##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934for the quarterly period
ended June 30, 2006
 or
 o
    
    Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
 Commission file number:001-13997
 BALLY TOTAL FITNESS HOLDING CORPORATION
  Delaware
    
    36-3228107(State or other jurisdiction of incorporation)
    
    (I.R.S. Employer Identification No.)8700 West Bryn Mawr Avenue, Chicago, Illinois
    
    60631(Address of principal executive offices)
    
    (Zip Code)
 (773) 380-3000
  þ o
  o þ o
 o þ




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##### 



TABLE OF ADDITIONAL REGISTRANTS
 Jurisdiction of
    
    I.R.S. EmployerExact Name of Additional Registrants
    
    Incorporation
    
    Identification Number59th Street Gym LLC
    
    New York
    
    36-4474644708 Gym LLC
    
    New York
    
    36-4474644Ace, LLC
    
    New York
    
    36-4474644Bally Fitness Franchising, Inc.
    
    Illinois
    
    36-4029332Bally Franchise RSC, Inc.
    
    Illinois
    
    36-4028744Bally Franchising Holdings, Inc.
    
    Illinois
    
    36-4024133Bally Sports Clubs, Inc.
    
    New York
    
    36-3407784Bally Total Fitness Corporation
    
    Delaware
    
    36-2762953Bally Total Fitness International, Inc.
    
    Michigan
    
    36-1692238Bally Total Fitness of California, Inc.
    
    California
    
    36-2763344Bally Total Fitness of Colorado, Inc.
    
    Colorado
    
    84-0856432Bally Total Fitness of Connecticut Coast, Inc.
    
    Connecticut
    
    36-3209546Bally Total Fitness of Connecticut Valley, Inc.
    
    Connecticut
    
    36-3209543Bally Total Fitness of Greater New York, Inc.
    
    New York
    
    95-3445399Bally Total Fitness of the Mid-Atlantic, Inc.
    
    Delaware
    
    52-0820531Bally Total Fitness of the Midwest, Inc.
    
    Ohio
    
    34-1114683Bally Total Fitness of Minnesota, Inc.
    
    Ohio
    
    84-1035840Bally Total Fitness of Missouri, Inc.
    
    Missouri
    
    36-2779045Bally Total Fitness of Upstate New York, Inc.
    
    New York
    
    36-3209544Bally Total Fitness of Philadelphia, Inc.
    
    Pennsylvania
    
    36-3209542Bally Total Fitness of Rhode Island, Inc.
    
    Rhode Island
    
    36-3209549Bally Total Fitness of the Southeast, Inc.
    
    South Carolina
    
    52-1230906Bally Total Fitness of Toledo, Inc.
    
    Ohio
    
    38-1803897Ballys Fitness and Racquet Clubs, Inc.
    
    Florida
    
    36-3496461BFIT Rehab of West Palm Beach, Inc.
    
    Florida
    
    36-4154170BTF/CFI, Inc.
    
    Delaware
    
    36-4474644Crunch LA LLC
    
    New York
    
    36-4474644Crunch World LLC
    
    New York
    
    36-4474644Flambe LLC
    
    New York
    
    36-4474644Greater Philly No. 1 Holding Company
    
    Pennsylvania
    
    36-3209566Greater Philly No. 2 Holding Company
    
    Pennsylvania
    
    36-3209557Health & Tennis Corporation of New York
    
    Delaware
    
    36-3628768Holiday Health Clubs of the East Coast, Inc.
    
    Delaware
    
    52-1271028Holiday/Southeast Holding Corp.
    
    Delaware
    
    52-1289694Jack La Lanne Holding Corp.
    
    New York
    
    95-3445400Mission Impossible, LLC
    
    California
    
    36-4474644New Fitness Holding Co., Inc.
    
    New York
    
    36-3209555Nycon Holding Co., Inc.
    
    New York
    
    36-3209533Rhode Island Holding Company
    
    Rhode Island
    
    36-3261314Soho Ho LLC
    
    New York
    
    36-4474644Tidelands Holiday Health Clubs, Inc.
    
    Virginia
    
    52-1229398U.S. Health, Inc.
    
    Delaware
    
    52-1137373West Village Gym at the Archives LLC
    
    New York
    
    36-4474644
 nd




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##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Quarterly Report on Form 10-Q For Period Ended June 30, 2006
TABLE OF CONTENTS
 PageNumberFORWARD-LOOKING STATEMENTSPART I. FINANCIAL INFORMATIONItem 1. Financial Statements:Condensed Consolidated Balance Sheets as of June 30, 2006 (Unaudited) and December 31, 2005
    
    
    1Consolidated Statements of Operations (Unaudited) for the Three Months Ended June 30, 2006 and 2005
    
    
    2Consolidated Statements of Operations (Unaudited) for the Six Months Ended June 30, 2006 and 2005
    
    
    3Consolidated Statement of Stockholders Deficit and Comprehensive Income (Unaudited) for the Six Months Ended June 30, 2006
    
    
    4Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2006 and 2005
    
    
    5Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    29Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    40Item 4. Controls and Procedures
    
    
    42PART II. OTHER INFORMATION
    
    
    43Item 1. Legal Proceedings
    
    
    43Item 1A. Risk Factors
    
    
    45Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    47Item 3. Defaults Upon Senior Securities
    
    
    47Item 4. Submission of Matters to a Vote of Security Holders
    
    
    47Item 5. Other Information
    
    
    47Item 6. Exhibits
    
    
    48SIGNATURE PAGE
    
    
    50Certification of the Chief Executive OfficerCertification of the Chief Financial OfficerCertification of the CEO and Chief Financial Officer




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##### 



FORWARD-LOOKING STATEMENTS
  
    
    ability to maintain existing or obtain new sources of equity and debt financing, on acceptable terms or at all, to satisfy
the Companys cash needs and obligations;
    
    availability, terms, and development of capital;
    
    availability of adequate sources of liquidity and the Companys ability to meet its obligations beyond the
first quarter of 2007;
    
    ability to satisfy long-term obligations as they become due;
    
    ability to remain in compliance with, or obtain waivers under, the Companys loan agreements and indentures;
    
    success of operating initiatives, advertising and promotional efforts;
    
    ability to attract, retain and motivate highly skilled employees;
    
    the outcome of the Companys exploration of strategic
alternatives, which is now focused on restructuring and refinancing
alternatives;
    
    business abilities and judgment of personnel;
    
    general economic and business conditions;
    
    competition;
    
    acceptance of new product and service offerings;
    
    changes in business strategy or plans;
    
    the effect of material weaknesses in internal controls over financial reporting on the Companys ability to
prepare financial statements and file reports with the SEC;
    
    the outcome of the SEC and Department of Justice investigations;
    
    existence of adverse publicity or litigation (including various stockholder litigations and  insurance
rescission actions) and the outcome thereof and the costs and expenses associated therewith;
    
    changes in, or the failure to comply with, government regulations; and
    
    other factors described in this Quarterly Report on Form 10-Q, including the risk factors identified in
Item 1A, and prior filings of the Company with the SEC.




---



##### 



PART I. FINANCIAL INFORMATION
 
  BALLY TOTAL FITNESS HOLDING CORPORATION
 
 Condensed Consolidated Balance Sheets
 June 30
    
    
    December 312006
    
    
    2005(Unaudited)ASSETSCurrent assets:Cash
    
    $
    15,156
    
    
    $
    17,454Deferred income taxes
    
    
    236
    
    
    
    151Prepaid expenses
    
    
    18,331
    
    
    
    20,846Other current assets
    
    
    13,241
    
    
    
    17,394Current assets held for sale
    
    
    
    
    
    
    342Total current assets
    
    
    46,964
    
    
    
    56,187Property and equipment, less accumulated depreciation and amortization of
$766,260 and $749,860
    
    
    303,084
    
    
    
    314,670Goodwill, net
    
    
    19,734
    
    
    
    19,734Trademarks, net of accumulated amortization of $1,607 and $1,510
    
    
    6,871
    
    
    
    6,912Intangible assets, net of accumulated amortization of $14,036 and $13,463
    
    
    2,547
    
    
    
    2,879Deferred financing costs, net of accumulated amortization of $27,737 and $18,190
    
    
    41,170
    
    
    
    29,501Other assets
    
    
    10,532
    
    
    
    10,317Non-current assets held for sale
    
    
    
    
    
    
    39,894$
    430,902
    
    
    $
    480,094LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable
    
    $
    49,246
    
    
    $
    57,832Income taxes payable
    
    
    1,951
    
    
    
    1,697Accrued liabilities
    
    
    100,921
    
    
    
    96,442Current maturities of long-term debt
    
    
    180,354
    
    
    
    13,018Deferred revenues
    
    
    279,155
    
    
    
    299,441Current liabilities associated with assets held for sale
    
    
    
    
    
    
    7,764Total current liabilities
    
    
    611,627
    
    
    
    476,194Long-term debt, less current maturities
    
    
    542,786
    
    
    
    756,304Deferred rent liability
    
    
    89,871
    
    
    
    87,290Deferred income taxes
    
    
    1,693
    
    
    
    1,435Other liabilities
    
    
    29,573
    
    
    
    28,112Deferred revenues
    
    
    565,645
    
    
    
    566,469Non-current liabilities associated with assets held for sale
    
    
    
    
    
    
    27,976Stockholders deficit
    
    
    (1,410,293
    )
    
    
    (1,463,686
    )$
    430,902
    
    
    $
    480,094
  1




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##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
 
 Consolidated Statements of Operations
 Three months endedJune 302006
    
    
    2005(As restated)Net revenues:Membership services
    
    $
    239,549
    
    
    $
    243,369Retail products
    
    
    11,460
    
    
    
    12,640Miscellaneous
    
    
    3,622
    
    
    
    3,608254,631
    
    
    
    259,617Operating costs and expenses:Membership services
    
    
    170,203
    
    
    
    170,713Retail products
    
    
    10,667
    
    
    
    13,424Advertising
    
    
    16,180
    
    
    
    14,641General and administrative
    
    
    21,230
    
    
    
    21,583Gain on sale of land and building
    
    
    (872
    )
    
    
    Depreciation and amortization
    
    
    13,233
    
    
    
    15,023230,641
    
    
    
    235,384Operating income
    
    
    23,990
    
    
    
    24,233Interest expense, net
    
    
    (26,148
    )
    
    
    (21,164
    )Foreign exchange gain (loss)
    
    
    1,760
    
    
    
    (163
    )Other, net
    
    
    166
    
    
    
    64(24,222
    )
    
    
    (21,263
    )Income (loss) from continuing operations before income taxes
    
    
    (232
    )
    
    
    2,970Income tax provision
    
    
    (501
    )
    
    
    (239
    )Income (loss) from continuing operations
    
    
    (733
    )
    
    
    2,731Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    (1,124
    )Net income (loss)
    
    $
    (733
    )
    
    $
    1,607Basic income (loss) per common share:Income (loss) from continuing operations
    
    $
    (0.02
    )
    
    $
    0.08Loss from discontinued operations
    
    
    
    
    
    
    (0.03
    )Net income (loss)
    
    $
    (0.02
    )
    
    
    0.05Diluted income (loss) per common share:Income (loss) from continuing operations
    
    $
    (0.02
    )
    
    $
    0.08Loss from discontinued operations
    
    
    
    
    
    
    (0.03
    )Net income (loss)
    
    $
    (0.02
    )
    
    $
    0.05
  2




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##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
 
