News
"I am pleased with our second quarter operating results, which included strong top-line and in-center revenue expansion, and net income growth"
CHANHASSEN, Minn.--(BUSINESS WIRE)--Life Time Fitness, Inc. (NYSE:LTM), The Healthy Way of Life Company, today reported its financial results for the second quarter ended June 30, 2012.
Second quarter 2012 revenue grew 12.3% to $288.3 million from $256.7 million during the same period last year. Total revenue for the first six months of 2012 grew 11.9% to $556.8 million from $497.3 million during the same period last year.
Net income for the quarter was $30.3 million, or $0.73 per diluted share, compared to net income of $24.9 million, or $0.61 per diluted share, for 2Q 2011. Net income for the first six months of 2012 was $56.0 million, or $1.34 per diluted share, compared to net income of $45.8 million, or $1.12 per diluted share, for the prior-year period.
“I am pleased with our second quarter operating results, which included strong top-line and in-center revenue expansion, and net income growth,” said Bahram Akradi, chairman, president and chief executive officer. “Our results also reflect the ongoing progress we’ve made in driving our member experience and connectivity objectives. Our focus remains on growing our Healthy Way of Life Company and brand by providing our members and customers with programs and services – both inside and outside of our centers – that help them achieve their goals. Our business model is strong and the investments we are making further position Life Time for long-term growth and success.”
During the quarter, Life Time opened new centers in Tulsa and Atlanta, marking its first and sixth locations in Oklahoma and Georgia, respectively. The Company also continued the integration, remodeling and rebranding activities associated with the acquired Lifestyle Family Fitness facilities in Indiana, Ohio and North Carolina. Life Time now operates 105 centers in the United States and Canada.
Three and Six Months Ended June 30, 2012, Financial Highlights:
Total revenue for the second quarter grew 12.3% to $288.3 million from $256.7 million in 2Q 2011. Total revenue for the first six months of 2012 grew 11.9% to $556.8 million from $497.3 million during the same period last year.
|
(Period-over-period growth) |
2Q 2012 vs. 2Q 2011 |
|
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$184.9 vs. $167.0 (up 10.7%) | |
|
$90.1 vs. $80.3 (up 12.2%) | |
|
$9.4 vs. $4.7 (up 99.4%) | |
|
$400 vs. $389 (up 3.0%) | |
|
$129 vs. $124 (up 4.4%) | |
|
Up 4.2% | |
|
Up 3.6% | |
| (Period-over-period growth) |
YTD 2012 vs. YTD 2011 |
|
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$360.4 vs. $325.0 (up 10.9%) | |
|
$174.7 vs. $154.0 (up 13.5%) | |
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$13.8 vs. $8.4 (up 63.2%) | |
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$786 vs. $768 (up 2.4%) | |
|
$253 vs. $242 (up 4.6%) | |
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Up 4.8% | |
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Up 4.3% | |
Memberships grew 6.7% to 708,585 at June 30, 2012, from 664,307 at June 30, 2011.
- Excluding memberships acquired in connection with the Lifestyle Family Fitness transaction, memberships grew 2.8%.
- Attrition in 2Q 2012 was 8.6% compared to 8.1% in the prior-year period. Excluding the Lifestyle Family Fitness transaction, 2Q 2012 attrition was 8.2%. The increase in attrition was driven primarily by the impact of this transaction and pricing actions taken in late 2011/early 2012.
- Attrition for the trailing 12-month period ended June 30, 2012, was 36.0% compared to trailing 12-month attrition of 35.8% at June 30, 2011. Excluding the impact of the Lifestyle Family Fitness transaction, trailing 12-month attrition was 35.5%.
Total operating expenses during 2Q 2012 were $231.7 million compared to $210.4 million for 2Q 2011. Total operating expenses for the first six months of 2012 were $451.8 million compared to $410.8 million in 2011.
- Income from operations margin was 19.6% for 2Q 2012 compared to 18.0% in the prior-year period.
