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, 2008
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period fromto
 Commission File No. 001-32230
 
 
 Life Time Fitness, Inc.
  Minnesota
(State or other jurisdiction of 
incorporation or organization)2902 Corporate Place 
Chanhassen, Minnesota
(Address of principal executive offices)
    
    41-1689746
(I.R.S. Employer
Identification No.)55317
(Zip Code)
 952-947-0000
 
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



TABLE OF CONTENTS
 PagePART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsConsolidated Balance Sheets as of June 30, 2008 (unaudited) and December 31, 2007
    
    
    3Consolidated Statements of Operations for the Three and Six Months Ended June 30,
2008 and 2007 (unaudited)
    
    
    4Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2008 and
2007 (unaudited)
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    18Item 4.
    
    Controls and Procedures
    
    
    18PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    19Item 1A.
    
    Risk Factors
    
    
    19Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    19Item 3.
    
    Defaults Upon Senior Securities
    
    
    19Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    20Item 5.
    
    Other Information
    
    
    20Item 6.
    
    Exhibits
    
    
    21SIGNATURES
    
    
    
    
    23




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##### 



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)
 June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    3,674
    
    
    $
    5,354Accounts receivable, net
    
    
    3,800
    
    
    
    4,475Inventories
    
    
    14,198
    
    
    
    14,324Prepaid expenses and other current assets
    
    
    18,506
    
    
    
    15,963Deferred membership origination costs
    
    
    18,289
    
    
    
    16,205Deferred income taxes
    
    
    1,352
    
    
    
    1,188Income tax receivable
    
    
    
    
    
    
    5,814Total current assets
    
    
    59,819
    
    
    
    63,323PROPERTY AND EQUIPMENT, net
    
    
    1,494,787
    
    
    
    1,259,271RESTRICTED CASH
    
    
    9,001
    
    
    
    6,767DEFERRED MEMBERSHIP ORIGINATION COSTS
    
    
    15,658
    
    
    
    14,367OTHER ASSETS
    
    
    54,639
    
    
    
    42,805TOTAL ASSETS
    
    $
    1,633,904
    
    
    $
    1,386,533LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Current maturities of long-term debt
    
    $
    9,953
    
    
    $
    9,568Accounts payable
    
    
    14,377
    
    
    
    12,872Construction accounts payable
    
    
    76,665
    
    
    
    59,261Accrued expenses
    
    
    56,814
    
    
    
    47,052Deferred revenue
    
    
    41,190
    
    
    
    34,851Total current liabilities
    
    
    198,999
    
    
    
    163,604LONG-TERM DEBT, net of current portion
    
    
    712,800
    
    
    
    555,037DEFERRED RENT LIABILITY
    
    
    26,429
    
    
    
    25,526DEFERRED INCOME TAXES
    
    
    46,538
    
    
    
    38,607DEFERRED REVENUE
    
    
    17,777
    
    
    
    17,529OTHER LIABILITIES
    
    
    16,076
    
    
    
    13,673Total liabilities
    
    
    1,018,619
    
    
    
    813,976COMMITMENTS AND CONTINGENCIES (Note 6)SHAREHOLDERS EQUITY:Undesignated preferred stock, 10,000,000
shares authorized; none issued or
outstanding
    
    
    
    
    
    
    Common stock, $.02 par value, 50,000,000
shares authorized; 39,604,782 and
39,137,947 shares issued and outstanding,
respectively
    
    
    792
    
    
    
    783Additional paid-in capital
    
    
    379,705
    
    
    
    373,910Retained earnings
    
    
    237,122
    
    
    
    199,890Accumulated other comprehensive loss
    
    
    (2,334
    )
    
    
    (2,026
    )Total shareholders equity
    
    
    615,285
    
    
    
    572,557TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    1,633,904
    
    
    $
    1,386,533
  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 Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007REVENUE:Membership dues
    
    $
    126,121
    
    
    $
    106,667
    
    
    $
    245,769
    
    
    $
    207,195Enrollment fees
    
    
    6,640
    
    
    
    6,378
    
    
    
    13,173
    
    
    
    12,064In-center revenue
    
    
    55,969
    
    
    
    45,891
    
    
    
    111,234
    
    
    
    89,788Total center revenue
    
    
    188,730
    
    
    
    158,936
    
    
    
    370,176
    
    
    
    309,047Other revenue
    
    
    3,677
    
    
    
    3,201
    
    
    
