Bally Total Fitness

History

In 1983, slot-machine maker Bally Manufacturing purchased Health and Tennis Corporation of America and Lifecycle, an 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 1996, Bally Total Fitness 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.

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 December 2002, immediately after predecessor Lee Hillman resigned.

On November 18, 2011, Bally Total Fitness announced the sale of 171 of its clubs located in sixteen states and the District of Columbia to an affiliate of LA Fitness for $153 million. In February 2012, it sold the Toledo Airport Road club to Red Fitness 24/7. In April 2012, Bally sold an additional 39 facilities to Blast Fitness. Blast Fitness has begun operating the new facilities under their own name in stages, transitioning entirely away from the Bally's name. Those two sales left Bally with 44 locations, 27 of them in the New York area, 8 in the San Francisco area, 1 in Louisiana and 8 in Colorado. After the LA Fitness transaction, Bally had approximately 800,000 members; the sale allowed Bally to retire its corporate debt.

All of the clubs in the Cleveland area were sold to Red Fitness 24/7, effective December 31, 2012. Some employees received termination notices the same day.

The number of clubs still in the Bally chain continued to dwindle. For example, the Bally Total Fitness location in Danville, California closed on June 22, 2012 and reopened as Danville Fit.

The former Bally club in Colorado Springs, CO changed ownership in June 2014, and became Voretex Fitness.

In December 2014, thirty-two locations located in New York, New Jersey, Denver, and San Francisco Bay Area are acquired by 24 Hour Fitness.

The Greece, New York location closed without notice on December 30, 2014.

The NYC 106th st location became a Tapout Fitness center in August 2016. As of October 2016, Bally was down to its last location in New York City. The last Bally location in Penta NYC closed on 10/26/2016, also becoming a Tapout Fitness center. Bally Total Fitness is officially deleted.

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 Sheets, 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 the global credit crisis. The company indicated at that time that it would explore options including reorganization or possibly even a sale, but that it hoped to emerge from bankruptcy as soon as possible.

Investigations and controversies

Bally Total Fitness has been the subject of controversy over its sales and membership cancellation practices, with some customers claiming they were misled into signing loans with terms up to three years using documents containing uncommonly-used language such as "Retail Installment Contract". Customers alleged that they subsequently found themselves dealing with collection agencies.

In April 1994, Bally paid $120,000 to settle Federal Trade Commission charges of illegal billing, cancellation, refund, and debt-collection practices. Consumers have complained, however, 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.

The company is the subject of numerous complaints on the ConsumerAffairs.com website, to which Bally company representatives sometimes post public responses.

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 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 filed financial fraud charges against Bally Total Fitness. The SEC alleged that in 2001, Bally overstated its originally reported stockholder's equity by roughly $1.8 billion (over 340%), and that Bally understated its 2003 net loss by $90.8 million (or 845%).

In December 2009, the SEC announced that the auditing firm of Ernst & Young had 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. He 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 working at 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 had mailed over 11,000 fake past-due notices to former members. The Attorney General charged that Bally had urged consumers to immediately pay their late fees and that the conduct was part of a scheme to get consumers to re-join the club.