Life Time Fitness Announces Third Quarter 2010 Financial Results
Company Reports Revenue Growth of 11.2% and Earnings Per Diluted Share of $0.57 for the Quarter
CHANHASSEN, Minn.--(BUSINESS WIRE)-- Life Time Fitness, Inc. (NYSE:LTM) today reported its operating results for the third quarter ended September 30, 2010.
Third quarter 2010 revenue grew 11.2% to $238.3 million from $214.3 million during the same period last year. Net income for the quarter was $23.4 million, or $0.57 per diluted share, versus $20.6 million, or $0.51 per diluted share, for 3Q 2009. For the nine months ended September 30, 2010, revenue grew 8.8% to $689.2 million from $633.3 million during the same period last year. Net income for the same period was $63.1 million, or $1.55 per diluted share, compared to $54.0 million, or $1.36 per diluted share, for the first nine months of 2009.
"We are pleased with our third quarter financial results," said Bahram Akradi, Life Time Fitness chairman, president and chief executive officer. "In particular, our strong in-center revenue and same center sales performance, and improvement in member retention, were driven by the continued investments we are making in our member connectivity initiatives and expanded program offerings. Moving forward, further differentiating and expanding our member value proposition will remain a key area of focus. This will occur through enhanced program and service offerings intended to increase member acquisition and retention within the challenged consumer environment we expect to see for the foreseeable future."
In August, the Company opened a new yoga and Pilates boutique in Minneapolis. Additionally, in December, the Company plans to open a large-format center in Centennial, Colorado, representing the third Life Time Fitness center in the Denver market.
Three and Nine Months Ended September 30, 2010, Financial Highlights:
Total revenue for the third quarter grew 11.2% to $238.3 million. Total revenue for the first nine months of 2010 grew to $689.2 million from $633.3 million during the same period last year.
(Period-over-period growth) 3Q 2010 vs. 3Q 2009 YTD 2010 vs. YTD 2009 Membership dues 7.2% 6.6% Enrollment fees (8.1%) (5.4%) In-center revenue 17.5% 13.9% Same-center revenue (13th month of 6.6% 4.7% operation) Same-center revenue (37th month of 4.0% 1.6% operation) Average center revenue / membership $374 - up 4.4% $1,113 - up 4.7% Average in-center revenue / $112 - up 11.9% $335 - up 10.0% membership
Memberships increased 5.4% to 622,698 at September 30, 2010, from 590,716 at September 30, 2009.
Total operating expenses for 3Q 2010 were $192.7 million compared to $174.3 million for 3Q 2009. Year-to-date operating expenses totaled $563.0 million compared to $522.5 million for the same period last year.
Operating margin was 19.1% for 3Q 2010 compared to 18.7% in the prior-year period. Year-to-date operating margin was 18.3% compared to 17.5% in the prior-year period.
(Expense as a percent of total 3Q 2010 vs. 3Q 2009 YTD 2010 vs. YTD 2009 revenue) Center operations 60.9% vs. 59.5% 61.7% vs. 60.5% Advertising and marketing 2.6% vs. 2.7% 2.7% vs. 3.2% General and administrative 4.5% vs. 4.5% 4.7% vs. 5.2% Other operating 3.1% vs. 3.7% 2.5% vs. 2.8% Depreciation and amortization 9.8% vs. 10.9% 10.1% vs. 10.8%
Net income for 3Q 2010 was $23.4 million compared to $20.6 million for 3Q 2009. For the nine months ended September 30, 2010, net income was $63.1 million compared to $54.0 million in the prior-year period.
EBITDA for 3Q 2010 grew 8.7% to $69.3 million from $63.7 million in 3Q 2009. Year-to-date EBITDA grew 9.2% to $196.4 million from $179.9 million during the same period last year.
Cash flows from operations for the first nine months of 2010 totaled $146.1 million compared to $138.6 million in the prior-year period.
