Life Time Fitness Announces Fourth Quarter and Full-Year 2007 Financial Results
Company Reports Revenue Growth of 22.8% and Earnings Per Share of $0.48 for the Quarter; Full-Year Revenue Grew 28.1% and Earnings Per Share was $1.78
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, 2007.
Fourth quarter 2007 revenue grew 22.8% to $171.1 million from $139.3 million during the same period last year. Revenue for the year totaled $655.8 million, up 28.1% from $511.9 million in 2006.
Net income during the quarter grew 35.0% to $19.1 million, or $0.48 per diluted share. This compares to net income of $14.1 million, or $0.38 per diluted share, for 4Q 2006. For the full year, net income grew 34.5% to $68.0 million, or $1.78 per diluted share, from $50.6 million, or $1.37 per diluted share, for 2006.
"Life Time Fitness continued to achieve its operational and financial objectives in 2007," said Bahram Akradi, chairman and chief executive officer. "Our strong value proposition and unwavering commitment to deliver the highest possible quality services, programs and products, and unparalleled member experience, led to yet another outstanding year. Looking ahead in 2008, we remain confident in our differentiated and disciplined business model. In light of the current challenging economic environment, we continue to adapt, focusing on enhancing the member experience and optimizing membership levels at our centers, while implementing ongoing operational and product improvements. We have extended our planned openings in 2008 to 11, including expansion into higher income demographic areas and three new states. With our steadfast focus on member service and experience, we also will continue to invest in our existing centers, amenities and services, nutritional products and expanded corporate wellness programs, and our rigorous employee training and certification initiatives."
Life Time Fitness continued its expansion efforts during the fourth quarter with openings in Austin, Texas, Sugarloaf, Georgia (Atlanta-area), and San Antonio, Texas, representing the company's second location in each of these markets. Additionally, in January 2008, Life Time Fitness opened its first Colorado center in Parker (Denver-area).
Memberships grew 12.5% in 2007 to 499,092.
Three and Twelve Months Ended December 31, 2007, Financial Highlights:
Total revenue for the fourth quarter grew 22.8% to $171.1 million, driven primarily by growth in membership dues and in-center revenue. Total revenue for the full year grew to $655.8 million from $511.9 million in 2006.
(Period-over-period growth) 4Q 2007 vs. 4Q 2006 2007 vs. 2006
------------------- ----------------
-- Membership dues 21.9% 27.8%
-- Enrollment fees 8.0% 10.3%
-- In-center revenue 25.1% 31.7%
-- Same-center revenue 5.3% 6.1%
-- Average center revenue /
membership $344 - up 6.8% $1,360 - up 6.2%
-- Average in-center revenue /
membership $93 - up 9.4% $387 - up 9.1%
Total operating expenses during 4Q 2007 totaled $133.5 million compared to $111.3 million for 4Q 2006 and full-year operating expenses were $518.4 million, compared with $411.4 million in 2006, driven primarily by increased expenses to support new centers, membership ramp, and in-center revenue growth.
Operating margin was 22.0% for 4Q 2007, compared to 20.1% in the prior-year period. Full-year operating margin was 21.0%, compared to 19.6% in 2006.
(Expense as a percent of total 4Q 2007 vs. 4Q 2006 2007 vs. 2006
revenue)
------------------- ---------------
-- Center operations 56.1% vs. 58.1% 57.5% vs. 57.1%
-- Advertising and marketing 4.0% vs. 3.8% 3.8% vs. 4.1%
-- General and administrative 5.8% vs. 6.7 % 6.2% vs. 7.4%
-- Other operating 2.9% vs. 2.5% 2.5% vs. 2.5%
-- Depreciation and amortization 9.2% vs. 8.7% 9.0% vs. 9.3%
Net income during 4Q 2007 grew 35.0% to $19.1 million from $14.1 million in 4Q 2006, and full-year net income grew 34.5% to $68.0 million from $50.6 million in 2006, driven by continued top-line growth.
-- Net income margin for 4Q 2007 was 11.1% compared with 10.1% in
4Q 2006. Net income margin in 2007 was 10.4% compared with
9.9% in 2006.
-- The effective income tax rate for 2007 was 39.9%, the same
rate reported for 2006.
EBITDA for 4Q 2007 grew 32.8% to $53.7 million from $40.4 million in 4Q 2006. Full-year EBITDA grew 32.7% to $197.7 million from $149.0 million in 2006.
-- As a percentage of total revenue, EBITDA was 31.4% in 4Q 2007,
compared to 29.0% in 4Q 2006.
-- EBITDA margin in 2007 was 30.1% compared to 29.1% in 2006.
Cash flows from operations for the full year grew 13.0% to $142.2 million from $125.9 million in 2006.
Weighted average diluted shares for 4Q 2007 totaled 39.5 million compared to 37.3 million shares in 4Q 2006. For the full year, weighted average diluted shares totaled 38.1 million compared with 36.8 million in 2006.
2008 Business Outlook:
The following statements are based on the Company's current expectations for calendar 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 $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
$2.05-$2.08 (or approximately 15-17% growth).
