# FORM 10-Q

|[X] | Quarterly Report Pursuant to Section
13 or 15 (d) of the Securities Exchange Act of 1934 for the period ended
September 30, 2000
|--- | --------------------------------------------------------------------------------------------------------------------------------

|[   ] | Transition Report Pursuant to Section
13 or 15 (d) of the Securities Exchange Act of 1934
|----- | -----------------------------------------------------------------------------------------

|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)                            

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
  Yes: X
   No:

As of October 31, 2000, 24,310,787 shares of the registrant's
common stock were outstanding.

| |  | Page   | 
| |  | ------ | 
| |  | Number | 

| | Item 1.   Financial statements: |  | 
| | ------------------------------- |  | 

| | Condensed consolidated balance sheet
(unaudited) |  | 
| | ------------------------------------------------ |  | 

| | September 30, 2000 and December 31, 1999 | 1 | 
| | ---------------------------------------- | - | 

| | Consolidated statement of operations
(unaudited) |  | 
| | ------------------------------------------------ |  | 

| | Three months ended September 30, 2000 and 1999 | 2 | 
| | ---------------------------------------------- | - | 

| | Consolidated statement of operations
(unaudited) |  | 
| | ------------------------------------------------ |  | 

| | Nine months ended September 30, 2000 and 1999 | 3 | 
| | --------------------------------------------- | - | 

| | Consolidated statement of stockholders'
equity (unaudited) |  | 
| | ---------------------------------------------------------- |  | 

| | Nine months ended September 30, 2000 | 4 | 
| | ------------------------------------ | - | 

| | Consolidated statement of cash flows
(unaudited) |  | 
| | ------------------------------------------------ |  | 

| | Nine months ended September 30, 2000 and 1999 | 5 | 
| | --------------------------------------------- | - | 

| | Notes to condensed consolidated financial
statements |  | 
| | ---------------------------------------------------- |  | 

| | (unaudited) | 7 | 
| | ----------- | - | 

| | Item 2.   Management's
discussion and analysis of financial |  | 
| | ----------------------------------------------------------- |  | 

| | condition and results of operations | 10 | 
| | ----------------------------------- | -- | 

| | Item 6.   Exhibits and reports
on Form 8-K | 14 | 
| | ------------------------------------------ | -- | 

|SIGNATURE PAGE |  | 15 | 
|-------------- |  | -- | 

|Item 1. | Financial Statements
|------- | --------------------

`BALLY TOTAL FITNESS HOLDING CORPORATION
                       Condensed Consolidated Balance Sheet
                                  (Unaudited)

                                                     September 30   December 31
                                                             2000          1999
                                                     ------------  ------------
                                                           (In thousands)
                                 ASSETS

Current assets:
  Cash and equivalents                               $     12,401  $     23,450
  Installment contracts receivable, net                   275,327       241,450
  Other current assets                                     53,824        46,185
                                                     ------------  ------------
    Total current assets                                  341,552       311,085

Installment contracts receivable, net                     282,461       244,693
Property and equipment, less accumulated
  depreciation and amortization of
  $421,318 and $382,897                                   535,837       473,111
Intangible assets, less accumulated
  amortization of $69,497 and $64,554                     153,368       137,156
Deferred income taxes                                      56,607        39,444
Deferred membership origination costs                     114,532       106,195
Other assets                                               40,546        36,873
                                                     ------------  ------------
                                                     $  1,524,903  $  1,348,557
                                                     ============  ============


                   LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                   $     55,926  $     49,629
  Income taxes payable                                      3,051         3,063
  Deferred income taxes                                    37,704        40,933
  Accrued liabilities                                      75,435        59,197
  Current maturities of long-term debt                     16,327         9,505
  Deferred revenues                                       311,398       290,123
                                                     ------------  ------------
    Total current liabilities                             499,841       452,450

Long-term debt, less current maturities                   639,585       593,903
Other liabilities                                           7,502         6,531
Deferred revenues                                          92,025        83,214
Stockholders' equity                                      285,950       212,459
                                                     ------------  ------------
                                                     $  1,524,903  $  1,348,557
                                                     ============  ============


                            See accompanying notes.

