<< Back
Town Sports International Holdings, Inc. Announces Fourth Quarter and Calendar Year 2006 Financial Results

  • Fourth quarter 2006 revenue increased 11.8% to 110.2 million versus $98.5 million in fourth quarter 2005
  • Comparable-club revenue increased by 7.9% for both the quarter and the full year
  • Operating income increased by 26.1% to $13.8 million for the quarter
  • Company raises 2007 earnings guidance based on recent debt refinancing

NEW YORK--(BUSINESS WIRE)--March 6, 2007--Town Sports International Holdings, Inc. ("TSI" or the "Company") (NASDAQ: CLUB), a leading owner of health clubs located primarily in major cities from Washington, DC north through New England, operating under the brand names New York Sports Clubs, Boston Sports Clubs, Washington Sports Clubs and Philadelphia Sports Clubs, announced its results for the quarter and year ended December 31, 2006.

Fourth quarter 2006 revenue grew 11.8% to $110.2 million from $98.5 million for the same period last year. For the year ended December 31, 2006, revenue grew 11.5% to $433.1 million from $388.6 million for the prior year. Comparable club revenue increased 7.9% during the fourth quarter compared to the same period in the prior year.

Robert Giardina, Chief Executive Officer of TSI, commented: "We finished our first year as a publicly traded company with accelerated sales growth and with average annual club revenue surpassing the $3.0 million mark for the first time in the company's history. We also opened the 100th New York Sports Clubs facility in early 2007, further solidifying our number-one position in the region, and have a pipeline that is set to deliver 10% club growth in 2007." Mr. Giardina continued, "With all of these achievements, plus the strong comparable-club revenue growth, ancillary revenue growth, and performance of our multi-recreational facilities in the fourth quarter, we are confident that our overall fundamentals are as sound as they have ever been."

Quarter ended December 31, 2006 Financial Highlights:

Revenue (in $'000s) is comprised of the following:

                                      Three Months Ended December 31,
                                           2005            2006
                                      --------------- ----------------
Membership dues                       $79,608   80.8% $ 89,041   80.8%
Initiation fees                         2,898    2.9%    2,724    2.5%
                                      -------- ------ --------- ------
Membership revenue                     82,506   83.7%   91,765   83.3%
                                      -------- ------ --------- ------
Personal training revenue              10,301   10.5%   12,596   11.4%
Other ancillary club revenue            4,215    4.3%    5,022    4.6%
                                      -------- ------ --------- ------
Ancillary club revenue                 14,516   14.8%   17,618   16.0%
                                      -------- ------ --------- ------
Fees and Other revenue                  1,492    1.5%      784    0.7%
                                      -------- ------ --------- ------
Total revenue                         $98,514  100.0% $110,167  100.0%
                                      ======== ====== ========= ======

Total revenue for the fourth quarter grew 11.8% to $110.2 million from $98.5 million for the same period last year. The increase in revenue was driven by growth in membership revenue and ancillary club revenue.

  • Membership revenue for Q4 2006 grew 11.2% to $91.8 million from $82.5 million in Q4 2005.
  • Ancillary club revenue for Q4 2006 grew 21.4% to $17.6 million from $14.5 million in Q4 2005.
  • Comparable club revenue increased by 7.9% during Q4 2006 compared to Q4 2005. This increase in comparable club revenue is due to a 4.4% increase in membership, a 1.7% increase in price, and a 2.0% increase in ancillary revenue offset by a 0.2% decrease in initiation fee revenue recognized as a direct result of our policy to amortize membership initiation fees over a 30-month, rather than a 24-month period, which was implemented in the first quarter of 2006.

Total operating expenses increased by 10.0% to $96.4 million in Q4 2006 compared to $87.6 million in Q4 2005.

