Town Sports International (CLUBQ) 8-K Town Sports International Holdings, Inc. Announces Third Quarter 2011 Financial Results

Exhibit 99.1

For Release on October 26, 2011

TOWN SPORTS INTERNATIONAL HOLDINGS, INC. ANNOUNCES THIRD QUARTER 2011
FINANCIAL RESULTS

New York, NY — October 26, 2011— 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, 2011.

Third Quarter Overview:

• Total member count increased 5,000 to 522,000 in Q3 2011.

• Membership attrition averaged 3.7% per month in Q3 2011 compared to 3.8% per month in Q3 2010.

• Revenue increased 2.7% in Q3 2011 compared to Q3 2010.

• Comparable club revenue increased 3.0% in Q3 2011 compared to Q3 2010.

• Ancillary club revenue increased 8.3% in Q3 2011 compared to Q3 2010.

• Diluted earnings per share were $0.08 in Q3 2011 compared to loss per share of ($0.00) in Q3 2010.

• EBITDA was $21.8 million in Q3 2011, an increase of $4.1 million, or 23.0%, when compared to EBITDA of $17.7 million in Q3 2010.

Robert Giardina, Chief Executive Officer of TSI, commented: “We were very pleased to have continued to build on our momentum from the first half of the year in the third quarter. Comparable club revenue, new member signups, and attrition were all on or ahead of plan, and memberships at our two new clubs that open for workouts in the fourth quarter are running nicely ahead of plan. When combined with tight expense controls, these revenue drivers translated into EBITDA for the quarter that was up 23%; and overall, this was one of our best quarters in years. We are also on track to add more members in the fourth quarter and exceed our membership goals for the year. We also believe we are much better positioned than we were a couple years ago on a number of fronts, and even if the current weak economy persists we believe we can continue to make progress next year toward our target of a 20% EBITDA margin.”

Quarter Ended and Year to Date September 30, 2011 Financial Results:

Revenue (in thousands):

	Quarter Ended September 30,
	2011					2010
	Revenue		% Revenue			Revenue		% Revenue			% Variance
Membership dues	$	89,816		77.3	%	$	89,075		78.8	%		0.8	%
Joining fees		1,602		1.4	%		1,239		1.0	%		29.3	%
Membership revenue		91,418		78.7	%		90,314		79.8	%		1.2	%
Personal training revenue		14,852		12.8	%		13,837		12.2	%		7.3	%
Other ancillary club revenue		8,612		7.4	%		7,819		7.0	%		10.1	%
Ancillary club revenue		23,464		20.2	%		21,656		19.2	%		8.3	%
Fees and other revenue		1,256		1.1	%		1,157		1.0	%		8.6	%
Total revenue	$	116,138		100.0	%	$	113,127		100.0	%		2.7	%

Total revenuefor Q3 2011 increased $3.0 million, or 2.7%, compared to Q3 2010. Revenue at clubs operated for over 12 months (“comparable club revenue”) increased 3.0% in Q3 2011 compared to Q3 2010.

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Operating expenses:

	Quarter Ended September 30,
	2011			2010
							Expense %
	Expense % of Revenue						Variance
Payroll and related		37.3	%		39.3	%		(2.5)	%
Club operating		39.1	%		39.3	%		2.4	%
General and administrative		5.3	%		6.2	%		(12.9)	%
Depreciation and amortization		10.9	%		11.6	%		(3.9)	%
Operating expenses		92.6	%		96.4	%		(1.4)	%

Total operating expensesdecreased $1.5 million, or 1.4%, in Q3 2011 compared to Q3 2010. Operating margin was 7.4% for Q3 2011 compared to 3.6% in Q3 2010.

     Payroll and related. Payroll related to club staffing decreased as we continued to realize efficiencies from programs put in place in the second half of 2010.

     Club operating. In Q3 2011, occupancy-related expenses and laundry and towels expenses increased, which was partially offset by a decrease in utilities expenses.