 Consolidated Statements of Operations
 Six months endedJune 302006
    
    
    2005(As restated)Net revenues:Membership services
    
    $
    479,204
    
    
    $
    479,504Retail products
    
    
    23,397
    
    
    
    25,987Miscellaneous
    
    
    7,196
    
    
    
    7,879509,797
    
    
    
    513,370Operating costs and expenses:Membership services
    
    
    342,488
    
    
    
    338,674Retail products
    
    
    21,678
    
    
    
    26,232Advertising
    
    
    35,075
    
    
    
    31,752General and administrative
    
    
    42,619
    
    
    
    39,453Gain on
sales of land and buildings
    
    
    (1,773
    )
    
    
    Depreciation and amortization
    
    
    27,447
    
    
    
    29,962467,534
    
    
    
    466,073Operating income
    
    
    42,263
    
    
    
    47,297Interest expense, net
    
    
    (49,181
    )
    
    
    (39,241
    )Foreign exchange gain
    
    
    1,770
    
    
    
    44Other, net
    
    
    284
    
    
    
    139(47,127
    )
    
    
    (39,058
    )Income (loss) from continuing operations before income taxes
    
    
    (4,864
    )
    
    
    8,239Income tax provision
    
    
    (702
    )
    
    
    (479
    )Income (loss) from continuing operations
    
    
    (5,566
    )
    
    
    7,760Discontinued operations:Loss from discontinued operations, net of income taxes
    
    
    (872
    )
    
    
    (1,538
    )Gain on disposal
    
    
    38,375
    
    
    
    Gain (loss) from discontinued operations
    
    
    37,503
    
    
    
    (1,538
    )Net income
    
    $
    31,937
    
    
    $
    6,222Basic income (loss) per common share:Income (loss) from continuing operations
    
    $
    (0.14
    )
    
    $
    0.23Income (loss) from discontinued operations
    
    
    0.96
    
    
    
    (0.04
    )Net income
    
    $
    0.82
    
    
    $
    0.19Diluted income (loss) per common share:Income (loss) from continuing operations
    
    $
    (0.14
    )
    
    $
    0.22Income (loss) from discontinued operations
    
    
    0.96
    
    
    
    (0.04
    )Net income
    
    $
    0.82
    
    
    $
    0.18
  3




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##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
 
 Consolidated Statement of Stockholders Deficit and Comprehensive Income
 AccumulatedCommon stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common
    
    
    other
    
    
    TotalShares
    
    
    Par
    
    
    Contributed
    
    
    Accumulated
    
    
    Unearned
    
    
    stock in
    
    
    comprehensive
    
    
    stockholdersoutstanding
    
    
    value
    
    
    capital
    
    
    deficit
    
    
    compensation
    
    
    treasury
    
    
    loss
    
    
    deficitBalance at December 31,
2005
    
    
    38,503,551
    
    
    $
    392
    
    
    $
    669,089
    
    
    $
    (2,113,854
    )
    
    $
    (5,534
    )
    
    $
    (11,635
    )
    
    $
    (2,144
    )
    
    $
    (1,463,686
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,937
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,937Cumulative translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,805
    )
    
    
    (3,805
    )Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,132Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    1,798
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,798Sale of common stock
    
    
    800,000
    
    
    
    8
    
    
    
    5,592
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,600Shares issued to
noteholders
    
    
    1,956,195
    
    
    
    19
    
    
    
    17,469
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,488Shares issued to agent
    
    
    11,936
    
    
    
    
    
    
    
    98
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98Reclassification of
unearned compensation
balance to contributed
capital
    
    
    
    
    
    
    
    
    
    
    (5,534
    )
    
    
    
    
    
    
    5,534
    
    
    
    
    
    
    
    
    
    
    
    Forfeiture of
restricted stock
    
    
    (7,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common
stock under stock
option plans
    
    
    51,081
    
    
    
    1
    
    
    
    276
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    277Balance at June 30, 2006
    
    
    41,315,263
    
    
    $
    420
    
    
    $
    688,788
    
    
    $
    (2,081,917
    )
    
    $
    
    
    
    $
    (11,635
    )
    
    $
    (5,949
    )
    
    $
    (1,410,293
    )
  4




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##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
 
 Consolidated Statements of Cash Flows
 Six months endedJune 302006
    
    
    2005(As restated)CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    31,937
    
    
    $
    6,222Adjustments to reconcile to cash provided by operating activitiesDepreciation and amortization, including amortization included in interest expense
    
    
    37,070
    
    
    
    35,289Changes in operating assets and liabilities
    
    
    (19,123
    )
    
    
    (10,404
    )Deferred income taxes, net
    
    
    179
    
    
    
    210Gain on disposal of discontinued operations
    
    
    (38,375
    )
    
    
    Loss (gain) on sale of assets
    
    
    (1,385
    )
    
    
    67Foreign currency translation gain
    
    
    (1,770
    )
    
    
    (46
    )Stock-based compensation
    
    
    1,798
    
    
    
    4,337Cash provided by operating activities
    
    
    10,331
    
    
    
    35,675CASH FLOWS FROM INVESTING ACTIVITIES:Purchases and construction of property and equipment
    
    
    (18,889
    )
    
    
    (14,474
    )Proceeds from sale of discontinued operations
    
    
    45,052
    
    
    
    Proceeds from sale of discontinued operations in escrow
    
    
    438
    
    
    
    Proceeds from sale of property
    
    
    3,307
    
    
    
    1,455Cash provided by (used in) investing activities
    
    
    29,908
    
    
    
    (13,019
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net repayments under credit agreement
    
    
    (36,811
    )
    
    
    (875
    )Net repayments of other long-term debt
    
    
    (8,205
    )
    
    
    (9,612
    )Debt issuance and refinancing costs
    
    
    (3,751
    )
    
    
    (2,274
    )Proceeds from sale of common stock
    
    
    5,600
    
    
    
    Proceeds from issuance of common stock under stock option plans
    
    
    277
    
    
    
    162Cash used in financing activities
    
    
    (42,890
    )
    
    
    (12,599
    )Increase (decrease) in cash
    
    
    (2,651
    )
    
    
    10,057Effect of exchange rate changes on cash balance
    
    
    353
    
    
    
    225Cash, beginning of period
    
    
    17,454
    
    
    
    19,177Cash, end of period
    
    $
    15,156
    
    
    $
    29,459
  5




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##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Consolidated Statements of Cash Flows-- (continued)
 Six months endedJune 302006
    
    
    2005(As restated)SUPPLEMENTAL CASH FLOWS INFORMATION:Changes in operating assets and liabilities:Decrease in other current and other assets
    
    $
    5,606
    
    
    $
    1,758Decrease in accounts payable
    
    
    (8,599
    )
    
    
    (8,061
    )Increase in income taxes payable
    
    
    254
    
    
    
    237Increase (decrease) in accrued liabilities
    
    
    1,235
    
    
    
    (3,124
    )Increase in other liabilities
    
    
    3,355
    
    
    
    10,161Decrease in deferred revenues
    
    
    (20,974
    )
    
    
    (11,375
    )Change in operating assets and liabilities
    
    $
    (19,123
    )
    
    $
    (10,404
    )Cash payments for interest and income taxes were as follows Interest paid
    
    $
    39,883
    
    
    $
    35,737Interest capitalized
    
    
    (367
    )
    
    
    (140
    )Income taxes paid, net
    
    
    276
    
    
    
    70Investing and financing activities exclude the following non-cash transactions Acquisitions of property and equipment through capital leases/borrowings
    
    $
    
    
    
    $
    302Reclassification of unearned compensation balance to contributed capital
    
    
    5,534
    
    
    
    Payments of consents with common stock
    
    
    17,488
    
    
    
    Stock issued to agent
    
    
    98
    
    
    
    
  6




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##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
 
 Notes to Condensed Consolidated Financial Statements
 Note 1 Basis of Presentation
   Accounting
for the Impairment or Disposal of Long-Lived Assets
 Seasonal factors
  Market risk
   Fair
value of financial instrument
  Note 2 Restatement of 2005 Quarterly Information
  7




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##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
 Note 3 Commitments and Contingencies
 Operating leases:
 Litigation:
 Putative Securities Class Actions
 In re Bally Total Fitness Securities Litigation
  Stockholder Derivative Lawsuits in Illinois State Court
  Stockholder Derivative Lawsuit in Illinois Federal Court
  8




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##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
 Individual Securities Action in Illinois
 Levine v. Bally Total Fitness Holding Corporation, et
al.
 Lawsuit in Oregon
 Jack Garrison and Deane Garrison v. Bally Total
Fitness Holding Corporation, Lee S. Hillman and John W. Dwyer,
  Lawsuit in Massachusetts
 Fit Tech Inc., et al. v.
Bally Total Fitness Holding Corporation, et al.
  Securities and Exchange Commission Investigation
  9




---



##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
 Department of Justice Investigation
  Insurance Lawsuits
 Travelers Indemnity Company and ACE American Insurance
Company v. Bally Total Fitness Holding Corporation; Holiday Universal, Inc, n/k/a Bally Total
Fitness of the Mid-Atlantic, Inc; George N. Aronoff; Paul Toback; John W. 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,
 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,
 Great American Insurance Company
v. Bally Total Fitness Holding Corporation, ab initio
  Other:
   10




---



##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
   Note 4 Debt
    11




---



##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
     12




---



##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
 Note 5 Deferred Revenue
  Six months ended June 30, 2006Balance at
    
    
    
    
    
    
    
    
    
    
    Balance atDecember 31,
    
    
    Cash
    
    
    Revenue
    
    
    June 30,2005
    
    
    Additions
    
    
    Recognized
    
    
    2006Deferral of receipts from financed members:Initial contract term payments
    
    $
    517,624
    
    
    $
    115,100
    
    
    $
    (137,132
    )
    
    $
    495,592Down payments
    
    
    100,009
    
    
    
    26,032
    
    
    
    (27,353
    )
    
    
    98,688Deferral of receipts representing advance payments:Paid-in-full membership fees collected upon origination
    
    
    109,819
    
    
    
    18,125
    
    
    
    (18,587
    )
    
    
    109,357Advance payments of periodic dues and membership fees
    
    
    120,696
    
    
    
    60,060
    
    
    
    (59,199
    )
    
    
    121,557Receipts collected and earned without deferral during period
    
    
    
    
    
    
    173,822
    
    
    
    (173,822
    )
    
    
    Deferral of receipts for personal training services
    
    
    17,762
    
    
    
    64,955
    
    
    
    (63,111
    )
    
    
    19,606$
    865,910
    
    
    $
    458,094
    
    
    $
    (479,204
    )
    
    $
    844,800
 Six months ended June 30, 2005Balance at
    
    
    
    
    
    
    
    
    
    
    Balance atDecember 31,
    
    
    Cash
    
    
    Revenue
    
    
    June 30,2004
    
    
    Additions
    
    
    Recognized
    
    
    2005Deferral of receipts from financed members:Initial contract term payments
    
    $
    534,446
    
    
    $
    142,041
    
    
    $
    (150,279
    )
    
    $
    526,208Down payments
    
    
    105,614
    
    
    
    28,761
    
    
    
    (27,886
    )
    
    
    106,489Deferral of receipts representing advance payments:Paid-in-full membership fees collected upon origination
    
    
    115,735
    
    
    
    14,331
    
    
    
    (17,691
    )
    
    
    112,375Advance payments of periodic dues and membership fees
    
    
    132,164
    
    
    
