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Battling a huge debt load and rising costs, Bally Total Fitness (NYSE:BFT)admitted that it would consider filing for Chapter 11 bankruptcy protection, in a note accompanying its SEC filing indicating that it would not be filing its 10-K for 2006 on schedule. Ouch. On March 12th, the company recognized the need to take an impairment charge of roughly 36 million dollars to reflect the declining returns of past leasehold improvements. The company is also battling past shareholders, as it faces class-action lawsuits stemming from the company's poor performance. The company has 45 million dollars in cash, compared with 827 million dollars in debt.
Bally may look interesting with a price to sales ratio 0.08, but there is an overwhelming amount of risk and uncertainty. According to the NT 10-K: ...The Company's management is assessing the effectiveness of its internal control over financial reporting as of December 31, 2006. The portion of the assessment completed to date has led management to conclude that there were material weaknesses in the internal control over financial reporting as of December 31, 2006. After management completes its assessment, the Company will include the assessment in the 2006 Form 10-K...
And then the real killer:
the response of creditors, customers and suppliers, including financial intermediaries such as credit card payment processors, to the filing of this notification and the matters discussed therein, particularly as those matters relate to liquidity, the uncertain timing of the filing by the Company of its 2006 Form 10-K and the presence of an explanatory paragraph in the audit report on the Company's consolidated financial statements indicating that substantial doubt exists as to the Company's ability to continue as a going concern and other actions the Company may take to restructure or reorganize its obligations, including a reorganization of its operations under Chapter 11 of the U.S. Bankruptcy Code ("Chapter 11")
While past investors in BFT may claim that they were misled about the company's prospects, it appears that the company is now giving investors the dismal prognosis as they see it. Any investor who decides to sign up BFT has no one but himself to blame if it doesn't work out.
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Reader Comments (Page 1 of 1)
3-20-2007 @ 4:54PM
Jeremi said...
I'm thinking the market is finally rewarding Bally's for their poor customer service and shoddy management (i.e. Aggressive contracts and sales people, filthy facilities, and the list goes on.)
3-25-2007 @ 10:14AM
glad2b gone said...
I am a former manager for Bally's. worked for them about 4 years and got out as you would have to be an idiot to not realize the company was going down hill fast. I can say first hand that it is very shady sales tactics and extremely high pressure on the managers. There were daily quotas to hit, and if you don't hit them you don't go home. I'm talking 14-16 hr work days. Trust me, we would do or say ANYTHING to get that contract so we could stop getting pressured from above and get to go home to our families at night. If you've ever wondered why it's a bunch of punk kids working there, it's because nobody with a family can do that job. I found very few satisfied and happy members in my years at Bally's. I'm actually glad to see that their shaddy practices and ignoring their customers unhappiness has finally caught up with them. Gyms are a customer service industry. You can't run a customer service industry like a used car lot. Everybody dreads the car buying experience - and that's exactly the experience you get at Bally's.
4-02-2007 @ 4:25PM
alsoglad said...
Also a former Bally manager/supervisor, I don't disagree with glad2b gone (and I'm also GLAD TO BE GONE). But, it's not just the fault of the front line staff. I worked with many committed, hard-working people at Bally, but the culture from the top was "grab as much as you can, while you can". Paul Toback, the former CEO who ran the company from $9/share to about $.75/share (before he resigned) paid himself literally millions in salary and bonuses while the company fell apart around him. Check out the VP's salaries on their public information - they're all getting rich while the clubs fall apart and the staff works their butts off, subjected to the unbelievable pressure that glad2b gone talks about.
I don't know how these people look themselves in the mirror. It's the same greed and selfishness as Enron, Qwest, etc. The bad thing is it's the front line staff and customers who will end up suffering. Maybe they should put together a class-action against the crooks/idiots - start with Toback.
4-17-2007 @ 5:00AM
Lobot said...
"HELLO, ITS A GYM...GO WORKOUT AND SHUT YOUR MOUTH"? If there is somthing wrong with your car do you say IT'S A CAR...GO DRIVE IT AND SHUT YOUR MOUTH.? no, and why, because when you work with the public, customer service is how you keep you customers happy. Bally's is really one of the shaddiest buisnesses i have ever been to. I go to 3 in the Baltimore area and the trainers are terrible. They are 18 and pulled right off the street with very very basic knowladge of body. When my best friend went to inquire about a membership, the sales person told him his budget was $35 a month. After some discussion the sales person left the room crying. Who does that? And the last straw is the cross cables was broken on 3/14/07 and was fixed this weekend 4/15/07. over a month!!! When i tried to complain about this the manager wrote me off and i tried to go to his boss but i was never able to get thru. It's about time Bally's takes a dive.