Life Time Fitness Announces First Quarter 2008 Financial Results

Company Reports Revenue Growth of 20.5%, Net Income Growth of 23.1%, and Earnings Per Diluted Share of $0.44 for the Quarter

CHANHASSEN, Minn.--(BUSINESS WIRE)--

Life Time Fitness, Inc. (NYSE: LTM) today reported its operating results for the first quarter ended March 31, 2008.

First quarter 2008 revenue grew 20.5% to $184.5 million from $153.1 million during the same period last year. Net income during the quarter grew 23.1% to $17.4 million, or $0.44 per diluted share. This compares to net income of $14.1 million, or $0.38 per diluted share, for 1Q 2007.

"We continue to deliver against our fundamental business objectives," said Bahram Akradi, chairman and chief executive officer. "Just as we seek to continually evolve the unparalleled experience and value we deliver to members, we continue to improve our differentiated business model and the opportunities our company has for future growth and expansion. In support of this, we remain focused on driving our member connectivity initiatives and concentrating on research and development activities in the areas of consumer and corporate wellness programming and services."

Life Time Fitness continued its expansion efforts during the first quarter with an opening in Parker, Colorado, representing the Company's first location in this market. Construction is underway for the remaining ten planned openings in 2008.

Three Months Ended March 31, 2008, Financial Highlights:

Total revenue for the first quarter grew 20.5% to $184.5 million, driven primarily by growth in membership dues and in-center revenue.

(Period-over-period growth)                        1Q 2008 vs. 1Q 2007
                                                   -------------------
-- Memberships                                      521,177 - up 9.9%
-- Membership dues                                        19.0%
-- Enrollment fees                                        14.9%
-- In-center revenue                                      25.9%
-- Same-center revenue                                    4.3%
-- Average center revenue / membership               $363 - up 8.7%
-- Average in-center revenue / membership            $111 - up 13.3%

Total operating expenses during 1Q 2008 totaled $148.4 million compared to $124.4 million for 1Q 2007, driven primarily by increased expenses to support new centers, membership ramp, and in-center revenue growth. Operating margin was 19.5% for 1Q 2008, compared to 18.8% in the prior-year period.

(Expense as a percent of total revenue)            1Q 2008 vs. 1Q 2007
                                                   -------------------
-- Center operations                                 58.3% vs. 58.4%
-- Advertising and marketing                          5.1% vs. 4.8%
-- General and administrative                         5.8% vs. 6.9%
-- Other operating                                    2.3% vs. 2.2%
-- Depreciation and amortization                      9.0% vs. 8.9%

Net income during 1Q 2008 grew 23.1% to $17.4 million from $14.1 million in 1Q 2007, driven by continued top-line growth and improved operating margin. Net income margin for 1Q 2008 was 9.4% compared with 9.2% in 1Q 2007.

EBITDA for 1Q 2008 grew 23.8% to $52.9 million from $42.7 million in 1Q 2007. As a percentage of total revenue, EBITDA was 28.7% in 1Q 2008, compared to 27.9% in 1Q 2007.

Cash flows from operations for the first quarter grew 26.4% to $49.3 million from $39.0 million in the prior-year period.

Weighted average diluted shares for 1Q 2008 totaled 39.4 million compared to 37.4 million shares in 1Q 2007.

Updated 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 (up from $81.5-$83.0 million, or
        approximately 20-22% 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 (up from
        $2.05-$2.08, or approximately 15-17% growth).

As announced on April 16, 2008, the Company will hold a conference call today at 10:00 a.m. ET to discuss first quarter 2008 results. Bahram Akradi, chairman and chief executive officer, Michael Robinson, executive vice president and chief financial officer, and Kenneth Cooper, senior director 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 April 24, 2008, Life Time Fitness operated 71 centers in 16 states, including Arizona, Colorado, Florida, Georgia, Illinois, Indiana, Kansas, Maryland, Michigan, Minnesota, Nebraska, North Carolina, Ohio, Texas, Utah and Virginia. The Company also operated one satellite facility and five preview locations in existing and new markets. 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.
                     CONSOLIDATED BALANCE SHEETS
                            (In thousands)
                             (Unaudited)

                                      March 31, 2008 December 31, 2007
                                      -------------- -----------------
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents              $    2,459        $    5,354
  Accounts receivable, net                    3,278             4,475
  Inventories                                13,942            14,324
  Prepaid expenses and other current
   assets                                    13,173            15,963
  Deferred membership origination
   costs                                     17,333            16,205
  Deferred tax asset                          1,177             1,188
  Income tax receivable                           -             5,814
                                      -------------- -----------------
    Total current assets                     51,362            63,323
PROPERTY AND EQUIPMENT, net               1,360,427         1,259,271
RESTRICTED CASH                               3,515             6,767
DEFERRED MEMBERSHIP ORIGINATION COSTS        15,157            14,367
OTHER ASSETS                                 52,654            42,805
                                      -------------- -----------------
    TOTAL ASSETS                         $1,483,115        $1,386,533
                                      ============== =================