    66,528
    
    
    
    (71,375
    )
    
    
    127,317Receipts collected and earned without deferral during period
    
    
    
    
    
    
    151,368
    
    
    
    (151,368
    )
    
    
    Deferral of receipts for personal training services
    
    
    17,697
    
    
    
    62,634
    
    
    
    (60,905
    )
    
    
    19,426$
    905,656
    
    
    $
    465,663
    
    
    $
    (479,504
    )
    
    $
    891,815
 13




---



##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
 Note 6 Income (loss) per Common Share
 Earnings per Share
 Three months ended June 30,
    
    
    Six months ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Weighted average number of common shares outstanding
    
    
    40,190,279
    
    
    
    33,886,380
    
    
    
    38,944,691
    
    
    
    33,417,715Effect of outstanding stock options and warrants
    
    
    1,320,118
    
    
    
    534,193
    
    
    
    1,327,717
    
    
    
    983,878Diluted weighted average number of shares outstanding
    
    
    41,510,397
    
    
    
    34,420,573
    
    
    
    40,272,408
    
    
    
    34,401,593Options and warrants excluded from the computation of
diluted weighted average number of common shares
because the exercise prices were greater than the average
market prices of the common stock
    
    
    1,618,840
    
    
    
    5,417,152
    
    
    
    1,618,840
    
    
    
    5,417,152Range of exercise prices per share:High
    
    $
    36.00
    
    
    $
    36.00
    
    
    $
    36.00
    
    
    $
    36.00Low
    
    $
    2.91
    
    
    $
    2.91
    
    
    $
    2.91
    
    
    $
    2.91
 Note 7 Income Taxes
  Accounting for Income Taxes,
 Note 8
Share-based payments
 Share-Based Payment Accounting for Stock-based Compensation Accounting for Stock Issued to Employees
  14




---



##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
   Three months ended
    
    
    Six months endedJune 30, 2006
    
    
    June 30, 2006Under APB
    
    
    
    
    
    
    Under APBAs Reported
    
    
    No. 25
    
    
    As Reported
    
    
    No. 25Loss from continuing operations before income taxes
    
    $
    (232
    )
    
    $
    258
    
    
    $
    (4,864
    )
    
    $
    (3,813
    )Loss from continuing operations
    
    
    (733
    )
    
    
    (243
    )
    
    
    (5,566
    )
    
    
    (4,515
    )Net income (loss)
    
    
    (733
    )
    
    
    (243
    )
    
    
    31,937
    
    
    
    32,988Cash flow from operating activities
    
    
    (246
    )
    
    
    (246
    )
    
    
    10,331
    
    
    
    10,331Cash flow from financing activities
    
    
    5,108
    
    
    
    5,108
    
    
    
    (42,890
    )
    
    
    (42,890
    )Basic and diluted income (loss) per common shareLoss from continuing operations
    
    $
    (0.02
    )
    
    $
    (0.01
    )
    
    $
    (0.14
    )
    
    $
    (0.11
    )Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    0.96
    
    
    
    0.96Net income (loss)
    
    $
    (0.02
    )
    
    $
    (0.01
    )
    
    $
    0.82
    
    
    $
    0.85
  Three months ended
    
    
    Six months endedJune 30, 2005
    
    
    June 30, 2005Net income, as reported
    
    $
    1,607
    
    
    $
    6,222Plus: stock-based compensation expense included in net income
    
    
    4,207
    
    
    
    4,337Less: stock-based compensation expense
determined under fair value based method
    
    
    (4,699
    )
    
    
    (5,377
    )Pro forma net income
    
    $
    1,115
    
    
    $
    5,182Basic income per common share:As reported
    
    $
    0.05
    
    
    $
    0.19Pro forma
    
    
    0.03
    
    
    
    0.16Diluted income per common share:As reported
    
    $
    0.05
    
    
    $
    0.18Pro forma
    
    
    0.03
    
    
    
    0.15
 15




---



##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
 Stock-Based Compensation Plans
     Stock Options
  WeightedAverageWeighted
    
    
    RemainingAverage
    
    
    Contractual
    
    
    AggregateExercise
    
    
    Term
    
    
    IntrinsicNumber of Shares
    
    
    Price
    
    
    (Years)
    
    
    ValueOutstanding at December 31, 2005
    
    
    4,138,514
    
    
    $
    13.26Granted
    
    
    19,500
    
    
    
    8.02Exercised
    
    
    (51,081
    )
    
    
    5.41Forfeited
    
    
    (62,834
    )
    
    
    6.43Canceled
    
    
    (160,758
    )
    
    
    21.43Outstanding at June 30, 2006
    
    
    3,883,341
    
    
    $
    13.11
    
    
    
    6.2
    
    
    $
    2,630Exercisable at June 30, 2006
    
    
    2,851,341
    
    
    $
    15.86
    
    
    
    5.2
    
    
    $
    1,186
 16




---



##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
  Three months ended
    
    Six months endedJune 30,
    
    June 30,2006
    
    2005
    
    2006
    
    2005Weighted average grant-date fair value of stock options granted
    
    $
    4.30
    
    
    $
    1.56
    
    
    $
    4.42
    
    
    $
    1.72Total intrinsic value of stock options exercised
    
    $
    149
    
    
    $
    
    
    
    $
    276
    
    
    $
    
   Three months ended
    
    Six months endedJune 30,
    
    June 30,2006
    
    2005
    
    2006
    
    2005Expected option life in years
    
    
    6
    
    
    
    6
    
    
    
    6
    
    
    
    6Risk-free interest rate
    
    
    4.98
    %
    
    
    3.86
    %
    
    
    4.87
    %
    
    
    4.15
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expected volatility
    
    
    52
    %
    
    
    51
    %
    
    
    52
    %
    
    
    52
    %
  Restricted Stock
   WeightedAverageGrant Date FairNumber of Shares
    
    
    ValueOutstanding at December 31, 2005
    
    
    837,000
    
    
    $
    6.92Vested
    
    
    (2,500
    )
    
    
    7.01Forfeited
    
    
    (7,500
    )
    
    
    7.01Outstanding at June 30, 2006
    
    
    827,000
    
    
    $
    6.92
  Stock
issued for services
  17




---



##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
 Note 9 Guarantees
     Note
10 Gain on sale of land and building
  Note 11 Insurance Proceeds
  Note 12 Discontinued Operations
   Three months ended June 30,
    
    
    Six months ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue
    
    $
    
    
    
    $
    16,821
    
    
    $
    4,687
    
    
    $
    34,652Loss from discontinued operations before income taxes
    
    
    
    
    
    
    (1,105
    )
    
    
    (866
    )
    
    
    (1,500
    )Income tax provision
    
    
    
    
    
    
    (19
    )
    
    
    (6
    )
    
    
    (38
    )Loss from discontinued operations
    
    
    
    
    
    
    (1,124
    )
    
    
    (872
    )
    
    
    (1,538
    )Gain on disposal of discontinued operations
    
    
    
    
    
    
    
    
    
    
    38,375
    
    
    
    Net income (loss) from discontinued operations
    
    $
    
    
    
    $
    (1,124
    )
    
    $
    37,503
    
    
    $
    (1,538
    )
 18




---



##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
 Note 13 Subsequent Events
 Real Estate Transaction
  Separation Agreement with Mr. Landeck
  Director Compensation
  Appointment of Mr. Eidell as Chief Financial Officer
  Employment Agreement and Separation Agreement with Mr. Toback
   19




---



##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
 Appointment of Acting Chief Executive Officer
  Appointment of Interim Chairman of the Board
  Strategic Alternatives Committee
  Resignation of Director
  Note 14 Condensed Consolidating Financial Statements
     20




---



##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
 CONDENSED CONSOLIDATING BALANCE SHEET
 June 30, 2006Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    ConsolidatedParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalASSETSCurrent assets:Cash
    
    $
    
    
    
    $
    12,370
    
    
    $
    2,786
    
    
    $
    
    
    
    $
    15,156Other current assets
    
    
    
    
    
    
    30,512
    
    
    
    1,296
    
    
    
    
    
    
    
    31,808Total current assets
    
    
    
    
    
    
    42,882
    
    
    
    4,082
    
    
    
    
    
    
    
    46,964Property and equipment, net
    
    
    
    
    
    
    287,711
    
    
    
    15,373
    
    
    
    
    
    
    
    303,084Goodwill, net
    
    
    
    
    
    
    19,734
    
    
    
    
    
    
    
    
    
    
    
    19,734Trademarks, net
    
    
    6,507
    
    
    
    
    
    
    
    364
    
    
    
    
    
    
    
    6,871Intangible assets, net
    
    
    
    
    
    
    2,079
    
    
    
    468
    
    
    
    
    
    
    
    2,547Investment in and advances to subsidiaries
    
    
    (725,863
    )
    
    
    221,315
    
    
    
    
    
    
    
    504,548
    
    
    
    Other assets
    
    
    41,007
    
    
    
    6,946
    
    
    
    3,749
    
    
    
    
    
    
    
    51,702$
    (678,349
    )
    
    $
    580,667
    
    
    $
    24,036
    
    
    $
    504,548
    
    
    $
    430,902LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    49,072
    
    
    $
    174
    
    
    $
    
    
    
    $
    49,246Income taxes payable
    
    
    
    
    
    
    1,895
    
    
    
    56
    
    
    
    
    
    
    
    1,951Accrued liabilities
    
    
    21,617
    
    
    
    69,628
    
    
    
    9,676
    
    
    
    
    
    
    
    100,921Current maturities of long-term debt
    
    
    175,230
    
    
    
    2,003
    
    
    
    3,121
    
    
    
    
    
    
    
    180,354Deferred revenues
    
    
    
    
    
    
    273,246
    
    
    
    5,909
    
    
    
    
    
    
    
    279,155Total current liabilities
    
    
    196,847
    
    
    
    395,844
    
    
    
    18,936
    
    
    
    
    
    
    
    611,627Long-term debt, less current maturities
    
    
    535,097
    
    
    
    2,764
    
    
    
    4,925
    
    
    
    
    
    
    
    542,786Net affiliate payable
    
    
    
    
    
    
    436,004
    
    
    
    61,676
    
    
    
    (497,680
    )
    
    
    Other liabilities
    
    
    
    
    
    
    115,308
    
    
    
    5,829
    
    
    
    
    
    
    
    121,137Deferred revenues
    
    
    
    
    
    
    554,670
    
    
    
    10,975
    
    
    
    
    
    
    
    565,645Stockholders deficit
    
    
    (1,410,293
    )
    
    
    (923,923
    )
    
    
    (78,305
    )
    
    
    1,002,228
    
    
    
    (1,410,293
    )$
    (678,349
    )
    
    $
    580,667
    
    
    $
    24,036
    
    
    $
    504,548
    
    
    $
    430,902
 21




---



##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
 CONDENSED CONSOLIDATING BALANCE SHEET
 December 31, 2005Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    ConsolidatedParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalASSETSCurrent assets:Cash
    
    $
    
    
    
    $
    16,238
    
    
    $
    1,216
    
    
    $
    
    
    
    $
    17,454Other current assets
    
    
    
    
    
    
    36,976
    
    
    
    1,415
    
    
    
    
    
    
    
    38,391Current assets held for sale
    
    
    
    
    
    
    342
    
    
    
    
    
    
    
    
    
    
    
    342Total current assets
    
    
    
    
    
