TSI Continues Revenue Growth after Going Public

NEW YORK — Almost a year after going public, Town Sports International Holdings Inc. (TSI) had an 11.8 percent increase in fourth quarter 2006 revenue and an 11.5 percent revenue increase for the year, according to the company's earnings released last month. Fourth quarter 2006 revenue grew to $110.2 million from $98.5 million for the same period last year. For the year ended Dec. 31, 2006, revenue grew to $433.1 million from $388.6 million for the prior year.

TSI's share price has almost doubled since the company went public on June 1 last year. At that time, shares were offered at $13, but as of the end of the day on March 23, the stock was going for $22 per share.

The company will add 15 clubs this year, says Robert Giardina, chief executive officer. TSI raised its 2007 earnings guidance based on a recent refinancing of its debt, which will save the company approximately $3.1 million on a pre-tax basis in reduced interest expense. TSI now expects net income to be between $13.8 million and $14.8 million for 2007. Net income in 2006 was $4.6 million.

TSI expects revenues for 2007 to be about $475 million, representing about 10 percent growth over 2006, driven by club membership and ancillary revenue growth, the maturation of recently opened clubs as well as new clubs to be opened during the year.

The increase in revenue was driven by growth in membership revenue and ancillary club revenue, Giardina says. The company had a 4.9 percent increase in membership, a 1.9 percent increase in price, and a 1.7 percent increase in ancillary revenue offset by a 0.6 percent decrease in initiation fee revenue recognized as a direct result of TSI's policy to amortize membership initiation fees over a 30-month, rather than a 24-month period. This change was implemented in the first quarter of 2006.

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