Life Time Fitness Announces Fourth Quarter and Full Year 2013 Financial Results

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  • 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%

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
 

Life Time Fitness, Inc.
Investor Relations
John Heller, 952-229-7427
ir@lifetimefitness.com
Media Relations
Jason Thunstrom, 952-229-7435
pr@lifetimefitness.com

Source: Life Time Fitness, Inc.

Released February 20, 2014