    6,682
    
    
    
    6,191Total revenue
    
    
    192,407
    
    
    
    162,137
    
    
    
    376,858
    
    
    
    315,238OPERATING EXPENSES:Center operations
    
    
    113,259
    
    
    
    94,035
    
    
    
    220,839
    
    
    
    183,527Advertising and marketing
    
    
    6,823
    
    
    
    5,439
    
    
    
    16,321
    
    
    
    12,808General and administrative
    
    
    10,582
    
    
    
    10,693
    
    
    
    21,254
    
    
    
    21,181Other operating
    
    
    4,675
    
    
    
    3,792
    
    
    
    8,770
    
    
    
    7,116Depreciation and amortization
    
    
    17,190
    
    
    
    14,678
    
    
    
    33,780
    
    
    
    28,365Total operating expenses
    
    
    152,529
    
    
    
    128,637
    
    
    
    300,964
    
    
    
    252,997Income from operations
    
    
    39,878
    
    
    
    33,500
    
    
    
    75,894
    
    
    
    62,241OTHER INCOME (EXPENSE):Interest expense, net of
interest income of $17, $111,
$88 and $155, respectively
    
    
    (6,905
    )
    
    
    (6,369
    )
    
    
    (14,116
    )
    
    
    (11,897
    )Equity in earnings of affiliate
    
    
    326
    
    
    
    285
    
    
    
    649
    
    
    
    601Total other income (expense)
    
    
    (6,579
    )
    
    
    (6,084
    )
    
    
    (13,467
    )
    
    
    (11,296
    )INCOME BEFORE INCOME TAXES
    
    
    33,299
    
    
    
    27,416
    
    
    
    62,427
    
    
    
    50,945PROVISION FOR INCOME TAXES
    
    
    13,471
    
    
    
    10,931
    
    
    
    25,195
    
    
    
    20,326NET INCOME
    
    $
    19,828
    
    
    $
    16,485
    
    
    $
    37,232
    
    
    $
    30,619BASIC EARNINGS PER COMMON SHARE
    
    $
    0.51
    
    
    $
    0.45
    
    
    $
    0.96
    
    
    $
    0.83DILUTED EARNINGS PER COMMON
SHARE
    
    $
    0.50
    
    
    $
    0.44
    
    
    $
    0.95
    
    
    $
    0.82WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 
BASIC
    
    
    38,963
    
    
    
    36,864
    
    
    
    38,923
    
    
    
    36,747WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 
DILUTED
    
    
    39,325
    
    
    
    37,498
    
    
    
    39,372
    
    
    
    37,359
  4




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##### 



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 For the Six Months EndedJune 30,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    37,232
    
    
    $
    30,619Adjustments to reconcile net income to net cash provided by operating
activities:Depreciation and amortization
    
    
    33,780
    
    
    
    28,365Deferred income taxes
    
    
    8,874
    
    
    
    2,474Provision for doubtful accounts
    
    
    27
    
    
    
    46Loss on disposal of property and equipment, net
    
    
    1,335
    
    
    
    164Amortization of deferred financing costs
    
    
    571
    
    
    
    405Share-based compensation
    
    
    3,895
    
    
    
    3,816Excess tax benefit from stock option exercises
    
    
    (5
    )
    
    
    (3,838
    )Equity in earnings of affiliate
    
    
    (654
    )
    
    
    (601
    )Changes in operating assets and liabilities
    
    
    20,555
    
    
    
    4,692Other
    
    
    50
    
    
    
    35Net cash provided by operating activities
    
    
    105,660
    
    
    
    66,177CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment (excluding non-cash purchases
supplementally noted below)
    
    
    (235,577
    )
    
    
    (200,446
    )Proceeds from sale of property and equipment
    
    
    365
    
    
    
    48Proceeds from property insurance settlements
    
    
    270
    
    
    
    48Increase in other assets
    
    
    (12,140
    )
    
    
    (9,555
    )Increase in restricted cash
    
    
    (2,234
    )
    
    
    (1,011
    )Net cash used in investing activities
    
    
    (249,316
    )
    
    
    (210,916
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from long-term borrowings
    
    
    38,538
    
    
    
    105,000Repayments of long-term borrowings
    
    
    (10,588
    )
    
    
    (6,147
    )Proceeds from revolving credit facility, net
    
    
    116,200
    
    
    
    40,000Increase in deferred financing costs
    
    
    (3,641
    )
    
