##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File No. 001-32230
 
 Life Time Fitness, Inc.
  Minnesota
    
    41-1689746(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)6442 City West Parkway
    
    55344Eden Prairie, Minnesota
    
    (Zip Code)(Address of principal executive offices)
 952-947-0000
 
 þ o
  þ o o
 o þ




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##### 



TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets as of June 30, 2007 and December 31, 2006 (unaudited)
    
    
    3Consolidated Statements of Operations for the Three and Six Months Ended June 30,
2007 and 2006 (unaudited)
    
    
    4Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and
2006 (unaudited)
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    18Item 4. Controls and Procedures
    
    
    18PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    18Item 1A. Risk Factors
    
    
    18Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18Item 3. Defaults upon Senior Securities
    
    
    18Item 4. Submission of Matters to a Vote of Security Holders
    
    
    19Item 5. Other Information
    
    
    19Item 6. Exhibits
    
    
    20SIGNATURES
    
    
    21Second Amended and Restated Credit AgreementCertification of Principal Executive OfficerCertification of Principal Financial and Accounting OfficerSection 1350 Certifications




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (In thousands, except share and per share data)
 (Unaudited)
 June 30,
    
    
    December 31,2007
    
    
    2006ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    8,263
    
    
    $
    6,880Accounts receivable, net
    
    
    3,283
    
    
    
    2,320Inventories
    
    
    12,649
    
    
    
    8,773Prepaid expenses and other current assets
    
    
    12,251
    
    
    
    9,201Deferred membership origination costs
    
    
    14,746
    
    
    
    12,575Income tax receivable
    
    
    
    
    
    
    97Total current assets
    
    
    51,192
    
    
    
    39,846PROPERTY AND EQUIPMENT, net
    
    
    1,076,132
    
    
    
    902,122RESTRICTED CASH
    
    
    5,749
    
    
    
    4,738DEFERRED MEMBERSHIP ORIGINATION COSTS
    
    
    13,496
    
    
    
    10,875OTHER ASSETS
    
    
    43,427
    
    
    
    30,095TOTAL ASSETS
    
    $
    1,189,996
    
    
    $
    987,676LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Current maturities of long-term debt
    
    $
    10,265
    
    
    $
    15,228Accounts payable
    
    
    14,143
    
    
    
    8,878Construction accounts payable
    
    
    52,171
    
    
    
    49,285Accrued expenses
    
    
    46,348
    
    
    
    37,191Deferred revenue
    
    
    36,319
    
    
    
    29,773Total current liabilities
    
    
    159,246
    
    
    
    140,355LONG-TERM DEBT, net of current portion
    
    
    518,108
    
    
    
    374,327DEFERRED RENT LIABILITY
    
    
    25,606
    
    
    
    25,716DEFERRED INCOME TAXES
    
    
    32,213
    
    
    
    38,584DEFERRED REVENUE
    
    
    17,836
    
    
    
    15,917OTHER LIABILITIES
    
    
    536
    
    
    
    264Total liabilities
    
    
    753,545
    
    
    
    595,163COMMITMENTS AND CONTINGENCIES (Note 7)SHAREHOLDERS EQUITY:Undesignated preferred stock, 10,000,000
shares authorized; none issued or
outstanding
    
    
    
    
    
    
    Common stock, $.02 par value, 50,000,000
shares authorized; 37,300,484 and
36,817,199 shares issued and outstanding,
respectively
    
    
    747
    
    
    
    737Additional paid-in capital
    
    
    273,214
    
    
    
    259,905Retained earnings
    
    
    162,490
    
    
    
    131,871Total shareholders equity
    
    
    436,451
    
    
    
    392,513TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    1,189,996
    
    
    $
    987,676
  3




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share data)
 (Unaudited)
 For the Three
    
    
    For the SixMonths Ended
    
    
    Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006REVENUE:Membership dues
    
    $
    106,667
    
    
    $
    80,550
    
    
    $
    207,195
    
    
    $
    156,349Enrollment fees
    
    
    6,378
    
    
    
    5,561
    
    
    
    12,064
    
    
    
