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Life Time Fitness Announces Second Quarter 2010 Financial Results
Company Reports Revenue Growth of 8.7%, Net Income Growth of 19.8% and Earnings Per Diluted Share of $0.53 for the Quarter
"During the second quarter, we continued to see good progress in our operating results despite sustained consumer headwinds"

CHANHASSEN, Minn.--(BUSINESS WIRE)--Life Time Fitness, Inc. (NYSE:LTM) today reported its operating results for the second quarter ended June 30, 2010.

Revenue for the second quarter of 2010 grew 8.7% to $231.1 million from $212.5 million during the same period last year. Net income during the quarter was $21.9 million, or $0.53 per diluted share, compared with $18.3 million, or $0.46 per diluted share, for 2Q 2009.

For the six months ended June 30, 2010, revenue grew 7.6% to $450.9 million from $419.0 million during the same period last year. Net income for the same period was $39.7 million, or $0.98 per diluted share, as compared with $33.4 million, or $0.85 per diluted share, for the first six months of 2009.

“During the second quarter, we continued to see good progress in our operating results despite sustained consumer headwinds,” said Bahram Akradi, chairman, president and chief executive officer. “Of particular note, we achieved our second quarter stretch goal of positive same-center revenue on our mature stores. This speaks to the unwavering focus we have placed on providing our members with high-quality, high-value services and products. Additionally, we reduced our attrition rate for the quarter to 8.4%, driven by the ongoing impact of our connectivity initiatives and relentless commitment to improve the member experience we provide. Furthermore, I am very pleased with the cohesiveness and alignment of our entire company around delivering the people, programs and places that help our members achieve their goals.”

In August, the Company plans to open a new yoga and Pilates boutique in Minneapolis. Additionally, in December, the Company plans to open a large-format center in Centennial, Colorado, representing the third Life Time Fitness center in the Denver market.

Three and Six Months Ended June 30, 2010, Financial Highlights:

Total revenue for the second quarter grew 8.7% to $231.1 million from $212.5 million in 2Q 2009. Total revenue for the first six months of 2010 grew 7.6% to $450.9 million from $419.0 million during the same period last year.

       
(Period-over-period growth) 2Q 2010 vs. 2Q 2009   YTD 2010 vs. YTD 2009
  • Membership dues

7.0%

  

6.4%
  • Enrollment fees
 (5.6%)   (3.9%)
  • In-center revenue

13.6%

   12.1%
       
  • Same-center revenue (13th month of operation)
 4.8%   3.7%
  • Same-center revenue (37th month of operation)
 1.8%   0.4%
  • Average center revenue / membership
 $371 – up 5.0%   $740 – up 4.8%
  • Average in-center revenue / membership
 $112 – up 9.9%   $223 – up 9.1%

Memberships increased 3.9% to 631,862 at June 30, 2010, from 608,281 at June 30, 2009.

Total operating expenses during 2Q 2010 totaled $188.2 million compared with $174.3 million for 2Q 2009. Year-to-date operating expenses totaled $370.3 million compared with $348.2 million for the same period last year.

Operating margin was 18.6% for 2Q 2010 compared with 18.0% during the prior-year period. Year-to-date operating margin was 17.9%, compared with 16.9% in the prior-year period.

       
(Expense as a percent of total revenue) 2Q 2010 vs. 2Q 2009   YTD 2010 vs. YTD 2009
  • Center operations
 61.5% vs. 60.6%   62.0% vs. 61.1%
  • Advertising and marketing
 2.6% vs. 2.9%   2.8% vs. 3.4%
  • General and administrative
 4.9% vs. 5.5%   4.9% vs. 5.6%
  • Other operating
 2.4% vs. 2.3%   2.2% vs. 2.3%
  • Depreciation and amortization
 10.0% vs. 10.7%   10.2% vs. 10.7%

Net income during 2Q 2010 was $21.9 million compared with $18.3 million for 2Q 2009. For the six months ended June 30, 2010, net income was $39.7 million compared with $33.4 million in the prior-year period.

EBITDA for 2Q 2010 grew 8.5% to $66.4 million from $61.2 in 2Q 2009. Year-to-date EBITDA grew 9.5% to $127.2 million from $116.1 million during the same period last year.

