# FORM 10-Q

|[X] | Quarterly Report Pursuant to Section
13 or 15 (d) of the Securities Exchange Act of 1934 for the period ended
June 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 July 31, 2000, 24,268,842 shares of the registrant's
common stock were outstanding.

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

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

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

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

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

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

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

| | Six months ended June 30, 2000 and 1999 | 3 | 
| | --------------------------------------- | - | 

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

| | Six months ended June 30, 2000 | 4 | 
| | ------------------------------ | - | 

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

| | Six months ended June 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 4.   Submission of matters
to a vote of security holders | 14 | 
| | ------------------------------------------------------------- | -- | 

| | 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)

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

Current assets:
  Cash and equivalents                               $    14,308    $    23,450
  Installment contracts receivable, net                  270,164        241,450
  Other current assets                                    45,777         46,185
                                                     -----------    -----------
    Total current assets                                 330,249        311,085

Installment contracts receivable, net                    273,536        244,693
Property and equipment, less accumulated
  depreciation and amortization of $407,124
  and $382,897                                           521,196        473,111
Intangible assets, less accumulated
  amortization of $67,868 and $64,554                    142,937        137,156
Deferred income taxes                                     38,437         39,444
Deferred membership origination costs                    112,107        106,195
Other assets                                              38,971         36,873
                                                     -----------    -----------
                                                     $ 1,457,433    $ 1,348,557
                                                     ===========    ===========


                   LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                   $    48,578    $    49,629
  Income taxes payable                                     3,023          3,063
  Deferred income taxes                                   39,521         40,933
  Accrued liabilities                                     62,399         59,197
  Current maturities of long-term debt                    13,381          9,505
  Deferred revenues                                      306,841        290,123
                                                     -----------    -----------
    Total current liabilities                            473,743        452,450

Long-term debt, less current maturities                  634,275        593,903
Other liabilities                                          6,509          6,531
Deferred revenues                                         91,981         83,214
Stockholders' equity                                     250,925        212,459
                                                     -----------    -----------
                                                     $ 1,457,433    $ 1,348,557
                                                     ===========    ===========

                            See accompanying notes.

                                       1`

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

                                                             Three months ended
                                                                        June 30
                                                     --------------------------
                                                            2000           1999
                                                     -----------    -----------
                                           (In thousands, except per share data)
Net revenues:
  Membership revenues--
    Initial membership fees on financed
      memberships originated                         $   133,426    $   118,891
    Initial membership fees on paid-in-full
      memberships originated                               5,624          5,435
    Dues collected                                        71,083         55,354
    Change in deferred revenues                           (5,882)          (839)
                                                     -----------    -----------
                                                         204,251        178,841

  Finance charges earned                                  17,103         15,477
  Products and services                                   26,763         12,943
  Miscellaneous revenue                                    2,752          2,216
                                                     -----------    -----------
                                                         250,869        209,477

Operating costs and expenses:
  Fitness center operations                              115,901        106,675
  Products and services                                   17,745          8,894
  Member processing and collection centers                11,053          9,710
  Advertising                                             14,077         11,884
  General and administrative                               6,674          6,203
  Provision for doubtful receivables                      40,352         34,876
  Depreciation and amortization                           15,662         12,649
  Change in deferred membership origination costs         (2,279)        (2,562)
                                                     -----------    -----------
                                                         219,185        188,329
                                                     -----------    -----------

Operating income                                          31,684         21,148
Interest income                                              445            553
Interest expense                                         (16,009)       (12,446)
                                                     -----------    -----------
Income before income taxes                                16,120          9,255
Income tax provision                                        (250)          (180)
                                                     -----------    -----------
Net income                                           $    15,870    $     9,075
                                                     ===========    ===========

Basic earnings per common share                      $      0.67    $      0.39
                                                     ===========    ===========

Diluted earnings per common share                    $      0.58    $      0.34
                                                     ===========    ===========

                            See accompanying notes.