- Income from operations margin for the first six months of 2012 was 18.8% compared to 17.4% in the prior year period.
| (Expense as a percent of total revenue) |
2Q 2012 vs. 2Q 2011 |
YTD 2012 vs. YTD 2011 | ||
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57.8% vs. 61.0% | 58.8% vs. 61.6% | ||
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3.4% vs. 3.5% | 3.6% vs. 3.5% | ||
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4.8% vs. 4.7% | 4.9% vs. 5.0% | ||
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4.4% vs. 3.1% | 3.8% vs. 2.8% | ||
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10.0% vs. 9.7% | 10.1% vs. 9.7% | ||
Net income for 2Q 2012 was $30.3 million, or $0.73 per diluted share, compared to net income of $24.9 million, or $0.61 per diluted share, for 2Q 2011. Net income for the first six months of 2012 was $56.0 million, or $1.34 per diluted share, compared to net income of $45.8 million, or $1.12 per diluted share, for the prior-year period.
EBITDA for 2Q 2012 was $85.8 million compared with $71.2 million in 2Q 2011. For the first six months of 2012, EBITDA was $161.5 million compared with $135.4 million in the prior-year period.
- As a percentage of total revenue, EBITDA in 2Q 2012 was 29.7% compared to 27.8% in 2Q 2011.
- For the first six months of 2012, EBITDA, as a percentage of total revenue, was 29.0% compared to 27.2% in the prior-year period.
Cash flows from operating activities for the first six months of 2012 totaled $142.2 million compared with $118.5 million in the prior-year period.
Weighted average fully diluted shares for 2Q 2012 totaled 41.8 million compared to 40.8 million in 2Q 2011. For the first six months of 2012, weighted average fully diluted shares totaled 41.8 million compared to 40.8 million for the prior-year period.
Updated 2012 Business Outlook:
The following statements are based on the Company’s current expectations for fiscal year 2012 and incorporate year to date 2012 operating trends. These 2012 expectations are subject to the risks and uncertainties further described in the Company’s forward-looking statements:
- Revenue is expected to be up 11-12%, or $1.122-1.137 billion (up from 10-12%, or $1.110-1.135 billion), driven primarily by price and mix optimization, square foot expansion, and growth in in-center and ancillary business revenue.
- Net income is expected to be up 22-25%, or $113.0-116.0 million (up from 21-25%, or $112.0-115.5 million), driven by revenue growth and cost efficiencies. The Company included $1.6 million (after tax) of anticipated performance share-based compensation expense in this net income guidance.
- Diluted earnings per common share is expected to be $2.70-2.76 (up from $2.65-2.73), which includes $0.04 impact of anticipated performance share-based compensation expense.
As announced on July 12, 2012, the Company will hold a conference call today at 10:00 a.m. ET to discuss its second quarter 2012 results. Bahram Akradi, Michael Robinson, executive vice president and chief financial officer, and John Heller, senior director, investor relations & treasurer, 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 the same day via the Company’s website beginning at approximately 1:00 p.m. ET.
About Life Time Fitness, Inc.
As The Healthy Way of Life Company, Life Time Fitness (NYSE:LTM) helps organizations, communities and individuals achieve their total health objectives, athletic aspirations and fitness goals by engaging in their areas of interest – or discovering new passions – both inside and outside of Life Time’s distinctive and large sports, professional fitness, family recreation and spa destinations, most of which operate 24 hours a day, seven days a week. The Company’s Healthy Way of Life approach enables customers to achieve this by providing the best programs, people and places of uncompromising quality and value. As of July 19, 2012, the Company operated 105 centers under the LIFE TIME FITNESS® and LIFE TIME ATHLETIC(SM) brands in the United States and Canada. Additional information about Life Time centers, programs and services is available at lifetimefitness.com.
