Life Time Fitness Announces Fourth Quarter and Full-Year 2009 Financial Results
Company Reports Revenue Growth of 5.0% and Earnings Per Share of $0.46 for the Quarter; Full-Year Revenue Grew 8.8% and Earnings Per Share was $1.82
CHANHASSEN, Minn.--(BUSINESS WIRE)-- Life Time Fitness, Inc. (NYSE:LTM) today reported its financial results for the fourth quarter and full year ended December 31, 2009.
Fourth quarter 2009 revenue grew 5.0% to $203.7 million from $194.0 million during the same period last year. Revenue for the year totaled $837.0 million, up 8.8% from $769.6 million in 2008.
Net income for the quarter was $18.4 million, or $0.46 per diluted share. This compares to net income of $13.0 million, or $0.33 per diluted share, for 4Q 2008. For the full year, net income was $72.4 million, or $1.82 per diluted share, compared to $71.8 million, or $1.83 per diluted share, for 2008.
"In 2009, we set our minds on winning on a number of fronts and I'm pleased with our progress on many of them, including free cash flow delivery, debt reduction and cost structure improvements," said Bahram Akradi, Life Time Fitness chairman, president and chief executive officer. "At the same time, our same-center revenue and attrition metrics remain key areas of focus, and we saw some improvement during the year, but we are not satisfied. In 2010, we will strive to improve both of these metrics. We also remain highly committed to ongoing growth as a Healthy Way of Life Company in spite of the continuing economic headwind. Overall, I am pleased with the impact we are starting to see on many of our connectivity and growth initiatives, and with our entire team's focus on making significant progress through the course of this year."
In January, the Company opened a new center in Beachwood, Ohio, marking its first location in the Cleveland market and the first of three new, large format centers planned for 2010. In March, the Company expects to open its second new, large format center for the year in Lenexa, Kansas. This represents the second Life Time Fitness location in the Kansas City market. One additional large format center is expected to open in the fourth quarter. This month, the Company also plans to open a new Pilates, yoga and personal training boutique concept center in Scottsdale, Arizona.
Three and Twelve Months Ended December 31, 2009, Financial Highlights:
Total revenue for the fourth quarter grew 5.0% to $203.7 million from $194.0 million. Total revenue for the full year grew 8.8% to $837.0 million from $769.6 million in 2008.
(Period-over-period growth) 4Q 2009 vs. 4Q 2008 2009 vs. 2008
-- Membership dues 5.8 % 10.9 %
-- Enrollment fees (1.1 %) (1.6 %)
-- In-center revenue 6.6 % 6.7 %
-- Same-center revenue (13th 0.3 % (3.1 %)
month of operation)
-- Same-center revenue (37th (4.7 %) (7.5 %)
month of operation)
-- Average center revenue per $350 - up 1.6% $1,414 - down 0.9%
membership
-- Average in-center revenue per $95 - up 2.4 % $400 - down 3.4%
membership
Memberships grew 2.1% to 578,937 at December 31, 2009, from 567,110 at December 31, 2008.
- Attrition in 4Q 2009 was 10.8%, the same as the prior-year period.
- Attrition improved to 40.6% in 2009 compared to 42.3% in 2008.
Total operating expenses during 4Q 2009 totaled $165.6 million compared to $164.6 million for 4Q 2008. Fourth quarter 2008 results included $5.0 million in costs primarily related to slowing the development of new centers. Full-year operating expenses were $688.1 million compared with $622.3 million in 2008.
- Operating margin was 18.7% for 4Q 2009 compared to 15.1% in the prior-year period.
- Full-year operating margin was 17.8% compared to 19.1% in 2008.
(Expense as a percent of total revenue) 4Q 2009 vs. 4Q 2008 2009 vs. 2008
-- Center operations 60.4% vs. 60.6% 60.5% vs. 59.1%
-- Advertising and marketing 3.0% vs. 4.1% 3.2% vs. 4.1%
-- General and administrative 4.8% vs. 6.7% 5.1% vs. 5.7%
-- Other operating 2.0% vs. 3.0% 2.6% vs. 2.5%
-- Depreciation and amortization 11.1% vs. 10.5% 10.8% vs. 9.5%
Net income for 4Q 2009 was $18.4 million compared with $13.0 million in 4Q 2008, and full-year net income was $72.4 million compared with $71.8 million in 2008. The effective income tax rate for 2009 was 39.6% compared with 39.7% in 2008.
