Bally Total Fitness
Encyclopedia
Bally Total Fitness is an American
fitness club
chain which operates 100 gym
s, in several U.S. states. In November of 2011, competitor L.A. Fitness took over operation of 171 former Bally locations. At its 2007 peak, prior to the filing of the first of two Chapter 11 bankruptcies, Bally operated nearly 440 facilities located in 29 states, Mexico
, Canada
, Korea
, China
and the Caribbean
under the Bally Total Fitness, Crunch Fitness, Gorilla Sports, Pinnacle Fitness, Bally Sports Clubs, and Sports Clubs of Canada brands. In response to an increasingly competitive market invaded by niche clubs catering to specific market demographics, Bally diversified into franchising, with over thirty Bally facilities once operating as franchises. The company's headquarters are located in Chicago, Illinois.
product called the Ballyhoo. Its success at building slot machine
s led the company to open casinos in Atlantic City and Las Vegas
.
In 1983 it purchased Health and Tennis Corporation of America in 1983 and Lifecycle exercise bike manufacturer. In 1987 it was the world's largest owner and operator of fitness centers. It further expanded with the purchase of the American Fitness Centers and Nautilus Fitness Centers, which were once connected to Vic Tanny
and Jack LaLanne
. The various brands were consolidated under the Bally Total Fitness brand in 1995. In 1995 Dean Moloney consolidation plan with Lee Hillman put various brand together with Life Fitness.
In 1996 it was spun from its casino-owning parent. In May 1998 it was listed on the New York Stock Exchange trading under the ticker symbol
of BFT. The company carried $300 million in debt at the time of its initial public offering.
On November 18, 2011, Bally Total Fitness announced the sale of 171 of its clubs located in 16 states and the District of Columbia to an affiliate of LA Fitness for $153 million. The sale leaves Bally with 100 locations, more than 20 of them in the New York, 10 in Houston, nine in the San Francisco-Oakland-San Jose area, seven in Denver, seven in Cleveland, five in Boston, five in Dallas-Fort Worth, and four in both San Antonio and Milwaukee. Bally had approximately 800,000 members following the sale, which allowed it to retire its corporate debt.
, a plunge of over 99% of its value. It was removed from the NYSE shortly thereafter.
On October 1, 2007, Bally announced its emergence from bankruptcy court protection, 100% owned by a hedge fund
, Harbinger Capital
. Earlier that year it had sold off its 16 Toronto health clubs to existing chains: 10 locations were sold to GoodLife Fitness, and 6 to Extreme Fitness, allowing the latter company its first move into the downtown core for what had heretofore been a suburban chain.
On December 3, 2008, Bally again filed for bankruptcy due to problems arising from a global credit crisis. The company indicated that it would explore options including reorganization or possibly even a sale, but that it hoped to emerge from bankruptcy as soon as possible.
Dean Moloney and Mark Mastrov with Angelo, Gordon & Co a private equity firm acquired Crunch Fitness for 45 million after Bally's Total Fitness Filed for Bankruptcy as part of reorganization by New Evolution Fitness Company. (New Electonic Fund Company)
.
In April 1994, Bally paid $120,000 to settle Federal Trade Commission
charges of illegal billing, cancellation, refund, and debt-collection practices. But consumers complain that little has changed over the years. From 1999 to 2004, over six hundred customers complained to the New York
Attorney General
's office, leading to an investigation and subsequent agreement by Bally Total Fitness to reform their sales tactics in February 2004.
According to ConsumerAffairs.com
, "We get so many complaints about Bally Total Fitness, it's a workout just to sort through them."
Bally has been the subject of at least one federal investigation, in addition to the aforementioned probe into consumer complaints against Bally, conducted by the New York State Attorney General
, regarding the firm's sales practices. In April 2004, Bally disclosed the U.S. Securities and Exchange Commission (SEC) was investigating its accounting practices, and in February of 2005, the U.S. Justice Department joined the probe. The company eventually restated its financial statements
for 1997 through 2003.
On February 28, 2008, the SEC formally filed financial fraud charges against Bally Total Fitness. Among the charges, the SEC alleges that in 2001, Bally overstated its originally reported stockholder's equity by roughly $1.8 billion (over 340%), and understated its 2003 net loss by $90.8 million (or 845%).