                                       1`

`BALLY TOTAL FITNESS HOLDING CORPORATION
                      Consolidated Statement of Operations
                                  (Unaudited)

                                                             Three months ended
                                                                   September 30
                                                     --------------------------
                                                             2000          1999
                                                     ------------  ------------
                                           (In thousands, except per share data)
Net revenues:
  Membership revenues--
    Initial membership fees on financed
      memberships originated                         $    133,014  $    118,768
    Initial membership fees on paid-in-full
      memberships originated                                6,084         5,816
    Dues collected                                         70,422        58,672
    Change in deferred revenues                            (4,585)          897
                                                     ------------  ------------
                                                          204,935       184,153

  Finance charges earned                                   17,285        15,086
  Products and services                                    29,209        17,384
  Miscellaneous revenue                                     3,383         2,434
                                                     ------------  ------------
                                                          254,812       219,057

Operating costs and expenses:
  Fitness center operations                               119,859       106,552
  Products and services                                    18,831        10,957
  Member processing and collection centers                 10,638         9,962
  Advertising                                              11,339        11,941
  General and administrative                                6,854         6,975
  Provision for doubtful receivables                       40,368        35,719
  Depreciation and amortization                            16,954        13,232
  Change in deferred membership origination costs          (2,425)       (1,421)
                                                     ------------  ------------
                                                          222,418       193,917
                                                     ------------  ------------

Operating income                                           32,394        25,140
Interest income                                               474           415
Interest expense                                          (16,680)      (13,062)
                                                     ------------  ------------
Income before income taxes                                 16,188        12,493
Income tax benefit (provision)                             19,750          (250)
                                                     ------------  ------------

Net income                                           $     35,938  $     12,243
                                                     ============  ============

Basic earnings per common share                      $       1.50  $       0.52
                                                     ============  ============

Diluted earnings per common share                    $       1.30  $       0.45
                                                     ============  ============


                            See accompanying notes.

                                       2`

`BALLY TOTAL FITNESS HOLDING CORPORATION
                      Consolidated Statement of Operations
                                  (Unaudited)

                                                              Nine months ended
                                                                   September 30
                                                     --------------------------
                                                             2000          1999
                                                     ------------  ------------
                                           (In thousands, except per share data)
Net revenues:
  Membership revenues--
    Initial membership fees on financed
      memberships originated                         $    410,902  $    364,389
    Initial membership fees on paid-in-full
      memberships originated                               18,425        17,921
    Dues collected                                        208,866       173,994
    Change in deferred revenues                           (26,768)      (13,379)
                                                     ------------  ------------
                                                          611,425       542,925

  Finance charges earned                                   50,762        44,546
  Products and services                                    82,585        42,317
  Miscellaneous revenue                                    10,161         7,182
                                                     ------------  ------------
                                                          754,933       636,970

Operating costs and expenses:
  Fitness center operations                               350,045       318,118
  Products and services                                    53,865        27,751
  Member processing and collection centers                 32,519        30,310
  Advertising                                              40,249        37,526
  General and administrative                               20,673        19,866
  Provision for doubtful receivables                      124,127       107,410
  Depreciation and amortization                            47,901        38,276
  Change in deferred membership origination costs          (8,337)       (6,872)
                                                     ------------  ------------
                                                          661,042       572,385
                                                     ------------  ------------

Operating income                                           93,891        64,585
Interest income                                             1,409         1,829
Interest expense                                          (47,500)      (37,805)
                                                     ------------  ------------
Income before income taxes and cumulative effect
  of a change in accounting principle                      47,800        28,609
Income tax benefit (provision)                             19,275          (580)
                                                     ------------  ------------

Income before cumulative effect of a change in
  accounting principle                                     67,075        28,029
Cumulative effect of a change in accounting
  principle, net of income tax                                             (262)
                                                     ------------  ------------

Net income                                           $     67,075  $     27,767
                                                     ============  ============
Basic earnings per common share:
  Income before cumulative effect of a change
    in accounting principle                          $       2.82  $       1.20
  Cumulative effect of a change in accounting
    principle                                                             (0.01)
                                                     ------------  ------------
  Net income per common share                        $       2.82  $       1.19
                                                     ============  ============

Diluted earnings per common share:
  Income before cumulative effect of a change
    in accounting principle                          $       2.44  $       1.03
  Cumulative effect of a change in accounting
    principle                                                             (0.01)
                                                     ------------  ------------
  Net income per common share                        $       2.44  $       1.02
                                                     ============  ============


                            See accompanying notes.

