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Life Time Fitness Announces Third Quarter 2008 Financial Results
Company Reports Revenue Growth of 17.3%, Net Income Growth of 17.6%, and Earnings Per Diluted Share of $0.55 for the Quarter
"In the face of pressures impacting all segments of our economy, we are pleased with our third quarter results, which are indicative of continued execution on our key business strategies"

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

Third quarter 2008 revenue grew 17.3% to $198.8 million from $169.5 million during the same period last year. Net income during the quarter grew 17.6% to $21.6 million, or $0.55 per diluted share. This compares to net income of $18.4 million, or $0.48 per diluted share, for 3Q 2007. For the nine months ended September 30, 2008, revenue grew 18.8% to $575.7 million from $484.7 million during the same period last year. Net income grew 20.1% for the same period to $58.8 million, or $1.49 per diluted share, from $49.0 million, or $1.30 per diluted share, for the first nine months of 2007.

“In the face of pressures impacting all segments of our economy, we are pleased with our third quarter results, which are indicative of continued execution on our key business strategies,” said Bahram Akradi, Life Time Fitness chairman and chief executive officer. “Our unique member service and program offerings led to more than 18% in-center revenue growth. We also saw an increase in annual membership growth from the second quarter to third quarter, indicating consumer demand for our facilities and services in spite of challenging economic conditions.”

During the third quarter, Life Time Fitness continued its expansion efforts with openings in Rockville, its second location in Maryland; CityCentre, its fourth location in Houston; and Vernon Hills, its ninth location in Illinois. In October, the Company held grand opening events at Mansfield, its eighth location in Dallas, and Loudoun County, its third location in Virginia. Life Time Fitness will hold its final two planned 2008 grand openings in November at Florham Park, its first location in New Jersey, and Westminster, its second location in Colorado.

Three and Nine Months Ended September 30, 2008, Financial Highlights:

Total revenue for the third quarter grew 17.3% to $198.8 million, driven primarily by growth in membership dues and in-center revenue. Total revenue for the first nine months of 2008 grew to $575.7 million from $484.7 million during the same period last year.

        YTD 2008 vs.
(Period-over-period growth)   3Q 2008 vs. 3Q 2007   YTD 2007
  • Membership dues
     17.4 %     18.2 %
  • Enrollment fees
     4.9 %     7.7 %
  • In-center revenue
     18.2 %     21.9 %
         
  • Same-center revenue
     3.9 %     3.8 %
  • Average center revenue / membership
   $ 358 - up 3.9 %   $ 1,082 - up 6.5 %
  • Average in-center revenue / membership
   $ 104 - up 4.8 %   $ 321 - up 9.2 %

Memberships increased 13.2% to 557,164 at September 30, 2008, from 492,410 at September 30, 2007.

Total operating expenses during 3Q 2008 were $156.7 million compared to $131.9 million for 3Q 2007, driven primarily by increased expenses to support new centers, membership growth, and presale activities. Year-to-date operating expenses totaled $457.7 million, compared to $384.9 million for the same period last year.

Operating margin was 21.2% for 3Q 2008 compared to 22.1% in the prior-year period. Year-to-date operating margin was 20.5%, compared to 20.6% in the prior-year period.

        YTD 2008 vs.
(Expense as a percent of total revenue)   3Q 2008 vs. 3Q 2007   YTD 2007
         
  • Center operations
   58.5% vs. 57.6%   58.6% vs. 58.0%
  • Advertising and marketing
   3.7% vs. 3.2%   4.1% vs. 3.8%
  • General and administrative
   4.8% vs. 5.8%   5.3% vs. 6.4%
  • Other operating
   2.5% vs. 2.5%   2.4% vs. 2.3%
  • Depreciation and amortization
   9.4% vs. 8.8%   9.1% vs. 8.9%

Net income during 3Q 2008 grew 17.6% to $21.6 million from $18.4 million in 3Q 2007. For the nine months ended September 30, 2008, net income grew to $58.8 million compared with $49.0 million in the prior-year period.

EBITDA for 3Q 2008 grew 15.9% to $61.2 million from $52.8 million in 3Q 2007. Year-to-date EBITDA grew 19.1% to $171.5 million from $144.0 million for the same period last year.

