Bally Total Fitness Holding Corp. said Wednesday that its new auditor, KPMG, will need more time to review the company's financial statements for 2002-2004.
If an extension is not granted to the July 31 deadline, the gym operator said that it would be in default on its notes. The company will seek an extension from public noteholders giving Bally until Oct. 31 to disclose the results. The initial waivers were granted last December, after an audit committee investigation turned up numerous errors in past accounting.
"During the past nine months, we have made substantial progress towards completing this audit despite having to replace several key finance executives, hiring a new chief financial officer, treasurer and controller, and dealing with many complex accounting issues, several of which were unearthed during the process," Bally chair and chief executive Paul Toback said in a statement. "Now I believe that, barring any unforeseen circumstances, we are close to completing this long process, despite needing a little more time to do so."
KPMG replaced Ernst & Young in November, when Bally said that it could not rely on reports from the former auditor.
The Securities and Exchange Commission began investigating Bally's handling of prepaid membership dues in April 2004, and federal prosecutors opened a criminal investigation this February. That same month, Bally alleged that faulty accounting practices were used by former chief executive Lee Hillman and former chief financial officer John Dwyer.