  • Payroll and related expenses totaled $41.5 million in Q4 2006 compared to $38.0 million in Q4 2005. Payroll costs directly related to the Company's personal training, Group Exclusives, and Sports Clubs for Kids programs increased $1.4 million or 19.1%, due to increased demand for these programs.
  • Club operating expenses totaled $37.3 million for Q4 2006 compared to $32.9 million in Q4 2005. Rent and occupancy expenses increased $2.9 million. Rent and occupancy costs at clubs that have opened since January 1, 2005 or that are currently being constructed increased $2.0 million.
  • General and administrative expenses were $7.6 million during Q4 2006 compared to $6.8 million in Q4 2005. There was a $1.3 million increase in legal and professional fees in Q4 2006 compared to Q4 2005. In Q4 2006, these fees included $0.5 million related to a corporate tax restructuring. In Q4 2005, the Company also incurred expenses of $0.9 million related to the examination of financing alternatives, while there was no such expense in Q4 2006.
  • Depreciation and amortization expenses totaled $9.9 million during both Q4 2006 and Q4 2005.
  • The Company recorded an income tax provision of $0.8 million in Q4 2006 compared to $0.6 million in Q4 2005. A nonrecurring tax benefit of $2.0 million was recorded in Q4 2006 as a result of a restructuring which will allow the Company to recognize certain state deferred tax assets which were previously reserved through a valuation allowance. This restructuring also required the Company to re-measure certain state deferred tax assets.

Net income for Q4 2006 was $6.6 million compared to $1.2 million in Q4 2005.

EBITDA for Q4 2006 increased 13.7% to $24.2 million from $21.3 million in Q4 2005. As a percentage of total revenue, EBITDA margin was 22.0% in Q4 2006, compared to 21.6% in Q4 2005.

Year ended December 31, 2006 Financial Highlights:

Revenue (in $'000s) is comprised of the following:

                                         Year Ended December 31,
                                         2005              2006
                                   ----------------- -----------------
Membership dues                    $ 309,811   79.7% $ 346,201   79.9%
Initiation fees                       11,916    3.1%     9,563    2.2%
                                   ---------- ------ ---------- ------
Membership revenue                   321,727   82.8%   355,764   82.1%
                                   ---------- ------ ---------- ------
Personal training revenue             42,277   10.9%    49,511   11.4%
Other ancillary club revenue          20,139    5.2%    22,863    5.3%
                                   ---------- ------ ---------- ------
Ancillary club revenue                62,416   16.1%    72,374   16.7%
                                   ---------- ------ ---------- ------
Fees and Other revenue                 4,413    1.1%     4,942    1.2%
                                   ---------- ------ ---------- ------
Total revenue                      $ 388,556  100.0% $ 433,080  100.0%
                                   ========== ====== ========== ======

Total revenue for the year ended December 31, 2006 grew 11.5% to $433.1 million from $388.6 million during the same period last year. The increase in revenue was driven by growth in membership revenue and ancillary club revenue.

  • Membership revenue for the year ended December 31, 2006 grew 10.6% to $355.8 million from $321.7 million for 2005.
  • Ancillary club revenue for the year ended December 31, 2006 grew 16.0% to $72.4 million from $62.4 million for 2005.
  • Comparable club revenue increased by 7.9% during the year ended December 31, 2006 compared to the prior-year period. This increase in comparable club revenue is due to a 4.9% increase in membership, a 1.9% increase in price, and a 1.7% increase in ancillary revenue offset by a 0.6% decrease in initiation fee revenue recognized as a direct result of our policy to amortize membership initiation fees over a 30 month, rather than a 24 month period, which was implemented in the first quarter of 2006.

Total operating expenses increased 9.1% to $380.1 million for 2006, compared with $348.3 million in 2005.