Paul Toback
, a former White House
aide in the Clinton administration
who joined Bally as a corporate development officer in 1997, was named Chief Executive Officer (CEO) in late 2002, after predecessor Lee Hillman resigned.
In December of 2009, the United States Securities and Exchange Commission announced that the auditing firm of Ernst & Young
agreed to pay $8.5 million
to settle charges against six current and former partners, five based in Chicago, for failing to detect and report accounting fraud at Bally. The SEC also settled charges against former Bally chief financial officer John W. Dwyer, and former controller Theodore Noncek. Dwyer agreed to pay a $250,000 fine and was permanently barred from serving as an officer or director at a public company. Noncek consented to similar injunctions for two years. The Ernst & Young Chicago partners - where Lee Hillman and Dwyer had worked prior to Bally - audited Bally from 2001 to 2003 and failed to find and report fraud despite the fact that Ernst & Young had previously identified Bally as its riskiest account in the Chicago area. Bally overstated its year-end 2001 stockholders' equity by $1.8 billion and understated net losses in 2002 by $92.4 million and by $90.8 million in 2003.
In 2010, Texas Attorney General Greg Abbott announced that the company mailed over 11,000 fake past due notices to former members. The accusations state that Bally urged consumers to immediately pay their late fees and were a scheme to get them to re-join the club.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
fitness club
Health club
A health club is a place which houses exercise equipment for the purpose of physical exercise.-Main workout area:...
chain which operates 100 gym
Gym
The word γυμνάσιον was used in Ancient Greece, that mean a locality for both physical and intellectual education of young men...
s, in several U.S. states. In November of 2011, competitor L.A. Fitness took over operation of 171 former Bally locations. At its 2007 peak, prior to the filing of the first of two Chapter 11 bankruptcies, Bally operated nearly 440 facilities located in 29 states, Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
, Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
, Korea
Korea
Korea ) is an East Asian geographic region that is currently divided into two separate sovereign states — North Korea and South Korea. Located on the Korean Peninsula, Korea is bordered by the People's Republic of China to the northwest, Russia to the northeast, and is separated from Japan to the...
, China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
and the Caribbean
Caribbean
The Caribbean is a crescent-shaped group of islands more than 2,000 miles long separating the Gulf of Mexico and the Caribbean Sea, to the west and south, from the Atlantic Ocean, to the east and north...
under the Bally Total Fitness, Crunch Fitness, Gorilla Sports, Pinnacle Fitness, Bally Sports Clubs, and Sports Clubs of Canada brands. In response to an increasingly competitive market invaded by niche clubs catering to specific market demographics, Bally diversified into franchising, with over thirty Bally facilities once operating as franchises. The company's headquarters are located in Chicago, Illinois.
History
The company traces it roots to 1931 Lion Manufacturing which was later named Bally Manufacturing (named for its successful pinballPinball
Pinball is a type of arcade game, usually coin-operated, where a player attempts to score points by manipulating one or more metal balls on a playfield inside a glass-covered case called a pinball machine. The primary objective of the game is to score as many points as possible...
product called the Ballyhoo. Its success at building slot machine
Slot machine
A slot machine , informally fruit machine , the slots , poker machine or "pokies" or simply slot is a casino gambling machine with three or more reels which spin when a button is pushed...
s led the company to open casinos in Atlantic City and Las Vegas
Las Vegas Strip
The Las Vegas Strip is an approximately stretch of Las Vegas Boulevard in Clark County, Nevada; adjacent to, but outside the city limits of Las Vegas proper. The Strip lies within the unincorporated townships of Paradise and Winchester...
.
In 1983 it purchased Health and Tennis Corporation of America in 1983 and Lifecycle exercise bike manufacturer. In 1987 it was the world's largest owner and operator of fitness centers. It further expanded with the purchase of the American Fitness Centers and Nautilus Fitness Centers, which were once connected to Vic Tanny
Vic Tanny
Victor "Vic" Tanny was a pioneer in the creation of the modern health club.In 1935 he opened his first club in his hometown of Rochester, New York. In 1939 he sold the club and opened a new one in Santa Monica, California...
and Jack LaLanne
Jack LaLanne
Francois Henri "Jack" LaLanne was an American fitness, exercise, and nutritional expert and motivational speaker who is sometimes called "the godfather of fitness" and the "first fitness superhero." He described himself as being a "sugarholic" and a "junk food junkie" until he was 15...