     General and administrative.In Q3 2011, general liability insurance decreased due to a further reduction in claims activity and a related reduction in claims reserves. Consulting and legal expenses also decreased.

     Depreciation and amortization. In Q3 2011 compared to Q3 2010, depreciation and amortization decreased primarily due to the closing of two clubs subsequent to September 30, 2010.

Net incomefor Q3 2011 was $1.9 million compared to net loss of $18,000 for Q3 2010.

Cash flow from operating activitiesfor the nine months ended 2011 totaled $53.2 million, an increase of $15.2 million from the corresponding period in 2010, which was partially related to the increase in overall earnings. Also, in the nine months ended 2011, due to the timing of payments affecting working capital, prepaid rent decreased $4.1 million, while in the corresponding period in 2010 there was minimal cash effect from prepaid rent. In addition, income tax refunds, net of cash paid for income taxes, increased $9.4 million in the nine months ended 2011, compared to year to date 2010. Partially offsetting the operating cash increases was the increase in cash paid for interest of $4.4 million and $2.5 million of call premium paid on the redemption of our Senior Discount Notes in May 2011.

Fourth Quarter 2011 Business Outlook:

Based on the current business environment, recent performance and current trends in the marketplace and subject to the risks and uncertainties inherent in forward-looking statements, our outlook for the fourth quarter of 2011 includes the following:

• Revenue for Q4 2011 is expected to be between $114.5 million and $115.5 million versus $111.4 million for Q4 2010, after adjusting Q4 2010 revenue downward for $2.7 million of expired personal training sessions recognized in Q4 2010.

• In Q4 2011, as a percentage of revenue, we expect payroll and related expenses to be approximately 50 basis points higher than Q3 2011 and club operating expenses to approximate 38%. General and administrative expenses are expected to be approximately $7.0 million, while depreciation and amortization and interest expenses are expected to be similar to Q3 2011 amounts in total dollars.

• Adjusted EBITDA is expected to improve $2.5 million, or 13.2%, to $21.5 million in Q4 2011 compared to Q4 2010, after adjusting Q4 2010 Adjusted EBITDA downward for $2.7 million of expired personal training sessions recognized in Q4 2010.

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• We estimate that net income for Q4 2011 will be between $1.6 million and $2.1 million, and earnings per share will be in the range of $0.07 per share to $0.09 per share, assuming a 34% effective tax rate and 23.5 million weighted average fully diluted shares outstanding.

Investing Activities Outlook:

For the year ending December 31, 2011, we currently plan to invest $29.0 million to $32.0 million in capital expenditures, which represents an increase from $22.0 million of capital expenditures in 2010. This amount includes approximately $7.5 million to $8.5 million related to two new club openings in Q4 2011, approximately $15.0 million to $16.0 million for the upgrade of existing clubs and approximately $3.5 million principally related to major renovations at clubs with recent lease renewals and upgrading our in-club entertainment system network. We also expect to invest $3.0 million to $3.5 million to enhance our management information and communication systems.

We expect our 2012 capital expenditures to be similar to or less than the 2011 levels, as we are currently targeting up to three openings of smaller fitness-only clubs in 2012.

Forward-Looking Statements:

Statements in this release that do not constitute historical facts, including, without limitation, statements under the captions “Fourth Quarter 2011 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 initiatives, any security and privacy breaches involving customer data, the application of Federal and state tax laws and regulations, 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 158 fitness clubs as of September 30, 2011, comprising 106 New York Sports Clubs, 25 Boston Sports Clubs, 18 Washington Sports Clubs (two of which are partly-owned), six Philadelphia Sports Clubs, and three clubs located in Switzerland. These clubs collectively served approximately 522,000 members. For more information on TSI, visithttp://www.mysportsclubs.com.

The Company will hold a conference call on Wednesday October 26, 2011 at 4:30 PM (Eastern) to discuss the third quarter results. Robert Giardina, 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 Web site atwww.mysportsclubs.com. A replay and transcript of the call will be available via the Company’s Web site beginning October 27, 2011.