    10,644In-center revenue
    
    
    45,891
    
    
    
    33,787
    
    
    
    89,788
    
    
    
    66,121Total center revenue
    
    
    158,936
    
    
    
    119,898
    
    
    
    309,047
    
    
    
    233,114Other revenue
    
    
    3,201
    
    
    
    2,557
    
    
    
    6,191
    
    
    
    4,766Total revenue
    
    
    162,137
    
    
    
    122,455
    
    
    
    315,238
    
    
    
    237,880OPERATING EXPENSES:Center operations
    
    
    94,035
    
    
    
    68,540
    
    
    
    183,527
    
    
    
    133,633Advertising and marketing
    
    
    5,439
    
    
    
    4,732
    
    
    
    12,808
    
    
    
    10,571General and administrative
    
    
    10,693
    
    
    
    10,861
    
    
    
    21,181
    
    
    
    19,676Other operating
    
    
    3,792
    
    
    
    2,646
    
    
    
    7,116
    
    
    
    5,633Depreciation and amortization
    
    
    14,678
    
    
    
    12,146
    
    
    
    28,365
    
    
    
    23,665Total operating expenses
    
    
    128,637
    
    
    
    98,925
    
    
    
    252,997
    
    
    
    193,178Income from operations
    
    
    33,500
    
    
    
    23,530
    
    
    
    62,241
    
    
    
    44,702OTHER INCOME (EXPENSE):Interest expense, net of
interest income of $111, $80,
$155 and $149, respectively
    
    
    (6,369
    )
    
    
    (4,140
    )
    
    
    (11,897
    )
    
    
    (8,257
    )Equity in earnings of affiliate
    
    
    285
    
    
    
    251
    
    
    
    601
    
    
    
    494Total other income (expense)
    
    
    (6,084
    )
    
    
    (3,889
    )
    
    
    (11,296
    )
    
    
    (7,763
    )INCOME BEFORE INCOME TAXES
    
    
    27,416
    
    
    
    19,641
    
    
    
    50,945
    
    
    
    36,939PROVISION FOR INCOME TAXES
    
    
    10,931
    
    
    
    7,256
    
    
    
    20,326
    
    
    
    14,121NET INCOME
    
    $
    16,485
    
    
    $
    12,385
    
    
    $
    30,619
    
    
    $
    22,818BASIC EARNINGS PER COMMON SHARE
    
    $
    0.45
    
    
    $
    0.34
    
    
    $
    0.83
    
    
    $
    0.64DILUTED EARNINGS PER COMMON SHARE
    
    $
    0.44
    
    
    $
    0.33
    
    
    $
    0.82
    
    
    $
    0.62WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
BASIC
    
    
    36,864
    
    
    
    36,143
    
    
    
    36,747
    
    
    
    35,915WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
DILUTED
    
    
    37,498
    
    
    
    37,033
    
    
    
    37,359
    
    
    
    36,888
  4




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 For the Six Months EndedJune 30,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    30,619
    
    
    $
    22,818Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    28,365
    
    
    
    23,665Deferred income taxes
    
    
    2,474
    
    
    
    515Loss on disposal of property and equipment, net
    
    
    164
    
    
    
    120Amortization of deferred financing costs
    
    
    405
    
    
    
    331Share-based compensation
    
    
    3,816
    
    
    
    4,926Excess tax benefit from stock option exercises
    
    
    (3,838
    )
    
    
    (5,228
    )Change in investment in unconsolidated subsidiary
    
    
    (601
    )
    
    
    (498
    )Changes in operating assets and liabilities
    
    
    4,692
    
    
    
    13,706Other
    
    
    81
    
    
    
    128Net cash provided by operating activities
    
    
    66,177
    
    
    
    60,483CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (200,446
    )
    
    
    (110,432
    )Proceeds from sale of property and equipment
    
    
    48
    
    
    
    6,566Proceeds from property insurance settlement
    
    
    48
    
    
    
    Increase in other assets
    
    
    (9,555
    )
    
    
    (345
    )Decrease (increase) in restricted cash
    
    
    (1,011
    )
    
    
    96Net cash used in investing activities
    
    
    (210,916
    )
    