                                       3`

`BALLY TOTAL FITNESS HOLDING CORPORATION
               Consolidated Statement of Stockholders' Equity
                                  (Unaudited)


                                      Common stock                                Unearned
                                    -----------------                            compensation    Common       Total
                                                 Par   Contributed  Accumulated  (restricted    stock in   stockholders'
                                      Shares    value    capital      deficit        stock)     treasury      equity
                                    ----------  -----  -----------  -----------  ------------  ----------  -------------
                                                            (In thousands, except share data)

Balance at December 31, 1999        23,755,394  $ 243   $ 498,093    $(267,124)    $  (7,978)  $ (10,775)    $ 212,459

Net income                                                              67,075                                  67,075

Issuance of common stock for
  acquisitions of businesses           295,151      3       4,691                                                4,694

Issuance/(cancellation) of
  common stock under long-term
  incentive plan (net)                  90,000      1       3,779                     (3,779)                        1

Issuance of common stock under
  stock purchase and option plans      168,069      2       1,719                                                1,721
                                    ----------  -----   ---------    ---------     ---------   ---------     ---------

Balance at September 30, 2000       24,308,614  $ 249   $ 508,282    $(200,049)    $ (11,757)  $ (10,775)    $ 285,950
                                    ==========  =====   =========    =========     =========   =========     =========


                            See accompanying notes.

                                       4`

`BALLY TOTAL FITNESS HOLDING CORPORATION
                    Consolidated Statement of Cash Flows
                                  (Unaudited)

                                                              Nine months ended
                                                                   September 30
                                                     --------------------------
                                                             2000          1999
                                                     ------------  ------------
                                                           (In thousands)
OPERATING:
  Income before cumulative effect of a change
    in accounting principle                          $     67,075  $     28,029
  Adjustments to reconcile to cash provided--
    Depreciation and amortization, including
      amortization included in interest expense            51,174        40,714
    Provision for doubtful receivables                    124,127       107,410
    Change in operating assets and liabilities           (196,567)     (148,920)
                                                     ------------  ------------
      Cash provided by operating activities                45,809        27,233

INVESTING:
  Purchases and construction of property
    and equipment                                         (77,851)      (82,736)
  Acquisitions of businesses and other                     (3,816)      (16,783)
                                                     ------------  ------------
      Cash used in investing activities                   (81,667)      (99,519)

FINANCING:
  Debt transactions--
    Net borrowings under revolving credit agreement        36,500        28,500
    Repayments of other long-term debt                    (13,412)       (5,584)
    Debt issuance and refinancing costs                                  (4,225)
                                                     ------------  ------------
      Cash provided by debt transactions                   23,088        18,691
  Equity transactions--
    Proceeds from issuance of common stock under
      stock purchase and option plans                       1,721         1,730
                                                     ------------  ------------
      Cash provided by financing activities                24,809        20,421
                                                     ------------  ------------
Decrease in cash and equivalents                          (11,049)      (51,865)
Cash and equivalents, beginning of period                  23,450        64,382
                                                     ------------  ------------
Cash and equivalents, end of period                  $     12,401  $     12,517
                                                     ============  ============


                            See accompanying notes.

                                       5`

`BALLY TOTAL FITNESS HOLDING CORPORATION
              Consolidated Statement of Cash Flows--(continued)
                                  (Unaudited)

                                                              Nine months ended
                                                                   September 30
                                                     --------------------------
                                                             2000          1999
                                                     ------------  ------------
                                                           (In thousands)
SUPPLEMENTAL CASH FLOWS INFORMATION:

Changes in operating assets and liabilities,
  were as follows--
    Increase in installment contracts receivable     $   (195,465) $   (165,622)
    Increase in other current and other assets            (14,089)       (5,852)
    Increase in deferred membership origination
      costs                                                (8,337)       (6,872)
    Increase in accounts payable                            6,297         1,869
    Increase (decrease) in income taxes payable           (20,403)          444
    Increase in accrued and other liabilities               8,662        12,534
    Increase in deferred revenues                          26,768        14,579
                                                     ------------  ------------
                                                     $   (196,567) $   (148,920)
                                                     ============  ============

Cash payments for interest and income taxes
  were as follows--
    Interest paid                                    $     38,197  $     28,843
    Interest capitalized                                   (1,569)       (1,032)
    Income taxes paid, net                                  1,128           136

Investing and financing activities exclude the
  following non-cash transactions--
    Acquisitions of businesses with common stock     $      4,694  $      7,799
    Acquisitions of property and equipment
      through capital leases/borrowings                    21,897        22,113
    Common stock issued/(cancelled) under
      long-term incentive plan (net)                        3,779
    Debt, including assumed debt, related to
      acquisitions of businesses                            7,577        24,835


                            See accompanying notes.

