CHANHASSEN, MN -- Life Time Fitness, Chanhassen, MN, had membership growth of 13.6 percent in 2008 compared to 2007, according to preliminary financial results announced today for the fourth quarter and full year ended Dec. 31, 2008. The company also announced preliminary expectations for 2009.
“We were very pleased with this achievement, especially given the current difficult economic environment,” Life Time Executive Vice President and CFO Mike Robinson said in today’s conference call. He added that Life Time’s attrition rate rose in the fourth quarter to just over 42 percent for the year.
The membership growth is expected to drive Life Time’s revenue of approximately $192 million to $194 million for fourth quarter 2008, and approximately $768 million to $770 million for the year 2008. In October, Life Time projected its revenue for the year would be between $775 million and $780 million.
Life Time’s preliminary revenue guidance for 2009 is between $830 million and $860 million. The guidance assumes revenue growth from ramping centers, as well as new centers the company expects to open in 2009. The guidance also assumes Life Time’s attrition rates and membership rates remain at about the same levels as in late 2008.
Life Time opened a center in Berkeley Heights, NJ, on Tuesday and plans to open its Atascocita (Houston), TX, center tonight. The company has seven centers in various stages of construction that it plans to open over the next two years. Life Time expects to spend $150 million to $200 million in capital expenditures in 2009.
Previously, the company announced delays in the construction of clubs in Colorado Springs, CO, and in the Memphis, TN, suburb of Collierville, TN. The publicly traded company had pared down its expansion plans for 2009 from 11 clubs to six because of tight credit markets and a slowing economy. As a result of slowing its expansion efforts and various efficiency initiatives, Life Time laid off about 100 employees late last year.
“Our plan is to closely monitor costs and cash flow and modify the construction schedules accordingly, if needed, to ensure we have adequate liquidity,” Robinson said. “We can slow down further or add new sites to our opening mix depending on our cash flow generation and the credit environment.”
Robinson added that Life Time had some success raising capital in fourth quarter 2008 through a small equipment leasing line and a small mortgage on a Minnesota center.
Life Time had an increase in more individual memberships compared to couple and family memberships, and saw an impact from new lower-priced dues programs. A “young professionals” membership plan, in which individuals 26 years old and under qualify for up to $20 in lower monthly dues, received the highest acceptance of any of the special plans offered, Robinson said. In the fourth quarter, employees also could refer one friend or family member to join at a reduced enrollment fee and a $20 reduction in monthly dues per member.
This past January, Life Time saw a net membership increase of approximately 20,000 memberships compared to the net 10,000 memberships added in January 2008. The company was ahead of its internal plan on new membership acquisition in January 2009, and attrition was stable compared to the last part of 2008, Robinson said.
“While lower average dues per incremental membership and the resulting lower profitability per incremental membership present some challenges, we fully believe the best long-term strategy is to attract new members to Life Time Fitness,” Robinson said. “It is in the best interest of our business to maintain existing membership levels and to ramp new memberships. We expect dues growth and in-center businesses to rebound as the economy improves.”
Robinson did not take questions in today’s conference call. Life Time will announce its official fourth quarter 2008 and year-end 2008 results in a conference call on Feb. 19, at which time Life Time executives will answer questions from analysts.
Around noon EST today, Life Time’s stock price was $12.47 on the New York Stock Exchange.