Town Sports International Holdings, Inc. Announces Second Quarter 2010 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 second quarter ended June 30, 2010.

Second Quarter Overview:

• Revenue decreased 5.2% in Q2 2010 compared to Q2 2009.

• Comparable club revenue decreased 4.2% in Q2 2010 compared to Q2 2009.

• Total member count, excluding short-term summer, seasonal and student

  members, decreased 2.2% compared to March 31, 2010 and 3.8% compared

  to June 30, 2009.

• Total number of clubs in operation decreased to 161 as of June 30,

  2010 from 166 as of June 30, 2009.

• Membership attrition averaged 3.3% per month in Q2 2010 compared to

  3.5% in Q1 2010 and 3.7% per month in Q2 2009.

• Loss per share was ($0.04) in Q2 2010.

• Q2 2010 results include fixed asset impairment and severance charges,

  net of taxes, of $2.0 million or ($0.09) per share. Q2 2009 results

  included severance charges, early lease termination costs and rent

  expense related to an anticipated judgment in connection with a lease

  dispute, net of taxes, of $879,000 or ($0.04) per share.

Robert Giardina, Chief Executive Officer of TSI, commented: “After being

back at TSI for a few months and visiting almost all of our clubs, I am

very encouraged by the condition of our facilities and by the experience

our members receive from the team we now have in place. We are also

pleased with our improved member attrition and the favorable response to

our recent initiatives. So while we are still in the very early stages

of reinvigorating our business, we are confident that we are putting the

right strategies in place.”

Quarter and Year to Date June 30, 2010

Financial Results:

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

Total revenue for Q2 2010 decreased $6.5 million, or 5.2%,

compared to Q2 2009. For Q2 2010, revenues increased $1.2 million at the

eight clubs opened or acquired subsequent to June 30, 2008 offset by

decreases in revenue of 5.4% or $6.4 million at our clubs opened or

acquired prior to June 30, 2008 and $1.3 million related to the 10 clubs

that were closed subsequent to June 30, 2008.

Revenue at clubs operated for over 12 months (“comparable club revenue”)

decreased 4.2% in Q2 2010 compared to Q2 2009.

Operating expenses:

Total operating expenses decreased 0.1% for Q2 2010 compared to

Q2 2009. Operating expenses were impacted by a 3.6% decrease in the

total months of clubs in operation. Operating margin was 2.1% for Q2

2010 compared to 7.1% for Q2 2009.

Payroll and related

. Offsetting the decreases in payroll

related to membership consultants and the effects from the decrease in

total club months of operations was an increase related to personal

training payroll.

Club operating

. In addition to the decrease in total

months of club operation and total member club usage, in Q2 2010,

operating expenses decreased related to laundry and towel efficiencies

of $413,000 when compared to Q2 2009. Rent and occupancy decreased

$687,000 in Q2 2010.

General and administrative

. Decreases in Q2 2010 general

and administrative expenses compared to Q2 2009 were principally

attributable to decreases in general liability insurance expense due to

a reduction in claims activity and therefore a reduction of claims

reserves.

Depreciation and amortization.

Depreciation and

amortization decreased in Q2 2010 due to the closing of five clubs

subsequent to June 30, 2009, the accelerated depreciation related to

clubs closed prior to lease expiration dates in Q2 2009 and the effect

of the fixed asset impairment write-offs in the year ended December 31,

2009 and Q1 2010.

Impairment of fixed assets. In Q2 2010, we recorded fixed

asset impairment charges of $2.9 million, $1.2 million representing the

write-off of fixed assets at an underperforming club and $1.7 million

related to the planned closure of another club prior to the lease

expiration date. There were no fixed asset impairment charges in Q2 2009.

Net Loss for Q2 2010 was $815,000 compared to net income of

$2.5 million for Q2 2009.

For the six months ended June 30, 2010, total revenue decreased

$15.4 million or 6.2% compared to the same period in 2009 and operating

margin was 2.2% compared to 5.7% for the six months ended June 30, 2009.

For the six months ended June 30, 2010, we recorded fixed asset

impairment charges of $3.3 million compared to $1.1 million in the same

period in 2009. Net loss was $1.5 million compared to net income of

$3.2 million for the six months ended June 30, 2009.

Cash flow from operating activities for the six months ended June

30, 2010 totaled $29.5 million, a decrease of $21.5 million from the six

months ended June 30, 2009, which was primarily related to the decrease

in earnings and increases in cash paid for interest and taxes of $7.3

million and $4.9 million, respectively.

Third Quarter 2010 Business Outlook:

We are limiting our guidance to the third quarter of 2010. 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 third quarter of 2010

includes the following:

• Revenue for Q3 2010 is expected to be between $113.5 million and

  $114.5 million versus $120.4 million for Q3 2009. As percentages of

  revenue, we expect Q3 2010 payroll and related expenses to approximate

  40.0%, club operating expenses to approximate 39.5% and general and

  administrative expenses to approximate 7.0%.

• We expect a net loss for Q3 2010 of between $1.0 million and $1.5

  million, and loss per share to be in the range of ($0.04) per share to

  ($0.07) per share, assuming a 60% effective tax rate and 22.6 million

  weighted average fully diluted shares outstanding.

Investing Activities Outlook:

For the year ending December 31, 2010, we currently plan to invest $26.0

million to $28.0 million in capital expenditures. This is down from

$49.3 million of capital expenditures in 2009. We expect that the 2010

amount will include approximately $20.0 million to continue to upgrade

existing clubs and $4.0 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 $1.5 million to

enhance our management information systems. The remainder of our 2010

capital expenditures will be committed to building or expanding clubs.

Forward-Looking Statements:

Statements in this release that do not constitute historical facts,

including, without limitation, statements under the captions “Third

Quarter 2010 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 161

fitness clubs as of June 30, 2010, comprising 109 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 484,000

members, excluding short-term, seasonal and student members, and 12,000

student members. For more information on TSI, visit http://www.mysportsclubs.com.

The Company will hold a conference call on Thursday, July 29, 2010 at

4:30 PM (Eastern) to discuss the second quarter 2010 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 at www.mysportsclubs.com.

A replay and transcript of the call will be available via the Company's

Web site beginning July 30, 2010.

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

at http://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 at http://www.mysportsclubs.com.