# FORM 10-Q

|[X] | Quarterly
Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
for the period ended March 31, 2001
|--- | ----------------------------------------------------------------------------------------------------------------------------

|[   ] | 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 April 30, 2001,
28,877,148 shares of the registrants common stock were outstanding.

# BALLY TOTAL
FITNESS HOLDING CORPORATION

# INDEX

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

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

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

| | March
31, 2001 and December 31, 2000 | 1 | 
| | ------------------------------------ | - | 

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

| | Three
months ended March 31, 2001 and 2000 | 2 | 
| | ------------------------------------------ | - | 

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

| | Three
months ended March 31, 2001 | 3 | 
| | --------------------------------- | - | 

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

| | Three months
ended March 31, 2001 and 2000 | 4 | 
| | ------------------------------------------ | - | 

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

| | (unaudited) | 6 | 
| | ----------- | - | 

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

| | condition
and results of operations | 9 | 
| | ----------------------------------- | - | 

| | Item 6. | Exhibits and reports on Form 8-K | 12 | 
| | ------- | -------------------------------- | -- | 

|SIGNATURE PAGE |  | 13 | 
|-------------- |  | -- | 

# PART I.  
FINANCIAL INFORMATION

## Item 1.  
Financial Statements

`March 31   December 31
                                                             2001          2000
                                                       ----------   -----------
                                                           (In thousands)
                   ASSETS

Current assets:
  Cash and equivalents                                 $   43,323    $   13,074
  Installment contracts receivable, net                   273,221       286,053
  Other current assets                                     64,773        61,516
                                                       ----------    ----------
    Total current assets                                  381,317       360,643

Installment contracts receivable, net                     267,040       273,421
Property and equipment, less accumulated depreciation
  and amortization of $451,092 and $435,860               572,548       558,277
Intangible assets, less accumulated
  amortization of $74,079 and $72,071                     151,911       153,113
Deferred income taxes                                      62,566        68,115
Deferred membership origination costs                     116,279       114,129
Other assets                                               33,100        32,926
                                                       ----------    ----------
                                                       $1,584,761    $1,560,624
                                                       ==========    ==========

         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                     $   56,997    $   54,819
  Income taxes payable                                      4,119         3,703
  Deferred income taxes                                    43,135        49,217
  Accrued liabilities                                      72,546        66,566
  Current maturities of long-term debt                     18,538        17,589
  Deferred revenues                                       309,396       306,493
                                                       ----------    ----------
    Total current liabilities                             504,731       498,387

Long-term debt, less current maturities                   604,873       674,349
Other liabilities                                           7,060         7,299
Deferred revenues                                          84,965        82,747
Stockholders' equity                                      383,132       297,842
                                                       ----------    ----------
                                                       $1,584,761    $1,560,624
                                                       ==========    ==========`

`Three months ended
                                                                       March 31
                                                       ------------------------
                                                             2001          2000
                                                       ----------    ----------
                                                            (In thousands,
                                                          except share data)
Net revenues:
  Membership revenues--
    Initial membership fees on financed
      memberships originated                           $  146,201    $  144,462
    Initial membership fees on paid-in-full
      memberships originated                                7,562         6,717
    Dues collected                                         73,181        67,994
    Change in deferred revenues                            (5,121)      (16,301)
                                                       ----------    ----------
                                                          221,823       202,872

  Finance charges earned                                   17,831        16,374
  Products and services                                    36,436        26,615
  Miscellaneous revenue                                     4,246         4,024
                                                       ----------    ----------
                                                          280,336       249,885
Operating costs and expenses:
  Fitness center operations                               124,417       114,838
  Products and services                                    23,121        17,369
  Member processing and collection centers                 10,604        10,828
  Advertising                                              15,859        14,833
  General and administrative                                7,243         7,145
  Provision for doubtful receivables                       48,643        43,407
  Depreciation and amortization                            17,912        15,285
  Change in deferred membership origination costs          (2,150)       (3,633)
                                                       ----------    ----------
                                                          245,649       220,072
                                                       ----------    ----------
Operating income                                           34,687        29,813
Interest income                                               266           490
Interest expense                                          (15,958)      (14,811)
                                                       ----------    ----------
Income before income taxes                                 18,995        15,492
Income tax provision                                         (350)         (225)
                                                       ----------    ----------
Net income                                             $   18,645    $   15,267
                                                       ==========    ==========

Basic earnings per common share                        $     0.75    $     0.65
                                                       ==========    ==========

