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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 12, 2007
BALLY TOTAL FITNESS HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
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001-13997
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36-3228107 |
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(State or other jurisdiction
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(Commission
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(I.R.S. Employer |
of incorporation)
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File Number)
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Identification No.) |
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8700 West Bryn Mawr Avenue, Chicago, Illinois
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60631 |
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(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code (773) 380-3000
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
BALLY TOTAL FITNESS HOLDING CORPORATION
FORM 8-K
Current Report
Item 2.02 Results of Operations and Financial Condition.
On
March 15, 2007, Bally Total Fitness Holding Corporation (the Company) filed a Form 12b-25 with the Securities and Exchange Commission (the SEC) to report that it is
unable to file its Annual Report on Form 10-K for the year ended December 31, 2006 (2006 Form 10-K) by March 16,
2007. The Company at this time is unable to determine when it will
file its 2006 Form 10-K.
The
Company announced the filing of the Form 12b-25 in a press release dated March 15, 2007. A copy of the press release is filed as Exhibit 99.1 to this report and incorporated herein by reference.
The information in this item shall be deemed filed for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the Exchange Act).
Item 2.06 Material Impairments.
On March 12, 2007, the Company concluded that it is required to record an adjustment (impairment charge) of approximately $35 to $37
million to reduce the carrying values of certain of its long-lived assets, primarily leasehold improvements to the Companys fitness clubs, to the lower of their
respective carrying or fair values. This adjustment reflects the Companys current estimate of the
future cash flows associated with the utilization of these assets, including relevant data such as
recent, lower estimates of operating cash contribution, increasing cost of capital, and updated
projections regarding the deployment of capital into the business in the form of future capital
expenditures, reflecting the Companys fitness club footprint analysis. The Company has not reached a
final conclusion as to the amount of the impairment described above and there can be no assurance
that the final impairment charge will not differ from this estimate by a material amount.
Accordingly, the above information on impairment of assets is preliminary until the Companys
financial statements for the year ended December 31, 2006 are finalized. The Company does not expect the impairment adjustment to result in future cash expenditures.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers.
On March 12, 2007, the Compensation Committee of the Companys Board of Directors (the
Compensation Committee) approved payments of annual incentive compensation for fiscal 2006
applicable to certain of the Companys named executive officers. These bonus awards were approved
because of the need to retain employees critical to the operation and management of the Companys
ongoing business in light of its current financial condition. The Compensation Committee
considered the Companys cash and financial position, as well as the potential effect of bonus
awards on covenant compliance under the Companys Amended and Restated Credit Agreement, and set
the aggregate amount of the corporate bonus pool for 2006. The Compensation Committee compared
this amount to the sum of the target bonus levels for all of the Companys corporate employees and
concluded that the corporate bonus pool represented approximately 60% of the sum of individual
target bonus levels. Corporate employees who are not part of executive management were generally
awarded bonuses of approximately 60% of their individual target bonus levels. The remaining value
of the corporate bonus pool was equal to approximately 60% of the sum of the executive managers
target bonus levels. The Compensation Committee then reviewed the 2006 performance levels of each
executive manager and subjectively determined the amounts of the bonus awards for each executive.
No executive manager received more that 100% of his or her target bonus level. Messrs. Barry
Elson, the Companys acting Chief Executive Officer, Don Kornstein, interim Chairman of the
Companys Board of Directors, and Ronald Eidell, Senior Vice President and Chief Financial Officer,
were not eligible for and did not receive bonuses relating to their service in 2006.
In accordance with these parameters, the Compensation Committee awarded annual bonus payments
for 2006 to the named executive officers listed below as follows:
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NAME |
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2006 BONUS |
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Marc D. Bassewitz
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Senior Vice President, Secretary and General Counsel
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175,000 |
John H. Wildman
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Senior Vice President and Chief Operating Officer
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$ |
150,000 |
James A. McDonald
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Senior Vice President and Chief Marketing Officer
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$ |
95,000 |
Item 8.01 Other Events.
Legal Proceedings
Putative Securities Class Actions
Between May and July 2004, ten putative securities class actions, now consolidated and
designated In re Bally Total Fitness Securities Litigation, were filed in the United States
District Court for the Northern District of Illinois against the Company and certain of its former
and current officers and directors. Each of these substantially similar lawsuits alleged that the
defendants violated Sections 10(b) and/or 20(a) of the Exchange Act, as well as Rule 10b-5 thereunder, in connection with the Companys proposed
restatement of its financial statements.
