Posted October 25, 2013 1:30 pm by

Life Time Fitness Announces Third Quarter 2013 Financial Results

thC3NRRN81Life Time Fitness Announces Third Quarter 2013 Financial Results

CHANHASSEN, Minn.--(BUSINESS WIRE)--October 24, 2013--

Life Time Fitness, Inc. (NYSE: LTM), The Healthy Way of Life Company, today reported its financial results for the third quarter ended September 30, 2013.

Third quarter 2013 revenue grew 7.2% to $316.0 million from $294.9 million during the same period last year. Revenue for the first nine months of 2013 grew 7.4% to $914.9 million from $851.6 million during the same period last year.

Net income for the quarter was $34.4 million, or $0.83 per diluted share, compared to net income of $32.1 million, or $0.77 per diluted share, for 3Q 2012. Net income for the first nine months of 2013 was $95.7 million, or $2.30 per diluted share, compared to net income of $88.1 million, or $2.10 per diluted share for the prior-year period.

“Our focus in 2013 continues to be upon improving the operational execution and consistency with which we deliver our broad range of programs, services and products in health, fitness and nutrition,” said Bahram Akradi, chairman, president and chief executive officer. “At the same time, our unwavering efforts to establish Life Time as the definitive Healthy Way of Life Company and brand are taking hold as communities, organizations and individuals alike select our offerings. As we look toward the acceleration of our new center expansion in 2014, we are well positioned to provide even more value to our customers.”

During the quarter, the Company opened its fourth center in Virginia, located in Reston (Washington D.C. market). The Company’s final planned 2013 new center opening will occur in November in Montvale, New Jersey (Greater New York market), representing the third Life Time location in New Jersey. In 2014, plans call for six new center openings in existing and new markets.

Three and Nine Months Ended September 30, 2013, Financial Highlights:

Total revenue for the third quarter grew 7.2% to $316.0 million from $294.9 million in 3Q 2012. Total revenue for the first nine months of 2013 grew 7.4% to $914.9 million from $851.6 million during the prior-year period.

 
                                                 3Q 2013 vs. 3Q 2012 
                                           (in millions except revenue per 
                                                   membership data) 
Membership dues                              $195.7 vs. $187.6 (up 4.3%) 
In-center revenue                             $97.2 vs. $90.5 (up 7.4%) 
Other revenue                                 $19.5 vs. $12.9 (up 51.3%) 

Average center revenue per Access              $421 vs. $403 (up 4.3%) 
membership 
Average in-center revenue per Access           $140 vs. $131 (up 6.6%) 
membership 
Same-center revenue (open 13 months or                 Up 4.2% 
longer) 
Same-center revenue (open 37 months or                 Up 3.4% 
longer) 

                                                YTD 2013 vs. YTD 2012 
                                           (in millions except revenue per 
                                                   membership data) 
Membership dues                              $576.8 vs. $547.9 (up 5.3%) 
In-center revenue                            $286.5 vs. $265.3 (up 8.0%) 
Other revenue                                 $41.0 vs. $26.7 (up 53.6%) 

Average center revenue per Access            $1,243 vs. $1,182 (up 5.1%) 
membership 
Average in-center revenue per Access           $412 vs. $385 (up 7.2%) 
membership 
Same-center revenue (open 13 months or                 Up 4.2% 
longer) 
Same-center revenue (open 37 months or                 Up 3.4% 
longer)

Total memberships grew 0.7% to 801,851 at September 30, 2013, from 796,102 at September 30, 2012.

   -- Access memberships grew 0.1% to 695,923 at September 30, 2013, from 
      695,271 at September 30, 2012. 

   -- Non-Access memberships grew 5.1% to 105,928 at September 30, 2013, from 
      100,831 at September 30, 2012. 

   -- Attrition in 3Q 2013 was 9.5% compared to 9.0% in the prior-year period. 
      Attrition for the trailing 12-month period ended September 30, 2013, was 
      35.0% compared to trailing 12-month attrition of 32.9% at September 30, 
      2012.

Total operating expenses during 3Q 2013 were $253.2 million compared to $235.5 million for 3Q 2012. Total operating expenses for the first nine months of 2013 were $738.9 million compared to $687.3 million in 2012.