Diluted earnings per common share                      $     0.65    $     0.56
                                                       ==========    ==========`

`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, 2000   24,352,946   $  249    $ 508,639   $(188,514)   $ (11,757)    $ (10,775)    $ 297,842

Net income                                                           18,645                                   18,645

Issuance of common stock
  through public offering       2,238,821       22       53,805                                               53,827

Exercise of warrants            2,207,104       22       11,587                                               11,609

Issuance of common stock
  under stock purchase
  and option plans                 79,018        1        1,447                                                1,448

Other                             (11,361)                 (344)                     105                        (239)
                               ----------   ------    ---------   ---------    ---------     ---------     ---------

Balance at March 31, 2001      28,866,528   $  294    $ 575,134   $(169,869)   $ (11,652)    $ (10,775)    $ 383,132
                               ==========   ======    =========   =========    =========     =========     =========`

`Three months ended
                                                                       March 31
                                                       ------------------------
                                                             2001          2000
                                                       ----------    ----------
                                                             (In thousands)
OPERATING:
  Net income                                           $   18,645    $   15,267
  Adjustments to reconcile to cash provided--
    Depreciation and amortization, including
      amortization included in interest expense            18,848        16,372
    Provision for doubtful receivables                     48,643        43,407
    Change in operating assets and liabilities            (23,599)      (57,078)
                                                       ----------    ----------
      Cash provided by operating activities                62,537        17,968

INVESTING:
  Purchases and construction of property
    and equipment                                         (23,569)      (32,071)
  Acquisitions of businesses                               (1,055)       (1,900)
                                                       ----------    ----------
      Cash used in investing activities                   (24,624)      (33,971)

FINANCING:
  Debt transactions--
    Net borrowings (repayments) under revolving
      credit agreement                                    (69,500)        4,500
    Net repayments of other long-term debt                 (5,048)       (3,272)
                                                       ----------    ----------
      Cash provided by (used in) debt transactions        (74,548)        1,228

  Equity transactions--
    Proceeds from issuance or common stock
      through public offering                              53,827
    Exercise of warrants                                   11,609
    Proceeds from issuance of common stock under
      stock purchase and option plans                       1,448           836
                                                       ----------    ----------
      Cash provided by (used in) financing activities      (7,664)        2,064
                                                       ----------    ----------


Increase (decrease) in cash and equivalents                30,249       (13,939)
Cash and equivalents, beginning of period                  13,074        23,450
                                                       ----------    ----------
Cash and equivalents, end of period                    $   43,323    $    9,511
                                                       ==========    ==========`

`Three months ended
                                                                       March 31
                                                       ------------------------
                                                             2001          2000
                                                       ----------    ----------
                                                            (In thousands)
SUPPLEMENTAL CASH FLOWS INFORMATION:

Changes in operating assets and liabilities,
  were as follows--
    Increase in installment contracts receivable       $  (29,562)   $  (74,875)
    Increase in other current and other assets             (4,676)       (3,462)
    Increase in deferred membership origination costs      (2,150)       (3,633)
    Increase in accounts payable                            2,178           374
    Decrease in income taxes payable                         (117)          (25)
    Increase in accrued and other liabilities               5,607         8,242
    Increase in deferred revenues                           5,121        16,301
                                                       ----------    ----------
                                                       $  (23,599)   $  (57,078)
                                                       ==========    ==========

Cash payments for interest and income taxes
  were as follows--
    Interest paid                                      $    8,890    $    7,120
    Interest capitalized                                   (1,031)         (695)
    Income taxes paid, net                                    467           248

Investing and financing activities exclude the
  following non-cash transactions--
    Acquisition of property and equipment
      through capital leases/borrowings                $    5,977    $    5,734`

## Basis of
presentation

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, 2000.

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 March 31, 2001, its consolidated statements of income and cash
flows for the three months ended March 31, 2001 and 2000, and its consolidated
statement of stockholders equity for the three months ended March 31,
2001. 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 2001 presentation.

## Seasonal
factors

The Companys operations are subject to seasonal factors and, therefore,
the results of operations for the three months ended March 31, 2001 and 2000 are
not necessarily indicative of the results of operations for the full year.

