##### 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, 2005
 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




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TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets as of June 30, 2005 (unaudited) and December 31, 2004
    
    
    3Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2005 and 2004 (unaudited)
    
    
    4Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 and 2004 (unaudited)
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    23PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    24Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24Item 3. Defaults Upon Senior Securities
    
    
    24Item 4. Submission of Matters to a Vote of Security Holders
    
    
    24Item 5. Other Information
    
    
    24Item 6. Exhibits
    
    
    27SIGNATURES
    
    
    28Certification of Principal Executive OfficerCertification of Principal Financial 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)
 June 30,
    
    December 31,2005
    
    2004(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    346
    
    
    $
    10,211Accounts receivable, net
    
    
    3,336
    
    
    
    1,187Inventories
    
    
    4,733
    
    
    
    4,971Prepaid expenses and other current assets
    
    
    7,890
    
    
    
    7,275Deferred membership origination costs
    
    
    9,369
    
    
    
    8,271Deferred tax asset
    
    
    1,597
    
    
    
    1,597Income tax receivable
    
    
    1,682
    
    
    
    4,579Total current assets
    
    
    28,953
    
    
    
    38,091PROPERTY AND EQUIPMENT, net
    
    
    564,883
    
    
    
    503,690RESTRICTED CASH
    
    
    3,873
    
    
    
    12,092DEFERRED MEMBERSHIP ORIGINATION COSTS
    
    
    7,603
    
    
    
    7,061OTHER ASSETS
    
    
    12,050
    
    
    
    11,153TOTAL ASSETS
    
    $
    617,362
    
    
    $
    572,087LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Current maturities of long-term debt
    
    $
    15,870
    
    
    $
    47,477Accounts payable
    
    
    7,629
    
    
    
    5,762Construction accounts payable
    
    
    22,389
    
    
    
    17,633Accrued expenses
    
    
    24,555
    
    
    
    19,152Deferred revenue
    
    
    24,361
    
    
    
    20,019Total current liabilities
    
    
    94,804
    
    
    
    110,043LONG-TERM DEBT, net of current portion
    
    
    194,402
    
    
    
    161,767DEFERRED RENT LIABILITY
    
    
    5,132
    
    
    
    3,678DEFERRED INCOME TAXES
    
    
    32,827
    
    
    
    33,701DEFERRED REVENUE
    
    
    13,966
    
    
    
    12,264Total liabilities
    
    
    341,131
    
    
    
    321,453COMMITMENTS AND CONTINGENCIES (Note 7)SHAREHOLDERS EQUITY:Undesignated preferred stock, 10,000,000
shares authorized; none issued or
outstandingCommon stock, $.02 par value, 50,000,000
shares authorized; 34,803,404 and
33,791,610 shares issued and outstanding,
respectively
    
    
    696
    
    
    
    676Additional paid-in capital
    
    
    217,187
    
    
    
    209,931Deferred compensation
    
    
    (154
    )
    
    
    (66
    )Retained earnings
    
    
    58,502
    
    
    
    40,093Total shareholders equity
    
    
    276,231
    
    
    
    250,634TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    617,362
    
    
    $
    572,087
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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 30,2005
    
    2004
    
    2005
    
    2004REVENUE:Membership dues
    
    $
    64,313
    
    
    $
    51,005
    
    
    $
    124,790
    
    
    $
    100,184Enrollment fees
    
    
    5,452
    
    
    
    5,073
    
    
    
    10,137
    
    
    
    9,580In-center revenue
    
    
    24,029
    
    
    
    17,856
    
    
    
    46,702
    
    
    
    35,114Total center revenue
    
    
    93,794
    
    
    
    73,934
    
    
    
    181,629
    
    
    
    144,878Other revenue
    
    
    1,813
    
    
    
    2,655
    
    
    
    3,306
    
    
    
    5,881Total revenue
    
    
    95,607
    
    
    
    76,589
    
    
    
    184,935
    
    
    
    150,759OPERATING EXPENSES:Center operations
    
    
    52,827
    
    
    