From time to time we may use our Web site as a channel of distribution of material company information. Financial and other material information regarding the Company is routinely posted on and accessible athttp://www.mysportsclubs.com. In addition, you may automatically receive email alerts and other information about us by enrolling your email by visiting the “Email Alert” section athttp://www.mysportsclubs.com.

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

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

or

ICR, Inc.
Joseph Teklits / Farah Soi
(203) 682-8390
farah.soi@icrinc.com

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TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2011 and December 31, 2010
(All figures in thousands)
(Unaudited)

	September 30,			December 31,
	2011			2010
ASSETS
Current assets:
Cash and cash equivalents	$	39,029		$	38,803
Accounts receivable, net		8,478			5,258
Inventory		223			217
Prepaid corporate income taxes		2,603			7,342
Prepaid expenses and other current assets		8,157			13,213
Total current assets		58,490			64,833
Fixed assets, net		290,862			309,371
Goodwill		32,840			32,794
Intangible assets, net		—			44
Deferred tax assets, net		39,086			41,883
Deferred membership costs		9,492			5,934
Other assets		14,318			9,307
Total assets	$	445,088		$	464,166
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current portion of long-term debt	$	15,000			14,550
Accounts payable		6,190			4,008
Accrued expenses		24,534			27,477
Accrued interest		956			6,579
Deferred revenue		42,613			35,106
Total current liabilities		89,293			87,720
Long-term debt		277,649			301,963
Deferred lease liabilities		64,859			67,180
Deferred revenue		6,497			3,166
Other liabilities		10,012			11,082
Total liabilities		448,310			471,111
Stockholders’ deficit:
Common stock		23			23
Paid-in capital		(20,472	)		(21,788	)
Accumulated other comprehensive income		1,463			2,121
Retained earnings		15,764			12,699
Total stockholders’ deficit		(3,222	)		(6,945	)
Total liabilities and stockholders’ deficit	$	445,088		$	464,166

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TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarters and Nine Months Ended September 30, 2011 and 2010
(All figures in thousands except share and per share data)
(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Revenues:
Club operations	$	114,882		$	111,970		$	347,659		$	344,737
Fees and other		1,256			1,157			3,469			3,585
		116,138			113,127			351,128			348,322
Operating Expenses:
Payroll and related		43,286			44,409			133,639			141,525
Club operating		45,496			44,451			132,983			131,723
General and administrative		6,139			7,049			19,655			22,280
Depreciation and amortization		12,642			13,151			38,829			40,212
Impairment of fixed assets		—			—			—			3,254
		107,563			109,060			325,106			338,994
Operating income		8,575			4,067			26,022			9,328
Loss on extinguishment of debt		—			—			4,865			—
Interest expense		6,062			5,305			18,265			15,668
Interest income		(45	)		(41	)		(135	)		(76	)
Equity in the earnings of investees and rental income		(578	)		(499	)		(1,833	)		(1,553	)
Income (loss) before benefit for corporate income taxes		3,136			(698	)		4,860			(4,711	)
Provision (benefit) for corporate income taxes		1,194			(680	)		1,795			(3,146	)
Net income (loss)	$	1,942		$	(18	)	$	3,065		$	(1,565	)
Earnings (loss) per share:
Basic	$	0.09		$	(0.00	)	$	0.13		$	(0.07	)
Diluted	$	0.08		$	(0.00	)	$	0.13		$	(0.07	)
Weighted average number of shares used in calculating earnings (loss) per share:
Basic		22,834,206			22,646,470			22,782,124			22,625,765
Diluted		23,457,058			22,646,470			23,318,879			22,625,765

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TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2011 and 2010
(All figures in thousands)
(Unaudited)