    
    53,556
    
    
    
    2,631
    
    
    
    
    
    
    
    56,187Property and equipment, net
    
    
    
    
    
    
    294,888
    
    
    
    19,782
    
    
    
    
    
    
    
    314,670Goodwill, net
    
    
    
    
    
    
    19,734
    
    
    
    
    
    
    
    
    
    
    
    19,734Trademarks, net
    
    
    6,507
    
    
    
    
    
    
    
    405
    
    
    
    
    
    
    
    6,912Intangible assets, net
    
    
    
    
    
    
    2,333
    
    
    
    546
    
    
    
    
    
    
    
    2,879Investment in and advances to
subsidiaries
    
    
    (724,893
    )
    
    
    221,315
    
    
    
    
    
    
    
    503,578
    
    
    
    Other assets
    
    
    29,265
    
    
    
    6,580
    
    
    
    3,973
    
    
    
    
    
    
    
    39,818Non-current assets held for sale
    
    
    
    
    
    
    39,894
    
    
    
    
    
    
    
    
    
    
    
    39,894$
    (689,121
    )
    
    $
    638,300
    
    
    $
    27,337
    
    
    $
    503,578
    
    
    $
    480,094LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    57,724
    
    
    $
    108
    
    
    $
    
    
    
    $
    57,832Income taxes payable
    
    
    
    
    
    
    1,641
    
    
    
    56
    
    
    
    
    
    
    
    1,697Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    22,407
    
    
    
    67,768
    
    
    
    6,267
    
    
    
    
    
    
    
    96,442Current maturities of long-term debt
    
    
    6,594
    
    
    
    485
    
    
    
    5,939
    
    
    
    
    
    
    
    13,018Deferred revenues
    
    
    
    
    
    
    293,116
    
    
    
    6,325
    
    
    
    
    
    
    
    299,441Current liabilities associated with
assets held for sale
    
    
    
    
    
    
    7,764
    
    
    
    
    
    
    
    
    
    
    
    7,764Total current liabilities
    
    
    29,001
    
    
    
    428,498
    
    
    
    18,695
    
    
    
    
    
    
    
    476,194Long-term debt, less current maturities
    
    
    745,564
    
    
    
    5,182
    
    
    
    5,558
    
    
    
    
    
    
    
    756,304Net affiliate payable
    
    
    
    
    
    
    517,799
    
    
    
    58,658
    
    
    
    (576,457
    )
    
    
    Other liabilities
    
    
    
    
    
    
    108,259
    
    
    
    8,578
    
    
    
    
    
    
    
    116,837Deferred revenues
    
    
    
    
    
    
    554,722
    
    
    
    11,747
    
    
    
    
    
    
    
    566,469Non-current liabilities associated with
assets held for sale
    
    
    
    
    
    
    27,976
    
    
    
    
    
    
    
    
    
    
    
    27,976Stockholders deficit
    
    
    (1,463,686
    )
    
    
    (1,004,136
    )
    
    
    (75,899
    )
    
    
    1,080,035
    
    
    
    (1,463,686
    )$
    (689,121
    )
    
    $
    638,300
    
    
    $
    27,337
    
    
    $
    503,578
    
    
    $
    480,094
 22




---



##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
 Three months ended June 30, 2006Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    ConsolidatedParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalNet revenues:Membership services
    
    $
    
    
    
    $
    230,006
    
    
    $
    9,543
    
    
    $
    
    
    
    $
    239,549Retail products
    
    
    
    
    
    
    11,162
    
    
    
    298
    
    
    
    
    
    
    
    11,460Miscellaneous
    
    
    
    
    
    
    3,258
    
    
    
    364
    
    
    
    
    
    
    
    3,622
    
    
    
    244,426
    
    
    
    10,205
    
    
    
    
    
    
    
    254,631Operating costs and expenses:Membership services
    
    
    
    
    
    
    163,167
    
    
    
    7,036
    
    
    
    
    
    
    
    170,203Retail products
    
    
    
    
    
    
    10,352
    
    
    
    315
    
    
    
    
    
    
    
    10,667Advertising
    
    
    
    
    
    
    16,007
    
    
    
    173
    
    
    
    
    
    
    
    16,180General and administrative
    
    
    1,706
    
    
    
    18,966
    
    
    
    558
    
    
    
    
    
    
    
    21,230Gain on sale of land and building
    
    
    
    
    
    
    (872
    )
    
    
    
    
    
    
    
    
    
    
    (872
    )Depreciation and amortization
    
    
    
    
    
    
    12,271
    
    
    
    962
    
    
    
    
    
    
    
    13,2331,706
    
    
    
    219,891
    
    
    
    9,044
    
    
    
    
    
    
    
    230,641Operating income (loss)
    
    
    (1,706
    )
    
    
    24,535
    
    
    
    1,161
    
    
    
    
    
    
    
    23,990Equity in net income from subsidiaries
    
    
    25,898
    
    
    
    
    
    
    
    
    
    
    
    (25,898
    )
    
    
    Interest expense
    
    
    (25,555
    )
    
    
    (348
    )
    
    
    (925
    )
    
    
    680
    
    
    
    (26,148
    )Foreign
exchange gain (loss)
    
    
    
    
    
    
    1,763
    
    
    
    (3
    )
    
    
    
    
    
    
    1,760Other, net
    
    
    630
    
    
    
    134
    
    
    
    82
    
    
    
    (680
    )
    
    
    166973
    
    
    
    1,549
    
    
    
    (846
    )
    
    
    (25,898
    )
    
    
    (24,222
    )Income (loss) before income taxes
    
    
    (733
    )
    
    
    26,084
    
    
    
    315
    
    
    
    (25,898
    )
    
    
    (232
    )Income tax provision
    
    
    
    
    
    
    (501
    )
    
    
    
    
    
    
    
    
    
    
    (501
    )Net income (loss)
    
    $
    (733
    )
    
    $
    25,583
    
    
    $
    315
    
    
    $
    (25,898
    )
    
    $
    (733
    )
 23




---



##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
 Three months ended June 30, 2005(As restated)Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    ConsolidatedParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalNet revenues:Membership services
    
    $
    
    
    
    $
    233,443
    
    
    $
    9,926
    
    
    $
    
    
    
    $
    243,369Retail products
    
    
    
    
    
    
    12,281
    
    
    
    359
    
    
    
    
    
    
    
    12,640Miscellaneous
    
    
    
    
    
    
    3,081
    
    
    
    527
    
    
    
    
    
    
    
    3,608
    
    
    
    248,805
    
    
    
    10,812
    
    
    
    
    
    
    
    259,617Operating costs and expenses:Membership services
    
    
    
    
    
    
    163,376
    
    
    
    7,337
    
    
    
    
    
    
    
    170,713Retail products
    
    
    
    
    
    
    13,088
    
    
    
    336
    
    
    
    
    
    
    
    13,424Advertising
    
    
    
    
    
    
    14,360
    
    
    
    281
    
    
    
    
    
    
    
    14,641General and administrative
    
    
    1,163
    
    
    
    20,101
    
    
    
    319
    
    
    
    
    
    
    
    21,583Depreciation and amortization
    
    
    
    
    
    
    14,345
    
    
    
    678
    
    
    
    
    
    
    
    15,0231,163
    
    
    
    225,270
    
    
    
    8,951
    
    
    
    
    
    
    
    235,384Operating income (loss)
    
    
    (1,163
    )
    
    
    23,535
    
    
    
    1,861
    
    
    
    
    
    
    
    24,233Equity in income from continuing
operations of subsidiaries
    
    
    23,477
    
    
    
    
    
    
    
    
    
    
    
    (23,477
    )
    
    
    Interest expense
    
    
    (20,049
    )
    
    
    (722
    )
    
    
    (908
    )
    
    
    515
    
    
    
    (21,164
    )Foreign
exchange gain (loss)
    
    
    
    
    
    
    85
    
    
    
    (248
    )
    
    
    
    
    
    
    (163
    )Other, net
    
    
    466
    
    
    
    49
    
    
    
    64
    
    
    
    (515
    )
    
    
    643,894
    
    
    
    (588
    )
    
    
    (1,092
    )
    
    
    (23,477
    )
    
    
    (21,263
    )Income from continuing operations
before income taxes
    
    
    2,731
    
    
    
    22,947
    
    
    
    769
    
    
    
    (23,477
    )
    
    
    2,970Income tax provision
    
    
    
    
    
    
    (239
    )
    
    
    
    
    
    
    
    
    
    
    (239
    )Income from continuing operations
    
    
    2,731
    
    
    
    22,708
    
    
    
    769
    
    
    
    (23,477
    )
    
    
    2,731Loss from discontinued operations
    
    
    (1,124
    )*
    
    
    (1,124
    )
    
    
    
    
    
    
    1,124
    
    
    
    (1,124
    )Net income
    
    $
    1,607
    
    
    $
    21,584
    
    
    $
    769
    
    
    $
    (22,353
    )
    
    $
    1,607
 
 *
    
    Equity in amounts from subsidiaries related to discontinued operations. 24




---



##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
 Six months ended June 30, 2006Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    ConsolidatedParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalNet revenues:Membership services
    
    $
    
    
    
    $
    460,321
    
    
    $
    18,883
    
    
    $
    
    
    
    $
    479,204Retail products
    
    
    
    
    
    
    22,780
    
    
    
    617
    
    
    
    
    
    
    
    23,397Miscellaneous
    
    
    
    
    
    
    6,457
    
    
    
    739
    
    
    
    
    
    
    
    7,196
    
    
    
    489,558
    
    
    
    20,239
    
    
    
    
    
    
    
    509,797Operating costs and expenses:Membership services
    
    
    
    
    
    
    328,365
    
    
    
    14,123
    
    
    
    
    
    
    
    342,488Retail products
    
    
    
    
    
    
    21,062
    
    
    
    616
    
    
    
    
    
    
    
    21,678Advertising
    
    
    
    
    
    
    34,545
    
    
    
    530
    
    
    
    
    
    
    
    35,075General and administrative
    
    
    2,989
    
    
    
    38,508
    
    
    
    1,122
    
    
    
    
    
    
    
    42,619Gain on
sales of land and buildings
    
    
    
    
    
    
    (872
    )
    
    
    (901
    )
    
    
    
    
    
    
    (1,773
    )Depreciation and amortization
    
    
    
    
    
    
    25,897
    
    
    
    1,550
    
    
    
    
    
    
    
    27,4472,989
    
    
    
    447,505
    
    
    
    17,040
    
    
    
    
    
    
    
    467,534Operating income (loss)
    
    
    (2,989
    )
    
    
    42,053
    
    
    
    3,199
    
    
    
    
    
    
    
    42,263Equity in income from continuing operations
of subsidiaries
    
    
    44,109
    
    
    
    
    
    
    
    
    
    
    
    (44,109
    )
    
    
    Interest expense
    
    
    (47,900
    )
    
    
    (693
    )
    
    
    (1,901
    )
    
    
    1,313
    
    
    
    (49,181
    )Foreign
exchange gain (loss)
    
    
    
    
    
    
    1,829
    
    
    
    (59
    )
    
    
    
    
    
    
    1,770Other, net
    
    
    1,214
    
    
    
    223
    
    
    
    160
    
    
    
    (1,313
    )
    
    
    284(2,577
    )
    
    
    1,359
    
    
    
    (1,800
    )
    
    
    (44,109
    )
    
