Town Sports International (CLUBQ) 8-K Town Sports International Holdings, Inc. Announces Third Quarter 2009 Financial Results

Exhibit 99.1

For Release on October 28, 2009

TOWN SPORTS INTERNATIONAL HOLDINGS, INC. ANNOUNCES THIRD QUARTER 2009
FINANCIAL RESULTS

New York, NY — October 28, 2009— 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, 2009.

3^rd Quarter Overview:

• Revenue decreased 6.0% to $120.4 million compared to Q3 2008.

• Comparable club revenue decreased 7.0% compared to Q3 2008.

• Total member count was 494,000 at September 30, 2009, a decrease of 25,000 or 4.8% compared to September 30, 2008.

• Membership attrition averaged 4.2% per month compared to 3.6% in Q3 2008 and 3.7% in Q2 2009.

• Loss per diluted share was $0.07.

• Results reflected fixed asset impairment charges, net of taxes, of $2.0 million offset by one-time tax benefits of $200,000. These items reduced earnings per diluted share by $0.08.

Alex Alimanestianu, Chief Executive Officer of TSI, commented: “Our third quarter results were in line with our expectations, and we are encouraged that new member sign-ups for the quarter were somewhat better than expected. With that said, membership declines over the past year will continue to weigh on our earnings results into the fourth quarter and next year. We will maintain our focus on controlling expenses and limiting expansion capital expenditures while continuing to enhance and differentiate our member experience. Overall, we remain committed to our business strategy, and we are confident in the teams we have supporting our effort throughout the organization. We look forward to benefiting from stronger operations and an improving economy.”

Quarter and Year-to-Date September 30, 2009 Financial Results:

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

	Quarter Ended September 30,										Year-to-Date September 30,
	2009					2008					2009					2008
	Revenue		% Revenue			Revenue		% Revenue			Revenue		% Revenue			Revenue		% Revenue
Membership dues	$	95,400		79.2	%	$	101,025		78.9	%	$	294,465		79.4	%	$	301,696		78.6	%
Initiation fees		3,113		2.6	%		3,505		2.7	%		9,622		2.6	%		10,393		2.7	%
Membership revenue		98,513		81.8	%		104,530		81.6	%		304,087		82.0	%		312,089		81.3	%
Personal training revenue		13,526		11.2	%		14,871		11.6	%		43,696		11.7	%		47,712		12.4	%
Other ancillary club revenue		7,243		6.0	%		7,281		5.7	%		19,587		5.3	%		19,517		5.1	%
Ancillary club revenue		20,769		17.2	%		22,152		17.3	%		63,283		17.0	%		67,229		17.5	%
Fees and other revenue		1,167		1.0	%		1,427		1.1	%		3,700		1.0	%		4,504		1.2	%
Total revenue	$	120,449		100.0	%	$	128,109		100.0	%	$	371,070		100.0	%	$	383,822		100.0	%

Period-over-period revenue variances:

	Q3 2009 vs.			YTD 2009 vs. YTD
	Q3 2008			2008
	% Decrease			% Increase (Decrease)
Membership dues		(5.6	)%		(2.4	)%
Initiation fees		(11.2	)%		(7.4	)%
Membership revenue		(5.8	)%		(2.6	)%
Personal training revenue		(9.0	)%		(8.4	)%
Other ancillary club revenue		(0.5	)%		0.4	%
Ancillary club revenue		(6.2	)%		(5.9	)%
Fees and other revenue		(18.2	)%		(17.9	)%
Total revenue		(6.0	)%		(3.3	)%

Total revenuefor Q3 2009 decreased $7.7 million or 6.0% compared to Q3 2008. For Q3 2009, revenues increased $5.1 million at the 22 clubs opened or acquired subsequent to September 30, 2007, offset by decreases in revenue of 9.1% or $10.8 million at our clubs opened or acquired prior to September 30, 2007 and $2.0 million related to the 11 clubs that were closed subsequent to September 30, 2007.

