##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
 For the quarterly period ended March 31, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
 For the Transition period from     to     .
 Commission File Number 000-52013
 TOWN SPORTS INTERNATIONAL HOLDINGS, INC.
 (Exact name of Registrant as specified in its charter)
 Delaware
    
    20-0640002(State or other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification Number)
 888 Seventh Avenue (25th Floor)
New York, New York 10106
Telephone: (212) 246-6700
 (Address, zip code, and telephone number, including
area code, of registrants principal executive office.)
 þ o
  o o þ
 o þ




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##### 



TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
 FORM 10-Q
For the Quarter Ended March 31, 2007
 INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)a) Condensed Consolidated Balance Sheets as of December 31, 2006 and March 31, 2007
    
    
    3b)
Condensed Consolidated Statements of Operations and Statements of
Comprehensive Income (Loss) for the
three months ended March 31, 2006 and 2007
    
    
    4c) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2006 and 2007
    
    
    5d) Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    24PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    26Item 1A. Risk Factors
    
    
    26Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 3. Defaults upon Senior Securities
    
    
    26Item 4. Submission of Matters to a Vote of Security Holders
    
    
    26Item 5. Other Information
    
    
    26Item 6. Exhibits
    
    
    27SIGNATURESSection 302 certification
    
    
    33Section 302 certification
    
    
    34Section 906 certification
    
    
    35Section 906 certification
    
    
    36EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
  2




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##### Table of Contents



TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS
 
 December 31, 2006 and March 31, 2007
 (All figures in $000s, except share data)
(Unaudited)
 December 31,
    
    
    March 31,2006
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    6,810
    
    
    $
    9,277Accounts receivable (less allowance for doubtful accounts of $2,026 and
$2,820 as of December 31, 2006 and March 31, 2007, respectively)
    
    
    8,028
    
    
    
    9,976Inventory
    
    
    435
    
    
    
    415Prepaid corporate income taxes
    
    
    
    
    
    
    1,620Prepaid expenses and other current assets
    
    
    14,757
    
    
    
    13,449Total current assets
    
    
    30,030
    
    
    
    34,737Fixed assets, net
    
    
    281,606
    
    
    
    287,274Goodwill
    
    
    50,112
    
    
    
    50,107Intangible assets, net
    
    
    922
    
    
    
    769Deferred tax asset, net
    
    
    32,437
    
    
    
    35,311Deferred membership costs
    
    
    15,703
    
    
    
    16,538Other assets
    
    
    12,717
    
    
    
    11,658Total assets
    
    $
    423,527
    
    
    $
    436,394LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Current portion of long-term debt
    
    $
    181
    
    
    $
    1,999Accounts payable
    
    
    9,972
    
    
    
    9,127Accrued expenses
    
    
    33,220
    
    
    
    29,380Accrued interest
    
    
    3,466
    
    
    
    1,335Corporate income taxes payable
    
    
    2,577
    
    
    
    Deferred revenue
    
    
    38,980
    
    
    
    44,459Total current liabilities
    
    
    88,396
    
    
    
    86,300Long-term debt
    
    
    280,948
    
    
    
    297,013Deferred lease liabilities
    
    
    54,929
    
    
    
    56,120Deferred revenue
    
    
    5,807
    
    
    
    5,916Other liabilities
    
    
    11,276
    
    
    
    11,352Total liabilities
    
    
    441,356
    
    
    
    456,701Commitments and contingencies (Note 9)
    
    
    
    
    
    
    Stockholders deficit:Class A voting common stock, $.001 par value; issued and outstanding
25,975,948 and 26,067,508 shares at December 31, 2006 and March 31,
2007, respectively. (See Note 2)
    
    
    26
    
    
    
    26Paid-in capital
    
    
    (21,068
    )
    
    
    (19,766
    )Accumulated other comprehensive income (currency translation adjustment)
    
    
    539
    
    
    
    560Retained earnings (accumulated deficit)
    
    
    2,674
    
    
    
    (1,127
    )Total stockholders deficit
    
    
    (17,829
    )
    
    
    (20,307
    )Total liabilities and stockholders deficit
    
    $
    423,527
    
    
    $
    436,394
  3




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##### Table of Contents



TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 For the three months ended March 31, 2006 and 2007
 (All figures in $000s except share and per share data)
(Unaudited)
 Three Months Ended March 31,2006
    
    
    2007Revenues:Club operations
    
    $
    102,923
    
    
    $
    114,340Fees and other
    
    
    1,104
    
    
    
    1,037104,027
    
    
    
    115,377Operating Expenses:Payroll and related
    
    
    40,897
    
    
    
    44,751Club operating
    
    
    34,470
    
    
    
    39,364General and administrative
    
    
    7,861
    
    
    
    7,758Depreciation and amortization
    
    
    10,386
    
    
    
    11,09193,614
    
    
    
    102,964Operating income
    
    
    10,413
    
    
    
    12,413Loss on extinguishment of debt
    
    
    
    
    
    
    12,521Interest expense
    
    
    10,687
    
    
    
    7,016Interest income
    
    
    (725
    )
    
    
    (259
    )Equity in the earnings of investees and rental income
    
    
    (433
    )
    
    
    (422
    )Income (loss) before provision (benefit) for corporate income taxes
    
    
    884
    
    
    
    (6,443
    )Provision (benefit) for corporate income taxes
    
    
    1,019
    
    
    
    (2,642
    )Net loss
    
    $
    (135
    )
    
    $
    (3,801
    )Loss per share:Basic
    
    $
    (0.01
    )
    
    $
    (0.15
    )Diluted
    
    $
    (0.01
    )
    
    $
    (0.15
    )Weighted average number of shares used in calculating loss per share:Basic
    
    
    18,327,722
    
    
    