Cash flows from operations for the first nine months of 2008 totaled $151.0 million, up 40.7% compared with $107.3 million in the prior-year period.

Weighted average fully diluted shares for 3Q 2008 totaled 39.4 million compared to 38.3 million shares in 3Q 2007.

Updated 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 $775-$780 million, or approximately 18-19% growth (down from 19-22%, or approximately $780-$800 million), driven primarily by new center growth, membership ramp at new and existing centers, and in-center revenue growth.
  • Net income is expected to be $79.0-$80.5 million, or approximately 16-18% growth (down from 21-23%, or approximately $82.0-$83.5 million), driven primarily by our growth strategies.
  • Diluted earnings per common share is expected to be $2.01-$2.04, or approximately 13-15% growth (down from 16-18%, or approximately $2.06-$2.09 per share).

The Company will hold a conference call today at 10:00 a.m. ET to discuss its third 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 call. The conference call will be Web cast live 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 today 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 October 23, 2008, Life Time Fitness operated 79 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 at lifetimefitness.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)
             
             
        September 30, 2008   December 31, 2007
        (Unaudited)    
ASSETS        
CURRENT ASSETS:      
  Cash and cash equivalents $ 7,119     $ 5,354  
  Accounts receivable, net   5,318       4,475  
  Inventories   14,739       14,324  
  Prepaid expenses and other current assets   15,510       15,963  
  Deferred membership origination costs   19,280       16,205  
  Deferred income taxes   2,126       1,188  
  Income tax receivable   -       5,814  
    Total current assets   64,092       63,323  
PROPERTY AND EQUIPMENT, net   1,451,641       1,259,271  
RESTRICTED CASH   9,285       6,767  
DEFERRED MEMBERSHIP ORIGINATION COSTS   14,895       14,367  
OTHER ASSETS   56,012       42,805  
    TOTAL ASSETS $ 1,595,925     $ 1,386,533  
             
LIABILITIES AND SHAREHOLDERS' EQUITY      
CURRENT LIABILITIES:      
  Current maturities of long-term debt $ 10,222     $ 9,568  
  Accounts payable   15,921       12,872  
  Construction accounts payable   86,744       59,261  
  Accrued expenses   55,430       47,052  
  Deferred revenue   37,146       34,851  
    Total current liabilities   205,463       163,604  
LONG-TERM DEBT, net of current portion   636,898       555,037  
DEFERRED RENT LIABILITY   26,906       25,526  
DEFERRED INCOME TAXES   48,931       38,607  
DEFERRED REVENUE   15,415       17,529  
OTHER LIABILITIES   21,888       13,673  
    Total liabilities   955,501       813,976  
SHAREHOLDERS' EQUITY:      
  Common stock   794       783  
  Additional paid-in capital   383,470       373,910  
  Retained earnings   258,696       199,890  
  Accumulated other comprehensive loss   (2,536 )     (2,026 )
    Total shareholders' equity   640,424       572,557  
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,595,925     $ 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   Nine Months Ended
      September 30,   September 30,
        2008     2007       2008     2007  
REVENUE:          
  Membership dues $ 131,232   $ 111,744     $ 377,001   $ 318,939  
  Enrollment fees   6,818     6,501       19,991     18,565  
  In-center revenue   56,151     47,517       167,385     137,305  
    Total center revenue   194,201     165,762       564,377     474,809  
  Other revenue   4,608     3,688       11,290     9,879  
    Total revenue   198,809     169,450       575,667     484,688  
OPERATING EXPENSES:          
  Center operations   116,300     97,626       337,139     281,153  
  Advertising and marketing   7,287     5,359       23,608     18,167  
  General and administrative   9,453     9,750       30,707     30,931  
  Other operating   4,926     4,255       13,696     11,371  
  Depreciation and amortization   18,720     14,917       52,500     43,282  
    Total operating expenses   156,686     131,907       457,650     384,904  
    Income from operations   42,123     37,543       118,017     99,784  
OTHER INCOME (EXPENSE):          
  Interest expense, net   (7,185 )   (7,135 )     (21,301 )   (19,032 )
  Equity in earnings of affiliate   336     316       985     917  
    Total other income (expense)   (6,849 )   (6,819 )     (20,316 )   (18,115 )
INCOME BEFORE INCOME TAXES   35,274     30,724       97,701     81,669  
PROVISION FOR INCOME TAXES   13,700     12,374       38,895     32,700  
NET INCOME $ 21,574   $ 18,350     $ 58,806   $ 48,969  
BASIC EARNINGS PER COMMON SHARE $ 0.55   $ 0.49     $ 1.51   $ 1.32  
DILUTED EARNINGS PER COMMON SHARE $ 0.55   $ 0.48     $ 1.49   $ 1.30  
WEIGHTED AVERAGE NUMBER OF COMMON SHARES          
  OUTSTANDING - BASIC   39,025     37,630       38,946     37,061  
WEIGHTED AVERAGE NUMBER OF COMMON SHARES          
  OUTSTANDING - DILUTED   39,370     38,309       39,350     37,651  
LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
        For the Nine Months Ended
        September 30,
          2008     2007  
CASH FLOWS FROM OPERATING ACTIVITIES:    
  Net income $ 58,806   $ 48,969  
  Adjustments to reconcile net income to net cash provided by    
  operating activities:    
    Depreciation and amortization   52,500     43,282  
    Deferred income taxes   8,094     4,856  
    Provision for doubtful accounts   15     105  
    Loss on disposal of property and equipment, net   1,159     281  
    Amortization of deferred financing costs   1,078     628  
    Share-based compensation   5,989     5,671  
    Excess tax benefit from stock option exercises   (38 )   (4,501 )
    Equity in earnings of affiliate   (985 )   (917 )
    Changes in operating assets and liabilities   24,328     8,953  
    Other   54     17  
      Net cash provided by operating activities   151,000     107,344  
           
