Life Time Fitness' CEO Discusses Q4 2011 Results - Earnings Call Transcript

Life Time Fitness (LTM)

Q4 2011 Earnings Call

February 16, 2012 10:00 am ET

Executives

John Heller -

Bahram Akradi - Founder, Chairman, Chief Executive Officer and President

Michael R. Robinson - Chief Financial Officer and Executive Vice President

Kenneth E. Cooper - Vice President of Finance

Analysts

Paul Swinand - Morningstar Inc., Research Division

Sean P. Naughton - Piper Jaffray Companies, Research Division

Brent R. Rystrom - Feltl and Company, Inc., Research Division

Gregory J. McKinley - Dougherty & Company LLC, Research Division

Sharon Zackfia - William Blair & Company L.L.C., Research Division

Unknown Analyst

Michael Lasser - UBS Investment Bank, Research Division

Presentation

Operator

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Good day, ladies and gentlemen, and welcome to the Fourth Quarter and Final Year 2011 Life Time Fitness Inc. Earnings Conference Call. My name is Fab and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. John Heller, Senior Director of Investor Relations and Treasurer. Please proceed.

John Heller

Thanks Fab. Good morning, and thank you for joining us on today's conference call to discuss the fourth quarter 2011 and full year 2011 financial results for Life Time Fitness. We issued our press release this morning. If you did not obtain a copy, you may access it at our website, which is lifetimefitness.com. Concurrent with the issuance of our fourth quarter results, we have filed the Form 8-K with the SEC, which also includes the press release.

On today's call, Bahram Akradi, our Chairman, President and CEO, will discuss key highlights from our fourth quarter and our operations. Following that, Mike Robinson, our CFO, will review our financial highlights and provide financial guidance for 2012. Once we have completed our prepared remarks, we will answer your question until 11:00 a.m. Eastern time. At that point in the call, Fab will provide instructions on how to ask a question. In order to give as many as possible a chance to ask a question, please limit yourself to only one question. I will close with a tentative date of our first quarter 2012 earnings call. Finally, a replay of this teleconference will be available on our website at approximately 1:00 p.m. Eastern time today.

Today's conference call contains forward-looking statements and future results could differ materially from those statements made. Actual results may be affected by many factors, including the risks and uncertainties identified in our SEC filings. Certain information in our earnings release and information disclosed on this call constitute non-GAAP financial measures including EBITDA, free cash flow and other non-GAAP operating measures. We have included reconciliations of the differences between GAAP and non-GAAP measures in our earnings release and our Form 8-K. Other required information about our non-GAAP data is included in our Form 8-K.

With that, let me now turn the call over to Bahram Akradi. Bahram?

Bahram Akradi

Thanks, John. I'm pleased to be here to share my thoughts and perspective on our 2011 results and our big picture objectives for 2012. Let me begin by reviewing our 4 main areas of focus we set last year for 2011. We set a stretch goal of $1 billion in revenue a major milestone. Through intense focus on executing our business plans we not only achieved but exceeded at that goal delivering more than $1,013,000,000 of revenue. Last year, we stated that we wanted to reestablish a faster growth rate. Our growth drivers of newer square footage, price and mix optimization and continuous improvement of our in-center and ancillary businesses delivered revenue growth of 11% in 2011 versus 9.1% in 2010. We wanted to achieve and maintain an investment grade-like balance sheet and credit profile. Our balance sheet is strong and our leverage ratios are in the range we want. During the year, we retired $70 million of mortgage debt. In June, we increased the amount and extended the term of our revolving credit facility. In December, we acquired 6 additional centers that we previously leased. In the process we assumed low rate mortgage loans from the seller and we substantially reduced our rent expense going forward. Altogether, we are very pleased by accomplishing our goal in this area as well.

Our fourth objective for the year was to position Life Time as a Healthy Way of Life company rather than a gym operator. This is and will remain a work in progress. To accomplish this, we will need to continue to improve and enhance the variety of programs we offer both internally and externally today to a specific interest groups such as weight loss, cycling, running, corporate health, athletic events and so on. I am very pleased with the progress we have made in 2011 and look forward to what we can accomplish in 2012 and beyond.

Turning to financial performance of Life Time in 2011. We saw improvements in many of our key metrics including growth in square footage, membership, revenue, average revenue per membership, cash flow from operations and net income. Attrition for the year was 35%. We are very pleased with this number. It is below our stated goal of keeping attrition lower than 36%. In 2011, our in-center businesses grew revenue nearly 16% over 2010, even better than the 14% they grew last year over 2009. Excluding the impact of non-cash performance share-based compensation expense for the full year, we delivered non-GAAP earnings per share of $2.42, a 16% increase over last year. Non-GAAP net income was $99.1 million, just shy of our stretch goal of $100 million including the impact of non-cash performance share based compensation expense, EPS was $2.26 and net income was $92.6 million. On behalf of our entire team I can say we are very happy with these results.

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