Town Sports International Holdings, Inc. Announces Fourth Quarter and Full-Year 2007 Financial Results

Business Wire, Feb 28, 2008

* Revenue for Q4 2007 increased 7.9% to $118.9 million from $110.2 million for Q4 2006.

* Earnings per diluted share were $0.23 per share for Q4 2007, or $0.21 per share before favorable tax adjustments of $0.02 per share recorded during the quarter.

* Revenue for the year increased 9.2%, to $472.9 million for 2007 from $433.1 million for 2006.

* Earnings per diluted share were $0.51 per share for 2007, or $0.77 before the net effect of the loss on extinguishment of debt of $0.28 per share and the aforementioned favorable tax adjustments of $0.02 per share.

NEW YORK -- 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 fourth quarter and year ended December 31, 2007.

Alex Alimanestianu, Chief Executive Officer of TSI, commented: "We are very pleased to report positive results for the fourth quarter and full-year and that our strong position in the market and our current business trends are providing us with a favorable outlook despite the current economic conditions. Our team executed nine new club openings in the fourth quarter, and our new clubs continue to perform well. In 2008, we will look to capitalize on strengths such as our corporate and group sales programs, which leverage our clustering strategy, and will continue to look for ways to improve our execution at the club level."

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Total revenue for Q4 2007 increased 7.9% to $118.9 million from $110.2 million for Q4 2006. This increase was driven by growth in membership revenue and ancillary club revenue. Comparable club revenue increased 3.2% for Q4 2007. Of this increase, 1.8% was due to an increase in membership, 1.0% was due to an increase in price and 0.4% was due to an increase in ancillary club revenue and fees and other revenue.

Total operating expenses increased 7.7% to $103.7 million for Q4 2007 compared to $96.4 million for Q4 2006.

* Payroll and related expenses increased 7.7%, or $3.2 million, to $44.7 million for Q4 2007 compared to $41.5 million for Q4 2006, in line with revenue growth.

* Club operating expenses decreased 0.8%, or $317,000, to $37.0 million for Q4 2007 compared to $37.3 million for Q4 2006.

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* General and administrative expenses increased $2.2 million, or 29.3%, to $9.8 million for Q4 2007 from $7.6 million for Q4 2006. The primary factors were the increases in professional fees in connection with Sarbanes-Oxley initiatives and other first-time public company expenses together with increases in general liability claims encountered in the ordinary course of business. The remaining increase was due to costs to support the growth in our business in Q4 2007.

* Depreciation and amortization expenses increased $2.3 million, or 22.7%, to $12.2 million for Q4 2007 from $9.9 million for Q4 2006, principally due to new and expanded clubs.

* The Company recorded an income tax provision of $3.3 million for Q4 2007 compared to $836,000 for Q4 2006. For Q4 2007 it recognized $538,000 of favorable tax adjustments.

Net income for Q4 2007 was $6.0 million compared to $6.6 million for Q4 2006.

EBITDA for Q4 2007 increased 14.8% to $27.8 million from $24.2 million for Q4 2006. EBITDA as a percentage of total revenue ("EBITDA margin) was 23.4% for Q4 2007, compared to 22.0% for Q4 2006. Please refer to the reconciliation of net income to EBITDA at the end of this release.

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Total revenue increased $39.8 million, or 9.2%, to $472.9 million for the year ended December 31, 2007 from $433.1 million for the year ended December 31, 2006. Comparable club revenue increased 5.2% for the year ended December 31, 2007. Of this 5.2% increase, 2.7% was due to an increase in membership, 1.0% was due to an increase in price and 1.5% was due to an increase in ancillary club revenue and fees and other revenue.

Total operating expenses increased 9.2%, or $35.0 million, to $415.1 million for the year ended December 30, 2007 compared to $380.1 million for the same period in 2006, in line with revenue growth.

* Payroll and related expenses increased $14.7 million, or 9.0%, to $177.4 million for the year ended December 31, 2007, from $162.7 million for the year ended December 31, 2006.

* Club operating expenses increased $10.4 million, or 7.1%, to $156.7 million for the year ended December 31, 2007, from $146.3 million for the year ended December 31, 2006.

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* General and administrative expenses increased $4.8 million, or 16.0%, to $35.1 million for the year ended December 31, 2007 from $30.3 million for the year ended December 31, 2006. The primary factors were the increases in corporate rent, professional fees in connection with Sarbanes-Oxley initiatives and other first-time public company expenses together with increases in general liability claims encountered in the ordinary course of business. The remaining increase was due to costs to support the growth in our business in 2007. Offsetting these increases was a decrease in costs related to the examination of strategic and financing alternatives of $1.2 million.