    40,466
    
    
    
    102,398
    
    
    
    79,519Advertising and marketing
    
    
    2,619
    
    
    
    2,774
    
    
    
    6,910
    
    
    
    6,454General and administrative
    
    
    7,331
    
    
    
    5,599
    
    
    
    13,821
    
    
    
    11,549Other operating
    
    
    3,226
    
    
    
    4,393
    
    
    
    6,164
    
    
    
    8,949Depreciation and amortization
    
    
    9,190
    
    
    
    6,971
    
    
    
    17,924
    
    
    
    13,918Total operating expenses
    
    
    75,193
    
    
    
    60,203
    
    
    
    147,217
    
    
    
    120,389Income from operations
    
    
    20,414
    
    
    
    16,386
    
    
    
    37,718
    
    
    
    30,370OTHER INCOME (EXPENSE):Interest expense, net
    
    
    (3,243
    )
    
    
    (4,449
    )
    
    
    (7,069
    )
    
    
    (9,061
    )Equity in earnings of affiliate
    
    
    266
    
    
    
    267
    
    
    
    554
    
    
    
    520Total other expense
    
    
    (2,977
    )
    
    
    (4,182
    )
    
    
    (6,515
    )
    
    
    (8,541
    )INCOME BEFORE INCOME TAXES
    
    
    17,437
    
    
    
    12,204
    
    
    
    31,203
    
    
    
    21,829PROVISION FOR INCOME TAXES
    
    
    7,150
    
    
    
    4,993
    
    
    
    12,794
    
    
    
    8,970NET INCOME
    
    
    10,287
    
    
    
    7,211
    
    
    
    18,409
    
    
    
    12,859ACCRETION ON REDEEMABLE
PREFERRED STOCK
    
    
    
    
    
    
    1,737
    
    
    
    
    
    
    
    3,474NET INCOME APPLICABLE TO COMMON
SHAREHOLDERS
    
    $
    10,287
    
    
    $
    5,474
    
    
    $
    18,409
    
    
    $
    9,385BASIC EARNINGS PER COMMON SHARE
    
    $
    0.30
    
    
    $
    0.34
    
    
    $
    0.54
    
    
    $
    0.58DILUTED EARNINGS PER COMMON
SHARE
    
    $
    0.28
    
    
    $
    0.25
    
    
    $
    0.51
    
    
    $
    0.44WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
BASIC
    
    
    34,360
    
    
    
    16,195
    
    
    
    34,091
    
    
    
    16,175WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
DILUTED
    
    
    36,161
    
    
    
    29,123
    
    
    
    36,047
    
    
    
    29,124
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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 For the SixMonths EndedJune 30,2005
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    18,409
    
    
    $
    12,859Adjustments to reconcile net income to net cash provided by operating
activities:Depreciation and amortization
    
    
    17,924
    
    
    
    13,918Deferred income taxes
    
    
    (874
    )
    
    
    (118
    )Loss on disposal of property, net
    
    
    370
    
    
    
    128Amortization of deferred financing costs
    
    
    701
    
    
    
    704Compensation related to stock options and restricted stock
    
    
    215
    
    
    
    149Tax benefit from exercise of stock options
    
    
    4,222
    
    
    
    Changes in operating assets and liabilities
    
    
    13,069
    
    
    
    8,719Net cash provided by operating activities
    
    
    54,036
    
    
    
    36,359CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment (excluding non-cash purchases
supplementally noted below)
    
    
    (83,266
    )
    
    
    (58,721
    )Increase in construction accounts payable
    
    
    4,756
    
    
    
    9,894Proceeds from sale of property
    
    
    3,778
    
    
    
    1,247Increase in other assets
    
    
    (425
    )
    
    
    (2,592
    )Decrease (increase) in restricted cash
    
    
    8,219
    
    
    
    (771
    )Net cash used in investing activities
    
    
    (66,938
    )
    
    
    (50,943
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from long-term borrowings
    
