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Life Time Fitness Announces Second Quarter 2008 Financial Results

Company Reports Revenue Growth of 18.7%, Net Income Growth of 20.3%, and Earnings Per Diluted Share of $0.50 for the Quarter

"Our second quarter results demonstrate continued delivery against our key business strategies"

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

Second quarter 2008 revenue grew 18.7% to $192.4 million from $162.1 million during the same period last year. Net income during the quarter grew 20.3% to $19.8 million, or $0.50 per diluted share. This compares to net income of $16.5 million, or $0.44 per diluted share, for 2Q 2007.

For the six months ended June 30, 2008, revenue grew 19.5% to $376.9 million from $315.2 million during the same period last year. Net income grew 21.6% for the same period to $37.2 million, or $0.95 per diluted share, from $30.6 million, or $0.82 per diluted share, for the first six months of 2007.

“Our second quarter results demonstrate continued delivery against our key business strategies,” said Bahram Akradi, Life Time Fitness chairman and chief executive officer. “We are seeing continued in-center revenue growth, driven by our unique, member-focused services and programs designed to help members realize their health and fitness goals. We also saw an increase in annual membership growth from the first quarter to second quarter, indicating that consumers are continuing to invest in their health and wellness, and seeking the depth and breadth of our offerings. Additionally, we are continuing to drive member connectivity initiatives that further increase the impact and value of Life Time Fitness for our members.”

Life Time Fitness continued its expansion efforts during the quarter with openings in West County, Missouri, the first location in the St. Louis market, and Johns Creek, Georgia, and Mountain Brook, Georgia, the Company’s third and fourth locations in the Atlanta market, respectively. The Company also completed comprehensive remodeling projects and held grand opening events at four previously acquired clubs in Minnesota. Construction is underway for the remaining seven planned openings in 2008.

Three and Six Months Ended June 30, 2008, Financial Highlights:

Total revenue for the second quarter grew 18.7% to $192.4 million, driven primarily by growth in membership dues and in-center revenue. Total revenue for the first six months of 2008 grew to $376.9 million from $315.2 million during the same period last year.

		YTD 2008 vs.
(Period-over-period growth)	2Q 2008 vs. 2Q 2007	YTD 2007
Membership dues	18.2%	18.6%
Enrollment fees	4.1%	9.2%
In-center revenue	22.0%	23.9%
Same-center revenue	3.3%	3.8%
Average center revenue / membership	$361 – up 6.9%	$724 – up 7.7%
Average in-center revenue / membership	$107 – up 9.8%	$218 – up 11.4%

Memberships increased 11.9% to 547,497 at June 30, 2008 from 489,489 at June 30, 2007.

Total operating expenses during 2Q 2008 totaled $152.5 million compared to $128.6 million for 2Q 2007, driven primarily by increased expenses to support new centers, membership growth, and presale activities. Year-to-date operating expenses totaled $301.0 million, compared with $253.0 million for the same period last year.

Operating margin was 20.7% for 2Q 2008, the same as in the prior-year period. Year-to-date operating margin was 20.1%, compared to 19.7% in the prior-year period.

		YTD 2008 vs.
(Expense as a percent of total revenue)	2Q 2008 vs. 2Q 2007	YTD 2007

Center operations	58.9% vs. 58.0%	58.6% vs. 58.2%
Advertising and marketing	3.5% vs. 3.4%	4.3% vs. 4.1%
General and administrative	5.5% vs. 6.6%	5.7% vs. 6.7%
Other operating	2.4% vs. 2.3%	2.3% vs. 2.3%
Depreciation and amortization	9.0% vs. 9.0%	9.0% vs. 9.0%

Net income during 2Q 2008 grew 20.3% to $19.8 million from $16.5 million in 2Q 2007, driven by continued top-line growth. For the six months ended June 30, 2008, net income grew to $37.2 million compared with $30.6 million in the prior-year period.

EBITDA for 2Q 2008 grew 18.4% to $57.4 million from $48.5 million in 2Q 2007. Year-to-date EBITDA grew 21.0% to $110.3 million from $91.2 million for the same period last year.

Cash flows from operations for the first half of 2008 totaled $105.7 million compared with $66.2 million in the prior-year period.

Weighted average fully diluted shares for 2Q 2008 totaled 39.3 million compared to 37.5 million shares in 2Q 2007.

Reaffirmed 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 $780-$800 million, or approximately 19-22% growth. This year-over-year increase is driven primarily by new center growth, membership ramp at new and existing centers, and in-center revenue growth.
Net income is expected to be $82.0-$83.5 million, or approximately 21-23% growth. This year-over-year increase is driven primarily by our growth strategies.
Diluted earnings per common share is expected to be $2.06-$2.09, or approximately 16-18% growth.