    25,997,253Diluted
    
    
    18,327,722
    
    
    
    25,997,253Statements of Comprehensive Income (Loss)Net loss
    
    $
    (135
    )
    
    $
    (3,801
    )Foreign currency translation adjustments
    
    
    6
    
    
    
    21Comprehensive loss
    
    $
    (129
    )
    
    $
    (3,780
    )
  4




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##### Table of Contents



TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 For the three months ended March 31, 2006 and 2007
 (All figures in $000s)
(Unaudited)
 Three MonthsEnded March 31,2006
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (135
    )
    
    $
    (3,801
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    10,386
    
    
    
    11,091Non-cash interest expense on Senior Discount Notes
    
    
    4,126
    
    
    
    2,962Loss on extinguishment of debt
    
    
    
    
    
    
    12,521Amortization of debt issuance costs
    
    
    417
    
    
    
    269Noncash rental expense, net of noncash rental income
    
    
    (19
    )
    
    
    508Compensation expense incurred in connection with stock options
    
    
    43
    
    
    
    169Net changes in certain operating assets and liabilities
    
    
    22,331
    
    
    
    (2,411
    )Increase in deferred tax asset
    
    
    (2,315
    )
    
    
    (2,874
    )Landlord contributions to tenant improvements
    
    
    1,610
    
    
    
    1,131Increase in reserve for self-insured liability claims
    
    
    495
    
    
    
    140Increase in deferred membership costs
    
    
    (2,221
    )
    
    
    (835
    )Other
    
    
    22
    
    
    
    21Total adjustments
    
    
    34,875
    
    
    
    22,692Net cash provided by operating activities
    
    
    34,740
    
    
    
    18,891Cash flows from investing activities:Capital expenditures
    
    
    (15,023
    )
    
    
    (19,311
    )Net cash used in investing activities
    
    
    (15,023
    )
    
    
    (19,311
    )Cash flows from financing activities:Proceeds from New Credit Facility
    
    
    
    
    
    
    185,000Costs related to issuance of New Credit Facility
    
    
    
    
    
    
    (2,631
    )Repayment of Senior Notes
    
    
    
    
    
    
    (169,999
    )Premium paid on extinguishment of debt and related costs
    
    
    
    
    
    
    (9,309
    )Repayment of long term borrowings
    
    
    (311
    )
    
    
    (79
    )Change in book overdraft
    
    
    (986
    )
    
    
    (1,230
    )Tax benefit from stock option exercises
    
    
    
    
    
    
    515Proceeds from exercise of stock options
    
    
    
    
    
    
    620Net cash (used in) provided by financing activities
    
    
    (1,297
    )
    
    
    2,887Net increase in cash and cash equivalents
    
    
    18,420
    
    
    
    2,467Cash and cash equivalents at beginning of period
    
    
    51,304
    
    
    
    6,810Cash and cash equivalents at end of period
    
    $
    69,724
    
    
    $
    9,277Summary of change in certain operating assets and liabilities:Increase in accounts receivable
    
    $
    (2,083
    )
    
    $
    (2,247
    )(Increase) decrease in inventory
    
    
    (71
    )
    
    
    20Decrease in prepaid expenses and other current assets
    
    
    369
    
    
    
    933Increase (decrease) in accounts payable, accrued expenses and accrued interest
    
    
    10,110
    
    
    
    (2,510
    )Change in prepaid corporate income taxes and corporate income taxes payable
    
    
    4,518
    
    
    
    (4,197
    )Increase in deferred revenue
    
    
    9,488
    
    
    
    5,590Net changes in certain operating assets and liabilities
    
    $
    22,331
    
    
    $
    (2,411
    )Supplemental disclosures of cash flow information:Cash payments for interest
    
    $
    150
    
    
    $
    6,044Cash payments for income taxes
    
    $
    645
    
    
    $
    3,915
  5




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TOWN SPORTS INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (All figures $000s except share and per share data)
(Unaudited)
 1. Basis of Presentation
    2. Initial Public Offering
  3.
Recent Accounting Pronouncements
 Fair Value Measurements
 6




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The Fair Value Option for Financial Assets and
Financial Liabilities Including an amendment of FASB No. 115
 4. Long-Term Debt
 December 31,
    
    
    March 31,2006
    
    
    2007($000s)
    
    
    ($000s)Term Loan Facility
    
    $
    
    
    
    $
    185,0009 5/8%
Senior Notes
    
    
    169,999
    
    
    
    11.0% Senior
Discount Notes due 2014 (Payment-in-Kind Notes)
    
    
    110,850
    
    
    
    113,811Notes payable for acquired businesses
    
    
    280
    
    
    
    201281,129
    
    
    
    299,012Less, current portion to be paid within one year
    
    
    181
    
    
    
    1,999Long-term portion
    
    $
    280,948
    
    
    $
    297,013
    Tender premium
    
    $
    8,759Call premium
    
    
    215Write-off of
deferred financing costs related to the Senior Credit Facility and
9 5/8% Senior Notes
    
    
    3,212Fees and expenses
    
    
    335Loss on early extinguishment of debt
    
    $
    12,521
    7




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##### Table of Contents



5. Earnings (Loss) Per Share
  6. Stock-Based Compensation
      8




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##### Table of Contents



7. Goodwill and Other Intangibles
   Balance as of December 31, 2006
    
    $
    50,112Changes due to foreign currency exchange rate fluctuations
    
    
    (5
    )Balance as of March 31, 2007
    
    $
    50,107
 As of December 31, 2006($000s)Gross Carrying
    
    
    AccumulatedAcquired Intangible Assets
    
    Amount
    
    
    Amortization
    
    
    Net IntangiblesMembership lists
    
    $
    12,146
    
    
    $
    (11,389
    )
    