    
    (1,896
    )Excess tax benefit from stock option exercises
    
    
    5
    
    
    
    3,838Proceeds from stock option exercises
    
    
    1,462
    
    
    
    5,327Net cash provided by financing activities
    
    
    141,976
    
    
    
    146,122INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (1,680
    )
    
    
    1,383CASH AND CASH EQUIVALENTS  Beginning of period
    
    
    5,354
    
    
    
    6,880CASH AND CASH EQUIVALENTS  End of period
    
    $
    3,674
    
    
    $
    8,263SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash payments for interest, net of capitalized interest of $4,652 and
$3,773, respectively
    
    $
    13,341
    
    
    $
    11,341Cash payments for income taxes
    
    $
    3,855
    
    
    $
    16,924SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:Purchase of property financed through capital lease obligation
    
    $
    12,121
    
    
    $
    Purchases of property and equipment in accounts payable
    
    $
    17,999
    
    
    $
    3,671Non-cash share-based compensation capitalized to projects under
development
    
    $
    443
    
    
    $
    338
  
 5




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 
  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  (Table amounts in thousands, except share and per share data)
 1. Basis of Presentation
   2. Share-Based Compensation
   For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Share-based compensation expense
related to stock options
    
    $
    617
    
    
    $
    771
    
    
    $
    1,319
    
    
    $
    1,701Share-based compensation expense
related to restricted shares
    
    
    1,458
    
    
    
    1,195
    
    
    
    2,508
    
    
    
    2,054Share-based compensation expense
related to ESPP
    
    
    38
    
    
    
    32
    
    
    
    68
    
    
    
    61Total share-based compensation expense
    
    $
    2,113
    
    
    $
    1,998
    
    
    $
    3,895
    
    
    $
    3,816
 6




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
  WeightedAverageWeighted-
    
    RemainingAverage
    
    Contractual
    
    AggregateStock
    
    Exercise
    
    Term (in
    
    IntrinsicOptions
    
    Price
    
    years)
    
    ValueOutstanding at December 31, 2007
    
    
    1,208,267
    
    
    $
    21.17Granted
    
    
    
    
    
    
    Exercised
    
    
    (79,170
    )
    
    $
    18.59Canceled
    
    
    (2,764
    )
    
    $
    27.65Outstanding at June 30, 2008
    
    
    1,126,333
    
    
    $
    21.34
    
    
    
    6.0
    
    
    $
    9,245Vested or Expected to Vest at
June 30, 2008
    
    
    1,099,246
    
    
    $
    21.18
    
    
    
    6.0
    
    
    $
    9,196Exercisable at June 30, 2008
    
    
    841,209
    
    
    $
    19.17
    
    
    
    5.8
    
    
    $
    8,728
  (1)
 For the Three Months
    
    For the Six MonthsEnded June 30,
    
    Ended June 30,2008
    
    2007
    
    2008
    
    2007Risk-free interest rate (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.7
    %Expected dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expected life in years (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Volatility (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36.9
    %
 
 (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 reported by a peer group of publicly traded companies.  7




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
  Range ofMarket PriceRestricted
    
    Per Share onShares
    
    Grant DateOutstanding at December 31, 2007
    
    
    302,345
    
    
    $
    24.75-53.95Granted
    
    
    388,675
    
    
    
    26.46-35.77Canceled
    
    
    (1,010
    )
    
    
    26.46-51.15Vested
    
    
    (72,687
    )
    
    
    24.75-53.95Outstanding at June 30, 2008
    
    
    617,323
    
    
    $
    26.46-53.95
    3. Earnings per Share
   For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    19,828
    
    
    $
    16,485
    
    
    $
    37,232
    
    
    $
    30,619Weighted average number of common shares
outstanding  basic
    
    
    38,963
    
    
    
    36,864
    
    
    
    38,923
    
    
    
    36,747Effect of dilutive stock options
    
    
    264
    
    
    
    522
    
    
    
    274
    
    
    
    507Effect of dilutive restricted stock awards
    
    
    98
    
    
    
    112
    
    
    
    175
    
    
    
    105Weighted average number of common shares
outstanding  diluted
    
    
    39,325
    
    
    
    37,498
    
    
    
    39,372
    
    
    
