Life Time Fitness Announces Fourth Quarter and Full-Year 2006 Financial Results
Company Reports Revenue Growth of 34.5% and Earnings Per Share of $0.38 for the Quarter; Full-Year Revenue Grew 31.2% and Earnings Per Share was $1.37
EDEN PRAIRIE, Minn.--(BUSINESS WIRE)--
Life Time Fitness, Inc. (NYSE:LTM), a national operator of distinctive and large health and fitness centers, today reported its operating results for the fourth quarter and full year ended December 31, 2006.
Fourth quarter 2006 revenue grew 34.5% to $139.3 million from $103.6 million during the same period last year. Revenue for the year totaled $511.9 million, up 31.2% from $390.1 million in 2005.
Net income during the quarter grew 16.9% to $14.1 million, or $0.38 per diluted share, including the effect of share-based compensation expense. This compares to net income of $12.1 million, or $0.33 per diluted share, for 4Q 2005. For the full year, net income grew 22.7% to $50.6 million, or $1.37 per diluted share, from $41.2 million, or $1.13 per diluted share, for 2005.
"The Company's fourth quarter and full-year results reflect our continued focus upon and execution of our core growth strategies," said Bahram Akradi, Life Time Fitness chairman and chief executive officer. "During the quarter, we continued our expansion with openings in Overland Park, Kansas, Palm Valley, Arizona, Alpharetta, Georgia, and Scottsdale, Arizona. We also have acquired the land and commenced construction on the eight new current model centers we plan to open this year. During 2006, our memberships grew 23.8% to 443,660. We also are pleased with the in-center revenue growth of 41.7% to $35.9 million during 4Q 2006, and 41.6% to $138.3 million for the full year, which was driven primarily by membership ramp, targeted marketing programs, and new products and services."
Three and Twelve Months Ended December 31, 2006, Financial Highlights:
Total revenue for the fourth quarter grew 34.5% to $139.3 million, driven primarily by growth in membership dues and in-center revenue. Total revenue for the full year grew to $511.9 million from $390.1 million in 2005.
(Period-over-period growth) 4Q 2006 vs. 4Q 2005 2006 vs. 2005
------------------- ----------------
-- Membership dues 33.8% 29.1%
-- Enrollment fees 16.1% 10.3%
-- In-center revenue 41.7% 41.6%
-- Same-center revenue 6.7% 7.3%
-- Average center revenue /
membership $322 - up 8.3% $1,270 - up 8.4%
-- Average in-center revenue /
membership $85 - up 13.7% $351 - up 16.9%
Total operating expenses during 4Q 2006 totaled $111.3 million compared to $81.5 million for 4Q 2005 and full-year operating expenses were $411.4 million, compared with $309.2 million in 2005, driven primarily by increased expenses to support new centers, membership ramp, in-center revenue growth, and share-based compensation expense.
Operating margin was 20.1% for 4Q 2006, compared to 21.3% in the prior-year period. Full-year operating margin was 19.6%, compared to 20.7% in 2005. Excluding share-based compensation expense, operating margin was 21.1% for 4Q 2006 (as compared with 21.6% in 4Q 2005) and 21.1% for the full year (as compared with 20.8% for 2005). Share-based compensation expense, including stock option expense and restricted stock expense resulting from the adoption of SFAS 123R, totaled $1.4 million for the quarter and $7.6 million for the full year.
(Expense as a percent of total
revenue) 4Q 2006 vs. 4Q 2005 2006 vs. 2005
------------------- ---------------
-- Center operations (including
$0.4 million and $2.2 million of
share-based compensation expense 58.1% vs. 55.3% 57.1% vs. 55.4%
in 4Q and full-year 2006,
respectively)
-- Advertising and marketing 3.8% vs. 3.3% 4.1% vs. 3.7%
-- General and administrative
(including $0.9 million and $5.4
million of share-based 6.7% vs. 6.8 % 7.4% vs. 7.0%
compensation expense in 4Q and
full-year 2006, respectively)
-- Other operating 2.5% vs. 3.4% 2.5% vs. 3.3%
-- Depreciation and amortization 8.7% vs. 10.0% 9.3% vs. 9.8%
Net income during 4Q 2006 grew 16.9% to $14.1 million from $12.1 million in 4Q 2005, and full-year net income grew 22.7% to $50.6 million from $41.2 million in 2005, driven by continued top-line growth.
-- Net income margin for 4Q 2006 was 10.1% compared with 11.7% in
4Q 2005. The net income margin in 2006 was 9.9% compared with
10.6% in 2005. This reduction in net income margin is due to
share-based compensation expense in 2006 and a business
realignment that reduced state income taxes and deferred tax
liabilities in 4Q 2005.