                                       6`

The
accompanying condensed consolidated financial statements include the accounts of
Bally Total Fitness Holding Corporation (the "Company") and the subsidiaries it
controls. The Company, through its subsidiaries, is a commercial operator of
fitness centers in North America with approximately 385 facilities concentrated
in 28 states and Canada. The Company operated in one industry segment, and all
significant revenues arise from the commercial operation of fitness centers,
primarily in major metropolitan markets in the United States and Canada. Unless
otherwise specified in the text, references to the Company include the Company
and its subsidiaries. These condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1999.

All
adjustments have been recorded which are, in the opinion of management,
necessary for a fair presentation of the condensed consolidated balance sheet of
the Company at September 30, 2000, its consolidated statements of operations for
the three and nine months ended September 30, 2000 and 1999, its consolidated
statements of cash flows for the nine months ended September 30, 2000 and 1999,
and its consolidated statement of stockholders' equity for the nine months ended
September 30, 2000. All such adjustments were of a normal recurring nature.

The
accompanying condensed consolidated financial statements have been prepared in
conformity with generally accepted accounting principles which require the
Company's management to make estimates and assumptions that affect the amounts
reported therein. Actual results could vary from such estimates. In addition,
certain reclassifications have been made to prior period financial statements to
conform with the 2000 presentation.

The
Companys operations are subject to seasonal factors and, therefore, the
results of operations for the nine months ended September 30, 2000 and 1999 are
not necessarily indicative of the results of operations for the full year.

During
the first nine months of 2000, the Company acquired 13 fitness centers located
in the Portland, Oregon area and three fitness centers located in the San Diego
area.

`September 30   December 31
                                                             2000          1999
                                                     ------------  ------------
Current:
  Installment contracts receivable                   $    416,868  $    355,029
  Unearned finance charges                                (51,946)      (41,515)
  Allowance for doubtful receivables
    and cancellations                                     (89,595)      (72,064)
                                                     ------------  ------------
                                                     $    275,327  $    241,450
                                                     ============  ============
Long-term:
  Installment contracts receivable                   $    372,410  $    319,034
  Unearned finance charges                                (25,501)      (20,367)
  Allowance for doubtful receivables
    and cancellations                                     (64,448)      (53,974)
                                                     ------------  ------------
                                                     $    282,461  $    244,693
                                                     ============  ============`

`Three months ended     Nine months ended
                                             September 30          September 30
                                     --------------------  --------------------
                                          2000       1999       2000       1999
                                     ---------  ---------  ---------  ---------

Balance at beginning of period       $ 151,957  $ 132,297  $ 126,038  $ 106,301
Contract cancellations and
  write-offs of uncollectible
  amounts, net of recoveries           (84,485)   (70,123)  (238,672)  (197,640)
Provision for cancellations
  (classified as a direct
  reduction of revenues)                46,203     38,543    142,550    120,365
Provision for doubtful receivables      40,368     35,719    124,127    107,410
                                     ---------  ---------  ---------  ---------
Balance at end of period             $ 154,043  $ 136,436  $ 154,043  $ 136,436
                                     =========  =========  =========  =========`

Basic
earnings per common share for each period is computed based on the weighted
average number of shares of common stock outstanding of 24,001,923 and
23,417,395 for the three months ended September 30, 2000 and 1999, respectively,
and 23,797,183 and 23,316,082 for the nine months ended September 30, 2000 and
1999, respectively. Diluted earnings per common share for each period includes
the addition of common stock equivalents of 3,674,307 and 3,930,773 for the
three months ended September 30, 2000 and 1999, respectively, and 3,746,601 and
3,779,647 for the nine months ended September 30, 2000 and 1999, respectively.
Common stock equivalents represent the dilutive effect of the assumed exercise
of outstanding warrants and stock options.

In
April 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-5, Reporting the Costs of Start-up
Activities. The SOP was effective beginning on January 1, 1999, and required
that start-up costs including organization costs capitalized prior to January 1,
1999 be written-off and any future start-up costs be expensed as incurred. The
Company's unamortized start-up costs at January 1, 1999 were written off and
reported as a cumulative effect of a change in accounting principle, net of tax,
in accordance with APB Opinion No. 20.