  • Payroll and related expenses for the year ended December 31, 2006 increased $10.8 million to $162.7 million from $151.9 million for the year ended December 31, 2005.
  • Payroll costs directly related to our personal training, Group Exclusive, and Sports Club for Kids programs increased $4.4 million or 13.7%, due to an increase in demand for these programs.
  • In the year ended December 31, 2006, share-based compensation charges totaled $1.1 million compared to $0.3 million in 2005.
  • During the first quarter of 2006 our former Chairman and certain executives entered into severance packages totaling an estimated $1.6 million. The total cost of these severance packages were recorded in the year ended December 31, 2006 while no such costs were incurred in the same period of the prior year.
  • Total club operating expenses for the year ended December 31, 2006 grew $16.0 million, or 12.3%, to $146.2 million from $130.2 million in the year ended December 31, 2005.
  • Rent and occupancy expenses increased $8.6 million. Rent and occupancy costs at clubs that have opened since January 1, 2005 or that are currently being constructed increased $6.6 million. In addition, during the year ended December 31, 2006 the Company also incurred a $0.2 million lease termination expense resulting from closing a club, and merging the membership base at this club into one of our newly opened nearby clubs.
  • Utility costs increased $3.8 million. Utilities at clubs that were opened or acquired in 2005 and 2006 increased $1.9 million. The balance of the increase is due to higher utility rates throughout the remainder of the club base.
  • Total general and administrative expenses for the year ended December 31, 2006 increased $3.6 million to $30.2 million from $26.6 million during the year ended December 31, 2005. There was a $1.7 million increase in legal and professional fees in the year ended December 31, 2006 compared to the year ended December 31, 2005. In Q4 2006, these fees included $0.5 million related to a corporate tax restructuring. In the year ended December 31, 2006 the Company incurred expenses of $1.7 million related to the examination of financing alternatives compared to $0.9 million in 2005. This examination has been completed.
  • In the year ended December 31, 2006, depreciation and amortization expenses increased $1.3 million to $40.9 million from $39.6 million in the year ended December 31, 2005.
  • Loss on extinguishment of debt totaled $16.1 million during the year ended December 31, 2006. The Company recorded a loss of $7.4 million during the third quarter of 2006 due to the early termination fees, deferred financing costs write-off, and associated fees related to the redemption of 35% of the 11% Senior Discount Notes on July 7, 2006, having an aggregated accreted value of $56.6 million. During the second quarter, the Company incurred a loss of $8.7 million related to the early redemption of $85.0 million of outstanding principal of the 9 5/8% Senior Notes issued by its wholly owned subsidiary Town Sports International LLC ("TSI LLC").
  • The Company recorded an income tax provision of $0.7 million during the year ended December 31, 2006 compared to $1.0 million last year. A nonrecurring tax benefit of $2.0 million was recorded in the fourth quarter of 2006 as a result of a restructuring which will allow the Company to recognize certain state deferred tax assets which were previously reserved through a valuation allowance. This restructuring also required the Company to re-measure certain state deferred tax assets. Additionally the Company incurred $0.8 million of nonrecurring income tax charges, in the first and second quarters, to reflect the reduction in state tax benefits associated with the Company's use of the proceeds from its initial public offering ("IPO"), which closed on June 7, 2006.

Net Income for the year ended December 31, 2006 was $4.6 million compared to $1.8 million in 2005.

EBITDA for the year December 31, 2006 grew 17.3% to $95.7 million from $81.6 million during the same period last year. As a percentage of total revenue, EBITDA margin was 22.1% compared to 21.0% in 2005.

Cash flow from operations for the year ended December 31, 2006 grew 18.9% to $75.2 million from $63.3 million from the prior year. Cash flow from operations has increased due to the growth in operating income excluding the effects of depreciation and amortization, net changes in operating assets and liabilities, including the increase in deferred revenue and the decrease in prepaid taxes. For the year ended December 31, 2006, cash flows from operations decreased by $13.0 million related to payment of interest on the Company's 11% Senior Discount Notes.

