Life Time Fitness Announces Second Quarter 2013 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, 2013.

Second quarter 2013 revenue grew 6.9% to $308.1 million from $288.3 million during the same period last year. Total revenue for the first six months of 2013 grew 7.6% to $598.9 million from $556.8 million during the same period last year.

Net income for the quarter was $33.2 million, or $0.80 per diluted share, compared to net income of $30.3 million, or $0.73 per diluted share, for 2Q 2012. Net income for the first six months of 2013 was $61.3 million, or $1.47 per diluted share, compared to net income of $56.0 million, or $1.34 per diluted share for the prior-year period.

“Our unrelenting focus on the member experience continues to differentiate the high quality of our centers and programs, and emphasizes our strong business model,” said Bahram Akradi, chairman, president and chief executive officer. “As our company has evolved so has the precision with which we operate our centers and serve our members. This has allowed us to deliver strong business results and created a solid platform for future growth through new center expansion and our portfolio of healthy way of life programs and services delivered both inside and outside of our destinations.”

During the quarter, the Company opened its first center in Alabama, located in Vestavia Hills (Birmingham market). Two additional centers are planned for opening in 2013, including Reston, Virginia (Washington D.C. market), in September, and Montvale, New Jersey (Greater New York area market), in November. These represent the Company’s fourth and third centers in Virginia and New Jersey, respectively. In 2014, plans call for six new center openings, led by locations in Harrison, New York (Greater New York area market) and Laguna Niguel, California (Orange County market) during the first quarter.

Three and Six Months Ended June 30, 2013, Financial Highlights:

Total revenue for the second quarter grew 6.9% to $308.1 million from $288.3 million in 2Q 2012. Total revenue for the first six months of 2013 grew 7.6% to $598.9 million from $556.8 million during the prior-year period.
(Period-over-period growth)  

2Q 2013 vs. 2Q 2012

(in millions except revenue per membership data)
  • Membership dues
$194.8 vs. $184.9 (up 5.4%)
  • In-center revenue
$97.3 vs. $90.1 (up 7.9%)
  • Other revenue
$12.4 vs. $9.4 (up 32.9%)
 
  • Average center revenue per Access membership
$416 vs. $396 (up 5.2%)
  • Average in-center revenue per Access membership
$139 vs. $129 (up 7.2%)
  • Same-center revenue (open 13 months or longer)
Up 4.8%
  • Same-center revenue (open 37 months or longer)
Up 3.8%
(Period-over-period growth)   YTD 2013 vs. YTD 2012

(in millions except revenue per membership data)
  • Membership dues
$381.2 vs. $360.4 (up 5.8%)
  • In-center revenue
$189.2 vs. $174.7 (up 8.3%)
  • Other revenue
$21.5 vs. $13.8 (up 55.8%)
 
  • Average center revenue per Access membership
$821 vs. $778 (up 5.5%)
  • Average in-center revenue per Access membership
$272 vs. $253 (up 7.6%)
  • Same-center revenue (open 13 months or longer)
Up 4.2%
  • Same-center revenue (open 37 months or longer)
Up 3.4%

Total memberships grew 1.2% to 812,866 at June 30, 2013, from 802,889 at June 30, 2012.
  • Access memberships grew 0.6% to 713,138 at June 30, 2013, from 708,585 at June 30, 2012.
  • Non-Access memberships grew 5.8% to 99,728 at June 30, 2013, from 94,304 at June 30, 2012.
  • Attrition in 2Q 2013 was 8.2% compared to 7.6% in the prior-year period. Attrition for the trailing 12-month period ended June 30, 2013, was 34.5% compared to trailing 12-month attrition of 31.9% at June 30, 2012. The second quarter year-over-year attrition increase was driven primarily by Non-Access membership terminations. The trailing 12-month attrition increase was driven primarily by Non-Access membership terminations and the Lifestyle Family Fitness acquisition.

Total operating expenses during 2Q 2013 were $247.4 million compared to $231.7 million for 2Q 2012. Total operating expenses for the first six months of 2013 were $485.8 million compared to $451.8 million in 2012.
  • Income from operations margin was 19.8% for 2Q 2013, up from 19.6% for 2Q 2012.
  • Income from operations margin was 18.9% for the first six months of 2013 compared to 18.8% for 2012.
           
