Life Time Fitness, Chanhassen, MN, reported first quarter 2015 revenue of $331.1 million, a 6.1 percent increase from $311.9 million in first quarter 2014, according to the 10-Q report the company filed today with the Securities and Exchange Commission.
This filing may be the last financial report made public by the company, which has entered into an agreement to be purchased by affiliates of Leonard Green & Partners and TPG plus investors that include LNK Partners and Life Time Chairman, President and CEO Bahram Akradi. The sale and plan to go private is dependent upon approval by shareholders, but the company noted that it expects the sale to close by the end of the second quarter.
Akradi and the company's CFO typically hold a call with analysts to discuss quarterly results, but a company spokesperson says no call will be held this quarter and no official press release will be issued.
Net income for the quarter dropped to $24.6 million compared to $28.1 million in first quarter 2014.
Total center revenue increased 6.4 percent to $317.3 million for the quarter compared to $298.3 million during the same period in 2014. Of the $19 million increase in total center revenue, 58.1 percent was from membership dues, which increased 5.6 percent to $207.8 million. The company attributed the increase mostly to higher average dues. The access dues increased to $154 per month from $144 in first quarter 2014. The number of access memberships increased to 711,181 compared to 702,011 at the end of first quarter 2014.
The next largest portion of the total center revenue increase came from in-center revenue at 43 percent. In-center revenue, which grew 8.3 percent, included a $4.3 million increase in personal training revenue to $53.2 million, a $1.5 million increase in café sales and a $1.1 million increase in tennis revenue.
Member attrition was 7.3 percent compared to 8.2 percent in first quarter 2014. The company attributed the decrease to increased member retention efforts.
The 10-Q filing noted three putative class action lawsuits that have been filed challenging the proposed merger.
The first class action suit, filed March 30, is St. Clair County Employees’ Retirement System v. Life Time Fitness, Inc., et al. The second was filed on April 8 as Bell v. Akradi, et al. The third class action suit was filed on April 10 as Lusk v. Life Time Fitness, Inc., et al. The first two suits allege, among other charges, that the board breached its fiduciary duties. The third suit alleges that the preliminary proxy is false and materially misleading because the company failed to disclose material information about the background of the merger as well as financial information that would help shareholders make a decision about the merger.
Life Time said each action is without merit, stating: "Life Time and the Board intend to vigorously defend the Actions, denying any and all violations of state or federal law alleged therein."
The company shares in its 10-Q that it had planned to open six centers this year, five of which will be Life Time Athletic Centers and three of which are in markets with existing Life Time facilities. One of the new clubs opened in the first quarter.
New clubs are being centered in locations with "higher demographic profiles" that the company says will generate higher average dues and higher in-center revenue per membership and per square foot.
Life Time said that it anticipates its overall membership growth rate to be less in the future but its average dues and in-center revenue per membership to be higher because it will open more Life Time Athletic centers.