-- The effective income tax rate was 39.9% for 2006, compared
with 39.4% for 2005.
EBITDA for 4Q 2006 grew 23.9% to $40.4 million from $32.6 million in 4Q 2005. Full-year EBITDA grew 23.8% to $149.0 million from $120.4 million in 2005.
-- As a percentage of total revenue, EBITDA was 29.0% in 4Q 2006,
compared to 31.5% in 4Q 2005.
-- EBITDA margin in 2006 was 29.1% compared to 30.9% in 2005.
Cash flows from operations for the full year grew 16.6% to $125.9 million from $108.0 million in 2005.
Weighted average fully diluted shares for 4Q 2006 totaled 37.3 million compared to 36.7 million shares in 4Q 2005. For the full year, weighted average fully diluted shares totaled 36.8 million compared with 36.3 million in 2005.
2007 Business Outlook:
The following statements are based on the Company's current expectations for fiscal year 2007 and subject to the risks and uncertainties described below:
-- Revenue is expected to be $640-$650 million (or approximately
25-27% 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 $64.3-$65.3 million (or
approximately 27-29% growth). This year-over-year increase is
driven primarily by our growth strategies.
-- Diluted earnings per common share is expected to be
$1.71-$1.74 (or approximately 25-27% growth).
As announced on February 1, 2007, the Company will hold a conference call today at 10:00 a.m. ET to discuss its fourth quarter and full-year 2006 results. Bahram Akradi, chairman and chief executive officer, and Michael Robinson, executive vice president and chief financial officer, 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 sports and athletic, professional fitness, family recreation and resort/spa centers. As of February 15, 2007, the Company operated 60 centers in 13 states, including Arizona, Florida, Georgia, Illinois, Indiana, Kansas, Maryland, Michigan, Minnesota, Ohio, Texas, Utah and Virginia. The Company also operates two satellite facilities and five preview locations in existing and new markets. Additionally, Life Time Fitness 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 and supplements. Life Time Fitness is headquartered in Eden Prairie, Minnesota (www.lifetimefitness.com). LIFE TIME FITNESS, the LIFE TIME FITNESS logo, and EXPERIENCE LIFE 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. 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. 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.
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, December 31,
2006 2005
------------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $6,880 $4,680
Accounts receivable, net 2,320 4,267
Inventories 8,773 5,669
Prepaid expenses and other current assets 9,201 7,187
Deferred membership origination costs 12,575 10,082
Income tax receivable 97 3,510
------------- -------------
Total current assets 39,846 35,395
PROPERTY AND EQUIPMENT, net 902,122 661,371
RESTRICTED CASH 4,738 3,915
DEFERRED MEMBERSHIP ORIGINATION COSTS 10,875 8,410
OTHER ASSETS 30,095 14,369
------------- -------------
TOTAL ASSETS $987,676 $723,460
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $15,228 $14,447
Accounts payable 8,878 9,964
Construction accounts payable 49,285 25,811
Accrued expenses 37,191 27,862
Deferred revenue 29,773 23,434
------------- -------------
Total current liabilities 140,355 101,518
LONG-TERM DEBT, net of current portion 374,327 258,835
DEFERRED RENT LIABILITY 25,716 5,492
DEFERRED INCOME TAXES 38,584 35,419
DEFERRED REVENUE 15,917 14,352
OTHER LIABILITIES 264 -
------------- -------------
Total liabilities 595,163 415,616
------------- -------------
SHAREHOLDERS' EQUITY:
Common stock 737 712
Additional paid-in capital 259,905 228,132
Deferred compensation - (2,306)
Retained earnings 131,871 81,306
------------- -------------
Total shareholders' equity 392,513 307,844
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $987,676 $723,460
============= =============
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,
------------------ -------------------
2006 2005 2006 2005
--------- -------- --------- ---------
REVENUE:
Membership dues $94,500 $70,610 $339,623 $262,989
Enrollment fees 5,721 4,926 22,438 20,341
In-center revenue 35,892 25,327 138,332 97,710
--------- -------- --------- ---------
Total center revenue 136,113 100,863 500,393 381,040
Other revenue 3,163 2,706 11,504 9,076
--------- -------- --------- ---------
Total revenue 139,276 103,569 511,897 390,116
OPERATING EXPENSES:
Center operations (including
share-based compensation of
$447, $0, $2,179 and $0,
respectively) 80,929 57,285 292,273 216,314
Advertising and marketing 5,266 3,374 20,770 14,446
General and administrative
(including share-based
compensation of $940, $310,
$5,377 and $388,
