MBA+520-+Bally

===Mike [|__Bally Total Fitness__] [|__https://bb9prodapp.bryant.edu/webapps/blackboard/execute/uploadAssignment?content_id=_126896_1&course_id=_5367_1&assign_group_id=&mode=view__] === Please consider these questions in preparation for our Bally Total Fitness case discussion:

1. Is the fitness center industry structurally attractive? Why or why not?

PH Comments: No, the fitness center industry is not structurally attractive. One, there is currently an over-saturation of firms in the market, whether national, regional or local based entities; and with excess competition in the market place, the consumer has the advantage of choice/commitment to a provider. Therefore, unless the firm has a unique “element”, “approach” or “offering”, firms are not able to distinguish themselves from their competitors, thus conveying to existing and potential customers that they have the authority and power to to determine the firms future. This can be documented by the fact that as much as 45 percent of fitness club members choose not to renew each year, making revenues uncertain and requiring substantial marketing efforts to sustain the club. Second, profit margins for Bally’s are low (2006 - 4.07% - Mergent Industry Review and Hoovers database) and industry is viewed as “low risk “for investors. Over the five years to 2011, total industry profit is expected to increase at an average of 1.5% annually to reach $2.0 billion (IBIS World).

Industry Revenue Growth
 * Year || Revenue $ million || Growth % ||
 * 1997 || 15,033.2 ||  ||
 * 1998 || 15,402.0 || 2.5 ||
 * 1999 || 16,458.3 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">6.9 ||
 * <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2000 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">17,157.2 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">4.2 ||
 * <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2001 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">18,026.2 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">5.1 ||
 * <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2002 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">19,549.1 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">8.4 ||
 * <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2003 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">20,575.7 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">5.3 ||
 * <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2004 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">21,309.4 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">3.6 ||
 * <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2005 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">22,080.6 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">3.6 ||
 * <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2006 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">22,783.4 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">3.2 ||
 * <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2007 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">24,136.1 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">5.9 ||
 * <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2008 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">24,145.4 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">0.0 ||
 * <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2009 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">23,707.9 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-1.8 ||
 * <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2010 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">24,227.5 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2.2 ||
 * <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2011 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">24,781.4 || <span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2.3 ||

<span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Further, the industry is fragmented: the 50 largest companies account for about 30 percent of revenue, and only a few dozen companies own more than 10 centers.

<span style="background-color: transparent; color: #38761d; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">NH Comments: The fitness center industry is not extremely attractive because it is very difficult to get a big share of the market. In the text we see that the larger companies only have 33% of the market so. Furthermore, it seems difficult to get a competitive advantage over other competitors. The best bet seems to find a niche and run with it. You can go the route of Curves or Lady of America and go after the female demo. Or go the route of Gold’s and try to attract serious body builders with a no frills type structure. Realistically, you have to decide what time of gym you are going to run and run with it. Straddling doesn’t seem to help because the market isn’t going to get much bigger. Lastly, Only a certain percentage of the population is going to go the gym anyway. There is a limited market when it comes to people actually willing to go to a gym.

<span style="background-color: transparent; color: #0000ff; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">GA:

From Ibis world: Basis of Competition

Competition in this industry is high and the trend is increasing Over the past five years, the Gym, Health and Fitness Clubs industry has become more competitive. Well financed competitors have entered the industry, and existing regional and national operators have expanded their operations. Barriers to entry in this industry are low and are steady. The high cost and long-term nature of brand reputation is a potential barrier to success. Existing players have already established trade names, and new entrants will have to invest money and time to persuade the population to shift away from existing trade names.

The market is over saturated.

<span style="background-color: transparent; color: #9900ff; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">CG’s Comments: Due to the market saturation and existence of a diverse set of companies that offer fitness services, the attractiveness of the fitness industry is low in comparison to other types of industries. For example, the 55 largest fitness companies in the US only takes up 33% of the industry revenue. This is a very low number in comparison to other industries. Thus, the point is...there’s a ton of competition and many companies provide different types of fitness options for different types of people. So, it becomes structurally unattractive in general because it would be quite difficult for most start-ups to offer something new. In order for a new company to work, I think they must offer something unique that other companies have yet to offer. New start-ups need to look at the industry and the populations served and ask this question: Where is there a need that is yet under-served?

