##### 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 September 30, 2009
 or
  ̈
    
    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
 
 (LIFETIME FITNESS LOGO)
Life Time Fitness, Inc.
  Minnesota
(State or other jurisdiction of 
incorporation or organization)
    
    41-1689746
(I.R.S. Employer
Identification No.)2902 Corporate Place 
Chanhassen, Minnesota
(Address of principal executive offices)
    
    55317
(Zip Code)
 952-947-0000
 
 þ o
 o o
  Large accelerated filer þ
Accelerated filer oNon-accelerated filer o(do not check if smaller reporting company)
Smaller reporting company o
 o þ




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##### 



TABLE OF CONTENTS
 PagePART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsConsolidated Balance Sheets as of September 30, 2009 (unaudited) and December 31, 2008
    
    
    3Consolidated Statements of Operations for the Three and Nine Months Ended September
30, 2009 and 2008 (unaudited)
    
    
    4Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009
and 2008 (unaudited)
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    21Item 4.
    
    Controls and Procedures
    
    
    22PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    22Item 1A.
    
    Risk Factors
    
    
    22Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3.
    
    Defaults Upon Senior Securities
    
    
    22Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    22Item 5.
    
    Other Information
    
    
    22Item 6.
    
    Exhibits
    
    
    23SIGNATURES
    
    
    24EX-31.1EX-31.2EX-32




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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)
 September 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    8,137
    
    
    $
    10,829Accounts receivable, net
    
    
    3,192
    
    
    
    6,114Inventories and center operating supplies
    
    
    13,935
    
    
    
    14,632Prepaid expenses and other current assets
    
    
    14,964
    
    
    
    10,994Deferred membership origination costs
    
    
    21,497
    
    
    
    19,877Deferred income taxes
    
    
    1,872
    
    
    
    1,365Total current assets
    
    
    63,597
    
    
    
    63,811PROPERTY AND EQUIPMENT, net
    
    
    1,507,073
    
    
    
    1,515,957RESTRICTED CASH
    
    
    3,785
    
    
    
    3,936DEFERRED MEMBERSHIP ORIGINATION COSTS
    
    
    11,726
    
    
    
    14,210OTHER ASSETS
    
    
    49,967
    
    
    
    49,789TOTAL ASSETS
    
    $
    1,636,148
    
    
    $
    1,647,703LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Current maturities of long-term debt
    
    $
    12,130
    
    
    $
    10,335Accounts payable
    
    
    16,926
    
    
    
    14,842Construction accounts payable
    
    
    10,602
    
    
    
    63,418Accrued expenses
    
    
    52,323
    
    
    
    46,230Deferred revenue
    
    
    37,230
    
    
    
    36,098Total current liabilities
    
    
    129,211
    
    
    
    170,923LONG-TERM DEBT, net of current portion
    
    
    671,165
    
    
    
    702,569DEFERRED RENT LIABILITY
    
    
    28,464
    
    
    
    27,925DEFERRED INCOME TAXES
    
    
    60,252
    
    
    
    51,982DEFERRED REVENUE
    
    
    10,622
    
    
    
    13,719OTHER LIABILITIES
    
    
    19,390
    
    
    
    27,684Total liabilities
    
    
    919,104
    
    
    
    994,802COMMITMENTS AND CONTINGENCIES (Note 6)SHAREHOLDERS EQUITY:Undesignated preferred stock, 10,000,000
shares authorized; none issued or
outstanding
    
    
    
    
    
    
    Common stock, $.02 par value, 75,000,000
and 50,000,000 shares authorized,
respectively; 41,391,895 and 39,612,775
shares issued and outstanding, respectively
    
    
    828
    
    
    
    793Additional paid-in capital
    
    
    393,864
    
    
    
    385,095Retained earnings
    
    
    325,718
    
    
    
    271,711Accumulated other comprehensive loss
    
    
    (3,366
    )
    
    
    (4,698
    )Total shareholders equity
    
    
    717,044
    
    
    
    652,901TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    1,636,148
    
    
    $
    1,647,703
  3




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008REVENUE:Membership dues
    
    $
    144,832
    
    
    $
    131,232
    
    
    $
    425,070
    
    
    $
    377,001Enrollment fees
    
    
    6,617
    
    
    
    6,818
    
    
    
    19,630
    
    
    
    19,991In-center revenue
    
    
    59,129
    
    
    
    56,151
    
    
    
