News

Life Time Fitness Announces Second Quarter 2008 Financial Results
Company Reports Revenue Growth of 18.7%, Net Income Growth of 20.3%, and Earnings Per Diluted Share of $0.50 for the Quarter
"Our second quarter results demonstrate continued delivery against our key business strategies"

CHANHASSEN, Minn.--(BUSINESS WIRE)--Life Time Fitness, Inc. (NYSE:LTM) today reported its operating results for the second quarter ended June 30, 2008.

Second quarter 2008 revenue grew 18.7% to $192.4 million from $162.1 million during the same period last year. Net income during the quarter grew 20.3% to $19.8 million, or $0.50 per diluted share. This compares to net income of $16.5 million, or $0.44 per diluted share, for 2Q 2007.

For the six months ended June 30, 2008, revenue grew 19.5% to $376.9 million from $315.2 million during the same period last year. Net income grew 21.6% for the same period to $37.2 million, or $0.95 per diluted share, from $30.6 million, or $0.82 per diluted share, for the first six months of 2007.

“Our second quarter results demonstrate continued delivery against our key business strategies,” said Bahram Akradi, Life Time Fitness chairman and chief executive officer. “We are seeing continued in-center revenue growth, driven by our unique, member-focused services and programs designed to help members realize their health and fitness goals. We also saw an increase in annual membership growth from the first quarter to second quarter, indicating that consumers are continuing to invest in their health and wellness, and seeking the depth and breadth of our offerings. Additionally, we are continuing to drive member connectivity initiatives that further increase the impact and value of Life Time Fitness for our members.”

Life Time Fitness continued its expansion efforts during the quarter with openings in West County, Missouri, the first location in the St. Louis market, and Johns Creek, Georgia, and Mountain Brook, Georgia, the Company’s third and fourth locations in the Atlanta market, respectively. The Company also completed comprehensive remodeling projects and held grand opening events at four previously acquired clubs in Minnesota. Construction is underway for the remaining seven planned openings in 2008.

Three and Six Months Ended June 30, 2008, Financial Highlights:

Total revenue for the second quarter grew 18.7% to $192.4 million, driven primarily by growth in membership dues and in-center revenue. Total revenue for the first six months of 2008 grew to $376.9 million from $315.2 million during the same period last year.

        YTD 2008 vs.
(Period-over-period growth)   2Q 2008 vs. 2Q 2007   YTD 2007
  • Membership dues
  18.2%   18.6%
  • Enrollment fees
  4.1%   9.2%
  • In-center revenue
  22.0%   23.9%
  • Same-center revenue
  3.3%   3.8%
  • Average center revenue / membership
 

$361 – up 6.9%

 

$724 – up 7.7%

  • Average in-center revenue / membership
 

$107 – up 9.8%

 

$218 – up 11.4%

         

Memberships increased 11.9% to 547,497 at June 30, 2008 from 489,489 at June 30, 2007.

Total operating expenses during 2Q 2008 totaled $152.5 million compared to $128.6 million for 2Q 2007, driven primarily by increased expenses to support new centers, membership growth, and presale activities. Year-to-date operating expenses totaled $301.0 million, compared with $253.0 million for the same period last year.

Operating margin was 20.7% for 2Q 2008, the same as in the prior-year period. Year-to-date operating margin was 20.1%, compared to 19.7% in the prior-year period.

        YTD 2008 vs.
(Expense as a percent of total revenue)   2Q 2008 vs. 2Q 2007   YTD 2007
         
  • Center operations
  58.9% vs. 58.0%   58.6% vs. 58.2%
  • Advertising and marketing
  3.5% vs. 3.4%   4.3% vs. 4.1%
  • General and administrative
  5.5% vs. 6.6%   5.7% vs. 6.7%
  • Other operating
  2.4% vs. 2.3%   2.3% vs. 2.3%
  • Depreciation and amortization
  9.0% vs. 9.0%   9.0% vs. 9.0%
         

Net income during 2Q 2008 grew 20.3% to $19.8 million from $16.5 million in 2Q 2007, driven by continued top-line growth. For the six months ended June 30, 2008, net income grew to $37.2 million compared with $30.6 million in the prior-year period.