<span style="background-color: #9fc5e8; color: #ff00ff; font-family: Arial; font-size: 12pt; text-decoration: none; vertical-align: baseline;">Lena<3

<span style="background-color: transparent; color: #ff00ff; font-family: Tahoma; font-size: 11pt; text-decoration: none; vertical-align: baseline;">No. Threat of new entrants: It is not extremely difficult to enter the market as a new firm, as the services offered can be duplicated. In this way, it is hard for company to establish a unique identity. That being said, while it is easy to enter the market it is not easy to attract customers. Threat of substitutes: The threat of substitutes is high. Many firms offer the same products/services, which means customers have the liberty of finding the same thing at another business. Bargaining power of suppliers: This is low when it comes to the exercise equipment, however based on the article it is difficult to find motivated employees/managers to manage these exercise facilities. This probably means it is easy for them to leave their job and find another one, so I would categorize this threat medium. Bargaining power of buyers: This is high. Customers can find the same products/services somewhere else. They can be selective about where they go based on location, price, and products offered. Rivalry between competitors: High. There are competitors in the industry that offer the same product at similar prices. Barriers of entry are low, so other competitors can join easily.

<span style="background-color: transparent; color: #38761d; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">KD Comments:

<span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Since I’m new to the 5-forces model, I wanted to explicitly use it as a guide to making a judgment. To start off, it depends on who is making the call – the incumbent (in this case Bally), or a newcomer.
 * <span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;"><span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Threat of entry: several factors need to be considered here…
 * <span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;"><span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Capital requirements – these vary significantly and there are a wide range of formats from large 100,000 sq. ft. clubs with pools, courts, etc. to fairly bare-bones sub-10,000 sq. ft. clubs in malls and downtown locations. Can the smaller clubs compete? It seems that Curves International has shown that they can. We are also told that, because of leasing and used equipment possibilities, upfront capital to open a new fitness center could be as low as %25k-35k. hence we conclude that capital requirements do not pose a substantial barrier to entry.
 * <span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;"><span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Economies of scale – since we already know that the fitness center industry is not very capital- or research- intensive, there should not be a barrier for new entrants. Advertizing might be an issue, but starting small and focusing at the local/neighborhood level in unlikely to be a problem, and can be quite effective in attracting business that might have gone to the big players or nowhere at all. Hence, we can conclude that economies of scale do not pose a barrier to entry.
 * <span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;"><span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Absolute cost advantages – “raw material” costs here are essentially equipment costs, and while the big players may have (some) bargaining power with equipment manufacturers, we are not told that this is the case. Further, since capital requirements are small anyway, this is unlikely to be a factor.
 * <span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;"><span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Product Differentiation – this is an interesting dimension. It seems that most incumbents are redefining themselves to offer a full range of health and wellness services in addition to basic workout space. However, since the Top 50 firms owned just 33% of the market in 2004, we can conclude that there is much room for new entrants. The key issue seems to be effective differentiation, and with the media expounding on new ways to improve health on an almost daily basis, there is no dearth of ideas for differentiation. Even if the differentiated idea is a fad without lasting power, the rate at which these fads come and go suggest that a constant stream of new entrants can effectively enter (and maybe disappear shortly thereafter) and take market share from the incumbents.
 * <span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;"><span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Channels of distribution – traditional issues such as shelf space etc. discussed in the text do not apply here; word of mouth is likely to be fairly important in driving success for new entrants.
 * <span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;"><span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Government/Legal barriers – N/A
 * <span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;"><span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Retaliation – definitely an issue (as we know the incumbents are taking note of changing trends and trying to adjust their strategies accordingly). If growth were driven by equipment-intensive basic workout facilities, it would be possible for incumbents to launch price wars and sink new entrants lacking deep pockets. However, since capital requirements and new ideas are fairly easy to come by, it’s going to be hard to retaliate effectively against the vast multitude of ever-changing fitness centers. Further as we are told, high growth segments include seniors and high income groups, who may be willing to pay more for unique and/or more tailored services.
 * <span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;"><span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Rivalry between established competitors – many of the same issues here, so not much more to add. One issue stood out for me though…
 * <span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;"><span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Product differentiation – to me it seems that this is an issue more applicable to the incumbent-entrant situation than to the incumbent-incumbent case. Although I agree with NH in that some of the bigger players (Gold’s, 24, Curves) have established some differentiation, I’m reminded of the analogous situation in Auto, where even though a few incumbents rightly assessed the need for, and supplied the market with sports utility vehicles, and enjoyed high profitability for a while, eventually a large group of Auto makers entered with their own models and brought down profits for everyone. How hard is it for Bally to cater to the female demo? YMCA is already doing it, as is the JCC. Outside the US, especially in Asia, the female demo is an extremely high growth segment and all competitors already have targeted offerings. In some cases though, early movers will have an advantage, for instance in branded merchandise such as sports nutrition, it may be possible to sustain profitability once a reputation is established.
 * <span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;"><span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Buyer and Supplier power – I’m sure something can be said here, but I don’t think these dimensions are critical to analyzing the industry, as they apply more to manufacturing.
 * <span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;"><span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Substitutes – this, to me, is another interesting dimension since it brings into question the raison d’être for the fitness center. If it is to develop well-defined musculature, then yes, it’s hard to substitute the whole range of body area-specific workout equipment outside the gym. If it is to merely stay in good health, any number of substitutes exist, from investing in your own treadmill/climber, to exploring the myriad diet/alternative medicine options out there, to simply cycling or walking in free public spaces. If it is to engage in new and exciting activities with some health benefits, a number of cheap alternatives exist, such as dance club/restaurant-organized activities (e.g., belly dancing) or neighborhood/apartment-complex/workplace groups of people participating in some cool new activity (e.g., dance, tai chi, meditation). Finally, if it is primarily to socialize, again a whole set of alternatives exist. Given that we are told the growth areas include children and older/wealthier/more educated segments, one argue that healthy activities offering an overall richer and more fun experience will be more attractive in the future, and consequently the threat of substitutes should be of concern to incumbents. This is not to say that the fitness center industry is doomed, but that the industry needs to come up with effective strategies if it wants to survive and prosper.

