News

Life Time Fitness Logo

Life Time Fitness Announces Fourth Quarter And Full-Year 2008 Financial Results
Company Reports Revenue Growth of 13.4% and Earnings Per Share of $0.33 for the Quarter; Full-Year Revenue Grew 17.4% and Earnings Per Share was $1.83
"Our 2008 results did not meet our expectations"

CHANHASSEN, Minn.--(BUSINESS WIRE)--Life Time Fitness, Inc. (NYSE: LTM) today reported its operating results for the fourth quarter and full year ended December 31, 2008.

Fourth quarter 2008 revenue grew 13.4% to $194.0 million from $171.1 million during the same period last year. Revenue for the year totaled $769.6 million, up 17.4% from $655.8 million in 2007.

Net income during the quarter was $13.0 million, or $0.33 per diluted share. This compares to net income of $19.1 million, or $0.48 per diluted share, for 4Q 2007. For the full year, net income grew 5.6% to $71.8 million, or $1.83 per diluted share, from $68.0 million, or $1.78 per diluted share, for 2007.

Included in the Company’s reported results is $0.08 of diluted earnings per share impact from charges that relate to previously announced plans to slow the development of new centers. These charges include severance costs, lower-of-cost-or-market adjustments in connection with assets held for sale, and write-offs associated with land development cancelled during the quarter.

“Our 2008 results did not meet our expectations,” said Bahram Akradi, Life Time Fitness chairman and chief executive officer. “However, we remain confident in our business model and are pleased with the growth in new memberships we saw last year. In this environment, we believe that people are seeking our healthy-way-of-life destinations to stay active and fit, be entertained and reduce stress. We will continue to build on the member experience with the launch of new connectivity initiatives, such as myLT.com, an interactive Web site designed to foster deeper member relationships and deliver enhanced value. We also remain focused on managing our business prudently by taking strong and prompt measures to eliminate unnecessary costs and inefficiencies, without damaging the member experience or our brand.”

During the fourth quarter, Life Time Fitness opened four centers:

  • Mansfield, its eighth location in the Dallas/Ft. Worth area
  • Loudoun County, its third location in Northern Virginia
  • Florham Park, its first location in New Jersey
  • Westminster, its second location in the Denver, Colorado, area

In February 2009, the Company opened two additional centers:

  • Berkeley Heights, its second location in New Jersey
  • Lake Houston (Atascocita), its fifth location in Houston, Texas

Three and Twelve Months Ended December 31, 2008, Financial Highlights:

Total revenue for the fourth quarter grew 13.4% to $194.0 million, driven primarily by growth in membership dues and in-center revenue. Total revenue for the full year grew 17.4% to $769.6 million from $655.8 million in 2007.

(Period-over-period growth)   4Q 2008 vs. 4Q 2007   2008 vs. 2007
  • Membership dues
   14.5%   17.2%
  • Enrollment fees
   6.5%   7.4%
  • In-center revenue
   13.1%   19.7%
         
  • Same-center revenue
   Flat   2.8%
  • Average center revenue / membership
   $345 – up 0.3%   $1,427 – up 4.9%
  • Average in-center revenue / membership
   $93 – Flat   $414 – up 7.0%

Memberships grew 13.6% to 567,110 at December 31, 2008, from 499,092 at December 31, 2007.

Total operating expenses during 4Q 2008 totaled $164.6 million compared to $133.5 million for 4Q 2007 and full-year operating expenses were $622.3 million, compared with $518.4 million in 2007, driven primarily by increased expenses to support new centers, membership ramp, in-center revenue growth, and $5.0 million in charges primarily related to slowing the development of new centers.

  • Operating margin was 15.1% for 4Q 2008, compared to 22.0% in the prior-year period. Full-year operating margin was 19.1%, compared to 21.0% in 2007.
(Expense as a percent of total revenue)   4Q 2008 vs. 4Q 2007   2008 vs. 2007
  • Center operations
   60.6% vs. 56.1%   59.1% vs. 57.5%
  • Advertising and marketing
   4.1% vs. 4.0%   4.1% vs. 3.8%
  • General and administrative
   6.7% vs. 5.8%   5.7% vs. 6.2%
  • Other operating
   3.0% vs. 2.9%   2.5% vs. 2.5%
  • Depreciation and amortization
   10.5% vs. 9.2%   9.5% vs. 9.0%

Net income during 4Q 2008 was $13.0 million compared with $19.1 million in 4Q 2007, and full-year net income was $71.8 million compared with $68.0 million in 2007.

