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Life Time Fitness Announces Third Quarter 2010 Financial Results
Company Reports Revenue Growth of 11.2% and Earnings Per Diluted Share of $0.57 for the Quarter
"We are pleased with our third quarter financial results"

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

Third quarter 2010 revenue grew 11.2% to $238.3 million from $214.3 million during the same period last year. Net income for the quarter was $23.4 million, or $0.57 per diluted share, versus $20.6 million, or $0.51 per diluted share, for 3Q 2009. For the nine months ended September 30, 2010, revenue grew 8.8% to $689.2 million from $633.3 million during the same period last year. Net income for the same period was $63.1 million, or $1.55 per diluted share, compared to $54.0 million, or $1.36 per diluted share, for the first nine months of 2009.

“We are pleased with our third quarter financial results,” said Bahram Akradi, Life Time Fitness chairman, president and chief executive officer. “In particular, our strong in-center revenue and same center sales performance, and improvement in member retention, were driven by the continued investments we are making in our member connectivity initiatives and expanded program offerings. Moving forward, further differentiating and expanding our member value proposition will remain a key area of focus. This will occur through enhanced program and service offerings intended to increase member acquisition and retention within the challenged consumer environment we expect to see for the foreseeable future.”

In August, the Company opened 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 Nine Months Ended September 30, 2010, Financial Highlights:

Total revenue for the third quarter grew 11.2% to $238.3 million. Total revenue for the first nine months of 2010 grew to $689.2 million from $633.3 million during the same period last year.

(Period-over-period growth)   3Q 2010 vs. 3Q 2009     YTD 2010 vs. YTD 2009
           
Membership dues   7.2%     6.6%
Enrollment fees   (8.1%)     (5.4%)
In-center revenue   17.5%     13.9%
Same-center revenue (13th month of operation)   6.6%     4.7%
Same-center revenue (37th month of operation)   4.0%     1.6%
Average center revenue / membership   $374 – up 4.4%     $1,113 – up 4.7%
Average in-center revenue / membership   $112 – up 11.9%     $335 – up 10.0%
           

Memberships increased 5.4% to 622,698 at September 30, 2010, from 590,716 at September 30, 2009.

Total operating expenses for 3Q 2010 were $192.7 million compared to $174.3 million for 3Q 2009. Year-to-date operating expenses totaled $563.0 million compared to $522.5 million for the same period last year.

Operating margin was 19.1% for 3Q 2010 compared to 18.7% in the prior-year period. Year-to-date operating margin was 18.3% compared to 17.5% in the prior-year period.

(Expense as a percent of total revenue)    

3Q 2010

  

vs.

  

3Q 2009

    

YTD 2010

  

vs.

  

YTD 2009
                             
Center operations     60.9%   vs.   59.5%     61.7%   vs.   60.5%
Advertising and marketing     2.6%   vs.   2.7%     2.7%   vs.   3.2%
General and administrative     4.5%   vs.   4.5%     4.7%   vs.   5.2%
Other operating     3.1%   vs.   3.7%     2.5%   vs.   2.8%
Depreciation and amortization     9.8%   vs.   10.9%     10.1%   vs.   10.8%
                             

Net income for 3Q 2010 was $23.4 million compared to $20.6 million for 3Q 2009. For the nine months ended September 30, 2010, net income was $63.1 million compared to $54.0 million in the prior-year period.

EBITDA for 3Q 2010 grew 8.7% to $69.3 million from $63.7 million in 3Q 2009. Year-to-date EBITDA grew 9.2% to $196.4 million from $179.9 million during the same period last year.

Cash flows from operations for the first nine months of 2010 totaled $146.1 million compared to $138.6 million in the prior-year period.

Weighted average fully diluted shares for 3Q 2010 totaled 41.3 million compared to 40.3 million in 3Q 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 $900-910 million (up from $890-905 million), driven primarily by in-center revenue growth.
  • Net income is expected to be $81.0-83.5 million (up from $79.0-81.0 million), driven by revenue growth.
  • Diluted earnings per common share is expected to be $1.98-2.04 (up from $1.92-1.98).

As announced on October 14, 2010, the Company will hold a conference call today at 10:00 a.m. ET to discuss its third quarter 2010 results. Bahram Akradi, chairman, president and chief executive officer, Michael Robinson, executive vice president and chief financial officer, and John Heller, senior director, investor relations and treasurer, will host the call. The conference call will be webcast live 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 beginning at approximately 1:00 p.m. ET on October 21, 2010.

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 October 21, 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)
         
