Town Sports International (CLUBQ) 8-K Town Sports International Holdings, Inc. Announces Third Quarter 2008 Financial Results

Exhibit 99.1

For Release on October 30, 2008

TOWN SPORTS INTERNATIONAL HOLDINGS, INC. ANNOUNCES THIRD QUARTER 2008 FINANCIAL RESULTS

LOWERS FISCAL 2008 GUIDANCE

New York, NY — October 30, 2008— 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 third quarter ended September 30, 2008.

3^rd Quarter Highlights:

• Revenues increased 7.8% to $128.1 million.

• Comparable club revenue increased 2.2%.

• Personal training revenues grew 12.3%, to $14.9 million.

• EBITDA increased 1.4% to $25.6 million.

• Diluted earnings per share decreased 26.3% to $0.14, including a $0.02 fixed asset impairment charge.

• Membership attrition averaged 3.6% per month.

Alex Alimanestianu, Chief Executive Officer of TSI, commented: “After a solid first half of the year, we were able to post increases in membership and same club revenue in the third quarter, but fell below our overall financial targets for the period. As the quarter progressed, we felt the increasing effects of the recessionary economy, and the outlook we are giving for the fourth quarter reflects the worsening consumer spending environment. We are convinced that health and fitness will continue to be a major priority for our target customers, and we remain extremely confident in our strategy, the operational initiatives we have undertaken, and the growth potential of this company. Until conditions improve, we will manage costs and capital expenditures to match the environment, while continuing to focus on delivering a high quality experience to our members.”

Quarter Ended September 30, 2008 Financial Highlights:

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

	Quarter Ended September 30,
	2008					2007
	Revenue		% Revenue			Revenue		% Revenue			% Growth
Membership dues	$	101,025		78.9	%	$	93,735		78.8	%		7.8	%
Initiation fees		3,505		2.7	%		3,202		2.7	%		9.5	%
Membership revenue		104,530		81.6	%		96,937		81.5	%		7.8	%
Personal training revenue		14,871		11.6	%		13,243		11.2	%		12.3	%
Other ancillary club revenue		7,281		5.7	%		7,245		6.1	%		0.5	%
Ancillary club revenue		22,152		17.3	%		20,488		17.3	%		8.1	%
Fees and other revenue		1,427		1.1	%		1,461		1.2	%		(2.3	)%
Total revenue	$	128,109		100.0	%	$	118,886		100.0	%		7.8	%

Total revenuefor Q3 2008 increased 7.8% compared to Q3 2007 driven by growth in membership and personal training revenue. Revenue at clubs operated by us for over 12 months (“comparable club revenue”) increased 2.2% during the three months ended September 30, 2008. Of this 2.2% increase, 0.9% was due to an increase in membership, 0.9% was due to an increase in price and 0.4% was due to an increase in ancillary club revenue and fees and other revenue.

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

	Quarter Ended September 30,
	2008					2007
	Expense		% Revenue			Expense		% Revenue			% Change
Payroll and related	$	49,171		38.4	%	$	43,331		36.5	%		13.5	%
Club operating		44,398		34.6	%		42,360		35.6	%		4.8	%
General and administrative		8,697		6.8	%		8,368		7.0	%		3.9	%
Depreciation and amortization		13,423		10.5	%		10,950		9.2	%		22.6	%
Impairment of fixed assets		839		0.7	%		—		0.0	%		100.0	%
Operating expenses	$	116,528		91.0	%	$	105,009		88.3	%		11.0	%
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Total operating expensesincreased 11.0% for Q3 2008 compared to Q3 2007. Operating margin was 9.0% for Q3 2008 and 11.7% in Q3 2007.

• The increases in payroll and related and club operating expenses were principally attributable to a 7.8% increase in the total months of club operation from 451 in Q3 2007 to 486 in Q3 2008. There was a net increase of 10 clubs in the twelve months ended September 30, 2008. In addition, we have been discounting our new member initiation fees in an effort to drive membership sales. Our payroll costs that we defer are limited to the amount of these initiation fees, thus causing a pre-tax increase in payroll of approximately $2.1 million when compared to Q3 2007; a $1.3 million effect, net of tax. In addition, payroll costs directly related to our personal training, group fitness training, and programming for children increased $1.8 million or 17.9%, principally due to the increase in revenue related to these programs.