    
    (104,115
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from long-term borrowings
    
    
    105,000
    
    
    
    1,650Repayments on long-term borrowings
    
    
    (6,147
    )
    
    
    (12,654
    )Proceeds from revolving credit facility, net
    
    
    40,000
    
    
    
    36,800Increase in deferred financing costs
    
    
    (1,896
    )
    
    
    (651
    )Excess tax benefit from stock option exercises
    
    
    3,838
    
    
    
    5,228Proceeds from exercise of stock options
    
    
    5,327
    
    
    
    8,579Net cash provided by financing activities
    
    
    146,122
    
    
    
    38,952INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    1,383
    
    
    
    (4,680
    )CASH AND CASH EQUIVALENTS  Beginning of period
    
    
    6,880
    
    
    
    4,680CASH AND CASH EQUIVALENTS  End of period
    
    $
    8,263
    
    
    $
    SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash payments for interest, including capitalized interest of
$3,773 and $1,962, respectively
    
    $
    15,114
    
    
    $
    7,766Cash payments for income taxes
    
    $
    16,924
    
    
    $
    7,079SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:Purchases of property and equipment in accounts payable
    
    $
    3,671
    
    
    $
    2,054
  5




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. Basis of Presentation
   2. Share-Based Compensation
    Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Share-based compensation expense related to
stock options
    
    $
    771
    
    
    $
    3,329
    
    
    $
    1,701
    
    
    $
    4,224Share-based compensation expense related to
restricted shares
    
    
    1,195
    
    
    
    386
    
    
    
    2,054
    
    
    
    702Share-based compensation expense related to ESPP
    
    
    32
    
    
    
    
    
    
    
    61
    
    
    
    Total share-based compensation expense
    
    $
    1,998
    
    
    $
    3,715
    
    
    $
    3,816
    
    
    $
    4,926
 6




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WeightedAverageWeighted
    
    
    Remaining
    
    
    AggregateAverage
    
    
    Contractual
    
    
    IntrinsicExercise
    
    
    Term (in
    
    
    Value (inOptions
    
    Shares
    
    
    Price
    
    
    years)
    
    
    thousands)Outstanding on December 31, 2006
    
    
    1,724,599
    
    
    $
    20.15Granted
    
    
    2,477
    
    
    
    50.85Exercised
    
    
    (339,151
    )
    
    
    15.71Canceled
    
    
    (6,900
    )
    
    
    24.46Outstanding at June 30, 2007
    
    
    1,381,025
    
    
    $
    21.28
    
    
    
    7.0
    
    
    $
    44,125Vested or Expected to Vest at June 30, 2007
    
    
    1,321,904
    
    
    $
    21.13
    
    
    
    7.0
    
    
    $
    42,434Exercisable at June 30, 2007
    
    
    731,346
    
    
    $
    18.30
    
    
    
    6.6
    
    
    $
    25,544
   Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,Weighted Average Valuation Assumptions(1)
    
    2007
    
    2006
    
    2007
    
    2006Risk-free interest rate (2)
    
    
    
    
    
    
    5.0
    %
    
    
    4.7
    %
    
    
    5.0
    %Expected dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expected stock price volatility (3)
    
    
    
    
    
    
    36.0
    %
    
    
    36.9
    %
    
    
    36.0
    %Expected life of stock options (in years) (3)
    
    
    
    
    
    
    5.0
    
    
    
    5.0
    
    
    
    5.0
 
 (1)
    
    Forfeitures are estimated based on historical experience and projected employee
turnover.(2)
    
    Based on the five-year Treasury constant maturity interest rate with the term
that is consistent with the expected life of our stock options.(3)
    
    We estimate the expected life and volatility of stock options based on an
average of the expected lives and volatilities assumptions reported by a peer group of
publicly traded companies.  7




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Restricted
    
    Range of MarketShares
    
    Price Per ShareOutstanding
    
    on Grant DateBalance  December 31, 2006
    
    
    210,894
    
    
    $
    24.75-50.82Granted
    
    
    145,876
    
    
    
    49.06-53.70Canceled
    
    
    (1,740
    )
    