                                       2`

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

                                                               Six months ended
                                                                        June 30
                                                     --------------------------
                                                            2000           1999
                                                     -----------    -----------
                                           (In thousands, except per share data)
Net revenues:
  Membership revenues--
    Initial membership fees on financed
      memberships originated                         $   277,888    $   245,621
    Initial membership fees on paid-in-full
      memberships originated                              12,341         12,105
    Dues collected                                       138,444        115,322
    Change in deferred revenues                          (22,183)       (14,276)
                                                     -----------    -----------
                                                         406,490        358,772

  Finance charges earned                                  33,477         29,460
  Products and services                                   53,376         24,933
  Miscellaneous revenue                                    6,778          4,748
                                                     -----------    -----------
                                                         500,121        417,913

Operating costs and expenses:
  Fitness center operations                              230,106        211,566
  Products and services                                   35,114         16,794
  Member processing and collection centers                21,881         20,348
  Advertising                                             28,910         25,585
  General and administrative                              13,819         12,891
  Provision for doubtful receivables                      83,759         71,691
  Depreciation and amortization                           30,947         25,044
  Change in deferred membership origination costs         (5,912)        (5,451)
                                                     -----------    -----------
                                                         438,624        378,468
                                                     -----------    -----------

Operating income                                          61,497         39,445
Interest income                                              935          1,414
Interest expense                                         (30,820)       (24,743)
                                                     -----------    -----------
Income before income taxes and cumulative effect
  of a change in accounting principle                     31,612         16,116
Income tax provision                                        (475)          (330)
                                                     -----------    -----------

Income before cumulative effect of a change in
  accounting principle                                    31,137         15,786
Cumulative effect of a change in accounting
  principle, net of income tax                                             (262)
                                                     -----------    -----------

Net income                                           $    31,137    $    15,524
                                                     ===========    ===========
Basic earnings per common share:
  Income before cumulative effect of a change in
    accounting principle                             $      1.31    $      0.68
  Cumulative effect of a change in accounting
    principle                                                             (0.01)
                                                     -----------    -----------
  Net income per common share                        $      1.31    $      0.67
                                                     ===========    ===========

Diluted earnings per common share:
  Income before cumulative effect of a change in
    accounting principle                             $      1.13    $      0.59
  Cumulative effect of a change in accounting
    principle                                                             (0.01)
                                                     -----------    -----------
  Net income per common share                        $      1.13    $      0.58
                                                     ===========    ===========

                            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                                                              31,137                                  31,137

Issuance of common stock for
  acquisitions of businesses           311,818      4       5,770                                                5,774

Issuance of common stock under
  stock purchase and option plans      127,963      1       1,554                                                1,555
                                    ----------  -----   ---------    ---------     ---------   ---------     ---------

Balance at June 30, 2000            24,195,175  $ 248   $ 505,417    $(235,987)    $  (7,978)  $ (10,775)    $ 250,925
                                    ==========  =====   =========    =========     =========   =========     =========

                            See accompanying notes.

                                       4`

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

                                                               Six months ended
                                                                        June 30
                                                     --------------------------
                                                            2000           1999
                                                     -----------    -----------
                                                          (In thousands)
OPERATING:
  Income before cumulative effect of a change
    in accounting principle                          $    31,137    $    15,786
  Adjustments to reconcile to cash provided--
    Depreciation and amortization, including
      amortization included in interest expense           33,122         26,603
    Provision for doubtful receivables                    83,759         71,691
    Change in operating assets and liabilities          (125,264)       (97,550)
                                                     -----------    -----------
      Cash provided by operating activities               22,754         16,530

INVESTING:
  Purchases and construction of property
    and equipment                                        (57,245)       (54,199)
  Acquisitions of businesses and other                    (3,327)        (7,027)
                                                     -----------    -----------
      Cash used in investing activities                  (60,572)       (61,226)

FINANCING:
  Debt transactions--
    Net borrowings under revolving credit agreement       36,500
    Repayments of other long-term debt                    (9,379)        (3,605)
    Debt issuance and refinancing costs                                  (4,225)
                                                     -----------    -----------
      Cash provided by (used in) debt transactions        27,121         (7,830)
  Equity transactions--
    Proceeds from issuance of common stock under
      stock purchase and option plans                      1,555          1,164
                                                     -----------    -----------
      Cash provided by (used in) financing
        activities                                        28,676         (6,666)
                                                     -----------    -----------
Decrease in cash and equivalents                          (9,142)       (51,362)
Cash and equivalents, beginning of period                 23,450         64,382
                                                     -----------    -----------
Cash and equivalents, end of period                  $    14,308    $    13,020
                                                     ===========    ===========


                            See accompanying notes.

