News

Life Time Fitness Announces First Quarter 2010 Financial Results
Company Reports Revenue Growth of 6.5%, Net Income Growth of 18% and Earnings Per Diluted Share of $0.44 for the Quarter
"During the first quarter, we continued to focus on reducing attrition and growing same-center revenue"

CHANHASSEN, Minn.--(BUSINESS WIRE)--Life Time Fitness, Inc. (NYSE:LTM) today reported its operating results for the first quarter ended March 31, 2010.

Revenue for the first quarter of 2010 grew 6.5% to $219.8 million from $206.4 million during the same period last year. Net income during the quarter was $17.8 million, or $0.44 per diluted share, compared with $15.1 million, or $0.38 per diluted share, for 1Q 2009.

“During the first quarter, we continued to focus on reducing attrition and growing same-center revenue,” said Bahram Akradi, Life Time Fitness chairman, president and chief executive officer. “I am pleased to report positive trends in both areas, which are reflected in our improved operating results. We achieved an attrition rate of 8.5% for the quarter, driven by our relentless commitment to members’ experiences and the growing impact of our connectivity initiatives. At the same time, we saw our third consecutive quarter of mature same-center revenue improvement. This is indicative of our clear focus on delivering programs and services that truly help members achieve success with their fitness goals. Moving forward, we remain focused on improving these key metrics and implementing our healthy way of life initiatives that demonstrate just how different Life Time is when it comes to changing members’ lives for the better.”

During the first quarter, Life Time Fitness opened two new large format centers. These included the January opening of Beachwood, Ohio (the Company’s first location in the Cleveland market) and the March opening of Lenexa, Kansas (the Company’s second location in the Kansas City market). In February, the Company also opened a new Pilates, yoga and personal training boutique in Scottsdale, Arizona. A new Pilates and yoga boutique is planned to open in the third quarter in Minneapolis and the third new large format center opening in 2010 is planned for the Denver market in the fourth quarter.

Three Months Ended March 31, 2010, Financial Highlights:

Total revenue for the first quarter grew 6.5% to $219.8 million, driven by growth in membership dues and in-center revenue.

(Period-over-period growth)    

1Q 2010 vs. 1Q 2009

• Membership dues

    5.7%

• Enrollment fees

    (2.3%)

• In-center revenue

    10.5%
       

• Same-center revenue (13th month of operation)

    2.6%

• Mature same-center revenue (37th month of operation)

    (1.2%)

• Average center revenue per membership

    $369 – up 4.7%

• Average in-center revenue per membership

    $111 – up 8.3%

Memberships grew 2.3% to 613,882 at March 31, 2010, from 599,919 at March 31, 2009.

  • Attrition in 1Q 2010 was 8.5% compared with 9.8% in 1Q 2009.
  • Trailing 12-month attrition through March 31, 2010, improved to 39.3%.

Total operating expenses during 1Q 2010 totaled $182.1 million compared to $173.9 million for 1Q 2009. Operating margin was 17.1% for 1Q 2010, compared to 15.7% in the prior-year period.

(Expense as a percent of total revenue)     1Q 2010 vs. 1Q 2009
  • Center operations
    62.5% vs. 61.5%
  • Advertising and marketing
    3.1% vs. 4.0%
  • General and administrative
    4.9% vs. 5.7%
  • Other operating
    2.0% vs. 2.4%
  • Depreciation and amortization
    10.4% vs. 10.7%

Net income during 1Q 2010 was $17.8 million compared with $15.1 million in 1Q 2009. Net income margin for 1Q 2010 was 8.1% compared with 7.3% in the prior-year period.

EBITDA for 1Q 2010 grew 10.6% to $60.7 million from $54.9 million in 1Q 2009. As a percentage of total revenue, EBITDA was 27.6% in 1Q 2010, compared to 26.6% in the prior-year period.

Cash flows from operations for 1Q 2010 were $53.9 million as compared with $49.7 million in the prior-year period. Free cash flow for 1Q 2010 was $30.8 million.

Weighted average diluted shares for 1Q 2010 totaled 40.8 million as compared with 39.4 million in the prior-year period.

Updated 2010 Business Outlook:

The following statements are based on the Company's current expectations for fiscal year 2010 subject to the risks and uncertainties described below:

  • Revenue is expected to be $880-895 million (updated from $870-895 million), driven primarily by membership dues and in-center revenue growth.
  • Net income is expected to be $76.5-79.5 million (up from $75-79 million), driven by revenue growth and cost efficiencies.
  • Diluted earnings per common share is expected to be $1.88-1.96 (up from $1.85-1.95).