    
    (47,127
    )Income (loss) from continuing operations
before income taxes
    
    
    (5,566
    )
    
    
    43,412
    
    
    
    1,399
    
    
    
    (44,109
    )
    
    
    (4,864
    )Income tax provision
    
    
    
    
    
    
    (702
    )
    
    
    
    
    
    
    
    
    
    
    (702
    )Income (loss) from continuing operations
    
    
    (5,566
    )
    
    
    42,710
    
    
    
    1,399
    
    
    
    (44,109
    )
    
    
    (5,566
    )Gain from discontinued operations
    
    
    37,503
    *
    
    
    37,503
    
    
    
    
    
    
    
    (37,503
    )
    
    
    37,503Net income
    
    $
    31,937
    
    
    $
    80,213
    
    
    $
    1,399
    
    
    $
    (81,612
    )
    
    $
    31,937
 
 *
    
    Equity in amounts from subsidiaries related to discontinued operations. 25




---



##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
 Six months ended June 30, 2005(As restated)Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    ConsolidatedParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalNet revenues:Membership services
    
    $
    
    
    
    $
    459,839
    
    
    $
    19,665
    
    
    $
    
    
    
    $
    479,504Retail products
    
    
    
    
    
    
    25,266
    
    
    
    721
    
    
    
    
    
    
    
    25,987Miscellaneous
    
    
    
    
    
    
    6,934
    
    
    
    945
    
    
    
    
    
    
    
    7,879
    
    
    
    492,039
    
    
    
    21,331
    
    
    
    
    
    
    
    513,370Operating costs and expenses:Membership services
    
    
    
    
    
    
    324,085
    
    
    
    14,589
    
    
    
    
    
    
    
    338,674Retail products
    
    
    
    
    
    
    25,550
    
    
    
    682
    
    
    
    
    
    
    
    26,232Advertising
    
    
    
    
    
    
    31,110
    
    
    
    642
    
    
    
    
    
    
    
    31,752General and administrative
    
    
    2,041
    
    
    
    36,804
    
    
    
    608
    
    
    
    
    
    
    
    39,453Depreciation and amortization
    
    
    
    
    
    
    28,483
    
    
    
    1,479
    
    
    
    
    
    
    
    29,9622,041
    
    
    
    446,032
    
    
    
    18,000
    
    
    
    
    
    
    
    466,073Operating income (loss)
    
    
    (2,041
    )
    
    
    46,007
    
    
    
    3,331
    
    
    
    
    
    
    
    47,297Equity in income from continuing
operations of subsidiaries
    
    
    46,063
    
    
    
    
    
    
    
    
    
    
    
    (46,063
    )
    
    
    Interest expense
    
    
    (37,150
    )
    
    
    (1,304
    )
    
    
    (1,772
    )
    
    
    985
    
    
    
    (39,241
    )Foreign
exchange gain (loss)
    
    
    
    
    
    
    168
    
    
    
    (124
    )
    
    
    
    
    
    
    44Other, net
    
    
    888
    
    
    
    114
    
    
    
    122
    
    
    
    (985
    )
    
    
    1399,801
    
    
    
    (1,022
    )
    
    
    (1,774
    )
    
    
    (46,063
    )
    
    
    (39,058
    )Income from continuing operations
before income taxes
    
    
    7,760
    
    
    
    44,985
    
    
    
    1,557
    
    
    
    (46,063
    )
    
    
    8,239Income tax provision
    
    
    
    
    
    
    (479
    )
    
    
    
    
    
    
    
    
    
    
    (479
    )Income from continuing operations
    
    
    7,760
    
    
    
    44,506
    
    
    
    1,557
    
    
    
    (46,063
    )
    
    
    7,760Loss from discontinued operations
    
    
    (1,538
    )*
    
    
    (1,538
    )
    
    
    
    
    
    
    1,538
    
    
    
    (1,538
    )Net income
    
    $
    6,222
    
    
    $
    42,968
    
    
    $
    1,557
    
    
    $
    (44,525
    )
    
    $
    6,222
 
 *
    
    Equity in amounts from subsidiaries related to discontinued operations. 26




---



##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
 Six months ended June 30, 2006Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    ConsolidatedParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalCASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    31,937
    
    
    $
    80,213
    
    
    $
    1,399
    
    
    $
    (81,612
    )
    
    $
    31,937Adjustments to reconcile to cash provided Depreciation and amortization, including
amortization included in interest expense
    
    
    9,465
    
    
    
    26,036
    
    
    
    1,569
    
    
    
    
    
    
    
    37,070Changes in operating assets and liabilities
    
    
    (660
    )
    
    
    (18,127
    )
    
    
    (336
    )
    
    
    
    
    
    
    (19,123
    )Changes in net affiliate balances
    
    
    
    
    
    
    (80,509
    )
    
    
    1,732
    
    
    
    78,777
    
    
    
    Other, net
    
    
    1,798
    
    
    
    (41,410
    )
    
    
    59
    
    
    
    
    
    
    
    (39,553
    )Cash provided by (used in) operating
activities
    
    
    42,540
    
    
    
    (33,797
    )
    
    
    4,423
    
    
    
    (2,835
    )
    
    
    10,331CASH FLOWS FROM INVESTING ACTIVITIES:Purchases and construction of property and
equipment
    
    
    
    
    
    
    (18,699
    )
    
    
    (190
    )
    
    
    
    
    
    
    (18,889
    )Proceeds from sale of discontinued
operations
    
    
    
    
    
    
    45,052
    
    
    
    
    
    
    
    
    
    
    
    45,052Proceeds from sale of discontinued
operations in escrow
    
    
    
    
    
    
    438
    
    
    
    
    
    
    
    
    
    
    
    438Proceeds from sale of property
    
    
    
    
    
    
    3,307
    
    
    
    
    
    
    
    
    
    
    
    3,307Investment in and advances to subsidiaries
    
    
    (2,835
    )
    
    
    
    
    
    
    
    
    
    
    2,835
    
    
    
    Cash provided by (used in) investing
activities
    
    
    (2,835
    )
    
    
    30,098
    
    
    
    (190
    )
    
    
    2,835
    
    
    
    29,908CASH FLOWS FROM FINANCING ACTIVITIES:Net repayments under credit agreement
    
    
    (36,811
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,811
    )Net repayments of other long-term debt
    
    
    (5,020
    )
    
    
    (169
    )
    
    
    (3,016
    )
    
    
    
    
    
    
    (8,205
    )Debt issuance and refinancing costs
    
    
    (3,751
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,751
    )Proceeds from sale of common stock
    
    
    5,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,600Stock purchase and options plans
    
    
    277
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    277Cash used in financing activities
    
    
    (39,705
    )
    
    
    (169
    )
    
    
    (3,016
    )
    
    
    
    
    
    
    (42,890
    )Increase (decrease) in cash
    
    
    
    
    
    
    (3,868
    )
    
    
    1,217
    
    
    
    
    
    
    
    (2,651
    )Effect of exchange rate changes on cash
balances
    
    
    
    
    
    
    
    
    
    
    353
    
    
    
    
    
    
    
    353Cash,
beginning of period
    
    
    
    
    
    
    16,238
    
    
    
    1,216
    
    
    
    
    
    
    
    17,454Cash, end of
period
    
    $
    
    
    
    $
    12,370
    
    
    $
    2,786
    
    
    $
    
    
    
    $
    15,156
 27




---



##### 



BALLY TOTAL FITNESS HOLDING CORPORATION
Notes to Condensed Consolidated Financial Statements  (continued)
 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
 Six months ended June 30, 2005(As restated)Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    ConsolidatedParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalCASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    6,222
    
    
    $
    42,968
    
    
    $
    1,557
    
    
    $
    (44,525
    )
    
    $
    6,222Adjustments to reconcile to cash provided Depreciation and amortization, including
amortization included in interest expense
    
    
    1,657
    
    
    
    32,153
    
    
    
    1,479
    
    
    
    
    
    
    
    35,289Changes in operating assets and liabilities
    
    
    46
    
    
    
    (11,024
    )
    
    
    574
    
    
    
    
    
    
    
    (10,404
    )Changes in net affiliate balances
    
    
    
    
    
    
    (39,622
    )
    
    
    (1,160
    )
    
    
    40,782
    
    
    
    Other, net
    
    
    4,337
    
    
    
    109
    
    
    
    122
    
    
    
    
    
    
    
    4,568Cash provided by operating activities
    
    
    12,262
    
    
    
    24,584
    
    
    
    2,572
    
    
    
    (3,743
    )
    
    
    35,675CASH FLOWS FROM INVESTING ACTIVITIES:Purchases and construction of property and
equipment
    
    
    
    
    
    
    (13,898
    )
    
    
    (576
    )
    
    
    
    
    
    
    (14,474
    )Proceeds from sale of land
    
    
    
    
    
    
    1,455
    
    
    
    
    
    
    
    
    
    
    
    1,455Investment in and advances to subsidiaries
    
    
    (3,743
    )
    
    
    
    
    
    
    
    
    
    
    3,743
    
    
    
    Cash used in investing activities
    
    
    (3,743
    )
    
    
    (12,443
    )
    
    
    (576
    )
    
    
    3,743
    
    
    
    (13,019
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net repayments under revolving credit
agreement
    
    
    (875
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (875
    )Net repayments of other long-term debt
    
    
    (5,532
    )
    
    
    (2,052
    )
    
    
    (2,028
    )
    
    
    
    
    
    
    (9,612
    )Debt
issuance and refinancing costs
    
    
    (2,274
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,274
    )Proceeds from stock purchase and options plans
    
    
    162
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    162Cash used in financing activities
    
    
    (8,519
    )
    
    
    (2,052
    )
    
    
    (2,028
    )
    
    
    
    
    
    
    (12,599
    )Increase (decrease) in cash
    
    
    
    
    
    
    10,089
    
    
    
    (32
    )
    
    
    
    
    
    
    10,057Effect of exchange rate changes on cash
balances
    
    
    
    
    
    
    
    
    
    
    225
    
    
    
    
    
    
    
    225Cash,
beginning of period
    
    
    
    
    
    
    18,726
    
    
    
    451
    
    
    
    
    
    
    
    19,177Cash, end of
period
    
    $
    
    
    
    $
    28,815
    
    
    $
    644
    
    
    $
    
    
    
    $
    29,459
 28




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Executive Summary of Business
   ®
 SM
  1)
    
    Our primary revenue source is membership services revenue
derived from the operation of our fitness centers.
Membership services revenue includes amounts paid by our
members in the form of membership fees and dues payments.
It also includes revenue generated from provision of
personal training services.Currently, the majority of our members choose to purchase
their membership under our multi-year value plan by
paying an enrollment fee and by making monthly payments
throughout the obligatory term of their membership. After
the obligatory period of membership, our members enter
the non-obligatory renewal period of membership and make
monthly payments (renewal payments) to maintain
membership privileges. Under sales methods in effect
prior to December 2005, renewal payments were
substantially discounted from the obligatory period
monthly payment level. Following the nationwide
implementation of our new BYOM pricing plan, in most BYOM markets we anticipate that renewal payments will likely carry a smaller discount
from the obligatory period monthly payment level. Our
members may also choose to purchase a prepaid membership
for periods up to three years. Members choosing our
month-to-month membership payment option make
month-to-month non-obligatory payments after paying an
enrollment fee. Ongoing membership dues for members in
renewal periods may be paid monthly or annually or may be
prepaid for multiple future periods.Our membership services revenue is generally collected as
cash on a basis that does not conform to its basis of
revenue recognition, resulting in the deferral of
significant amounts received early in the membership
period that will be recognized in later periods. This
recognition methodology is a consequence of our long
history of offering membership programs with higher
levels of monthly or total payments during the obligatory
period of membership, generally for periods of up to
three years, followed by discounted payments in the
subsequent renewal phase of membership. Our revenue
recognition objective is to
recognize an even amount of membership revenue from our
members throughout their entire term of membership,
regardless of the payment pattern. As a result, we make
estimates of membership term length on a composite group
basis of all members joining in a period and set up
separate amortization pools based on estimated total
group membership term length averages. Estimated term
lengths used to create the separate amortization term
groups for revenue recognition are based on historical
average membership terms experienced by our members.
 29