Weighted average fully diluted shares for 3Q 2010 totaled 41.3 million compared to 40.3 million in 3Q 2009.
Updated 2010 Business Outlook:
The following statements are based on the Company's current expectations for fiscal year 2010 subject to the risks and uncertainties described below:
-- Revenue is expected to be $900-910 million (up from $890-905 million),
driven primarily by in-center revenue growth.
-- Net income is expected to be $81.0-83.5 million (up from $79.0-81.0
million), driven by revenue growth.
-- Diluted earnings per common share is expected to be $1.98-2.04 (up from
$1.92-1.98).
As announced on October 14, 2010, the Company will hold a conference call today at 10:00 a.m. ET to discuss its third quarter 2010 results. Bahram Akradi, chairman, president and chief executive officer, Michael Robinson, executive vice president and chief financial officer, and John Heller, senior director, investor relations and treasurer, will host the call. The conference call will be webcast live 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 beginning at approximately 1:00 p.m. ET on October 21, 2010.
About Life Time Fitness, Inc.
Life Time Fitness, Inc. (NYSE:LTM) is a healthy way of life company based in Chanhassen, Minnesota. The Company is dedicated to providing programs and services that help its members connect and engage with their areas of interest, and achieve success with their health and fitness goals. Life Time Fitness designs and operates distinctive, multi-use sports, professional fitness, family recreation and spa/resort centers that help members lead healthy and active lives. As of October 21, 2010, the Company operated 89 centers in 19 states and 24 markets. Additional information about Life Time Fitness centers, programs and services is available at www.lifetimefitness.com.
Risks and Uncertainties
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, our ability to access existing credit facilities and obtain additional financing, strains on our business from continued growth, risks related to maintenance of our data, competition from other health and fitness centers, delays in opening new centers, identifying and acquiring suitable sites for new centers and other factors set forth in the Company's filings with the Securities and Exchange Commission. Diluted earnings per 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. The Company's expectations for fiscal year 2010 exclude any unusual items that might occur during the fiscal year, such as legal matters or the potential recognition of compensation expense in association with the June 2009 grant of long-term performance-based restricted stock to the Company's senior management team. The Company cautions investors not to place undue reliance on any forward-looking statement. Any forward-looking statement speaks only as of the date on which the 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,
2010 2009
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 33,502 $ 6,282
Accounts receivable, net 5,453 4,026
Center operating supplies and inventories 15,766 14,621
Prepaid expenses and other current assets 14,423 12,938
Deferred membership origination costs 16,245 20,278
Deferred income taxes 942 660
Total current assets 86,331 58,805
PROPERTY AND EQUIPMENT, net 1,546,749 1,512,993
RESTRICTED CASH 2,052 2,941
DEFERRED MEMBERSHIP ORIGINATION COSTS 7,281 8,716
OTHER ASSETS 60,111 48,070
TOTAL ASSETS $ 1,702,524 $ 1,631,525
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 77,518 $ 16,716
Accounts payable 14,014 14,429
Construction accounts payable 22,375 9,882
Accrued expenses 58,085 48,235
Deferred revenue 33,426 36,939
Total current liabilities 205,418 126,201
LONG-TERM DEBT, net of current portion 554,228 643,630
DEFERRED RENT LIABILITY 31,455 29,048
DEFERRED INCOME TAXES 81,656 77,189
DEFERRED REVENUE 7,314 8,819
OTHER LIABILITIES 9,523 9,207
Total liabilities 889,594 894,094
SHAREHOLDERS' EQUITY:
Common stock 840 829
Additional paid-in capital 405,203 395,121
Retained earnings 407,193 344,095
Accumulated other comprehensive loss (306 ) (2,614 )