Forward-Looking Statements
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, the ability to access our existing credit facility and obtain additional financing, strains on our business from continued and future growth, including potential acquisitions and other strategic initiatives, risks related to maintenance and security of our data, 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 common 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 and repurchases. The Company’s expectations for fiscal year 2012 exclude any additional unusual items that might occur during the fiscal year, such as litigation matters or the potential recognition of compensation expense associated with the May 2012 grant of long-term performance-based restricted stock to the Company’s senior management team. While the Company has determined that achieving the 2012 diluted earnings per common share performance criteria required for vesting the remaining stock related to the June 2009 performance share-based restricted stock grant is probable and anticipates recognizing additional performance share-based compensation expense in 2012, the Company may not be able to meet those criteria due to risks and uncertainties, including those factors described above.
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, 2012 |
December 31, 2011 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 15,499 | $ | 7,487 | ||||
| Accounts receivable, net | 8,111 | 6,156 | ||||||
| Center operating supplies and inventories | 25,999 | 21,600 | ||||||
| Prepaid expenses and other current assets | 25,033 | 22,905 | ||||||
| Deferred membership origination costs | 12,226 | 12,525 | ||||||
| Deferred income taxes | 5,764 | 9,850 | ||||||
| Income tax receivable | - | 5,022 | ||||||
| Total current assets | 92,632 | 85,545 | ||||||
| PROPERTY AND EQUIPMENT, net | 1,786,183 | 1,740,434 | ||||||
| RESTRICTED CASH | 1,538 | 1,088 | ||||||
| DEFERRED MEMBERSHIP ORIGINATION COSTS | 8,809 | 8,131 | ||||||
| GOODWILL | 34,272 | 25,550 | ||||||
| OTHER ASSETS | 71,012 | 55,080 | ||||||
| TOTAL ASSETS | $ | 1,994,446 | $ | 1,915,828 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Current maturities of long-term debt | $ | 7,866 | $ | 6,849 | ||||
| Accounts payable | 18,829 | 22,035 | ||||||
| Construction accounts payable | 16,666 | 21,892 | ||||||
| Accrued expenses | 74,257 | 56,284 | ||||||
| Deferred revenue | 42,936 | 33,898 | ||||||
| Total current liabilities | 160,554 | 140,958 | ||||||
| LONG-TERM DEBT, net of current portion | 667,408 | 679,449 | ||||||
| DEFERRED RENT LIABILITY | 21,077 | 19,370 | ||||||
| DEFERRED INCOME TAXES | 94,465 | 100,582 | ||||||
| DEFERRED REVENUE | 8,859 | 8,203 | ||||||
| OTHER LIABILITIES | 12,964 | 9,793 | ||||||
| Total liabilities | 965,327 | 958,355 | ||||||
| SHAREHOLDERS' EQUITY: | ||||||||
| Common stock | 870 | 849 | ||||||
| Additional paid-in capital | 458,911 | 441,813 | ||||||
| Retained earnings | 573,368 | 517,404 | ||||||
| Accumulated other comprehensive loss | (4,030 | ) | (2,593 | ) | ||||
| Total equity | 1,029,119 | 957,473 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 1,994,446 | $ | 1,915,828 | ||||
| LIFE TIME FITNESS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share data) (Unaudited) |
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|
For the Three Months Ended |
For the Six Months Ended |
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| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| REVENUE: | ||||||||||||||||
| Membership dues | $ | 184,895 | $ | 167,013 | $ | 360,365 | $ | 325,026 | ||||||||
| Enrollment fees | 3,929 | 4,686 | 7,883 | 9,887 | ||||||||||||
| In-center revenue | 90,118 | 80,299 | 174,734 | 153,988 | ||||||||||||
| Total center revenue | 278,942 | 251,998 | 542,982 | 488,901 | ||||||||||||
| Other revenue | 9,362 | 4,696 | 13,769 | 8,438 | ||||||||||||