    178,681
    
    
    
    167,385Total center revenue
    
    
    210,578
    
    
    
    194,201
    
    
    
    623,381
    
    
    
    564,377Other revenue
    
    
    3,742
    
    
    
    4,608
    
    
    
    9,922
    
    
    
    11,290Total revenue
    
    
    214,320
    
    
    
    198,809
    
    
    
    633,303
    
    
    
    575,667OPERATING EXPENSES:Center operations
    
    
    127,468
    
    
    
    116,300
    
    
    
    383,313
    
    
    
    337,139Advertising and marketing
    
    
    5,756
    
    
    
    7,287
    
    
    
    20,145
    
    
    
    23,608General and administrative
    
    
    9,669
    
    
    
    9,453
    
    
    
    33,172
    
    
    
    30,707Other operating
    
    
    8,017
    
    
    
    4,926
    
    
    
    17,791
    
    
    
    13,696Depreciation and amortization
    
    
    23,428
    
    
    
    18,720
    
    
    
    68,127
    
    
    
    52,500Total operating expenses
    
    
    174,338
    
    
    
    156,686
    
    
    
    522,548
    
    
    
    457,650Income from operations
    
    
    39,982
    
    
    
    42,123
    
    
    
    110,755
    
    
    
    118,017OTHER INCOME (EXPENSE):Interest expense, net of
interest income of $208, $30,
$370 and $119, respectively
    
    
    (7,651
    )
    
    
    (7,185
    )
    
    
    (23,005
    )
    
    
    (21,301
    )Equity in earnings of affiliate
    
    
    316
    
    
    
    336
    
    
    
    985
    
    
    
    985Total other income (expense)
    
    
    (7,335
    )
    
    
    (6,849
    )
    
    
    (22,020
    )
    
    
    (20,316
    )INCOME BEFORE INCOME TAXES
    
    
    32,647
    
    
    
    35,274
    
    
    
    88,735
    
    
    
    97,701PROVISION FOR INCOME TAXES
    
    
    12,014
    
    
    
    13,700
    
    
    
    34,728
    
    
    
    38,895NET INCOME
    
    $
    20,633
    
    
    $
    21,574
    
    
    $
    54,007
    
    
    $
    58,806BASIC EARNINGS PER COMMON SHARE
    
    $
    0.52
    
    
    $
    0.55
    
    
    $
    1.38
    
    
    $
    1.51DILUTED EARNINGS PER COMMON SHARE
    
    $
    0.51
    
    
    $
    0.55
    
    
    $
    1.36
    
    
    $
    1.49WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING  BASIC
    
    
    39,410
    
    
    
    39,025
    
    
    
    39,221
    
    
    
    38,946WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING  DILUTED
    
    
    40,255
    
    
    
    39,370
    
    
    
    39,687
    
    
    
    39,350
  4




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 For the Nine Months EndedSeptember 30,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    54,007
    
    
    $
    58,806Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    68,127
    
    
    
    52,500Deferred income taxes
    
    
    6,957
    
    
    
    8,094Provision for doubtful accounts
    
    
    (8
    )
    
    
    15Loss on disposal of property and equipment, net
    
    
    818
    
    
    
    1,159Gain on sale of land held for sale
    
    
    (873
    )
    
    
    Amortization of deferred financing costs
    
    
    1,925
    
    
    
    1,078Share-based compensation
    
    
    5,907
    
    
    
    5,989Excess tax benefit related to share-based payment arrangements
    
    
    (433
    )
    
    
    (38
    )Equity in earnings of affiliate
    
    
    (985
    )
    
    
    (985
    )Changes in operating assets and liabilities
    
    
    2,000
    
    
    
    16,840Other
    
    
    1,109
    
    
    
    54Net cash provided by operating activities
    
    
    138,551
    
    
    
    143,512CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (116,853
    )
    
    
    (360,551
    )Proceeds from sale of property and equipment
    
    
    8
    
    
    
    161,885Proceeds from sale of land held for sale
    
    
    1,327
    
    
    
    Proceeds from property insurance settlements
    
    
    
    
    
    
    317Increase in other assets
    
    
    (213
    )
    
    
    (6,443
    )Decrease (increase) in restricted cash
    
    
    151
    
    
    
    (2,518
    )Net cash used in investing activities
    
    
    (115,580
    )
    
    
    (207,310
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from long-term borrowings
    
    
    7,813
    
    
    