                                       5`

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

                                                               Six months ended
                                                                        June 30
                                                     --------------------------
                                                            2000           1999
                                                     -----------    -----------
                                                          (In thousands)
SUPPLEMENTAL CASH FLOWS INFORMATION:

Changes in operating assets and liabilities,
  were as follows--
    Increase in installment contracts receivable     $  (140,926)   $  (113,077)
    Increase in other current and other assets            (3,312)          (701)
    Increase in deferred membership origination costs     (5,912)        (5,451)
    Increase (decrease) in accounts payable               (1,051)         3,214
    Increase (decrease) in income taxes payable             (445)           227
    Increase in accrued and other liabilities              4,199          3,963
    Increase in deferred revenues                         22,183         14,275
                                                     -----------    -----------
                                                     $  (125,264)   $   (97,550)

Cash payments for interest and income taxes
  were as follows--
    Interest paid                                    $    29,752    $    23,731
    Interest capitalized                                  (1,249)          (567)
    Income taxes paid, net                                   920            103

Investing and financing activities exclude the
  following non-cash transactions--
    Acquisitions of businesses with common stock     $     8,950
    Acquisitions of property and equipment
      through capital leases/borrowings                    9,652    $     6,284
    Debt, including assumed debt, related to
      acquisitions of businesses                           7,577          3,417

                            See accompanying notes.

                                       6`

The
accompanying condensed consolidated financial statements include the accounts of
Bally Total Fitness Holding Corporation (the "Company") and the subsidiaries
that 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 June 30, 2000, its consolidated statements of operations for the
three and six months ended June 30, 2000 and 1999, its consolidated statements
of cash flows for the six months ended June 30, 2000 and 1999, and its
consolidated statement of stockholders' equity for the six months ended June 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 six months ended June 30, 2000 and 1999 are not
necessarily indicative of the results of operations for the full
year.

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

`June 30    December 31
                                                            2000           1999
                                                     -----------    -----------
Current:
  Installment contracts receivable                   $   407,170    $   355,029
  Unearned finance charges                               (49,728)       (41,515)
  Allowance for doubtful receivables and
    cancellations                                        (87,278)       (72,064)
                                                     -----------    -----------
                                                     $   270,164    $   241,450
                                                     ===========    ===========
Long-term:
  Installment contracts receivable                   $   362,625    $   319,034
  Unearned finance charges                               (24,410)       (20,367)
  Allowance for doubtful receivables and
    cancellations                                        (64,679)       (53,974)
                                                     -----------    -----------
                                                     $   273,536    $   244,693
                                                     ===========    ===========`

`Three months ended       Six Months Ended
                                                 June 30                June 30
                                     -------------------    -------------------
                                         2000       1999        2000       1999
                                     --------   --------    --------   --------

Balance at beginning of period       $143,236   $121,109    $126,038   $106,301
Contract cancellations and
  write-offs of uncollectible
  amounts, net of recoveries          (77,983)   (63,710)   (154,187)  (127,517)
Provision for cancellations
  (classified as a direct
  reduction of revenues)               46,352     40,022      96,347     81,822
Provision for doubtful receivables     40,352     34,876      83,759     71,691
                                     --------   --------    --------   --------
Balance at end of period             $151,957   $132,297    $151,957   $132,297
                                     ========   ========    ========   ========`

Basic
earnings per common share for each period is computed based on the weighted
average number of shares of common stock outstanding of 23,816,907 and
23,325,783 for the three months ended June 30, 2000 and 1999, respectively, and
23,693,687 and 23,264,586 for the six months ended June 30, 2000 and 1999,
respectively. Diluted earnings per common share for each period includes the
addition of common stock equivalents of 3,738,812 and 3,683,768 for the three
months ended June 30, 2000 and 1999, respectively, and 3,777,161 and 3,654,937
for the six months ended June 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.