---



##### 



Membership services revenue related to members who
maintain their membership for periods beyond the
obligatory term of membership is deferred as collected
and recognized on a straight-line basis over the
estimated term of total membership. Our historical
evaluation of members has resulted in a determination
that approximately 37% of originated monthly payment
revenue from our members is subject to deferral to be
recognized over their entire term of membership. As a
result, we defer all collections received from members in
this group, and recognize as membership service revenue
these amounts based on five amortization pools with
amortization periods of 39 months to 245 months,
representing composite average membership terms of
membership of between 37 months and 360 months.
Membership services revenues that have been prepaid in
their entirety for the obligatory period of membership
are recognized in a similar manner, except that the
estimate of the group expected to remain a member for
only the obligatory period of membership is amortized
over the length of the contract, which is generally 36
months, but varies by state. Based on the historical
attrition patterns of members who pay their membership in
full upon origination, approximately 56% of such
membership revenue relates to members who maintain their
membership beyond the obligatory three-year period of
membership, which is amortized using the same five
amortization pools as described for monthly collections.We evaluate the actual attrition patterns of all of our
deferred revenue pools on a quarterly basis and make
adjustments from our historical experience to take into
account actual attrition by origination month groups. As
we determine that our new estimated attrition is
different than the initial estimate based on historical
patterns, we recognize as a change in accounting estimate
a charge or credit to membership services revenue in the
period of evaluation to cumulatively adjust past
recognition and ending deferred revenue. Under our
deferred revenue methodology, an increase in membership
attrition rates will result in an increase in revenue in
the period of adjustment as it is determined that amounts
previously deferred to future periods of membership no
longer need to be deferred. Alternatively, a decrease in
membership attrition rates can reduce membership services
revenue as it is determined that amounts previously
considered earned are required to be deferred for
recognition in future periods.Personal training and other services are provided at most
of the Companys fitness centers. Personal training
services contracts are either paid-in-full at the point
of origination, or are financed and collected generally
over three months after an initial payment. Collections
related to paid-in-full personal training services
contracts are deferred and recognized as personal
training services are rendered. Revenue related to
personal training services contracts that have been
financed is recognized at the later of cash receipt or
the rendering of personal training services.Membership services revenue comprised approximately 94%
and 93% of total revenue for the six months ended June
30, 2006 and 2005, respectively. Membership services
revenue is recognized at the later of when membership
services fees are collected or earned. Membership
services fees collected but not yet earned are included
as a deferred revenue liability on the balance sheet.2)
    
    We generate revenue from the sales of products at our
in-fitness center retail stores including Bally-branded
and third-party nutritional products, juice bar
nutritional drinks and fitness-related convenience
products such as clothing. Revenue from product sales
represented approximately 5% of total revenue for each of
the six months ended June 30, 2006 and 2005.3)
    
    The balance of our revenue (approximately 1% and 2% for
the six months ended June 30, 2006 and 2005,
respectively), primarily consists of franchising revenue,
guest fees and specialty fitness programs. We also
generate revenue through granting concessions in our
facilities to operators offering wellness-related
services such as physical therapy and from sales of
Bally-branded products by third-parties. Revenue from
sales of in-club advertising and sponsorships is also
included in this category, which we refer to as
miscellaneous revenue.
 30




---



##### 



1)
    
    Membership services expenses consist primarily of salaries,
commissions, payroll taxes, benefits, rent, real estate taxes and
other occupancy costs, utilities, repairs and maintenance and supplies
to operate our fitness centers and provide personal training. Also
included are the costs to operate member processing and collection
centers, which provide contract processing, member relations, billing
and collection services.2)
    
    Retail products expenses consist primarily of the cost of
products sold as well as the payroll and related costs of
dedicated retail associates.3)
    
    Advertising expenses consist of our marketing department,
media and production and advertising costs to support
fitness center membership growth as well as the growth of
our brand.4)
    
    General and administrative expenses include costs
relating to our centralized support functions, such as
information technology, accounting, treasury, human
resources, procurement, real estate and development and
senior management. General and administrative also
includes professional services costs such as legal,
consulting and auditing as well as expenses related to
various accounting investigations.5)
    
    Depreciation and amortization expenses represent
primarily the depreciation on our fitness centers,
including amortization of leasehold improvements. Owned
buildings and related improvements are depreciated over 5
to 35 years and leasehold improvements are amortized on
the straight-line method over the lesser of the estimated
useful lives of the improvements or the remaining
non-cancelable lease terms. In addition, equipment and
furnishings are depreciated over 5 to 10 years.
 th
     Industry Data Survey of the Health and Fitness
Club Industry,
 31




---



##### 



Critical Accounting Policies
   Results of Operations
  Three
    
    
    
    
    
    
    ThreeMonths
    
    
    
    
    
    
    MonthsEnded
    
    
    % of
    
    
    Ended
    
    
    % of
    
    
    Change fromJune 30,
    
    
    Net
    
    
    June 30,
    
    
    Net
    
    
    Previous Period2006
    
    
    Revenue
    
    
    2005
    
    
    Revenue
    
    
    Dollars
    
    
    Percent(As restated)REVENUEMembership
    
    $
    207,342
    
    
    
    81
    %
    
    $
    211,546
    
    
    
    82
    %
    
    $
    (4,204
    )
    
    
    -2
    %Personal training
    
    
    32,207
    
    
    
    13
    %
    
    
    31,823
    
    
    
    12
    %
    
    
    384
    
    
    
    1
    %Membership services revenue
    
    
    239,549
    
    
    
    94
    %
    
    
    243,369
    
    
    
    94
    %
    
    
    (3,820
    )
    
    
    -2
    %Retail products
    
    
    11,460
    
    
    
    5
    %
    
    
    12,640
    
    
    
    5
    %
    
    
    (1,180
    )
    
    
    -9
    %Miscellaneous
    
    
    3,622
    
    
    
    1
    %
    
    
    3,608
    
    
    
    1
    %
    
    
    14
    
    
    
    0
    %Net revenues
    
    
    254,631
    
    
    
    100
    %
    
    
    259,617
    
    
    
    100
    %
    
    
    (4,986
    )
    
    
    -2
    %OPERATING COSTS AND
EXPENSESMembership services
    
    
    170,203
    
    
    
    67
    %
    
    
    170,713
    
    
    
    66
    %
    
    
    (510
    )
    
    
    0
    %Retail products
    
    
    10,667
    
    
    
    4
    %
    
    
    13,424
    
    
    
    5
    %
    
    
    (2,757
    )
    
    
    -21
    %Advertising
    
    
    16,180
    
    
    
    7
    %
    
    
    14,641
    
    
    
    6
    %
    
    
    1,539
    
    
    
    11
    %Information technology
    
    
    5,303
    
    
    
    2
    %
    
    
    5,472
    
    
    
    2
    %
    
    
    (169
    )
    
    
    -3
    %Other general and administrative
    
    
    15,927
    
    
    
    6
    %
    
    
    16,111
    
    
    
    6
    %
    
    
    (184
    )
    
    
    -1
    %Gain on sale of land
and building
    
    
    (872
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (872
    )
    
    
    Depreciation and amortization
    
    
    13,233
    
    
    
    5
    %
    
    
    15,023
    
    
    
    6
    %
    
    
    (1,790
    )
    
    
    -12
    %230,641
    
    
    
    91
    %
    
    
    235,384
    
    
    
    91
    %
    
    
    (4,743
    )
    
    
    -2
    %Operating income
    
    $
    23,990
    
    
    
    9
    %
    
    $
    24,233
    
    
    
    9
    %
    
    $
    (243
    )
    
    
    -1
    %
 32




---



##### 



Six Months
    
    
    
    
    
    
    Six MonthsEnded
    
    
    % of
    
    
    Ended
    
    
    % of
    
    
    Change fromJune 30,
    
    
    Net
    
    
    June 30,
    
    
    Net
    
    
    Previous Period2006
    
    
    Revenue
    
    
    2005
    
    
    Revenue
    
    
    Dollars
    
    
    Percent(As restated)REVENUEMembership
    
    $
    416,093
    
    
    
    82
    %
    
    $
    418,599
    
    
    
    81
    %
    
    $
    (2,506
    )
    
    
    -1
    %Personal training
    
    
    63,111
    
    
    
    12
    %
    
    
    60,905
    
    
    
    12
    %
    
    
    2,206
    
    
    
    4
    %Membership services revenue
    
    
    479,204
    
    
    
    94
    %
    
    
    479,504
    
    
    
    93
    %
    
    
    (300
    )
    
    
    0
    %Retail products
    
    
    23,397
    
    
    
    5
    %
    
    
    25,987
    
    
    
    5
    %
    
    
    (2,590
    )
    
    
    -10
    %Miscellaneous
    
    
    7,196
    
    
    
    1
    %
    
    
    7,879
    
    
    
    2
    %
    
    
    (683
    )
    
    
    -9
    %Net revenues
    
    
    509,797
    
    
    
    100
    %
    
    
    513,370
    
    
    
    100
    %
    
    
    (3,573
    )
    
    
    -1
    %OPERATING COSTS AND
EXPENSESMembership services
    
    
    342,488
    
    
    
    67
    %
    
    
    338,674
    
    
    
    66
    %
    
    
    3,814
    
    
    
    1
    %Retail products
    
    
    21,678
    
    
    
    4
    %
    
    
    26,232
    
    
    
    5
    %
    
    
    (4,554
    )
    
    
    -17
    %Advertising
    
    
    35,075
    
    
    
    7
    %
    
    
    31,752
    
    
    
    6
    %
    
    
    3,323
    
    
    
    10
    %Information technology
    
    
    10,398
    
    
    
    2
    %
    
    
    10,782
    
    
    
    2
    %
    
    
    (384
    )
    
    
    -4
    %Other general and administrative
    
    
    32,221
    
    
    
    6
    %
    
    
    28,671
    
    
    
    6
    %
    
    
    3,550
    
    
    
    12
    %Gain on sales
of land and buildings
    
    
    (1,773
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,773
    )
    
    
    Depreciation and amortization
    
    
    27,447
    
    
    
    6
    %
    
    
    29,962
    
    
    
    6
    %
    
    
    (2,515
    )
    
    
    -8
    %467,534
    
    
    
    92
    %
    
    
    466,073
    
    
    
    91
    %
    
    
    1,461
    
    
    
    0
    %Operating income
    
    $
    42,263
    
    
    
    8
    %
    
    $
    47,297
    
    
    
    9
    %
    
    $
    (5,034
    )
    
    
    -11
    %
 Key Operating Data
 Membership rollforward and statistics (000s, except dollars):
 Three months ended June 30,2006
    