(Expense as a percent of total revenue) 2Q 2013   vs.   2Q 2012 YTD 2013   vs.   YTD 2012
Center operations 57.4% vs. 57.8% 57.9% vs. 58.8%
Advertising and marketing 3.1% vs. 3.4% 3.4% vs. 3.6%
General and administrative 5.1% vs. 4.8% 5.2% vs. 4.9%
Other operating 4.9% vs. 4.4% 4.7% vs. 3.8%
Depreciation and amortization 9.7% vs. 10.0% 9.9% vs. 10.1%

Net income for 2Q 2013 was $33.2 million, or $0.80 per diluted share, compared to net income of $30.3 million, or $0.73 per diluted share, for 2Q 2012. Net income for the first six months of 2013 was $61.3 million, or $1.47 per diluted share, compared to net income of $56.0 million, or $1.34 per diluted share, for the prior-year period.

EBITDA for 2Q 2013 was $91.1 million compared to $85.8 million in 2Q 2012. For the first six months of 2013, EBITDA was $173.1 million compared with $161.5 million in the prior-year period.
  • As a percentage of total revenue, EBITDA in 2Q 2013 was 29.6% in 2Q 2013 and 29.8% in 2Q 2012.
  • For the first six months of 2013, EBITDA, as a percentage of total revenue, was 28.9% compared to 29.0% in the prior-year period.

Cash flows from operating activities for the first six months of 2013 totaled $124.5 million compared to $142.2 million in the prior-year period. This reduction is driven primarily by the timing of income and real estate tax payments, and lower growth in operating liabilities this year.

Weighted average fully diluted shares for 2Q 2013 totaled 41.7 million compared to 41.8 million in 2Q 2012. For the first six months of 2013, weighted average fully diluted shares totaled 41.6 million compared to 41.8 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 7-8%, or $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 8.5-11%, or $121.0-124.0 million, driven by revenue growth and cost efficiencies.
  • Diluted earnings per common share is expected to be $2.89-2.95 (updated from $2.87-2.95).

As announced on July 18, 2013, the Company will hold a conference call today at 10:00 a.m. ET to discuss its second quarter 2013 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.

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 July 25, 2013, the Company operated 106 centers under the LIFE TIME FITNESS® and LIFE TIME ATHLETIC® 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)
   
June 30, December 31,
2013 2012

ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 13,126 $ 16,499
Accounts receivable, net 8,151 9,272
Center operating supplies and inventories 30,195 27,240
Prepaid expenses and other current assets 28,881 26,826
Deferred membership origination costs 11,438 11,664
Deferred income taxes 2,912 8,813
Income tax receivable   1,813     -  
Total current assets 96,516 100,314
PROPERTY AND EQUIPMENT, net 1,952,894 1,858,666
RESTRICTED CASH 447 2,087
DEFERRED MEMBERSHIP ORIGINATION COSTS 6,740 6,820
GOODWILL 40,198 37,176
OTHER ASSETS   66,134     67,111  
TOTAL ASSETS $ 2,162,929   $ 2,072,174  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 12,288 $ 12,603
Accounts payable 24,243 32,140
Construction accounts payable 40,163 25,208
Accrued expenses 64,191 63,333
Deferred revenue   42,555     34,753  
Total current liabilities 183,440 168,037
LONG-TERM DEBT, net of current portion 723,133 691,867
DEFERRED RENT LIABILITY 23,810 22,490
DEFERRED INCOME TAXES 91,204 95,509
DEFERRED REVENUE 6,783 6,840
OTHER LIABILITIES   20,830     14,514  
Total liabilities   1,049,200     999,257  
SHAREHOLDERS' EQUITY:
Common stock 858 864
Additional paid-in capital 427,761 447,912
Retained earnings 690,230 628,942
Accumulated other comprehensive loss   (5,120 )   (4,801 )
Total equity   1,113,729     1,072,917  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,162,929   $ 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 Six Months Ended
June 30, June 30,
  2013     2012     2013     2012  
REVENUE:
Membership dues $ 194,816 $ 184,895 $ 381,190 $ 360,365
Enrollment fees 3,573 3,929 6,969 7,883
In-center revenue   97,275     90,118     189,246     174,734  
Total center revenue 295,664 278,942 577,405 542,982
Other revenue   12,444     9,362     21,450     13,769  
Total revenue   308,108     288,304     598,855     556,751  
OPERATING EXPENSES:
Center operations 176,798 166,554 346,760 327,269
Advertising and marketing 9,629 9,689 20,588 20,045
General and administrative 15,713 13,856 31,069 27,559
Other operating 15,225 12,761 28,059 21,152
Depreciation and amortization   30,017     28,861     59,279     55,821  
Total operating expenses   247,382     231,721     485,755     451,846  
Income from operations   60,726     56,583     113,100     104,905  
OTHER INCOME (EXPENSE):
Interest expense, net (6,434 ) (6,545 ) (12,563 ) (12,822 )
Equity in earnings of affiliate   378     395     724     768  
Total other income (expense)   (6,056 )   (6,150 )   (11,839 )   (12,054 )
INCOME BEFORE INCOME TAXES 54,670 50,433 101,261 92,851
PROVISION FOR INCOME TAXES   21,483     20,141     39,973     36,887  
NET INCOME $ 33,187   $ 30,292   $ 61,288   $ 55,964  
 