	Nine Months Ended September 30,
	2011			2010
Cash flows from operating activities:
Net income (loss)	$	3,065		$	(1,565	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		38,829			40,212
Impairment of fixed assets		—			3,254
Loss on extinguishment of debt		4,865			—
Call premium on redemption of Senior Discount Notes		(2,538	)		—
Amortization of debt discount		149			—
Amortization of debt issuance costs		840			759
Non-cash rental expense, net of non-cash rental income		(3,017	)		(3,518	)
Compensation expense incurred in connection with stock options and common stock grants		925			1,139
Decrease in deferred tax asset		3,261			5,533
Net change in certain operating assets and liabilities		11,542			(7,174	)
(Increase) decrease in deferred membership costs		(3,558	)		720
Landlord contributions to tenant improvements		711			100
Decrease in insurance reserves		(1,511	)		(1,053	)
Other		(323	)		(368	)
Total adjustments		50,175			39,604
Net cash provided by operating activities		53,240			38,039
Cash flows from investing activities:
Capital expenditures		(21,641	)		(9,976	)
Net cash used in investing activities		(21,641	)		(9,976	)
Cash flows from financing activities:
Proceeds from 2011 Senior Credit Facility, net of original issue discount		297,000			—
Debt issuance costs		(8,065	)		—
Repayment of 2007 Term Loan Facility		(178,063	)		(1,388	)
Repayment of Senior Discount Notes		(138,450	)		—
Principal payment on 2011 Term Loan Facility		(4,500	)		—
Proceeds from exercise of stock options		291			81
Tax benefit from stock option exercises		100			—
Net cash used in financing activities		(31,687	)		(1,307	)
Effect of exchange rate changes on cash		314			331
Net increase in cash and cash equivalents		226			27,087
Cash and cash equivalents beginning of period		38,803			10,758
Cash and cash equivalents end of period	$	39,029		$	37,845
Summary of the change in certain operating assets and liabilities:
Increase in accounts receivable		(3,206	)		(3,120	)
Increase in inventory		(6	)		(119	)
Decrease in prepaid expenses and other current assets		4,156			1,386
Decrease in accounts payable, accrued expenses and accrued interest		(5,207	)		(626	)
Change in prepaid corporate income taxes and corporate income taxes payable		4,738			(11,279	)
Increase in deferred revenue		11,067			6,584
Net change in certain working capital components	$	11,542		$	(7,174	)

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TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

Reconciliation of Net Cash Provided by Operating Activities to EBITDA and Adjusted EBITDA
For the Quarters Ended September 30, 2011 and 2010
(All figures in thousands)
(Unaudited)

	Quarter Ended
	September 30,
	2011			2010
Net cash provided by operating activities	$	18,158		$	8,567
Interest expense, net of interest income		6,017			5,264
Provision (benefit) for corporate income taxes		1,194			(680	)
Changes in operating assets and liabilities		(3,410	)		11,583
Amortization of debt discount		(97	)		—
Amortization of debt issuance costs		(287	)		(253	)
Compensation expense incurred in connection with stock options and common stock grants		(267	)		(402	)
Landlord contributions to tenant improvements		(562	)		—
Non-cash rental expense, net of non-cash rental income		935			1,347
Decrease (increase) in insurance reserves		527			(28	)
Decrease in deferred tax asset		(2,241	)		(9,704	)
Increase in deferred membership costs		1,321			1,170
Other		507			853
EBITDA	$	21,795		$	17,717

Note: We define Adjusted EBITDA as EBITDA excluding loss on extinguishment of debt, any fixed asset or goodwill impairments and revenue recognized in Q4 2010 for unused and expired personal training sessions. For the quarters ended September 30, 2011 and 2010, we did not incur any loss on extinguishment of debt or any fixed asset or goodwill impairments. Accordingly, EBITDA and Adjusted EBITDA are identical for these quarters

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TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

Reconciliation of Net Cash Provided by Operating Activities to EBITDA and Adjusted EBITDA
For the Quarter Ending December 31, 2011 and the Quarter Ended December 31, 2010
(All figures in thousands)
(Unaudited)