    $
    757Covenants-not-to-compete
    
    
    1,151
    
    
    
    (1,004
    )
    
    
    147Beneficial lease
    
    
    223
    
    
    
    (205
    )
    
    
    18$
    13,520
    
    
    $
    (12,598
    )
    
    $
    922
 As of March 31, 2007($000s)Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Net IntangiblesMembership lists
    
    $
    12,146
    
    
    $
    (11,525
    )
    
    $
    621Covenants-not-to-compete
    
    
    1,151
    
    
    
    (1,018
    )
    
    
    133Beneficial lease
    
    
    223
    
    
    
    (208
    )
    
    
    15$
    13,520
    
    
    $
    (12,751
    )
    
    $
    769
  Aggregate Amortization Expense for the twelve months ending March 31, ($000s)2008
    
    $
    3902009
    
    
    3562010
    
    
    23$
    769
  9




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##### Table of Contents



8. Income Taxes
 Accounting
for Uncertainty in Income Taxes
   9. Commitments and Contingencies
 Sarah Cruz, et ano v. Town Sports International, Inc.
 Carlos Urbina et ano v. 26 Court Street Associates, LLC et al.,
 10




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##### Table of Contents



10. Investments in Affiliated Companies
  Three months endedMarch 31,($000s)2006
    
    2007Revenue
    
    $
    906
    
    
    $
    900Income from operations
    
    
    367
    
    
    
    373Net income
    
    
    347
    
    
    
    348
 11. Guarantors
   11




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##### Table of Contents



Condensed Consolidating Balance Sheet
December 31, 2006
(All figures in $000s)
(Unaudited)
 Non-TSI
    
    
    
    
    
    
    Subsidiary
    
    
    GuarantorHoldings
    
    
    TSI LLC
    
    
    Guarantors
    
    
    Subsidiary
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    437
    
    
    
    1,226
    
    
    $
    3,027
    
    
    $
    2,120
    
    
    $
    
    
    
    $
    6,810Accounts receivable, net
    
    
    
    
    
    
    4,422
    
    
    
    3,459
    
    
    
    147
    
    
    
    
    
    
    
    8,028Inventory
    
    
    
    
    
    
    
    
    
    
    409
    
    
    
    26
    
    
    
    
    
    
    
    435Prepaid corporate income taxes
    
    
    5,813
    
    
    
    (5,812
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    Inter-company receivable (payable)
    
    
    840
    
    
    
    (840
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Prepaid expenses and other current assets
    
    
    
    
    
    
    5,265
    
    
    
    9,492
    
    
    
    
    
    
    
    
    
    
    
    14,757Total current assets
    
    
    7,090
    
    
    
    4,261
    
    
    
    16,386
    
    
    
    2,293
    
    
    
    
    
    
    
    30,030Investment in subsidiaries
    
    
    67,592
    
    
    
    230,359
    
    
    
    
    
    
    
    
    
    
    
    (297,951
    )
    
    
    Fixed assets, net
    
    
    
    
    
    
    9,901
    
    
    
    271,034
    
    
    
    671
    
    
    
    
    
    
    
    281,606Goodwill
    
    
    
    
    
    
    
    
    
    
    49,305
    
    
    
    807
    
    
    
    
    
    
    
    50,112Intangible assets, net
    
    
    
    
    
    
    
    
    
    
    922
    
    
    
    
    
    
    
    
    
    
    
    922Deferred tax assets, net
    
    
    16,092
    
    
    
    16,888
    
    
    
    (491
    )
    
    
    (52
    )
    
    
    
    
    
    
    32,437Deferred membership costs
    
    
    
    
    
    
    
    
    
    
    15,703
    
    
    
    
    
    
    
    
    
    
    
    15,703Other assets
    
    
    2,247
    
    
    
    9,264
    
    
    
    1,206
    
    
    
    
    
    
    
    
    
    
    
    12,717Total assets
    
    $
    93,021
    
    
    $
    270,673
    
    
    $
    354,065
    
    
    $
    3,719
    
    
    $
    (297,951
    )
    
    $
    423,527LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Current portion of long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    181
    
    
    $
    
    
    
    $
    
    
    
    $
    181Accounts payable
    
    
    
    
    
    
    
    
    
    
    9,972
    
    
    
    
    
    
    
    
    
    
    
    9,972Accrued expenses
    
    
    
    
    
    
    14,263
    
    
    
    21,107
    
    
    
    427
    
    
    
    
    
    
    
    35,797Accrued interest
    
    
    
    
    
    
    3,464
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    3,466Deferred revenue
    
    
    
    
    
    
    267
    
    
    
    38,622
    
    
    
    91
    
    
    
    
    
    
    
    38,980Total current liabilities
    
    
    
    
    
    
    17,994
    
    
    
    69,884
    
    
    
    518
    
    
    
    
    
    
    
    88,396Long-term debt
    
    
    110,850
    
    
    
    173,571
    
    
    
    (3,473
    )
    
    
    
    
    
    
    
    
    
    
    280,948Deferred lease liabilities
    
    
    
    
    
    
    482
    
    
    
    54,447
    
    
    
    
    
    
    
    
    
    
    
    54,929Deferred revenue
    
    
    
    
    
    
    
    
    
    
    5,807
    
    
    
    
    
    
    
    
    
    
    
    5,807Other liabilities
    
    
    
    
    
    
    11,034
    
    
    
    242
    
    
    
    
    
    
    
    
    
    
    
    11,276Total liabilities
    
    
    110,850
    
    
    
    203,081
    
    
    
    126,907
    
    
    
    518
    
    
    
    
    
    
    
    441,356Stockholders deficit:Common stockholders deficit
    
    
    (18,368
    )
    
    
    67,592
    
    
    