Cash flows from operating activities for the first half of 2010 totaled $100.7 million compared with $98.3 million in the prior-year period.

Weighted average fully diluted shares for 2Q 2010 totaled 41.2 million compared with 39.8 million in 2Q 2009.

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 $890-905 million (up from $880-895 million), driven primarily by membership dues and in-center revenue growth.
  • Net income is expected to be $79.0-81.0 million (up from $76.5-79.5 million), driven by revenue growth and cost efficiencies.
  • Diluted earnings per common share is expected to be $1.92-1.98 (up from $1.88-1.96).

As announced on July 15, 2010, the Company will hold a conference call today at 10:00 a.m. ET to discuss its second 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 webcast and may be accessed via the Company's Investor Relations section of its website at lifetimefitness.com. A replay of the call will be available via the Company’s website beginning at approximately 1:00 p.m. ET today.

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 July 22, 2010, the Company operated 89 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’s expectations for fiscal year 2010 exclude any unusual items that might occur during the fiscal year, such as legal matters or the potential recognition of compensation expense in association with the June 2009 grant of long-term performance-based restricted stock to the Company’s senior management team. The Company cautions investors not to place undue reliance on any forward-looking statement. Any forward-looking statement speaks only as of the date on which the 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,   December 31,
        2010   2009
        (Unaudited)    
ASSETS        
CURRENT ASSETS:      
  Cash and cash equivalents $ 24,010     $ 6,282  
  Accounts receivable, net   4,280       4,026  
  Center operating supplies and inventories   15,559       14,621  
  Prepaid expenses and other current assets   17,279       12,938  
  Deferred membership origination costs   17,660       20,278  
  Deferred income taxes   12       660  
    Total current assets   78,800       58,805  
PROPERTY AND EQUIPMENT, net   1,529,539       1,512,993  
RESTRICTED CASH   1,980       2,941  
DEFERRED MEMBERSHIP ORIGINATION COSTS   7,715       8,716  
OTHER ASSETS   54,544       48,070  
    TOTAL ASSETS $ 1,672,578     $ 1,631,525  
             
LIABILITIES AND SHAREHOLDERS' EQUITY      
CURRENT LIABILITIES:      
  Current maturities of long-term debt $ 11,916     $ 16,716  
  Accounts payable   19,023       14,429  
  Construction accounts payable   20,170       9,882  
  Accrued expenses   54,530       48,235  
  Deferred revenue   39,697       36,939  
    Total current liabilities   145,336       126,201  
LONG-TERM DEBT, net of current portion   616,694       643,630  
DEFERRED RENT LIABILITY   30,821       29,048  
DEFERRED INCOME TAXES   76,495       77,189  
DEFERRED REVENUE   7,770       8,819  
OTHER LIABILITIES   9,409       9,207  
    Total liabilities   886,525       894,094  
SHAREHOLDERS' EQUITY:      
  Common stock   838       829  
  Additional paid-in capital   402,563       395,121  
  Retained earnings   383,815       344,095  
  Accumulated other comprehensive loss   (1,163 )     (2,614 )
    Total shareholders' equity   786,053       737,431  
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,672,578     $ 1,631,525  
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,
      2010   2009   2010   2009
REVENUE:              
  Membership dues $ 152,879     $ 142,841     $ 298,044     $ 280,238  
  Enrollment fees   6,175       6,540       12,499       13,013  
  In-center revenue   68,457       60,250       133,989       119,552  
    Total center revenue   227,511       209,631       444,532       412,803  
  Other revenue   3,577       2,918       6,327       6,180  
    Total revenue   231,088       212,549       450,859       418,983  
OPERATING EXPENSES:              
  Center operations   142,151       128,871       279,734       255,845  
  Advertising and marketing   5,903       6,091       12,675       14,389  
  General and administrative   11,343       11,795       22,043       23,503  
  Other operating   5,549       4,887       9,858       9,774  
  Depreciation and amortization   23,218       22,635       45,984       44,699  
    Total operating expenses   188,164       174,279       370,294       348,210  
    Income from operations   42,924       38,270       80,565       70,773  
OTHER INCOME (EXPENSE):              
  Interest expense, net   (6,917 )     (7,880 )     (15,013 )     (15,354 )
  Equity in earnings of affiliate   303       332       603       669  
    Total other income (expense)   (6,614 )     (7,548 )     (14,410 )     (14,685 )
INCOME BEFORE INCOME TAXES   36,310       30,722       66,155       56,088  
PROVISION FOR INCOME TAXES   14,426       12,462       26,435       22,714  
NET INCOME $ 21,884     $ 18,260     $ 39,720     $ 33,374  
BASIC EARNINGS PER COMMON SHARE $ 0.55     $ 0.46     $ 1.01     $ 0.85  
DILUTED EARNINGS PER COMMON SHARE $ 0.53     $ 0.46     $ 0.98     $ 0.85  
WEIGHTED AVERAGE NUMBER OF COMMON SHARES              
  OUTSTANDING - BASIC   39,885       39,285       39,401       39,167  
WEIGHTED AVERAGE NUMBER OF COMMON SHARES              
  OUTSTANDING - DILUTED   41,154       39,763       40,533       39,475  
LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
          For the
          Six Months Ended
          June 30,
          2010   2009
CASH FLOWS FROM OPERATING ACTIVITIES:        
  Net income   $ 39,720     $ 33,374  
 