## Installment contracts receivable

`March 31   December 31
                                                             2001          2000
                                                       ----------   -----------
Current:
  Installment contracts receivable                     $  392,469    $  403,777
  Unearned finance charges                                (48,413)      (49,601)
  Allowance for doubtful receivables
    and cancellations                                     (70,835)      (68,123)
                                                       ----------    ----------
                                                       $  273,221    $  286,053
                                                       ==========    ==========
Long-term:
  Installment contracts receivable                     $  355,475    $  361,812
  Unearned finance charges                                (23,654)      (24,237)
  Allowance for doubtful receivables
    and cancellations                                     (64,781)      (64,154)
                                                       ----------    ----------
                                                       $  267,040    $  273,421
                                                       ==========    ==========`

## Allowance for doubtful
receivables and cancellations

`Three months ended
                                                                       March 31
                                                       ------------------------
                                                             2001          2000
                                                       ----------    ----------

Balance at beginning of period                         $  132,277    $  126,038
Contract cancellations and write-offs of
  uncollectible amounts, net of recoveries                (87,636)      (76,204)
Provision for cancellations
  (classified as a direct reduction of revenues)           42,332        49,995
Provision for doubtful receivables                         48,643        43,407
                                                       ----------    ----------
Balance at end of period                               $  135,616    $  143,236
                                                       ==========    ==========`

## Earnings per
common share

Basic earnings per common share for each period is computed based on the
weighted average number of shares of common stock outstanding of 24,816,783 in
2001 and 23,570,467 in 2000. Diluted earnings per common share for each period
includes the addition of common stock equivalents of 3,935,644 and 3,794,965 in
2001 and 2000, respectively. Common stock equivalents represent the dilutive
effect of the assumed exercise of outstanding warrants and stock options.

## Income taxes

As a result of the Companys improved operating results and trends, the
Company continues to evaluate the need for its approximate $105 million
valuation allowance offsetting the deferred tax assets that otherwise arise from
its approximate $450 million of tax loss carryforwards. As required by Financial
Accounting Standard No. 109, Accounting for Income Taxes, management
expects, during the current year, to complete its re-evaluation of the tax
valuation allowance and determine an appropriate amount, if any, to be reversed.
Any reversal of the tax valuation allowance will be reflected as a reduction of
the income tax provision, therefore increasing net income.

## New accounting
pronouncements

The Financial Accounting Standards Board 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. The Company has adopted SFAS 133, as amended, as of January 1,
2001. There has been no impact on the Companys consolidated financial
statements resulting from the adoption of SFAS 133, as amended.

# BALLY TOTAL
FITNESS HOLDING CORPORATION

## Item 2.  
Management's Discussion and Analysis of Financial Condition and Results of Operations

## Comparison of the
Three Months Ended March 31, 2001 and 2000

Net revenue for the first quarter of 2001 was $280.3 million compared to $249.8
million in 2000, an increase of $30.5 million (12%). Net revenues from
comparable fitness centers increased 9%. This increase in net revenues resulted
from the following:

- Initial membership fees
recognized, including the impact of deferral accounting, increased $12.8 million
(9%), versus the prior year quarter. Membership unit sales were approximately
flat with prior year, while the weighted-average selling price of full
memberships increased 3%.  As a result, membership fees originated increased
$2.6 million (2%). Membership unit sales were reduced by a number of factors
including the implementation of a new consumer-oriented sales process which has
resulted in fewer cancellations, persistent severe weather in a number of our
major markets, an earthquake, rolling blackouts in California, and one less
retail day in February 2001.
- Dues collected
increased $5.2 million (8%) from the 2000 quarter, reflecting both continued
improvements in member retention and pricing strategies, as well as a growing
proportion of dues from newly originated memberships.
- Finance charges
earned during the first quarter of 2001 increased $1.5 million (9%) compared to
the 2000 quarter, due to the growth in the average portfolio balance prior to
the sale of a portion of the portfolio in March 2001. 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 89% at the end of both periods. The
average interest rate for finance charges to members was substantially unchanged
between the periods.
- Products and
services revenue increased $9.8 million (37%) over the 2000 quarter, primarily
reflecting the continued growth of personal training services and nutritional
and other retail products.
- Miscellaneous
revenue increased 6% over the 2000 quarter, primarily reflecting additional
revenue from co-marketing partnerships.

The weighted average number of fitness centers increased to 385 in the first
quarter of 2001 from 366 in the first quarter of 2000, including an increase in
the weighted-average number of centers operating under our four upscale brands,
which are modeled on smaller membership volumes, from 34 to 36.