    227,158
    
    
    
    3,201
    
    
    
    (297,951
    )
    
    
    (18,368
    )Accumulated other comprehensive income
    
    
    539
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    539Total stockholders deficit
    
    
    (17,829
    )
    
    
    67,592
    
    
    
    227,158
    
    
    
    3,201
    
    
    
    (297,951
    )
    
    
    (17,829
    )Total liabilities and stockholders deficit:
    
    $
    93,021
    
    
    $
    270,673
    
    
    $
    354,065
    
    
    $
    3,719
    
    
    $
    (297,951
    )
    
    $
    423,527
 12




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##### Table of Contents



Condensed Consolidating Balance Sheet
March 31, 2007
(All figures in $000s)
(Unaudited)
 Non-TSI
    
    
    
    
    
    
    Subsidiary
    
    
    GuarantorHoldings
    
    
    TSI LLC
    
    
    Guarantors
    
    
    Subsidiary
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,084
    
    
    $
    377
    
    
    $
    5,575
    
    
    $
    2,241
    
    
    $
    
    
    
    $
    9,277Accounts receivable
    
    
    
    
    
    
    5,059
    
    
    
    4,633
    
    
    
    284
    
    
    
    
    
    
    
    9,976Inventory
    
    
    
    
    
    
    
    
    
    
    389
    
    
    
    26
    
    
    
    
    
    
    
    415Prepaid corporate income taxes
    
    
    5,813
    
    
    
    (4,200
    )
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    1,620Intercompany receivable (payable)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Prepaid expenses and other current assets
    
    
    683
    
    
    
    6,415
    
    
    
    7,951
    
    
    
    (1,600
    )
    
    
    
    
    
    
    13,449Total current assets
    
    
    7,580
    
    
    
    7,651
    
    
    
    18,555
    
    
    
    951
    
    
    
    
    
    
    
    34,737Investment in subsidiaries
    
    
    66,371
    
    
    
    228,286
    
    
    
    
    
    
    
    
    
    
    
    (294,657
    )
    
    
    Fixed assets, net
    
    
    
    
    
    
    9,643
    
    
    
    277,006
    
    
    
    625
    
    
    
    
    
    
    
    287,274Goodwill
    
    
    
    
    
    
    
    
    
    
    49,296
    
    
    
    811
    
    
    
    
    
    
    
    50,107Intangible assets, net
    
    
    
    
    
    
    
    
    
    
    769
    
    
    
    
    
    
    
    
    
    
    
    769Deferred tax assets, net
    
    
    17,397
    
    
    
    18,458
    
    
    
    (491
    )
    
    
    (53
    )
    
    
    
    
    
    
    35,311Deferred membership costs
    
    
    
    
    
    
    
    
    
    
    16,538
    
    
    
    
    
    
    
    
    
    
    
    16,538Other assets
    
    
    2,189
    
    
    
    8,405
    
    
    
    1,064
    
    
    
    
    
    
    
    
    
    
    
    11,658Total assets
    
    $
    93,537
    
    
    $
    272,443
    
    
    $
    362,737
    
    
    $
    2,334
    
    
    $
    (294,657
    )
    
    $
    436,394LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Current portion of long-term debt
    
    $
    
    
    
    $
    1,850
    
    
    $
    149
    
    
    $
    
    
    
    $
    
    
    
    $
    1,999Accounts payable
    
    
    
    
    
    
    
    
    
    
    9,127
    
    
    
    
    
    
    
    
    
    
    
    9,127Accrued expenses and corporate income taxes payable
    
    
    33
    
    
    
    7,526
    
    
    
    21,378
    
    
    
    443
    
    
    
    
    
    
    
    29,380Accrued interest
    
    
    
    
    
    
    1,335
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,335Deferred revenue
    
    
    
    
    
    
    413
    
    
    
    43,954
    
    
    
    92
    
    
    
    
    
    
    
    44,459Total current liabilities
    
    
    33
    
    
    
    11,124
    
    
    
    74,608
    
    
    
    535
    
    
    
    
    
    
    
    86,300Long-term debt
    
    
    113,811
    
    
    
    183,150
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    297,013Deferred lease liabilities
    
    
    
    
    
    
    695
    
    
    
    55,425
    
    
    
    
    
    
    
    
    
    
    
    56,120Deferred revenue
    
    
    
    
    
    
    
    
    
    
    5,916
    
    
    
    
    
    
    
    
    
    
    
    5,916Other Liabilities
    
    
    
    
    
    
    11,103
    
    
    
    249
    
    
    
    
    
    
    
    
    
    
    
    11,352Total liabilities
    
    
    113,844
    
    
    
    206,072
    
    
    
    136,250
    
    
    
    535
    
    
    
    
    
    
    
    456,701Stockholders Deficit:Common Stockholders deficit
    
    
    (20,867
    )
    
    
    66,371
    
    
    
    226,487
    
    
    
    1,799
    
    
    
    (294,657
    )
    
    
    (20,867
    )Accumulated other comprehensive income
    
    
    560
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    560Total stockholders deficit
    
    
    (20,307
    )
    
    
    66,371
    
    
    
    226,487
    
    
    
    1,799
    
    
    
    (294,657
    )
    
    
    (20,307
    )Total liabilities and stockholders deficit
    
    $
    93,537
    
    
    $
    272,443
    
    
    $
    362,737
    
    
    $
    2,334
    
    
    $
    (294,657
    )
    
    $
    436,394
 13




---



##### Table of Contents



Condensed Consolidating Statements of Operations
For the three months ended March 31, 2006
(All figures in $000s)
(Unaudited)
 Non-Subsidiary
    
    
    GuarantorTSI Holdings
    
    
    TSI LLC
    
    
    Guarantors
    
    
    Subsidiary
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Club operations
    
    $
    
    
    