    39,188Repayments of long-term borrowings
    
    
    (7,755
    )
    
    
    (13,043
    )Proceeds from (repayments of) revolving credit facility, net
    
    
    (27,600
    )
    
    
    42,500Increase in deferred financing costs
    
    
    (745
    )
    
    
    (6,113
    )Excess tax benefit related to share-based payment arrangements
    
    
    433
    
    
    
    38Proceeds from stock option exercises
    
    
    2,191
    
    
    
    2,993Net cash provided by (used in) financing activities
    
    
    (25,663
    )
    
    
    65,563INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (2,692
    )
    
    
    1,765CASH AND CASH EQUIVALENTS  Beginning of period
    
    
    10,829
    
    
    
    5,354CASH AND CASH EQUIVALENTS  End of period
    
    $
    8,137
    
    
    $
    7,119
  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 Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Share-based compensation expense related to
stock options
    
    $
    98
    
    
    $
    533
    
    
    $
    730
    
    
    $
    1,852Share-based compensation expense related to
restricted shares
    
    
    1,752
    
    
    
    1,531
    
    
    
    5,087
    
    
    
    4,039Share-based compensation expense related to ESPP
    
    
    30
    
    
    
    30
    
    
    
    90
    
    
    
    98Total share-based compensation expense
    
    $
    1,880
    
    
    $
    2,094
    
    
    $
    5,907
    
    
    $
    5,989
 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)
  WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateStock
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    
    Price
    
    
    Term (in years)
    
    
    ValueOutstanding at December 31, 2008
    
    
    980,929
    
    
    $
    21.65
    
    
    
    5.6Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Canceled
    
    
    (2,354
    )
    
    $
    31.06Outstanding at March 31, 2009
    
    
    978,575
    
    
    $
    21.63
    
    
    
    5.4
    
    
    $
    632Granted
    
    
    
    
    
    
    Exercised
    
    
    (24,100
    )
    
    $
    8.00Canceled
    
    
    (3,947
    )
    
    $
    29.85Outstanding at June 30, 2009
    
    
    950,528
    
    
    $
    21.94
    
    
    
    5.2
    
    
    $
    2,439Granted
    
    
    
    
    
    
    Exercised
    
    
    (121,950
    )
    
    $
    16.38Canceled
    
    
    (1,000
    )
    
    $
    25.47Outstanding at September 30, 2009
    
    
    827,578
    
    
    $
    22.76
    
    
    
    5.0
    
    
    $
    5,800Vested or Expected to Vest at September 30, 2009
    
    
    825,702
    
    
    $
    22.71
    
    
    
    5.0
    
    
    $
    5,800Exercisable at September 30, 2009
    
    
    806,963
    
    
    $
    22.22
    
    
    
    5.0
    
    
    $
    5,800
    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 of MarketRestricted
    
    Price Per ShareShares
    
    on Grant DateOutstanding at December 31, 2008
    
    
    487,203
    
    
    $
    14.31-53.95Granted
    
    
    657,315
    
    
    $
    9.72Canceled
    
    
    (2,253
    )
    
    $
    14.31-49.06Vested
    
    
    (100,136
    )
    
    $
    14.31-53.95Outstanding at March 31, 2009
    
    
    1,042,129
    
    
    $
    9.72-53.95Granted
    
    
    1,028,514
    
    
    $
    16.39-20.44Canceled
    
    
    (50,366
    )
    
    $
    9.72-50.82Vested
    
    
    (35,206
    )
    
    $
    14.31-50.82Outstanding at June 30, 2009
    
    
    1,985,071
    
    
    $
    9.72-53.95Granted
    
    
    
    
    
    $
    Canceled
    
    
    (140
    )
    
    $
    20.44-46.51Vested
    
    
    (3,174
    )
    
    $
    9.72-51.15Outstanding at September 30, 2009
    
    
    1,981,757
    
    
    $
    9.72-53.95
    8




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
   3. Earnings per Share
   For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income
    
    $
    20,633
    
    
    $
    21,574
    
    
    $
    54,007
    
    
    $
    58,806Weighted average number of common shares
outstanding  basic
    
    
    39,410
    
    
    
    39,025
    
    
    
    39,221
    
    
    
    38,946Effect of dilutive stock options
    
    
    141
    
    
    
    215
    
    
    
    55
    
    
    
    215Effect of dilutive restricted stock awards
    
    
    704
    
    
    