    2005
    
    change
    
    % changeMembers at beginning of period
    
    
    3,563
    
    
    
    3,677
    
    
    
    (114
    )
    
    
    -3
    %Number of
new members joining during the period
    
    
    278
    
    
    
    292
    
    
    
    (14
    )
    
    
    -5
    %Number of
net member drops during the period
    
    
    (241
    )
    
    
    (298
    )
    
    
    57
    
    
    
    19
    %Members at end of period
    
    
    3,600
    
    
    
    3,671
    
    
    
    (71
    )
    
    
    -2
    %Average
number of members during the period (1)
    
    
    3,581
    
    
    
    3,674
    
    
    
    (93
    )
    
    
    -3
    %Average
monthly membership revenue recognized per member (2)
    
    $
    19.30
    
    
    $
    19.19
    
    
    $
    0.11
    
    
    
    1
    %Average
monthly cash received per member (3)
    
    $
    17.92
    
    
    $
    17.79
    
    
    $
    0.13
    
    
    
    1
    %Fitness centers open at end of period
    
    
    383
    
    
    
    391
    
    
    
    (8
    )
    
    
    -2
    %
 Six months ended June 30,2006
    
    2005
    
    change
    
    % changeMembers at beginning of period
    
    
    3,531
    
    
    
    3,593
    
    
    
    (62
    )
    
    
    -2
    %Number of
new members joining during the period
    
    
    635
    
    
    
    657
    
    
    
    (22
    )
    
    
    -3
    %Number of
net member drops during the period
    
    
    (566
    )
    
    
    (579
    )
    
    
    13
    
    
    
    2
    %Members at end of period
    
    
    3,600
    
    
    
    3,671
    
    
    
    (71
    )
    
    
    -2
    %Average
number of members during the period (1)
    
    
    3,564
    
    
    
    3,654
    
    
    
    (90
    )
    
    
    -2
    %Average monthly membership revenue
recognized per member (2)
    
    $
    19.46
    
    
    $
    19.09
    
    
    $
    0.37
    
    
    
    2
    %Average
monthly cash received per member (3)
    
    $
    18.38
    
    
    $
    18.38
    
    
    $
    0.00
    
    
    
    0
    %Fitness centers open at end of period
    
    
    383
    
    
    
    391
    
    
    
    (8
    )
    
    
    -2
    %
 33




---



##### 



Summary of revenue recognition method
          34




---



##### 



Comparison of the Three Months Ended June 30, 2006 and 2005
   
    
    Membership revenue recognized decreased to $207.3 million from $211.6
million in 2005, a decrease of $4.3 million (2%) from the prior year
period. In the current year, a 3% decrease in average number of members to
3.581 million members was partially offset by an increase in the average
monthly membership revenue per member to $19.30 from $19.19.
    
    Cash collections of membership revenue during the three months ended
June 30, 2006 were $192.5 million, a decrease of $3.6 million (2%) from
2005. This decrease is the result of a 3% decrease in average number of
members to 3.581 million members, offset by an increase in the average
monthly cash received per member to $17.92 from $17.79.
Cash collections of membership revenue include payments from members who prepay the remaining portion of amounts
outstanding under value plan memberships (accelerations), voluntarily or in response to an offer to prepay
at a discount similar to that offered at point of sale. We received $5.9 million and $3.8 million of proceeds from
accelerations during the three months ended June 30, 2006 and 2005, respectively. We also
allow certain members to reactivate their expired membership at a discount in order to
incent these members to restart their workout routine (reactivations). We received $6.3
million and $5.3 million of proceeds from reactivations during the three months ended June 30, 2006 and 2005, respectively. The average monthly cash received
per member includes $1.14
and $.83 of accelerations and reactivations for the three months ended June 30, 2006 and 2005,
respectively.

 Increases in
renewal dues have had a positive impact on average monthly cash
received per member. The mix of new member signups has changed under
the BYOM program to include a higher number of one-club memberships,
along with an increase in family add-on member signups at discounted
monthly rates relative to primary member monthly rates, and a higher
percentage of nonobligatory month-to-month members, including members
added under family add-on programs. In the three months ended June 30,
2006, new member signups were approximately 72% value plan, 12%
paid-in-full and 16% month-to-month. In the year earlier period, new
member signups were approximately 76% value plan, 11% paid-in-full and
13% month-to-month. As a result, membership cash collections have been
negatively affected due to the higher attrition tendency of
month-to-month members, and the lower average monthly rates of the
increasing mix of one-club memberships and discounted family member
signups. Because of the Companys historical attrition patterns whereby
a high percentage of new members drop their membership during the first
twelve months subsequent to joining, a significant portion of cash
collections have historically been provided by new members early in
their membership term. Accordingly, a decrease in new member pricing
(both obligatory and nonobligatory) coupled with the change in the mix
of new membership signups had a disproportionate impact on cash
collections of membership revenue in 2006 as compared to 2005 and will
continue to have a negative impact for the remainder of 2006 and
beyond.
    
    Personal training revenue increased to $32.2 million from $31.8 million
in 2005, an increase of $0.4 million (1%), primarily reflecting the
Companys emphasis on growth in personal training services and
expansion of new programs such as small group training.
    
    Retail products revenue decreased to $11.5 million from $12.6 million
in 2005, a decrease of $1.1 million (9%), due primarily to the
conversion of lower performing full size in-club retail stores to a
more efficient, but lower sales model integrated with the front desk
operation and a 3% decrease in average number of members to
3.581 million members reducing workout traffic in the clubs.
    
    Miscellaneous revenue of $3.6 million was unchanged from the prior year.
  
    
    Membership services expenses for the three months
ended June 30, 2006 decreased $0.5 million
from 2005, reflecting a reduction in personnel
costs as a result of the Companys cost reduction
initiatives offset by increases in occupancy
(primarily rent and utilities) and insurance costs.
    
    Retail products expenses, which included labor
costs, for the three months ended June 30, 2006
decreased $2.7 million (21%) from 2005, primarily
as a result of a decrease in cost of goods sold
from lower sales and reduced labor costs as a
result of the Companys front desk retail model
integration.
 35




---



##### 




    
    Advertising expenses for the three months ended
June 30, 2006 increased $1.5 million (11%) from
2005, primarily from planned increases in media
spending and television commercial production
costs.
    
    Information technology expenses for the three
months ended June 30, 2006 decreased $0.2 million
(3%) from 2005 primarily as a result of reduced use
of outside consultants and lower telecommunication
costs partially offset by increased internal
salaries.
    
    Other general and administrative expenses for the
three months ended June 30, 2006 decreased $0.2 million (1%) from 2005. Increases in insurance, Directors fees and audit costs were offset by a reversal of approximately $900 of the $4,600 write-down of equipment at various clubs recorded in the fourth quarter of 2005.
    
    The Company recorded a gain of approximately $0.9 million on
the sale of the land and a building relating to a club in Ohio, recorded as a gain on sale of land and building.
    
    Depreciation and amortization expense for the three
months ended June 30, 2006 decreased $1.8 million
from 2005, reflecting fewer depreciable assets resulting from fixed
asset impairment charges in 2005, along with a reduction in capital
expenditures in prior periods.
  Comparison of the Six Months Ended June 30, 2006 and 2005
   
    
    Membership revenue recognized decreased to $416.1
million from $418.6 million in 2005, a decrease of
$2.5 million (1%) from the prior year period. In
the current year, a 2% decrease in average number
of members to 3.564 million members was partially
offset by an increase in the average monthly
membership revenue per member to $19.46 from
$19.09.
    
    Cash collections of membership revenue during the
six months ended June 30, 2006 were $393.1 million,
a decrease of $9.9 million (2%) from 2005. This
decrease is the result of a 2% decrease in average
number of members to 3.564 million members.
The average monthly cash received per member was $18.38 for both periods. We received $9.7
million and $8.3 million of proceeds from accelerations during the six months ended June 30, 2006
and 2005, respectively. We also received $12.2 million and $11.9 million of proceeds from
reactivations during the six months ended June 30, 2006 and 2005, respectively. The average
monthly cash received per member includes $1.03 and $.92 of proceeds from accelerations and
reactivations for the six months ended June 30, 2006 and 2005, respectively.

Increases in renewal dues have had a positive
impact on average monthly cash received per member.
However, the mix of new member signups has changed
under the BYOM program to include a higher number
of one-club memberships, along with an increase in
family add-on member signups at discounted monthly
rates relative to primary member monthly rates, and
a higher percentage of nonobligatory month-to-month
members, including members added under family
add-on programs. In the six months ended June 30,
2006, new member signups were approximately 72%
value plan, 12% paid-in-full and 16%
month-to-month. In the year earlier period, new
member signups were approximately 77% value plan,
11% paid-in-full and 12% month-to-month. As a
result, membership cash collections have been
negatively affected due to the higher attrition
tendency of month-to-month members, and the lower
average monthly rates of the increasing mix of
one-club memberships and discounted family member
signups. Because of the Companys historical
attrition patterns whereby a high percentage of new
members drop their membership during the first
twelve months subsequent to joining, a significant
portion of cash collections have historically been
provided by new members early in their membership
term. Accordingly, a decrease in new member
pricing (both obligatory and nonobligatory) coupled
with the change in the mix of new membership
signups had a disproportionate impact on cash
collections of membership revenue in 2006 as
compared to 2005 and will continue to have a
negative impact for the remainder of 2006 and
beyond.
    
    Personal training revenue increased to $63.1
million from $60.9 million in 2005, an increase of
$2.2 million (4%), primarily reflecting the
Companys emphasis on growth in personal training
services and expansion of new programs such as
small group training.
    
    Retail products revenue decreased to $23.4 million
from $26.0 million in 2005, a decrease of $2.6
million (10%), due primarily to the conversion of
lower performing full size in-club retail stores to
a more efficient, but lower sales model integrated
with the front desk operation and a 2% decrease in
average number of members to 3.564 million members
reducing workout traffic in the clubs.
    
    Miscellaneous revenue decreased to $7.2 million
from $7.9 million in 2005, primarily due to lower
revenue from income producing strategic
partnerships and franchising fees.
 36




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
    
    Membership services expenses for the six months
ended June 30, 2006 increased $3.8 million (1%)
from 2005, reflecting increases in occupancy
(primarily utilities) and insurance costs offset by
a reduction in personnel costs as a result of the
Companys cost reduction initiatives.
    
    Retail products expenses, which included labor
costs, for the six months ended June 30, 2006
decreased $4.6 million (17%) from 2005, primarily
as a result of a decrease in cost of goods sold
from lower sales and reduced labor costs as a
result of the Companys front desk retail model
integration.
    
    Advertising expenses for the six months ended June
30, 2006 increased $3.3 million (10%) from 2005,
primarily from planned increases in media spending
and television commercial production costs.
    
    Information technology expenses for the six months
ended June 30, 2006 decreased $0.4 million (4%)
from 2005 primarily as a result of reduced use of
outside consultants and lower telecommunication
costs partially offset by increased internal
salaries.
    
    Other general and administrative expenses for the
six months ended June 30, 2006 increased $3.6 million (12%) from 2005, primarily as a result of
costs incurred in connection with the proxy
solicitation, restructuring and ongoing
investigations and litigation related to the
restatement of the Companys financial statements
and an increase in insurance, Directors fees and
audit costs.
    
    Gain on sales of land and buildings includes a gain on the
March 2006 sale of the land and a building relating to a club in Canada ($0.9 million)
and a gain on the June 2006 sale of a club in Ohio
($0.9 million).
    