    37,359Basic earnings per common share
    
    $
    0.51
    
    
    $
    0.45
    
    
    $
    0.96
    
    
    $
    0.83Diluted earnings per common share
    
    $
    0.50
    
    
    $
    0.44
    
    
    $
    0.95
    
    
    $
    0.82
 8




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
 4. Operating Segments
   For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Membership dues
    
    $
    126,121
    
    
    $
    106,667
    
    
    $
    245,769
    
    
    $
    207,195Enrollment fees
    
    
    6,640
    
    
    
    6,378
    
    
    
    13,173
    
    
    
    12,064Personal training
    
    
    26,568
    
    
    
    20,890
    
    
    
    55,149
    
    
    
    42,776Other in-center
    
    
    29,401
    
    
    
    25,001
    
    
    
    56,085
    
    
    
    47,012Other
    
    
    3,677
    
    
    
    3,201
    
    
    
    6,682
    
    
    
    6,191Total revenue
    
    $
    192,407
    
    
    $
    162,137
    
    
    $
    376,858
    
    
    $
    315,238
 5. Supplementary Cash Flow Information
  For the Six MonthsEnded June 30,2008
    
    
    2007Accounts receivable
    
    $
    648
    
    
    $
    (963
    )Income tax receivable
    
    
    5,819
    
    
    
    3,935Inventories
    
    
    126
    
    
    
    (3,876
    )Prepaid expenses and other current assets
    
    
    (1,981
    )
    
    
    (3,050
    )Deferred membership origination costs
    
    
    (3,375
    )
    
    
    (4,792
    )Accounts payable
    
    
    861
    
    
    
    4,499Accrued expenses
    
    
    10,684
    
    
    
    312Deferred revenue
    
    
    6,598
    
    
    
    8,465Deferred rent
    
    
    903
    
    
    
    (110
    )Other liabilities
    
    
    272
    
    
    
    272Changes in operating assets and liabilities
    
    $
    20,555
    
    
    $
    4,692
 6. Commitments and Contingencies
 Litigation
 9




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##### 



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
 7. New Accounting Pronouncements
     
 Item 2.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements
   10




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##### 



Overview
    Experience
Life
 11




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##### 



Critical Accounting Policies and Estimates
   12




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##### 



Results of Operations
  For the Three
    
    
    For the SixMonths Ended
    
    
    Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007RevenueCenter revenueMembership dues
    
    
    65.5
    %
    
    
    65.8
    %
    
    
    65.2
    %
    
    
    65.7
    %Enrollment fees
    
    
    3.5
    
    
    
    3.9
    
    
    
    3.5
    
    
    
    3.8In-center revenue
    
    
    29.1
    
    
    
    28.3
    
    
    
    29.5
    
    
    
    28.5Total center revenue
    
    
    98.1
    
    
    
    98.0
    
    
    
    98.2
    
    
    
    98.0Other revenue
    
    
    1.9
    
    
    
    2.0
    
    
    
    1.8
    
    
    
    2.0Total revenue
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Operating expensesCenter operations
    
    
    58.9
    
    
    
    58.0
    
    
    
    58.6
    
    
    
    58.2Advertising and marketing
    
    
    3.5
    
    
    
    3.4
    
    
    
    4.3
    
    
    
    4.1General and administrative
    
    
    5.5
    
    
    
    6.6
    
    
    
    5.7
    
    
    
    6.7Other operating
    
    
    2.4
    
    
    
    2.3
    
    
    
    2.3
    
    
    
    2.3Depreciation and amortization
    
    
    9.0
    
    
    
    9.0
    
    
    
    9.0
    
    
    
    9.0Total operating expenses
    
    
    79.3
    
    
    
    79.3
    
    
    
    79.9
    
    
    
    80.3Income from operations
    
    
    20.7
    
    
    
    20.7
    
    
    
    20.1
    
    
    
    19.7Other income (expense)Interest expense, net
    
    
    (3.6
    )
    
    
    (4.0
    )
    
    
    (3.7
    )
    
    
    (3.8
    )Equity in earnings of affiliate
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.2Total other income (expense)
    
    
    (3.4
    )
    
    
    (3.8
    )
    
    
    (3.5
    )
    
    
    (3.6
    )Income before income taxes
    
    
    17.3
    
    
    
    16.9
    
    
    
    16.6
    
    
    
    16.1Provision for income taxes
    
    
    7.0
    
    
    
    6.7
    
    
    
    6.7
    
    
    
