Nautilus shares hit low on weak Q2 earnings, analyst downgrades
Shares of Nautilus (NYSE: NLS) hit a 52-week low on July 17, after the company reported weak second-quarter earnings, and an RBC Capital Markets analyst said results might not improve in the second half of the year.

After the market closed on July 16, Nautilus reported fiscal second-quarter profit fell 34 percent, despite a hefty one-time gain, as sales of home exercise equipment were softer than expected. Excluding the gain, the company posted a loss of $9.5 million, or $0.30 per share. Revenue fell 15 percent to $117.1 million, below expectations.

“We were expecting weak results … but not this weak,” RBC Capital Markets analyst Edward Aaron wrote in a note to investors.

He said he was concerned about the second half of the year. The company expects earnings between $0.20 and $0.30 per share, compared with a $0.61 gain in the same period a year ago. Analysts were expecting earnings of $0.74 per share for the period.

However, Aaron said that given industry weakness and recent sales trends, the company might not make that guidance. He expects a loss of $0.02 per share in 2007 and earnings of $0.35 per share in 2008. He said investors should wait on the sidelines until the company’s business shows signs of stabilizing and downgraded the stock to “Sector Perform” from “Outperform.”

On July 17, Nautilus shares hit a 52-week low of $9.27 — shedding as much as $2.67 during the day’s trading from the previous day’s close. It ended the day at $9.90. The stock had traded between $11.10 and $18.63 during the past 52 weeks.

Q2 sales for Winmark on the rise
Winmark (Nasdaq: WINA) said that second-quarter profits were down slightly, as it ramps up a new leasing business.

Its net income for the quarter was $547,200, or $0.10 per diluted share, compared to net income of $650,400, or $0.11 per share a year ago. The company also reported revenue of $7.56 million, compared to $6.27 million in the year earlier period.

Winmark CEO John Morgan, said in a statement, “The highlight of the second quarter was the growth of our leasing portfolio. We continue to build leased assets and experienced a significant increase in our backlog.”

Leasing income more than doubled from the year-ago period, to $995,800 from $424,900. But this relatively new business that hasn’t started turning a profit held down earnings for Winmark, which also incurred a small one-time charge, Morgan said.

Winmark creates, supports and finances business, operating 843 franchises including Play It Again Sports.

GSI Commerce opens new fulfillment center
GSI Commerce (Nasdaq: GSIC) said it opened a new automated fulfillment center in Richmond, Ky. The 540,000-square-foot center is its largest facility, and can ship more than 110,000 orders per day during the peak holiday season, GSI said.

The company said the center would employ more than 500 full-time workers and another 500 on a seasonal basis. Besides standard functions like storage, packing and shipping, the center will also offer gift-wrapping, gift messaging, cell phone activation and other services, it added.

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