Total shareholders' equity 812,930 737,431
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,702,524 $ 1,631,525
LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
REVENUE:
Membership dues $ 155,288 $ 144,832 $ 453,332 $ 425,070
Enrollment fees 6,078 6,617 18,577 19,630
In-center revenue 69,453 59,129 203,442 178,681
Total center revenue 230,819 210,578 675,351 623,381
Other revenue 7,493 3,742 13,820 9,922
Total revenue 238,312 214,320 689,171 633,303
OPERATING EXPENSES:
Center operations 145,205 127,468 424,940 383,313
Advertising and marketing 6,265 5,756 18,940 20,145
General and administrative 10,563 9,669 32,606 33,172
Other operating 7,289 8,017 17,146 17,791
Depreciation and 23,402 23,428 69,385 68,127
amortization
Total operating expenses 192,724 174,338 563,017 522,548
Income from operations 45,588 39,982 126,154 110,755
OTHER INCOME (EXPENSE):
Interest expense, net (6,792 ) (7,651 ) (21,806 ) (23,005 )
Equity in earnings of 302 316 906 985
affiliate
Total other income (6,490 ) (7,335 ) (20,900 ) (22,020 )
(expense)
INCOME BEFORE INCOME TAXES 39,098 32,647 105,254 88,735
PROVISION FOR INCOME TAXES 15,720 12,014 42,156 34,728
NET INCOME $ 23,378 $ 20,633 $ 63,098 $ 54,007
BASIC EARNINGS PER COMMON $ 0.59 $ 0.52 $ 1.59 $ 1.38
SHARE
DILUTED EARNINGS PER COMMON $ 0.57 $ 0.51 $ 1.55 $ 1.36
SHARE
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES
OUTSTANDING - BASIC 39,932 39,410 39,597 39,221
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES
OUTSTANDING - DILUTED 41,260 40,255 40,783 39,687
LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the
Nine Months Ended
September 30,
2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 63,098 $ 54,007
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 69,385 68,127
Deferred income taxes (1,100 ) 6,957
Loss on disposal of property and equipment, net 979 818
Gain on sale of land held for sale (527 ) (873 )
Amortization of deferred financing costs 2,024 1,925
Share-based compensation 5,412 5,907
Excess tax benefit related to share-based payment (1,697 ) (433 )
arrangements
Equity in earnings of affiliate (906 ) (985 )
Dividend received from equity investment 350 350
Changes in operating assets and liabilities 8,930 1,650
Other 199 1,101
Net cash provided by operating activities 146,147 138,551
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (86,132 ) (116,853 )
Acquisitions, net of cash acquired (14,378 ) -
Proceeds from sale of property and equipment 721 8
Proceeds from sale of land held for sale 1,019 1,327
Increase in other assets (578 ) (213 )
Decrease in restricted cash 889 151
Net cash used in investing activities (98,459 ) (115,580 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings - 7,813
Repayments of long-term borrowings (38,067 ) (7,755 )
Proceeds from (repayments of) revolving credit 12,500 (27,600 )
facility, net
Increase in deferred financing costs (258 ) (745 )
Excess tax benefit related to share-based payment 1,697 433
arrangements
Proceeds from exercise of stock options 3,660 2,191
Net cash used in financing activities (20,468 ) (25,663 )
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 27,220 (2,692 )
CASH AND CASH EQUIVALENTS - Beginning of period 6,282 10,829
CASH AND CASH EQUIVALENTS - End of period $ 33,502 $ 8,137
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 disclosure 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 Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
Net income $ 23,378 $ 20,633 $ 63,098 $ 54,007
Interest expense, net 6,792 7,651 21,806 23,005
Provision for income 15,720 12,014 42,156 34,728
taxes
Depreciation and 23,402 23,428 69,385 68,127
amortization
EBITDA $ 69,292 $ 63,726 $ 196,445 $ 179,867
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. 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 Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
Net cash provided by $ 45,439 $ 40,267 $ 146,147 $ 138,551
operating activities
Less: Purchases of (37,968 ) (25,128 ) (86,132 ) (116,853 )
property and equipment
Free cash flow $ 7,471 $ 15,139 $ 60,015 $ 21,698
Source: Life Time Fitness, Inc.
Released October 21, 2010