    
    112,641
    
    
    
    26,466Repayments on long-term borrowings
    
    
    (111,613
    )
    
    
    (29,172
    )Increase in deferred financing costs
    
    
    (1,174
    )
    
    

    (976
    )Proceeds from exercise of stock options
    
    
    3,183
    
    
    
    246Net cash provided by (used in) financing activities
    
    
    3,037
    
    
    
    (3,436
    )DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (9,865
    )
    
    
    (18,020
    )CASH AND CASH EQUIVALENTS  Beginning of period
    
    
    10,211
    
    
    
    18,446CASH AND CASH EQUIVALENTS  End of period
    
    $
    346
    
    
    $
    426SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash payments for interest, net of capitalized interest of $2,037 and
$789, respectively
    
    $
    7,934
    
    
    $
    8,410Cash payments for income taxes
    
    $
    6,549
    
    
    $
    6,819SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Property and equipment purchases financed through notes payable
    
    $
    
    
    
    $
    2,954Property and equipment purchases financed through capital lease obligations
    
    $
    
    
    
    $
    145
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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
 1. Basis of Presentation
    2. Initial Public Offering and Capital Stock
   3. Earnings per Share
  6




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For the Three
    
    For the SixMonths Ended
    
    Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net income applicable to common
shareholders  basic
    
    $
    10,287
    
    
    $
    5,474
    
    
    $
    18,409
    
    
    $
    9,385Add back: accretion on redeemable
preferred stock
    
    
    
    
    
    
    1,737
    
    
    
    
    
    
    
    3,474Net income applicable to common
shareholders  diluted
    
    $
    10,287
    
    
    $
    7,211
    
    
    $
    18,409
    
    
    $
    12,859Weighted average number of common
shares outstanding  basic
    
    
    34,360
    
    
    
    16,195
    
    
    
    34,091
    
    
    
    16,175Effect of dilutive stock options and
restricted stock awards
    
    
    1,801
    
    
    
    1,910
    
    
    
    1,956
    
    
    
    1,931Effect of dilutive redeemable preferred
shares
    
    
    
    
    
    
    11,018
    
    
    
    
    
    
    
    11,018Weighted average number of common
shares outstanding  diluted
    
    
    36,161
    
    
    
    29,123
    
    
    
    36,047
    
    
    
    29,124Basic earnings per common share
    
    $
    0.30
    
    
    $
    0.34
    
    
    $
    0.54
    
    
    $
    0.58Diluted earnings per common share
    
    $
    0.28
    
    
    $
    0.25
    
    
    $
    0.51
    
    
    $
    0.44
 4. Stock-Based Compensation
 Accounting for Stock Issued to Employees
 For the Three
    
    For the SixMonths Ended
    
    Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net income applicable to common shareholders  basic:As reported
    
    $
    10,287
    
    
    $
    5,474
    
    
    $
    18,409
    
    
    $
    9,385Pro forma
    
    $
    9,097
    
    
    $
    5,175
    
    
    $
    16,550
    
    
    $
    8,793Basic earnings per common share:As reported
    
    $
    0.30
    
    
    $
    0.34
    
    
    $
    0.54
    
    
    $
    0.58Pro forma
    
    $
    0.26
    
    
    $
    0.32
    
    
    $
    0.49
    
    
    $
    0.54Net income applicable to common shareholders 
diluted:As reported
    
    $
    10,287
    
    
    $
    7,211
    
    
    $
    18,409
    
    
    $
    12,859Pro forma
    
    $
    9,097
    
    
    $
    6,912
    
    
    $
    16,550
    
    
    $
    12,268Diluted earnings per common share:As reported
    
    $
    0.28
    
    
    $
    0.25
    
    
    $
    0.51
    
    
    $
    0.44Pro forma
    
    $
    0.25
    
    
    $
    0.24
    
    
    $
    0.46
    
    
    $
    0.42
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5. Operating Segments
 Disclosures about Segments of an Enterprise and Related
Information
  Centers
    