The
FASB issued Statement of Financial Accounting Standards ("SFAS") No. 133
"Accounting for Derivative Instruments and Hedging Activities," as amended by
SFAS No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging
Activities," which requires companies to recognize all derivatives as either
assets or liabilities in the balance sheet and measure such instruments at fair
value. Adoption is required no later than January 1, 2001. The Company does not
expect adoption of SFAS 133, as amended to have an impact on the Companys
consolidated financial statements.

In
accordance with SFAS No. 109 Accounting for Income Taxes, the Company
reviewed the likelihood of realizing the future benefits of tax loss
carryforwards. Based on consistent and growing profitability over the past three
years and reasonably expected continuation of these trends, the Company reduced
its tax valuation allowance against net operating losses realized in prior
periods by $20,000 during the third quarter of 2000. This adjustment decreased
the income tax provision, increasing net income. The Company will continue to
review and evaluate the remaining approximate $100,000 valuation allowance
periodically.

|Item 2. | Managements Discussion and Analysis
of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The
Company's non-executive Chairman of the Board, Arthur M. Goldberg, died on
October 19, 2000. On October 25, 2000, Lee S. Hillman, President and CEO, was
elected to the additional post of Chairman of the Board.

Net
revenue for the third quarter of 2000 was $254.8 million compared to $219.1
million in 1999, an increase of $35.7 million (16%). Net revenues from
comparable fitness centers increased 9%. The increase in net revenues resulted
from the following:

- Full membership units sold increased 7% and the weighted
average selling price of membership contracts sold increased 5% over the prior
year quarter. During the 2000 quarter, shorter-term and seasonal memberships
added 1% more membership units and less than 1% more revenue. As a result,
initial membership fees originated increased $14.5 million (12%).
- Dues collected increased $11.8 million (20%) from the 1999
quarter, reflecting continued improvements in member retention and pricing
strategies and an increase attributable to fitness centers operating under our
four upscale brands.
- Finance charges earned during the third quarter of 2000
increased $2.2 million (15%) compared to the 1999 quarter, due to the growth in
size and consistent quality of the receivables portfolio. Membership receivables
written off in the 2000 period, as a percent of average membership receivables,
was consistent with prior periods. The percentage of accounts current with all
contractual payments was 87% as of September 30, 2000 compared to 86% as of a
year earlier. The average interest rate for finance charges to members was
substantially unchanged between the periods.
- Products and services revenue increased $11.8 million (68%)
over the 1999 quarter, primarily reflecting the continued growth of personal
training services and nutritional and other retail product sales.
- Fees and other revenues increased $.9 million over the 1999
quarter, primarily reflecting the continuing growth of licensing revenue.

The
weighted average number of fitness centers increased to 380 in the third quarter
of 2000 from 348 in the third quarter of 1999, including an increase in the
weighted-average number of centers operating under our four upscale brands,
which have smaller membership volume strategies, from 25 to 34.

Operating
income for the third quarter of 2000 was $32.4 million compared to $25.1 million
in 1999. The increase of $7.3 million (29%) was due to a $35.8 million (16%)
increase in net revenue, offset, in part, by an increase in operating costs and
expenses of $24.8 million (14%) and a $3.7 million increase in depreciation and
amortization. The operating margin before depreciation and amortization
increased to 19% from 18% in the prior year quarter. Excluding the provision for
doubtful receivables, depreciation and amortization and the effect of deferral
accounting, operating costs and expenses increased $21.1 million (14%) from
1999. Fitness center operating expenses increased $13.3 million (12%) due
principally to incremental costs of operating new fitness centers and additional
sales commissions from the growth in initial membership fees originated. A
substantial portion of commission expense is deferred through deferral
accounting. Products and services expenses increased $7.9 million (72%) to
support the revenue growth of product and service offerings. Operating income
from products and services increased to $10.4 million from $6.4 million in the
prior year quarter, with an operating margin of 36% in 2000 compared to 37% in
the 1999 quarter. Member processing and collection center expenses increased $.7
million (7%) due to increased printing and postage costs to support the growth
in the collection of membership fees and dues. Advertising expenses decreased
$.6 million (5%)

compared to the prior year. General and administrative expenses
decreased 2% compared to the prior year quarter due to the elimination of
licensing fees as a result of the Companys purchase of various Bally
trademarks. Depreciation and amortization expense increased $3.7 million (28%)
as a result of increased expenditures for property and equipment and acquired
fitness centers during the past two years.