    
    46.51Vested
    
    
    (37,382
    )
    
    
    26.23-47.40Balance  June 30, 2007
    
    
    317,648
    
    
    $
    24.75-53.70
    3. Earnings per Share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net income
    
    $
    16,485
    
    
    $
    12,385
    
    
    $
    30,619
    
    
    $
    22,818Weighted average number of
common shares outstanding 
basic
    
    
    36,864
    
    
    
    36,143
    
    
    
    36,747
    
    
    
    35,915Effect of dilutive stock options
and restricted stock awards
    
    
    634
    
    
    
    890
    
    
    
    612
    
    
    
    973Weighted average number of
common shares outstanding 
diluted
    
    
    37,498
    
    
    
    37,033
    
    
    
    37,359
    
    
    
    36,888Basic earnings per common share
    
    $
    0.45
    
    
    $
    0.34
    
    
    $
    0.83
    
    
    $
    0.64Diluted earnings per common share
    
    $
    0.44
    
    
    $
    0.33
    
    
    $
    0.82
    
    
    $
    0.62
 8




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4. Operating Segments
   Centers
    
    
    All Other
    
    
    ConsolidatedThree months ended June 30, 2007:Revenue
    
    $
    158,936
    
    
    $
    3,201
    
    
    $
    162,137Net income (loss)
    
    $
    18,404
    
    
    $
    (1,919
    )
    
    $
    16,485Provision (benefit) for income taxes
    
    
    12,210
    
    
    
    (1,279
    )
    
    
    10,931Interest expense, net
    
    
    4,600
    
    
    
    1,769
    
    
    
    6,369Depreciation and amortization
    
    
    13,108
    
    
    
    1,570
    
    
    
    14,678EBITDA
    
    $
    48,322
    
    
    $
    141
    
    
    $
    48,463Total assets
    
    $
    1,057,223
    
    
    $
    132,773
    
    
    $
    1,189,996Three months ended June 30, 2006:Revenue
    
    $
    119,898
    
    
    $
    2,557
    
    
    $
    122,455Net income (loss)
    
    $
    13,872
    
    
    $
    (1,487
    )
    
    $
    12,385Provision (benefit) for income taxes
    
    
    8,247
    
    
    
    (991
    )
    
    
    7,256Interest expense, net
    
    
    3,156
    
    
    
    984
    
    
    
    4,140Depreciation and amortization
    
    
    10,643
    
    
    
    1,503
    
    
    
    12,146EBITDA
    
    $
    35,918
    
    
    $
    9
    
    
    $
    35,927Total assets
    
    $
    713,170
    
    
    $
    91,343
    
    
    $
    804,513Six months ended June 30, 2007:Revenue
    
    $
    309,047
    
    
    $
    6,191
    
    
    $
    315,238Net income (loss)
    
    $
    34,180
    
    
    $
    (3,561
    )
    
    $
    30,619Provision (benefit) for income taxes
    
    
    22,700
    
    
    
    (2,374
    )
    
    
    20,326Interest expense, net
    
    
    8,792
    
    
    
    3,105
    
    
    
    11,897Depreciation and amortization
    
    
    25,120
    
    
    
    3,245
    
    
    
    28,365EBITDA
    
    $
    90,792
    
    
    $
    415
    
    
    $
    91,207Total assets
    
    $
    1,057,223
    
    
    $
    132,773
    
    
    $
    1,189,996Six months ended June 30, 2006:Revenue
    
    $
    233,114
    
    
    $
    4,766
    
    
    $
    237,880Net income (loss)
    
    $
    25,669
    
    
    $
    (2,851
    )
    
    $
    22,818Provision (benefit) for income taxes
    
    
    16,022
    
    
    
    (1,901
    )
    
    
    14,121Interest expense, net
    
    
    6,533
    
    
    
    1,724
    
    
    
    8,257Depreciation and amortization
    
    
    20,663
    
    
    
    3,002
    
    
    
    23,665EBITDA
    
    $
    68,887
    
    
    $
    (26
    )
    