    September 30,   December 31,
    2010   2009
    (Unaudited)    
ASSETS        
CURRENT ASSETS:        
Cash and cash equivalents   $ 33,502     $ 6,282  
Accounts receivable, net     5,453       4,026  
Center operating supplies and inventories     15,766       14,621  
Prepaid expenses and other current assets     14,423       12,938  
Deferred membership origination costs     16,245       20,278  
Deferred income taxes     942       660  
Total current assets     86,331       58,805  
PROPERTY AND EQUIPMENT, net     1,546,749       1,512,993  
RESTRICTED CASH     2,052       2,941  
DEFERRED MEMBERSHIP ORIGINATION COSTS     7,281       8,716  
OTHER ASSETS     60,111       48,070  
TOTAL ASSETS   $ 1,702,524     $ 1,631,525  
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
CURRENT LIABILITIES:        
Current maturities of long-term debt   $ 77,518     $ 16,716  
Accounts payable     14,014       14,429  
Construction accounts payable     22,375       9,882  
Accrued expenses     58,085       48,235  
Deferred revenue     33,426       36,939  
Total current liabilities     205,418       126,201  
LONG-TERM DEBT, net of current portion     554,228       643,630  
DEFERRED RENT LIABILITY     31,455       29,048  
DEFERRED INCOME TAXES     81,656       77,189  
DEFERRED REVENUE     7,314       8,819  
OTHER LIABILITIES     9,523       9,207  
Total liabilities     889,594       894,094  
SHAREHOLDERS' EQUITY:        
Common stock     840       829  
Additional paid-in capital     405,203       395,121  
Retained earnings     407,193       344,095  
Accumulated other comprehensive loss     (306 )     (2,614 )
Total shareholders' equity     812,930       737,431  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 1,702,524     $ 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     Nine Months Ended
    September 30,     September 30,
    2010   2009     2010   2009
REVENUE:                  
Membership dues   $ 155,288     $ 144,832       $ 453,332     $ 425,070  
Enrollment fees     6,078       6,617         18,577       19,630  
In-center revenue     69,453       59,129         203,442       178,681  
Total center revenue     230,819       210,578         675,351       623,381  
Other revenue     7,493       3,742         13,820       9,922  
Total revenue     238,312       214,320         689,171       633,303  
OPERATING EXPENSES:                  
Center operations     145,205       127,468         424,940       383,313  
Advertising and marketing     6,265       5,756         18,940       20,145  
General and administrative     10,563       9,669         32,606       33,172  
Other operating     7,289       8,017         17,146       17,791  
Depreciation and amortization     23,402       23,428         69,385       68,127  
Total operating expenses     192,724       174,338         563,017       522,548  
Income from operations     45,588       39,982         126,154       110,755  
OTHER INCOME (EXPENSE):                  
Interest expense, net     (6,792 )     (7,651 )       (21,806 )     (23,005 )
Equity in earnings of affiliate     302       316         906       985  
Total other income (expense)     (6,490 )     (7,335 )       (20,900 )     (22,020 )
INCOME BEFORE INCOME TAXES     39,098       32,647         105,254       88,735  
PROVISION FOR INCOME TAXES     15,720       12,014         42,156       34,728  
NET INCOME   $ 23,378     $ 20,633       $ 63,098     $ 54,007  
BASIC EARNINGS PER COMMON SHARE   $ 0.59     $ 0.52       $ 1.59     $ 1.38  
DILUTED EARNINGS PER COMMON SHARE   $ 0.57     $ 0.51       $ 1.55     $ 1.36  
WEIGHTED AVERAGE NUMBER OF COMMON SHARES                  
OUTSTANDING - BASIC     39,932       39,410         39,597       39,221  
WEIGHTED AVERAGE NUMBER OF COMMON SHARES                  
OUTSTANDING - DILUTED     41,260       40,255         40,783       39,687  
                                   
LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
         
    For the
    Nine Months Ended
    September 30,
    2010   2009
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income   $ 63,098     $ 54,007  

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

        
Depreciation and amortization     69,385       68,127  
Deferred income taxes     (1,100 )     6,957  
Loss on disposal of property and equipment, net     979       818  
Gain on sale of land held for sale     (527 )     (873 )
Amortization of deferred financing costs     2,024       1,925  
Share-based compensation     5,412       5,907  
Excess tax benefit related to share-based payment arrangements     (1,697 )     (433 )
Equity in earnings of affiliate     (906 )     (985 )
Dividend received from equity investment     350       350  
Changes in operating assets and liabilities     8,930       1,650  
Other     199       1,101  
Net cash provided by operating activities     146,147       138,551  
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchases of property and equipment     (86,132 )     (116,853 )
Acquisitions, net of cash acquired     (14,378 )     -  
Proceeds from sale of property and equipment     721       8  
Proceeds from sale of land held for sale     1,019       1,327  
Increase in other assets     (578 )     (213 )
Decrease in restricted cash     889       151  
Net cash used in investing activities     (98,459 )     (115,580 )
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from long-term borrowings     -       7,813  
Repayments of long-term borrowings     (38,067 )     (7,755 )
Proceeds from (repayments of) revolving credit facility, net     12,500       (27,600 )
Increase in deferred financing costs     (258 )     (745 )
Excess tax benefit related to share-based payment arrangements     1,697       433  
Proceeds from exercise of stock options     3,660       2,191  
Net cash used in financing activities     (20,468 )     (25,663 )
         
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS     27,220       (2,692 )
CASH AND CASH EQUIVALENTS - Beginning of period     6,282       10,829  
CASH AND CASH EQUIVALENTS - End of period   $ 33,502     $ 8,137  
                 

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 Nine Months Ended
    September 30,     September 30,
    2010   2009     2010   2009
Net income   $ 23,378   $ 20,633     $ 63,098   $ 54,007
Interest expense, net     6,792     7,651       21,806     23,005
Provision for income taxes     15,720     12,014       42,156     34,728
Depreciation and amortization     23,402     23,428       69,385     68,127
EBITDA   $ 69,292   $ 63,726     $ 196,445   $ 179,867
                           

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 Nine Months Ended
    September 30,     September 30,
    2010   2009     2010   2009
Net cash provided by operating activities   $ 45,439     $ 40,267       $ 146,147     $ 138,551  
Less: Purchases of property and equipment     (37,968 )     (25,128 )       (86,132 )     (116,853 )
Free cash flow   $ 7,471     $ 15,139       $ 60,015     $ 21,698  
 
For further information: Life Time Fitness, Inc. Investor Contact: John Heller, 952-229-7427 ir@lifetimefitness.com or Media Contact: Jason Thunstrom, 952-229-7435 pr@lifetimefitness.com