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Life Time Fitness Announces First Quarter 2013 Financial Results
Revenue Grew 8.3%, Net Income Grew 9.5% and Diluted EPS was $0.67
"We delivered solid revenue, net income and earnings-per-share performance in the first quarter"

CHANHASSEN, Minn.--(BUSINESS WIRE)--Life Time Fitness, Inc. (NYSE: LTM), The Healthy Way of Life Company, today reported its financial results for the first quarter ended March 31, 2013.

First quarter 2013 revenue grew 8.3% to $290.7 million from $268.4 million during the same period last year. Net income for the quarter was $28.1 million, or $0.67 per diluted share, compared to net income of $25.7 million, or $0.62 per diluted share, for 1Q 2012.

“We delivered solid revenue, net income and earnings-per-share performance in the first quarter,” said Bahram Akradi, chairman, president and chief executive officer. “Our focus continues to be delivering on our member experience and connectivity objectives, while building our Healthy Way of Life Company and brand. Today, our wide range of interest-driven programs and services, and certified professionals help our members establish personalized health objectives and plans that allow them to achieve real, sustainable results. This has created a differentiated and powerful business model for Life Time that we believe positions us for long-term growth and success.”

In April, the Company opened its first center in Alabama, located in Vestavia Hills. Two additional centers are planned for opening in the second half of 2013, including Montvale, New Jersey and Reston, Virginia. These represent the Company’s third and fourth centers in New Jersey and Virginia, respectively. In 2014, plans call for six new center openings, led by locations in Harrison, New York and Laguna Niguel, California during the first quarter.

Three Months Ended March 31, 2013, Financial Highlights:

Total revenue for the first quarter grew 8.3% to $290.7 million from $268.4 million in 1Q 2012.
             
(Period-over-period growth) 1Q 2013   vs.   1Q 2012
 

(in millions except revenue per membership data)
Membership dues $186.4   vs.   $175.5   (up 6.2%)
In-center revenue $92.0   vs.   $84.6   (up 8.7%)
Other revenue $9.0   vs.   $4.4   (up 104.4%)
               
Average center revenue per Access membership $404   vs.   $382   (up 5.9%)
Average in-center revenue per Access membership $134   vs.   $124   (up 8.0%)
Same-center revenue (open 13 months or longer) Up   3.5%        
Same-center revenue (open 37 months or longer) Up   3.0%        
               

Total memberships grew 1.5% to 809,813 at March 31, 2013, from 797,640 at March 31, 2012.

  • Access memberships grew 0.6% to 708,563 at March 31, 2013, from 704,467 at March 31, 2012.
  • Non-Access memberships grew 8.7% to 101,250 at March 31, 2013, from 93,173 at March 31, 2012.
  • Attrition in 1Q 2013 was 8.2% compared to 7.9% in the prior-year period. Attrition for the trailing 12-month period ended March 31, 2013, was 33.9% compared to trailing 12-month attrition of 31.7% at March 31, 2012. The year-over-year attrition increase was driven primarily by Non-Access membership terminations. The trailing 12-month attrition increase was driven primarily by Non-Access membership terminations and the Lifestyle Family Fitness acquisition.

Total operating expenses during 1Q 2013 were $238.4 million compared to $220.1 million for 1Q 2012.

  • Income from operations margin was 18.0% for 1Q 2013 and 1Q 2012.
(Expense as a percent of total revenue)   1Q 2013   vs.   1Q 2012
Center operations   58.5 %   vs.   59.9%
Advertising and marketing   3.8 %   vs.   3.9%
General and administrative   5.2 %   vs.   5.1%
Other operating   4.4 %   vs.   3.0%
Depreciation and amortization   10.1 %   vs.   10.1%
               

Net income for 1Q 2013 was $28.1 million, or $0.67 per diluted share, compared to net income of $25.7 million, or $0.62 per diluted share, for 1Q 2012.

EBITDA for 1Q 2013 was $82.0 million compared to $75.7 million in 1Q 2012.

  • As a percentage of total revenue, EBITDA in 1Q 2013 was 28.2% in 1Q 2013 and 1Q 2012.