    $
    68,861Total assets
    
    $
    713,170
    
    
    $
    91,343
    
    
    $
    804,513
 9




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5. Income Taxes
      6. Supplementary Cash Flow Information
  For the Six Months EndedJune 30,2007
    
    
    2006Accounts receivable
    
    $
    (963
    )
    
    $
    1,966Income taxes receivable
    
    
    3,935
    
    
    
    6,531Inventories
    
    
    (3,876
    )
    
    
    (723
    )Prepaids and other current assets
    
    
    (3,050
    )
    
    
    (2,714
    )Deferred membership origination costs
    
    
    (4,792
    )
    
    
    (2,440
    )Accounts payable
    
    
    4,499
    
    
    
    (262
    )Accrued expenses
    
    
    312
    
    
    
    3,987Deferred revenue
    
    
    8,465
    
    
    
    7,079Deferred rent
    
    
    (110
    )
    
    
    282Other liabilities
    
    
    272
    
    
    
    $
    4,692
    
    
    $
    13,706
 7. Commitments and Contingencies
 Litigation
 10




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##### Table of Contents



Item 2.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements
   Overview
    11




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Experience Life
   Critical Accounting Policies and Estimates
   12




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Results of Operations
  For the Three
    
    
    For the SixMonths Ended
    
    
    Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006RevenueCenter revenue:Membership dues
    
    
    65.8
    %
    
    
    65.8
    %
    
    
    65.7
    %
    
    
    65.7
    %Enrollment fees
    
    
    3.9
    
    
    
    4.5
    
    
    
    3.8
    
    
    
    4.5In-center revenue
    
    
    28.3
    
    
    
    27.6
    
    
    
    28.5
    
    
    
    27.8Total center revenue
    
    
    98.0
    
    
    
    97.9
    
    
    
    98.0
    
    
    
    98.0Other revenue
    
    
    2.0
    
    
    
    2.1
    
    
    
    2.0
    
    
    
    2.0Total revenue
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Operating expensesCenter operations
    
    
    58.0
    
    
    
    56.0
    
    
    
    58.2
    
    
    
    56.2Advertising and marketing
    
    
    3.4
    
    
    
    3.8
    
    
    
    4.1
    
    
    
    4.4General and administrative
    
    
    6.6
    
    
    
    8.9
    
    
    
    6.7
    
    
    
    8.3Other operating
    
    
    2.3
    
    
    
    2.2
    
    
    
    2.3
    
    
    
    2.4Depreciation and amortization
    
    
    9.0
    
    
    
    9.9
    
    
    
    9.0
    
    
    
    9.9Total operating expenses
    
    
    79.3
    
    
    
    80.8
    
    
    
    80.3
    
    
    
    81.2Income from operations
    
    
    20.7
    
    
    
    19.2
    
    
    
    19.7
    
    
    
    18.8Other income (expense)Interest expense, net
    
    
    (4.0
    )
    
    
    (3.4
    )
    
    
    (3.8
    )
    
    
    (3.5
    )Equity in earnings of affiliate
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.2Total other income (expense)
    
    
    (3.8
    )
    
    
    (3.2
    )
    
    
    (3.6
    )
    
    
    (3.3
    )Income before income taxes
    
    
    16.9
    
    
    
    16.0
    
    
    
    16.1
    
    
    
    15.5Provision for income taxes
    
    
    6.7
    
    
    
    5.9
    
    
    
    6.4
    
    
    
    5.9Net income
    
    
    10.2
    %
    
    
    10.1
    %
    
    
    9.7
    %
    
    
    9.6
    %Other financial and operating data:Average center revenue per membership
    
    $
    338
    
    
    $
    318
    
    
    $
    672
    
    
    $
    632Average in-center revenue per membership
    
    $
    98
    
    
    $
    90
    
    
    $
    195
    
    
    $
    179Centers open at end of period
    
    
    64
    
    
    
    49
    
    
    
    64
    
    
    
    49Number of memberships at end of period
    
    
    489,489
    
    
    
    393,011
    
    
    
    489,489
    
    
    
    393,011
 Three Months Ended June 30, 2007, Compared to Three Months Ended June 30, 2006
 Total revenue.
  