    6.4Net income
    
    
    10.3
    %
    
    
    10.2
    %
    
    
    9.9
    %
    
    
    9.7
    %Other financial and operating dataAverage center revenue per membership
    
    $
    361
    
    
    $
    338
    
    
    $
    724
    
    
    $
    672Average in-center revenue per membership
    
    $
    107
    
    
    $
    98
    
    
    $
    218
    
    
    $
    195Centers open at end of period
    
    
    74
    
    
    
    64
    
    
    
    74
    
    
    
    64Number of memberships at end of period
    
    
    547,497
    
    
    
    489,489
    
    
    
    547,497
    
    
    
    489,489Total center square footage at end of period (1)
    
    
    7,298,299
    
    
    
    6,251,727
    
    
    
    7,298,299
    
    
    
    6,251,727
 
 (1)
    
    The square footage presented in this table reflects fitness square footage which is
the best metric for the efficiencies of a facility. We exclude outdoor pool, outdoor play
areas, indoor/outdoor tennis elements and satellite facility square footage. 13




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##### 



Three Months Ended June 30, 2008, Compared to Three Months Ended June 30, 2007
 Total revenue.
  
    
    65.3% was from membership dues, which increased $19.5 million, or 18.2%, due to increased
memberships at new centers, junior membership programs and increased sales of value-added
memberships. Our number of memberships increased 11.9% to 547,497 at June 30, 2008 from
489,489 at June 30, 2007. The membership growth of 11.9% was down from membership growth of
24.5% from June 30, 2007 over June 30, 2006, primarily due to our anniversary of the
acquisition of seven leased centers in July 2006, our strategy to reduce memberships in
centers where memberships exceed our target capacity and the effects of a slower economy in
the fourth quarter of 2007 and the first half of 2008.
    
    33.8% was from in-center revenue, which increased $10.1 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
from $98 for the three months ended June 30, 2007 to $107 for the three months ended June 30,
2008.
    
    0.9% was from enrollment fees, which are deferred until a center opens and recognized on
a straight-line basis over 33 months for the second quarter of 2008 and 36 months for the
first quarter of 2008 and prior periods. Enrollment fees increased
$0.2 million for the
three months ended June 30, 2008 to $6.6 million.
  Center operations expenses.
 Advertising and marketing expenses.
 General and administrative expenses.
 Other operating expenses.
 Depreciation and amortization.
 Interest expense, net.
 14




---



##### 



Provision for income taxes.
 Net income.
 Six Months Ended June 30, 2008, Compared to Six Months Ended June 30, 2007
 Total revenue.
  
    
    63.1% was from membership dues, which increased $38.6 million, or 18.6%, due to increased
memberships at new centers, junior membership programs and increased sales of value-added
memberships. Our number of memberships increased 11.9% to 547,497 at June 30, 2008 from
489,489 at June 30, 2007. The membership growth of 11.9% was down from membership growth of
24.5% from June 30, 2007 over June 30, 2006, primarily due to our anniversary of the
acquisition of seven leased centers in July 2006, our strategy to reduce memberships in
centers where memberships exceed our target capacity and the effects of a slower economy in
the fourth quarter of 2007 and the first half of 2008.
    
    35.1% was from in-center revenue, which increased $21.4 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
from $195 for the six months ended June 30, 2007 to $218 for the six months ended June 30,
2008.
    
    1.8% was from enrollment fees, which are deferred until a center opens and recognized on
a straight-line basis over 33 months for the second quarter of 2008 and 36 months for the
first quarter of 2008 and prior periods. Enrollment fees increased $1.1 million for the six
months ended June 30, 2008 to $13.2 million.
  Center operations expenses.
 Advertising and marketing expenses.
 General and administrative expenses.
 Other operating expenses.
 15




---



##### 



Depreciation and amortization.
 Interest expense, net.
 Provision for income taxes.
 Net income.
 Liquidity and Capital Resources
 Liquidity
  Operating Activities
   Investing Activities
   16




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##### 



For the Six MonthsEnded June 30,2008
    
    
    2007Cash purchases of property and equipment
    
    $
    235,577
    
    
    $
    200,446Non-cash purchase of property financed through capital lease obligation
    
    
    12,121
    
    
    
    Non-cash purchases of property and equipment in accounts payable
    
    
    17,999
    
    
    
    3,671Non-cash share-based compensation capitalized to projects under
development
    
    
    443
    
    
    