Cash used in financing activities for the year ended December 31, 2006 totaled $52.6 million. On June 7, 2006, the Company completed the IPO of 8,950,000 shares of common stock at a price to the public of $13.00 per share, 7,650,000 of which were sold by the Company and the remainder of which were sold by certain selling stockholders to certain specified purchasers. Upon completing the IPO, the Company received approximately $91.8 million of proceeds net of underwriting discounts and expenses. The IPO proceeds were used for the redemption of 35% of its outstanding 11% Senior Discount Notes, having an aggregated accreted value of $56.6 million and the remainder of the proceeds together with cash on hand was used to consummate the tender offer for $85.0 million of the 9 5/8% Senior Notes, issued by TSI LLC. The tender offer for the 9 5/8% Senior Notes was consummated on June 8, 2006 and the redemption of the 11% Senior Discount Notes occurred July 7, 2006. In connection with the IPO the Board of Directors approved a 14 for 1 common stock split.

The Company will hold a conference call on Tuesday, March 6, 2007 at 5:00 PM (Eastern) to discuss the fourth quarter results. Robert Giardina, chief executive officer, and Richard Pyle, chief financial officer, will host the conference call. The conference call will be Web cast and may be accessed via the Company's Investor Relations section of its Website at www.mysportsclubs.com. A replay and transcript of the call will be available via the Company's Website beginning March 7, 2007.

2007 Business Outlook:

Based upon the current business environment, 2006 performance and current trends in our marketplace, the Company currently expects the following results for calendar year 2007, subject to risks and uncertainties in any forward-looking statements:

The Company expects to open approximately 15 new clubs in 2007. Based upon the current business environment and current trends in our marketplace, the Company currently expects revenues for the year to be in the range of $475.0 million to $480.0 million, representing 10% to 11% growth over 2006, driven by club membership and ancillary revenue growth, the maturation of recently opened clubs as well as new clubs to be opened during the year.

The Company is updating its guidance for net income and earnings per share ("EPS"), based upon the successful refinancing of the 9 5/8% Senior Notes issued by TSI LLC. TSI LLC used the proceeds from its new $185.0 million term loan facility priced at LIBOR plus 1.75%, currently set at 7.1%, including the applicable margin, for the purchase and redemption of its 9 5/8% Senior Notes. Given the assumption that this interest rate remains unchanged for the duration of 2007, the Company will be able to save approximately $3.1 million on a pre-tax basis in reduced interest expense. This would translate into a $0.07 per share saving excluding the estimated after-tax loss of $7.3 million on early extinguishment of debt costs associated with the tender.

Accordingly, the Company now expects net income to be between $13.8 million and $14.8 million for 2007, when compared with 2006's net income of $4.6 million. The net income for 2007 will be arrived at after a total charge of approximately $12.3 million for early extinguishment of debt before corporate income taxes, or $7.3 million after corporate income taxes. On an adjusted basis, the Company expects net income to be between $21.1 million and $22.1 million without the post tax effects of these debt extinguishment costs. The Company expects EPS of between $0.52 and $0.56 per share for the year, or between $0.79 and $0.83 per share when adjusted for the early debt extinguishment charges on a post-tax basis, an increase from previous guidance.

All figures in thousands,
 except share and per
 share data                 2006       2007 Guidance       Increase
                          --------- --------------------
                                     Between     And     Between  And
                                    --------- ---------- ------- -----

Revenue                   $433,080  $475,000  $ 480,000     9.7% 10.8%
                          --------- --------- ---------- ------- -----

Net income                $  4,647  $ 13,800  $  14,800
Loss on extinguishment of
 debt, net of effect of
 taxes                       9,507     7,300      7,300
Net non-recurring tax
 benefit (1)                (1,221)       --         --
Net income before loss on
 extinguishment of debt
 and non-recurring tax
 benefit                  $ 12,933  $ 21,100  $  22,100    63.1% 70.9%
                          --------- --------- ---------- ------- -----

Fully diluted EPS         $   0.20  $   0.52  $    0.56
EPS related to loss on
 extinguishment of debt   $   0.41  $   0.27  $    0.27
EPS related to net non-
 recurring tax benefit    $  (0.05)       --         --
EPS prior to loss on
 extinguishment of debt
 and non-recurring tax
 benefit                  $   0.56  $   0.79  $    0.83    41.1% 48.2%
                                                         ------- -----

Fully diluted share count used in 2007 guidance: 26,600,000

(1) This net non-recurring tax benefit represents the $2.0 million non-recurring deferred tax benefit recorded in the fourth quarter of 2006, net of the $0.8 million nonrecurring income tax charges in the first and second quarters of 2006. The Company estimates that its normalized effective tax rate for 2007 will be between 40.0% and 42.0%.