BASIC EARNINGS PER COMMON SHARE $ 0.80   $ 0.73   $ 1.48   $ 1.35  
DILUTED EARNINGS PER COMMON SHARE $ 0.80   $ 0.73   $ 1.47   $ 1.34  

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC
  41,456     41,462     41,376     41,313  

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED
  41,659     41,750     41,644     41,777  
 
 
LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the Six Months Ended
June 30,
  2013       2012  
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 61,288 $ 55,964

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 59,279 55,821
Deferred income taxes 671 (1,073 )
(Gain) loss on disposal of property and equipment, net (216 ) 579
Amortization of deferred financing costs 1,100 1,006
Share-based compensation 6,286 7,312
Excess tax benefit related to share-based compensation (4,564 ) (8,365 )
Changes in operating assets and liabilities 1,726 31,450
Other   (1,116 )   (504 )
Net cash provided by operating activities   124,454     142,190  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (137,433 ) (106,102 )
Acquisitions, net of cash acquired (437 ) (26,415 )
Proceeds from sale of property and equipment 763 362
Proceeds from property insurance settlements 175 790
Increase in other assets (736 ) (250 )
Decrease in restricted cash   1,640     651  
Net cash used in investing activities   (136,028 )   (130,964 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 75,000 -
Repayments of long-term borrowings (28,272 ) (3,521 )
Repayments of revolving credit facility, net (13,500 ) (10,000 )
Increase in deferred financing costs (976 ) (256 )
Excess tax benefit related to share-based compensation 4,564 8,365
Proceeds from stock option exercises 1,108 1,982
Proceeds from employee stock purchase plan 607 590
Stock purchased for employee stock purchase plan (569 ) (649 )
Repurchases of common stock   (28,157 )   -  
Net cash provided by (used in) financing activities   9,805     (3,489 )
 
Effect of exchange rates on cash and cash equivalents   (1,604 )   275  
 
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (3,373 ) 8,012
CASH AND CASH EQUIVALENTS - Beginning of period   16,499     7,487  
CASH AND CASH EQUIVALENTS - End of period $ 13,126   $ 15,499  
 

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 Six Months Ended
June 30, June 30,
2013 2012 2013 2012
Net income $ 33,187 $ 30,292 $ 61,288 $ 55,964
Interest expense, net 6,434 6,545 12,563 12,822
Provision for income taxes 21,483 20,141 39,973 36,887

Depreciation and amortization
  30,017   28,861   59,279   55,821
EBITDA $ 91,121 $ 85,839 $ 173,103 $ 161,494
 

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 Six Months Ended
June 30, June 30,

  2013  
2012   2013   2012  
Net cash provided by operating activities $

48,223
$ 68,287 $ 124,454 $ 142,190
Less: Purchases of property and equipment  

(78,288

)
  (67,625 )   (137,433 )   (106,102 )
Free cash flow $

(30,065

)
$ 662   $ (12,979 ) $ 36,088  

Copyright Business Wire 2010

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