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TSI's Revenue Increases for Fourth Quarter and 2007

New York — Town Sports International (TSI) reported a 7.9 percent increase in revenue in the fourth quarter of last year and a 9.2 percent revenue growth for the year, according to financials released by the company in late February. Fourth quarter 2007 revenue was $118.9 million, up from $110.2 million during the same period in 2006. Revenue for the year was $472.9 million, up from $433.1 million in 2006.

Although net income declined from $6.6 million in the fourth quarter of 2006 to $6 million in the fourth quarter of last year, overall net income increased from $4.6 million in 2006 to $13.6 million last year.

“We are very pleased to report positive results for the fourth quarter and full year and that our strong position in the market and our current business trends are providing us with a favorable outlook despite the current economic conditions,” TSI CEO Alex Alimanestianu said in a statement from the company.

The company opened 15 new clubs in 2007. In a call with analysts in late February, Alimanestianu said that the company will be slightly less aggressive in its new club openings in 2008, planning just 11 new clubs instead of the 15 new clubs originally announced. Instead, the company will “focus on selected operations initiatives and dedicate capital to several corporate projects,” he said in the call.

He also said that the company would invest in a multi-year program to upgrade its enterprise management IT system and a new laundry facility in New York to serve more than 100 clubs. The new laundry facility will save the company $1.5 million to $2 million per year beginning in the second quarter of 2009.

TSI is also testing a new membership consultant hiring and compensation program in four Washington, DC, clubs. The new program is designed to attract and retain more qualified sales employees and to enable the clubs to operate and achieve their sales targets with fewer, more productive consultants, Alimanestianu says.

He also says that the company is still searching for a new chief operating officer. The position has been empty since Randall Stephen left the company in January.

Membership revenue increased from $91.7 million in the fourth quarter of 2006 to $99.2 million in the fourth quarter of last year. Overall, membership revenue increased 8.8 percent, from $355.7 million in 2006 to $386.9 million last year.

TSI estimates that revenue in 2008 will be in the range of $510 million to $520 million, representing a growth of 8 percent to 10 percent. The growth will be driven primarily by club membership and ancillary revenue growth, and the maturation of recently opened clubs and new clubs.

The company's stock is at one of its lowest points since the company went public almost two years ago, closing at $7.50 on March 26. The company has a $310.5 million debt and is facing at least one class action lawsuit by employees over pay.

TSI does business under the brand names New York Sports Clubs, Boston Sports Clubs, Washington Sports Clubs and Philadelphia Sports Clubs.

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