As a
result of the Companys improved operating results and trends, the Company
has been evaluating the continuing need for its approximate $160 million
valuation allowance offsetting the deferred tax assets that otherwise arise from
its approximate $500 million of tax loss carryforwards. Based on the
Companys investigation and discussions with its external auditors, it has
been determined that a reduction in the valuation allowance is appropriate. As
required by Financial Accounting Standard No. 109, Accounting for Income Taxes,
management expects, during the third quarter of 2000, to complete the necessary
analysis of its tax valuation allowance and determine an appropriate initial
reduction amount. The Company believes this reduction will range between $15
million to $25 million. The reduction of the tax valuation allowance will be
reflected as a reduction of the income tax provision, increasing net income. The
Company will continue to review the remaining amount of the valuation allowance
periodically.

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

Net
revenue for the second quarter of 2000 was $250.9 million compared to $209.5
million in 1999, an increase of $41.4 million (20%). Net revenues from
comparable fitness centers increased 11%. This significant increase in net
revenues resulted from the following:

- Full membership units sold increased 6% and the weighted
average selling price of membership contracts sold increased 6% over the prior
year quarter. Additionally, during the 2000 quarter, the Company expanded its
selection of short-term seasonal memberships which added 5% more membership
units and 1% more revenue. As a result, initial membership fees originated
increased $14.7 million (12%).
- Dues collected increased $15.7 million (28%) 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 second quarter of 2000
increased $1.6 million (11%) compared to the 1999 quarter, due to the growth in
size and consistent higher quality of the receivables portfolio. Membership
receivables written off in the current period, as a percent of average
membership receivables, was consistent with prior periods. The percentage of
accounts current with all contractual payments was 88% as of June 30, 2000
compared to 87% 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 $13.8 million (107%)
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 $.5 million over the 1999
quarter, primarily reflecting the continuing growth of licensing revenue.

The
weighted average number of fitness centers increased to 375 in the second
quarter of 2000 from 336 in the second 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 16 to 34.

Operating
income for the second quarter of 2000 was $31.7 million compared to $21.1
million in 1999. The increase of $10.6 million (50%) was due to a $41.4 million
(20%) increase in net revenue, offset, in part, by an increase in operating
costs and expenses of $27.8 million (16%) and a $3.0 million increase in
depreciation and amortization. The operating margin before depreciation and
amortization increased to 19% from 16% 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 $22.1 million
(15%) from 1999. Fitness center operating expenses increased $9.2 million (9%)
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 $8.9 million
(100%) to support the revenue growth of product and service offerings. Operating
income from products and services, net of related development, pre-opening and
start-up costs, increased to $9.0 million from $4.0 million in the prior year
quarter, with an operating margin of 34% in 2000 compared to 31% in the 1999
quarter. Member processing and collection center expenses increased $1.3 million
(14%) due to increased printing and postage costs to support the growth in the
collection of membership fees and dues. Advertising expenses increased $2.2
million (18%) compared to the prior year due to increased market research, new
club marketing, and direct mail programs used to grow initial membership fees.
General and administrative expenses increased 8% compared to the prior year
quarter to support acquisition strategies and the Company's overall growth.
Depreciation and amortization expense increased $3.0 million (24%) 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 $5.3 million for 2000 compared to 1999. This
reduction reflects the greater deferral of revenues and lower deferral of
expenses reflecting the efficiency of higher membership originations.

Interest
expense was $16.0 million for the second quarter of 2000 compared to $12.4
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 second quarters of 2000 and 1999 reflect state
income taxes only. The federal provisions were offset by the utilization of
prior years' net operating losses.

Net
revenue for the first six months of 2000 was $500.1 million compared to $417.9
million in 1999, an increase of $82.2 million (20%). Net revenues from
comparable fitness centers increased 11%. This significant 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 8% 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 $32.5 million (13%).
- Dues collected increased $23.1 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 six months of 2000
increased $4.0 million (14%) compared to the 1999 period, due to the growth in
size and consistent higher quality of the receivables portfolio. Membership
receivables written off in the current 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 $28.4 million (114%)
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 $2.0 million (43%) over
the 1999 period, primarily reflecting the continued growth of licensing
revenue.