As announced on February 7, 2008, the Company will hold a conference call today at 10:00 a.m. ET to discuss its fourth quarter and full-year 2007 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 February 22, 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 www.lifetimefitness.com. LIFE TIME FITNESS, the LIFE TIME FITNESS logo, 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)
December 31, 2007 December 31, 2006
----------------- ------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,354 $ 6,880
Accounts receivable, net 4,475 2,320
Inventories 14,324 8,773
Prepaid expenses and other
current assets 15,963 9,201
Deferred membership origination
costs 16,205 12,575
Deferred tax asset 1,188 -
Income tax receivable 5,814 97
----------------- ------------------
Total current assets 63,323 39,846
PROPERTY AND EQUIPMENT, net 1,259,271 902,122
RESTRICTED CASH 6,767 4,738
DEFERRED MEMBERSHIP ORIGINATION
COSTS 14,367 10,875
OTHER ASSETS 42,805 30,095
----------------- ------------------
TOTAL ASSETS $1,386,533 $987,676
================= ==================
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
debt $ 9,568 $ 15,228
Accounts payable 12,872 8,878
Construction accounts payable 59,261 49,285
Accrued expenses 47,052 37,191
Deferred revenue 34,851 29,773
----------------- ------------------
Total current liabilities 163,604 140,355
LONG-TERM DEBT, net of current
portion 555,037 374,327
DEFERRED RENT LIABILITY 25,526 25,716
DEFERRED INCOME TAXES 38,607 38,584
DEFERRED REVENUE 17,529 15,917
OTHER LIABILITIES 13,673 264
----------------- ------------------
Total liabilities 813,976 595,163
----------------- ------------------
SHAREHOLDERS' EQUITY:
Common stock 783 737
Additional paid-in capital 373,910 259,905
Retained earnings 199,890 131,871
Accumulated other comprehensive
loss (2,026) -
----------------- ------------------
Total shareholders' equity 572,557 392,513
----------------- ------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,386,533 $987,676
================= ==================
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,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
REVENUE:
Membership dues $115,199 $ 94,500 $434,138 $339,623
Enrollment fees 6,176 5,721 24,741 22,438
In-center revenue 44,910 35,892 182,215 138,332
--------- --------- --------- ---------
Total center revenue 166,285 136,113 641,094 500,393
Other revenue 4,813 3,163 14,692 11,504
--------- --------- --------- ---------
Total revenue 171,098 139,276 655,786 511,897
--------- --------- --------- ---------
OPERATING EXPENSES:
Center operations 96,082 80,929 377,235 292,273
Advertising and marketing 6,800 5,266 24,967 20,770
General and administrative 9,889 9,376 40,820 37,781
Other operating 4,969 3,507 16,340 12,998
Depreciation and
amortization 15,732 12,179 59,014 47,560
--------- --------- --------- ---------
Total operating expenses 133,472 111,257 518,376 411,382
--------- --------- --------- ---------
Income from operations 37,626 28,019 137,410 100,515
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense, net (6,411) (4,895) (25,443) (17,356)
Equity in earnings of
affiliate 355 237 1,272 919
--------- --------- --------- ---------
Total other income
(expense) (6,056) (4,658) (24,171) (16,437)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 31,570 23,361 113,239 84,078
PROVISION FOR INCOME TAXES 12,520 9,253 45,220 33,513
--------- --------- --------- ---------
NET INCOME $ 19,050 $ 14,108 $ 68,019 $ 50,565
========= ========= ========= =========
BASIC EARNINGS PER COMMON
SHARE $ 0.49 $ 0.39 $ 1.81 $ 1.40
========= ========= ========= =========
DILUTED EARNINGS PER COMMON
SHARE $ 0.48 $ 0.38 $ 1.78 $ 1.37
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
BASIC 38,821 36,448 37,518 36,118
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
DILUTED 39,529 37,285 38,127 36,779
========= ========= ========= =========
LIFE TIME FITNESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the
Year Ended
December 31,
---------------------
2007 2006
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 68,019 $ 50,565
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 59,014 47,560
Deferred income taxes 11,505 3,165
Loss on disposal of property and equipment,
net 354 946
Amortization of deferred financing costs 853 696
Share-based compensation 7,746 7,556
Excess tax benefit from stock option
exercises (4,605) (10,229)
Changes in operating assets and liabilities (544) 25,425
Other (136) 168
---------- ----------
Net cash provided by operating activities 142,206 125,852
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (415,822) (261,767)
Proceeds from sale of property and equipment 5,054 6,629
Proceeds from property insurance settlement 78 581
Increase in other assets (4,488) (7,803)
Increase in restricted cash (2,029) (823)
---------- ----------
Net cash used in investing activities (417,207) (263,183)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 113,455 -
Repayments on long-term borrowings (11,181) (19,120)
Proceeds from revolving credit facility, net 67,800 134,000
Increase in deferred financing costs (2,160) (842)
Proceeds from common stock offering, net of
underwriting discount and offering costs 92,502 -
Excess tax benefit from stock option exercises 4,605 10,229
Proceeds from exercise of stock options 8,454 15,264
---------- ----------
Net cash provided by financing activities 273,475 139,531
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,526) 2,200
CASH AND CASH EQUIVALENTS - Beginning of period 6,880 4,680
---------- ----------
CASH AND CASH EQUIVALENTS - End of period $ 5,354 $ 6,880
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash payments for interest, including
capitalized interest $ 30,621 $ 22,183
========== ==========
Cash payments for income taxes $ 33,746 $ 17,005
========== ==========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Property purchase financed through note
payable $ 95 $ 1,620
========== ==========
Property purchase financed through capital
lease obligation $ 1,445 $ -
========== ==========
Purchases of property and equipment in
accounts payable $ 10,218 $ 22,594
========== ==========
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,
------------------- -------------------
2007 2006 2007 2006
---------- -------- --------- ---------
Net income $19,050 $14,108 $ 68,019 $ 50,565
Interest expense, net 6,411 4,895 25,443 17,356
Provision for income taxes 12,520 9,253 45,220 33,513
Depreciation and amortization 15,732 12,179 59,014 47,560
---------- -------- --------- ---------
EBITDA $53,713 $40,435 $197,696 $148,994
========== ======== ========= =========
Source: Life Time Fitness, Inc.
Released February 22, 2008