    All Other
    
    ConsolidatedThree months ended June 30, 2005:Revenue
    
    $
    93,794
    
    
    $
    1,813
    
    
    $
    95,607Net income (loss)
    
    $
    11,832
    
    
    $
    (1,545
    )
    
    $
    10,287Provision (benefit) for income taxes
    
    
    8,223
    
    
    
    (1,073
    )
    
    
    7,150Interest expense, net
    
    
    2,867
    
    
    
    376
    
    
    
    3,243Depreciation and amortization
    
    
    7,570
    
    
    
    1,620
    
    
    
    9,190EBITDA
    
    $
    30,492
    
    
    $
    (622
    )
    
    $
    29,870Total assets
    
    $
    546,941
    
    
    $
    70,421
    
    
    $
    617,362Three months ended June 30, 2004:Revenue
    
    $
    73,934
    
    
    $
    2,655
    
    
    $
    76,589Net income (loss)
    
    $
    9,306
    
    
    $
    (2,095
    )
    
    $
    7,211Provision (benefit) for income taxes
    
    
    6,449
    
    
    
    (1,456
    )
    
    
    4,993Interest expense, net
    
    
    4,058
    
    
    
    391
    
    
    
    4,449Depreciation and amortization
    
    
    5,600
    
    
    
    1,371
    
    
    
    6,971EBITDA
    
    $
    25,413
    
    
    $
    (1,789
    )
    
    $
    23,624Total assets
    
    $
    410,934
    
    
    $
    73,811
    
    
    $
    484,745Six months ended June 30, 2005:Revenue
    
    $
    181,629
    
    
    $
    3,306
    
    
    $
    184,935Net income (loss)
    
    $
    21,378
    
    
    $
    (2,969
    )
    
    $
    18,409Provision (benefit) for income taxes
    
    
    14,857
    
    
    
    (2,063
    )
    
    
    12,794Interest expense, net
    
    
    6,187
    
    
    
    882
    
    
    
    7,069Depreciation and amortization
    
    
    14,785
    
    
    
    3,139
    
    
    
    17,924EBITDA
    
    $
    57,207
    
    
    $
    (1,011
    )
    
    $
    56,196Total assets
    
    $
    546,941
    
    
    $
    70,421
    
    
    $
    617,362Six months ended June 30, 2004:Revenue
    
    $
    144,878
    
    
    $
    5,881
    
    
    $
    150,759Net income (loss)
    
    $
    17,011
    
    
    $
    (4,152
    )
    
    $
    12,859Provision (benefit) for income taxes
    
    
    11,855
    
    
    
    (2,885
    )
    
    
    8,970Interest expense, net
    
    
    8,236
    
    
    
    825
    
    
    
    9,061Depreciation and amortization
    
    
    11,192
    
    
    
    2,726
    
    
    
    13,918EBITDA
    
    $
    48,294
    
    
    $
    (3,486
    )
    
    $
    44,808Total assets
    
    $
    410,934
    
    
    $
    73,811
    
    
    $
    484,745
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6. Supplementary Cash Flow Information
  For the Six Months EndedJune 30,2005
    
    2004Accounts receivable
    
    $
    (2,149
    )
    
    $
    (929
    )Income taxes receivable
    
    
    2,897
    
    
    
    1,314Inventories
    
    
    238
    
    
    
    372Prepaids and other current assets
    
    
    (615
    )
    
    
    1,296Deferred membership origination costs
    
    
    (2,070
    )
    
    
    (492
    )Accounts payable
    
    
    1,867
    
    
    
    (653
    )Accrued expenses
    
    
    5,403
    
    
    
    4,153Deferred revenue
    
    
    6,044
    
    
    
    3,160Deferred rent
    
    
    1,454
    
    
    
    498$
    13,069
    
    
    $
    8,719
 7. Commitments and Contingencies
 Litigation
 
 ITEM 2.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements
   9




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Overview
      10




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Experience Life
   Critical Accounting Policies and Estimates
   11