Cash flows from operating activities for 1Q 2013 totaled $76.2 million compared to $73.9 million in 1Q 2012.

Weighted average fully diluted shares for 1Q 2013 totaled 41.6 million compared to 41.7 million in 1Q 2012.

Updated 2013 Business Outlook:

The following statements are based on the Company’s current expectations for fiscal year 2013 and incorporate 2013 operating trends. These 2013 expectations are subject to the risks and uncertainties further described in the Company’s forward-looking statements:

  • Revenue is expected to be up 7-8%, or $1.205-1.220 billion (updated from $1.200-1.220 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 8.5-11%, or $121.0-124.0 million (updated from $120.0-124.0 million), driven by revenue growth and cost efficiencies.
  • Diluted earnings per common share is expected to be $2.87-2.95 (updated from $2.85-2.95).

As announced on April 18, 2013, the Company will hold a conference call today at 10:00 a.m. ET to discuss its first quarter 2013 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 2:00 p.m. ET.

Additionally, the Company will hold its Annual Meeting of Shareholders at 2:00 p.m. ET at its headquarters (2902 Corporate Place in Chanhassen, Minnesota). The meeting will be webcast and may be accessed live via the Company’s investor relations section of its website at lifetimefitness.com. A replay of the webcast will be available beginning at approximately 5:00 p.m. ET today, and remain available for 30 days.

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 April 25, 2013, the Company operated 106 centers under the LIFE TIME FITNESS® and LIFE TIME ATHLETIC® brands in the United States and Canada. Additional information about Life Time centers, programs and services is available at lifetimefitness.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can usually be identified by the use of terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “evolve,” “expect,” “forecast,” “intend,” “looking ahead,” “may,” “opinion,” “plan,” “possible,” “potential,” “project,” “should,” “will” and similar words or expressions. Forward-looking 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, potential recognition of compensation expense related to performance-based stock grants, 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 risk factor section of the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission.

The Company cautions investors not to place undue reliance on any such forward-looking statements, which speak only as of the date on which such statements were made. The Company undertakes no obligation to update such statements to reflect events or circumstances arising after such date. All remarks made during the Company’s preliminary financial results webcast will be current at the time of the webcast and the Company is under no obligation to update the recording.

 

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
    March 31,   December 31,
    2013   2012
    (Unaudited)    
ASSETS        
CURRENT ASSETS:        
Cash and cash equivalents   $ 13,694     $ 16,499  
Accounts receivable, net   8,376     9,272  
Center operating supplies and inventories   29,132     27,240  
Prepaid expenses and other current assets   28,941     26,826  
Deferred membership origination costs   11,596     11,664  
Deferred income taxes   2,193     8,813  
Total current assets   93,932     100,314  
PROPERTY AND EQUIPMENT, net   1,898,070     1,858,666  
RESTRICTED CASH   2,362     2,087  
DEFERRED MEMBERSHIP ORIGINATION COSTS   6,286     6,820  
GOODWILL   39,762     37,176  
OTHER ASSETS   66,354     67,111  
TOTAL ASSETS   $ 2,106,766     $ 2,072,174  
LIABILITIES AND SHAREHOLDERS' EQUITY        
CURRENT LIABILITIES:        
Current maturities of long-term debt   $ 22,228     $ 12,603  
Accounts payable   34,683     32,140  
Construction accounts payable   34,898     25,208  
Accrued expenses   66,305     63,333  
Deferred revenue   41,810     34,753  
Total current liabilities   199,924     168,037  
LONG-TERM DEBT, net of current portion   676,631     691,867  
DEFERRED RENT LIABILITY   23,120     22,490  
DEFERRED INCOME TAXES   93,685     95,509  
DEFERRED REVENUE   6,326     6,840  
OTHER LIABILITIES   21,387     14,514  
Total liabilities   1,021,073     999,257  
SHAREHOLDERS’ EQUITY:        
Common stock   862     864  
Additional paid-in capital   432,852     447,912  
Retained earnings   657,043     628,942  
Accumulated other comprehensive income   (5,064 )   (4,801 )
Total shareholders’ equity   1,085,693     1,072,917  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 2,106,766     $ 2,072,174  
                 
