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TSI Revenues Increase 8 Percent in Second Quarter 2008

NEW YORK -- A growth in membership and personal training revenue as well as a low attrition rate highlighted the second quarter 2008 results for Town Sports International (TSI).

Revenues for TSI increased 8 percent to $129.4 million in the second quarter 2008 compared to $119.8 million during the same period ended June 30, 2007. Revenue at clubs operated by TSI for more than 12 months, or comparable club revenue, increased 3.2 percent during the three months ended June 30, 2008. Total revenue for the six months ended June 30, 2008 increased 8.7 percent to $255.7 million compared to $235.1 million in the six months ended June 30, 2007.

The 3.2 percent monthly attrition rate in the second quarter was better than the levels of attrition in the second quarter 2007, TSI CEO Alex Alimanestianu said.

“We are pleased with our second quarter performance, and we are once again reaffirming our guidance for the year,” Alimanestianu said in a statement released prior to last week’s conference call. “As we have said before, we believe that our core customer base in major Northeastern metropolitan areas will remain committed to their health and fitness goals despite any additional economic strains that may arise.”

Membership dues increased 8.2 percent to $101.4 million, and personal training revenue grew 7.9 percent to $16.7 million in the second quarter.

Net income was $6.8 million for second quarter 2008 compared to a net income of $6.4 million for second quarter 2007. Net income for the six months ended June 30, 2008, was $11.6 million compared to $2.6 million for the six months ended June 30, 2007. The increase was due primarily to the loss on extinguishment of debt of $7.4 million recorded in the six months ended June 30, 2007.

TSI expects total revenue for 2008 to be between $510 million and $520 million, representing 8 percent to 10 percent growth over 2007. For the year ending Dec. 31, 2008, TSI estimates it will invest between $90 million and $95 million in capital expenditures. This amount includes about $21 million to upgrade existing clubs, $9 million to support and enhance information systems, and $6 million for the construction of a new regional laundry facility in TSI’s New York Sports Clubs market.

TSI expects to open 11 new clubs and close four clubs in 2008. As of June 30, TSI opened five clubs and closed three clubs.

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