Life Time Fitness Announces Second Quarter 2008 Financial Results
Company Reports Revenue Growth of 18.7%, Net Income Growth of 20.3%, and Earnings Per Diluted Share of $0.50 for the Quarter
CHANHASSEN, Minn.--(BUSINESS WIRE)--
Life Time Fitness, Inc. (NYSE:LTM) today reported its operating results for the second quarter ended June 30, 2008.
Second quarter 2008 revenue grew 18.7% to $192.4 million from $162.1 million during the same period last year. Net income during the quarter grew 20.3% to $19.8 million, or $0.50 per diluted share. This compares to net income of $16.5 million, or $0.44 per diluted share, for 2Q 2007.
For the six months ended June 30, 2008, revenue grew 19.5% to $376.9 million from $315.2 million during the same period last year. Net income grew 21.6% for the same period to $37.2 million, or $0.95 per diluted share, from $30.6 million, or $0.82 per diluted share, for the first six months of 2007.
"Our second quarter results demonstrate continued delivery against our key business strategies," said Bahram Akradi, Life Time Fitness chairman and chief executive officer. "We are seeing continued in-center revenue growth, driven by our unique, member-focused services and programs designed to help members realize their health and fitness goals. We also saw an increase in annual membership growth from the first quarter to second quarter, indicating that consumers are continuing to invest in their health and wellness, and seeking the depth and breadth of our offerings. Additionally, we are continuing to drive member connectivity initiatives that further increase the impact and value of Life Time Fitness for our members."
Life Time Fitness continued its expansion efforts during the quarter with openings in West County, Missouri, the first location in the St. Louis market, and Johns Creek, Georgia, and Mountain Brook, Georgia, the Company's third and fourth locations in the Atlanta market, respectively. The Company also completed comprehensive remodeling projects and held grand opening events at four previously acquired clubs in Minnesota. Construction is underway for the remaining seven planned openings in 2008.
Three and Six Months Ended June 30, 2008, Financial Highlights:
Total revenue for the second quarter grew 18.7% to $192.4 million, driven primarily by growth in membership dues and in-center revenue. Total revenue for the first six months of 2008 grew to $376.9 million from $315.2 million during the same period last year.
YTD 2008 vs.
(Period-over-period growth) 2Q 2008 vs. 2Q 2007 YTD 2007
------------------- ---------------
-- Membership dues 18.2% 18.6%
-- Enrollment fees 4.1% 9.2%
-- In-center revenue 22.0% 23.9%
-- Same-center revenue 3.3% 3.8%
-- Average center revenue /
membership $361 - up 6.9% $724 - up 7.7%
-- Average in-center revenue /
membership $107 - up 9.8% $218 - up 11.4%
Memberships increased 11.9% to 547,497 at June 30, 2008 from 489,489 at June 30, 2007.
Total operating expenses during 2Q 2008 totaled $152.5 million compared to $128.6 million for 2Q 2007, driven primarily by increased expenses to support new centers, membership growth, and presale activities. Year-to-date operating expenses totaled $301.0 million, compared with $253.0 million for the same period last year.
Operating margin was 20.7% for 2Q 2008, the same as in the prior-year period. Year-to-date operating margin was 20.1%, compared to 19.7% in the prior-year period.
YTD 2008 vs.
(Expense as a percent of total
revenue) 2Q 2008 vs. 2Q 2007 YTD 2007
------------------- ---------------
-- Center operations 58.9% vs. 58.0% 58.6% vs. 58.2%
-- Advertising and marketing 3.5% vs. 3.4% 4.3% vs. 4.1%
-- General and administrative 5.5% vs. 6.6% 5.7% vs. 6.7%
-- Other operating 2.4% vs. 2.3% 2.3% vs. 2.3%
-- Depreciation and amortization 9.0% vs. 9.0% 9.0% vs. 9.0%
Net income during 2Q 2008 grew 20.3% to $19.8 million from $16.5 million in 2Q 2007, driven by continued top-line growth. For the six months ended June 30, 2008, net income grew to $37.2 million compared with $30.6 million in the prior-year period.
