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TSI Loses Revenue in 2009, Gains Giardina

NEW YORK -- The same day that Town Sports International (TSI), New York, announced revenue losses for the fourth quarter 2009 and the year, its board of directors replaced its CEO with a familiar face.

On Tuesday, TSI’s board elected Robert Giardina to replace Alexander Alimanestianu as president and CEO. Alimanestianu will continue to serve as a member of the board. In addition, the board elected Thomas Galligan to succeed Jason Fish as the chairman of the board. Both changes were effective Tuesday.

Giardina served as CEO of TSI from January 2002 through October 2007. He originally joined TSI in 1981 and served as president and chief operating officer from 1992 to 2001. He left TSI in 2007 for personal and health reasons. He became CEO of Hydromassage, Clearwater, FL, last year.

One industry insider wasn’t surprised by Alimanestianu’s departure, but he was surprised by Giardina’s return.

“The company has been dramatically underperforming under Alex’s leadership. The stock has been hammered, and the direction they’ve taken the company hasn’t worked,” he says. ““The surprise is getting Robert back. He left before on a medical leave. [It] bodes well that he’s back in there. I think that’s a good move by the company.”

TSI’s revenue decreased 7 percent to $114.3 million in the fourth quarter compared to the fourth quarter 2008 revenue of $122.9 million. For the year, revenue fell 4.2 percent to $485.4 million compared to 2008 revenue of $506.7 million. Comparable club revenue decreased 7.1 percent in fourth quarter 2009 compared to the same period last year and 5.6 percent for the year compared to 2008.

The total member count decreased 4.7 percent to 486,000 as of Dec. 31, 2009, compared to Dec. 31, 2008. Membership attrition averaged 3.6 percent per month in the fourth quarter and 3.8 percent per month for the year. That was higher than the 3.4 percent per month attrition average in full year 2008.

However, TSI lost fewer net members in fourth quarter 2009 than it did in the third quarter. In January, TSI had a net member gain, although the snowstorms in the Northeast caused the company to lose some of those gains in February, Alimanestianu said in a call with stockholders and analysts Tuesday. However, he said that he expects memberships to increase in a quarter-over-quarter basis by the fourth quarter of this year.

“A year ago, and even through the first half of last year, we had little visibility in how bad things would get, and it was very difficult to predict the business even a couple of quarters out,” Alimanestianu said during the call. “Unless there is another jolt to the economy, we feel that the bottom is behind us, and we now believe there is more predictability in the business. At this time last year, we could only hope we’d be where we are now, and that includes having no issues with our balance sheet or debt covenants, enhanced operations in member experience, and improvement in our club teams and team training and, most importantly, seeing evidence that the key metrics, such as net member gains, member retention and personal training, begin to trend in the right direction.”

During the call, which occurred at 7:30 a.m. Eastern time, no mention was made of a change in leadership at the company.

In the announcement released this morning about Giardina’s return to TSI, Galligan said, “We are very pleased to welcome Robert back to TSI. Robert is a highly talented individual, with strong strategic skills and leadership capabilities. His deep understanding of our business makes him uniquely qualified to lead the company. Given Robert’s long history with the company, I am confident that this will be a smooth transition.”

Galligan also wished Alimanestianu well in his future plans.

“We appreciate the many contributions that Alex has made to advance the business during his 20-year tenure, and we wish him the best of luck,” Galligan said.

Paul Lunter, president of Hydromassage, says Giardina’s move back to TSI came quickly, not giving him time to find a replacement yet, but he understood Giardina's decision to return to TSI.

“Town Sports was in need of his assistance to make some changes in the company,” Lunter says. “He was instrumental in their growth for the past 17 years, so he was an obvious replacement.”

Giardina's health club background helped Hydromassage grow its health club business about 40 percent during the past 12 months, Lunter says, noting that much of the company's business is still in the medical industry.

The employees at Hydromassage were shocked and saddened by Giardina’s departure as it’s a small company and he had become a part of the family in the past six months, Lunter says. However, Giardina has promised to bring Hydromassage into TSI clubs in the future, he says.

A spokesperson for TSI said that the company cannot release any further details about the CEO and chairman of the board changes at this time.

TSI’s stock closed the day at $3.95 a share, up from $3.90 a share the day before. Earlier in the month, the company’s shares had varied between $2.58 and $3.32 a share.

TSI operates clubs under the names New York Sports Clubs, Boston Sports Clubs, Washington Sports Clubs and Philadelphia Sports Clubs

Stuart Goldman, managing editor, contributed to this story.

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