About Town Sports International Holdings, Inc.:

New York-based Town Sports International Holdings, Inc. is a leading owner and operator of fitness clubs in the Northeast and mid-Atlantic regions of the United States. In addition to New York Sports Clubs, TSI operates under the brand names of Boston Sports Clubs, Washington Sports Clubs and Philadelphia Sports Clubs, with 147 clubs and more than 447,000 members in the U.S. In addition, the Company operates three facilities in Switzerland with approximately 6,000 members. For more information on TSI visit http://www.mysportsclubs.com.

      TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED BALANCE SHEETS
                      December 31, 2005 and 2006
              (All figures in $'000s, except share data)
                             (Unaudited)

                                             December 31, December 31,
                                                 2005         2006
                                             ------------ ------------
                   ASSETS
Current assets:
Cash and cash equivalents                     $   51,304   $    6,810
Accounts receivable, net                           7,103        8,028
Inventory                                            421          435
Prepaid corporate income taxes                     4,518           --
Prepaid expenses and other current assets         13,907       14,757
                                             ------------ ------------
 Total current assets                             77,253       30,030
Fixed assets, net                                253,131      281,606
Goodwill                                          49,974       50,112
Intangible assets, net                               741          922
Deferred tax asset, net                           24,378       32,437
Deferred membership costs                         11,522       15,703
Other assets                                      16,772       12,717
                                             ------------ ------------
 Total assets                                 $  433,771   $  423,527
                                             ============ ============
    LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt             $    1,267   $      181
Accounts payable                                   8,333        9,972
Accrued expenses                                  31,620       33,220
Accrued interest                                   5,267        3,466
Taxes payable                                         --        2,577
Deferred revenue                                  33,028       38,980
                                             ------------ ------------
 Total current liabilities                        79,515       88,396
Long-term debt                                   409,895      280,948
Deferred lease liabilities                        48,898       54,929
Deferred revenue                                   2,905        5,807
Other liabilities                                  8,241       11,276
                                             ------------ ------------
 Total liabilities                               549,454      441,356
Stockholders' deficit:
Class A voting common stock, $.001 par value;
 issued and outstanding 18,327,722 and
 25,975,948 shares at December 31, 2005 and
 2006, respectively                                    1           26
Paid-in capital                                 (113,588)     (21,068)
Unearned compensation                               (509)          --
Accumulated other comprehensive income
 (currency translation adjustment)                   386          539
Retained earnings (accumulated deficit)           (1,973)       2,674
                                             ------------ ------------
 Total stockholders' deficit                    (115,683)     (17,829)
                                             ------------ ------------
 Total liabilities and stockholders' deficit  $  433,771   $  423,527
                                             ============ ============
      TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
   For the three months and years ended December 31, 2005 and 2006
       (All figures in $'000s except share and per share data)
                             (Unaudited)