<span style="background-color: transparent; color: #1f497d; font-family: Calibri; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Hence, I would say that the fitness center industry is structurally attractive to new entrants and consequently not that attractive to incumbents such as Bally.

<span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">2. Does Bally Fitness have a competitive advantage? Is it a low cost advantage of a differentiation strategy? Please try to perform several simple calculations to examine whether it has lower costs than the competition, or whether it's able to charge a premium price relative to its rivals.

<span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">PH Comments: Comparison between Bally’s Total Fitness and Health Fitness Corp.

2005 : Bally’s Health Fitness Corp Membership4,070,000 3,500,000 Revenue1,003.8m54.94m COGS714.9m41.13m % of Costs/Rev71.2%74.9%

Bally’s24 Hour FitnessOthers 2011 Mem Rate (monthly)$21.65$34.99$25-35

Bally’s Membership Info (Clubindustry.com report - August 1, 2005)
 * || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2005 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2004  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">% Change  ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">New joining members* || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">557  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">517  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">8%  ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Members (end of period)* || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">4,070  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">4,033  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">1%  ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Average committed monthly fee per member (dollars) || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">$36.15  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">$38.35  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-6%  ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Average committed duration per member (in months) || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">27.4  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">29.8  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-8%  ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">New memberships* || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">390  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">383  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2%  ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Average committed monthly fee per membership (dollars) || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">$52.78  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">$52.84  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">0%  ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Average committed duration per membership (in months) || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">26.8  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">29.2  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-8%  ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Gross committed membership fees: ||   ||   ||   ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Total company || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">$551,680  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">$590,889  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-7%  ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Same club || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">$510,968  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">$566,965  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-10%  ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">*in thousands ||   ||   ||   ||

<span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Bally’s Financials <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Millions of U.S. Dollars || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">As of: || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Dec 31 <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2003 <span style="background-color: transparent; color: #999999; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Restated <span style="background-color: transparent; color: #999999; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">USD || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Dec 31 <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2004 <span style="background-color: transparent; color: #999999; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Restated <span style="background-color: transparent; color: #999999; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">USD || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Dec 31 <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2005 <span style="background-color: transparent; color: #999999; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Restated <span style="background-color: transparent; color: #999999; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">USD || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Dec 31 <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2006 <span style="background-color: transparent; color: #999999; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">USD || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">4-Year <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Trend ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Currency in
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Revenues ||  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">985.1 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">957.5 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">988.7 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">1,044.8 || * ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Other Revenues ||  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">17.7 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">17.0 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">15.1 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">14.3 || * ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">TOTAL REVENUES ||  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">1,002.9 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">974.5 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">1,003.8 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">1,059.1 || * ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Cost of Goods Sold ||  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">783.7 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">722.9 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">714.9 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">704.2 || * ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">GROSS PROFIT ||  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">219.1 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">251.6 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">289.0 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">354.9 || * ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Selling General & Admin Expenses, Total ||  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">107.1 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">135.8 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">142.2 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">153.6 || * ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Depreciation & Amortization, Total ||  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">76.8 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">65.9 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">58.4 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">54.2 || * ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">OTHER OPERATING EXPENSES, TOTAL ||  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">183.9 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">201.7 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">200.7 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">207.8 || * ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">OPERATING INCOME ||  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">35.2 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">49.8 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">88.3 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">147.1 || * ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Interest Expense ||  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-62.6 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-67.2 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-85.3 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-101.9 || * ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">NET INTEREST EXPENSE ||  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-62.6 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-67.2 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-85.3 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-101.9 || * ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Income (Loss) on Equity Investments ||  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-1.0 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-0.8 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-0.3 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-0.8 || * ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Currency Exchange Gains (Loss) ||  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2.4 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">1.6 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">0.9 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">1.1 || * ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Other Non-Operating Income (Expenses) ||  || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-1.5 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-1.2 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">0.4 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">1.5 || * ||

