Life Time Fitness Announces Fourth Quarter and Full-Year 2008 Financial Results
Company Reports Revenue Growth of 13.4% and Earnings Per Share of $0.33 for the Quarter; Full-Year Revenue Grew 17.4% and Earnings Per Share was $1.83
CHANHASSEN, Minn.--(BUSINESS WIRE)-- Life Time Fitness, Inc. (NYSE: LTM) today reported its operating results for the fourth quarter and full year ended December 31, 2008.
Fourth quarter 2008 revenue grew 13.4% to $194.0 million from $171.1 million during the same period last year. Revenue for the year totaled $769.6 million, up 17.4% from $655.8 million in 2007.
Net income during the quarter was $13.0 million, or $0.33 per diluted share. This compares to net income of $19.1 million, or $0.48 per diluted share, for 4Q 2007. For the full year, net income grew 5.6% to $71.8 million, or $1.83 per diluted share, from $68.0 million, or $1.78 per diluted share, for 2007.
Included in the Company's reported results is $0.08 of diluted earnings per share impact from charges that relate to previously announced plans to slow the development of new centers. These charges include severance costs, lower-of-cost-or-market adjustments in connection with assets held for sale, and write-offs associated with land development cancelled during the quarter.
"Our 2008 results did not meet our expectations," said Bahram Akradi, Life Time Fitness chairman and chief executive officer. "However, we remain confident in our business model and are pleased with the growth in new memberships we saw last year. In this environment, we believe that people are seeking our healthy-way-of-life destinations to stay active and fit, be entertained and reduce stress. We will continue to build on the member experience with the launch of new connectivity initiatives, such as myLT.com, an interactive Web site designed to foster deeper member relationships and deliver enhanced value. We also remain focused on managing our business prudently by taking strong and prompt measures to eliminate unnecessary costs and inefficiencies, without damaging the member experience or our brand."
During the fourth quarter, Life Time Fitness opened four centers:
- Mansfield, its eighth location in the Dallas/Ft. Worth area
- Loudoun County, its third location in Northern Virginia
- Florham Park, its first location in New Jersey
- Westminster, its second location in the Denver, Colorado, area
In February 2009, the Company opened two additional centers:
- Berkeley Heights, its second location in New Jersey
- Lake Houston (Atascocita), its fifth location in Houston, Texas
Three and Twelve Months Ended December 31, 2008, Financial Highlights:
Total revenue for the fourth quarter grew 13.4% to $194.0 million, driven primarily by growth in membership dues and in-center revenue. Total revenue for the full year grew 17.4% to $769.6 million from $655.8 million in 2007.
(Period-over-period growth) 4Q 2008 vs. 4Q 2007 2008 vs. 2007
-- Membership dues 14.5% 17.2%
-- Enrollment fees 6.5% 7.4%
-- In-center revenue 13.1% 19.7%
-- Same-center revenue Flat 2.8%
-- Average center revenue / $345 - up 0.3% $1,427 - up 4.9%
membership
-- Average in-center revenue / $93 - Flat $414 - up 7.0%
membership
Memberships grew 13.6% to 567,110 at December 31, 2008, from 499,092 at December 31, 2007.
Total operating expenses during 4Q 2008 totaled $164.6 million compared to $133.5 million for 4Q 2007 and full-year operating expenses were $622.3 million, compared with $518.4 million in 2007, driven primarily by increased expenses to support new centers, membership ramp, in-center revenue growth, and $5.0 million in charges primarily related to slowing the development of new centers.
- Operating margin was 15.1% for 4Q 2008, compared to 22.0% in the prior-year period. Full-year operating margin was 19.1%, compared to 21.0% in 2007.
(Expense as a percent of total revenue) 4Q 2008 vs. 4Q 2007 2008 vs. 2007
-- Center operations 60.6% vs. 56.1% 59.1% vs. 57.5%
-- Advertising and marketing 4.1% vs. 4.0% 4.1% vs. 3.8%
-- General and administrative 6.7% vs. 5.8% 5.7% vs. 6.2%
-- Other operating 3.0% vs. 2.9% 2.5% vs. 2.5%
-- Depreciation and amortization 10.5% vs. 9.2% 9.5% vs. 9.0%
Net income during 4Q 2008 was $13.0 million compared with $19.1 million in 4Q 2007, and full-year net income was $71.8 million compared with $68.0 million in 2007.