    130
    
    
    
    411
    
    
    
    189Weighted average number of common shares
outstanding  diluted
    
    
    40,255
    
    
    
    39,370
    
    
    
    39,687
    
    
    
    39,350Basic earnings per common share
    
    $
    0.52
    
    
    $
    0.55
    
    
    $
    1.38
    
    
    $
    1.51Diluted earnings per common share
    
    $
    0.51
    
    
    $
    0.55
    
    
    $
    1.36
    
    
    $
    1.49
 4. Operating Segments
  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)
  For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Membership dues
    
    $
    144,832
    
    
    $
    131,232
    
    
    $
    425,070
    
    
    $
    377,001Enrollment fees
    
    
    6,617
    
    
    
    6,818
    
    
    
    19,630
    
    
    
    19,991Personal training
    
    
    27,353
    
    
    
    25,944
    
    
    
    84,492
    
    
    
    81,093Other in-center
    
    
    31,776
    
    
    
    30,207
    
    
    
    94,189
    
    
    
    86,292Other
    
    
    3,742
    
    
    
    4,608
    
    
    
    9,922
    
    
    
    11,290Total revenue
    
    $
    214,320
    
    
    $
    198,809
    
    
    $
    633,303
    
    
    $
    575,667
 5. Supplementary Cash Flow Information
  For the Nine MonthsEnded September 30,2009
    
    
    2008Accounts receivable
    
    $
    2,930
    
    
    $
    (858
    )Income tax receivable
    
    
    
    
    
    
    5,852Inventories and center operating supplies
    
    
    697
    
    
    
    (415
    )Prepaid expenses and other current assets
    
    
    (177
    )
    
    
    2,273Deferred membership origination costs
    
    
    864
    
    
    
    (3,603
    )Other assets
    
    
    (1,598
    )
    
    
    Accounts payable
    
    
    2,954
    
    
    
    (4,637
    )Accrued expenses
    
    
    6,047
    
    
    
    8,757Deferred revenue
    
    
    (1,964
    )
    
    
    181Deferred rent liability
    
    
    539
    
    
    
    1,380Other liabilities
    
    
    (8,292
    )
    
    
    7,910Changes in operating assets and liabilities
    
    $
    2,000
    
    
    $
    16,840
    6. Commitments and Contingencies
 Litigation
 10




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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. Recent Accounting Pronouncements
  8. Derivative Instruments
    9. Fair Value Measurements
   September 30, 2009Carrying
    
    
    EstimatedValue
    
    
    Fair ValueFixed-rate debt
    
    $
    363,132
    
    
    $
    340,742Obligations under capital leases
    
    
    18,929
    
    
    
    18,759Floating-rate debt
    
    
    301,234
    
    
    
    284,763Total
    
    $
    683,295
    
    
    $
    644,264
  11




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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)
     
 Item 2.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements
   Overview
  th
   12




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##### Table of Contents




    
    First, our largest source of revenue is membership dues (67.1% of total revenue for the
nine months ended September 30, 2009) and enrollment fees (3.1% of total revenue for the
nine months ended September 30, 2009) paid by our members. We recognize revenue from
monthly membership dues in the month to which they pertain. We recognize revenue from
enrollment fees over the expected average life of the membership, which we estimate to be
30 months for 2009 and the fourth quarter of 2008, 33 months for the second and third
quarters of 2008 and 36 months for the first quarter of 2008 and prior periods.
 
    
    Second, we generate revenue within a center, which we refer to as in-center revenue, or
in-center businesses (28.2% of total revenue for the nine months ended September 30, 2009),
including fees for personal training, registered dieticians, group fitness training and
other member activities, sales of products at our LifeCafe, sales of products and services
offered at our LifeSpa, tennis programs and renting space in certain of our centers.
 