    
    67.1% was from membership dues, which increased $26.1 million, due to increased
memberships at new and existing centers, junior membership programs and increased sales of
Sports, Advantage and other value-added memberships.
    
    28.9% was from in-center revenue, which increased $12.1 million primarily as a
result of our members increased use of our personal training, member activities, LifeCafe
and LifeSpa products and services. As a result of this in-center revenue growth and our
focus on broadening our offerings to our members, average in-center revenue per membership
increased to $98 for the three months ended June 30, 2007, from $90 for the three months
ended June 30, 2006.
 13




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##### Table of Contents




    
    4.0% was from enrollment fees, which are deferred until a center opens and recognized on
a straight-line basis over 36 months. Enrollment fees increased $0.8 million for the three
months ended June 30, 2007 to $6.4 million. Our number of memberships increased 24.5% to
489,489 at June 30, 2007, from 393,011 at June 30, 2006.
  Center operations expenses.
 Advertising and marketing expenses.
 General and administrative expenses.
 Other operating expenses.
 Depreciation and amortization.
 Interest expense, net.
 Provision for income taxes.
 Net income.
 Six Months Ended June 30, 2007, Compared to Six Months Ended June 30, 2006
 Total revenue.
  
    
    67.0% was from membership dues, which increased $50.8 million, due to increased
memberships at new and existing centers, junior membership programs and increased sales of
Sports, Advantage and other value-added memberships.
 14




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##### Table of Contents




    
    29.1% was from in-center revenue, which increased $23.7 million primarily as a
result of our members increased use of our personal training, member activities, LifeCafe
and LifeSpa products and services. As a result of this in-center revenue growth and our
focus on broadening our offerings to our members, average in-center revenue per membership
increased to $195 for the six months ended June 30, 2007, from $179 for the six months
ended June 30, 2006.
    
    3.9% was from enrollment fees, which are deferred until a center opens and
recognized on a straight-line basis over 36 months. Enrollment fees increased $1.4 million
for the six months ended June 30, 2007 to $12.1 million. Our number of memberships
increased 24.5% to 489,489 at June 30, 2007, from 393,011 at June 30, 2006.
  Center operations expenses.
 Advertising and marketing expenses.
 General and administrative expenses.
 Other operating expenses.
 Depreciation and amortization.
 Interest expense, net.
 Provision for income taxes.
 Net income.
 Liquidity and Capital Resources
 Liquidity
  15




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##### Table of Contents



Operating Activities
   Investing Activities
    For the Six Months EndedJune 30,2007
    
    
    2006(In thousands)Capital expenditures for new center land, building and construction
    
    $
    173,135
    
    
    $
    91,588Capital expenditures for updating existing centers and corporate
infrastructure
    
    
    27,311
    
    
    
    18,844Total capital expenditures
    
    $
    200,446
    
    
    $
    110,432
   16




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##### Table of Contents



Financing Activities
        17




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##### Table of Contents



Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 4. CONTROLS AND PROCEDURES
  
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Issuer Purchases of Equity Securities in Second Quarter 2007
 Total Number of
    
    Maximum Number ofTotal Number
    
    Average
    
    Shares Purchased as
    
    Shares that May Yet beof Shares
    
    Price Paid
    
    Part of Publicly
    
    Purchased Under thePeriod
    
    Purchased
    
    per Share
    
    Announced Plan (1)
    
    Plan (1)April 1 - 30, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    489,265May 1 - 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    489,265June 1 - 30, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    489,265Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    489,265
 
 (1)
    
    In June 2006, our Board of Directors authorized the repurchase of 500,000 shares of our
common stock from time to time in the open market or otherwise for the primary purpose of
offsetting the dilutive effect of shares issued pursuant to our Employee Stock Purchase Plan. 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  18




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##### Table of Contents



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   Nominee
    
    For
    
    WithheldBahram Akradi
    
    
    33,826,174
    
    
    
    386,339Giles H. Bateman
    
    
    34,159,342
    
    
    
    53,171James F. Halpin
    
    
    34,159,677
    
    
    
    52,836Guy C. Jackson
    
    
    33,457,419
    
    
    
    755,094John B. Richards
    
    
    34,137,822
    
    
    
    74,691Stephen R. Sefton
    
    
    33,826,417
    
    
    
    386,096Joseph H. Vassalluzzo
    
    
    34,142,784
    
    
    
    69,729
   
 ITEM 5. OTHER INFORMATION
  19




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##### Table of Contents



ITEM 6. EXHIBITS
 Exhibits filed with this report
 ExhibitNo.
    