As announced on July 16, 2008, the Company will hold a conference call today at 10:00 a.m. ET to discuss second 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 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 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 July 24, 2008, Life Time Fitness operated 74 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 atlifetimefitness.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)


			June 30, 2008			December 31, 2007
			(Unaudited)
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$	3,674		$	5,354
	Accounts receivable, net			3,800			4,475
	Inventories			14,198			14,324
	Prepaid expenses and other current assets			18,506			15,963
	Deferred membership origination costs			18,289			16,205
	Deferred income taxes			1,352			1,188
	Income tax receivable			-			5,814
		Total current assets		59,819			63,323
PROPERTY AND EQUIPMENT, net				1,494,787			1,259,271
RESTRICTED CASH				9,001			6,767
DEFERRED MEMBERSHIP ORIGINATION COSTS				15,658			14,367
OTHER ASSETS				54,639			42,805
		TOTAL ASSETS	$	1,633,904		$	1,386,533

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
	Current maturities of long-term debt		$	9,953		$	9,568
	Accounts payable			14,377			12,872
	Construction accounts payable			76,665			59,261
	Accrued expenses			56,814			47,052
	Deferred revenue			41,190			34,851
		Total current liabilities		198,999			163,604
LONG-TERM DEBT, net of current portion				712,800			555,037
DEFERRED RENT LIABILITY				26,429			25,526
DEFERRED INCOME TAXES				46,538			38,607
DEFERRED REVENUE				17,777			17,529
OTHER LIABILITIES				16,076			13,673
		Total liabilities		1,018,619			813,976
SHAREHOLDERS' EQUITY:
	Common stock			792			783
	Additional paid-in capital			379,705			373,910
	Retained earnings			237,122			199,890
	Accumulated other comprehensive loss			(2,334	)		(2,026	)
		Total shareholders' equity		615,285			572,557
		TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,633,904		$	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						Six Months Ended
			June 30,						June 30,
				2008			2007			2008			2007
REVENUE:
	Membership dues		$	126,121		$	106,667		$	245,769		$	207,195
	Enrollment fees			6,640			6,378			13,173			12,064
	In-center revenue			55,969			45,891			111,234			89,788
		Total center revenue		188,730			158,936			370,176			309,047
	Other revenue			3,677			3,201			6,682			6,191
		Total revenue		192,407			162,137			376,858			315,238
OPERATING EXPENSES:
	Center operations			113,259			94,035			220,839			183,527
	Advertising and marketing			6,823			5,439			16,321			12,808
	General and administrative			10,582			10,693			21,254			21,181
	Other operating			4,675			3,792			8,770			7,116
	Depreciation and amortization			17,190			14,678			33,780			28,365
		Total operating expenses		152,529			128,637			300,964			252,997
		Income from operations		39,878			33,500			75,894			62,241
OTHER INCOME (EXPENSE):
	Interest expense, net			(6,905	)		(6,369	)		(14,116	)		(11,897	)
	Equity in earnings of affiliate			326			285			649			601
		Total other income (expense)		(6,579	)		(6,084	)		(13,467	)		(11,296	)
INCOME BEFORE INCOME TAXES				33,299			27,416			62,427			50,945
PROVISION FOR INCOME TAXES				13,471			10,931			25,195			20,326
NET INCOME			$	19,828		$	16,485		$	37,232		$	30,619
BASIC EARNINGS PER COMMON SHARE			$	0.51		$	0.45		$	0.96		$	0.83
DILUTED EARNINGS PER COMMON SHARE			$	0.50		$	0.44		$	0.95		$	0.82
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC				38,963			36,864			38,923			36,747
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED				39,325			37,498			39,372			37,359

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
				For the Six Months Ended
				June 30,
					2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income			$	37,232		$	30,619
	Adjustments to reconcile net income to net cash provided by operating activities:

		Depreciation and amortization			33,780			28,365
		Deferred income taxes			8,874			2,474
		Provision for doubtful accounts			27			46
		Loss on disposal of property and equipment, net			1,335			164
		Amortization of deferred financing costs			571			405
		Share-based compensation			3,895			3,816
		Excess tax benefit from stock option exercises			(5	)		(3,838	)
		Equity in earnings of affiliate			(654	)		(601	)
		Changes in operating assets and liabilities			20,555			4,692
		Other			50			35
			Net cash provided by operating activities		105,660			66,177

CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of property and equipment (excluding non-cash purchases supplementally noted below)
					(235,577	)		(200,446	)
	Proceeds from sale of property and equipment				365			48
	Proceeds from property insurance settlements				270			48
	Increase in other assets				(12,140	)		(9,555	)
	Increase in restricted cash				(2,234	)		(1,011	)
			Net cash used in investing activities		(249,316	)		(210,916	)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from long-term borrowings				38,538			105,000
	Repayments of long-term borrowings				(10,588	)		(6,147	)
	Proceeds from revolving credit facility, net				116,200			40,000
	Increase in deferred financing costs				(3,641	)		(1,896	)
	Excess tax benefit from stock option exercises				5			3,838
	Proceeds from stock option exercises				1,462			5,327
			Net cash provided by financing activities		141,976			146,122

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS					(1,680	)		1,383
CASH AND CASH EQUIVALENTS - Beginning of period					5,354			6,880
CASH AND CASH EQUIVALENTS - End of period				$	3,674		$	8,263

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
	Cash payments for interest, net of capitalized interest			$	17,993		$	15,114
	Cash payments for income taxes			$	3,855		$	16,924

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

	Purchases of property and equipment financed through capital lease obligations
				$	12,121		$	-
	Purchases of property and equipment in accounts payable			$	17,999		$	3,671
	Non-cash share-based compensation capitalized to projects under development
				$	443		$	338

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				Six Months Ended
	June 30,				June 30,
		2008		2007		2008		2007

Net income	$	19,828	$	16,485	$	37,232	$	30,619
Interest expense, net		6,905		6,369		14,116		11,897
Provision for income taxes		13,471		10,931		25,195		20,326
Depreciation and amortization		17,190		14,678		33,780		28,365
EBITDA	$	57,394	$	48,463	$	110,323	$	91,207

For further information: Life Time Fitness, Inc. Investors: Kenneth Cooper, 952-229-7427 ir@lifetimefitness.com or Media: Jason Thunstrom, 952-229-7435 pr@lifetimefitness.com