EBITDA for 2Q 2008 grew 18.4% to $57.4 million from $48.5 million in 2Q 2007. Year-to-date EBITDA grew 21.0% to $110.3 million from $91.2 million for the same period last year.

Cash flows from operations for the first half of 2008 totaled $105.7 million compared with $66.2 million in the prior-year period.

Weighted average fully diluted shares for 2Q 2008 totaled 39.3 million compared to 37.5 million shares in 2Q 2007.

Reaffirmed 2008 Business Outlook:

The following statements are based on the Company’s current expectations for fiscal year 2008 and subject to the risks and uncertainties described below:

  • Revenue is expected to be $780-$800 million, or approximately 19-22% growth. This year-over-year increase is driven primarily by new center growth, membership ramp at new and existing centers, and in-center revenue growth.
  • Net income is expected to be $82.0-$83.5 million, or approximately 21-23% growth. This year-over-year increase is driven primarily by our growth strategies.
  • Diluted earnings per common share is expected to be $2.06-$2.09, or approximately 16-18% growth.

As announced on July 16, 2008, the Company will hold a conference call today at 10:00 a.m. ET to discuss second quarter 2008 results. Bahram Akradi, chairman and chief executive officer, Michael Robinson, executive vice president and chief financial officer, and Kenneth Cooper, vice president of Finance, will host the conference call. The conference call will be Web cast and may be accessed via the Company’s Investor Relations section of its Web site at lifetimefitness.com. A replay of the call will be available the same day via the Company’s Web site beginning at approximately 1:00 p.m. ET.

About Life Time Fitness, Inc.

Life Time Fitness, Inc. (NYSE:LTM) operates distinctive and large, multi-use sports and athletic, professional fitness, family recreation and resort and spa centers. The company also provides consumers with personal training consultation, full-service spas and cafes, corporate wellness programs, health and nutrition education, the healthy lifestyle magazine, Experience Life, athletic events and nutritional products. As of July 24, 2008, Life Time Fitness operated 74 centers in 17 states, including Arizona, Colorado, Florida, Georgia, Illinois, Indiana, Kansas, Maryland, Michigan, Minnesota, Missouri, Nebraska, North Carolina, Ohio, Texas, Utah and Virginia. Life Time Fitness is headquartered in Chanhassen, Minnesota, and can be located on the Web atlifetimefitness.com. LIFE TIME FITNESS, EXPERIENCE LIFE, and the LIFE TIME FITNESS TRIATHLON SERIES are registered trademarks of Life Time Fitness, Inc. All other trademarks or registered trademarks are the property of their respective owners.

Risks & Uncertainties

Certain information contained in this press release may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause the Company’s actual results in the future to differ materially from its historical results and those presently anticipated or projected. Among these factors are identifying and acquiring suitable sites for new sports, fitness and family recreation centers, opening new sports, fitness and family recreation centers, attracting and retaining members, obtaining additional financing and other factors set forth in the Company’s filings with the Securities and Exchange Commission. Diluted earnings per share could also be affected by the number of shares outstanding, which depends on factors such as the number of shares issued upon exercise of stock options and future grants of awards pursuant to equity-based incentive plans as well as stock offerings. The Company cautions investors not to place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update such statement to reflect events or circumstances arising after such date.

All remarks made during the Company’s financial results conference call will be current at the time of the call and the Company undertakes no obligation to update the replay.