Operating income for the first quarter of 2001 was $34.7 million compared to
$29.8 million in 2000. The increase of $4.9 million (16%) was due to a $30.5
million (12%) increase in net revenue, offset, in part, by an increase in
operating costs and expenses of $23.0 million (11%) and a $2.6 million increase
in depreciation and amortization. The operating margin before depreciation and
amortization increased to 19% from 18% for the 2000 quarter. Excluding the
provision for doubtful receivables, depreciation and amortization and the effect
of deferral accounting, operating costs and expenses increased $16.2 million
(10%) from 2000. Fitness center operating expenses increased $9.6 million (8%)
due principally to incremental costs of operating additional fitness centers.
Products and services expenses increased $5.8 million (33%) to support the
revenue growth of product and service offerings. Operating income from products
and services increased to $13.3 million from $9.2 million in the prior year
quarter, with an operating margin of 37% in 2001 compared to 35% in the 2000
quarter. Member processing and collection center expenses were substantially
unchanged from the prior year quarter. Advertising expenses increased 7%
compared to the prior year supporting clubs in new markets. General and
administrative expenses were substantially unchanged from the prior year
quarter. Depreciation and amortization expense increased $2.6 million (17%)
largely as a result of the significant additions to property and equipment
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. However, the provision for cancellations for the 2001 quarter was 19%
compared to 21% for the first quarter of 2000 reflecting the significantly
improved experience of actual cancellations from sales during the March 2001
quarter. Notwithstanding this improvement, which may have residual positive
effects, the provision for doubtful receivables for the first quarter of 2001
was increased to offset this improvement and maintain a combined provision rate
of 41%. The Company believes it is prudent to measure sustained collection
improvements over a longer period before changing the overall provision rate.

Deferral accounting reduced earnings by $3.0 million for 2001 compared to a
reduction of $12.7 million for 2000. The improvement from the prior year quarter
reflects the net impact of an increase of $11.2 million in recognized revenues
from member origination fees and dues offset by an increase of $1.5 million in
the net expense recognition.

Interest expense was $16.0 million for the first quarter of 2001 compared to
$14.8 million in 2000. The $1.2 million increase was due to higher average
levels of debt outstanding during the first quarter of 2001 as compared to 2000.

The income tax provisions for the first quarter of 2001 and 2000 reflect state
income taxes only. The federal provisions were offset by the utilization of
prior years net operating losses.

## Liquidity and
Capital Resources

In March 2001, we sold 2,238,821 shares of our common stock to the public and
the Estate of Arthur M. Goldberg, our former Chairman, exercised an outstanding
warrant to purchase 2,207,104 shares of common stock. We received net proceeds
from these transactions of approximately $65 million, which was used principally
to reduce bank debt.

Also in March 2001, we sold to a major financial institution approximately 8% of
our receivables portfolio at net book value. We received initial proceeds of
approximately $45 million from this transaction, and used the proceeds to reduce
debt.

Cash flow from operating activities was $62.5 million in the 2001 quarter
compared to $18.0 million in the 2000 quarter. Exclusive of the proceeds from
the sale of a portion of our receivables portfolio, net of the foregone
principal and interest collections on these receivables, cash from operating
activities for the March 2001 quarter was $21.1 million, an 18% increase over
the prior year quarter.

Our bank credit facility, dated November 10, 1999, 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 March 31, 2001, our $100 million revolving
credit line was unused and we had outstanding letters of credit totaling $4.6
million. The $75.0 million term loan is repayable in 19 quarterly installments,
commencing March 31, 2000, of $250,000, 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, through
March 31, 2002, are approximately $76.4 million. We believe that we will be able
to satisfy these 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. It is anticipated that we will
either refinance our securitization facility or complete further bulk sales of a
portion of our accounts receivable portfolio prior to year-end, although there
can be no assurance we will be able to complete these transactions.

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 three months of 2001, we invested approximately $23.6 million
in property and equipment, including approximately $15.0 million related to new
fitness centers and $2.0 million related to major upgrades and expansions,
including new equipment, of existing fitness centers.

## Forward-Looking
Statements

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.

# BALLY TOTAL
FITNESS HOLDING CORPORATION

# PART II.  
OTHER INFORMATION

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

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

| |                   |           | Financial 
| | ----------------- | --------- | ----------
| | Date              | Items     | Statements
| |                   |           |           
| | February 7, 2001  | #5 and #7 | None      
| | February 14, 2001 | #5 and #7 | None      
| | February 22, 2001 | #5 and #7 | None      

# BALLY TOTAL
FITNESS HOLDING CORPORATION

# SIGNATURE
PAGE

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)