EBITDA for 4Q 2009 was $61.1 million compared with $50.0 million in 4Q 2008. Full-year EBITDA was $240.9 million compared with $221.5 million in 2008.
- As a percentage of total revenue, EBITDA was 30.0% in 4Q 2009 compared to 25.8% in 4Q 2008.
- EBITDA margin in 2009 was 28.8%, the same as the prior year.
Cash flows from operations for the full year 2009 totaled $186.2 million compared to $183.1 million in 2008.
Weighted average diluted shares for 4Q 2009 totaled 40.3 million compared to 39.2 million in 4Q 2008. For the full year 2009, weighted average diluted shares totaled 39.9 million compared to 39.3 million in 2008.
2010 Business Outlook:
The following statements are based on the Company's current expectations for fiscal year 2010, which incorporate late 2009 operating trends and are subject to the risks and uncertainties described below:
- Revenue is expected to be up 4-7%, or $870-895 million, driven primarily by membership growth at new and ramping centers.
- Net income is expected to be up 4-9%, or $75-79 million, driven by revenue growth and cost efficiencies.
- Diluted earnings per common share is expected to be $1.85-1.95.
As announced on February 11, 2010, the Company will hold a conference call today at 10:00 a.m. ET to discuss its fourth quarter and full-year 2009 results. Bahram Akradi, Michael Robinson, executive vice president and chief financial officer, and Kenneth Cooper, vice president of finance, will host the conference call. The conference call will be Web cast and may be accessed via the Company's Investor Relations section of its Web site at lifetimefitness.com. A replay of the call will be available the same day via the Company's Web site beginning at approximately 1:00 p.m. ET.
About Life Time Fitness, Inc.
Life Time Fitness, Inc. (NYSE:LTM) operates distinctive and large, multi-use sports and athletic, professional fitness, family recreation and resort and spa centers. The Company also provides consumers with personal training consultation, full-service spas and cafes, corporate wellness programs, health and nutrition education, the healthy lifestyle magazine, Experience Life, athletic events and nutritional products. As of February 18, 2010, Life Time Fitness operated 85 centers in 19 states, including Arizona, Colorado, Florida, Georgia, Illinois, Indiana, Kansas, Maryland, Michigan, Minnesota, Missouri, Nebraska, New Jersey, North Carolina, Ohio, Tennessee, Texas, Utah and Virginia. Life Time Fitness is headquartered in Chanhassen, Minnesota, and can be located on the Web at lifetimefitness.com. LIFE TIME FITNESS, LIFE TIME ATHLETIC, EXPERIENCE LIFE, and the LIFE TIME FITNESS TRIATHLON SERIES are trademarks or service marks of Life Time Fitness, Inc. All other trademarks or registered trademarks are the property of their respective owners.
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, 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 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 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)
December 31, 2009 December 31, 2008
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 6,282 $ 10,829
Accounts receivable, net 4,026 6,114
Inventories and center operating supplies 14,621 14,632
Prepaid expenses and other current assets 12,938 10,994
Deferred membership origination costs 20,278 19,877
Deferred income taxes 660 1,365
Total current assets 58,805 63,811
PROPERTY AND EQUIPMENT, net 1,512,993 1,515,957
RESTRICTED CASH 2,941 3,936
DEFERRED MEMBERSHIP ORIGINATION COSTS 8,716 14,210
OTHER ASSETS 48,070 49,789
TOTAL ASSETS $ 1,631,525 $ 1,647,703
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 16,716 $ 10,335
Accounts payable 14,429 14,842
Construction accounts payable 9,882 63,418
Accrued expenses 48,235 46,230
Deferred revenue 36,939 36,098
Total current liabilities 126,201 170,923
LONG-TERM DEBT, net of current portion 643,630 702,569
DEFERRED RENT LIABILITY 29,048 27,925
DEFERRED INCOME TAXES 77,189 51,982
DEFERRED REVENUE 8,819 13,719
OTHER LIABILITIES 9,207 27,684
Total liabilities 894,094 994,802
SHAREHOLDERS' EQUITY:
Common stock 829 793
Additional paid-in capital 395,121 385,095