• The increase in depreciation and amortization expenses was principally due to clubs opened after September 30, 2007.

• In the quarter ended September 30, 2008, we recorded a fixed asset impairment loss of $839,000 related to the decision to close a club prior to the lease expiration. The charge was determined based on the undiscounted cash flows expected over the remaining occupancy period.

Net incomefor Q3 2008 was $3.8 million compared to a net income of $5.1 million for Q3 2007.

EBITDAfor Q3 2008 increased 1.4% to $25.6 million from $25.3 million for Q3 2007. EBITDA as a percentage of total revenue (“EBITDA margin”) was 20.0% for Q3 2008, compared to 21.3% for Q3 2007. Please refer to the reconciliation of net income to EBITDA at the end of this release.

Nine Months Ended September 30, 2008 Financial Highlights:

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

	Nine Months Ended September 30,
	2008					2007
	Revenue		% Revenue			Revenue		% Revenue			% Growth
Membership dues	$	301,696		78.6	%	$	278,537		78.7	%		8.3	%
Initiation fees		10,393		2.7	%		9,181		2.6	%		13.2	%
Membership revenue		312,089		81.3	%		287,718		81.3	%		8.5	%
Personal training revenue		47,712		12.4	%		42,646		12.0	%		11.9	%
Other ancillary club revenue		19,517		5.1	%		19,529		5.5	%		0.0	%
Ancillary club revenue		67,229		17.5	%		62,175		17.5	%		8.1	%
Fees and other revenue		4,504		1.2	%		4,148		1.2	%		8.6	%
Total revenue	$	383,822		100.0	%	$	354,041		100.0	%		8.4	%

Total revenuefor the nine months ended September 30, 2008 increased 8.4% compared to the nine months ended September 30, 2007 driven by growth in membership and personal training revenue. Comparable club revenue increased 3.3% during the nine months ended September 30, 2008. Of this 3.3% increase, 1.4% was due to an increase in membership, 1.1% was due to an increase in price and 0.8% was due to an increase in ancillary club revenue and fees and other revenue.

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

	Nine Months Ended September 30,
	2008					2007
	Expense		% Revenue			Expense		% Revenue			% Change
Payroll and related	$	146,228		38.1	%	$	132,645		37.5	%		10.2	%
Club operating		128,799		33.6	%		119,662		33.8	%		7.6	%
General and administrative		25,898		6.7	%		25,248		7.1	%		2.6	%
Depreciation and amortization		38,788		10.1	%		33,772		9.5	%		14.9	%
Impairment of fixed assets		1,981		0.5	%		—		0.0	%		100.0	%
Operating expenses	$	341,694		89.0	%	$	311,327		87.9	%		9.8	%

Total operating expensesincreased 9.8% for the nine months ended September 30, 2008 compared to the nine months ended September 30, 2007. Operating margin was 11.0% for the nine months ended September 30, 2008 and 12.1% for the nine months ended September 30, 2007.

• The increases in payroll and related and club operating expenses were principally attributable to a 7.8% increase in the total months of club operation to 1,446 for the nine months ended September 30, 2008 from 1,341 for the same period last year. There was a net increase of 10 clubs in the twelve months ended September 30, 2008. In addition, we have been discounting new member initiation fees in an effort to drive membership sales. Our payroll costs that we defer are limited to the amount of these initiation fees, thus causing a pre-tax increase of approximately $4.6 million in payroll expense, a $2.7 million effect net of tax. In addition, payroll costs directly related to our personal training, group fitness training, and programming for children increased $4.7 million, or 15.2%, principally due to the increase in revenue related to these programs.

• The increase in depreciation and amortization expenses was principally due to clubs opened after July 1, 2007. Offsetting these increases are insurance proceeds of approximately $600,000 received for fixed asset damage at two of our clubs.