    338Total capital expenditures
    
    $
    266,140
    
    
    $
    204,455
  For the Six MonthsEnded June 30,2008
    
    
    2007New center land, building and construction on clubs opened or to be
opened through the current year
    
    $
    136,081
    
    
    $
    111,969New center land, building and construction on clubs to be opened in
the next calendar year
    
    
    60,372
    
    
    
    65,175Acquisitions, updating existing centers and corporate infrastructure
    
    
    69,687
    
    
    
    27,311Total capital expenditures
    
    $
    266,140
    
    
    $
    204,455
   Financing Activities
   17




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##### 



Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 4. CONTROLS AND PROCEDURES
  18




---



##### 



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 2008
 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, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    465,165May 1  31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    465,165June 1  30, 2008
    
    
    22,043
    
    
    $
    30.08
    
    
    
    22,043
    
    
    
    443,122Total
    
    
    22,043
    
    
    $
    30.08
    
    
    
    22,043
    
    
    
    443,122
 
 (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
  19




---



##### 



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   Nominee
    
    For
    
    WithheldBahram Akradi
    
    
    34,655,276
    
    
    
    156,634Giles H. Bateman
    
    
    33,843,737
    
    
    
    968,173James F. Halpin
    
    
    34,660,296
    
    
    
    151,614Guy C. Jackson
    
    
    33,840,657
    
    
    
    971,253John B. Richards
    
    
    34,630,514
    
    
    
    181,396Stephen R. Sefton
    
    
    34,654,426
    
    
    
    157,484Joseph H. Vassalluzzo
    
    
    34,625,260
    
    
    
    186,650
     
 ITEM 5. OTHER INFORMATION
  20




---



##### 



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
    
    Life Time Fitness, Inc. Executive
Cash Bonus Plan
    
    Incorporated by
reference to
Appendix A to the
Registrants proxy
statement for its
2008 Annual Meeting
of Shareholders
(File No.
001-32230), filed
with the Commission
on March 6, 200810.2
    
    Amended and Restated Life Time
Fitness, Inc. 2004 Long-Term
Incentive Plan (effective as of
April 24, 2008)
    
    Incorporated by
reference to
Appendix B to the
Registrants proxy
statement for its
2008 Annual Meeting
of Shareholders
(File No.
001-32230), filed
with the Commission
on March 6, 200810.3
    
    Summary of Non-Employee Director
Compensation Package (effective
April 24, 2008)
    
    Filed Electronically10.4
    
    Indenture of Trust between LTF Real
Estate VRDN I, LLC, as Borrower,
and Manufacturers and Traders Trust
Company, as Trustee for the LTF
Real Estate VRDN I, LLC $34,235,000
Variable Rate Demand Notes, Series
2008, dated as of June 1, 2008
    
    Filed Electronically10.5
    
    Reimbursement Agreement among
General Electric Capital
Corporation, GE Government Finance,
Inc., and LTF Real Estate VRDN I,
LLC for the LTF Real Estate VRDN I,
LLC $34,235,000 Variable Rate
Demand Notes, Series 2008, dated as
of June 1, 2008
    
    Filed Electronically10.6
    
    Lease Agreement between LTF Real
Estate VRDN I, LLC and LTF Club
Operations Company, Inc. dated as
of June 13, 2008 (Chanhassen, MN 
Headquarters)
    
    Filed Electronically10.7
    
    Lease Agreement between LTF Real
Estate VRDN I, LLC and LTF Club
Operations Company, Inc. dated as
of June 13, 2008 (Overland Park,
KS)
    
    Filed Electronically10.8
    
    Lease Guaranty and Negative Pledge
Agreement dated as of June 1, 2008
by Life Time Fitness, Inc. in favor
of LTF Real Estate VRDN I, LLC
    
    Filed Electronically10.9
    
    Mortgage, Security Agreement,
Assignment of Leases and Rents and
Fixture Filing dated as of June 1,
2008 by LTF Real Estate VRDN I, LLC
in favor of General Electric
Capital Corporation (Chanhassen,
MN)
    
    Filed Electronically
 21




---



##### 



ExhibitNo.
    