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
               
               
          June 30, 2008   December 31, 2007
          (Unaudited)    
ASSETS          
CURRENT ASSETS:        
  Cash and cash equivalents   $ 3,674     $ 5,354  
  Accounts receivable, net     3,800       4,475  
  Inventories     14,198       14,324  
  Prepaid expenses and other current assets     18,506       15,963  
  Deferred membership origination costs     18,289       16,205  
  Deferred income taxes     1,352       1,188  
  Income tax receivable     -       5,814  
    Total current assets     59,819       63,323  
PROPERTY AND EQUIPMENT, net     1,494,787       1,259,271  
RESTRICTED CASH     9,001       6,767  
DEFERRED MEMBERSHIP ORIGINATION COSTS     15,658       14,367  
OTHER ASSETS     54,639       42,805  
    TOTAL ASSETS   $ 1,633,904     $ 1,386,533  
               
LIABILITIES AND SHAREHOLDERS' EQUITY        
CURRENT LIABILITIES:        
  Current maturities of long-term debt   $ 9,953     $ 9,568  
  Accounts payable     14,377       12,872  
  Construction accounts payable     76,665       59,261  
  Accrued expenses     56,814       47,052  
  Deferred revenue     41,190       34,851  
    Total current liabilities     198,999       163,604  
LONG-TERM DEBT, net of current portion     712,800       555,037  
DEFERRED RENT LIABILITY     26,429       25,526  
DEFERRED INCOME TAXES     46,538       38,607  
DEFERRED REVENUE     17,777       17,529  
OTHER LIABILITIES     16,076       13,673  
    Total liabilities     1,018,619       813,976  
SHAREHOLDERS' EQUITY:        
  Common stock     792       783  
  Additional paid-in capital     379,705       373,910  
  Retained earnings     237,122       199,890  
  Accumulated other comprehensive loss     (2,334 )     (2,026 )
    Total shareholders' equity     615,285       572,557  
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 1,633,904     $ 1,386,533  
                     
LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
        For the   For the
        Three Months Ended   Six Months Ended
        June 30,   June 30,
          2008       2007       2008       2007  
REVENUE:                
  Membership dues   $ 126,121     $ 106,667     $ 245,769     $ 207,195  
  Enrollment fees     6,640       6,378       13,173       12,064  
  In-center revenue     55,969       45,891       111,234       89,788  
    Total center revenue     188,730       158,936       370,176       309,047  
  Other revenue     3,677       3,201       6,682       6,191  
    Total revenue     192,407       162,137       376,858       315,238  
OPERATING EXPENSES:                
  Center operations     113,259       94,035       220,839       183,527  
  Advertising and marketing     6,823       5,439       16,321       12,808  
  General and administrative     10,582       10,693       21,254       21,181  
  Other operating     4,675       3,792       8,770       7,116  
  Depreciation and amortization     17,190       14,678       33,780       28,365  
    Total operating expenses     152,529       128,637       300,964       252,997  
    Income from operations     39,878       33,500       75,894       62,241  
OTHER INCOME (EXPENSE):                
  Interest expense, net     (6,905 )     (6,369 )     (14,116 )     (11,897 )
  Equity in earnings of affiliate     326       285       649       601  
    Total other income (expense)     (6,579 )     (6,084 )     (13,467 )     (11,296 )
INCOME BEFORE INCOME TAXES     33,299       27,416       62,427       50,945  
PROVISION FOR INCOME TAXES     13,471       10,931       25,195       20,326  
NET INCOME   $ 19,828     $ 16,485     $ 37,232     $ 30,619  
BASIC EARNINGS PER COMMON SHARE   $ 0.51     $ 0.45     $ 0.96     $ 0.83  
DILUTED EARNINGS PER COMMON SHARE   $ 0.50     $ 0.44     $ 0.95     $ 0.82  

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC

    38,963       36,864       38,923       36,747  

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED

    39,325       37,498       39,372       37,359  
                                 
LIFE TIME FITNESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
(Unaudited)
          For the Six Months Ended
          June 30,
            2008       2007  
CASH FLOWS FROM OPERATING ACTIVITIES:        
  Net income   $ 37,232     $ 30,619  
  Adjustments to reconcile net income to net cash provided by operating activities:        
         