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Current maturities of long-term
   debt                                  $    9,314        $    9,568
  Accounts payable                           12,148            12,872
  Construction accounts payable              64,549            59,261
  Accrued expenses                           48,090            47,052
  Deferred revenue                           38,181            34,851
                                      -------------- -----------------
    Total current liabilities               172,282           163,604
LONG-TERM DEBT, net of current
 portion                                    622,130           555,037
DEFERRED RENT LIABILITY                      25,827            25,526
DEFERRED INCOME TAXES                        39,456            38,607
DEFERRED REVENUE                             18,620            17,529
OTHER LIABILITIES                            14,839            13,673
                                      -------------- -----------------
    Total liabilities                       893,154           813,976
                                      -------------- -----------------
SHAREHOLDERS' EQUITY:
  Common stock                                  791               783
  Additional paid-in capital                376,276           373,910
  Retained earnings                         217,294           199,890
  Accumulated other comprehensive
   loss                                      (4,400)           (2,026)
                                      -------------- -----------------
    Total shareholders' equity              589,961           572,557
                                      -------------- -----------------
    TOTAL LIABILITIES AND
     SHAREHOLDERS' EQUITY                $1,483,115        $1,386,533
                                      ============== =================
                       LIFE TIME FITNESS, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In thousands except per share data)
                             (Unaudited)
                                                        For the
                                                  Three Months Ended
                                                       March 31,
                                                 ---------------------
                                                    2008       2007
                                                 ---------- ----------
REVENUE:
  Membership dues                                 $119,648   $100,528
  Enrollment fees                                    6,533      5,686
  In-center revenue                                 55,265     43,897
                                                 ---------- ----------
    Total center revenue                           181,446    150,111
  Other revenue                                      3,005      2,990
                                                 ---------- ----------
    Total revenue                                  184,451    153,101
                                                 ---------- ----------
OPERATING EXPENSES:
  Center operations                                107,580     89,492
  Advertising and marketing                          9,498      7,369
  General and administrative                        10,672     10,488
  Other operating                                    4,095      3,324
  Depreciation and amortization                     16,590     13,687
                                                 ---------- ----------
    Total operating expenses                       148,435    124,360
                                                 ---------- ----------
    Income from operations                          36,016     28,741
                                                 ---------- ----------
OTHER INCOME (EXPENSE):
  Interest expense, net                             (7,211)    (5,528)
  Equity in earnings of affiliate                      323        316
                                                 ---------- ----------
    Total other income (expense)                    (6,888)    (5,212)
                                                 ---------- ----------
INCOME BEFORE INCOME TAXES                          29,128     23,529
PROVISION FOR INCOME TAXES                          11,724      9,395
                                                 ---------- ----------
NET INCOME                                        $ 17,404   $ 14,134
                                                 ========== ==========
BASIC EARNINGS PER COMMON SHARE                   $   0.45   $   0.39
                                                 ========== ==========
DILUTED EARNINGS PER COMMON SHARE                 $   0.44   $   0.38
                                                 ========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
 OUTSTANDING - BASIC                                38,895     36,642
                                                 ========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
 OUTSTANDING - DILUTED                              39,363     37,392
                                                 ========== ==========
                       LIFE TIME FITNESS, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (In thousands)
                             (Unaudited)
                                                        For the
                                                   Three Months Ended
                                                       March 31,
                                                  --------------------
                                                     2008      2007
                                                  ---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                      $  17,404  $ 14,134
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation and amortization                    16,590    13,687
    Deferred income taxes                             3,252     1,496
    Provision for doubtful accounts                      30        (5)
    Loss on disposal of property and equipment,
     net                                                831        39
    Amortization of deferred financing costs            235       195
    Share-based compensation                          1,782     1,818
    Excess tax benefit from stock option
     exercises                                          (65)     (916)
    Change in investment in unconsolidated
     subsidiary                                        (323)     (316)
    Changes in operating assets and liabilities       9,568     8,848
    Other                                                18        47
                                                  ---------- ---------
      Net cash provided by operating activities      49,322    39,027
                                                  ---------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment              (102,218)  (84,146)
  Proceeds from sale of property and equipment          392        35
  Proceeds from property insurance settlement             -        48
  Increase in other assets                           (5,482)   (1,155)
  Decrease in restricted cash                         3,252        29
                                                  ---------- ---------
      Net cash used in investing activities        (104,056)  (85,189)
                                                  ---------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from long-term borrowings                      -   105,000
  Repayments on long-term borrowings                 (2,415)   (3,179)
  Proceeds from (repayments on) revolving credit
   facility, net                                     54,200   (57,700)
  Increase in deferred financing costs                 (310)   (1,014)
  Excess tax benefit from stock option exercises         65       916
  Proceeds from exercise of stock options               299     1,171
                                                  ---------- ---------
      Net cash provided by financing activities      51,839    45,194
                                                  ---------- ---------

DECREASE IN CASH AND CASH EQUIVALENTS                (2,895)     (968)
CASH AND CASH EQUIVALENTS - Beginning of period       5,354     6,880
                                                  ---------- ---------
CASH AND CASH EQUIVALENTS - End of period         $   2,459  $  5,912
                                                  ========== =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION:
  Cash payments for interest, including
   capitalized interest                           $   8,683  $  5,721
                                                  ========== =========
  Cash payments for income taxes                  $     109  $    571
                                                  ========== =========

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
  FINANCING ACTIVITIES:
  Purchases of property and equipment financed
   through capital lease obligations              $  11,299  $      -
                                                  ========== =========
  Purchases of property and equipment in accounts
   payable                                        $   4,957  $    273
                                                  ========== =========
  Non-cash share-based compensation capitalized
   to projects under development                  $     228  $    166
                                                  ========== =========

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
                                                   Three Months Ended
                                                        March 31,
                                                   -------------------
                                                      2008      2007
                                                   ---------- --------

Net income                                            $17,404  $14,134
Interest expense, net                                   7,211    5,528
Provision for income taxes                             11,724    9,395
Depreciation and amortization                          16,590   13,687
                                                   ---------- --------
EBITDA                                                $52,929  $42,744
                                                   ========== ========

Source: Life Time Fitness, Inc.