    $
    
    
    
    $
    101,673
    
    
    $
    1,250
    
    
    $
    
    
    
    $
    102,923Fees and other
    
    
    
    
    
    
    261
    
    
    
    843
    
    
    
    
    
    
    
    
    
    
    
    1,104
    
    
    
    261
    
    
    
    102,516
    
    
    
    1,250
    
    
    
    
    
    
    
    104,027Operating expenses:Payroll and related
    
    
    
    
    
    
    8,043
    
    
    
    32,372
    
    
    
    482
    
    
    
    
    
    
    
    40,897Club operating
    
    
    
    
    
    
    438
    
    
    
    33,724
    
    
    
    308
    
    
    
    
    
    
    
    34,470General and administrative
    
    
    
    
    
    
    1,420
    
    
    
    6,302
    
    
    
    139
    
    
    
    
    
    
    
    7,861Depreciation and amortization
    
    
    
    
    
    
    1,281
    
    
    
    9,010
    
    
    
    95
    
    
    
    
    
    
    
    10,386
    
    
    
    11,182
    
    
    
    81,408
    
    
    
    1,024
    
    
    
    
    
    
    
    93,614Operating income (loss)
    
    
    
    
    
    
    (10,921
    )
    
    
    21,108
    
    
    
    226
    
    
    
    
    
    
    
    10,413Interest expense
    
    
    4,224
    
    
    
    5,267
    
    
    
    1,196
    
    
    
    
    
    
    
    
    
    
    
    10,687Interest income
    
    
    
    
    
    
    (725
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (725
    )Equity in the earnings on investees and rental income
    
    
    
    
    
    
    (261
    )
    
    
    (172
    )
    
    
    
    
    
    
    
    
    
    
    (433
    )Income(loss) from operations before provision for
corporate income taxes
    
    
    (4,224
    )
    
    
    (15,202
    )
    
    
    20,084
    
    
    
    226
    
    
    
    
    
    
    
    884Provision (benefit) for corporate income taxes
    
    
    (1,858
    )
    
    
    (4,554
    )
    
    
    7,431
    
    
    
    
    
    
    
    
    
    
    
    1,019Equity earnings from subsidiaries
    
    
    2,231
    
    
    
    12,879
    
    
    
    
    
    
    
    
    
    
    
    (15,110
    )
    
    
    Net income (loss)
    
    $
    (135
    )
    
    $
    2,231
    
    
    $
    12,653
    
    
    $
    226
    
    
    $
    (15,110
    )
    
    $
    (135
    )
 14




---



##### Table of Contents



Condensed Consolidating Statements of Operations
For the three months ended March 31, 2007
(All figures in $000s)
(Unaudited)
 TSI
    
    
    
    
    
    
    Subsidiary
    
    
    Non-GuarantorHoldings
    
    

TSI  LLC
    
    
    Guarantors
    
    
    Subsidiary
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Club operations
    
    $
    
    
    
    $
    197
    
    
    $
    112,966
    
    
    $
    1,177
    
    
    $
    
    
    
    $
    114,340Fees and other
    
    
    
    
    
    
    221
    
    
    
    816
    
    
    
    
    
    
    
    
    
    
    
    1,037
    
    
    
    418
    
    
    
    113,782
    
    
    
    1,177
    
    
    
    
    
    
    
    115,377Operating expenses:Payroll and related
    
    
    
    
    
    
    6,057
    
    
    
    38,239
    
    
    
    455
    
    
    
    
    
    
    
    44,751Club operating
    
    
    5
    
    
    
    386
    
    
    
    38,685
    
    
    
    288
    
    
    
    
    
    
    
    39,364General and administrative
    
    
    155
    
    
    
    1,007
    
    
    
    6,483
    
    
    
    113
    
    
    
    
    
    
    
    7,758Depreciation and amortization
    
    
    
    
    
    
    1,003
    
    
    
    10,033
    
    
    
    55
    
    
    
    
    
    
    
    11,091160
    
    
    
    8,453
    
    
    
    93,440
    
    
    
    911
    
    
    
    
    
    
    
    102,964Operating income (loss)
    
    
    (160
    )
    
    
    (8,035
    )
    
    
    20,342
    
    
    
    266
    
    
    
    
    
    
    
    12,413Loss on extinguishment of debt
    
    
    
    
    
    
    12,521
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,521Interest expense
    
    
    3,020
    
    
    
    2,378
    
    
    
    1,627
    
    
    
    (9
    )
    
    
    
    
    
    
    7,016Interest income
    
    
    
    
    
    
    (254
    )
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (259
    )Equity in the income of investees and rental income
    
    
    
    
    
    
    (259
    )
    
    
    (163
    )
    
    
    
    
    
    
    
    
    
    
    (422
    )Income (loss) before provision (benefit) for
corporate income taxes
    
    
    (3,180
    )
    
    
    (22,421
    )
    
    
    18,883
    
    
    
    275
    
    
    
    
    
    
    
    (6,443
    )Provision (benefit) for corporate income taxes
    
    
    (1,305
    )
    
    
    (8,391
    )
    
    
    6,987
    
    
    
    67
    
    
    
    
    
    
    
    (2,642
    )Income (loss) before equity earnings
    
    
    (1,875
    )
    
    
    (14,030
    )
    
    
    11,896
    
    
    
    208
    
    
    
    
    
    
    
    (3,801
    )Equity earnings from subsidiaries
    
    
    (1,926
    )
    
    
    12,104
    
    
    
    
    
    
    
    
    
    
    
    (10,178
    )
    
    
    Net income (loss)
    
    $
    (3,801
    )
    
    $
    (1,926
    )
    