    Depreciation and amortization     33,780       28,365  
    Deferred income taxes     8,874       2,474  
    Provision for doubtful accounts     27       46  
    Loss on disposal of property and equipment, net     1,335       164  
    Amortization of deferred financing costs     571       405  
    Share-based compensation     3,895       3,816  
    Excess tax benefit from stock option exercises     (5 )     (3,838 )
    Equity in earnings of affiliate     (654 )     (601 )
    Changes in operating assets and liabilities     20,555       4,692  
    Other     50       35  
      Net cash provided by operating activities     105,660       66,177  
               
CASH FLOWS FROM INVESTING ACTIVITIES:        
  Purchases of property and equipment (excluding non-cash purchases supplementally noted below)        
      (235,577 )     (200,446 )
  Proceeds from sale of property and equipment     365       48  
  Proceeds from property insurance settlements     270       48  
  Increase in other assets     (12,140 )     (9,555 )
  Increase in restricted cash     (2,234 )     (1,011 )
      Net cash used in investing activities     (249,316 )     (210,916 )
               
CASH FLOWS FROM FINANCING ACTIVITIES:        
  Proceeds from long-term borrowings     38,538       105,000  
  Repayments of long-term borrowings     (10,588 )     (6,147 )
  Proceeds from revolving credit facility, net     116,200       40,000  
  Increase in deferred financing costs     (3,641 )     (1,896 )
  Excess tax benefit from stock option exercises     5       3,838  
  Proceeds from stock option exercises     1,462       5,327  
      Net cash provided by financing activities     141,976       146,122  
               
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS     (1,680 )     1,383  
CASH AND CASH EQUIVALENTS - Beginning of period     5,354       6,880  
CASH AND CASH EQUIVALENTS - End of period   $ 3,674     $ 8,263  
               
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:        
  Cash payments for interest, net of capitalized interest   $ 17,993     $ 15,114  
  Cash payments for income taxes   $ 3,855     $ 16,924  
               
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:        
       
  Purchases of property and equipment financed through capital lease obligations        
    $ 12,121     $ -  
  Purchases of property and equipment in accounts payable   $ 17,999     $ 3,671  
  Non-cash share-based compensation capitalized to projects under development        
    $ 443     $ 338  
                   

Non-GAAP Financial Measures

This release contains a non-GAAP disclosure, EBITDA, which consists of net income plus interest expense, net, provision for income taxes and depreciation and amortization. This term, as the Company defines it, may not be comparable to a similarly titled measure used by other companies and is not a measure of performance presented in accordance with GAAP. The Company uses EBITDA as a measure of operating performance. The funds depicted by EBITDA are not necessarily available for discretionary use if they are reserved for particular capital purposes, to maintain compliance with debt covenants, to service debt or to pay taxes. EBITDA should not be considered as a substitute for net income, cash flows provided by operating activities or other income or cash flow data prepared in accordance with GAAP. Additional details related to EBITDA are provided in the Form 8-K that the Company filed with the Securities and Exchange Commission on the date of this press release.

The following table provides a reconciliation of net income, the most directly comparable GAAP measure, to EBITDA:

RECONCILIATION OF NET INCOME TO EARNINGS BEFORE INTEREST,
INCOME TAXES AND DEPRECIATION AND AMORTIZATION
(In thousands)
(Unaudited)
                 
    For the   For the
    Three Months Ended   Six Months Ended
    June 30,   June 30,
      2008     2007     2008     2007
                 
Net income   $ 19,828   $ 16,485   $ 37,232   $ 30,619
Interest expense, net     6,905     6,369     14,116     11,897
Provision for income taxes     13,471     10,931     25,195     20,326
Depreciation and amortization     17,190     14,678     33,780     28,365
EBITDA   $ 57,394   $ 48,463   $ 110,323   $ 91,207
 
For further information: Life Time Fitness, Inc. Investors: Kenneth Cooper, 952-229-7427 ir@lifetimefitness.com or Media: Jason Thunstrom, 952-229-7435 pr@lifetimefitness.com