Life Time Fitness Announces Third Quarter 2012 Financial Results

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,

2012

2011

(Unaudited)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

8,625

$

7,487

Accounts receivable, net

9,989

6,156

Center operating supplies and inventories

27,173

21,600

Prepaid expenses and other current assets

23,650

22,905

Deferred membership origination costs

12,174

12,525

Deferred income taxes

7,520

9,850

Income tax receivable

-

5,022

Total current assets

89,131

85,545

PROPERTY AND EQUIPMENT, net

1,822,139

1,740,434

RESTRICTED CASH

1,813

1,088

DEFERRED MEMBERSHIP ORIGINATION COSTS

8,142

8,131

GOODWILL

34,272

25,550

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 payable

25,832

22,035

Construction accounts payable

17,196

21,892

Accrued expenses

75,424

56,284

Deferred revenue

35,393

33,898

Total current liabilities

161,618

140,958

LONG-TERM DEBT, net of current portion

660,963

679,449

DEFERRED RENT LIABILITY

21,770

19,370

DEFERRED INCOME TAXES

92,473

100,582

DEFERRED REVENUE

8,177

8,203

OTHER LIABILITIES

12,976

9,793

Total liabilities

957,977

958,355

SHAREHOLDERS' EQUITY:

Common stock

872

849

Additional paid-in capital

463,433

441,813

Retained earnings

605,512

517,404

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

LIFE TIME FITNESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except per share data)

(Unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

REVENUE:

Membership dues

$

187,568

$

171,504

$

547,933

$

496,530

Enrollment fees

3,859

4,403

11,742

14,290

In-center revenue

90,543

80,741

265,277

234,729

Total center revenue

281,970

256,648

824,952

745,549

Other revenue

12,903

8,773

26,672

17,211

Total revenue

294,873

265,421

851,624

762,760

OPERATING EXPENSES:

Center operations

169,521

159,307

496,790

465,513

Advertising and marketing

8,826

8,940

28,871

26,500

General and administrative

13,631

12,544

41,190

37,307

Other operating

14,091

9,392

35,243

23,397

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 TAXES

53,273

45,154

146,124

122,098

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