     

LIFE TIME FITNESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
 
    For the Three Months Ended
    March 31,
    2013   2012
REVENUE:        
Membership dues   $ 186,374     $ 175,470  
Enrollment fees   3,396     3,954  
In-center revenue   91,971     84,616  
Total center revenue   281,741     264,040  
Other revenue   9,006     4,407  
Total revenue   290,747     268,447  
OPERATING EXPENSES:        
Center operations   169,962     160,715  
Advertising and marketing   10,959     10,356  
General and administrative   15,356     13,703  
Other operating   12,834     8,391  
Depreciation and amortization   29,262     26,960  
Total operating expenses   238,373     220,125  
Income from operations   52,374     48,322  
OTHER INCOME (EXPENSE):        
Interest expense, net of interest income   (6,129 )   (6,277 )
Equity in earnings of affiliate   346     373  
Total other income (expense)   (5,783 )   (5,904 )
INCOME BEFORE INCOME TAXES   46,591     42,418  
PROVISION FOR INCOME TAXES   18,490     16,746  
NET INCOME   $ 28,101     $ 25,672  
         
BASIC EARNINGS PER COMMON SHARE   $ 0.68     $ 0.62  
DILUTED EARNINGS PER COMMON SHARE   $ 0.67     $ 0.62  
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC   41,295     41,174  
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED   41,646     41,675  
             
     

LIFE TIME FITNESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
    For the Three Months Ended
    March 31,
    2013   2012
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income   $ 28,101     $ 25,672  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization   29,262     26,960  
Deferred income taxes   4,582     5,360  
Loss on disposal of property and equipment, net   (228 )   (2 )
Amortization of deferred financing costs   505     503  
Share-based compensation   2,830     3,878  
Excess tax benefit related to share-based compensation   (4,657 )   (8,118 )
Changes in operating assets and liabilities   16,645     19,789  
Other   (809 )   (139 )
Net cash provided by operating activities   76,231     73,903  
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchases of property and equipment   (59,145 )   (38,477 )
Acquisitions, net of cash acquired   —     (6,578 )
Proceeds from sale of property and equipment   555     363  
Proceeds from property insurance settlements   121     670  
Increase in other assets   (730 )   (172 )
Increase in restricted cash   (275 )   (177 )
Net cash used in investing activities   (59,474 )   (44,371 )
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from long-term borrowings   75,000     —  
Repayments of long-term borrowings   (1,696 )   (1,441 )
Repayments of revolving credit facility, net   (78,400 )   (34,600 )
Increase in deferred financing costs   (465 )   (10 )
Excess tax benefit related to share-based compensation   4,657     8,118  
Proceeds from stock option exercises   872     1,972  
Proceeds from employee stock purchase plan   414     388  
Stock purchased for employee stock purchase plan   (569 )   (649 )
Repurchases of common stock   (19,349 )   —  
Net cash used in financing activities   (19,536 )   (26,222 )
Effect of exchange rates on cash and cash equivalents   (26 )   —  
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS   (2,805 )   3,310  
CASH AND CASH EQUIVALENTS – Beginning of period   16,499     7,487  
CASH AND CASH EQUIVALENTS – End of period   $ 13,694     $ 10,797  
                 

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 measure 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
    March 31,
    2013   2012
Net income   $ 28,101     $ 25,672
Interest expense, net   6,129     6,277
Provision for income taxes   18,490     16,746
Depreciation and amortization   29,262     26,960
EBITDA   $ 81,982     $ 75,655
               

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)
         
    For the Three Months Ended
    March 31,
    2013   2012
Net cash provided by operating activities   $ 76,231     $ 73,903  
Less: Purchases of property and equipment   (59,145 )   (38,477 )
Free cash flow   $ 17,086     $ 35,426  
For further information: Life Time Fitness, Inc. John Heller, 952-229-7427 (Investors) ir@lifetimefitness.com Jason Thunstrom, 952-229-7435 (Media) pr@lifetimefitness.com