   -- Income from operations margin was 19.9% for 3Q 2013 compared to 20.1% in 
      the prior-year period. 

   -- Income from operations margin was 19.2% for the first nine months of 2013 
      compared to 19.3% for the first nine months of 2012. 

(Expense as a percent of total      3Q 2013 vs. 3Q 2012  YTD 2013 vs. YTD 2012 
revenue) 
                                    -------------------  --------------------- 
   Center operations                  57.1% vs. 57.5%       57.6% vs. 58.4% 
   Advertising and marketing           3.1% vs. 3.0%         3.3% vs. 3.4% 
   General and administrative          4.6% vs. 4.6%         5.0% vs. 4.8% 
   Other operating                     5.8% vs. 4.8%         5.1% vs. 4.1% 
   Depreciation and amortization      9.5% vs. 10.0%        9.8% vs. 10.0%

Net income for 3Q 2013 was $34.4 million, or $0.83 per diluted share, compared to net income of $32.1 million, or $0.77 per diluted share, for 3Q 2012. Net income for the first nine months of 2013 was $95.7 million, or $2.30 per diluted share, compared to net income of $88.1 million, or $2.10 per diluted share, for the prior-year period.

EBITDA for 3Q 2013 was $93.2 million compared to $89.2 million in 3Q 2012. For the first nine months of 2013, EBITDA was $266.3 million compared with $250.7 million in the prior-year period.

   -- As a percentage of total revenue, EBITDA in 3Q 2013 was 29.5% in 3Q 2013 
      and 30.2% in 3Q 2012. 

   -- For the first nine months of 2013, EBITDA, as a percentage of total 
      revenue, was 29.1% compared to 29.4% in the prior-year period.

Cash flows from operating activities for the first nine months of 2013 totaled $190.8 million compared to $202.9 million in the prior-year period. This reduction is driven primarily by changes in operating assets and liabilities.

Weighted average fully diluted shares for 3Q 2013 totaled 41.6 million compared to 41.9 million in 3Q 2012. For the first nine months of 2013, weighted average fully diluted shares totaled 41.6 million compared to 41.9 million for the prior-year period.

2013 Business Outlook:

The following statements are based on the Company’s current expectations for fiscal year 2013 and incorporate 2013 operating trends. These 2013 expectations are subject to the risks and uncertainties further described in the Company’s forward-looking statements:

   -- Revenue is expected to be up 7-7.5%, or $1.205-1.210 billion (updated 
      from $1.205-1.220 billion), driven primarily by price and mix 
      optimization, square foot expansion, and growth in in-center and 
      ancillary business revenue. 

   -- Net income is expected to be up 9-10%, or $121.5-122.5 million (updated 
      from $121.0-124.0 million), driven by revenue growth and cost 
      efficiencies. 

   -- Diluted earnings per common share is expected to be $2.91-2.93 (updated 
      from $2.89-2.95).

As announced on October 17, 2013, the Company will hold a conference call today at 10:00 a.m. ET to discuss its third quarter 2013 results. Bahram Akradi, Michael Robinson, executive vice president and chief financial officer, and John Heller, vice president, Finance and Investor Relations, will host the conference call. The conference call will be webcast and may be accessed via the Company’s Investor Relations section of its website at lifetimefitness.com. A replay of the call will be available the same day via the Company’s website beginning at approximately 2:00 p.m. ET.

About Life Time Fitness, Inc.

As The Healthy Way of Life Company, Life Time Fitness (NYSE:LTM) helps organizations, communities and individuals achieve their total health objectives, athletic aspirations and fitness goals by engaging in their areas of interest — or discovering new passions — both inside and outside of Life Time’s distinctive and large sports, professional fitness, family recreation and spa destinations, most of which operate 24 hours a day, seven days a week. The Company’s Healthy Way of Life approach enables customers to achieve this by providing the best programs, people and places of uncompromising quality and value. As of October 24, 2013, the Company operated 107 centers under the LIFE TIME FITNESS(R) and LIFE TIME ATHLETIC(R) brands in the United States and Canada. Additional information about Life Time centers, programs and services is available at lifetimefitness.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can usually be identified by the use of terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “evolve,” “expect,” “forecast,” “intend,” “looking ahead,” “may,” “opinion,” “plan,” “possible,” “potential,” “project,” “should,” “will” and similar words or expressions. Forward-looking 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, the ability to access our existing credit facility and obtain additional financing, strains on our business from continued and future growth, including potential acquisitions and other strategic initiatives, risks related to maintenance and security of our data, potential recognition of compensation expense related to performance-based stock grants, competition from other health and fitness centers, identifying and acquiring suitable sites for new centers, delays in opening

new centers and other factors set forth in the risk factor section of the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission.