• During the nine months ended September 30, 2008, we recorded an impairment loss of $755,000 on fixed assets of a remote club that did not benefit from being part of a regional cluster and therefore experienced a decline in asset fair value, and an impairment loss of $1.2 million related to the planned closures of two clubs prior to their lease expiration dates.

Net incomefor the nine months ended September 30, 2008 was $15.4 million compared to $7.6 million for the nine months ended September 30, 2007. This $7.8 million increase in net income was primarily due to the loss on extinguishment of debt of $7.4 million, net of taxes recorded in the nine months ended September 30, 2007.

EBITDAfor the nine months ended September 30, 2008 increased 26.5% to $82.6 million from $65.3 million for the nine months ended September 30, 2007. EBITDA margin, or EBITDA as a percentage of total revenue, was 21.5% for the nine months ended September 30, 2008 compared to 18.4% for the nine months ended September 30, 2007. The increase in EBITDA was primarily due to the loss on extinguishment of debt of $12.5 million recorded in the nine months ended September 30, 2007. Please refer to the reconciliation of net income to EBITDA at the end of this release.

Cash flow from operating activitiesfor the nine months ended September 30, 2008 totaled $76.9 million, an increase of $14.3 million, or 22.8% from the same period last year.

2008 Business Outlook:

During this third quarter our growth in net members was weaker than anticipated. We are forecasting these membership trends to soften further in the fourth quarter and are lowering our previous guidance for the year as follows:

• Total revenue of $504.0 million to $508.0 million, down from $510.0 million to $520.0 million.

• Net income of $16.5 million to $17.5 million, down from $21.3 million to $22.3 million.

• Earnings per share on a fully diluted basis of $0.62 to $0.66 for 2008, down from $0.80 to $0.84.

Investing Activities Outlook:

For the year ending December 31, 2008, the Company estimates it will invest between $90.0 million and $95.0 million in capital expenditures. This amount includes approximately $22.0 million to continue to upgrade existing clubs, $9.0 million to support and enhance our management information systems and $5.0 million for the construction of a new regional laundry facility in our New York Sports Clubs market. The remainder of our 2008 capital expenditures will be committed to building or expanding clubs. The Company now expects to open 9 new clubs and close four clubs in 2008. Two clubs expected to open in 2008 are now expected to open in early Q1 2009. As of September 30, 2008 we opened six clubs and closed three clubs.

While we are still evaluating our capital investment plans for the year ending December 31, 2009, our total capital expenditures are expected to be between $60.0 million and $70.0 million and we expect to open between four and six clubs and close four clubs.

Forward-Looking Statements:

Statements in this release that do not constitute historical facts, including, without limitation, statements under the captions “2008 Business Outlook” and “2008 Investing Activities Outlook”, other statements regarding future financial results and performance and potential sales revenue and 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”, are “forward-looking” statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. 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 hereof and the Company does not intend to update this information, except as required by law, to reflect developments or information obtained after the date hereof, and the Company disclaims any legal obligation to the contrary.

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 and, through its subsidiaries, operated 164 fitness clubs as of September 30, 2008, comprising 112 New York Sports Clubs, 23 Boston Sports Clubs, 19 Washington Sports Clubs (two of which are partly-owned), seven Philadelphia Sports Clubs, and three clubs located in Switzerland. These clubs collectively served approximately 519,000 members, excluding pre-sold, short-term and seasonal memberships. For more information on TSI visithttp://www.mysportsclubs.com.

The Company will hold a conference call on Thursday, October 30, 2008 at 4:30 PM (Eastern) to discuss the second quarter 2008 results. Alex Alimanestianu, Chief Executive Officer, and Dan Gallagher, 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 October 31, 2008.