    Description
    
    Method of Filing3.1
    
    Amended and Restated Articles of
Incorporation of the Registrant
    
    Incorporated by
reference to Exhibit
3.1 to the
Registrants Form
10-Q for the quarter
ended June 30, 2004
(File No. 001-32230)3.2
    
    Amended and Restated Bylaws of the
Registrant
    
    Incorporated by
reference to Exhibit
3.4 to Amendment No.
2 to the Registrants
Registration
Statement on Form S-1
(File No.
333-113764), filed
with the Commission
on May 21, 20044
    
    Specimen of Common Stock Certificate
    
    Incorporated by
reference to Exhibit
4 to Amendment No. 4
to the Registrants
Registration
Statement of Form S-1
(File No.
333-113764), filed
with the Commission
on June 23, 200410.1
    
    Second Amended and Restated Credit
Agreement, dated as of May 31, 2007,
among the Company, U.S. Bank National
Association, as administrative agent
and lead arranger, J.P. Morgan
Securities Inc. and Royal Bank of
Canada, as co-syndication agents, BMO
Capital Markets, as documentation
agent, and the banks party thereto
from time to time
    
    Filed Electronically31.1
    
    Rule 13a-14(a)/15d-14(a)
Certification by Principal Executive
Officer
    
    Filed Electronically31.2
    
    Rule 13a-14(a)/15d-14(a)
Certification by Principal Financial
and Accounting Officer
    
    Filed Electronically32
    
    Section 1350 Certifications
    
    Filed Electronically
 20




---



##### Table of Contents



SIGNATURES
  LIFE TIME FITNESS, INC.By:
    /s/ Bahram AkradiName:
    Bahram AkradiTitle:
    Chairman of the Board of Directors, Presidentand
Chief Executive Officer(Principal Executive Officer and Director)By:
    /s/ Michael R. RobinsonName:
    Michael R. RobinsonTitle:
    Executive Vice President and Chief Financial Officer(Principal Financial Officer)By:
    /s/ John M. HugoName:
    John M. HugoTitle:
    Controller
(Principal Accounting Officer)  21




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##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNo.
    
    Description
    
    Method of Filing3.1
    
    Amended and Restated Articles of
Incorporation of the Registrant
    
    Incorporated by
reference to Exhibit
3.1 to the
Registrants Form
10-Q for the quarter
ended June 30, 2004
(File No. 001-32230)3.2
    
    Amended and Restated Bylaws of the
Registrant
    
    Incorporated by
reference to Exhibit
3.4 to Amendment No.
2 to the Registrants
Registration
Statement on Form S-1
(File No.
333-113764), filed
with the Commission
on May 21, 20044
    
    Specimen of Common Stock Certificate
    
    Incorporated by
reference to Exhibit
4 to Amendment No. 4
to the Registrants
Registration
Statement of Form S-1
(File No.
333-113764), filed
with the Commission
on June 23, 200410.1
    
    Second Amended and Restated Credit
Agreement, dated as of May 31, 2007,
among the Company, U.S. Bank National
Association, as administrative agent
and lead arranger, J.P. Morgan
Securities Inc. and Royal Bank of
Canada, as co-syndication agents, BMO
Capital Markets, as documentation
agent, and the banks party thereto
from time to time
    
    Filed Electronically31.1
    
    Rule 13a-14(a)/15d-14(a)
Certification by Principal Executive
Officer
    
    Filed Electronically31.2
    
    Rule 13a-14(a)/15d-14(a)
Certification by Principal Financial
and Accounting Officer
    
    Filed Electronically32
    
    Section 1350 Certifications
    
    Filed Electronically