<span style="background-color: transparent; color: #134f5c; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Health Fitness Corp.
 * || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Dec 09 (Prelim.) || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Dec 08 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Dec 07 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Dec 06 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Dec 05 ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Revenue || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">79.47 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">77.68 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">69.96 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">63.58 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">54.94 ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Cost of Goods Sold || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">54.11 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">53.94 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">50.32 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">45.95 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">41.13 ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Gross Profit || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">25.36 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">23.74 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">19.64 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">17.63 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">13.82 ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Gross Profit Margin || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">31.91% || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">30.56% || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">28.08% || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">27.73% || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">25.15% ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">SG&A Expense || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">19.72 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">18.79 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">17.61 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">13.59 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">9.48 ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Depreciation & Amortization || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">0.10 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">0.16 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">0.17 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">0.37 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">0.82 ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Operating Income || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">5.55 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">4.78 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">1.86 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">3.68 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">3.51 ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Operating Margin || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">6.98% || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">6.16% || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2.66% || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">5.78% || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">6.40% ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Nonoperating Income || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;"><0.01 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;"><0.01 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;"><(0.01) || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">0.85 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">(0.62) ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Nonoperating Expenses || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-- || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-- || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-- || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-- || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-- ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Income Before Taxes || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">5.55 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">4.76 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">1.82 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">4.52 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2.86 ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Income Taxes || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2.27 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2.04 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">0.91 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">1.50 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">1.52 ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Net Income After Taxes || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">3.28 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2.72 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">0.91 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">3.02 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">1.35 ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Continuing Operations || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">3.28 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2.72 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">0.91 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">3.02 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">1.35 ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Discontinued Operations || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-- || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-- || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-- || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-- || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">-- ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Total Operations || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">3.28 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2.72 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">0.91 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">3.02 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">1.35 ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Total Net Income || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">3.28 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2.72 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">0.91 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">3.02 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">1.35 ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Net Profit Margin || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">4.13% || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">3.50% || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">1.30% || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">4.76% || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2.45% ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Total Net Income || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">3.28 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2.72 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">0.91 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">3.02 || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">1.35 ||
 * <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">Net Profit Margin || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">4.13% || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">3.50% || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">1.30% || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">4.76% || <span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 8pt; text-decoration: none; vertical-align: baseline;">2.45% ||

<span style="background-color: transparent; color: #38761d; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">NH Comments: From the number I saw, Bally’s seems to be going the low cost advtage strategy. They have cut their prices and if you look at the total number of members to the total revenue, you see that they bring in $263/member vs. 24’s who was at $327/member. I compare those too because the YMCA has a similar cost/member as Bally’s but there isn’t a perceived value in going to the Y. Where as 24 has a higher WTP and higher costs. I need to hear back from the professor before I continue because I have numbers that don’t make sense that I need him to explain.

<span style="background-color: transparent; color: #0000ff; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">GA: Cost for Bally’s in Millions 0403020100 1,0781,1061,032903858

Still researching the other companies. They are private. I have looked in Hoovers and several other places for the private companies financials. I could not find them any where. From what I can tell Bally’s cost would be higher because they have extra personnel. Places like Curves and 24 hour fitness have less salary cost because they have less people working there.

<span style="background-color: transparent; color: #ff0000; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">KD: Among the big players (2003 Rev > $100M), Bally is definitely the cheapest measured by Rev/member. Numbers are: Bally: 265 24 Hour: 327 Town Sports: 980 Life Time: 1028 Wellbridge: 870 Sport Club: 2620

<span style="background-color: transparent; color: #000000; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">3. What actions do you recommend for turning Bally Total Fitness around?