CASH FLOWS FROM INVESTING ACTIVITIES:    
  Purchases of property and equipment (excluding non-cash purchases  
    supplementally noted below)   (360,551 )   (310,478 )
  Proceeds from sale of property and equipment   161,885     4,664  
  Gain on sale leaseback transactions   (7,488 )   -  
  Proceeds from property insurance settlements   317     48  
  Increase in other assets   (6,443 )   (6,568 )
  Increase in restricted cash   (2,518 )   (2,253 )
      Net cash used in investing activities   (214,798 )   (314,587 )
           
CASH FLOWS FROM FINANCING ACTIVITIES:    
  Proceeds from long-term borrowings   39,188     105,000  
  Repayments of long-term borrowings   (13,043 )   (9,279 )
  Proceeds from revolving credit facility, net   42,500     2,800  
  Increase in deferred financing costs   (6,113 )   (2,008 )
  Proceeds from common stock offering, net of underwriting discount  
    and offering costs   -     92,510  
  Excess tax benefit from stock option exercises   38     4,501  
  Proceeds from stock option exercises   2,993     7,612  
      Net cash provided by financing activities   65,563     201,136  
           
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   1,765     (6,107 )
CASH AND CASH EQUIVALENTS - Beginning of period   5,354     6,880  
CASH AND CASH EQUIVALENTS - End of period $ 7,119   $ 773  
           
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:  
  Cash payments for interest, net of capitalized interest $ 19,555   $ 17,845  
  Cash payments for income taxes $ 18,839   $ 24,982  
           
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND    
  FINANCING ACTIVITIES:    
  Purchases of property and equipment financed through capital    
    lease obligations $ 12,294   $ -  
  Purchases of property and equipment in accounts payable $ 28,909   $ 2,548  
  Non-cash share-based compensation capitalized to projects    
    under development $ 552   $ 522  

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   Nine Months Ended
    September 30,   September 30,
      2008     2007     2008     2007
                 
Net income   $ 21,574   $ 18,350   $ 58,806   $ 48,969
Interest expense, net   7,185     7,135     21,301     19,032
Provision for income taxes   13,700     12,374     38,895     32,700
Depreciation and amortization   18,720     14,917     52,500     43,282
EBITDA   $ 61,179   $ 52,776   $ 171,502   $ 143,983
 
For further information: Ken Cooper, 952-229-7427 (Investors) ir@lifetimefitness.com Jason Thunstrom, 952-229-7435 (Media) pr@lifetimefitness.com