The Company cautions investors not to place undue reliance on any such forward-looking statements, which speak only as of the date on which such statements were made. The Company undertakes no obligation to update such statements to reflect events or circumstances arising after such date. All remarks made during the Company’s preliminary financial results webcast will be current at the time of the webcast and the Company is under no obligation to update the recording.

 

                  LIFE TIME FITNESS, INC. AND SUBSIDIARIES 
                        CONSOLIDATED BALANCE SHEETS 
                               (In thousands) 
                                (Unaudited) 

                                            September 30,     December 31, 
                                                2013              2012 
                                           ---------------  ---------------- 
ASSETS 
CURRENT ASSETS: 
   Cash and cash equivalents                $      19,719    $     16,499 
   Accounts receivable, net                         9,834           9,272 
   Center operating supplies and 
    inventories                                    30,691          27,240 
   Prepaid expenses and other current 
    assets                                         25,545          26,826 
   Deferred membership origination costs           10,747          11,664 
   Deferred income taxes                            4,037           8,813 
                                               ----------       --------- 
      Total current assets                        100,573         100,314 
PROPERTY AND EQUIPMENT, net                     2,024,070       1,858,666 
RESTRICTED CASH                                       734           2,087 
DEFERRED MEMBERSHIP ORIGINATION COSTS               6,019           6,820 
GOODWILL                                           49,256          37,176 
OTHER ASSETS                                       73,138          67,111 
                                               ----------       --------- 
      TOTAL ASSETS                          $   2,253,790    $  2,072,174 
                                               ==========       ========= 

LIABILITIES AND SHAREHOLDERS' EQUITY 
CURRENT LIABILITIES: 
   Current maturities of long-term debt     $      14,469    $     12,603 
   Accounts payable                                28,890          32,140 
   Construction accounts payable                   51,820          25,208 
   Accrued expenses                                66,528          63,333 
   Deferred revenue                                33,362          34,753 
                                               ----------       --------- 
      Total current liabilities                   195,069         168,037 
LONG-TERM DEBT, net of current portion            774,323         691,867 
DEFERRED RENT LIABILITY                            24,858          22,490 
DEFERRED INCOME TAXES                              91,232          95,509 
DEFERRED REVENUE                                    6,057           6,840 
OTHER LIABILITIES                                  21,216          14,514 
                                               ----------       --------- 
      Total liabilities                         1,112,755         999,257 
                                               ----------       --------- 
SHAREHOLDERS' EQUITY: 
   Common stock                                       854             864 
   Additional paid-in capital                     420,557         447,912 
   Retained earnings                              724,616         628,942 
   Accumulated other comprehensive loss            (4,992)         (4,801) 
                                               ----------       --------- 
      Total equity                              1,141,035       1,072,917 
                                               ----------       --------- 
      TOTAL LIABILITIES AND SHAREHOLDERS' 
       EQUITY                               $   2,253,790    $  2,072,174 
                                               ==========       ========= 

             LIFE TIME FITNESS, INC. AND SUBSIDIARIES 
               CONSOLIDATED STATEMENTS OF OPERATIONS 
               (In thousands except per share data) 
                            (Unaudited) 

