Life Time Fitness Announces Second Quarter 2009 Financial Results

Thursday, July 23, 2009 8:08 AM

Company Reports Revenue Growth of 10.5% and Earnings Per Diluted Share of $0.46 for the Quarter

Life Time Fitness, Inc. (NYSE: LTM) today reported its operating results for the second quarter ended June 30, 2009.

Second quarter 2009 revenue grew 10.5% to $212.5 million from $192.4 million during the same period last year. Net income during the quarter was $18.3 million, or $0.46 per diluted share. This compares to net income of $19.8 million, or $0.50 per diluted share, for 2Q 2008.

For the six months ended June 30, 2009, revenue grew 11.2% to $419.0 million from $376.9 million during the same period last year. Net income for the same period was $33.4 million, or $0.85 per diluted share, as compared with $37.2 million, or $0.95 per diluted share, for the first six months of 2008.

“We are pleased with our second quarter operating results, which are highlighted by increased free cash flow generation, lower debt balances, double-digit membership growth and lower membership acquisition costs,” said Bahram Akradi, Life Time Fitness chairman, chief executive officer and president. “We’re also seeing progress in managing our infrastructure expense and our trailing 12-month attrition rate reduced slightly during the quarter. Member retention remains a priority for us as does maintaining a close alignment between the products and services we deliver and today’s discerning consumer. To this end, we continue to advance several connectivity and value enhancement initiatives for members, including dedicated monthly events across a wide range of interest areas at every center and a significantly enhanced myLT.com Web portal. Through this, we are establishing stronger member connections and enhancing the value we provide, making Life Time an even bigger part of members’ lives.”

In June, Life Time Fitness opened its third and final planned center for 2009, located in Collierville, Tennessee (Memphis area). This location marks the Company’s first center in Tennessee.

Three and Six Months Ended June 30, 2009, Financial Highlights:
Total revenue for the second quarter grew 10.5% to $212.5 million. Total revenue for the first six months of 2009 grew to $419.0 million from $376.9 million during the same period last year.

		YTD 2009 vs.
(Period-over-period growth)	2Q 2009 vs. 2Q 2008	YTD 2008
Membership dues	13.3%	14.0%
Enrollment fees	(1.5%)	(1.2%)
In-center revenue	7.6%	7.5%
Same-center revenue	(4.4%)	(3.6%)
Average center revenue / membership	$354 – down 2.0%	$706 – down 2.5%
Average in-center revenue / membership	$102 – down 5.1%	$204 – down 6.0%

Memberships increased 11.1% to 608,281 at June 30, 2009, from 547,497 at June 30, 2008.

Total operating expenses during 2Q 2009 totaled $174.3 million compared to $152.5 million for 2Q 2008. Year-to-date operating expenses totaled $348.2 million compared with $301.0 million for the same period last year.

Operating margin was 18.0% for 2Q 2009 compared with 20.7% during the prior-year period. Year-to-date operating margin was 16.9%, compared to 20.1% in the prior-year period.

		YTD 2009 vs.
(Expense as a percent of total revenue)	2Q 2009 vs. 2Q 2008	YTD 2008

Center operations	60.6% vs. 58.9%	61.1% vs. 58.6%
Advertising and marketing	2.9% vs. 3.5%	3.4% vs. 4.3%
General and administrative	5.5% vs. 5.5%	5.6% vs. 5.7%
Other operating	2.3% vs. 2.4%	2.3% vs. 2.3%
Depreciation and amortization	10.7% vs. 9.0%	10.7% vs. 9.0%

Net income during 2Q 2009 was $18.3 million compared with $19.8 million for 2Q 2008. For the six months ended June 30, 2009, net income was $33.4 million compared with $37.2 million in the prior-year period.

EBITDA for 2Q 2009 grew 6.7% to $61.2 million from $57.4 in 2Q 2008. Year-to-date EBITDA grew 5.3% to $116.1 million from $110.3 million during the same period last year.

Cash flows from operations for the first half of 2009 totaled $98.3 million compared with $105.7 million in the prior-year period.

Weighted average fully diluted shares for 2Q 2009 totaled 39.8 million compared to 39.3 million shares in 2Q 2008.

Updated 2009 Business Outlook:
The following statements are based on the Company's current expectations for fiscal year 2009 and are subject to the risks and uncertainties described below:

Revenue is expected to be $830-$860 million.
Net income is expected to be $67-$71 million (updated from $62-$68 million).
Diluted earnings per common share is expected to be $1.65-$1.75 (updated from $1.55-$1.70).

As announced on July 16, 2009, the Company will hold a conference call today at 10:00 a.m. ET to discuss second quarter 2009 results. Bahram Akradi, chairman, chief executive officer and president, 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 services, 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 23, 2009, Life Time Fitness operated 84 centers in 19 states, including Arizona, Colorado, Florida, Georgia, Illinois, Indiana, Kansas, Maryland, Michigan, Minnesota, Missouri, Nebraska, New Jersey, North Carolina, Ohio, Tennessee, 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, LIFE TIME ATHLETIC, EXPERIENCE LIFE, and the LIFE TIME FITNESS TRIATHLON SERIES are trademarks of Life Time Fitness, Inc. All other trademarks or registered trademarks are the property of their respective owners.