. The various brands were consolidated under the Bally Total Fitness brand in 1995. In 1995 Dean Moloney consolidation plan with Lee Hillman put various brand together with Life Fitness.
In 1996 it was spun from its casino-owning parent. In May 1998 it was listed on the New York Stock Exchange trading under the ticker symbol
Ticker symbol
A stock symbol or ticker symbol is a short abbreviation used to uniquely identify publicly traded shares of a particular stock on a particular stock market. A stock symbol may consist of letters, numbers or a combination of both. "Ticker symbol" refers to the symbols that were printed on the ticker...
of BFT. The company carried $300 million in debt at the time of its initial public offering.
On November 18, 2011, Bally Total Fitness announced the sale of 171 of its clubs located in 16 states and the District of Columbia to an affiliate of LA Fitness for $153 million. The sale leaves Bally with 100 locations, more than 20 of them in the New York, 10 in Houston, nine in the San Francisco-Oakland-San Jose area, seven in Denver, seven in Cleveland, five in Boston, five in Dallas-Fort Worth, and four in both San Antonio and Milwaukee. Bally had approximately 800,000 members following the sale, which allowed it to retire its corporate debt.
Bankruptcies
Bally filed for bankruptcy in August 2007, with outstanding debts of $761 million. Over the preceding ten years, its stock price had fallen from a high of approximately US$37.00 to less than $0.37 on the Pink SheetsPink Sheets
OTC Markets Group, Inc., informally known as "Pink Sheets", is a private company that provides services to the U.S. over-the-counter securities market including electronic quotations, trading, messaging, and information platforms. According to the U.S. Securities and Exchange Commission, OTC...
, a plunge of over 99% of its value. It was removed from the NYSE shortly thereafter.
On October 1, 2007, Bally announced its emergence from bankruptcy court protection, 100% owned by a hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
, Harbinger Capital
Harbinger Capital
Harbinger Capital Partners is a private hedge fund based in New York City, New York.-Background:Harbinger was founded by its Senior Managing Director Philip Falcone and Harbert Management Corporation, a Birmingham, Alabama-based investment company that provided much of the original funding. Falcone...
. Earlier that year it had sold off its 16 Toronto health clubs to existing chains: 10 locations were sold to GoodLife Fitness, and 6 to Extreme Fitness, allowing the latter company its first move into the downtown core for what had heretofore been a suburban chain.
On December 3, 2008, Bally again filed for bankruptcy due to problems arising from a global credit crisis. The company indicated that it would explore options including reorganization or possibly even a sale, but that it hoped to emerge from bankruptcy as soon as possible.
Dean Moloney and Mark Mastrov with Angelo, Gordon & Co a private equity firm acquired Crunch Fitness for 45 million after Bally's Total Fitness Filed for Bankruptcy as part of reorganization by New Evolution Fitness Company. (New Electonic Fund Company)
Investigations and controversies
Bally Total Fitness has been the subject of controversy over their sales and membership cancellation practices, with some customers claiming they were misled into signing long term membership contracts that can last for three years, and subsequently found themselves dealing with collection agenciesCollection agency
A collection agency is a business that pursues payments of debts owed by individuals or businesses. Most collection agencies operate as agents of creditors and collect debts for a fee or percentage of the total amount owed....
.
In April 1994, Bally paid $120,000 to settle Federal Trade Commission
Federal Trade Commission
The Federal Trade Commission is an independent agency of the United States government, established in 1914 by the Federal Trade Commission Act...
charges of illegal billing, cancellation, refund, and debt-collection practices. But consumers complain that little has changed over the years. From 1999 to 2004, over six hundred customers complained to the New York
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
Attorney General
Attorney General
In most common law jurisdictions, the attorney general, or attorney-general, is the main legal advisor to the government, and in some jurisdictions he or she may also have executive responsibility for law enforcement or responsibility for public prosecutions.The term is used to refer to any person...