    Description
    
    Method of Filing10.10
    
    Mortgage, Security Agreement,
Assignment of Leases and Rents and
Fixture Filing dated as of June 1,
2008 by LTF Real Estate VRDN I, LLC
in favor of General Electric
Capital Corporation (Overland Park,
KS)
    
    Filed Electronically10.11
    
    Subordination, Attornment and
Lessee-Lessor Estoppel Agreement
dated as of June 1, 2008 by and
among LTF Real Estate VRDN I, LLC,
LTF Club Operations Company, Inc.
and General Electric Capital
Corporation (Chanhassen, MN)
    
    Filed Electronically10.12
    
    Subordination, Attornment and
Lessee-Lessor Estoppel Agreement
dated as of June 1, 2008 by and
among LTF Real Estate VRDN I, LLC,
LTF Club Operations Company, Inc.
and General Electric Capital
Corporation (Overland Park, KS)
    
    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 Officer
    
    Filed Electronically32
    
    Section 1350 Certifications
    
    Filed Electronically
 22




---



##### 



SIGNATURES
  LIFE TIME FITNESS, INC.By:
    /s/ Bahram AkradiName:
    Bahram AkradiTitle:
    Chairman of the Board of Directors and 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:
    Vice President and Corporate Controller(Principal Accounting Officer) 23




---



##### 



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
    
    Life Time Fitness, Inc. Executive
Cash Bonus Plan
    
    Incorporated by
reference to
Appendix A to the
Registrants proxy
statement for its
2008 Annual Meeting
of Shareholders
(File No.
001-32230), filed
with the Commission
on March 6, 200810.2
    
    Amended and Restated Life Time
Fitness, Inc. 2004 Long-Term
Incentive Plan (effective as of
April 24, 2008)
    
    Incorporated by
reference to
Appendix B to the
Registrants proxy
statement for its
2008 Annual Meeting
of Shareholders
(File No.
001-32230), filed
with the Commission
on March 6, 200810.3
    
    Summary of Non-Employee Director
Compensation Package (effective
April 24, 2008)
    
    Filed Electronically10.4
    
    Indenture of Trust between LTF Real
Estate VRDN I, LLC, as Borrower,
and Manufacturers and Traders Trust
Company, as Trustee for the LTF
Real Estate VRDN I, LLC $34,235,000
Variable Rate Demand Notes, Series
2008, dated as of June 1, 2008
    
    Filed Electronically10.5
    
    Reimbursement Agreement among
General Electric Capital
Corporation, GE Government Finance,
Inc., and LTF Real Estate VRDN I,
LLC for the LTF Real Estate VRDN I,
LLC $34,235,000 Variable Rate
Demand Notes, Series 2008, dated as
of June 1, 2008
    
    Filed Electronically10.6
    
    Lease Agreement between LTF Real
Estate VRDN I, LLC and LTF Club
Operations Company, Inc. dated as
of June 13, 2008 (Chanhassen, MN 
Headquarters)
    
    Filed Electronically10.7
    
    Lease Agreement between LTF Real
Estate VRDN I, LLC and LTF Club
Operations Company, Inc. dated as
of June 13, 2008 (Overland Park,
KS)
    
    Filed Electronically10.8
    
    Lease Guaranty and Negative Pledge
Agreement dated as of June 1, 2008
by Life Time Fitness, Inc. in favor
of LTF Real Estate VRDN I, LLC
    
    Filed Electronically10.9
    
    Mortgage, Security Agreement,
Assignment of Leases and Rents and
Fixture Filing dated as of June 1,
2008 by LTF Real Estate VRDN I, LLC
in favor of General Electric
Capital Corporation (Chanhassen,
MN)
    
    Filed Electronically
 24




---



##### 



ExhibitNo.
    
    Description
    
    Method of Filing10.10
    
    Mortgage, Security Agreement,
Assignment of Leases and Rents and
Fixture Filing dated as of June 1,
2008 by LTF Real Estate VRDN I, LLC
in favor of General Electric
Capital Corporation (Overland Park,
KS)
    
    Filed Electronically10.11
    
    Subordination, Attornment and
Lessee-Lessor Estoppel Agreement
dated as of June 1, 2008 by and
among LTF Real Estate VRDN I, LLC,
LTF Club Operations Company, Inc.
and General Electric Capital
Corporation (Chanhassen, MN)
    
    Filed Electronically10.12
    
    Subordination, Attornment and
Lessee-Lessor Estoppel Agreement
dated as of June 1, 2008 by and
among LTF Real Estate VRDN I, LLC,
LTF Club Operations Company, Inc.
and General Electric Capital
Corporation (Overland Park, KS)
    
    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 Officer
    
    Filed Electronically32
    
    Section 1350 Certifications
    
    Filed Electronically
 25