                      Three Months Ended           Years Ended
                          December 31,             December 31,
                      2005         2006         2005         2006
                   ------------ ------------ ------------ ------------
Revenues:
Club Operations    $    97,022  $   109,383  $   384,143  $   428,138
Fees and Other           1,492          784        4,413        4,942
                   ------------ ------------ ------------ ------------
                        98,514      110,167      388,556      433,080
                   ------------ ------------ ------------ ------------
Operating Expenses:
Payroll and related     37,968       41,498      151,920      162,709
Club operating          32,905       37,315      130,219      146,243
General and
 administrative          6,786        7,613       26,582       30,248
Depreciation and
 amortization            9,909        9,939       39,582       40,850
                   ------------ ------------ ------------ ------------
                        87,568       96,365      348,303      380,050
                   ------------ ------------ ------------ ------------
Operating Income        10,946       13,802       40,253       53,030
Loss on
 extinguishment of
 debt                       --           --           --       16,113
Interest expense        10,437        7,025       41,550       35,496
Interest income           (890)        (262)      (2,342)      (2,124)
Equity in the
 earnings of
 investees and
 rental income            (423)        (446)      (1,744)      (1,817)
                   ------------ ------------ ------------ ------------
Income before
 provision for
 corporate income
 taxes                   1,822        7,485        2,789        5,362
Provision for
 corporate income
 taxes                     600          836        1,020          715
                   ------------ ------------ ------------ ------------
Net income         $     1,222  $     6,649  $     1,769  $     4,647
                   ============ ============ ============ ============

Earnings per share:
  Basic            $      0.07  $      0.26  $      0.10  $      0.20
  Diluted          $      0.07  $      0.25  $      0.10  $      0.20
Weighted average
 number of shares
 used in
 calculating
 earnings per
 share:
  Basic             18,327,722   25,955,381   18,334,624   22,749,470
  Diluted           18,393,163   26,456,701   18,374,622   23,154,812

Statements of
 Comprehensive
 Income
Net income         $     1,222  $     6,649  $     1,769  $     4,647
Foreign currency
 translation
 adjustments            (1,024)          38         (530)         153
                   ------------ ------------ ------------ ------------
Comprehensive
 income            $       198  $     6,687  $     1,239  $     4,800
                   ============ ============ ============ ============
      TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
            For the years ended December 31, 2005 and 2006
                       (All figures in $'000s)
                             (Unaudited)

                                                         Years
                                                   Ended December 31,
                                                  --------------------
                                                    2005      2006
                                                  --------- ----------
Cash flows from operating activities:
Net income                                        $  1,769  $   4,647
                                                  --------- ----------
Adjustments to reconcile net income to net cash
 provided by operating activities:
Depreciation and amortization                       39,582     40,850
Interest expense on Senior Discount Notes           15,505     14,417
Loss on extinguishment of debt                          --     16,113
Payment of interest on Payment-in-Kind Notes            --    (12,961)
Amortization of debt issuance costs                  1,644      1,438
Noncash rental expense, net of noncash rental
 income                                              1,461      1,768
Compensation expense incurred in connection with
 stock options                                         279      1,135
Net changes in certain operating assets and
 liabilities                                         4,221     11,169
Increase in deferred tax asset                     (11,623)    (8,059)
Landlord contributions to tenant improvements        8,590      6,413
Increase in reserve for self-insured liability
 claims                                              1,837      2,564
Decrease (increase) in deferred membership costs       495     (4,181)
Other                                                 (504)       (98)
                                                  --------- ----------
 Total adjustments                                  61,487     70,568
                                                  --------- ----------
 Net cash provided by operating activities          63,256     75,215
                                                  --------- ----------
Cash flows from investing activities:
Capital expenditures, net of effect of acquired
 businesses                                        (62,393)   (66,253)
Acquisition of businesses                           (3,945)      (858)
                                                  --------- ----------
 Net cash used in investing activities             (66,338)   (67,111)
                                                  --------- ----------
Cash flows from financing activities:
Proceeds from initial public equity offering, net
 of underwriting discounts and offering costs           --     91,750
Repayment of Senior Notes                               --   (128,684)
Premium paid on extinguishment of debt and related
 costs                                                  --    (13,273)
Repayment of long term borrowings                   (1,144)    (2,805)
Change in book overdraft                            (1,792)       244
Repurchase of common stock                            (184)      (433)
Tax benefits from option exercises                      --        164
Proceeds from exercise of stock options                 --        439
                                                  --------- ----------
 Net cash used in financing activities              (3,120)   (52,598)
                                                  --------- ----------
 Net decrease in cash and cash equivalents          (6,202)   (44,494)
Cash and cash equivalents at beginning of period    57,506     51,304
                                                  --------- ----------
 Cash and cash equivalents at end of period       $ 51,304  $   6,810
                                                  ========= ==========