    $
    11,896
    
    
    $
    208
    
    
    $
    (10,178
    )
    
    $
    (3,801
    )
 15




---



##### Table of Contents



Condensed Consolidating Statement of Cash Flows
For the three months ended March 31, 2006
(All figures in $000s)
(Unaudited)
 Subsidiary
    
    
    Non- GuarantorTSI Holdings
    
    

TSI  LLC
    
    
    Guarantors
    
    
    Subsidiary
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    (135
    )
    
    $
    2,231
    
    
    $
    12,653
    
    
    $
    226
    
    
    $
    (15,110
    )
    
    $
    (135
    )Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    
    
    
    
    1,281
    
    
    
    9,010
    
    
    
    95
    
    
    
    
    
    
    
    10,386Compensation expense in connection with stock
options
    
    
    
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43Noncash rental expense, net of noncash rental income
    
    
    
    
    
    
    (40
    )
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    (19
    )Noncash interest expense on Senior Discount Notes
    
    
    4,126
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,126Amortization of debt issuance costs
    
    
    89
    
    
    
    328
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    417Increase in Insurance Reserve
    
    
    
    
    
    
    495
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    495Landlord Contributions
    
    
    
    
    
    
    (5
    )
    
    
    1,615
    
    
    
    
    
    
    
    
    
    
    
    1,610Changes in operating assets and liabilities
    
    
    8
    
    
    
    22,323
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,331Other
    
    
    (4,089
    )
    
    
    (11,159
    )
    
    
    (4,104
    )
    
    
    (272
    )
    
    
    15,110
    
    
    
    (4,514
    )Total adjustments
    
    
    134
    
    
    
    13,266
    
    
    
    6,542
    
    
    
    (177
    )
    
    
    15,110
    
    
    
    34,875Net cash
(used in)  provided by operating activities
    
    
    (1
    )
    
    
    15,497
    
    
    
    19,195
    
    
    
    49
    
    
    
    
    
    
    
    34,740Net cash used in investing activities
    
    
    
    
    
    
    (15,023
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,023
    )Net cash
used in financing activities
    
    
    
    
    
    
    (1,297
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,297
    )Net increase (decrease) in cash and cash equivalents
    
    
    (1
    )
    
    
    (823
    )
    
    
    19,195
    
    
    
    49
    
    
    
    
    
    
    
    18,420Cash and cash equivalents at beginning of period
    
    
    1
    
    
    
    1,359
    
    
    
    48,682
    
    
    
    1,262
    
    
    
    
    
    
    
    51,304Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    536
    
    
    $
    67,877
    
    
    $
    1,311
    
    
    $
    
    
    
    $
    69,724
 16




---



##### Table of Contents



Condensed Consolidating Statement of Cash Flows
For the three months ended March 31, 2007
(All figures in $000s)
(Unaudited)
 Non-TSI
    
    
    
    
    
    
    Subsidiary
    
    
    GuarantorHoldings
    
    

TSI
LLC
    
    
    Guarantors
    
    
    Subsidiary
    
    
    Eliminations
    
    
    ConsolidatedCash flows from Operating Activities:Net income (loss)
    
    $
    (3,801
    )
    
    $
    (1,926
    )
    
    $
    11,896
    
    
    $
    208
    
    
    $
    (10,178
    )
    
    $
    (3,801
    )Adjustments to reconcile net income to net cash provided
by operating activitiesDepreciation and amortization
    
    
    
    
    
    
    1,003
    
    
    
    10,033
    
    
    
    55
    
    
    
    
    
    
    
    11,091Compensation expense in connection with stock options
    
    
    
    
    
    
    169
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169Non-cash rental expense, net of noncash rental income
    
    
    
    
    
    
    213
    
    
    
    295
    
    
    
    
    
    
    
    
    
    
    
    508Non-cash interest expense on Senior Discount Notes
    
    
    2,962
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,962Loss on extinguishment of debt
    
    
    
    
    
    
    12,521
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,521Amortization of debt issuance costs
    
    
    57
    
    
    
    212
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    269Increase in reserve for self-insured liability claims
    
    
    
    
    
    
    140
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    140Landlord contributions to tenant improvements
    
    
    
    
    
    
    
    
    
    
    1,131
    
    
    
    
    
    
    
    
    
    
    
    1,131Changes in operating assets and liabilities
    
    
    188
    
    
    
    (2,599
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,411
    )Other
    
    
    621
    
    
    
    (9,396
    )
    
    
    (4,962
    )
    
    
    (129
    )
    
    
    10,178
    
    
    
    (3,688
    )Total adjustments
    
    
    3,828
    
    
    
    2,263
    
    
    
    6,497
    
    
    
    (74
    )
    
    
    10,178
    
    
    
    22,692Net cash provided by operating activities
    
    
    27
    
    
    
    337
    
    
    
    18,393
    
    
    
    134
    
    
    
    
    
    
    
    18,891Net cash used in investing activities
    
    
    
    
    
    
    (3,453
    )
    
    
    (15,845
    )
    
    
    (13
    )
    
    
    
    
    
    
    (19,311
    )Net cash
provided by financing activities
    
    
    620
    
    
    
    2,267
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,887Net increase (decrease) in cash and cash equivalents
    
    
    647
    
    
    
    (849
    )
    
    
    2,548
    
    
    
    121
    
    
    
    
    
    
    
    2,467Cash and cash equivalents at beginning of period
    
    
    437
    
    
    
    1,226
    
    
    
    3,027
    
    
    
    2,120
    
    
    
    
    
    
    
    6,810Cash and cash equivalents at end of period
    
    $
    1,084
    
    
    $
    377
    
    
    $
    5,575
    
    
    $
    2,241
    
    
    $
    
    
    
    $
    9,277
 17




---



##### Table of Contents



ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction
     
    
    Our largest sources of revenue are dues and initiation fees paid by our members. This
comprises 81.4% of our total revenue for the quarter ended March 31, 2007. We recognize
revenue from membership dues in the month when the services are rendered. Approximately
94.0% of our members pay their monthly dues by Electronic Funds Transfer, or EFT, while the
balance is paid annually in advance. We recognize revenue from initiation fees over the
expected average life of the membership. Prior to January 1, 2006, the expected average life
of a membership was 24 months. Effective January 1, 2006, we have revised this estimate to
be 30 months based on more favorable membership attrition trends.
    