    Depreciation and amortization expense for the six
months ended June 30, 2006 decreased $2.5 million
from 2005, reflecting fewer depreciable assets resulting from fixed
asset impairment charges in 2005, along with a reduction in capital
expenditures in prior periods.
   37




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Financial Condition
  
    
    a decrease in assets held for sale of $40.2 million
resulting from the sale of Crunch Fitness (however, $31.8
million of the proceeds of the sale of such assets was
used to make a mandatory repayment under the term loan of
the Credit Agreement);
    
    a $11.6 million net decrease in property and equipment
(capital expenditures less disposals and depreciation).
Capital expenditures of $18.9 million included a
scheduled replacement of exercise equipment. The Company
will continue a controlled capital spending program
reflective of its limited capital resources;
    
    a $4.2 million decrease in other current assets primarily from a reduction in inventory and a return of
cash held by our credit card processor; and
    
    a decrease in prepaid expenses of $2.5 million primarily from a decrease in prepaid advertising; offset by
    
    an increase in deferred financing costs of $11.7 million
primarily resulting from the fees paid to bondholders and
lenders to obtain waivers of financial reporting
requirements.
 Liquidity and Capital Resources
  July 31, 2006
    
    
    December 31, 2005
    
    
    ChangeCash and equivalents
    
    $
    12.3
    
    
    $
    17.5
    
    
    $
    (5.2
    )Unutilized revolving credit facility
    
    
    43.9
    
    
    
    51.4
    
    
    
    (7.5
    )Total liquidity
    
    $
    56.2
    
    
    $
    68.9
    
    
    $
    (12.7
    )
    38




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Interest Expense
   Cash Flows
  Six months ended June 30,
    
    
    Change from2006
    
    
    2005
    
    
    Previous Period(As restated)Cash provided by operating activities
    
    $
    10,331
    
    
    $
    35,675
    
    
    $
    (25,344
    )Cash provided by (used in) investing activities
    
    
    29,908
    
    
    
    (13,019
    )
    
    
    42,927Cash used in financing activities
    
    
    (42,890
    )
    
    
    (12,599
    )
    
    
    (30,291
    )Increase (decrease) in cash
    
    $
    (2,651
    )
    
    $
    10,057
    
    
    $
    (12,708
    )
 Operating Activities
  Investing Activities and Capital Expenditures
  39




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##### 



Financing Activities
  Dividend and Other Commitments
  Debt
 Credit Agreement
   Consent Solicitations
   40




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##### 



Other Secured Debt
  Off-Balance Sheet Arrangements
  Recently Issued Accounting Standards
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109
 Accounting for
a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a
Leveraged Lease Transaction. Accounting for Leases.
 41




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##### 



Item 3. Interest Rate Risk and Market Risk
   Foreign Exchange Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
 Controls and Procedures
  Form 10-Q;
 Changes in Internal Controls over Financial Reporting (ICFR)
 Controls and Procedures
 42




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##### 



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
 Litigation
 Putative Securities Class Actions
 In re Bally Total Fitness Securities Litigation
  Stockholder Derivative Lawsuits in Illinois State Court
  Stockholder Derivative Lawsuit in Illinois Federal Court
  Individual Securities Action in Illinois
 Levine v. Bally Total Fitness Holding Corporation, et
al.
 43




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##### 



Lawsuit in Oregon
 Jack Garrison and Deane Garrison v. Bally Total
Fitness Holding Corporation, Lee S. Hillman and John W. Dwyer,
  Lawsuit in Massachusetts
 Fit Tech Inc., et al. v.
Bally Total Fitness Holding Corporation, et al.,
  Securities and Exchange Commission Investigation
  Department of Justice Investigation
  Insurance Lawsuits
 Travelers Indemnity Company and ACE American Insurance
Company v. Bally Total Fitness Holding Corporation; Holiday Universal, Inc, n/k/a Bally Total
Fitness of the Mid-Atlantic, Inc; George N. Aronoff; Paul Toback; John W. 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,
 44




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##### 



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,
 Great American Insurance Company
v. Bally Total Fitness Holding Corporation, ab initio
  Other:
  Risk Factors
 
 Item 1A. Risk Factors
 Managements Discussion and
Analysis of Financial Condition and Results of Operations
 Our substantial leverage could adversely affect our financial health.
  
    
    limiting our ability to obtain additional financing to fund future working capital,
capital expenditures, acquisitions of clubs and other general corporate requirements;
    
    continuing to require us to dedicate a substantial portion of any cash flows from
operations to make interest payments on our debt, which reduces funds available for
operations and future business opportunities;
    
    increasing our vulnerability to adverse economic conditions;
 45




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##### 




    
    limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and
    
    making us more highly leveraged than some of our competitors, which could potentially
decrease our ability to compete in our industry.
 Our inability to comply with covenants under the Credit Agreement and indentures governing our
Senior Notes and Senior Subordinated Notes could adversely impact our ability to operate our
business.
    Recent
declines in our liquidity and upcoming obligations on our debt instruments will require us to obtain additional
financing and/or restructure or refinance our debt.
If we are unable to do so, we may not be able to continue to operate our
business.
    There can be no assurance that any strategic transaction will occur, or if one is undertaken, of
its potential terms or timing.
  46




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##### 



Our success depends in significant part upon the continuing service of management and the Companys
ability to attract a sufficient number of qualified personnel to meet its business needs.
   
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Repurchases of Common Stock
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
 Consent Solicitation
  PrincipalPrincipal Amount
    
    Principal Amount
    
    Amount
    
    Principal AmountNotes
    
    Outstanding ($)
    
    Voted For ($)
    
    Voted Against ($)
    
    Abstained ($)Senior Notes
    
    
    299,764,000
    
    
    
    283,970,000
    
    
    
    N/A
    
    
    
    15,794,000Senior Subordinated Notes
    
    
    235,000,000
    
    
    
    233,029,000
    
    
    
    N/A
    
    
    
    1,971,000
 
 Item 5. Other Information
  47




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##### 



Item 6. Exhibits
  3.1
    
    Amendment to the Bylaws of Bally Total Fitness Holding
Corporation (incorporated by reference to Exhibit 3.2 to the
Companys Current Report on Form 8-K, file no. 001-13997, filed
August 11, 2006).4.1
    
    Supplemental Indenture, dated as of April 7, 2006, among Bally
Total Fitness Holding Corporation and U.S. Bank National
Association, as trustee for the Registrants 9-7/8% Senior
Subordinated Notes due 2007 (incorporated by reference to
Exhibit 4.2 to the Companys Current Report on Form 8-K, file
no. 001-13997, dated April 12, 2006).4.2
    
    Supplemental Indenture, dated as of April 7, 2006, among Bally
Total Fitness Holding Corporation and U.S. Bank National
Association, as trustee for the Registrants 10-1/2% Senior
Notes due 2011 (incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K, file no. 001-13997, dated
April 12, 2006).4.3
    
    Amended and Restated Registration Rights Agreement dated as of
April 13, 2006 by and between Bally Total Fitness Holding
Corporation and certain holders who are signatories thereto
(incorporated by reference as Exhibit 10.4 to the Companys
Current Report on Form 8-K, file no. 001-13997, dated April 18,
2006).4.4
    
    Registration Rights Agreement, dated as of April 11, 2006, among
Bally Total Fitness Holding Corporation and the purchasers
listed on the signature page thereto (incorporated by reference
as Exhibit 4.3 to the Companys Current Report on Form 8-K, file
no. 001-13997, dated April 12, 2006).+10.1
    
    Interim Executive Services Agreement dated as of April 12, 2006
between Tatum, LLC and the Company (incorporated by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K, file
no. 001-13997, dated April 18, 2006).10.2
    
    Consent Agreement by and between Bally Total Fitness Holding
Corporation and Special Value Bond Fund II, LLC, Special Value
Absolute Return Fund, LLC, Special Value Opportunities Fund,
LLC and Special Value Expansion Fund, LLC (incorporated by
reference to Exhibit 10.1 to the Companys Current Report on
Form 8-K, file no. 001-13997, dated April 18, 2006).10.3
    
    Consent Agreement by and between Bally Total Fitness Holding
Corporation and Everest Capital Limited as agent for HFR ED
Advantage Master Trust, Everest Capital Event Fund, LP, GMAM
Investment Funds Trust II and Everest Capital Senior Debt Fund,
L.P. (incorporated by reference to Exhibit 10.2 to the
Companys Current Report on Form 8-K, file no. 001-13997, dated
April 18, 2006).10.4
    
    Consent Agreement by and between Bally Total Fitness Holding
Corporation and Pardus European Special Opportunities Master
Fund L.P. (incorporated by reference to Exhibit 10.3 to the
Companys Current Report on Form 8-K, file no. 001-13997, dated
April 18, 2006).10.5
    
    Stock Purchase Agreement, dated as of April 11, 2006, among
Bally Total Fitness Holding Corporation and Wattles Capital
Management, LLC (incorporated by reference to Exhibit 10.1 to
the Companys Current Report on Form 8-K, file no. 001-13997,
dated April 12, 2006).10.6
    
    Stock Purchase Agreement, dated as of April 11, 2006, among
Bally Total Fitness Holding Corporation and investment funds
affiliated with Ramius Capital Group, L.L.C. (incorporated by
reference to Exhibit 10.2 to the Companys Current Report on
Form 8-K, file no. 001-13997, dated April 12, 2006).
 48




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##### 



10.7
    
    Fourth Amendment dated as of June 23, 2006, under the Credit
Agreement, dated as of November 18, 1997, as amended and
restated as of October 14, 2004, among Bally Total Fitness
Holding Corporation, a Delaware corporation, the lenders
parties thereto, JPMorgan Chase Bank, N.A., as agent for the
lenders, Deutsche Bank Securities, Inc., as syndication agent,
and LaSalle Bank National Association, as documentation agent
(incorporated by reference to Exhibit 10.39 to the Companys
Annual Report on Form 10-K, file no. 001-13997, for the fiscal
year ended December 31, 2005).10.8
    
    Confidential Settlement and General Release, dated July 21,
2006, between the Company and Carl J. Landeck. (incorporated
by reference to Exhibit 10.1 to the Companys Current Report on
Form 8-K, file no. 001-13997, filed August 7, 2006).* 10.9
    
    Amendment to Employment Agreement between Bally Total Fitness
Holding Corporation and Paul Toback dated August 6, 2006.10.10
    
    Confidential Settlement Agreement and General Release, dated
August 10, 2006, between the Company and Paul A. Toback
(incorporated by reference to Exhibit 10.1 to the Companys
Current Report on Form 8-K, file no. 001-13997, filed August
11, 2006).31.1
    
    Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.31.2
    
    Certification of the Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.32.1
    
    Certification of the Chief Executive Officer and Principal
Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, filed herewith.* 99.1
    
    Managements Report on Internal Control Over Financial Reporting, included in Item 9A Controls and Procedures from the Companys Annual Report on Form 10-K in the year ended December 31, 2005.
 
 +
    
    Management contract or compensatory plan or arrangement.*
    
    Filed herewith. 49




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##### 



SIGNATURE PAGE
  BALLY TOTAL FITNESS HOLDING 
CORPORATION
RegistrantBy:
    
    /s/ Ronald G. EidellRonald G. EidellSenior Vice President and Chief Financial Officer(principal financial officer)
  50