EBITDA for 2Q 2008 grew 18.4% to $57.4 million from $48.5 million in 2Q 2007. Year-to-date EBITDA grew 21.0% to $110.3 million from $91.2 million for the same period last year.
Cash flows from operations for the first half of 2008 totaled $105.7 million compared with $66.2 million in the prior-year period.
Weighted average fully diluted shares for 2Q 2008 totaled 39.3 million compared to 37.5 million shares in 2Q 2007.
Reaffirmed 2008 Business Outlook:
The following statements are based on the Company's current expectations for fiscal year 2008 and subject to the risks and uncertainties described below:
-- Revenue is expected to be $780-$800 million, or
approximately 19-22% growth. This year-over-year
increase is driven primarily by new center growth,
membership ramp at new and existing centers, and
in-center revenue growth.
-- Net income is expected to be $82.0-$83.5 million, or
approximately 21-23% growth. This year-over-year
increase is driven primarily by our growth strategies.
-- Diluted earnings per common share is expected to be
$2.06-$2.09, or approximately 16-18% growth.
As announced on July 16, 2008, the Company will hold a conference call today at 10:00 a.m. ET to discuss second quarter 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 July 24, 2008, Life Time Fitness operated 74 centers in 17 states, including Arizona, Colorado, Florida, Georgia, Illinois, Indiana, Kansas, Maryland, Michigan, Minnesota, Missouri, Nebraska, 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, EXPERIENCE LIFE, and the LIFE TIME FITNESS TRIATHLON SERIES are registered 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 identifying and acquiring suitable sites for new sports, fitness and family recreation centers, opening new sports, fitness and family recreation centers, attracting and retaining members, obtaining additional financing 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)
June 30, 2008 December 31, 2007
------------- -----------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,674 $ 5,354
Accounts receivable, net 3,800 4,475
Inventories 14,198 14,324
Prepaid expenses and other current
assets 18,506 15,963
Deferred membership origination
costs 18,289 16,205
Deferred income taxes 1,352 1,188
Income tax receivable - 5,814
------------- -----------------
Total current assets 59,819 63,323
PROPERTY AND EQUIPMENT, net 1,494,787 1,259,271
RESTRICTED CASH 9,001 6,767
DEFERRED MEMBERSHIP ORIGINATION COSTS 15,658 14,367
OTHER ASSETS 54,639 42,805
------------- -----------------
TOTAL ASSETS $1,633,904 $1,386,533
============= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 9,953 $ 9,568
Accounts payable 14,377 12,872
Construction accounts payable 76,665 59,261
Accrued expenses 56,814 47,052
Deferred revenue 41,190 34,851
------------- -----------------
Total current liabilities 198,999 163,604
LONG-TERM DEBT, net of current portion 712,800 555,037
DEFERRED RENT LIABILITY 26,429 25,526
DEFERRED INCOME TAXES 46,538 38,607
DEFERRED REVENUE 17,777 17,529
OTHER LIABILITIES 16,076 13,673
------------- -----------------
Total liabilities 1,018,619 813,976
------------- -----------------
SHAREHOLDERS' EQUITY:
Common stock 792 783
Additional paid-in capital 379,705 373,910
Retained earnings 237,122 199,890
Accumulated other comprehensive loss (2,334) (2,026)
------------- -----------------
Total shareholders' equity 615,285 572,557
------------- -----------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,633,904 $1,386,533
============= =================
LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
REVENUE:
Membership dues $126,121 $106,667 $245,769 $207,195
Enrollment fees 6,640 6,378 13,173 12,064
In-center revenue 55,969 45,891 111,234 89,788
--------- --------- --------- ---------
Total center revenue 188,730 158,936 370,176 309,047
Other revenue 3,677 3,201 6,682 6,191
--------- --------- --------- ---------
Total revenue 192,407 162,137 376,858 315,238
--------- --------- --------- ---------
OPERATING EXPENSES:
Center operations 113,259 94,035 220,839 183,527
Advertising and marketing 6,823 5,439 16,321 12,808
General and administrative 10,582 10,693 21,254 21,181
