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Life Time Fitness Announces Fourth Quarter And Full Year 2013 Financial Results
For the Quarter, Revenue Grew 5.7%, Net Income Grew 11.1% and Diluted EPS was $0.63, up 12.5% For the Year, Revenue Grew 7.0%, Net Income Grew 9.1% and Diluted EPS was $2.93, up 10.2%
"2013 served as an important transition year for our company"

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

Fourth quarter 2013 revenue grew 5.7% to $291.0 million from $275.3 million during the same period last year. Revenue for the full year grew 7.0% to $1.206 billion from $1.127 billion during the same period last year.

Net income for the quarter was $26.0 million, or $0.63 per diluted share, compared to net income of $23.4 million, or $0.56 per diluted share, for 4Q 2012. Net income for the full year was $121.7 million, or $2.93 per diluted share, compared to net income of $111.5 million, or $2.66 per diluted share for the prior-year period.

“2013 served as an important transition year for our company,” said Bahram Akradi, chairman, president and chief executive officer. “We continued to differentiate Life Time in keeping with our strategy to operate a high barrier to entry business model in what is a low barrier to entry industry. We also concentrated on further aligning our company for higher growth in 2014 and beyond by ensuring our businesses operate in highly synergistic fashion and our comprehensive array of healthy way of life programs and services are optimized to deliver tremendous value for communities, organizations and individuals.”

During the quarter, the Company opened its third center in New Jersey, located in Montvale (greater New York market). In 2014, plans call for six new center openings in existing and new markets, led by Westchester County, New York, the Company’s second New York location, which opened on February 6. The remaining planned new center openings will be in the Tampa, Florida; Orange County, California; Des Moines, Iowa; Detroit, Michigan; and Las Vegas, Nevada markets.

Three and Twelve Months Ended December 31, 2013, Financial Highlights:

Total revenue for the fourth quarter grew 5.7% to $291.0 million from $275.3 million in 4Q 2012. Total revenue for the full year grew 7.0% to $1.206 billion from $1.127 billion during the prior-year period.

 

   4Q 2013 vs. 4Q 2012

(in millions except revenue per membership data)
     

Membership dues

  

$190.0 vs. $179.7 (up 5.8%)
In-center revenue   $89.0 vs. $83.0 (up 7.3%)
Other revenue   $8.6 vs. $9.1 (down 4.9%)
     
Average center revenue per Access membership   $412 vs. $388 (up 6.4%)
Average in-center revenue per Access membership   $132 vs. $122 (up 7.6%)
Same-center revenue (open 13 months or longer)   Up 3.6%
Same-center revenue (open 37 months or longer)   Up 2.7%
     

 

  

2013 vs. 2012

(in millions except revenue per membership data)
     

Membership dues

  

$766.8 vs. $727.6 (up 5.4%)
In-center revenue   $375.5 vs. $348.3 (up 7.8%)
Other revenue   $49.6 vs. $35.7 (up 38.8%)
     
Average center revenue per Access membership   $1,656 vs. $1,567 (up 5.7%)
Average in-center revenue per Access membership   $545 vs. $507 (up 7.5%)
Same-center revenue (open 13 months or longer)   Up 4.0%
Same-center revenue (open 37 months or longer)   Up 3.2%
     

Total memberships grew 0.3% to 789,490 at December 31, 2013, from 787,003 at December 31, 2012.

  • Access memberships were down 0.6% to 678,619 at December 31, 2013, from 682,621 at December 31, 2012.
  • Non-Access memberships grew 6.2% to 110,871 at December 31, 2013, from 104,382 at December 31, 2012.
  • Attrition in 4Q 2013 was 9.8% compared to 9.1% in the prior-year period. Attrition for the trailing 12-month period ended December 31, 2013, was 35.8% compared to trailing 12-month attrition of 33.5% at December 31, 2012.

Total operating expenses during 4Q 2013 were $242.4 million compared to $231.4 million for 4Q 2012. Total operating expenses for the full year were $981.3 million compared to $918.7 million in 2012.

  • Income from operations margin was 16.7% for 4Q 2013 compared to 16.0% in the prior-year period.
  • Income from operations margin was 18.6% for the full year compared to 18.5% in 2012.
(Expense as a percent of total revenue)   4Q 2013 vs. 4Q 2012   2013 vs. 2012
Center operations   58.1% vs. 57.8%   57.7% vs. 58.2%
Advertising and marketing   4.2% vs. 4.0%   3.6% vs. 3.5%
General and administrative   4.6% vs. 5.3%   4.9% vs. 5.0%
Other operating   6.2% vs. 6.1%   5.3% vs. 4.6%
Depreciation and amortization   10.2% vs. 10.8%   9.9% vs. 10.2%
         

Net income for 4Q 2013 was $26.0 million, or $0.63 per diluted share, compared to net income of $23.4 million, or $0.56 per diluted share, for 4Q 2012. Net income for the full year was $121.7 million, or $2.93 per diluted share, compared to net income of $111.5 million, or $2.66 per diluted share, for the prior-year period.