On March 15, 2005, the Court appointed a lead plaintiff and on May 23, 2005 the Court
appointed lead plaintiffs counsel. By stipulation of the parties, the consolidated lawsuit was
stayed pending restatement of the Companys financial statements in November 2005. On December 30,
2005, plaintiffs filed an amended consolidated complaint, asserting claims on behalf of a putative
class of persons who purchased Bally stock between August 3, 1999 and April 28, 2004. The Court
granted defendants motions to dismiss the amended consolidated complaint and dismissed the
complaint in its entirety on July 12, 2006 without prejudice to plaintiffs filing an amended
complaint on or before August 14, 2006. An amended complaint was filed on August 14, 2006. The
Company filed a motion to dismiss the amended complaint on September 28, 2006. On February 20,
2007, the Court issued a Memorandum Opinion and Order dismissing all claims against all defendants
with prejudice. The Court entered final judgment in favor of defendants on February 21, 2007. The
deadline for filing an appeal is March 23, 2007.
Individual Securities Action in Illinois.
On March 15, 2006, a lawsuit captioned Levine v. Bally Total Fitness Holding Corporation, et
al., Case No. 06 C 1437 was filed in the United States District Court for the Northern District of
Illinois against the Company, certain of its former and current officers and directors, and its
former outside audit firm, Ernst & Young, LLP. Plaintiffs complaint alleges violations of Sections
10(b), 18 and 20(a) of the Exchange Act, SEC Rule 10b-5, and the Illinois Consumer Fraud and
Deceptive Practices Act, as well common law fraud in connection with the Companys restatement. The
Court found this action related to the consolidated securities class action discussed above, and
transferred it to the judge before whom the putative class action cases were pending. After
defendants filed motions to dismiss the complaint and after the Court granted motions to dismiss
the class action cases, plaintiff moved for leave to amend its complaint. On July 19, 2006, the
Court denied plaintiffs motion and ordered completion of briefings on defendants motions to
dismiss on statute of limitations issues. On September 29, 2006, the Court granted defendants
motion to dismiss plaintiffs Section 18 claim as untimely, denied the motion as to Sections 10(b)
and 20(a), dismissed Ernst & Young, LLP as a defendant and granted plaintiff leave to amend his
complaint. An amended complaint was filed on November 3, 2006. Bally filed a motion to dismiss the
amended complaint on January 5, 2007, briefing of which was completed on March 12, 2007. It is not
yet possible to determine the ultimate outcome of this action.
Insurance Rescission Actions
On April 6, 2006, an excess director and officer liability insurance provider filed a
complaint captioned RLI Insurance Company v. Bally Total Fitness Holding Corporation; Holiday
Universal, Inc.; George N. Aronoff; Paul Toback; John H. Dwyer; Lee S. Hillman; Stephen C. Swid;
James McAnally; J. Kenneth Looloian; Liza M. Walsh; Annie P. Lewis, as Executor of the Estate of
Aubrey C. Lewis, Deceased; Theodore Noncek; Geoff Scheitlin; John H. Wildman; John W. Rogers, Jr.;
and Martin E. Franklin, Case No. 06CH06892 in the circuit court of Cook County, Illinois, County
Department Chancery Division. The complaint alleged that financial information included in the
Companys applications for director and officer liability insurance in the 2002-2003 policy year
was materially false and misleading. Plaintiff requested the Court to declare the Companys excess
policy for the year 2002-2003 void, voidable and/or subject to rescission. Defendants filed motions
to dismiss or stay the proceedings on July 10, 2006, and a motion for advancement of defense costs
and to compel interim funding on October 20, 2006. On November 16, 2006, the Court granted
defendants motion to dismiss. Notwithstanding the dismissal of this case, the Company has not
received any payments from RLI Insurance Company for invoices that it has tendered in respect of
outstanding claims.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1 Press
release, dated March 15, 2007, announcing filing of Form 12b-25.
Pursuant to the requirements of the Exchange Act, the Registrant has duly caused
this Report to be signed on its behalf by the undersigned hereunto duly authorized.
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BALLY TOTAL FITNESS HOLDING CORPORATION
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Registrant
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Dated: March 15, 2007 |
/s/ Marc D. Bassewitz
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Marc D. Bassewitz |
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Senior Vice President, Secretary and General Counsel |
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