    
    Third, we have expanded the LIFE TIME FITNESS brand into other wellness-related
offerings that generate revenue, which we refer to as other revenue, or corporate
businesses (1.6% of total revenue for the nine months ended September 30, 2009), including
our media, wellness and athletic events businesses. Our primary media offering is our
magazine, Experience Life. Other revenue also includes two restaurants in the Minneapolis
market and rental income from our Highland Park, Minnesota office building.
   13




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Critical Accounting Policies and Estimates
   14




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Results of Operations
  For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008RevenueCenter revenueMembership dues
    
    
    67.6
    %
    
    
    66.0
    %
    
    
    67.1
    %
    
    
    65.5
    %Enrollment fees
    
    
    3.1
    
    
    
    3.5
    
    
    
    3.1
    
    
    
    3.4In-center revenue
    
    
    27.6
    
    
    
    28.2
    
    
    
    28.2
    
    
    
    29.1Total center revenue
    
    
    98.3
    
    
    
    97.7
    
    
    
    98.4
    
    
    
    98.0Other revenue
    
    
    1.7
    
    
    
    2.3
    
    
    
    1.6
    
    
    
    2.0Total revenue
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Operating expensesCenter operations
    
    
    59.5
    
    
    
    58.4
    
    
    
    60.5
    
    
    
    58.6Advertising and marketing
    
    
    2.7
    
    
    
    3.7
    
    
    
    3.2
    
    
    
    4.1General and administrative
    
    
    4.5
    
    
    
    4.8
    
    
    
    5.2
    
    
    
    5.3Other operating
    
    
    3.7
    
    
    
    2.5
    
    
    
    2.8
    
    
    
    2.4Depreciation and amortization
    
    
    10.9
    
    
    
    9.4
    
    
    
    10.8
    
    
    
    9.1Total operating expenses
    
    
    81.3
    
    
    
    78.8
    
    
    
    82.5
    
    
    
    79.5Income from operations
    
    
    18.7
    
    
    
    21.2
    
    
    
    17.5
    
    
    
    20.5Other income (expense)Interest expense, net
    
    
    (3.6
    )
    
    
    (3.6
    )
    
    
    (3.7
    )
    
    
    (3.7
    )Equity in earnings of affiliate
    
    
    0.1
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.2Total other income (expense)
    
    
    (3.5
    )
    
    
    (3.4
    )
    
    
    (3.5
    )
    
    
    (3.5
    )Income before income taxes
    
    
    15.2
    
    
    
    17.8
    
    
    
    14.0
    
    
    
    17.0Provision for income taxes
    
    
    5.6
    
    
    
    6.9
    
    
    
    5.5
    
    
    
    6.8Net income
    
    
    9.6
    %
    
    
    10.9
    %
    
    
    8.5
    %
    
    
    10.2
    %Other financial and operating data:Comparable center revenue growth13 month (1)
    
    
    (5.4
    %)
    
    
    3.9
    %
    
    
    (4.2
    %)
    
    
    3.8
    %Comparable center revenue growth37 month (1)
    
    
    (8.7
    %)
    
    
    (1.9
    %)
    
    
    (8.5
    %)
    
    
    (1.9
    %)Average revenue per membership
    
    $
    358
    
    
    $
    358
    
    
    $
    1,063
    
    
    $
    1,082Average in-center revenue per membership
    
    $
    100
    
    
    $
    104
    
    
    $
    305
    
    
    $
    321EBITDA (in thousands)
    
    $
    63,726
    
    
    $
    61,179
    
    
    $
    179,867
    
    
    $
    171,502EBITDA margin
    
    
    29.7
    %
    
    
    30.8
    %
    
    
    28.4
    %
    
    
    29.8
    %Capital expenditures (in thousands)
    
    $
    25,128
    
    
    $
    124,974
    
    
    $
    116,853
    
    
    $
    360,551Centers open at end of period
    
    
    84
    
    
    
    77
    
    
    
    84
    
    
    
    77Number of memberships at end of period
    
    
    590,716
    
    
    
    557,164
    
    
    
    590,716
    
    
    
    557,164Total center square footage at end of period (2)
    
    
    8,445,689
    
    
    
    7,645,989
    
    
    
    8,445,689
    
    
    
    7,645,989
 
 (1)
    
    Membership dues, enrollment fees and in-center revenue for a center are included in
comparable center revenue growth  13 monthbeginning on the first day of the thirteenth full
calendar month of the centers operation and are included in comparable center revenue growth
 37 monthbeginning on the first day of the thirty-seventh full calendar month of the
centers operation, at which time it is considered a mature center.(2)
    
    The square footage presented in this table reflects fitness square footage which is the best
metric for the efficiencies of a facility. In a few of our centers, we sublease space to third
parties who operate our pro shop, salon or climbing wall or to hospitals or chiropractors that
use the space to provide physical therapy. The square footage figures include those subleased
areas. The square footage figures exclude areas used for tennis courts and outdoor swimming
pools. These figures are approximations. 15




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##### Table of Contents



Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008
 Total revenue.
  