    For the quarter ended March 31, 2007, we generated 12.0% of our revenue from personal
training and 5.7% of our revenue from other ancillary programs and services consisting of
programming for children, group fitness training and other member activities, as well as
sales of miscellaneous sports products.
  18




---



##### Table of Contents



Three Months Ended March 31,2006
    
    
    2007Membership dues
    
    $
    83,139
    
    
    
    79.9
    %
    
    $
    90,984
    
    
    
    78.9
    %Initiation fees
    
    
    1,931
    
    
    
    1.9
    %
    
    
    2,883
    
    
    
    2.5
    %Membership revenue
    
    
    85,070
    
    
    
    81.8
    %
    
    
    93,867
    
    
    
    81.4
    %Personal training revenue
    
    
    12,267
    
    
    
    11.8
    %
    
    
    13,921
    
    
    
    12.0
    %Other ancillary club revenue
    
    
    5,586
    
    
    
    5.4
    %
    
    
    6,552
    
    
    
    5.7
    %Ancillary club revenue
    
    
    17,853
    
    
    
    17.2
    %
    
    
    20,473
    
    
    
    17.7
    %Fees and Other revenue
    
    
    1,104
    
    
    
    1.0
    %
    
    
    1,037
    
    
    
    0.9
    %Total revenue
    
    $
    104,027
    
    
    
    100.0
    %
    
    $
    115,377
    
    
    
    100.0
    %
      Historical Club Growth
  2006
    
    2007Q1
    
    Q2
    
    Q3
    
    Q4
    
    Total
    
    Q1Wholly owned clubs operated at beginning of period
    
    
    139
    
    
    
    143
    
    
    
    142
    
    
    
    145
    
    
    
    139
    
    
    
    147New clubs opened
    
    
    5
    
    
    
    
    
    
    
    2
    
    
    
    3
    
    
    
    10
    
    
    
    3Clubs acquired
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    Clubs closed, relocated or sold (1)
    
    
    (1
    )
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    (3
    )
    
    
    Wholly owned clubs at end of period
    
    
    143
    
    
    
    142
    
    
    
    145
    
    
    
    147
    
    
    
    147
    
    
    
    150Total clubs operated at end of period (2)
    
    
    145
    
    
    
    144
    
    
    
    147
    
    
    
    149
    
    
    
    149
    
    
    
    152
 
 (1)
    
    In 2005, we temporarily closed a club for a renovation and
expansion. This club reopened in February 2006 and is included
with new clubs opened in the first quarter of 2006. 19




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##### Table of Contents



(2)
    
    Includes wholly owned and partly owned clubs. In addition to the
above, as of December 31, 2006 and March 31, 2007, we managed
five university fitness clubs in which we did not have an equity
interest. Existing Club Revenue
    Results of Operations
  Three MonthsEnded March 31,2006
    
    2007Revenue
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Payroll and related
    
    
    39.3
    
    
    
    38.8Club operating
    
    
    33.1
    
    
    
    34.1General and administrative
    
    
    7.6
    
    
    
    6.7Depreciation and amortization
    
    
    10.0
    
    
    
    9.690.0
    
    
    
    89.2Operating income
    
    
    10.0
    
    
    
    10.8Loss on extinguishment of debt
    
    
    
    
    
    
    10.9Interest expense
    
    
    10.3
    
    
    
    6.1Interest income
    
    
    (0.7
    )
    
    
    (0.2
    )Equity in the earnings of investees and rental income
    
    
    (0.4
    )
    
    
    (0.4
    )Income (loss) before provision (benefit) for corporate income taxes
    
    
    0.8
    
    
    
    (5.6
    )Provision (benefit) for corporate income taxes
    
    
    0.9
    
    
    
    (2.3
    )Net loss
    
    
    (0.1
    )%
    
    
    (3.3
    )%
 Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006
 Revenues.
  20




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##### Table of Contents



Operating Expenses.
  
    
    Payroll costs directly related to our personal training, Group Exclusive, and Sports
Club for Kids programs increased $939,000 or 10.4%, due to an increase in demand for these
programs.
    
    There was an offset to these increases due to a charge in the
three months ended March 31, 2006 relating to severance
packages to our Chairman and certain employees totaling $1.6 million. The total costs of
these severance packages were recorded in the
three months ended March 31, 2006 while no such costs were incurred in the
three months ended March 31, 2007.
  
    
    Rent and occupancy expenses increased $2.4 million. Rent and occupancy costs at clubs
that have opened since January 1, 2006, or that are currently under construction, increased
$1.9 million. The remaining $600,000 increase in rent and occupancy expenses relates to our
clubs that were open prior to January 1, 2006.
    
    Advertising and marketing expenses increased $1.1 million, as we expended $3.3 million
in the three months ended March 31, 2007 compared to $2.2 million in the
three months ended March 31, 2006, based in part
on specific marketing plans executed throughout the first quarter.
    