EBITDA for 4Q 2013 was $78.7 million compared to $74.1 million in 4Q 2012. For the full year, EBITDA was $345.0 million compared with $324.7 million in the prior-year period.

  • As a percentage of total revenue, EBITDA in 4Q 2013 was 27.0% in 4Q 2013, compared to 26.9% in the prior year period.
  • For the full year, EBITDA, as a percentage of total revenue, was 28.6% compared to 28.8% in the prior-year period.

Cash flows from operating activities for the full year totaled $258.4 million compared to $255.7 million in the prior-year period.

Weighted average fully diluted shares for 4Q 2013 totaled 41.3 million compared to 42.0 million in 4Q 2012. For the full year, weighted average fully diluted shares totaled 41.5 million compared to 42.0 million for the prior-year period.

2014 Business Outlook:

The following statements are based on the Company’s current expectations for fiscal year 2014 and incorporate 2013 operating trends. These 2014 expectations are subject to the risks and uncertainties further described in the Company’s forward-looking statements:

  • Revenue is expected to be up 8-9.5%, or $1.300-1.320 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 3-7%, or $125.0-130.0 million, driven by revenue growth, partially offset by increased costs associated with the acceleration of new center growth.
  • Diluted earnings per common share is expected to be $3.05-3.15.

As announced on February 13, 2014, the Company will hold a conference call today at 10:00 a.m. ET to discuss its fourth quarter and full year 2013 results. Bahram Akradi, Michael Robinson, executive vice president and chief financial officer, and John Heller, vice president, Finance and Investor Relations, 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.

As announced on August 27, 2013, Robinson plans to retire as executive vice president and chief financial officer following a 12-year tenure with the Company. The effective date of this transition is March 1, 2014. The Company plans to retain Robinson as an employee or consultant for a period of time thereafter. Effective March 2, 2014, Eric J. Buss, who currently serves as executive vice president, will assume the additional role of interim chief financial officer. Buss joined Life Time in September 1999 as vice president of Finance and general counsel. Prior to joining the Company, Buss was an associate with the law firm of Faegre & Benson LLP (now Faegre Baker Daniels LLP) and, before that, he served as an auditor with Arthur Andersen LLP.

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 February 20, 2014, the Company operated 109 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, potential impairment of long-lived assets, goodwill and intangible assets, 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)
 
    December 31,   December 31,
    2013   2012
ASSETS   (Unaudited)    
CURRENT ASSETS:        
Cash and cash equivalents   $ 8,334     $ 16,499  
Accounts receivable, net     8,298       9,272  
Center operating supplies and inventories     32,778       27,240  
Prepaid expenses and other current assets     25,802       26,826  
Deferred membership origination costs     9,945       11,664  
Deferred income taxes     6,881       8,813  
Income tax receivable     6,698       -  
Total current assets     98,736       100,314  
PROPERTY AND EQUIPMENT, net     2,105,077       1,858,666  
RESTRICTED CASH     850       2,087  
DEFERRED MEMBERSHIP ORIGINATION COSTS     5,210       6,820  
GOODWILL     49,195       37,176  
OTHER ASSETS     71,983       67,111  
TOTAL ASSETS   $ 2,331,051     $ 2,072,174  
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
CURRENT LIABILITIES:        
Current maturities of long-term debt   $ 24,505     $ 12,603  
Accounts payable     28,645       32,140  
Construction accounts payable     47,342       25,208  
Accrued expenses     67,435       63,333  
Deferred revenue     35,032       34,753  
Total current liabilities     202,959       168,037  
LONG-TERM DEBT, net of current portion     824,093       691,867  
DEFERRED RENT LIABILITY     28,933       22,490  
DEFERRED INCOME TAXES     100,504       95,509  
DEFERRED REVENUE     5,246       6,840  
OTHER LIABILITIES     21,287       14,514  
Total liabilities     1,183,022       999,257  
SHAREHOLDERS' EQUITY:        
Common stock     843       864  
Additional paid-in capital     402,147       447,912  
Retained earnings     750,654       628,942  
Accumulated other comprehensive loss     (5,615 )     (4,801 )
Total equity     1,148,029       1,072,917  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 2,331,051     $ 2,072,174  
 