Retained earnings 344,095 271,711
Accumulated other comprehensive loss (2,614 ) (4,698 )
Total shareholders' equity 737,431 652,901
TOTAL LIABILITIES AND SHAREHOLDERS' $ 1,631,525 $ 1,647,703
EQUITY
LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
For the For the
Three Months Ended Year Ended
December 31, December 31,
2009 2008 2009 2008
(Unaudited) (Unaudited) (Unaudited)
REVENUE:
Membership dues $ 139,535 $ 131,926 $ 564,605 $ 508,927
Enrollment fees 6,508 6,579 26,138 26,570
In-center revenue 54,153 50,813 232,834 218,198
Total center revenue 200,196 189,318 823,577 753,695
Other revenue 3,502 4,636 13,424 15,926
Total revenue 203,698 193,954 837,001 769,621
OPERATING EXPENSES:
Center operations 123,130 117,506 506,443 454,645
Advertising and marketing 6,154 7,892 26,299 31,500
General and administrative 9,604 13,042 42,776 43,749
Other operating 4,061 5,730 21,852 19,426
Depreciation and 22,643 20,447 90,770 72,947
amortization
Total operating expenses 165,592 164,617 688,140 622,267
Income from operations 38,106 29,337 148,861 147,354
OTHER INCOME (EXPENSE):
Interest expense, net (7,333 ) (8,251 ) (30,338 ) (29,552 )
Equity in earnings of 317 258 1,302 1,243
affiliate
Total other income (7,016 ) (7,993 ) (29,036 ) (28,309 )
(expense)
INCOME BEFORE INCOME TAXES 31,090 21,344 119,825 119,045
PROVISION FOR INCOME TAXES 12,713 8,329 47,441 47,224
NET INCOME $ 18,377 $ 13,015 $ 72,384 $ 71,821
BASIC EARNINGS PER COMMON $ 0.47 $ 0.33 $ 1.84 $ 1.84
SHARE
DILUTED EARNINGS PER COMMON $ 0.46 $ 0.33 $ 1.82 $ 1.83
SHARE
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES
OUTSTANDING - BASIC 39,444 39,124 39,297 39,002
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES
OUTSTANDING - DILUTED 40,331 39,172 39,870 39,342
LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the
Year Ended
December 31,
2009 2008
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 72,384 $ 71,821
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 90,770 72,947
Deferred income taxes 23,270 14,815
Loss on disposal of property and equipment, net 1,229 985
Gain on sale of land held for sale (1,132 ) -
Amortization of deferred financing costs 2,544 1,663
Share-based compensation 8,082 7,456
Excess tax benefit related to share-based payment (507 ) (103 )
arrangements
Changes in operating assets and liabilities (10,951 ) 13,543
Other 514 (61 )
Net cash provided by operating activities 186,203 183,066
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (146,632 ) (463,337 )
Proceeds from sale of property and equipment 8 161,888
Proceeds on sale of land held for sale 1,954 -
Proceeds from property insurance settlement - 318
Decrease (increase) in other assets 390 (7,695 )
Decrease in restricted cash 995 2,831
Net cash used in investing activities (143,285 ) (305,995 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 18,151 43,272
Repayments of long-term borrowings (11,001 ) (13,143 )
Proceeds from (repayments of) revolving credit (56,500 ) 101,800
facility, net
Increase in deferred financing costs (1,092 ) (6,664 )
Excess tax benefit related to share-based payment 507 103
arrangements
Proceeds from exercise of stock options 2,470 3,036
Net cash provided by (used in) financing (47,465 ) 128,404
activities
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,547 ) 5,475
CASH AND CASH EQUIVALENTS - Beginning of period 10,829 5,354
CASH AND CASH EQUIVALENTS - End of period $ 6,282 $ 10,829
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 For the
Three Months Ended Year Ended
December 31, December 31,
2009 2008 2009 2008
Net income $ 18,377 $ 13,015 $ 72,384 $ 71,821
Interest expense, net 7,333 8,251 30,338 29,552
Provision for income taxes 12,713 8,329 47,441 47,224
Depreciation and amortization 22,643 20,447 90,770 72,947
EBITDA $ 61,066 $ 50,042 $ 240,933 $ 221,544
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.
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
Year Ended
December 31,
2009 2008
Net cash provided by operating activities $ 186,203 $ 183,066
Less: Purchases of property and equipment (146,632 ) (463,337 )
Free cash flow $ 39,571 $ (280,271 )
Source: Life Time Fitness, Inc.
Released February 18, 2010