    
    83.0% was from membership dues, which increased $13.6 million, or 10.4%, due to increased
memberships at new centers. Our number of memberships increased 6.0% to 590,716 at September
30, 2009 from 557,164 at September 30, 2008.
    
    18.2% was from in-center revenue, which increased $3.0 million primarily as a result of
increased sales of our LifeCafe products and services and personal training. Average
in-center revenue per membership decreased from $104 for the three months ended September 30,
2008 to $100 for the three months ended September 30, 2009. We began to see slower in-center
revenue growth in the second half of 2008 through the current period in 2009 due to the
slower economy.
    
    (1.2%) was from enrollment fees, which are deferred until a center opens and recognized on
a straight-line basis over our estimated average life of a membership. Since the fourth
quarter of 2008, the estimated average life of a membership has been 30 months. For the
second and third quarters of 2008, it was 33 months, and for the first quarter of 2008 and
prior, it was 36 months. Enrollment fees decreased by $0.2 million for the three months ended
September 30, 2009 to $6.6 million. In 2008 and 2009, we lowered our enrollment fees to
stimulate new membership demand.
  Center operations expenses.
 Advertising and marketing expenses.
 General and administrative expenses.
 Other operating expenses.
 Depreciation and amortization.
 16




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##### Table of Contents



Interest expense, net.
 Provision for income taxes.
 Net income.
 Nine Months ended September 30, 2009 Compared to Nine Months ended September 30, 2008
 Total revenue.
  
    
    81.5% was from membership dues, which increased $48.1 million, or 12.8%, due to increased
memberships at new centers. Our number of memberships increased 6.0% to 590,716 at September
30, 2009 from 557,164 at September 30, 2008.
    
    19.1% was from in-center revenue, which increased $11.3 million primarily as a result of
increased sales of our LifeCafe products and services and personal training. Average
in-center revenue per membership decreased from $321 for the nine months ended September 30,
2008 to $305 for the nine months ended September 30, 2009. We began to see slower in-center
revenue growth in the second half of 2008 through the current period in 2009 due to the
slower economy.
    
    (0.6%) was from enrollment fees, which are deferred until a center opens and recognized on
a straight-line basis over our estimated average life of a membership. Since the fourth
quarter of 2008, the estimated average life of a membership has been 30 months. For the
second and third quarters of 2008, it was 33 months, and for the first quarter of 2008 and
prior, it was 36 months. Enrollment fees decreased by $0.4 million for the nine months ended
September 30, 2009 to $19.6 million. In 2008 and 2009, we lowered our enrollment fees to
stimulate new membership demand.
  Center operations expenses.
 Advertising and marketing expenses.
 17




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##### Table of Contents



General and administrative expenses.
 Other operating expenses.
 Depreciation and amortization.
 Interest expense, net.
 Provision for income taxes.
 Net income.
 Liquidity and Capital Resources
 Liquidity
  18




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##### Table of Contents



September 30,
    
    
    December 31,2009
    
    
    2008DebtLong-term debt
    
    $
    671,165
    
    
    $
    702,569Current maturities of long-term debt
    
    
    12,130
    
    
    
    10,335Total debt
    
    
    683,295
    
    
    
    712,904Shareholders EquityCommon stock
    
    
    828
    
    
    
    793Additional paid-in capital
    
    
    393,864
    
    
    
    385,095Retained earnings
    
    
    325,718
    
    
    
    271,711Accumulated other comprehensive loss
    
    
    (3,366
    )
    
    
    (4,698
    )Total shareholders equity
    
    
    717,044
    
    
    
    652,901Total capitalization
    
    $
    1,400,339
    
    
    $
    1,365,805
  September 30,
    
    December 31,2009
    
    2008Fixed-rate debt as a percent of total debt
    
    
    56.7
    %
    
    
    54.6
    %Weighted-average annual interest rate of total debt
    
    
    3.7
    %
    
    
    4.5
    %Total debt (net of cash) as a percent of total
capitalization (total debt (net of cash) and total
shareholders equity)
    
    
    48.5
    %
    
    
    51.8
    %Cash provided by operating activities (trailing
twelve months) as a percent of total debt
    
    
    26.1
    %
    
    
    25.7
    %
 Operating Activities
   Investing Activities
   19




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##### Table of Contents



For the Nine MonthsEnded September 30,2009
    
    
    2008Purchases of property and equipment
    
    $
    116,853
    
    
    $
    360,551Non-cash property and equipment financed through capital lease obligations
    