    As part of a customer service initiative, we have outsourced towel laundry service in 22
clubs in the three months ended March 31, 2007. As our clubs have become more intensely
clustered in our markets, and member cross usage becomes more prevalent, we have found it
increasingly necessary to offer these services at more of our clubs. Accordingly, we have
experienced a $609,000 increase in laundry expenses during the three months ended March 31,
2007 when compared to the
three months ended March 31, 2006.
   Loss
on Extinguishment of Debt.
 Interest Expense.
 Interest Income.
 Provision for Corporate Income Taxes.
 21




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##### Table of Contents



Liquidity and Capital Resources
  Operating Activities.
  Investing Activities.
 Financing Activities.
  
    
    Making it more difficult to satisfy our obligations;
    
    Increasing our vulnerability to general adverse economic conditions;
 22




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##### Table of Contents




    
    Limiting our ability to obtain additional financing to fund future working capital,
capital expenditures, acquisitions of new clubs and other general corporate requirements;
    
    Requiring cash flow from operations for the payment of interest on our credit facility
and reducing our ability to use our cash flow to fund working capital, capital expenditures,
acquisitions of new clubs and general corporate requirements; and
    
    Limiting our flexibility in planning for, or reacting to, changes in our business and the
industry in which we operate.
           Payments Due by Period (in $000s)Less than
    
    
    
    
    
    
    
    
    
    
    AfterContractual Obligations
    
    Total
    
    
    1 Year
    
    
    2-3 Years
    
    
    4-5 Years
    
    
    5 YearsLong-Term Debt(1)
    
    $
    399,798
    
    
    $
    1,999
    
    
    $
    21,519
    
    
    $
    34,159
    
    
    $
    342,121Operating Lease Obligations(2)
    
    
    887,341
    
    
    
    70,115
    
    
    
    152,336
    
    
    
    144,041
    
    
    
    520,849Total Contractual Cash Obligations
    
    $
    1,287,139
    
    
    $
    72,114
    
    
    $
    173,855
    
    
    $
    178,200
    
    
    $
    862,970
 23




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##### Table of Contents



(1)
    
    The long-term debt contractual cash obligations include principal and interest payment
requirements on our Senior Discount Notes. These amounts do not include interest on the Term Loan
Facility, as this interest rate is variable. The interest rate as of
March 31, 2007 was 7.125% or $13.2 million on an annualized
basis.(2)
    
    Operating lease obligations include base rent only. Certain leases provide for additional
rent based on real estate taxes, common area maintenance and defined amounts based on the
operating results of the lessee. Recent
Changes in or Recently Issued Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities Including an amendment of FASB No. 115
 Forward-Looking Statements
  
 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
   
 ITEM 4. Controls and Procedures.
  24




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##### Table of Contents



25




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. Legal Proceedings.
 Sarah Cruz, et ano v. Town Sports International, Inc.
 Carlos Urbina et ano v. 26 Court Street Associates, LLC et al.,
  
 Item 1A. Risk Factors
   
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 ITEM 3. Defaults Upon Senior Securities.
  
 ITEM 4. Submission of Matters to a Vote of Security Holders.
 
  ITEM 5. Other Information.
  26




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##### Table of Contents



ITEM 6. Exhibits.
 Exhibits
 Exhibit No.
    
    Description of Exhibit4.1
    
    Supplemental Indenture No. 4, dated as of February 27, 2007,
by and among Town Sports International, LLC, as issuer, the
Guarantors named therein and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.1 of the Companys
Current Report on Form 8-K filed February 28, 2007)10.1
    
    Credit Agreement dated as of February 27, 2007, by and among
Town Sports International Holdings, Inc. and Town Sports
International, LLC, and Deutsche Bank Trust Company Americas,
as administrative agent, Deutsche Bank Securities, Inc., as
sole lead arranger and book manager, and a syndicate of
lenders named therein (incorporated by reference to Exhibit
10.1 of the Companys Current Report on Form 8-K filed March
5, 2007)10.2
    
    Subsidiaries Guaranty dated as of February 27, 2007, made by
each of the guarantors named therein (incorporated by
reference to Exhibit 10.2 of the Companys Current Report on
Form 8-K filed March 5, 2007)10.3
    
    Borrower/Sub Pledge Agreement, dated as of February 27, 2007,
among each of the pledgors named therein and Deutsche Bank
Trust Company Americas, as collateral agent (incorporated by
reference to Exhibit 10.3 of the Companys Current Report on
Form 8-K filed March 5, 2007)10.4
    
    Security Agreement, dated as of February 27, 2007, made by
each of the assignors named therein in favor of Deutsche Bank
Trust Company Americas, as collateral agent (incorporated by
reference to Exhibit 10.4 of the Companys Current Report on
Form 8-K filed March 5, 2007)10.5
    
    Amendment No. 2 to the Town Sports International Holdings,
Inc. 2006 Stock Incentive Plan (incorporated by reference to
Exhibit 10.1 of the Companys Current Report on Form 8-K filed
March 12, 2007)10.6
    
    Non-Employee Director Compensation Summary (incorporated by
reference to Exhibit 10.2 of the Companys Current Report on
Form 8-K filed March 12, 2007)10.7
    
    Form of the Non-Qualified Stock Option Agreement for
Non-Employee Directors pursuant to the Companys 2006 Stock
Incentive Plan (incorporated by reference to Exhibit 10.1 of
the Companys Current Report on Form 8-K filed April 2, 2007)31.1
    
    Certification of Chief Executive Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act, as amended31.2
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act, as amended32.1
    
    Section 1350 Certification32.2
    
    Section 1350 Certification
 27




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##### Table of Contents



SIGNATURES
  TOWN SPORTS INTERNATIONALHOLDINGS, INC.DATE: May 7, 2007By:
    
    /s/ Richard PyleRichard PyleChief Financial Officer(principal financial, accounting officer)DATE: May 7, 2006By:
    
    /s/ Robert GiardinaRobert GiardinaChief Executive Officer(principal executive officer)
 28