| Total revenue | 288,304 | 256,694 | 556,751 | 497,339 | ||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Center operations | 166,554 | 156,654 | 327,269 | 306,206 | ||||||||||||
| Advertising and marketing | 9,689 | 8,997 | 20,045 | 17,560 | ||||||||||||
| General and administrative | 13,856 | 12,112 | 27,559 | 24,763 | ||||||||||||
| Other operating | 12,761 | 8,013 | 21,152 | 14,005 | ||||||||||||
| Depreciation and amortization | 28,861 | 24,663 | 55,821 | 48,287 | ||||||||||||
| Total operating expenses | 231,721 | 210,439 | 451,846 | 410,821 | ||||||||||||
| Income from operations | 56,583 | 46,255 | 104,905 | 86,518 | ||||||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||
| Interest expense, net | (6,545 | ) | (4,697 | ) | (12,822 | ) | (10,201 | ) | ||||||||
| Equity in earnings of affiliate | 395 | 326 | 768 | 627 | ||||||||||||
| Total other income (expense) | (6,150 | ) | (4,371 | ) | (12,054 | ) | (9,574 | ) | ||||||||
| INCOME BEFORE INCOME TAXES | 50,433 | 41,884 | 92,851 | 76,944 | ||||||||||||
| PROVISION FOR INCOME TAXES | 20,141 | 16,937 | 36,887 | 31,161 | ||||||||||||
| NET INCOME | $ | 30,292 | $ | 24,947 | $ | 55,964 | $ | 45,783 | ||||||||
| BASIC EARNINGS PER COMMON SHARE | $ | 0.73 | $ | 0.62 | $ | 1.35 | $ | 1.14 | ||||||||
| DILUTED EARNINGS PER COMMON SHARE | $ | 0.73 | $ | 0.61 | $ | 1.34 | $ | 1.12 | ||||||||
| WEIGHTED AVERAGE NUMBER OF COMMON | ||||||||||||||||
| SHARES OUTSTANDING - BASIC | 41,462 | 40,381 | 41,313 | 40,259 | ||||||||||||
| WEIGHTED AVERAGE NUMBER OF COMMON | ||||||||||||||||
| SHARES OUTSTANDING - DILUTED | 41,750 | 40,771 | 41,771 | 40,763 | ||||||||||||
| LIFE TIME FITNESS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) |
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| For the Six Months Ended June 30, |
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| 2012 | 2011 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 55,964 | $ | 45,783 | ||||
| Adjustments to reconcile net income to net cash provided by | ||||||||
| operating activities: | ||||||||
| Depreciation and amortization | 55,821 | 48,287 | ||||||
| Deferred income taxes | (1,073 | ) | (896 | ) | ||||
| Loss on disposal of property and equipment, net | 579 | 390 | ||||||
| Amortization of deferred financing costs | 1,006 | 1,297 | ||||||
| Share-based compensation | 7,312 | 6,408 | ||||||
| Excess tax benefit related to share-based payment arrangements | (8,365 | ) | (2,765 | ) | ||||
| Changes in operating assets and liabilities | 31,450 | 20,563 | ||||||
| Other | (504 | ) | (556 | ) | ||||
| Net cash provided by operating activities | 142,190 | 118,511 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchases of property and equipment | (106,102 | ) | (83,023 | ) | ||||
| Acquisitions, net of cash acquired | (26,415 | ) | (7,181 | ) | ||||
| Proceeds from sale of property and equipment | 362 | 453 | ||||||
| Proceeds from property insurance settlement | 790 | - | ||||||
| Increase in other assets | (250 | ) | (111 | ) | ||||
| Decrease in restricted cash | 651 | 2,011 | ||||||
| Net cash used in investing activities | (130,964 | ) | (87,851 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Repayments of long-term borrowings | (3,521 | ) | (73,604 | ) | ||||
| (Repayments of) proceeds from revolving credit facility, net | (10,000 | ) | 41,600 | |||||
| Increase in deferred financing costs | (256 | ) | (4,342 | ) | ||||
| Excess tax benefit related to share-based payment arrangements | 8,365 | 2,765 | ||||||
| Proceeds from stock option exercises | 1,982 | 1,045 | ||||||
| Proceeds from employee stock purchase plan | 590 | 517 | ||||||
| Stock purchased for employee stock purchase plan | (649 | ) | (547 | ) | ||||
| Net cash used in financing activities | (3,489 | ) | (32,566 | ) | ||||
| Effect of exchange rates on cash and cash equivalents | 275 | - | ||||||