                    For the Three Months 
                           Ended          For the Nine Months Ended 
                       September 30,            September 30, 
                    --------------------  ------------------------- 
                      2013       2012         2013         2012 
                    ---------  ---------  ------------  ----------- 
REVENUE: 
   Membership dues  $195,657   $187,568   $576,847      $547,933 
   Enrollment fees     3,598      3,859     10,567        11,742 
   In-center 
    revenue           97,234     90,543    286,480       265,277 
                     -------    -------    -------       ------- 
      Total center 
       revenue       296,489    281,970    873,894       824,952 
   Other revenue      19,522     12,903     40,972        26,672 
                     -------    -------    -------       ------- 
      Total 
       revenue       316,011    294,873    914,866       851,624 
                     -------    -------    -------       ------- 
OPERATING 
 EXPENSES: 
   Center 
    operations       180,431    169,521    527,191       496,790 
   Advertising and 
    marketing          9,758      8,826     30,346        28,871 
   General and 
    administrative    14,531     13,631     45,600        41,190 
   Other operating    18,479     14,091     46,538        35,243 
   Depreciation 
    and 
    amortization      29,956     29,396     89,235        85,217 
                     -------    -------    -------       ------- 
      Total 
       operating 
       expenses      253,155    235,465    738,910       687,311 
                     -------    -------    -------       ------- 
      Income from 
       operations     62,856     59,408    175,956       164,313 
                     -------    -------    -------       ------- 
OTHER INCOME 
 (EXPENSE): 
   Interest 
    expense, net      (6,436)    (6,510)   (18,999)      (19,332) 
   Equity in 
    earnings of 
    affiliate            379        375      1,103         1,143 
                     -------    -------    -------       ------- 
      Total other 
       income 
       (expense)      (6,057)    (6,135)   (17,896)      (18,189) 
                     -------    -------    -------       ------- 
INCOME BEFORE 
 INCOME TAXES         56,799     53,273    158,060       146,124 
PROVISION FOR 
 INCOME TAXES         22,413     21,129     62,386        58,016 
                     -------    -------    -------       ------- 
NET INCOME          $ 34,386   $ 32,144   $ 95,674      $ 88,108 
                     =======    =======    =======       ======= 

BASIC EARNINGS PER 
 COMMON SHARE       $   0.83   $   0.77   $   2.31      $   2.13 
                     =======    =======    =======       ======= 
DILUTED EARNINGS 
 PER COMMON SHARE   $   0.83   $   0.77   $   2.30      $   2.10 
                     =======    =======    =======       ======= 

WEIGHTED AVERAGE 
 NUMBER OF COMMON 
   SHARES 
    OUTSTANDING - 
    BASIC             41,307     41,484     41,353        41,370 
                     =======    =======    =======       ======= 
WEIGHTED AVERAGE 
 NUMBER OF COMMON 
   SHARES 
    OUTSTANDING - 
    DILUTED           41,613     41,881     41,606        41,885 
                     =======    =======    =======       ======= 

                 LIFE TIME FITNESS, INC. AND SUBSIDIARIES 
                  CONSOLIDATED STATEMENTS OF CASH FLOWS 
                              (In thousands) 
                               (Unaudited) 
                                              For the Nine Months Ended 
                                                    September 30, 
                                           ------------------------------- 
                                                2013             2012 
                                           ---------------  -------------- 
CASH FLOWS FROM OPERATING ACTIVITIES: 
   Net income                               $      95,674   $    88,108 
   Adjustments to reconcile net income to 
    net cash provided by operating 
    activities: 
      Depreciation and amortization                89,235        85,217 
      Deferred income taxes                          (583)       (4,387) 
      (Gain) loss on disposal of property 
       and equipment, net                            (100)        1,231 
      Gain on sale of land held for sale                -          (196) 
      Amortization of deferred financing 
       costs                                        1,635         1,504 
      Share-based compensation                      9,410        10,862 
      Excess tax benefit related to 
       share-based compensation                    (6,575)       (9,138) 
      Changes in operating assets and 
       liabilities                                  2,726        30,429 
      Other                                          (659)         (769) 
                                               ----------    ---------- 
         Net cash provided by operating 
          activities                              190,763       202,861 
                                               ----------    ---------- 

CASH FLOWS FROM INVESTING ACTIVITIES: 
   Purchases of property and equipment           (224,542)     (164,556) 
   Acquisitions, net of cash acquired             (13,102)      (28,984) 
   Proceeds from sale of property and 
    equipment                                       1,116           673 
   Proceeds from sale of land held for 
    sale                                                -         1,758 
   Proceeds from property insurance
    settlements                                       177           901 
   Increase in other assets                        (1,022)          (94) 
   Decrease in restricted cash                      1,353           376 
                                               ----------    ---------- 
         Net cash used in investing 
          activities                             (236,020)     (189,926) 
                                               ----------    ---------- 