The
provision for doubtful receivables, including the provision for cancellations
which is reported in the financial statements as a direct reduction of initial
membership fees on financed memberships originated, totaled 41% of the gross
financed portion of new membership fees originated in both periods.

Deferral
accounting reduced earnings by $4.5 million for 2000 compared to 1999. This
reduction reflects the greater deferral of revenues during the 2000 period.

Interest
expense was $16.7 million for the third quarter of 2000 compared to $13.1
million in 1999. The $3.6 million increase was primarily due to higher levels of
debt incurred to support the Company's growth.

The
income tax provisions for the third quarters of 2000 and 1999 reflect state
income taxes. The federal provisions were offset by the utilization of prior
years' net operating losses. In addition, as a result of the Company's improved
operating results and trends, the Company reduced its tax valuation allowance by
$20 million in the third quarter of 2000. This adjustment was reflected as a
reduction of the tax provision, increasing net income.

Net
revenue for the first nine months of 2000 was $754.9 million compared to $636.9
million in 1999, an increase of $118.0 million (19%). Net revenues from
comparable fitness centers increased 10%. The increase in net revenues resulted
from the following:

- Full membership units sold increased 5% and the weighted
average selling price of membership contracts sold increased 7% over the prior
year period. Additionally, during the 2000 period, the Company expanded its
selection of shorter-term and seasonal memberships which added 2% more
membership units and less than 1% more revenue. As a result, initial membership
fees originated increased $47.0 million (12%).
- Dues collected increased $34.9 million (20%) from the 1999
period, reflecting continued improvements in member retention and pricing
strategies and an increase attributable to fitness centers operating under our
four upscale brands.
- Finance charges earned during the first nine months of 2000
increased $6.2 million (14%) compared to the 1999 period, due to the growth in
size and consistent quality of the receivables portfolio. Membership receivables
written off in the 2000 period, as a percent of average membership receivables,
was consistent with prior periods. The average interest rate for finance charges
to members was substantially unchanged between the periods.
- Products and services revenue increased $40.3 million (95%)
from the 1999 period, primarily reflecting the continued growth of personal
training services and nutritional and other retail product sales.
- Fees and other revenues increased $3.0 million (41%) over
the 1999 period, primarily reflecting the continued growth of licensing revenue.

The
weighted average number of fitness centers increased to 374 in the first nine
months of 2000 from 338 in 1999, including an increase in the weighted-average
number of centers operating under our four upscale brands, which have smaller
membership volume strategies, from 20 to 34.

Operating
income for the first nine months of 2000 was $93.9 million compared to $64.6
million in 1999. The increase of $29.3 million (45%) was due to a $118.0 million
(19%) increase in net revenue, offset, in part, by an increase in operating
costs and expenses of $79.0 million (15%) and a $9.6 million increase in
depreciation and amortization. The operating margin before depreciation and
amortization increased to 19% for the first nine months of 2000 from 16% for the
1999 period. Excluding the provision for doubtful receivables, depreciation and
amortization and the effect of deferral accounting, operating costs and expenses
increased $63.8 million (15%) from 1999. Fitness center operating expenses
increased $31.9 million (10%) due principally to incremental costs of operating
new fitness centers and additional sales commissions from the growth in initial
membership fees originated. A substantial portion of commission expense is
deferred through deferral accounting. Products and services expenses increased
$26.1 million (94%) to support the revenue growth of product and service
offerings. Operating income from products and services increased to $28.7
million from $14.6 million in the prior year period, with an operating margin of
35% in 2000 compared to 34% in the 1999 period. Member processing and collection
center expenses increased $2.2 million (7%) due to increased printing and
postage costs to support the growth in the collection of membership fees and
dues. Advertising expenses increased $2.7 million (7%) compared to the prior
year due to increased market research, new club marketing, advertising in new
markets and direct mail programs used to grow initial membership fees. General
and administrative expenses increased 4% compared to the prior year period to
support the Company's overall growth. Depreciation and amortization expense
increased $9.6 million (25%) largely as a result of increased expenditures for
property and equipment and acquired fitness centers during the past two years.

The
provision for doubtful receivables, including the provision for cancellations
which is reported in the financial statements as a direct reduction of initial
membership fees on financed memberships originated, totaled 41% of the gross
financed portion of new membership fees originated in both periods.

Deferral
accounting reduced earnings by $11.9 million for 2000 compared to 1999. This
decrease principally reflects the greater deferral of revenues during the 2000
period.