Town Sports International Holdings, Inc., New York
Contact Information:

Investor Contact:
(212) 246-6700 extension 1650
Investor.relations@town-sports.com

or

Integrated Corporate Relations, Joseph Teklits
(203) 682-8258
joseph.teklits@icrinc.com

TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2008 and December 31, 2007
(All figures in $’000s)
(Unaudited)

	September 30,			December 31,
	2008			2007
ASSETS
Current assets:
Cash and cash equivalents	$	10,662		$	5,463
Accounts receivable, net		13,107			8,815
Inventory		236			230
Prepaid income taxes		1,309			—
Prepaid expenses and other current assets		7,934			11,334
Total current assets		33,248			25,842
Fixed assets, net		349,820			337,152
Goodwill		50,176			50,165
Intangible assets, net		470			477
Deferred tax assets, net		46,745			44,345
Deferred membership costs		16,034			17,974
Other assets		11,901			12,808
Total assets	$	508,394		$	488,763
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	1,902		$	10,898
Accounts payable		9,110			10,891
Accrued expenses		32,482			34,186
Accrued interest		414			738
Corporate income taxes payable		—			811
Deferred revenue		44,963			41,798
Total current liabilities		88,871			99,322
Long-term debt		314,013			305,124
Deferred lease liabilities		67,567			61,221
Deferred revenue		5,295			7,300
Other liabilities		14,752			15,613
Total liabilities		490,498			488,580
Stockholders’ equity:
Common stock		27			26
Paid-in capital		(14,733	)		(16,977	)
Accumulated other comprehensive income (currency translation adjustment)		830			814
Retained earnings		31,772			16,320
Total stockholders’ equity		17,896			183
Total liabilities and stockholders’ equity	$	508,394		$	488,763

TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS
For the Quarters and Nine Months Ended September 30, 2008 and 2007
(All figures in $’000s except share and per share data)
(Unaudited)

	Quarter Ended September 30,						Nine Months Ended September 30,
	2008			2007			2008			2007
Revenues:
Club operations	$	126,682		$	117,425		$	379,318		$	349,893
Fees and other		1,427			1,461			4,504			4,148
		128,109			118,886			383,822			354,041
Operating Expenses:
Payroll and related		49,171			43,331			146,228			132,645
Club operating		44,398			42,360			128,799			119,662
General and administrative		8,697			8,368			25,898			25,248
Depreciation and amortization		13,423			10,950			38,788			33,772
Impairment of fixed assets		839						1,981
		116,528			105,009			341,694			311,327
Operating income		11,581			13,877			42,128			42,714
Loss on extinguishment of debt		—			—			—			12,521
Interest expense		5,783			6,493			17,930			19,902
Interest income		(76	)		(344	)		(291	)		(882	)
Equity in the earnings of investees and rental income		(634	)		(447	)		(1,701	)		(1,351	)
Income before provision for corporate income taxes		6,508			8,175			26,190			12,524
Provision for corporate income taxes		2,668			3,100			10,738			4,884
Net income	$	3,840		$	5,075		$	15,452		$	7,640
Earnings per share:
Basic	$	0.15		$	0.19		$	0.59		$	0.29
Diluted	$	0.14		$	0.19		$	0.58		$	0.29
Weighted average number of shares used in calculating earnings per share:
Basic		26,445,288			26,225,449			26,389,804			26,122,531
Diluted		26,547,121			26,678,939			26,464,915			26,583,782

TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2008 and 2007
(All figures in $’000s)
(Unaudited)