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 8,012 | (1,906 | ) | |||||
| CASH AND CASH EQUIVALENTS - Beginning of period | 7,487 | 12,227 | ||||||
| CASH AND CASH EQUIVALENTS - End of period | $ | 15,499 | $ | 10,321 | ||||
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) |
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| For the Three Months Ended June 30, |
For the Six Months Ended June 30, |
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| 2012 | 2011 | 2012 | 2011 | |||||||||
| Net income | $ | 30,292 | $ | 24,947 | $ | 55,964 | $ | 45,783 | ||||
| Interest expense, net | 6,545 | 4,697 | 12,822 | 10,201 | ||||||||
| Provision for income taxes | 20,141 | 16,937 | 36,887 | 31,161 | ||||||||
| Depreciation and amortization | 28,861 | 24,663 | 55,821 | 48,287 | ||||||||
| EBITDA | $ | 85,839 | $ | 71,244 | $ | 161,494 | $ | 135,432 | ||||
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, excluding acquisitions. 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) |
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|
For the Three Months Ended |
For the Six Months Ended June 30, |
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| 2012 | 2011 | 2012 | 2011 | ||||||||||||
| Net cash provided by operating activities | $ | 68,287 | $ | 58,388 | $ | 142,190 | $ | 118,511 | |||||||
| Less: Purchases of property and equipment | (67,625 | ) | (44,660) | (106,102 | ) | (83,023 | ) | ||||||||
| Free cash flow | $ | 662 | $ | 13,728 | $ | 36,088 | $ | 35,488 | |||||||
Non-GAAP Average Center Revenue Per Membership. Non-GAAP average center revenue per membership is a non-GAAP financial measure consisting of average center revenue per membership excluding the impact of the Lifestyle Family Fitness transaction, which may provide a better metric for comparing operating results. The following table provides a reconciliation of average center revenue per membership, the most directly comparable GAAP measure, to non-GAAP average center revenue per membership.
| RECONCILIATION OF AVERAGE CENTER REVENUE PER MEMBERSHIP TO NON-GAAP AVERAGE CENTER REVENUE PER MEMBERSHIP (Unaudited) |
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| For the Three Months Ended June 30, |
|
For the Six Months Ended June 30, |
|
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| 2012 | 2011 |
Growth |
2012 | 2011 |
Growth |
|||||||||||||
| Average center revenue per membership | $ | 400 | $ | 389 | 3.0 | % | $ | 786 | $ | 768 | 2.4 | % | ||||||
| Excluding the impact of Lifestyle Family Fitness transaction | 10 | - | - | 16 | - | - | ||||||||||||
| Non-GAAP average center revenue per membership | $ | 410 | $ | 389 | 5.4 | % | $ | 802 | $ | 768 | 4.5 | % | ||||||
Non-GAAP Average In-Center Revenue Per Membership. Non-GAAP average in-center revenue per membership is a non-GAAP financial measure consisting of average in-center revenue per membership excluding the impact of the Lifestyle Family Fitness transaction, which may provide a better metric for comparing operating results. The following table provides a reconciliation of average in-center revenue per membership, the most directly comparable GAAP measure, to non-GAAP average in-center revenue per membership.
| RECONCILIATION OF AVERAGE IN-CENTER REVENUE PER MEMBERSHIP TO NON-GAAP AVERAGE IN-CENTER REVENUE PER MEMBERSHIP (Unaudited) |
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| For the Three Months Ended June 30, |
|
For the Six Months Ended June 30, |
|
|||||||||||||||
| 2012 | 2011 |
Growth |
2012 | 2011 |
Growth |
|||||||||||||
| Average in-center revenue per membership | $ | 129 | $ | 124 | 4.4 | % | $ | 253 | $ | 242 | 4.6 | % | ||||||
| Excluding the impact of Lifestyle Family Fitness transaction | 4 | - | 6 | - | - | |||||||||||||
| Non-GAAP average in-center revenue per membership | $ | 133 | $ | 124 | 7.4 | % | $ | 259 | $ | 242 | 7.2 | % | ||||||