  • Net income margin for 4Q 2008 was 6.7% compared with 11.1% in 4Q 2007. Net income margin in 2008 was 9.3% compared with 10.4% in 2007.
  • The effective income tax rate for 2008 was 39.7% compared with 39.9% in 2007.

EBITDA for 4Q 2008 was $50.0 million compared with $53.7 million in 4Q 2007. Full-year EBITDA was $221.5 million compared with $197.7 million in 2007.

  • As a percentage of total revenue, EBITDA was 25.8% in 4Q 2008, compared to 31.4% in 4Q 2007.
  • EBITDA margin in 2008 was 28.8% compared to 30.1% in 2007.

Cash flows from operations for the full year grew 28.8% to $183.1 million from $142.2 million in 2007.

Weighted average diluted shares for 4Q 2008 totaled 39.2 million compared to 39.5 million shares in 4Q 2007. For the full year, weighted average diluted shares totaled 39.3 million compared with 38.1 million in 2007.

2009 Business Outlook:

The following statements are based on the Company's current expectations for fiscal year 2009, which incorporate late 2008 operating trends in revenue per membership and attrition, and are subject to the risks and uncertainties described below:

  • Revenue is expected to be $830-$860 million, driven primarily by membership ramp at new and existing centers, and in-center revenue growth.
  • Net income is expected to be $60-$68 million, resulting from recent operating trends, including the higher cost of membership acquisition and lower average dues on new memberships, and the mix of newer centers.
  • Diluted earnings per common share is expected to be $1.50-$1.70.

As announced on February 12, 2009, the Company will hold a conference call today at 10:00 a.m. ET to discuss its fourth quarter and full-year 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 February 19, 2009, Life Time Fitness operated 83 centers in 18 states, including Arizona, Colorado, Florida, Georgia, Illinois, Indiana, Kansas, Maryland, Michigan, Minnesota, Missouri, Nebraska, New Jersey, North Carolina, Ohio, 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 & 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, 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.
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
               
          December 31, 2008   December 31, 2007
ASSETS          
CURRENT ASSETS:        
  Cash and cash equivalents   $ 10,829     $ 5,354  
  Accounts receivable, net     6,114       4,475  
  Inventories and center operations supplies     14,632       14,324  
  Prepaid expenses and other current assets     10,994       15,963  
  Deferred membership origination costs     19,877       16,205  
  Deferred income taxes     1,365       1,188  
  Income tax receivable     -       5,814  
    Total current assets     63,811       63,323  
PROPERTY AND EQUIPMENT, net     1,515,957       1,259,271  
RESTRICTED CASH     3,936       6,767  
DEFERRED MEMBERSHIP ORIGINATION COSTS     14,210       14,367  
OTHER ASSETS     49,789       42,805  
    TOTAL ASSETS   $ 1,647,703     $ 1,386,533  
               
