Life Time Fitness Announces Third Quarter 2012 Financial Results

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

Third quarter 2012 revenue grew 11.1% to $294.9 million from $265.4 million during the same period last year. Total revenue for the first nine months of 2012 grew 11.7% to $851.6 million from $762.8 million during the same period last year.

Net income for the quarter was $32.1 million, or $0.77 per diluted share, compared to net income of $27.0 million, or $0.66 per diluted share, for 3Q 2011. Net income for the first nine months of 2012 was $88.1 million, or $2.10 per diluted share, compared to net income of $72.8 million, or $1.78 per diluted share, for the prior-year period.

“We saw continued earnings growth, cash flow and margin improvement in the third quarter, and are pleased with our revenue metrics, which were highlighted by double-digit growth in total revenue and in-center revenue,” said Bahram Akradi, Life Time chairman, president and chief executive officer. “We remain focused on building our Healthy Way of Life brand by making strategic investments in programs and services that we see as powerful opportunities to enhance our members’ experience, while driving membership acquisition and retention. Our business model is strong, and we are steadfast in our focus on driving long-term growth and success.”

During the quarter, the Company completed the integration and rebranding activities associated with the acquired Lifestyle Family Fitness facilities. Additionally, the Company expanded plans in connection with its previously announced acquisition of the Atlanta-based Racquet Club of the South by incorporating enhanced fitness and nutrition programs, services and membership opportunities as part of the overall renovation of the tennis complex.

Three and Nine Months Ended September 30, 2012, Financial Highlights:

Total revenue for the third quarter grew 11.1% to $294.9 million from $265.4 million in 3Q 2011. Total revenue for the first nine months of 2012 grew 11.7% to $851.6 million from $762.8 million during the same period last year.

(Period-over-period growth)		3Q 2012 vs. 3Q 2011 (in millions except revenue per membership data)
Membership dues		$187.6 vs. $171.5 (up 9.4%)
In-center revenue		$90.5 vs. $80.7 (up 12.1%)
Other revenue		$12.9 vs. $8.8 (up 47.1%)
Average center revenue per membership (up 5.2% to $416 excluding the Lifestyle Family Fitness transaction)		$408 vs. $395 (up 3.2%)
Average in-center revenue per membership (up 7.8% to $134 excluding the Lifestyle Family Fitness transaction)		$131 vs. $124 (up 5.4%)
Same-center revenue (open 13 months or longer)		Up 4.1%
Same-center revenue (open 37 months or longer)		Up 3.1%

(Period-over-period growth)		YTD 2012 vs. YTD 2011 (in millions except revenue per membership data)
Membership dues		$547.9 vs. $496.5 (up 10.4%)
In-center revenue		$265.3 vs. $234.7 (up 13.0%)
Other revenue		$26.7 vs. $17.2 (up 55.0%)
Average center revenue per membership (up 4.7% to $1,218 excluding the Lifestyle Family Fitness transaction)		$1,194 vs. $1,163 (up 2.7%)
Average in-center revenue per membership (up 7.4% to $393 excluding the Lifestyle Family Fitness transaction)		$384 vs. $366 (up 4.9%)
Same-center revenue (open 13 months or longer)		Up 4.6%
Same-center revenue (open 37 months or longer)		Up 3.9%

Memberships grew 6.4% to 695,271 at September 30, 2012, from 653,300 at September 30, 2011.

• Excluding memberships acquired in connection with the Lifestyle Family Fitness transaction, memberships grew 3.0%.

• Attrition in 3Q 2012 was 10.3% compared to 9.0% in the prior-year period. Excluding the Lifestyle Family Fitness transaction, 3Q 2012 attrition was 9.8%.
• Attrition for the trailing 12-month period ended September 30, 2012, was 37.3% compared to trailing 12-month attrition of 35.3% at September 30, 2011. Excluding the impact of the Lifestyle Family Fitness transaction, trailing 12-month attrition was 36.3% .

Total operating expenses during 3Q 2012 were $235.5 million compared to $215.5 million for 3Q 2011. Total operating expenses for the first nine months of 2012 were $687.3 million compared to $626.4 million in 2011.

• Income from operations margin was 20.1% for 3Q 2012 compared to 18.8% in the prior-year period.
• Income from operations margin for the first nine months of 2012 was 19.3% compared to 17.9% in the prior year period.

(Expense as a percent of total revenue)			3Q 2012 vs. 3Q 2011			YTD 2012 vs. YTD 2011
Center operations			57.5% vs. 60.0%			58.4% vs. 61.0%
Advertising and marketing			3.0% vs. 3.4%			3.4% vs. 3.5%
General and administrative			4.6% vs. 4.7%			4.8% vs. 4.8%
Other operating			4.8% vs. 3.5%			4.1% vs. 3.1%
Depreciation and amortization			10.0% vs. 9.6%			10.0% vs. 9.7%

Net income for 3Q 2012 was $32.1 million, or $0.77 per diluted share, compared to net income of $27.0 million, or $0.66 per diluted share, for 3Q 2011. Net income for the first nine months of 2012 was $88.1 million, or $2.10 per diluted share, compared to net income of $72.8 million, or $1.78 per diluted share, for the prior-year period.

EBITDA for 3Q 2012 was $89.2 million compared with $75.6 million in 3Q 2011. For the first nine months of 2012, EBITDA was $250.7 million compared with $211.0 million in the prior-year period.

• As a percentage of total revenue, EBITDA in 3Q 2012 was 30.2% compared to 28.5% in 3Q 2011.
• For the first nine months of 2012, EBITDA, as a percentage of total revenue, was 29.4% compared to 27.7% in the prior-year period.

Cash flows from operating activities for the first nine months of 2012 totaled $202.7 million compared with $177.3 million in the prior-year period.

Weighted average fully diluted shares for 3Q 2012 totaled 41.9 million compared to 40.9 million in 3Q 2011. For the first nine months of 2012, weighted average fully diluted shares totaled 41.9 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 $1.127-1.137 billion (from $1.122-1.137 billion), driven primarily by price and mix optimization, square footage expansion, and growth in in-center and ancillary business revenue.
• Net income is expected to be up 24-25%, or $114.5-116.0 million (from $113.0-116.0 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 $2.73-2.76 (from $2.70-2.76), which includes $0.04 impact of anticipated performance share-based compensation expense.

As announced on October 11, 2012, the Company will hold a conference call today at 10:00 a.m. ET to discuss its third 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 2:00 p.m. ET.

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