As announced on April 8, 2010, the Company will hold a conference call today at 10:00 a.m. ET to discuss its first quarter 2010 results. Bahram Akradi, 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 via the Company’s Web site beginning at approximately 1:00 p.m. ET today.

The Company also announced on April 8, 2010, that its Annual Meeting of Shareholders will be held at the Life Time Fitness headquarters (2902 Corporate Place in Chanhassen, Minnesota) at 2:00 p.m. ET today. The meeting will be Web cast and may be accessed live via the Company’s Investor Relations section of its Web site at lifetimefitness.com. A replay of the Web cast will be available beginning at approximately 5:00 p.m. ET today, and remain available for 30 days.

About Life Time Fitness, Inc.

Life Time Fitness, Inc. (NYSE:LTM) is a healthy way of life company based in Chanhassen, Minnesota. The Company is dedicated to providing programs and services that help its members connect and engage with their areas of interest, and achieve success with their health and fitness goals. Life Time Fitness designs and operates distinctive, multi-use sports, professional fitness, family recreation and spa/resort centers that help members lead healthy and active lives. As of April 22, 2010, the Company operated 87 centers in 19 states and 24 markets. Additional information about Life Time Fitness centers, programs and services is available at www.lifetimefitness.com.

Risks and 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 attracting and retaining members, risks related to our debt levels and debt covenants, our ability to access existing credit facilities and obtain additional financing, strains on our business from continued growth, risks related to maintenance of our data, competition from other health and fitness centers, delays in opening new centers, identifying and acquiring suitable sites for new centers 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)
               
          March 31,   December 31,
            2010       2009  
          (Unaudited)    
ASSETS          
CURRENT ASSETS:        
  Cash and cash equivalents   $ 12,955     $ 6,282  
  Accounts receivable, net     3,638       4,026  
  Center operating supplies and inventories     15,222       14,621  
  Prepaid expenses and other current assets     16,540       12,938  
  Deferred membership origination costs     19,435       20,278  
  Deferred income taxes     -       660  
    Total current assets     67,790       58,805  
PROPERTY AND EQUIPMENT, net     1,513,385       1,512,993  
RESTRICTED CASH     2,434       2,941  
DEFERRED MEMBERSHIP ORIGINATION COSTS     7,748       8,716  
OTHER ASSETS     47,483       48,070  
    TOTAL ASSETS   $ 1,638,840     $ 1,631,525  
               
LIABILITIES AND SHAREHOLDERS' EQUITY        
CURRENT LIABILITIES:        
  Current maturities of long-term debt   $ 12,815     $ 16,716  
  Accounts payable     17,453       14,429  
  Construction accounts payable     9,499       9,882  
  Accrued expenses     57,485       48,235  
  Deferred revenue     38,154       36,939  
    Total current liabilities     135,406       126,201  
LONG-TERM DEBT, net of current portion     622,056       643,630  
DEFERRED RENT LIABILITY     30,197       29,048  
DEFERRED INCOME TAXES     76,105       77,189  
DEFERRED REVENUE     8,445       8,819  
OTHER LIABILITIES     9,297       9,207  
    Total liabilities     881,506       894,094  
SHAREHOLDERS' EQUITY:        
  Common stock     835       829  
  Additional paid-in capital     396,413       395,121  
  Retained earnings     361,931       344,095  
  Accumulated other comprehensive loss     (1,845 )     (2,614 )
    Total shareholders' equity     757,334       737,431  
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 1,638,840     $ 1,631,525  
LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
        For the
        Three Months Ended
        March 31,
          2010       2009  
REVENUE:        
  Membership dues   $ 145,165     $ 137,397  
  Enrollment fees     6,324       6,473  
  In-center revenue     65,532       59,302  
    Total center revenue     217,021       203,172  
  Other revenue     2,750       3,262  
    Total revenue     219,771       206,434  
OPERATING EXPENSES:        
  Center operations     137,584       126,974  
  Advertising and marketing     6,772       8,298  
  General and administrative     10,700       11,708  
  Other operating     4,308       4,887  
  Depreciation and amortization     22,765       22,064  
    Total operating expenses     182,129       173,931  
    Income from operations     37,642       32,503  
OTHER INCOME (EXPENSE):        
  Interest expense, net     (8,097 )     (7,474 )
  Equity in earnings of affiliate     301       337  
    Total other income (expense)     (7,796 )     (7,137 )
INCOME BEFORE INCOME TAXES     29,846       25,366  
PROVISION FOR INCOME TAXES     12,010       10,252  
NET INCOME   $ 17,836     $ 15,114  
BASIC EARNINGS PER COMMON SHARE   $ 0.45     $ 0.39  
DILUTED EARNINGS PER COMMON SHARE   $ 0.44     $ 0.38  
WEIGHTED AVERAGE NUMBER OF COMMON SHARES        
  OUTSTANDING - BASIC     39,746       39,226  
WEIGHTED AVERAGE NUMBER OF COMMON SHARES        
  OUTSTANDING - DILUTED     40,780       39,392  
LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
          For the
          Three Months Ended
          March 31,
            2010       2009  
CASH FLOWS FROM OPERATING ACTIVITIES:        
  Net income   $ 17,836     $ 15,114  
 