<span style="background-color: transparent; color: #45818e; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">PH Comments: -Partner with health providers (insurance companies) to create a joint wellness program approach. Use the motivation of the insurance company to save money on costly medical expenses to encourage their customers to join the gym at a subsidized rate. “Proof” programs can be used to motivate customers to document their exercise program that they can receive discounts in insurance rates. -Create/market a new image beyond the young hot perfect body; appeal image to a larger market group. “We are Ballys Fitness; we are you” -Get back to basics, but expand CORE themes with new elements or programs; more diverse class options to keep the interest of customers. -Look to create outreach and education programs by partnering with various community elements; tap into them for potential customers with specialized focused/themed programs. -Shift the control of the money back to the customer, get away from one sided membership contracts. Offer satisfaction level clauses. -Expand staff focus and training to priorities of customer service; motivation/support is a key component in exercising. -Partner with other industries to create a better “total” health experience. Focus expertise on fitness, let others help by adding their strengths such as Weight Watchers or Lein Cuisine and local farmers markets..

<span style="background-color: transparent; color: #0000ff; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">GA: There is still an untapped market in the area of mothers and fathers. If Bally focus’s on this untapped market it can start to compete with the YMCA. It can offer childcare & maybe gym classes for the children (address's childhood obesity). While the children are at play the parents can work out. The new mother is self conscience with the weight from her pregnancy. If a Bally’s has a swimming pool, offer swim classes for kids.

<span style="background-color: transparent; color: #38761d; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">NH Comments: If you look at Bally’s numbers, they need to stop expanding and possibly close some stores. They are carrying a ton of debt due to the fact that they are growing so rapidly. It is hurting their bottom line. Furthermore, they need to offer more classes and ancillary sales at their offices. If you look at the numbers, it tells us that an average center, in this market, brings in 28% of its gross income from non-due money. Bally’s is only bringing in 15%. There is a huge difference that they can make up. Focussing in on this segment of their business to take in more money from the people that are already going to the gym will increase profits and ultimately help them have a higher operating profit.

<span style="background-color: transparent; color: #9900ff; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">CG’s Comments: 1- Offer more add-on programs such as massage and personal training (companies that provide more add-on program options have higher retention rates and larger revenues) 2- create proprietary software (like 24 hr fitness) that tailors individualized nutrition and exercise programs to each client 3- Focus on ‘Bonanza’ markets such as Children and the Elderly. Our population is aging and baby boomers are an untapped source of revenue. Children and Parent programs will create opportunity to bond and draw in mothers and their children 4- Concentrate on developing state of the art information technology infrastructures to allow for easier electronic deduction from client’s checking accounts (like competitor 24 hr fitness) 5- employee incentive programs will provide potential impetus for greater employee satisfaction and loyalty. staff will be friendlier and more devoted to succeeding in their jobs which will result in greater customer satisfaction

<span style="background-color: #9fc5e8; color: #ff00ff; font-family: Arial; font-size: 12pt; text-decoration: none; vertical-align: baseline;">Lena<3

<span style="background-color: transparent; color: #ff00ff; font-family: Tahoma; font-size: 11pt; text-decoration: none; vertical-align: baseline;">The most important thing to me would be to first focus on customer satisfaction. From the lawsuits going on to the customers claiming that Bally is charging their credit cards without authorization, Bally has some work to do. When I googled them almost all of their reviews were around 1-2 out of 5 stars (for example one review said “their corporate customer service group is downright dishonest”). Another good idea for Bally would be to focus on some type of training for the employees. Based on the article, and as I mentioned before, they are having trouble motivating employees and seeing some type of success come from their work. I find it hard to believe that there is absolutely nothing the industry can do to find motivated employees. Whether it is offering some type of incentive besides commission or simply sending them to a training before beginning their jobs, Bally should focus on its staff if they want to see improvement in their company. Finally, Bally should attempt to follow industry trends a little more effectively. A survey asking over one thousand group fitness experts, personal trainers, fitness consultants, and nutritionists (done by Extreme Fitness Inc) listed a few key trends for 2011: <span style="background-color: transparent; color: #ff00ff; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">- <span style="background-color: transparent; color: #ff00ff; font-family: Tahoma; font-size: 11pt; text-decoration: none; vertical-align: baseline;">TABATA workouts <span style="background-color: transparent; color: #ff00ff; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">- <span style="background-color: transparent; color: #ff00ff; font-family: Tahoma; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Weight loss competitions <span style="background-color: transparent; color: #ff00ff; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">- <span style="background-color: transparent; color: #ff00ff; font-family: Tahoma; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Fun work outs (such as “the firefighter workout” <span style="background-color: transparent; color: #ff00ff; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">- <span style="background-color: transparent; color: #ff00ff; font-family: Tahoma; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Personal training <span style="background-color: transparent; color: #ff00ff; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">- <span style="background-color: transparent; color: #ff00ff; font-family: Tahoma; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Anything dance (f.e. Zumba) <span style="background-color: transparent; color: #ff00ff; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">- <span style="background-color: transparent; color: #ff00ff; font-family: Tahoma; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Kettlebell <span style="background-color: transparent; color: #ff00ff; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">- <span style="background-color: transparent; color: #ff00ff; font-family: Tahoma; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Expanding yoga Bally should make these a focus of their company, instead of just providing exercise equipment.