LIABILITIES AND SHAREHOLDERS' EQUITY        
CURRENT LIABILITIES:        
  Current maturities of long-term debt   $ 10,335     $ 9,568  
  Accounts payable     14,842       12,872  
  Construction accounts payable     63,418       59,261  
  Accrued expenses     46,230       47,052  
  Deferred revenue     36,098       34,851  
    Total current liabilities     170,923       163,604  
LONG-TERM DEBT, net of current portion     702,569       555,037  
DEFERRED RENT LIABILITY     27,925       25,526  
DEFERRED INCOME TAXES     51,982       38,607  
DEFERRED REVENUE     13,719       17,529  
OTHER LIABILITIES     27,684       13,673  
    Total liabilities     994,802       813,976  
SHAREHOLDERS' EQUITY:        
  Common stock     793       783  
  Additional paid-in capital     385,095       373,910  
  Retained earnings     271,711       199,890  
  Accumulated other comprehensive loss     (4,698 )     (2,026 )
    Total shareholders' equity     652,901       572,557  
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 1,647,703     $ 1,386,533  
LIFE TIME FITNESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
        For the   For the
        Three Months Ended   Year Ended
        December 31,   December 31,
          2008       2007       2008       2007  
REVENUE:                
  Membership dues   $ 131,926     $ 115,199     $ 508,927     $ 434,138  
  Enrollment fees     6,579       6,176       26,570       24,741  
  In-center revenue     50,813       44,910       218,198       182,215  
    Total center revenue     189,318       166,285       753,695       641,094  
  Other revenue     4,636       4,813       15,926       14,692  
    Total revenue     193,954       171,098       769,621       655,786  
OPERATING EXPENSES:                
  Center operations     117,506       96,082       454,645       377,235  
  Advertising and marketing     7,892       6,800       31,500       24,967  
  General and administrative     13,042       9,889       43,749       40,820  
  Other operating     5,730       4,969       19,426       16,340  
  Depreciation and amortization     20,447       15,732       72,947       59,014  
    Total operating expenses     164,617       133,472       622,267       518,376  
    Income from operations     29,337       37,626       147,354       137,410  
OTHER INCOME (EXPENSE):                
  Interest expense, net     (8,251 )     (6,411 )     (29,552 )     (25,443 )
  Equity in earnings of affiliate     258       355       1,243       1,272  
    Total other income (expense)     (7,993 )     (6,056 )     (28,309 )     (24,171 )
INCOME BEFORE INCOME TAXES     21,344       31,570       119,045       113,239  
PROVISION FOR INCOME TAXES     8,329       12,520       47,224       45,220  
NET INCOME   $ 13,015     $ 19,050     $ 71,821     $ 68,019  
BASIC EARNINGS PER COMMON SHARE   $ 0.33     $ 0.49     $ 1.84     $ 1.81  
DILUTED EARNINGS PER COMMON SHARE   $ 0.33     $ 0.48     $ 1.83     $ 1.78  
WEIGHTED AVERAGE NUMBER OF COMMON SHARES                
  OUTSTANDING - BASIC     39,124       38,821       39,002       37,518  
WEIGHTED AVERAGE NUMBER OF COMMON SHARES                
  OUTSTANDING - DILUTED     39,172       39,529       39,342       38,127  
LIFE TIME FITNESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
          For the Year Ended
          December 31,
            2008       2007  
CASH FLOWS FROM OPERATING ACTIVITIES:        
  Net income   $ 71,821     $ 68,019  
  Adjustments to reconcile net income to net cash        
    provided by operating activities:        
    Depreciation and amortization     72,947       59,014  
    Deferred income taxes     14,815       11,505  
    Provision for doubtful accounts     108       345  
    Loss on disposal of property and equipment, net     985       354  
    Amortization of deferred financing costs     1,663       853  
    Share-based compensation     7,456       7,746  
    Excess tax benefit from stock option exercises     (103 )     (4,605 )
    Equity in earnings of affiliate     (229 )     (235 )
    Changes in operating assets and liabilities     13,543       (544 )
    Other     60       (246 )
      Net cash provided by operating activities     183,066       142,206  
               
CASH FLOWS FROM INVESTING ACTIVITIES:        
 

Purchases of property and equipment (excluding non-cash purchases supplementally noted below)

     (464,482 )     (415,822 )
  Proceeds from sale of property and equipment     161,888       5,054  
  Proceeds from property insurance settlement     318       78  
  Increase in other assets     (6,550 )     (4,488 )
  Decrease (increase) in restricted cash     2,831       (2,029 )
      Net cash used in investing activities     (305,995 )     (417,207 )
               
CASH FLOWS FROM FINANCING ACTIVITIES:        
  Proceeds from long-term borrowings     43,272       113,455  
  Repayments on long-term borrowings     (13,143 )     (11,181 )
  Proceeds from revolving credit facility, net     101,800       67,800  
  Increase in deferred financing costs     (6,664 )     (2,160 )
 

Proceeds from common stock offering, net of underwriting discount and offering costs

     -       92,502  
  Excess tax benefit from stock option exercises     103       4,605  
  Proceeds from exercise of stock options     3,036       8,454  
      Net cash provided by financing activities     128,404       273,475  
               
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS     5,475       (1,526 )
CASH AND CASH EQUIVALENTS - Beginning of period     5,354       6,880  
CASH AND CASH EQUIVALENTS - End of period   $ 10,829     $ 5,354  
               
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:        
 

Cash payments for interest, net of capitalized interest of $9,062 at December 31, 2008, and inclusive of capitalized interest of $8,425 at December 31, 2007

   $ 23,972     $ 30,621  
  Cash payments for income taxes   $ 19,851     $ 33,746  

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   Year Ended
    December 31,   December 31,
      2008     2007     2008     2007
                 
Net income   $ 13,015   $ 19,050   $ 71,821   $ 68,019
Interest expense, net   8,251     6,411     29,552     25,443
Provision for income taxes   8,329     12,520     47,224     45,220
Depreciation and amortization   20,447     15,732     72,947     59,014
EBITDA   $ 50,042   $ 53,713   $ 221,544   $ 197,696
 
For further information: For Life Time Fitness, Inc. Ken Cooper, 952-229-7427 (Investors) ir@lifetimefitness.com Jason Thunstrom, 952-229-7435 (Media) pr@lifetimefitness.com