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Results of Operations
  For the
    
    For theThree Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,2005
    
    2004
    
    2005
    
    2004RevenueCenter revenue:Membership dues
    
    
    67.3
    %
    
    
    66.6
    %
    
    
    67.5
    %
    
    
    66.5
    %Enrollment fees
    
    
    5.7
    
    
    
    6.6
    
    
    
    5.5
    
    
    
    6.4In-center revenue
    
    
    25.1
    
    
    
    23.3
    
    
    
    25.2
    
    
    
    23.2Total center revenue
    
    
    98.1
    
    
    
    96.5
    
    
    
    98.2
    
    
    
    96.1Other revenue
    
    
    1.9
    
    
    
    3.5
    
    
    
    1.8
    
    
    
    3.9Total revenue
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Operating expensesCenter operations
    
    
    55.3
    
    
    
    52.8
    
    
    
    55.4
    
    
    
    52.7Advertising and marketing
    
    
    2.7
    
    
    
    3.6
    
    
    
    3.7
    
    
    
    4.3General and administrative
    
    
    7.7
    
    
    
    7.3
    
    
    
    7.5
    
    
    
    7.7Other operating
    
    
    3.3
    
    
    
    5.8
    
    
    
    3.3
    
    
    
    6.0Depreciation and amortization
    
    
    9.6
    
    
    
    9.1
    
    
    
    9.7
    
    
    
    9.2Total operating expenses
    
    
    78.6
    
    
    
    78.6
    
    
    
    79.6
    
    
    
    79.9Income from operations
    
    
    21.4
    
    
    
    21.4
    
    
    
    20.4
    
    
    
    20.1Interest expense, net
    
    
    3.4
    
    
    
    5.8
    
    
    
    3.8
    
    
    
    5.9Equity in earnings of affiliate
    
    
    0.3
    
    
    
    0.3
    
    
    
    0.3
    
    
    
    0.3Total other expense
    
    
    3.1
    
    
    
    5.5
    
    
    
    3.5
    
    
    
    5.6Income before income taxes
    
    
    18.3
    
    
    
    15.9
    
    
    
    16.9
    
    
    
    14.5Provision for income taxes
    
    
    7.5
    
    
    
    6.5
    
    
    
    6.9
    
    
    
    6.0Net income
    
    
    10.8
    %
    
    
    9.4
    %
    
    
    10.0
    %
    
    
    8.5
    %Other financial and operating data:Average center revenue per membership
    
    $
    294
    
    
    $
    282
    
    
    $
    585
    
    
    $
    567Average in-center revenue per membership
    
    $
    75
    
    
    $
    68
    
    
    $
    150
    
    
    $
    136Centers open at end of period
    
    
    41
    
    
    
    34
    
    
    
    41
    
    
    
    34Number of memberships at end of period
    
    
    335,816
    
    
    
    277,924
    
    
    
    335,816
    
    
    
    277,924
 Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004
 Total revenue.
  
    
    67.0% was from membership dues, which increased $13.3 million, due to increased
memberships at new and existing centers.
    
    31.1% was from in-center revenue, which increased $6.2 million primarily as a
result of our members increased use of our personal training, 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 $75 for the three months ended June 30, 2005, from $68 for the three months ended June
30, 2004.
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
    
    1.9% was from enrollment fees, which are deferred until a center opens and
recognized on a straight-line basis over 36 months. Enrollment fees increased $0.4 million
for the three months ended June 30, 2005 to $5.5 million. Our number of memberships
increased 20.8%, to 335,816 at June 30, 2005, from 277,924 at June 30, 2004.
  Center operations expenses.
 Advertising and marketing expenses.
 General and administrative expenses.
 Other operating expenses.
 Depreciation and amortization.
 Interest expense, net.
 Provision for income taxes.
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Net income.
 Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004
 Total revenue.
  
    
    67.0% was from membership dues, which increased $24.6 million, due to increased
memberships at new and existing centers.
    