Other operating 4,675 3,792 8,770 7,116
Depreciation and
amortization 17,190 14,678 33,780 28,365
--------- --------- --------- ---------
Total operating expenses 152,529 128,637 300,964 252,997
--------- --------- --------- ---------
Income from operations 39,878 33,500 75,894 62,241
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense, net (6,905) (6,369) (14,116) (11,897)
Equity in earnings of
affiliate 326 285 649 601
--------- --------- --------- ---------
Total other income
(expense) (6,579) (6,084) (13,467) (11,296)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 33,299 27,416 62,427 50,945
PROVISION FOR INCOME TAXES 13,471 10,931 25,195 20,326
--------- --------- --------- ---------
NET INCOME $ 19,828 $ 16,485 $ 37,232 $ 30,619
========= ========= ========= =========
BASIC EARNINGS PER COMMON
SHARE $ 0.51 $ 0.45 $ 0.96 $ 0.83
========= ========= ========= =========
DILUTED EARNINGS PER COMMON
SHARE $ 0.50 $ 0.44 $ 0.95 $ 0.82
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
BASIC 38,963 36,864 38,923 36,747
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
DILUTED 39,325 37,498 39,372 37,359
LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the Six Months Ended
June 30,
------------------------
2008 2007
------------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 37,232 $ 30,619
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 33,780 28,365
Deferred income taxes 8,874 2,474
Provision for doubtful accounts 27 46
Loss on disposal of property and
equipment, net 1,335 164
Amortization of deferred financing costs 571 405
Share-based compensation 3,895 3,816
Excess tax benefit from stock option
exercises (5) (3,838)
Equity in earnings of affiliate (654) (601)
Changes in operating assets and
liabilities 20,555 4,692
Other 50 35
------------- ----------
Net cash provided by operating
activities 105,660 66,177
------------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment
(excluding non-cash purchases
supplementally noted below) (235,577) (200,446)
Proceeds from sale of property and
equipment 365 48
Proceeds from property insurance
settlements 270 48
Increase in other assets (12,140) (9,555)
Increase in restricted cash (2,234) (1,011)
------------- ----------
Net cash used in investing activities (249,316) (210,916)
------------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 38,538 105,000
Repayments of long-term borrowings (10,588) (6,147)
Proceeds from revolving credit facility,
net 116,200 40,000
Increase in deferred financing costs (3,641) (1,896)
Excess tax benefit from stock option
exercises 5 3,838
Proceeds from stock option exercises 1,462 5,327
------------- ----------
Net cash provided by financing
activities 141,976 146,122
------------- ----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,680) 1,383
CASH AND CASH EQUIVALENTS - Beginning of
period 5,354 6,880
------------- ----------
CASH AND CASH EQUIVALENTS - End of period $ 3,674 $ 8,263
============= ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash payments for interest, net of
capitalized interest $ 17,993 $ 15,114
============= ==========
Cash payments for income taxes $ 3,855 $ 16,924
============= ==========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Purchases of property and equipment
financed through capital lease obligations $ 12,121 $ -
============= ==========
Purchases of property and equipment in
accounts payable $ 17,999 $ 3,671
============= ==========
Non-cash share-based compensation
capitalized to projects under development $ 443 $ 338
============= ==========
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 Six Months Ended
June 30, June 30,
------------------ ----------------
2008 2007 2008 2007
---------- ------- -------- -------
Net income $19,828 $16,485 $ 37,232 $30,619
Interest expense, net 6,905 6,369 14,116 11,897
Provision for income taxes 13,471 10,931 25,195 20,326
Depreciation and amortization 17,190 14,678 33,780 28,365
---------- ------- -------- -------
EBITDA $57,394 $48,463 $110,323 $91,207
========== ======= ======== =======
Source: Life Time Fitness, Inc.
Released July 24, 2008