 
LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
 
    For the Three Months Ended   For the Year Ended
    December 31,   December 31,
    2013   2012   2013   2012
    (Unaudited)   (Unaudited)   (Unaudited)    
REVENUE:                
Membership dues   $ 189,999     $ 179,663     $ 766,846     $ 727,596  
Enrollment fees     3,374       3,604       13,941       15,346  
In-center revenue     89,037       82,988       375,517       348,265  
Total center revenue     282,410       266,255       1,156,304       1,091,207  
Other revenue     8,628       9,068       49,600       35,740  
Total revenue     291,038       275,323       1,205,904       1,126,947  
OPERATING EXPENSES:                
Center operations     169,018       159,097       696,209       655,887  
Advertising and marketing     12,366       11,060       42,712       39,931  
General and administrative     13,386       14,525       58,986       55,715  
Other operating     17,863       16,927       64,401       52,170  
Depreciation and amortization     29,737       29,799       118,972       115,016  
Total operating expenses     242,370       231,408       981,280       918,719  
Income from operations     48,668       43,915       224,624       208,228  
OTHER INCOME (EXPENSE):                
Interest expense, net     (6,657 )     (6,143 )     (25,656 )     (25,475 )
Equity in earnings of affiliate     296       339       1,399       1,482  
Total other expense     (6,361 )     (5,804 )     (24,257 )     (23,993 )
INCOME BEFORE INCOME TAXES     42,307       38,111       200,367       184,235  
PROVISION FOR INCOME TAXES     16,269       14,681       78,655       72,697  
NET INCOME   $ 26,038     $ 23,430     $ 121,712     $ 111,538  
                 
BASIC EARNINGS PER COMMON SHARE   $ 0.64     $ 0.57     $ 2.95     $ 2.70  
DILUTED EARNINGS PER COMMON SHARE   $ 0.63     $ 0.56     $ 2.93     $ 2.66  

 

                

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC

     40,996       41,260       41,263       41,345  

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED

     41,295       42,015       41,482       41,972  
                                 
 
LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
    For the Year Ended
    December 31,
    2013   2012
    (Unaudited)    
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income   $ 121,712     $ 111,538  

Adjustments to reconcile net income to net cash provided by operating activities:

        
Depreciation and amortization     118,972       115,016  
Deferred income taxes     6,327       (2,832 )
Loss on disposal of property and equipment, net     251       1,086  
Gain on sale of land held for sale     (74 )     (196 )
Amortization of deferred financing costs     2,197       2,003  
Share-based compensation     12,469       14,686  
Excess tax benefit related to share-based compensation     (5,895 )     (8,502 )
Changes in operating assets and liabilities     2,633       22,999  
Other     (175 )     (53 )
Net cash provided by operating activities     258,417       255,745  
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchases of property and equipment     (348,948 )     (224,194 )
Acquisitions, net of cash acquired     (13,238 )     (30,614 )
Proceeds from sale of property and equipment     1,445       969  
Proceeds from sale of land held for sale     678       1,758  
Proceeds from property insurance settlements     177       909  
Increase in other assets     (1,187 )     (333 )
Decrease in restricted cash     1,237       102  
Net cash used in investing activities     (359,836 )     (251,403 )
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from long-term borrowings     125,000       -  
Repayments of long-term borrowings     (35,276 )     (6,929 )
Proceeds from revolving credit facility, net     56,500       22,000  
Increase in deferred financing costs     (4,631 )     (914 )
Excess tax benefit related to share-based compensation     5,895       8,502  
Proceeds from stock option exercises     1,734       2,342  
Proceeds from employee stock purchase plan     1,367       1,206  
Stock purchased for employee stock purchase plan     (1,309 )     (1,290 )
Repurchases of common stock     (61,959 )     (19,099 )
Net cash provided by financing activities     87,321       5,818  
         
Effect of exchange rates on cash and cash equivalents     5,933       (1,148 )
         
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS     (8,165 )     9,012  
CASH AND CASH EQUIVALENTS - Beginning of period     16,499       7,487  
CASH AND CASH EQUIVALENTS - End of period   $ 8,334     $ 16,499  
                 

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   For the Year Ended
    December 31,   December 31,
    2013   2012   2013   2012
Net income   $ 26,038   $ 23,430   $ 121,712   $ 111,538
Interest expense, net     6,657     6,143     25,656     25,475
Provision for income taxes     16,269     14,681     78,655     72,697
Depreciation and amortization     29,737     29,799     118,972     115,016
EBITDA   $ 78,701   $ 74,053   $ 344,995   $ 324,726
                         

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   For the Year Ended
  December 31,   December 31,
  2013   2012   2013   2012
Net cash provided by operating activities $ 67,654     $ 52,884     $ 258,417     $ 255,745
Less: Purchases of property and equipment   124,406       59,638       348,948       224,194
Free cash flow $ (56,752 )   $ (6,754 )   $ (90,531 )   $ 31,551
                             
 
For further information: Life Time Fitness, Inc. Investor Relations John Heller, 952-229-7427 ir@lifetimefitness.com Media Relations Jason Thunstrom, 952-229-7435 pr@lifetimefitness.com