Total revenue for the nine months ended September 30, 2009 decreased $12.8 million or 3.3% compared to the nine months ended September 30, 2008. Revenue increased $19.4 million at the 22 clubs opened or acquired subsequent to September 30, 2007, offset by decreases in revenue of 7.4% or $26.5 million at clubs opened or acquired prior to September 30, 2007 and $5.6 million related to the 11 clubs that were closed subsequent to September 30, 2007.

Revenue at clubs operated for over 12 months (“comparable club revenue”) decreased 7.0% in Q3 2009 compared to Q3 2008 and 5.1% in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008.

Operating expenses:

	Quarter Ended September 30,									Year-to-Date September 30,
	2009			2008			Expense %			2009			2008			Expense %
	Expense % of Revenue						Incr (Decr)			Expense % of Revenue						Incr (Decr)
Payroll and related		39.4	%		38.3	%		(3.4	)%		39.5	%		38.1	%		0.2	%
Club operating		37.9	%		34.7	%		2.7	%		37.1	%		33.5	%		6.8	%
General and administrative		6.7	%		6.8	%		(6.8	)%		6.4	%		6.8	%		(7.6	)%
Depreciation and amortization		11.9	%		10.5	%		6.9	%		11.6	%		10.1	%		10.8	%
Impairment of fixed assets		2.9	%		0.7	%		313.9	%		1.2	%		0.5	%		132.4	%
Operating expenses		98.8	%		91.0	%		2.1	%		95.8	%		89.0	%		4.0	%

Total operating expensesincreased 2.1% for Q3 2009 compared to Q3 2008 and operating margin was 1.2% for Q3 2009 compared to 9.0% for Q3 2008. The changes were due to a 0.8% increase in the total months of club operation for Q3 2009 compared to Q3 2008 as well as the following factors:

     Payroll and related. Decreases for Q3 2009 compared to Q3 2008 were primarily due to decreases in ancillary club payroll expense directly related to the decline in ancillary club revenue and decreases in membership sales commissions and bonuses related to decreases in the number of memberships sold. Our payroll costs that we defer are limited to the amount of these initiation fees.

     Club operating.Increases for Q3 2009 compared to Q3 2008 were principally attributable to the eight clubs added after July 1, 2008.

     General and administrative. Decreases for Q3 2009 compared to Q3 2008 were principally attributable to decreases in general liability insurance expense due to a reduction in claims activity and therefore a reduction of claims reserves. The remainder of the expense decrease was due to cost reduction efforts realized within various general and administrative expenses.

     Depreciation and amortization.Increases for Q3 2009 compared to Q3 2008 were principally attributable to the eight clubs added after July 1, 2008 and the new laundry facility and corporate office in Elmsford, NY.

     Impairment of fixed assets.In Q3 2009, impairment losses of $3.5 million were recorded representing the write-offs of fixed assets at two underperforming clubs. In Q3 2008, impairment losses of $839,000 were recorded related to the planned closure of a club prior to its lease expiration date.

Net Lossfor Q3 2009 was $1.5 million compared to net income of $3.8 million for Q3 2008. For the nine months ended September 30, 2009, net income was $1.7 million compared to $15.4 million for the nine months ended September 30, 2008.

Cash flow from operating activitiesfor the nine months ended September 30, 2009 totaled $58.8 million, a decrease of $17.5 million from the same period last year, which primarily related to the decrease in earnings.

Share Repurchases:The Company did not repurchase shares during Q3 2009. The Company repurchased 2.1 million shares at a total cost of $5.4 million in Q1 2009, resulting in a decrease in the number of total common shares outstanding.

Fourth Quarter 2009 Business Outlook:

The Company is limiting its guidance to the fourth quarter of 2009. Based on the current business environment, recent performance and current trends in the marketplace, and subject to the risks and uncertainties in its forward-looking statements, the Company’s outlook for the fourth quarter includes the following:

• Revenue for Q4 2009 is expected to be between $112.5 million and $114.5 million versus $122.9 million for Q4 2008. The Company expects Q4 2009 payroll costs to be slightly less than the Q3 2009 amount and depreciation and amortization expenses to be similar to Q3 2009 amount, although such items are expected to increase as a percentage of revenue given the anticipated decrease in revenue. General and administrative expense amounts are expected to approximate Q1 2009 levels.