CASH FLOWS FROM FINANCING ACTIVITIES: 
   Proceeds from long-term borrowings             125,000             - 
   Repayments of long-term borrowings             (31,773)       (5,094) 
   Repayments of revolving credit 
    facility, net                                  (7,150)      (16,000) 
   Increase in deferred financing costs            (4,213)         (306) 
   Excess tax benefit related to 
    share-based compensation                        6,575         9,138 
   Proceeds from stock option exercises             1,563         2,088 
   Proceeds from employee stock purchase 
    plan                                            1,074           999 
   Stock purchased for employee stock 
    purchase plan                                  (1,309)       (1,290) 
   Repurchases of common stock                    (40,272)            - 
                                               ----------    ---------- 
         Net cash provided by (used in) 
          financing activities                     49,495       (10,465) 
                                               ----------    ---------- 

Effect of exchange rates on cash and cash 
 equivalents                                       (1,018)       (1,332) 
                                               ----------    ---------- 

INCREASE IN CASH AND CASH EQUIVALENTS               3,220         1,138 
CASH AND CASH EQUIVALENTS - Beginning of 
 period                                            16,499         7,487 
                                               ----------    ---------- 
CASH AND CASH EQUIVALENTS - End of period   $      19,719   $     8,625 
                                               ==========    ==========

Non-GAAP Financial Measures

This release and the related conference call disclose certain non-GAAP financial measures.

EBITDA. Earnings Before Interest, Income Taxes and Depreciation and Amortization (EBITDA) is a non-GAAP measure consisting 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, net cash 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 EBITDA 
                               (In thousands) 
                                (Unaudited) 

                For the Three Months Ended      For the Nine Months Ended 
                      September 30,                   September 30, 
               ----------------------------  ------------------------------- 
                    2013           2012           2013             2012 
               --------------  ------------  ---------------  -------------- 
Net income      $      34,386  $     32,144   $       95,674   $      88,108 
Interest 
 expense, 
 net                    6,436         6,510           18,999          19,332 
Provision for 
 income 
 taxes                 22,413        21,129           62,386          58,016 
Depreciation 
 and 
 amortization          29,956        29,396           89,235          85,217 
                   ----------   -----------      -----------      ---------- 
EBITDA          $      93,191  $     89,179   $      266,294   $     250,673 
                   ==========   ===========      ===========      ==========

Free Cash Flow. Free cash flow is a non-GAAP measure consisting of net cash provided by operating activities, less purchases of property and equipment, excluding acquisitions. This term, as the Company defines it, may not be comparable to a similarly titled measure used by other companies and does not represent the total increase or decrease in the cash balance presented in accordance with GAAP. The Company uses free cash flow as a measure of cash generated after spending on property and equipment. Free cash flow should not be considered as a substitute for net cash provided by operating activities prepared in accordance with GAAP. Additional details related to free cash flow 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 cash provided by operating activities, the most directly comparable GAAP measure, to free cash flow:

 
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE 
                             CASH FLOW 
                           (In thousands) 
                            (Unaudited) 

               For the Three Months 
                       Ended             For the Nine Months Ended 
                   September 30,               September 30, 
             -------------------------  ---------------------------- 
                 2013          2012         2013           2012 
             -------------  ----------  -------------  ------------- 
Net cash 
 provided 
 by 
 operating 
 activities   $    66,309   $  60,671    $   190,763   $  202,861 
Less: 
 Purchases 
 of 
 property 
 and 
 equipment        (87,109)    (58,454)      (224,542)    (164,556) 
                 --------    --------       --------    --------- 
Free cash 
 flow         $   (20,800)  $   2,217    $   (33,779)  $   38,305 
                 ========    ========       ========    ========= 

    CONTACT: Life Time Fitness, Inc.

Investor Relations:

John Heller, 952-229-7427

ir@lifetimefitness.com

or

Media Relations:

Jason Thunstrom, 952-229-7435

pr@lifetimefitness.com