-- Net income margin for 4Q 2008 was 6.7% compared with 11.1% in 4Q 2007.
Net income margin in 2008 was 9.3% compared with 10.4% in 2007.
-- The effective income tax rate for 2008 was 39.7% compared with 39.9% in
2007.
EBITDA for 4Q 2008 was $50.0 million compared with $53.7 million in 4Q 2007. Full-year EBITDA was $221.5 million compared with $197.7 million in 2007.
-- As a percentage of total revenue, EBITDA was 25.8% in 4Q 2008, compared
to 31.4% in 4Q 2007.
-- EBITDA margin in 2008 was 28.8% compared to 30.1% in 2007.
Cash flows from operations for the full year grew 28.8% to $183.1 million from $142.2 million in 2007.
Weighted average diluted shares for 4Q 2008 totaled 39.2 million compared to 39.5 million shares in 4Q 2007. For the full year, weighted average diluted shares totaled 39.3 million compared with 38.1 million in 2007.
2009 Business Outlook:
The following statements are based on the Company's current expectations for fiscal year 2009, which incorporate late 2008 operating trends in revenue per membership and attrition, and are subject to the risks and uncertainties described below:
-- Revenue is expected to be $830-$860 million, driven primarily by
membership ramp at new and existing centers, and in-center revenue
growth.
-- Net income is expected to be $60-$68 million, resulting from recent
operating trends, including the higher cost of membership acquisition
and lower average dues on new memberships, and the mix of newer centers.
-- Diluted earnings per common share is expected to be $1.50-$1.70.
As announced on February 12, 2009, the Company will hold a conference call today at 10:00 a.m. ET to discuss its fourth quarter and full-year 2008 results. Bahram Akradi, chairman and chief executive officer, 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 19, 2009, Life Time Fitness operated 83 centers in 18 states, including Arizona, Colorado, Florida, Georgia, Illinois, Indiana, Kansas, Maryland, Michigan, Minnesota, Missouri, Nebraska, New Jersey, North Carolina, Ohio, 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 of Life Time Fitness, Inc. All other trademarks or registered trademarks are the property of their respective owners.
Risks & 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, 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 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.
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
December 31, 2008 December 31, 2007
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,829 $ 5,354
Accounts receivable, net 6,114 4,475
Inventories and center operations 14,632 14,324
supplies
Prepaid expenses and other current assets 10,994 15,963
Deferred membership origination costs 19,877 16,205
Deferred income taxes 1,365 1,188
Income tax receivable - 5,814
Total current assets 63,811 63,323
PROPERTY AND EQUIPMENT, net 1,515,957 1,259,271
RESTRICTED CASH 3,936 6,767
DEFERRED MEMBERSHIP ORIGINATION COSTS 14,210 14,367
OTHER ASSETS 49,789 42,805
TOTAL ASSETS $ 1,647,703 $ 1,386,533
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 10,335 $ 9,568
Accounts payable 14,842 12,872
Construction accounts payable 63,418 59,261
Accrued expenses 46,230 47,052
Deferred revenue 36,098 34,851
Total current liabilities 170,923 163,604
LONG-TERM DEBT, net of current portion 702,569 555,037
DEFERRED RENT LIABILITY 27,925 25,526
DEFERRED INCOME TAXES 51,982 38,607
DEFERRED REVENUE 13,719 17,529
OTHER LIABILITIES 27,684 13,673
Total liabilities 994,802 813,976
SHAREHOLDERS' EQUITY:
Common stock 793 783
Additional paid-in capital 385,095 373,910
Retained earnings 271,711 199,890
Accumulated other comprehensive loss (4,698 ) (2,026 )
Total shareholders' equity 652,901 572,557
TOTAL LIABILITIES AND SHAREHOLDERS' $ 1,647,703 $ 1,386,533
EQUITY
LIFE TIME FITNESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
For the For the
Three Months Ended Year Ended
December 31, December 31,
2008 2007 2008 2007
REVENUE:
Membership dues $ 131,926 $ 115,199 $ 508,927 $ 434,138
Enrollment fees 6,579 6,176 26,570 24,741