    
    
    
    
    
    12,294Changes in construction accounts payable and accounts payable related to
property and equipment
    
    
    (52,335
    )
    
    
    28,909Non-cash share-based compensation capitalized to projects under development
    
    
    319
    
    
    
    552Total capital expenditures
    
    $
    64,837
    
    
    $
    402,306
  New center building and construction on clubs opened in 2008 and 2009
    
    $
    27,786New center building and construction on clubs to be opened in 2010 and beyond
    
    
    15,435Updating existing centers and corporate infrastructure
    
    
    21,616Total capital expenditures
    
    $
    64,837
   Financing Activities
   September 30,
    
    
    December 31,2009
    
    
    2008Term notes payable to insurance company, monthly
interest and principal payments totaling $1,273
including interest at 8.25% to June 2011
    
    $
    107,150
    
    
    $
    111,812Revolving credit facility, interest only due monthly
at interest rates ranging from LIBOR plus 0.625% to
1.50% or base plus 0.0%, facility expires May 2012
    
    
    387,000
    
    
    
    414,600Term notes payable with monthly interest and principal
payments totaling $632 including interest at 6.03% to
February 2017
    
    
    101,763
    
    
    
    102,752Other
    
    
    68,453
    
    
    
    64,056Total debt (excluding obligations under capital leases)
    
    
    664,366
    
    
    
    693,220Obligations under capital leases
    
    
    18,929
    
    
    
    19,684Total debt
    
    
    683,295
    
    
    
    712,904Less current maturities
    
    
    12,130
    
    
    
    10,335Total long-term debt
    
    $
    671,165
    
    
    $
    702,569
 20




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##### Table of Contents



Revolving Credit Facility
   New Long-Term Debt
   Debt Covenants
   Actual as of
    
    Actual as ofSeptember 30,
    
    December 31,Covenant
    
    Requirement
    
    2009
    
    2008Total Consolidated Debt to EBITDAR
    
    Not more than 4.00 to 1.0
    
    3.45 to 1.0
    
    3.51 to 1.0Senior Debt to EBITDA
    
    Not more than 3.25 to 1.0
    
    2.02 to 1.0
    
    2.22 to 1.0Fixed Charge Coverage Ratio
    
    Not less than 1.60
    
    2.62 to 1.0
    
    3.16 to 1.0
   
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  21




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##### Table of Contents



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 Third Quarter 2009
 Total Number of
    
    Maximum Number ofAverage
    
    Shares Purchased as
    
    Shares that May YetTotal Number of
    
    Price Paid
    
    Part of Publicly
    
    be Purchased UnderPeriod
    
    Shares Purchased
    
    per Share
    
    Announced Plan (1)
    
    the Plan (1)July 1  31, 2009
    
    
    23,921
    
    
    $
    17.17
    
    
    
    23,921
    
    
    
    375,461August 1  31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    375,461September 1  30,
2009
    
    
    73
    
    
    $
    28.49
    
    
    
    73
    
    
    
    375,388Total
    
    
    23,994
    
    
    $
    17.21
    
    
    
    23,994
    
    
    
    375,388
 
 (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
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  22




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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, as amended, of the
Registrant
    
    Incorporated by
reference to
Exhibit 3.1 to the
Registrants Form
8-K dated April 20,
2009 (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, 200431.1
    
    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
 23




---



##### Table of Contents



SIGNATURES
  LIFE TIME FITNESS, INC.By:
    /s/ Bahram AkradiName:
    Bahram AkradiTitle:
    Chairman of the Board of Directors andChief Executive Officer
(Principal Executive Officer and Director) By:
    /s/ Michael R. RobinsonName:
    Michael R. RobinsonTitle:
    Executive Vice President andChief Financial Officer
(Principal Financial Officer)By:
    /s/ John M. HugoName:
    John M. HugoTitle:
    Vice President and Corporate Controller
(Principal Accounting Officer) 24




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##### Table of Contents



INDEX TO EXHIBITS
 Exhibit No.
    
    Description
    
    Method of Filing3.1
    
    Amended and Restated Articles of
Incorporation, as amended, of the
Registrant
    
    Incorporated by
reference to
Exhibit 3.1 to the
Registrants Form
8-K dated April 20,
2009 (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, 200431.1
    
    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