Life Time Fitness Announces Second Quarter 2012 Financial Results

Life Time Fitness, Inc. (NYSE:LTM), The Healthy Way of Life Company, today reported its financial results for the second quarter ended June 30, 2012.

Second quarter 2012 revenue grew 12.3% to $288.3 million from $256.7 million during the same period last year. Total revenue for the first six months of 2012 grew 11.9% to $556.8 million from $497.3 million during the same period last year.

Net income for the quarter was $30.3 million, or $0.73 per diluted share, compared to net income of $24.9 million, or $0.61 per diluted share, for 2Q 2011. Net income for the first six months of 2012 was $56.0 million, or $1.34 per diluted share, compared to net income of $45.8 million, or $1.12 per diluted share, for the prior-year period.

“I am pleased with our second quarter operating results, which included strong top-line and in-center revenue expansion, and net income growth,” said Bahram Akradi, chairman, president and chief executive officer. “Our results also reflect the ongoing progress we’ve made in driving our member experience and connectivity objectives. Our focus remains on growing our Healthy Way of Life Company and brand by providing our members and customers with programs and services – both inside and outside of our centers – that help them achieve their goals. Our business model is strong and the investments we are making further position Life Time for long-term growth and success.”

During the quarter, Life Time opened new centers in Tulsa and Atlanta, marking its first and sixth locations in Oklahoma and Georgia, respectively. The Company also continued the integration, remodeling and rebranding activities associated with the acquired Lifestyle Family Fitness facilities in Indiana, Ohio and North Carolina. Life Time now operates 105 centers in the United States and Canada.

Three and Six Months Ended June 30, 2012, Financial Highlights:

Total revenue for the second quarter grew 12.3% to $288.3 million from $256.7 million in 2Q 2011. Total revenue for the first six months of 2012 grew 11.9% to $556.8 million from $497.3 million during the same period last year.

(Period-over-period growth)		2Q 2012 vs. 2Q 2011 (in millions except revenue per membership data)
Membership dues		$184.9 vs. $167.0 (up 10.7%)
In-center revenue		$90.1 vs. $80.3 (up 12.2%)
Other revenue		$9.4 vs. $4.7 (up 99.4%)
Average center revenue per membership (up 5.4% to $410 excluding the Lifestyle Family Fitness transaction)		$400 vs. $389 (up 3.0%)
Average in-center revenue per membership (up 7.4% to $133 excluding the Lifestyle Family Fitness transaction)		$129 vs. $124 (up 4.4%)
Same-center revenue (open 13 months or longer)		Up 4.2%
Same-center revenue (open 37 months or longer)		Up 3.6%

(Period-over-period growth)		YTD 2012 vs. YTD 2011 (in millions except revenue per membership data)
Membership dues		$360.4 vs. $325.0 (up 10.9%)
In-center revenue		$174.7 vs. $154.0 (up 13.5%)
Other revenue		$13.8 vs. $8.4 (up 63.2%)
Average center revenue per membership (up 4.5% to $802 excluding the Lifestyle Family Fitness transaction)		$786 vs. $768 (up 2.4%)
Average in-center revenue per membership (up 7.2% to $259 excluding the Lifestyle Family Fitness transaction)		$253 vs. $242 (up 4.6%)
Same-center revenue (open 13 months or longer)		Up 4.8%
Same-center revenue (open 37 months or longer)		Up 4.3%

Memberships grew 6.7% to 708,585 at June 30, 2012, from 664,307 at June 30, 2011.

• Excluding memberships acquired in connection with the Lifestyle Family Fitness transaction, memberships grew 2.8%.

• Attrition in 2Q 2012 was 8.6% compared to 8.1% in the prior-year period. Excluding the Lifestyle Family Fitness transaction, 2Q 2012 attrition was 8.2%. The increase in attrition was driven primarily by the impact of this transaction and pricing actions taken in late 2011/early 2012.
• Attrition for the trailing 12-month period ended June 30, 2012, was 36.0% compared to trailing 12-month attrition of 35.8% at June 30, 2011. Excluding the impact of the Lifestyle Family Fitness transaction, trailing 12-month attrition was 35.5%.

Total operating expenses during 2Q 2012 were $231.7 million compared to $210.4 million for 2Q 2011. Total operating expenses for the first six months of 2012 were $451.8 million compared to $410.8 million in 2011.

• Income from operations margin was 19.6% for 2Q 2012 compared to 18.0% in the prior-year period.
• Income from operations margin for the first six months of 2012 was 18.8% compared to 17.4% in the prior year period.

(Expense as a percent of total revenue)		2Q 2012 vs. 2Q 2011		YTD 2012 vs. YTD 2011
Center operations		57.8% vs. 61.0%		58.8% vs. 61.6%
Advertising and marketing		3.4% vs. 3.5%		3.6% vs. 3.5%
General and administrative		4.8% vs. 4.7%		4.9% vs. 5.0%
Other operating		4.4% vs. 3.1%		3.8% vs. 2.8%
Depreciation and amortization		10.0% vs. 9.7%		10.1% vs. 9.7%

Net income for 2Q 2012 was $30.3 million, or $0.73 per diluted share, compared to net income of $24.9 million, or $0.61 per diluted share, for 2Q 2011. Net income for the first six months of 2012 was $56.0 million, or $1.34 per diluted share, compared to net income of $45.8 million, or $1.12 per diluted share, for the prior-year period.

EBITDA for 2Q 2012 was $85.8 million compared with $71.2 million in 2Q 2011. For the first six months of 2012, EBITDA was $161.5 million compared with $135.4 million in the prior-year period.

• As a percentage of total revenue, EBITDA in 2Q 2012 was 29.7% compared to 27.8% in 2Q 2011.
• For the first six months of 2012, EBITDA, as a percentage of total revenue, was 29.0% compared to 27.2% in the prior-year period.

Cash flows from operating activities for the first six months of 2012 totaled $142.2 million compared with $118.5 million in the prior-year period.

Weighted average fully diluted shares for 2Q 2012 totaled 41.8 million compared to 40.8 million in 2Q 2011. For the first six months of 2012, weighted average fully diluted shares totaled 41.8 million compared to 40.8 million for the prior-year period.

Updated 2012 Business Outlook:

The following statements are based on the Company’s current expectations for fiscal year 2012 and incorporate year to date 2012 operating trends. These 2012 expectations are subject to the risks and uncertainties further described in the Company’s forward-looking statements:

• Revenue is expected to be up 11-12%, or $1.122-1.137 billion (up from 10-12%, or $1.110-1.135 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 22-25%, or $113.0-116.0 million (up from 21-25%, or $112.0-115.5 million), driven by revenue growth and cost efficiencies. The Company included $1.6 million (after tax) of anticipated performance share-based compensation expense in this net income guidance.
• Diluted earnings per common share is expected to be $2.70-2.76 (up from $2.65-2.73), which includes $0.04 impact of anticipated performance share-based compensation expense.

As announced on July 12, 2012, the Company will hold a conference call today at 10:00 a.m. ET to discuss its second quarter 2012 results. Bahram Akradi, Michael Robinson, executive vice president and chief financial officer, and John Heller, senior director, investor relations & treasurer, 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 1:00 p.m. ET.

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