Summary of change in certain operating assets and
 liabilities; net of effects of acquired
 businesses:
Increase in accounts receivable                   $ (2,334) $  (3,168)
Decrease (increase) in inventory                       230        (13)
(Increase) decrease in prepaid expenses, prepaid
 income taxes, and other current assets             (2,647)     3,010
Increase in accounts payable, accrued expenses and
 accrued interest                                    4,920      2,662
Increase in deferred revenue                         4,052      8,678
                                                  --------- ----------
 Net changes in certain operating assets and
  liabilities                                     $  4,221  $  11,169
                                                  ========= ==========
      TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
                Reconciliation of Net Income to EBITDA
   For the three months and years ended December 31, 2005 and 2006
                       (All figures in $'000s)
                             (Unaudited)

                       Three Months Ended           Year Ended
                          December 31,             December 31,
                    ------------------------ -------------------------
                     2005      2006   % Chg.  2005      2006    % Chg.
                    --------  -------        --------  --------

Net income          $ 1,222  $ 6,649         $ 1,769   $ 4,647
Provision for
 corporate income
 taxes                  600      836           1,020       715
Loss on
 extinguishment of
 debt                     -        -               -    16,113
Interest expense,
 net of interest
 income               9,547    6,763          39,207    33,372
Depreciation and
 amortization         9,909    9,939          39,582    40,850
                    -------- --------        --------  --------

     EBITDA         $21,278  $24,187   13.7% $81,578   $95,697   17.3%
                    ======== ========        ========  ========

     EBITDA Margin     21.6%    22.0%           21.0%     22.1%

Non GAAP Financial Measures:

EBITDA is defined as earnings before interest, taxes, depreciation and amortization and loss on extinguishment of debt. EBITDA provides useful information regarding the Company's operating performance and financial condition, subject to the limitations described below. EBITDA should not be considered in isolation or as a substitute for net income, cash flows or other consolidated income (loss) or cash flow data prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") or as a measure of the Company's profitability or liquidity. Additionally, investors should be aware that EBITDA may not be comparable to similarly titled measures presented by other companies. EBITDA margin is defined as EBITDA as a percentage of consolidated revenue.

Forward-Looking Statements:

Statements in this release that do not constitute historical facts, including, without limitation, statements under the caption "2007 Business Outlook" and other statements regarding future financial results and performance and potential sales revenue are "forward-looking" statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, without limitation, statements under the caption "2007 Business Outlook", other statements regarding future financial results and performance and potential sales revenue, other statements that are predictive in nature or depend upon or refer to events or conditions, or that include words such as "expects", "anticipated", "intends", "plans", "believes", "estimates" or "could". These forward-looking statements are subject to various risks and uncertainties, many of which are outside the Company's control, including the level of market demand for the Company's services, competitive pressures, the ability to achieve reductions in operating costs and to continue to integrate acquisitions, the application of federal and state tax laws and regulations, and other specific factors discussed herein and in other releases and public filings made by the Company (including Forms 10-K and 10-Q filed with the Securities and Exchange Commission); accordingly, actual results could differ materially from any such forward-looking statement. The forward-looking statements speak only as of the date and hereof and the Company does not intend to update this information to reflect developments or information obtained after the date hereof and the Company disclaims any legal obligation to the contrary.

CONTACT: Investor:
Town Sports International Holdings, Inc., New York
212-246-6700, ext. 710
Investor.relations@town-sports.com
or
Integrated Corporate Relations
Joseph Teklits
joseph.teklits@icrinc.com

SOURCE: Town Sports International Holdings, Inc.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Town Sports International Holdings, Inc.'s business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.