<span style="background-color: transparent; color: #ff0000; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">KD comments:
 * <span style="background-color: transparent; color: #ff0000; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;"><span style="background-color: transparent; color: #ff0000; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Over the short term, having gone through 2 bankruptcies and saddled with excessive debt ($800M with total assets of $400M as of Dec 2008), it’s hard to imagine Bally experimenting with any creative options designed for long term growth. Right now, Harbinger is probably wondering how fast it can turn around a potentially toxic asset. If i were in Harbinger’s shoes (and my job was not running gyms but making sensible investments), I’d be looking for the fastest way to recover my $230M (and whatever else they’ve spent since then running Bally) and it would be hard to bypass extensive streamlining through gym closures and additional no-frills services (if that’s even possible). If some turnaround could be demonstrated, I’d be seriously negotiating with Gold’s or some other prospective buyer to get Bally off my hands. However, even if Gold’s or someone else buys Bally, the issue still remains of what to do with it. so, in addition to everything above, i would add:
 * <span style="background-color: transparent; color: #ff0000; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;"><span style="background-color: transparent; color: #ff0000; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Corporate partnerships: today 31% of America’s larger corporations subsidize club membership for their employees (Society for Human Resource management, 2003 report. This trend is sure to increase as corporations become even more health cost conscious. Bally can seek out corporate partnerships to lock in potential new customers.
 * <span style="background-color: transparent; color: #ff0000; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;"><span style="background-color: transparent; color: #ff0000; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Expand off-hours service: as a greater segment of the workforce adopts flexible (e.g., home office) schedules, Bally should tap into this segment.
 * <span style="background-color: transparent; color: #ff0000; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;"><span style="background-color: transparent; color: #ff0000; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Get creative with location: Target existing/new retail locations, which may offer attractive leasing rates (especially during a downturn such as now) and where potential customers are likely to be found in good numbers for reasons other than working out. if people won’t come to you, you’ve gotta go to them.
 * <span style="background-color: transparent; color: #ff0000; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;"><span style="background-color: transparent; color: #ff0000; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Faster international expansion: with the explosion in health awareness in emerging countries and huge potential markets (India, China), Bally should be making a major move here. Gold’s has done so and has been successful. The advantages of emerging countries are low set-up and operations costs, and the ability to offer no-frills services only, as the market is far from mature.
 * <span style="background-color: transparent; color: #ff0000; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;"><span style="background-color: transparent; color: #ff0000; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Expand the fraction of non-dues revenue: aside from the options listed above, Bally can leverage its reputation and increase its portfolio of branded merchandise. Outsourcing assures low costs, while brand name permits hefty margins. Competitors will not have an easy time matching this type of offering.
 * <span style="background-color: transparent; color: #ff0000; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;"><span style="background-color: transparent; color: #ff0000; font-family: Arial; font-size: 11pt; text-decoration: none; vertical-align: baseline;">Rethink the long term: Everyone seems to agree that diversification out of basic workout offerings is the way to go. But which type of diversification yields a sustainable competitive advantage? One possibility is to get serious about overall wellness/health. For example, to get into the nutritional supplement business. GNC has been doing pretty well with revenues increasing over the recession ($1.6B in 2008, $1.8B in 2010) and EBT doubling over the same period to $170M in 2010. As NH points out, Bally could slow down/sell off some undifferentiated locations and use the resources to enter this area. An acquisition or two to hit the ground running may also not be such a bad idea.