	Estimated
	Q4 2011			Q4 2010
Net cash provided by operating activities	$	18,500		$	13,199
Interest expense, net of interest income		6,050			5,421
Provision for corporate income taxes		650			3,002
Changes in operating assets and liabilities		(3,450	)		1,069
Amortization of debt issuance costs		(290	)		(252	)
Compensation expense incurred in connection with stock options and common stock grants		350			(197	)
Non-cash rental expense, net of non-cash rental income		750			2,034
Decrease in deferred tax asset		(300	)		(3,110	)
Decrease in insurance reserves		100			66
Increase in deferred member costs		(950	)		575
Other		90			(119	)
EBITDA		21,500			21,688
Unused and expired personal training sessions (1)		—			(2,697	)
Adjusted EBITDA	$	21,500		$	18,991

(1) In Q4 2010, we recognized $2,697 of revenue related to of unused and expired personal training sessions in three of the jurisdictions we operate in.

Non-GAAP Financial Measures — EBITDA and Adjusted EBITDA

     EBITDA consists of net income (loss) plus interest expense (net of interest income), provision for corporate income taxes, and depreciation and amortization. Adjusted EBITDA is the Company’s EBITDA excluding loss on extinguishment of debt, any fixed asset or goodwill impairments and revenue recognized in Q4 2010 for unused and expired personal training sessions. EBITDA is not a measure of liquidity or financial performance presented in accordance with GAAP. EBITDA, as we define it, may not be identical to similarly titled measures used by some other companies.

     EBITDA has material limitations as an analytical tool and should not be considered in isolation or as a substitute for cash flows from operating activities, operating income or other cash flow or income data prepared in accordance with GAAP. The items excluded from EBITDA, but included in the calculation of reported net income, are significant components of the consolidated statements of cash flows and income, and must be considered in performing a comprehensive assessment of our liquidity.

     EBITDA excludes, among other items, the effect of depreciation and amortization, which is a significant component of our reported GAAP data. Depreciation and amortization, which is a non-cash item, totaled $12.6 million in the quarter ended September 30, 2011. Although a premise underlying depreciation and amortization is that it will be reinvested in our business to restore, replenish or purchase property, equipment and other related assets, the funds represented by depreciation and amortization could, in the Company’s discretion, be utilized for other purposes (e.g., debt service). Accordingly, EBITDA may be useful as a supplemental measure to GAAP financial data for demonstrating our ability to satisfy our liquidity and capital resource requirements.

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     Investors or prospective investors in the Company regularly request EBITDA as a supplemental analytical measure to, and in conjunction with, our GAAP financial data. We understand that these investors use EBITDA, among other things, to assess our ability to service our existing debt and to incur debt in the future, to evaluate our executive compensation programs, to assess our ability to fund our capital expenditure program, and to gain insight into the manner in which the Company’s management and board of directors analyze our liquidity. We believe that investors find the inclusion of EBITDA in our press releases to be useful and helpful to them.

     Our management and board of directors also use EBITDA as a supplemental measure to our GAAP financial data for purposes broadly similar to those used by investors.

     The purposes to which EBITDA may be used by investors, and is used by our management and board of directors, include the following:

• The Company is required to comply with financial covenants and borrowing limitations that are based on variations of EBITDA as defined in our 2011 Senior Credit Facility.

• Our discussions with prospective lenders and investors in recent years, including in relation to our 2011 Senior Credit Facility, have confirmed the importance of EBITDA in their decision-making processes relating to the making of loans to us or investing in our debt securities.

• The Company uses EBITDA as a key factor in determining annual incentive bonuses for executive officers (as discussed in our proxy statement).

• The Company considers EBITDA to be a useful supplemental measure to GAAP financial data because it indicates our ability to generate funds sufficient to make capital expenditures (including for the opening of new clubs and the upgrading of existing clubs) as well as to undertake initiatives to enhance our business by offering new products and services in accordance with our strategy.

• Quarterly, our equity analysts often report on our EBITDA with respect to valuation commentary.

     We do not, and investors should not, place undue reliance on EBITDA or Adjusted EBITDA as a measure of our liquidity.

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