    31.5% was from in-center revenue, which increased $11.6 million primarily as a
result of our members increased use of our personal training, 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 $150 for the six months ended June 30, 2005, from $136 for the six months ended June 30,
2004.
    
    1.5% was from enrollment fees, which are deferred until a center opens and
recognized on a straight-line basis over 36 months. Enrollment fees increased $0.6 million
for the six months ended June 30, 2005 to $10.1 million. Our number of memberships
increased 20.8%, to 335,816 at June 30, 2005, from 277,924 at June 30, 2004.
  Center operations expenses.
 Advertising and marketing expenses.
 General and administrative expenses.
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##### Table of Contents



Other operating expenses.
 Depreciation and amortization.
 Interest expense, net.
 Provision for income taxes.
 Net income.
 Liquidity and Capital Resources
 Liquidity
  Operating Activities
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##### Table of Contents



Investing Activities
    For the Six MonthsEnded June 30,2005
    
    2004(In thousands)Purchases of property and equipment
    
    $
    83,266
    
    
    $
    58,721Non-cash property and equipment purchases
financed through notes payable
    
    
    
    
    
    
    2,954Non-cash property and equipment purchases
financed through capital lease obligations
    
    
    
    
    
    
    145Total capital expenditures
    
    $
    83,266
    
    
    $
    61,820
  For the Six MonthsEnded June 30,2005
    
    2004(In thousands)Capital expenditures for new construction
    
    $
    68,307
    
    
    $
    50,164Capital expenditures for maintenance and updating
existing centers and corporate infrastructure
    
    
    14,959
    
    
    
    11,656Total capital expenditures
    
    $
    83,266
    
    
    $
    61,820
  Financing Activities
  16




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Factors That May Affect Future Results
 If we are unable to identify and acquire suitable sites for new sports and athletic, professional
fitness, family recreation and resort/spa centers, our revenue growth rate and profits may be
negatively impacted.
  We may be unable to attract and retain members, which could have a negative effect on our business.
  Delays in new center openings could have a material adverse affect on our financial performance.
  
    
    obtaining acceptable financing for construction of new sites;
    
    obtaining entitlements, permits and licenses necessary to complete construction of the
new center on schedule;
    
    recruiting, training and retaining qualified management and other personnel;
    
    securing access to labor and materials necessary to develop and construct our centers;
    
    delays due to material shortages, labor issues, weather conditions or other acts of God,
discovery of contaminants, accidents, deaths or injunctions; and
    
    general economic conditions.
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Our continued growth could place strains on our management, employees, information systems and
internal controls which may adversely impact our business and the value of our shareholders
investment.
  The opening of new centers in existing locations may negatively impact our comparable-center
revenue increases and our operating margins.
   Our debt levels may limit our flexibility in obtaining additional financing and in pursuing other
business opportunities.
   
    
    our ability to obtain additional financing, if necessary, for capital expenditures,
working capital, acquisitions or other purposes may be impaired or such financing may not be
available on favorable terms;
    
    we will need a substantial portion of our cash flow to pay the principal of, and interest
on, our indebtedness, including indebtedness that we may incur in the future;
    
    payments on our indebtedness will reduce the funds that would otherwise be available for
our operations and future business opportunities;
    
    a substantial decrease in our cash flows from operations could make it difficult for us
to meet our debt service requirements and force us to modify our operations;
    
    we may be more highly leveraged than our competitors, which may place us at a competitive
disadvantage;
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##### Table of Contents




    
    our debt level may make us more vulnerable and less flexible than our competitors to a
downturn in our business or the economy in general; and
    
    some of our debt has a variable rate of interest, which increases our vulnerability to
interest rate fluctuations.
  Because of the capital-intensive nature of our business, we may have to incur additional
indebtedness or issue new equity securities and, if we are not able to obtain additional capital,
our ability to operate or expand our business may be impaired and our operating results could be
adversely affected.
  The health club industry is highly competitive and our competitors may have greater name
recognition than we have.
  Competitors could copy our business model and erode our market share, brand recognition and
profitability.
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##### Table of Contents



