Life Time Fitness Announces Third Quarter 2012 Financial Results

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Life Time Fitness Announces Third Quarter 2012 Financial Results

Revenue Grew 11.1%, Net Income Grew 19.1% and Diluted EPS was $0.77, up 16.7%

CHANHASSEN, Minn.--(BUSINESS WIRE)-- Life Time Fitness, Inc. (NYS: LTM) , The Healthy Way of Life Company, today reported its financial results for the third quarter ended September 30, 2012.


Third quarter 2012 revenue grew 11.1% to $294.9 million from $265.4 million during the same period last year. Total revenue for the first nine months of 2012 grew 11.7% to $851.6 million from $762.8 million during the same period last year.

Net income for the quarter was $32.1 million, or $0.77 per diluted share, compared to net income of $27.0 million, or $0.66 per diluted share, for 3Q 2011. Net income for the first nine months of 2012 was $88.1 million, or $2.10 per diluted share, compared to net income of $72.8 million, or $1.78 per diluted share, for the prior-year period.

"We saw continued earnings growth, cash flow and margin improvement in the third quarter, and are pleased with our revenue metrics, which were highlighted by double-digit growth in total revenue and in-center revenue," said Bahram Akradi, Life Time chairman, president and chief executive officer. "We remain focused on building our Healthy Way of Life brand by making strategic investments in programs and services that we see as powerful opportunities to enhance our members' experience, while driving membership acquisition and retention. Our business model is strong, and we are steadfast in our focus on driving long-term growth and success."

During the quarter, the Company completed the integration and rebranding activities associated with the acquired Lifestyle Family Fitness facilities. Additionally, the Company expanded plans in connection with its previously announced acquisition of the Atlanta-based Racquet Club of the South by incorporating enhanced fitness and nutrition programs, services and membership opportunities as part of the overall renovation of the tennis complex.

Three and Nine Months Ended September 30, 2012, Financial Highlights:

Total revenue for the third quarter grew 11.1% to $294.9 million from $265.4 million in 3Q 2011. Total revenue for the first nine months of 2012 grew 11.7% to $851.6 million from $762.8 million during the same period last year.

 
(Period-over-period growth)3Q 2012 vs. 3Q 2011

(in millions except revenue per membership data)

  • Membership dues
$187.6 vs. $171.5 (up 9.4%)
  • In-center revenue
$90.5 vs. $80.7 (up 12.1%)
  • Other revenue
$12.9 vs. $8.8 (up 47.1%)
 
  • Average center revenue per membership (up 5.2% to $416 excluding the Lifestyle Family Fitness transaction)
$408 vs. $395 (up 3.2%)
  • Average in-center revenue per membership (up 7.8% to $134 excluding the Lifestyle Family Fitness transaction)
$131 vs. $124 (up 5.4%)
  • Same-center revenue (open 13 months or longer)
Up 4.1%
  • Same-center revenue (open 37 months or longer)
Up 3.1%
 
(Period-over-period growth) YTD 2012 vs. YTD 2011

(in millions except revenue per membership data)

  • Membership dues
$547.9 vs. $496.5 (up 10.4%)
  • In-center revenue
$265.3 vs. $234.7 (up 13.0%)
  • Other revenue
$26.7 vs. $17.2 (up 55.0%)
 
  • Average center revenue per membership (up 4.7% to $1,218 excluding the Lifestyle Family Fitness transaction)
$1,194 vs. $1,163 (up 2.7%)
  • Average in-center revenue per membership (up 7.4% to $393 excluding the Lifestyle Family Fitness transaction)
$384 vs. $366 (up 4.9%)
  • Same-center revenue (open 13 months or longer)
Up 4.6%
  • Same-center revenue (open 37 months or longer)
Up 3.9%
 

Memberships grew 6.4% to 695,271 at September 30, 2012, from 653,300 at September 30, 2011.

  • Excluding memberships acquired in connection with the Lifestyle Family Fitness transaction, memberships grew 3.0%.
  • Attrition in 3Q 2012 was 10.3% compared to 9.0% in the prior-year period. Excluding the Lifestyle Family Fitness transaction, 3Q 2012 attrition was 9.8%.
  • Attrition for the trailing 12-month period ended September 30, 2012, was 37.3% compared to trailing 12-month attrition of 35.3% at September 30, 2011. Excluding the impact of the Lifestyle Family Fitness transaction, trailing 12-month attrition was 36.3%.

Total operating expenses during 3Q 2012 were $235.5 million compared to $215.5 million for 3Q 2011. Total operating expenses for the first nine months of 2012 were $687.3 million compared to $626.4 million in 2011.