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

        
    Depreciation and amortization     45,984       44,699  
    Deferred income taxes     (3,857 )     (421 )
    Loss on disposal of property and equipment, net     592       560  
    Gain on land held for sale     -       (873 )
    Amortization of deferred financing costs     1,437       1,301  
    Share-based compensation     3,561       4,027  
    Excess tax benefit related to share-based payment arrangements     (1,697 )     -  
    Equity in earnings of affiliate     (603 )     (669 )
    Dividend received from equity investment     350       350  
    Changes in operating assets and liabilities     15,150       13,895  
    Other     71       2,041  
      Net cash provided by operating activities     100,708       98,284  
               
CASH FLOWS FROM INVESTING ACTIVITIES:        
  Purchases of property and equipment     (48,164 )     (91,725 )
  Acquisitions, net of cash acquired     (9,414 )     -  
  Proceeds from sale of property and equipment     720       8  
  Proceeds from sale of land held for sale     -       1,327  
  Increase in other assets     (1,423 )     (921 )
  Decrease in restricted cash     961       497  
      Net cash used in investing activities     (57,320 )     (90,814 )
               
CASH FLOWS FROM FINANCING ACTIVITIES:        
  Proceeds from long-term borrowings     -       7,812  
  Repayments of long-term borrowings     (35,152 )     (7,978 )
  Proceeds from (repayments of) revolving credit facility, net     5,101       (6,800 )
  Increase in deferred financing costs     (258 )     (721 )
  Excess tax benefit related to share-based payment arrangements     1,697       -  
  Proceeds from exercise of stock options     2,952       193  
      Net cash used in financing activities     (25,660 )     (7,494 )
               
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS     17,728       (24 )
CASH AND CASH EQUIVALENTS - Beginning of period     6,282       10,829  
CASH AND CASH EQUIVALENTS - End of period   $ 24,010     $ 10,805  

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   For the Six Months Ended
  June 30,   June 30,
  2010   2009   2010   2009
Net income $ 21,884   $ 18,260   $ 39,720   $ 33,374
Interest expense, net   6,917     7,880     15,013     15,354
Provision for income taxes   14,426     12,462     26,435     22,714
Depreciation and amortization   23,218     22,635     45,984     44,699
EBITDA $ 66,445   $ 61,237   $ 127,152   $ 116,141

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. Additional details related to free cash flow 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 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   For the Six Months Ended
  June 30,   June 30,
  2010   2009   2010   2009
Net cash provided by operating activities $ 46,833     $ 48,624     $ 100,708     $ 98,284  
Less: Purchases of property and equipment   (25,125 )     (42,825 )     (48,164 )     (91,725 )
Free cash flow $ 21,708     $ 5,799     $ 52,544     $ 6,559  
 
For further information: Life Time Fitness, Inc. Investor Contact: Ken Cooper, 952-229-7427 ir@lifetimefitness.com or Media Contact: Jason Thunstrom, 952-229-7435 pr@lifetimefitness.com