	Nine Months
	Ended September 30,
	2008			2007
Cash flows from operating activities:
Net income	$	15,452		$	7,640
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		38,788			33,772
Impairment of fixed assets		1,981			—
Non-cash interest expense on Senior Discount Notes		10,328			9,268
Loss on extinguishment of debt		—			12,521
Amortization of debt issuance costs		583			630
Noncash rental expense, net of noncash rental income		(242	)		495
Compensation expense incurred in connection with stock options and common stock grants		876			616
Net changes in certain operating assets and liabilities		3,770			3,168
Increase in deferred tax asset		(2,400	)		(9,778	)
Landlord contributions to tenant improvements		4,282			3,958
Change in reserve for self-insured liability claims		1,738			2,085
Decrease (increase) in deferred membership costs		1,940			(1,834	)
Other		(190	)		104
Total adjustments		61,454			55,005
Net cash provided by operating activities		76,906			62,645
Cash flows from investing activities:
Capital expenditures		(63,162	)		(64,580	)
Insurance Proceeds		1,074			—
Acquisition of business		—			(4,450	)
Net cash used in investing activities		(62,088	)		(69,030	)
Cash flows from financing activities:
Proceeds from New Credit Facility		—			185,000
Costs related to issuance of New Credit Facility		—			(2,634	)
Repayment of Senior Notes		—			(169,999	)
Premium paid on extinguishment of debt and related costs		—			(9,309	)
Repayment of long term borrowings		(1,435	)		(1,105	)
Repayment of borrowings on Revolving Loan Facility		(9,000	)		—
Change in book overdraft		(583	)		2,122
Proceeds from exercise of stock options		1,194			1,997
Excess tax benefit from stock option exercises		174			1,061
Net cash (used in) provided by financing activities		(9,650	)		7,133
Effect of exchange rate changes on cash		31			111
Net increase in cash and cash equivalents		5,199			859
Cash and cash equivalents at beginning of period		5,463			6,810
Cash and cash equivalents at end of period	$	10,662		$	7,669
Summary of change in certain operating assets and liabilities:
(Increase) in accounts receivable	$	(3,611	)	$	(4,479	)
(Increase) decrease in inventory		(4	)		210
Decrease (increase) in prepaid expenses and other current assets		3,478			(1,219	)
Increase in accounts payable, accrued expenses and accrued interest		4,884			2,509
Change in corporate income taxes		(2,120	)		(456	)
Increase in deferred revenue		1,143			6,603
Net changes in certain operating assets and liabilities	$	3,770		$	3,168

TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Net Income to EBITDA
For the quarters and nine months ended September 30, 2008 and 2007
(All figures in $’000s)
(Unaudited)

	Quarter Ended									Nine Months Ended
	September 30,									September 30,
	2008			2007			% Chg.			2008			2007			% Chg.
Net income	$	3,840		$	5,075					$	15,452		$	7,640
Provision for corporate income taxes		2,668			3,100						10,738			4,884
Interest expense, net of interest income		5,707			6,149						17,639			19,020
Depreciation and amortization		13,423			10,950						38,788			33,772
EBITDA*	$	25,638		$	25,274			1.4	%	$	82,617		$	65,316			26.5	%
EBITDA margin		20.0	%		21.3	%					21.5	%		18.4	%

* Loss on extinguishment of debt is no longer excluded from EBITDA as it was in prior periods.

Non-GAAP Financial Measures

          EBITDA consists of net income (loss) plus interest expense, net of interest income, provision for corporate income taxes, depreciation and amortization. This term, as we define it, may not be comparable to a similarly titled measure used by other companies and is not a measure of performance presented in accordance with GAAP. EBITDA has its limitations as an analytical tool and should not be considered as a substitute for net income, operating income, cash flows provided by operating activities or other income or cash flow data prepared in accordance with GAAP. The funds depicted by EBITDA are not necessarily available for discretionary use if they are reserved for particular capital purposes, to maintain compliance with debt covenants, to service debt or to pay taxes. EBITDA margin is defined as EBITDA as a percentage of sales.

          EBITDA is used by both management, investors and industry analysts in conjunction with traditional GAAP operating performance measures as an important overall assessment of our performance and we do not place undue reliance on this measure as our only measure of operating performance.

• The elimination of items related to our capital and tax structures, including depreciation and amortization, enables a more accurate comparison of operating performance to other companies in our industry, as these structures may vary from company to company.

• The elimination of certain non-cash or non-operating items such as interest income, interest expense and income taxes, provides a meaningful measure of corporate performance as well as a comparison of our operating performance to companies in our industry. The Company believes it is beneficial to share with the investment community the same measurements against which it measures its own performance (and therefore the performance of its management team).

• EBITDA is the baseline measurement used to determine executive officer annual performance bonuses, as noted in the Compensation Discussion and Analysis in the Company’s proxy statement. Management also uses EBITDA in its presentations to its board of directors.

• We are required to comply with certain financial covenants and borrowing limitations that are based on variations of EBITDA measurements in certain of our financing documents. The Company believes it is important investors have visibility into the Company’s performance in this regard.