Interest
expense was $47.5 million for the first nine months of 2000 compared to $37.8
million in 1999. The $9.7 million increase was primarily due to higher levels of
debt incurred to support the Company's growth.

The
income tax provisions for the first nine months of 2000 and 1999 reflect state
income taxes. The federal provisions were offset by the utilization of prior
years' net operating losses. In addition, as a result of the Company's improved
operating results and trends, the Company reduced its tax valuation allowance by
$20 million in the 2000 period. This adjustment was reflected as a reduction of
the tax provision, increasing net income.

Cash
flow from operating activities was $45.8 million for the first nine months of
2000 compared to $27.2 million in 1999. Net contracts receivable grew $71.6
million compared to $58.2 million in 1999 and interest paid totaled $38.2
million compared to $28.8 million in 1999 resulting in a combined increase in
the use of working capital of $22.8 million. Cash provided by operating
activities, excluding the growth in net contracts receivable and interest paid,
increased $41.4 million period over period. The improvement principally reflects
the continued growth in overall collections from installment contracts
receivable and monthly dues and the continued improvement in operating margins.

Our
bank credit facility provides up to $175.0 million of availability consisting of
a five-year $75.0 million term loan and a $100.0 million three-year revolving
credit facility. The amount available under the revolving credit facility is
reduced by any outstanding letters of credit, which cannot exceed $30.0 million.
As of September 30, 2000, the Company had drawn $36.5 million on its $100
million revolving credit line and had outstanding letters of credit totaling
$6.0 million. The $75.0 million term loan is repayable in 19 quarterly
installments, commencing March 31, 2000, of $.25 million with a final
installment of $70.3 million due in November 2004. We have no scheduled
principal payments under our subordinated debt until October 2007, and the
principal amount of the certificates under our securitization facility remains
fixed at $160.0 million through July 2001. Our debt service requirements,
including interest, for the next 12 months are approximately

$74.4 million. We believe that we will be able to satisfy our
debt service requirements, capital expenditures and any stock repurchases for
the next 12 months, out of available cash balances, cash flow from operations
and borrowings on the revolving credit facility.

We
are authorized to repurchase up to 1,500,000 shares of our common stock on the
open market from time to time. We have repurchased 625,100 shares at an average
price of $18 per share. No purchases have been made since November 1999.

During
the first nine months of 2000, excluding acquisitions, we invested approximately
$77.9 million in property and equipment, including approximately $57.0 million
related to new fitness centers and major upgrades and expansions, including new
equipment, of existing fitness centers, and $1.5 million to purchase existing
leaseholds.

Forward-
looking statements in this Form 10-Q including, without limitation, statements
relating to our plans, strategies, objectives, expectations, intentions and
adequacy of resources, are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements involve known and unknown risks, uncertainties, and other factors
that may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by the forward-looking statements. These factors include, among others,
the following: general economic and business conditions; competition; success of
operating initiatives, advertising and promotional efforts; existence of adverse
publicity or litigation; acceptance of new product offerings; changes in
business strategy or plans; quality of management; availability, terms, and
development of capital; business abilities and judgment of personnel; changes
in, or the failure to comply with, government regulations; regional weather
conditions; and other factors described in this Form 10-Q or in other of our
filings with the Securities and Exchange Commission. We are under no obligation
to publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise.

|Item 6. | Exhibits and reports on Form 8-K
|------- | --------------------------------

| | (a) | Exhibits:
| | --- | ---------

| | 27.1 | Financial Data Schedule for September 30, 2000
(filed electronically only).
| | ---- | ---------------------------------------------------------------------------

| | 27.2 | Restated Financial Data Schedule for
September 30, 1999 (filed electronically only)
| | ---- | -----------------------------------------------------------------------------------

| | (b) | Reports on Form 8-K:
| | --- | --------------------

| |                       |                       | Financial            
| | --------------------- | --------------------- | ---------------------
| | Date                  | Items                 | Statements           
| | --------------------- | --------------------- | ---------------------
| | August 3, 2000        | #5 and #7             | None                 

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

| | BALLY TOTAL FITNESS HOLDING CORPORATION
-------------------------------------------------------------
Registrant                                                                             
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                              
| | /s/ John W. Dwyer
---------------------------------------------------------------
John W. Dwyer
Executive Vice President, Chief Financial Officer and Treasurer
(principal financial officer)