  • Income from operations margin was 20.1% for 3Q 2012 compared to 18.8% in the prior-year period.
  • Income from operations margin for the first nine months of 2012 was 19.3% compared to 17.9% in the prior year period.
(Expense as a percent of total revenue)  3Q 2012 vs. 3Q 2011  YTD 2012 vs. YTD 2011
  • Center operations

57.5% vs. 60.0%

58.4% vs. 61.0%
  • Advertising and marketing
3.0% vs. 3.4%3.4% vs. 3.5%
  • General and administrative
4.6% vs. 4.7%4.8% vs. 4.8%
  • Other operating
4.8% vs. 3.5%4.1% vs. 3.1%
  • Depreciation and amortization
10.0% vs. 9.6%10.0% vs. 9.7%
 

Net income for 3Q 2012 was $32.1 million, or $0.77 per diluted share, compared to net income of $27.0 million, or $0.66 per diluted share, for 3Q 2011. Net income for the first nine months of 2012 was $88.1 million, or $2.10 per diluted share, compared to net income of $72.8 million, or $1.78 per diluted share, for the prior-year period.

EBITDA for 3Q 2012 was $89.2 million compared with $75.6 million in 3Q 2011. For the first nine months of 2012, EBITDA was $250.7 million compared with $211.0 million in the prior-year period.

  • As a percentage of total revenue, EBITDA in 3Q 2012 was 30.2% compared to 28.5% in 3Q 2011.
  • For the first nine months of 2012, EBITDA, as a percentage of total revenue, was 29.4% compared to 27.7% in the prior-year period.

Cash flows from operating activities for the first nine months of 2012 totaled $202.7 million compared with $177.3 million in the prior-year period.

Weighted average fully diluted shares for 3Q 2012 totaled 41.9 million compared to 40.9 million in 3Q 2011. For the first nine months of 2012, weighted average fully diluted shares totaled 41.9 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 $1.127-1.137 billion (from $1.122-1.137 billion), driven primarily by price and mix optimization, square footage expansion, and growth in in-center and ancillary business revenue.
  • Net income is expected to be up 24-25%, or $114.5-116.0 million (from $113.0-116.0 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 $2.73-2.76 (from $2.70-2.76), which includes $0.04 impact of anticipated performance share-based compensation expense.

As announced on October 11, 2012, the Company will hold a conference call today at 10:00 a.m. ET to discuss its third 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 2:00 p.m. ET.

About Life Time Fitness, Inc.

As The Healthy Way of Life Company, Life Time Fitness (NYS: 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 October 18, 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 of the remaining stock related to the June 2009 performance-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)
   
September 30,December 31,
20122011
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$8,625$7,487
Accounts receivable, net9,9896,156
Center operating supplies and inventories27,17321,600
Prepaid expenses and other current assets23,65022,905
Deferred membership origination costs12,17412,525
Deferred income taxes7,5209,850
Income tax receivable -  5,022 
Total current assets89,13185,545
PROPERTY AND EQUIPMENT, net1,822,1391,740,434
RESTRICTED CASH1,8131,088
DEFERRED MEMBERSHIP ORIGINATION COSTS8,1428,131
GOODWILL34,27225,550
OTHER ASSETS 67,508  55,080 
TOTAL ASSETS$2,023,005 $1,915,828 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt$7,773$6,849
Accounts payable25,83222,035
Construction accounts payable17,19621,892
Accrued expenses75,42456,284
Deferred revenue 35,393  33,898 
Total current liabilities161,618140,958
LONG-TERM DEBT, net of current portion660,963679,449
DEFERRED RENT LIABILITY21,77019,370
DEFERRED INCOME TAXES92,473100,582
DEFERRED REVENUE8,1778,203
OTHER LIABILITIES 12,976  9,793 
Total liabilities 957,977  958,355 
SHAREHOLDERS' EQUITY:
Common stock872849
Additional paid-in capital463,433441,813
Retained earnings605,512517,404
Accumulated other comprehensive loss (4,789) (2,593)
Total equity 1,065,028  957,473 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$2,023,005 $1,915,828 
 
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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
        
For the Three Months EndedFor the Nine Months Ended
September 30,September 30,
2012201120122011
REVENUE:
Membership dues$187,568$171,504$547,933$496,530
Enrollment fees3,8594,40311,74214,290
In-center revenue 90,543  80,741  265,277  234,729 
Total center revenue281,970256,648824,952745,549
Other revenue 12,903  8,773  26,672  17,211 
Total revenue 294,873  265,421  851,624  762,760 
OPERATING EXPENSES:
Center operations169,521159,307496,790465,513
Advertising and marketing8,8268,94028,87126,500
General and administrative13,63112,54441,19037,307
Other operating14,0919,39235,24323,397
Depreciation and amortization 29,396  25,358  85,217  73,645 
Total operating expenses 235,465  215,541  687,311  626,362 
Income from operations 59,408  49,880  164,313  136,398 
OTHER INCOME (EXPENSE):
Interest expense, net(6,510)(5,072)(19,332)(15,273)
Equity in earnings of affiliate 375  346  1,143  973 
Total other income (expense) (6,135) (4,726) (18,189) (14,300)
INCOME BEFORE INCOME TAXES53,27345,154146,124122,098
PROVISION FOR INCOME TAXES 21,129  18,163  58,016  49,324 
NET INCOME$32,144 $26,991 $88,108 $72,774 
 
BASIC EARNINGS PER COMMON SHARE$0.77 $0.67 $2.13 $1.81 
DILUTED EARNINGS PER COMMON SHARE$0.77 $0.66 $2.10