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, competition from other health and fitness centers, identifying and acquiring suitable sites for new centers, delays in opening 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)


	June 30, 2009			December 31, 2008
ASSETS	(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	10,805		$	10,829
Accounts receivable, net		3,681			6,114
Inventories and center operating supplies		14,420			14,632
Prepaid expenses and other current assets		16,359			10,994
Deferred membership origination costs		21,317			19,877
Deferred income taxes		2,090			1,365
Total current assets		68,672			63,811
PROPERTY AND EQUIPMENT, net		1,517,206			1,515,957
RESTRICTED CASH		3,439			3,936
DEFERRED MEMBERSHIP ORIGINATION COSTS		13,115			14,210
OTHER ASSETS		49,918			49,789
TOTAL ASSETS	$	1,652,350		$	1,647,703

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt	$	11,945		$	10,335
Accounts payable		15,690			14,842
Construction accounts payable		22,223			63,418
Accrued expenses		55,526			46,230
Deferred revenue		41,123			36,098
Total current liabilities		146,507			170,923
LONG-TERM DEBT, net of current portion		695,401			702,569
DEFERRED RENT LIABILITY		27,882			27,925
DEFERRED INCOME TAXES		50,079			51,982
DEFERRED REVENUE		12,143			13,719
OTHER LIABILITIES		28,817			27,684
Total liabilities		960,829			994,802
SHAREHOLDERS' EQUITY:
Common stock		825			793
Additional paid-in capital		389,462			385,095
Retained earnings		305,085			271,711
Accumulated other comprehensive loss		(3,851	)		(4,698	)
Total shareholders' equity		691,521			652,901
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,652,350		$	1,647,703

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,
	2009			2008			2009			2008
REVENUE:
Membership dues	$	142,841		$	126,121		$	280,238		$	245,769
Enrollment fees		6,540			6,640			13,013			13,173
In-center revenue		60,250			55,969			119,552			111,234
Total center revenue		209,631			188,730			412,803			370,176
Other revenue		2,918			3,677			6,180			6,682
Total revenue		212,549			192,407			418,983			376,858
OPERATING EXPENSES:
Center operations		128,871			113,259			255,845			220,839
Advertising and marketing		6,091			6,823			14,389			16,321
General and administrative		11,795			10,582			23,503			21,254
Other operating		4,887			4,675			9,774			8,770
Depreciation and amortization		22,635			17,190			44,699			33,780
Total operating expenses		174,279			152,529			348,210			300,964
Income from operations		38,270			39,878			70,773			75,894
OTHER INCOME (EXPENSE):
Interest expense, net		(7,880	)		(6,905	)		(15,354	)		(14,116	)
Equity in earnings of affiliate		332			326			669			649
Total other income (expense)		(7,548	)		(6,579	)		(14,685	)		(13,467	)
INCOME BEFORE INCOME TAXES		30,722			33,299			56,088			62,427
PROVISION FOR INCOME TAXES		12,462			13,471			22,714			25,195
NET INCOME	$	18,260		$	19,828		$	33,374		$	37,232
BASIC EARNINGS PER COMMON SHARE	$	0.46		$	0.51		$	0.85		$	0.96
DILUTED EARNINGS PER COMMON SHARE	$	0.46		$	0.50		$	0.85		$	0.95
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - BASIC		39,285			38,963			39,167			38,923
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - DILUTED		39,763			39,325			39,475			39,372

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
	For the
	Six Months Ended
	June 30,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	33,374		$	37,232
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		44,699			33,780
Deferred income taxes		(421	)		8,874
Provision for doubtful accounts		279			27
Loss on disposal of property and equipment, net		560			1,335
Gain on sale of land held for sale		(873	)		-
Amortization of deferred financing costs		1,301			571
Share-based compensation		4,027			3,895
Excess tax benefit related to share-based payment arrangements		-			(5	)
Equity in earnings of affiliate		(669	)		(654	)
Changes in operating assets and liabilities		14,245			20,555
Other		1,762			50
Net cash provided by operating activities		98,284			105,660

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(91,725	)		(235,577	)
Proceeds from sale of property and equipment		8			365
Proceeds on sale of land held for sale		1,327			-
Proceeds from property insurance settlement		-			270
Increase in other assets		(921	)		(12,140	)
Decrease (increase) in restricted cash		497			(2,234	)
Net cash used in investing activities		(90,814	)		(249,316	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings		7,812			38,538
Repayments of long-term borrowings		(7,978	)		(10,588	)
Proceeds from (repayments of) revolving credit facility, net		(6,800	)		116,200
Increase in deferred financing costs		(721	)		(3,641	)
Excess tax benefit related to share-based payment arrangements		-			5
Proceeds from exercise of stock options		193			1,462
Net cash provided by (used in) financing activities		(7,494	)		141,976

DECREASE IN CASH AND CASH EQUIVALENTS		(24	)		(1,680	)
CASH AND CASH EQUIVALENTS - Beginning of period		10,829			5,354
CASH AND CASH EQUIVALENTS - End of period	$	10,805		$	3,674

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				For the
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2009		2008		2009		2008

Net income	$	18,260	$	19,828	$	33,374	$	37,232
Interest expense, net		7,880		6,905		15,354		14,116
Provision for income taxes		12,462		13,471		22,714		25,195
Depreciation and amortization		22,635		17,190		44,699		33,780
EBITDA	$	61,237	$	57,394	$	116,141	$	110,323

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
	Six Months Ended
	June 30,
	2009			2008
Net cash provided by operating activities	$	98,284		$	105,660
Less: Purchases of property and equipment		(91,725	)		(235,577	)
Free cash flow	$	6,559		$	(129,917	)

Life Time Fitness, Inc.
Investor Contact:
Kenneth Cooper, 952-229-7427
ir@lifetimefitness.com
or
Media Contact:
Jason Thunstrom, 952-229-7435
pr@lifetimefitness.com

(Source: Business Wire )

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