Adjustments to reconcile net income to net cash provided by operating activities:

       
    Depreciation and amortization     22,765       22,064  
    Deferred income taxes     (1,826 )     303  
    Loss on disposal of property and equipment, net     104       119  
    Amortization of deferred financing costs     849       669  
    Share-based compensation     1,775       2,234  
    Equity in earnings of affiliate     (301 )     (337 )
    Dividend received from equity investment     350       350  
    Changes in operating assets and liabilities     12,238       7,868  
    Other     85       1,276  
      Net cash provided by operating activities     53,875       49,660  
               
CASH FLOWS FROM INVESTING ACTIVITIES:        
  Purchases of property and equipment     (23,039 )     (48,900 )
  Proceeds from sale of property and equipment     20       4  
  Increase in other assets     (237 )     (1,634 )
  Decrease in restricted cash     507       144  
      Net cash used in investing activities     (22,749 )     (50,386 )
               
CASH FLOWS FROM FINANCING ACTIVITIES:        
  Proceeds from long-term borrowings     -       4,813  
  Repayments of long-term borrowings     (32,666 )     (3,694 )
  Proceeds from (repayments of) revolving credit facility, net     7,800       (300 )
  Decrease (increase) in deferred financing costs     42       (346 )
  Proceeds from exercise of stock options     371       -  
      Net cash provided by (used in) financing activities     (24,453 )     473  
               
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS     6,673       (253 )
CASH AND CASH EQUIVALENTS - Beginning of period     6,282       10,829  
CASH AND CASH EQUIVALENTS - End of period   $ 12,955     $ 10,576  

Non-GAAP Financial Measures

This release and the related conference call disclose certain non-GAAP financial measures.

EBITDA. Earnings Before Interest, Income Taxes and Depreciation and Amortization (EBITDA) is a non-GAAP disclosure consisting 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, net cash 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 EBITDA
(In thousands)
(Unaudited)
    For the Three Months Ended
    March 31,
      2010     2009
Net income   $ 17,836   $ 15,114
Interest expense, net     8,097     7,474
Provision for income taxes     12,010     10,252
Depreciation and amortization     22,765     22,064
EBITDA   $ 60,708   $ 54,904

Free Cash Flow. Free cash flow is a non-GAAP measure consisting of net cash provided by operating activities, less purchases of property and equipment. This term, as the Company defines it, may not be comparable to a similarly titled measure used by other companies and does not represent the total increase or decrease in the cash balance presented in accordance with GAAP. The Company uses free cash flow as a measure of cash generated after spending on property and equipment. Free cash flow should not be considered as a substitute for net cash provided by operating activities prepared in accordance with GAAP.

The following table provides a reconciliation of net cash provided by operating activities, the most directly comparable GAAP measure, to free cash flow:

RECONCILIATION OF NET CASH PROVIDED BY
OPERATING ACTIVITIES TO FREE CASH FLOW
(In thousands)
(Unaudited)
    For the Three Months Ended
    March 31,
      2010       2009  
Net cash provided by operating activities   $ 53,875     $ 49,660  
Less: Purchases of property and equipment     (23,039 )     (48,900 )
Free cash flow   $ 30,836     $ 760  
 
For further information: Life Time Fitness, Inc. Investor Contact: Ken Cooper, 952-229-7427 ir@lifetimefitness.com Media Contact: Jason Thunstrom, 952-229-7435 pr@lifetimefitness.com