CORRECTING and REPLACING Town Sports International Holdings, Inc. Announces Fourth Quarter and Full-Year 2008 Financial Results

Business Wire, March 03, 2009

NEW YORK -- In the third sentence of the first paragraph under the heading "Investing Activities Outlook:" the sentence should read: The remainder of our capital expenditures principally relates to 2008 and 2009 new club openings (sted The remainder of our capital expenditures principally relates to 2008 and 2007 new club openings).

The corrected release reads:

TOWN SPORTS INTERNATIONAL HOLDINGS, INC. ANNOUNCES FOURTH QUARTER AND FULL-YEAR 2008 FINANCIAL RESULTS

Town Sports International Holdings, Inc. (“TSI” or the “Company”) (NASDAQ: CLUB), a leading owner and operator 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 full-year ended December 31, 2008.

Fourth Quarter and Full-Year Results:

• Revenue during the quarter increased 3.4% to $122.9 million. For the full-year, revenues increased 7.1% to $506.7 million
• Comparable club revenue decreased 1.4% during the quarter but increased 2.2% for the full-year.
• Personal training revenues grew 4.3%, to $14.0 million during the quarter and 10.1%, to $61.8 million for the full-year.
• Membership attrition averaged 3.5% per month in Q4 2008 compared to 3.0% in Q4 2007 and totaled 40.2% for the full- year 2008 compared to 38.2% for the full-year 2007.
• Q4 2008 results include goodwill impairment charges of $17.6 million and fixed asset impairment charges of $1.9 million.
• Diluted loss per share for Q4 2008 was ($0.51), including ($0.66) related to goodwill and fixed asset impairment charges.
• A total of 1.8 million shares were repurchased during Q4 2008 under the repurchase program at a cost of $4.6 million. Since December 31, 2008, an additional 2.1 million shares were repurchased at a cost of $5.3 million.

Alex Alimanestianu, Chief Executive Officer of TSI, commented: “We are pleased with the overall resiliency of our business, as demonstrated by the continued growth in revenues in the fourth quarter of 2008 as compared to the fourth quarter of 2007. In an extremely challenging consumer spending environment, we generated operating cash flow of $18.7 million and $95.6 million in the fourth quarter and year ended December 31, 2008, respectively. Significant increases in total member usage from the fourth quarter of 2008 as compared to the fourth quarter of 2007 show the continued strong demand for the services offered at our clubs. However, we are facing ongoing challenges to our efforts to grow net memberships, which we expect to continue throughout 2009. As a result, we are reducing operating expenses and capital expenditures in an effort to protect our margins and preserve liquidity. On the operations front, we are seeing clear and positive signs that our ongoing initiatives to enhance the experience in our clubs are starting to produce favorable member feedback and overall satisfaction”.

On February 26, 2009, Mr. Jason Fish assumed the role of Chairman of the Board of Directors, replacing Mr. Paul Arnold, who will remain as a Director.

Quarter Ended December 31, 2008 Financial Highlights:

Revenue (in $’000s) was comprised of the following:

[Table Omitted]

Total revenue for Q4 2008 increased 3.4% compared to Q4 2007 driven by new club openings. For Q4 2008, revenues increased $9.6 million at the 24 clubs opened or acquired subsequent to December 31, 2006. This increase in revenue was offset by decreases in revenue of $4.0 million at our clubs opened or acquired prior to December 31, 2006 and $1.6 million related to the seven clubs that were closed subsequent to December 31, 2006. Revenue at clubs operated for over 12 months (“comparable club revenue”) decreased 1.4% during the three months ended December 31, 2008. Of this 1.4% decrease, 1.0% was due to a decrease in prices and 0.4% was due to a decrease in ancillary club revenue and fees and other revenue. There was no change in comparable club membership during the quarter.

Operating expenses (in $’000s) were comprised of the following:

[Table Omitted]

Total operating expenses increased 27.4% for Q4 2008 compared to Q4 2007. Operating margin was (7.6)% for Q4 2008 and 12.7% in Q4 2007.

• The increases in payroll and related expenses were attributable to a 6.8% increase in the total months of club operation from 458 in Q4 2007 to 489 in Q4 2008. There were nine clubs opened and four clubs closed for a net increase of five clubs in the twelve months ended December 31, 2008. In addition, we have been discounting our new member initiation fees in an effort to drive membership sales. Our deferred payroll costs are limited to the amount of these initiation fees, thus causing an increase in payroll of approximately $1.4 million when compared to Q4 2007, or roughly 1.1% of revenue.
• The $6.6 million increase in club operating expenses is principally due to increases in rent and utilities at clubs opened in 2008 and Q4 2007.
• The increase in depreciation and amortization expenses was principally due to clubs opened in 2008 and Q4 2007.
• In Q4 2008, we recorded fixed asset impairment charges totaling $1.9 million, which represent the write-off of assets at six underperforming clubs.
• In Q4 2008, we recorded a goodwill impairment charge of $17.6 million, representing a $15.8 million write-off of the total goodwill amount in our Boston Sports Clubs region and $1.8 million of goodwill at two of our remote clubs that did not benefit from being part of a regional cluster.