respectively) 9,376 7,018 37,781 27,375
Other operating 3,507 3,515 12,998 12,693
Depreciation and amortization 12,179 10,327 47,560 38,346
--------- -------- --------- ---------
Total operating expenses 111,257 81,519 411,382 309,174
--------- -------- --------- ---------
Income from operations 28,019 22,050 100,515 80,942
OTHER INCOME (EXPENSE):
Interest expense, net (4,895) (3,729) (17,356) (14,076)
Equity in earnings of
affiliate 237 269 919 1,105
--------- -------- --------- ---------
Total other income
(expense) (4,658) (3,460) (16,437) (12,971)
--------- -------- --------- ---------
INCOME BEFORE INCOME TAXES 23,361 18,590 84,078 67,971
PROVISION FOR INCOME TAXES 9,253 6,522 33,513 26,758
--------- -------- --------- ---------
NET INCOME $14,108 $12,068 $50,565 $41,213
========= ======== ========= =========
BASIC EARNINGS PER COMMON SHARE $0.39 $0.34 $1.40 $1.19
========= ======== ========= =========
DILUTED EARNINGS PER COMMON
SHARE $0.38 $0.33 $1.37 $1.13
========= ======== ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
BASIC 36,448 35,327 36,118 34,592
========= ======== ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
DILUTED 37,285 36,712 36,779 36,339
========= ======== ========= =========
LIFE TIME FITNESS, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the
Year Ended
December 31,
-------------------
2006 2005
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $50,565 $41,213
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 47,560 38,346
Deferred income taxes 3,165 3,315
Loss on disposal of property, net 946 539
Amortization of deferred financing costs 696 1,025
Share-based compensation 7,556 388
Excess tax benefit from stock options (10,229) -
Changes in operating assets and liabilities 25,425 22,870
Other 168 256
--------- ---------
Net cash provided by operating activities 125,852 107,952
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (261,767) (190,355)
Proceeds from sale of property and equipment 6,629 4,411
Proceeds from property insurance settlement 581 -
Increase in other assets (7,803) (3,083)
Decrease (increase) in restricted cash (823) 8,177
--------- ---------
Net cash used in investing activities (263,183) (180,850)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings - 5,652
Repayments on long-term borrowings (19,120) (23,971)
Proceeds from revolving credit facility, net 134,000 80,678
Increase in deferred financing costs (842) (1,175)
Excess tax benefit from stock options 10,229 -
Proceeds from exercise of stock options 15,264 6,183
--------- ---------
Net cash provided by financing activities 139,531 67,367
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,200 (5,531)
CASH AND CASH EQUIVALENTS - Beginning of period 4,680 10,211
--------- ---------
CASH AND CASH EQUIVALENTS - End of period $6,880 $4,680
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for interest, including capitalized
interest $22,183 $17,212
========= =========
Cash payments for income taxes $17,005 $13,227
========= =========
Non-GAAP Financial Measures
This release contains two non-GAAP disclosures. The first is 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. The second is operating margins excluding the impact of share-based compensation expense. Additional details related to these non-GAAP disclosures 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 tables provide reconciliations of these non-GAAP measures to the most directly comparable GAAP measures:
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,
------------------ -------------------
2006 2005 2006 2005
--------- -------- --------- ---------
Net income $14,108 $12,068 $50,565 $41,213
Interest expense, net 4,895 3,729 17,356 14,076
Provision for income taxes 9,253 6,522 33,513 26,758
Depreciation and amortization 12,179 10,327 47,560 38,346
--------- -------- --------- ---------
EBITDA $40,435 $32,646 $148,994 $120,393
========= ======== ========= =========
RECONCILIATION OF THE IMPACT OF SHARE-BASED COMPENSATION EXPENSE
ON OPERATING MARGINS
(In thousands except percentages)
(Unaudited)
For the For the
Three Months Ended Year Ended
December 31, December 31,
------------------ ------------------
2006 2005 2006 2005
--------- -------- --------- --------
Income from operations $28,019 $22,050 $100,515 $80,942
Add back share-based compensation
expense 1,387 310 7,556 388
--------- -------- --------- --------
Income from operations excluding
share- based compensation
expense $29,406 $22,360 $108,071 $81,330
========= ======== ========= ========
Operating margin 20.1% 21.3% 19.6% 20.7%
Operating margin excluding share-
based
compensation expense 21.1% 21.6% 21.1% 20.8%
Source: Life Time Fitness, Inc.
Released February 15, 2007