We have significant operations concentrated in certain geographic areas, and any disruption in the
operations of our centers in any of these areas could harm our operating results.
  If we cannot retain our key personnel and hire additional highly qualified personnel, we may not be
able to successfully manage our operations and pursue our strategic objectives.
  If our founder and chief executive officer leaves our company for any reason, it could have a
material adverse effect on us.
  We could be subject to claims related to health or safety risks at our centers.
  We are subject to extensive government regulation, and changes in these regulations could have a
negative effect on our financial condition and results of operations.
  
    
    general rules and regulations of the Federal Trade Commission, state and local consumer
protection agencies and state statutes that prescribe certain forms and provisions of
membership contracts and that govern the advertising, sale and collection of our
memberships;
    
    state and local health regulations; and
    
    regulation of rehabilitation service providers.
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##### Table of Contents



We have introduced other business initiatives that may not become profitable.
  We could be subject to claims related to our nutritional products.
  If it becomes necessary to protect or defend our intellectual property rights or if we infringe on
the intellectual property rights of others, we may be required to pay royalties or fees or become
involved in costly litigation.
  Our business could be affected by acts of war or terrorism.
  We will be exposed to risks relating to evaluations of controls required by Section 404 of the
Sarbanes-Oxley Act of 2002
  22




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
  23




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   Nominee
    
    For
    
    WithheldBahram Akradi
    
    
    28,215,570
    
    
    
    46,901Timothy C. DeVries
    
    
    27,878,975
    
    
    
    383,496James F. Halpin
    
    
    27,880,010
    
    
    
    382,461Guy C. Jackson
    
    
    28,221,555
    
    
    
    40,916David A. Landau
    
    
    27,878,022
    
    
    
    384,449Stephen R. Sefton
    
    
    28,221,555
    
    
    
    40,916
   
 ITEM 5. OTHER INFORMATION
  24




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##### Table of Contents



ITEM 6. EXHIBITS
 Exhibits filed with this report
 Exhibit No.
    
    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
of Form S-1 (File No.
333-113764), filed with
the Commission on May
21, 2004.4
    
    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
    
    Credit Agreement, dated as of April
15, 2005, among the Company, U.S.
Bank National Association, as
administrative agent and lead
arranger, J.P. Morgan Securities,
Inc., as syndication agent, and the
banks party thereto from time to
time.
    
    Incorporated by
reference to Exhibit
10.1 to the Registrants
Form 8-K dated April 15,
2005 (File No.
001-32230)10.2
    
    Security Agreement, dated as of
April 15, 2005, among the Company
and U.S. Bank National Association,
as administrative agent.
    
    Incorporated by
reference to Exhibit
10.2 to the Registrants
Form 8-K dated April 15,
2005 (File No.
001-32230)31.1
    
    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
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##### Table of Contents



SIGNATURES
  LIFE TIME FITNESS, INC.By:/s/ Bahram AkradiName: Bahram AkradiTitle: Chairman of the Board of
Directors, President and ChiefExecutive 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)
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##### Table of Contents



INDEX TO EXHIBITS
 Exhibit No.
    
    Description
    
    Page3.1
    
    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
of Form S-1 (File No.
333-113764), filed with
the Commission on May
21, 2004.4
    
    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
    
    Credit Agreement, dated as of April
15, 2005, among the Company, U.S.
Bank National Association, as
administrative agent and lead
arranger, J.P. Morgan Securities,
Inc., as syndication agent, and the
banks party thereto from time to
time.
    
    Incorporated by
reference to Exhibit
10.1 to the Registrants
Form 8-K dated April 15,
2005 (File No.
001-32230)10.2
    
    Security Agreement, dated as of
April 15, 2005, among the Company
and U.S. Bank National Association,
as administrative agent.
    
    Incorporated by
reference to Exhibit
10.2 to the Registrants
Form 8-K dated April 15,
2005 (File No.
001-32230)31.1
    
    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
 27