If all good things come to those who wait, then Bally Total Fitness stockholders should be seeing something tremendous at the end of their wait.

In November, the company said it would restate its financials from 2000 through the first quarter of 2004. In the meantime, the company has not filed a financial statement since the first quarter of 2004 (It has said it will file financial statements by the end of this July.).

Company executives and stockholders also await the findings of an investigation by the Securities and Exchange Commission (SEC) into accounting issues involving prepaid dues and a criminal investigation by the U.S. attorney's office in Washington, D.C. No details were released by the U.S. attorney's office on the scope of the criminal investigation or whether it involves former or current employees.

In the meantime, Bally has retained the Blackstone Group as a financial advisor in hopes that Blackstone can help turn around the company.

“The reason Blackstone, a well-respected company, was hired was to look at all the strategic options,” said Rick Caro of consulting company Management Vision. “The logical ones would be review its debt structure, which has been a burden for years, and see if there's a way to alleviate that. Certainly, they want to look at selling some of their noncore assets. Blackstone would be experienced in helping a client like Bally to do that in a way to maximize value.”

Bally has said that the Blackstone Group will work with it to evaluate and refine its business plan and develop a long-term financial strategy to improve the company's capital structure and maximize free cash flow. As of Sept. 30, Bally's net debt was $725 million.

“We are paying $70 million a year in interest on the debt. So for us, it is critical to restructure that debt and get it down,” said Jon Harris, Bally spokesperson. While that strategy may include franchising certain assets or the sale of certain noncore assets, Harris would not comment on which assets. However, the company has several clubs in Canada, China, the Caribbean, Korea and Mexico as well as the Crunch Fitness, Gorilla Sports and Pinnacle Fitness brands in the United States — any of which might be attractive to investors. Other assets that could be on the auction block include the company's remaining credit facilities. Last year, the company sold a $275 million credit facility.

Various publications have reported that certain investment firms are looking at purchasing parts of Bally. Companies mentioned include Bruckmann, Rosser, Sherrill & Co. LLC, which owns Town Sports International; TRT Holdings, which bought Gold's Gym last year; Brunswick Corp., which owns fitness equipment maker Life Fitness; and Tennenbaum Capital Partners LLC, a Santa Monica, CA-based merchant bank and large Bally bondholder, who may be working with Apollo Management LP and Texas Pacific Group to buy 40 percent of Bally.

Harris would not reveal a timeline for any decisions.

“We are in the midst of a turnaround,” he said. “I think the right decisions sometimes take time. We'd love to find a resolution as soon as possible, but this takes time. We know that we have a lot to do right now, and we are doing it.”

Harris credits Paul Toback for changing the face of the business since becoming CEO, saying that while the past regime was focused on growing through acquisition, Toback is focusing on maximizing what the company already has.

“Keep in mind, Paul Toback two and a half years ago took over a very broken company,” said Harris. “The company was riddled with problems from not having a focus, vision or solid business plan. We had 24 months of sagging membership sales. Within two years, Paul has undone what it took the prior regime seven years to do.”

Harris' comments echo those of Bally's independent audit committee, which in February released results from its investigation into the company's accounting woes. The committee blamed many of the accounting issues that necessitated the restatements of financials on former CEO Lee Hillman and former CFO John Dwyer. Hillman was chairman and CEO from 1996 to 2002 and Dwyer was CFO from 1996 to 2004. Toback served as COO during part of the time under question, but the audit committee did not find him responsible for the accounting issues.

The audit committee said that Hillman and Dwyer, both of whom were employed as certified public accountants by Bally's former auditors Ernst & Young before their employment with Bally, were responsible for multiple accounting errors in the company's financial statements and created a culture within the accounting and finance groups that encouraged aggressive accounting. In addition, the committee said that certain accounting policies and positions were suggested and implemented without a reasonable empirical basis and that Dwyer made a false and misleading statement to the SEC.

The Chicago Sun-Times quoted Hillman and Dwyer's attorney, Jerold S. Solovy of Jenner & Block, as saying, “These are scurrilous allegations. They are trying to pass the buck for the poor performance of current management onto Mr. Hillman and Mr. Dwyer.”

Two midlevel managers in the accounting department during 1997-2001 were also let go after the investigation.

While the investigation did not specifically examine Ernst & Young, which formerly was the auditor for the company, the committee stated that it believed that the firm made several errors in the course of its work. Ernst & Young declined to comment on the committee's statement.

The investigation found errors in the company's rationale for and implementation of its deferral of membership acquisition costs under Bally's prior accounting method. The investigation also concluded that the company took aggressively optimistic positions on several matters related to the analysis of the adequacy of the allowance for doubtful accounts, which were without a reasonable empirical basis.

The company also has identified deficiencies in its internal controls over financial reporting. A number of these deficiencies, either individually or in the aggregate, constitute material weaknesses in its internal controls over financial reporting, the company said.

The investigation, which took five months to complete, was led by former SEC attorney Herbert F. Janick III of Bingham McCutchen LLP. Forensic audit work was conducted by PricewaterhouseCoopers LLP. Results of the investigation have been reported to the SEC.

Harris said that the audit committee investigation sends a clear message that an aggressive accounting culture will not be tolerated. “What's nice about this is that it allows us to turn our full attention to the business turnaround and our strategic plans,” he said.

However, the SEC investigation and the criminal investigation by the U.S. attorney may prevent the company from moving forward too fast. Bally has stated that it is fully cooperating with both investigations.

“For us, it's about telling our story and letting people know that what was done in the former regime will not be tolerated in the current regime,” Harris said about how the problems Bally faces is affecting investor views of the company. “It is our goal to not only tell the financial community that, but our members and employees. We are very serious and focused on making this business successful and maximizing the true potential of this business. We are doing whatever we have to do to increase shareholder value and improve customer service and maximize the true value of the Bally brand and make this brand as good as it can be.”