's office, leading to an investigation and subsequent agreement by Bally Total Fitness to reform their sales tactics in February 2004.
According to ConsumerAffairs.com
ConsumerAffairs.com
ConsumerAffairs.com is a consumer advocacy and complaints site that defines itself as an “independent consumer news center”.The site publishes original and reprinted stories on consumer-related topics....
, "We get so many complaints about Bally Total Fitness, it's a workout just to sort through them."
Bally has been the subject of at least one federal investigation, in addition to the aforementioned probe into consumer complaints against Bally, conducted by the New York State Attorney General
New York State Attorney General
The New York State Attorney General is the chief legal officer of the State of New York. The office has been in existence in some form since 1626, under the Dutch colonial government of New York.The current Attorney General is Eric Schneiderman...
, regarding the firm's sales practices. In April 2004, Bally disclosed the U.S. Securities and Exchange Commission (SEC) was investigating its accounting practices, and in February of 2005, the U.S. Justice Department joined the probe. The company eventually restated its financial statements
Financial statements
A financial statement is a formal record of the financial activities of a business, person, or other entity. In British English—including United Kingdom company law—a financial statement is often referred to as an account, although the term financial statement is also used, particularly by...
for 1997 through 2003.
On February 28, 2008, the SEC formally filed financial fraud charges against Bally Total Fitness. Among the charges, the SEC alleges that in 2001, Bally overstated its originally reported stockholder's equity by roughly $1.8 billion (over 340%), and understated its 2003 net loss by $90.8 million (or 845%).
Paul Toback
Paul Toback
Paul Toback is an Illinois attorney who served as chief executive officer and chairman of the board of Bally Total Fitness Corporation from December, 2002 until August 11, 2006, prior to the company's Chapter 11 bankruptcy filing in 2007. He received a lump sum payment for more than $3 million, and...
, a former White House
White House
The White House is the official residence and principal workplace of the president of the United States. Located at 1600 Pennsylvania Avenue NW in Washington, D.C., the house was designed by Irish-born James Hoban, and built between 1792 and 1800 of white-painted Aquia sandstone in the Neoclassical...
aide in the Clinton administration
Presidency of Bill Clinton
The United States Presidency of Bill Clinton, also known as the Clinton Administration, was the executive branch of the federal government of the United States from January 20, 1993 to January 20, 2001. Clinton was the first Democratic president since Franklin D. Roosevelt to win a second full term...
who joined Bally as a corporate development officer in 1997, was named Chief Executive Officer (CEO) in late 2002, after predecessor Lee Hillman resigned.
In December of 2009, the United States Securities and Exchange Commission announced that the auditing firm of Ernst & Young
Ernst & Young
Ernst & Young is one of the largest professional services networks in the world and one of the "Big Four" accountancy firms, along with Deloitte, KPMG and PricewaterhouseCoopers ....
agreed to pay $8.5 million
Million
One million or one thousand thousand, is the natural number following 999,999 and preceding 1,000,001. The word is derived from the early Italian millione , from mille, "thousand", plus the augmentative suffix -one.In scientific notation, it is written as or just 106...
to settle charges against six current and former partners, five based in Chicago, for failing to detect and report accounting fraud at Bally. The SEC also settled charges against former Bally chief financial officer John W. Dwyer, and former controller Theodore Noncek. Dwyer agreed to pay a $250,000 fine and was permanently barred from serving as an officer or director at a public company. Noncek consented to similar injunctions for two years. The Ernst & Young Chicago partners - where Lee Hillman and Dwyer had worked prior to Bally - audited Bally from 2001 to 2003 and failed to find and report fraud despite the fact that Ernst & Young had previously identified Bally as its riskiest account in the Chicago area. Bally overstated its year-end 2001 stockholders' equity by $1.8 billion and understated net losses in 2002 by $92.4 million and by $90.8 million in 2003.
In 2010, Texas Attorney General Greg Abbott announced that the company mailed over 11,000 fake past due notices to former members. The accusations state that Bally urged consumers to immediately pay their late fees and were a scheme to get them to re-join the club.
External links
- "Weighty matters: Bally works to fend off bankruptcy", Jonathan Maze, Franchise Times (May, 2007)