In-center revenue 50,813 44,910 218,198 182,215
Total center revenue 189,318 166,285 753,695 641,094
Other revenue 4,636 4,813 15,926 14,692
Total revenue 193,954 171,098 769,621 655,786
OPERATING EXPENSES:
Center operations 117,506 96,082 454,645 377,235
Advertising and marketing 7,892 6,800 31,500 24,967
General and administrative 13,042 9,889 43,749 40,820
Other operating 5,730 4,969 19,426 16,340
Depreciation and 20,447 15,732 72,947 59,014
amortization
Total operating expenses 164,617 133,472 622,267 518,376
Income from operations 29,337 37,626 147,354 137,410
OTHER INCOME (EXPENSE):
Interest expense, net (8,251 ) (6,411 ) (29,552 ) (25,443 )
Equity in earnings of 258 355 1,243 1,272
affiliate
Total other income (7,993 ) (6,056 ) (28,309 ) (24,171 )
(expense)
INCOME BEFORE INCOME TAXES 21,344 31,570 119,045 113,239
PROVISION FOR INCOME TAXES 8,329 12,520 47,224 45,220
NET INCOME $ 13,015 $ 19,050 $ 71,821 $ 68,019
BASIC EARNINGS PER COMMON $ 0.33 $ 0.49 $ 1.84 $ 1.81
SHARE
DILUTED EARNINGS PER COMMON $ 0.33 $ 0.48 $ 1.83 $ 1.78
SHARE
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES
OUTSTANDING - BASIC 39,124 38,821 39,002 37,518
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES
OUTSTANDING - DILUTED 39,172 39,529 39,342 38,127
LIFE TIME FITNESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the Year Ended
December 31,
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 71,821 $ 68,019
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 72,947 59,014
Deferred income taxes 14,815 11,505
Provision for doubtful accounts 108 345
Loss on disposal of property and equipment, net 985 354
Amortization of deferred financing costs 1,663 853
Share-based compensation 7,456 7,746
Excess tax benefit from stock option exercises (103 ) (4,605 )
Equity in earnings of affiliate (229 ) (235 )
Changes in operating assets and liabilities 13,543 (544 )
Other 60 (246 )
Net cash provided by operating activities 183,066 142,206
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (excluding (464,482 ) (415,822 )
non-cash purchases supplementally noted below)
Proceeds from sale of property and equipment 161,888 5,054
Proceeds from property insurance settlement 318 78
Increase in other assets (6,550 ) (4,488 )
Decrease (increase) in restricted cash 2,831 (2,029 )
Net cash used in investing activities (305,995 ) (417,207 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 43,272 113,455
Repayments on long-term borrowings (13,143 ) (11,181 )
Proceeds from revolving credit facility, net 101,800 67,800
Increase in deferred financing costs (6,664 ) (2,160 )
Proceeds from common stock offering, net of - 92,502
underwriting discount and offering costs
Excess tax benefit from stock option exercises 103 4,605
Proceeds from exercise of stock options 3,036 8,454
Net cash provided by financing activities 128,404 273,475
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,475 (1,526 )
CASH AND CASH EQUIVALENTS - Beginning of period 5,354 6,880
CASH AND CASH EQUIVALENTS - End of period $ 10,829 $ 5,354
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for interest, net of capitalized
interest of $9,062 at December 31, 2008, and $ 23,972 $ 30,621
inclusive of capitalized interest of $8,425 at
December 31, 2007
Cash payments for income taxes $ 19,851 $ 33,746
Non-GAAP Financial Measures
This release contains a non-GAAP disclosure, EBITDA, which consists 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, cash flows 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 EARNINGS BEFORE INTEREST,
INCOME TAXES AND DEPRECIATION AND AMORTIZATION
(In thousands)
(Unaudited)
For the For the
Three Months Ended Year Ended
December 31, December 31,
2008 2007 2008 2007
Net income $ 13,015 $ 19,050 $ 71,821 $ 68,019
Interest expense, net 8,251 6,411 29,552 25,443
Provision for income taxes 8,329 12,520 47,224 45,220
Depreciation and amortization 20,447 15,732 72,947 59,014
EBITDA $ 50,042 $ 53,713 $ 221,544 $ 197,696
Source: Life Time Fitness, Inc.
Released February 19, 2009