• The Company expects a net loss for Q4 2009 of between $1.8 million and $2.3 million, and loss per share to be in the range of $0.08 per share to $0.10 per share, assuming a 50% effective tax rate and 22.6 million weighted average fully diluted shares outstanding.

Investing Activities Outlook:

For the full-year 2009, we estimate we will invest approximately $53.0 million in capital expenditures. This amount includes approximately $16.3 million of capital expenditures primarily related to clubs opened in the second half of 2008 and 2009, $23.4 million to continue to upgrade existing clubs, $8.8 million to support and enhance our management information systems, and $4.5 million for the completion of a new regional laundry facility and corporate office in our New York Sports Clubs market. In the nine months ended September 30, 2009, we have invested $39.8 million in capital expenditures, and we opened four clubs and closed five clubs. We plan to close four additional clubs in 2009.

While we are still developing our capital investment plans for the full-year 2010, our total capital expenditures are expected to be between $36.0 million and $44.0 million and we currently expect to open one club in 2010.

Forward-Looking Statements:

Statements in this release that do not constitute historical facts, including, without limitation, statements under the captions “Fourth Quarter 2009 Business Outlook” and “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, among others, the level of market demand for the Company’s services, economic conditions affecting the Company’s business, the geographic concentration of the Company’s clubs, competitive pressures, the ability to achieve reductions in operating costs and to continue to integrate acquisitions, environmental matters, any security and privacy breaches involving customer data, the levels and terms of the Company’s indebtedness, and other specific factors discussed herein and in other releases and public filings made by the Company (including the Company’s reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission). The Company believes that all forward-looking statements are based on reasonable assumptions when made; however, the Company cautions that it is impossible to predict actual results or outcomes or the effects of risks, uncertainties or other factors on anticipated results or outcomes and that, accordingly, one should not place undue reliance on these statements. Forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to update these statements in light of subsequent events or developments. Actual results may differ materially from anticipated results or outcomes discussed in any forward-looking statement.

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 165 fitness clubs as of September 30, 2009, comprising 111 New York Sports Clubs, 26 Boston Sports Clubs, 19 Washington Sports Clubs (two of which are partly-owned), six Philadelphia Sports Clubs, and three clubs located in Switzerland. These clubs collectively served approximately 494,000 members. For more information on TSI, visithttp://www.mysportsclubs.com.

The Company will hold a conference call on Wednesday, October 28, 2009 at 4:30 PM (Eastern) to discuss the third quarter 2009 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 atwww.mysportsclubs.com. A replay and transcript of the call will be available via the Company’s Website beginning October 29, 2009.

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, 2009 and December 31, 2008
(All figures in $’000s)
(Unaudited)

	September 30,			December 31,
	2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	12,021		$	10,399
Accounts receivable, net		6,130			4,508
Inventory		138			143
Prepaid corporate income taxes		3,571			8,116
Prepaid expenses and other current assets		11,779			14,154
Total current assets		33,639			37,320
Fixed assets, net		360,678			373,120
Goodwill		32,636			32,610
Intangible assets, net		198			281
Deferred tax assets, net		45,740			42,266
Deferred membership costs		10,117			14,462
Other assets		9,682			11,579
Total assets	$	492,690		$	511,638
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Current portion of long-term debt	$	10,650		$	20,850
Accounts payable		7,223			7,267
Accrued expenses		31,693			35,565
Accrued interest		2,917			523
Deferred revenue		38,298			40,326
Total current liabilities		90,781			104,531
Long-term debt		316,975			317,160
Deferred lease liabilities		72,088			69,719
Deferred revenue		1,602			4,554
Other liabilities		12,654			14,902
Total liabilities		494,100			510,866
Stockholders’ (deficit) equity:
Common stock		23			25
Paid-in capital		(23,020	)		(18,980	)
Accumulated other comprehensive income (currency translation adjustment)		1,252			1,070
Retained earnings		20,335			18,657
Total stockholders’ (deficit) equity		(1,410	)		772
Total liabilities and stockholders’ (deficit) equity	$	492,690		$	511,638

TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME
For the quarters and nine months ended September 30, 2009 and 2008
(All figures in $’000s except share and per share data)
(Unaudited)

	Quarter Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
Revenues:
Club operations	$	119,282		$	126,682		$	367,370		$	379,318
Fees and other		1,167			1,427			3,700			4,504
		120,449			128,109			371,070			383,822
Operating Expenses:
Payroll and related		47,487			49,171			146,480			146,228
Club operating		45,589			44,398			137,499			128,799
General and administrative		8,103			8,697			23,938			25,898
Depreciation and amortization		14,353			13,423			42,995			38,788
Impairment of fixed assets		3,473			839			4,604			1,981
		119,005			116,528			355,516			341,694
Operating income		1,444			11,581			15,554			42,128
Interest expense		5,378			5,783			15,944			17,930
Interest income		(1	)		(76	)		(2	)		(291	)
Equity in the earnings of investees and rental income		(444	)		(634	)		(1,452	)		(1,701	)
Income (loss) before provision (benefit) for corporate income taxes		(3,489	)		6,508			1,064			26,190
Provision (benefit) for corporate income taxes		(2,004	)		2,668			(614	)		10,738
Net income (loss)	$	(1,485	)	$	3,840		$	1,678		$	15,452
Earnings (loss) per share:
Basic	$	(0.07	)	$	0.15		$	0.07		$	0.59
Diluted	$	(0.07	)	$	0.14		$	0.07		$	0.58
Weighted average number of shares used in calculating earnings per share:
Basic		22,565,564			26,445,288			22,790,102			26,389,804
Diluted		22,565,564			26,547,121			22,825,640			26,464,915

TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2009 and 2008
(All figures in $’000s)
(Unaudited)

	Nine Months
	Ended September 30,
	2009			2008
Cash flows from operating activities:
Net income	$	1,678		$	15,452
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		42,995			38,788
Impairment of fixed assets		4,604			1,981
Non-cash interest expense on Senior Discount Notes		1,203			10,328
Write-off of deferred financing		100			—
Amortization of debt issuance costs		643			583
Noncash rental expense, net of noncash rental income		(1,686	)		(242	)
Compensation expense incurred in connection with stock options and common stock grants		1,257			876
Net changes in certain operating assets and liabilities		2,156			3,187
Increase in deferred tax asset		(3,474	)		(2,400	)
Landlord contributions to tenant improvements		4,664			4,282
Change in reserve for self-insured liability claims		430			1,738
Decrease in deferred membership costs		4,345			1,940
Other		(133	)		(190	)
Total adjustments		57,104			60,871
Net cash provided by operating activities		58,782			76,323
Cash flows from investing activities:
Capital expenditures		(39,805	)		(63,162	)
Insurance Proceeds		—			1,074
Net cash used in investing activities		(39,805	)		(62,088	)
Cash flows from financing activities:
Proceeds from borrowings on Revolving Loan Facility		82,800			—
Repayment of borrowings on Revolving Loan Facility		(93,000	)		(9,000	)
Repayment of long-term borrowings		(1,388	)		(1,435	)
Repurchase of common stock		(5,355	)		—
Costs related to deferred financing		(615	)		—
Proceeds from exercise of stock options		36			1,194
Tax benefit from stock option exercises		21			174
Net cash used in financing activities		(17,501	)		(9,067	)
Effect of exchange rate changes on cash		146			31
Net increase in cash and cash equivalents		1,622			5,199
Cash and cash equivalents at beginning of period		10,399			5,463
Cash and cash equivalents at end of period	$	12,021		$	10,662
Summary of change in certain operating assets and liabilities:
Increase in accounts receivable	$	(1,618	)	$	(3,611	)
Decrease (increase) in inventory		6			(4	)
Decrease in prepaid expenses and other current assets		1,018			3,478
Increase in accounts payable, accrued expenses and accrued interest		651			4,301
Increase in accrued interest on Senior Discount Notes		2,538			—
Change in prepaid corporate income taxes		4,545			(2,120	)
(Decrease) increase in deferred revenue		(4,984	)		1,143
Net changes in certain operating assets and liabilities	$	2,156		$	3,187