The
weighted average number of fitness centers increased to 371 in the first six
months of 2000 from 332 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 16 to 34.

Operating
income for the first six months of 2000 was $61.5 million compared to $39.4
million in 1999. The increase of $22.1 million (56%) was due to a $82.2 million
(20%) increase in net revenue, offset, in part, by an increase in operating
costs and expenses of $54.2 million (15%) and a $5.9 million increase in
depreciation and amortization. The operating margin before depreciation and
amortization increased to 18% for the first six months of 2000 from 15% for the
1999 period. Excluding the provision for doubtful receivables, depreciation and
amortization and the effect of deferral accounting, operating costs and expenses
increased $42.6 million (15%)

from 1999. Fitness center operating expenses increased $18.5
million (9%) 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 $18.3 million
(109%) to support the revenue growth of product and service offerings. Operating
income from products and services, net of related development, pre-opening and
start-up costs, increased to $18.3 million from $8.1 million in the prior year
period, with an operating margin of 34% in 2000 compared to 33% in the 1999
period. Member processing and collection center expenses increased $1.5 million
(8%) due to increased printing and postage costs to support the growth in the
collection of membership fees and dues. Advertising expenses increased $3.3
million (13%) compared to the prior year due to increased market research, new
club marketing, and direct mail programs used to grow initial membership fees.
General and administrative expenses increased 7% compared to the prior year
period to support acquisition strategies and the Company's overall growth.
Depreciation and amortization expense increased $5.9 million (24%) 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 $7.4 million for 2000 compared to 1999. This
decrease principally reflects the greater deferral of revenues during the 2000
period.

Interest
expense was $30.8 million for the first six months of 2000 compared to $24.7
million in 1999. The $6.1 million increase was primarily due to higher levels of
debt incurred to support the Company's growth.

The
income tax provisions for the first six months of 2000 and 1999 reflect state
income taxes only. The federal provisions were offset by the utilization of
prior years' net operating losses.

Cash
flow from operating activities was $22.8 million for the first six months of
2000 compared to $16.5 million in 1999. Net contracts receivable grew $57.2
million compared to $41.4 million in 1999 and interest paid totaled $29.8
million compared to $22.1 million in 1999 resulting in a combined increase in
the use of working capital of $23.5 million. Cash provided by operating
activities, excluding the growth in net contracts receivable and interest paid,
increased $29.8 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 June 30, 2000, the Company had drawn $36.5 million on its $100 million
revolving credit line and had outstanding letters of credit totaling $6.1
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 $70.7 million. We believe that we will be able
to satisfy our 2000 requirements for debt service, capital expenditures and any
stock repurchases, 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 six months of 2000, excluding acquisitions, we invested approximately
$57.2 million in property and equipment, including approximately $45.5 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 4. | Submission of matters to a vote of
security holders
|------- | ---------------------------------------------------

| | At the Company's annual meeting of
stockholders held on June 8, 2000, the stockholders considered and voted on the
following:
| | -----------------------------------------------------------------------------------------------------------------------------

| | Two persons nominated by the Board of
Directors for election as directors of Class I for three-year terms expiring in
2003 or until their successors have been duly elected, along with the voting
results which resulted in each nominee being elected as a director, were as
follows:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Votes | Votes
| |  |  | ----- | -----

| |  | Nominees | cast for | withheld
| |  | -------- | -------- | --------

| |  | Aubrey C. Lewis | 22,308,221 | 52,166
| |  | --------------- | ---------- | ------

| |  | Lisa M. Walsh | 22,306,265 | 54,122
| |  | ------------- | ---------- | ------

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

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

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

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

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

| |                       |                       | Financial            
| | --------------------- | --------------------- | ---------------------
| | Date                  | Items                 | Statements           
| | --------------------- | --------------------- | ---------------------
| |                       |                       |                      
| | May 11, 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)