##### 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, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File No. 001-32230
 
 
 Life
Time Fitness, Inc.
  Minnesota
(State or other jurisdiction of 
incorporation or organization)6442 City West Parkway 
Eden Prairie, Minnesota
(Address of principal executive offices)
    
    41-1689746
(I.R.S. Employer
Identification No.)55344
(Zip Code)
 952-947-0000
 
 þ o
  þ o o
 o þ




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##### 



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




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
 September 30,
    
    
    December 31,2007
    
    
    2006ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    773
    
    
    $
    6,880Accounts receivable, net
    
    
    3,561
    
    
    
    2,320Inventories
    
    
    12,737
    
    
    
    8,773Prepaid expenses and other current assets
    
    
    11,820
    
    
    
    9,201Deferred membership origination costs
    
    
    15,427
    
    
    
    12,575Income tax receivable
    
    
    2,755
    
    
    
    97Total current assets
    
    
    47,073
    
    
    
    39,846PROPERTY AND EQUIPMENT, net
    
    
    1,162,502
    
    
    
    902,122RESTRICTED CASH
    
    
    6,991
    
    
    
    4,738DEFERRED MEMBERSHIP ORIGINATION COSTS
    
    
    13,686
    
    
    
    10,875OTHER ASSETS
    
    
    44,026
    
    
    
    30,095TOTAL ASSETS
    
    $
    1,274,278
    
    
    $
    987,676LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Current maturities of long-term debt
    
    $
    9,641
    
    
    $
    15,228Accounts payable
    
    
    15,503
    
    
    
    8,878Construction accounts payable
    
    
    51,350
    
    
    
    49,285Accrued expenses
    
    
    43,460
    
    
    
    37,191Deferred revenue
    
    
    34,772
    
    
    
    29,773Total current liabilities
    
    
    154,726
    
    
    
    140,355LONG-TERM DEBT, net of current portion
    
    
    478,776
    
    
    
    374,327DEFERRED RENT LIABILITY
    
    
    25,551
    
    
    
    25,716DEFERRED INCOME TAXES
    
    
    34,020
    
    
    
    38,584DEFERRED REVENUE
    
    
    17,513
    
    
    
    15,917OTHER LIABILITIES
    
    
    11,394
    
    
    
    264Total liabilities
    
    
    721,980
    
    
    
    595,163COMMITMENTS AND CONTINGENCIES (Note 8)SHAREHOLDERS EQUITY:Undesignated preferred stock, 10,000,000
shares authorized; none issued or
outstanding
    
    
    
    
    
    
    Common stock, $.02 par value, 50,000,000
shares authorized; 39,090,794 and
36,817,199 shares issued and outstanding,
respectively
    
    
    783
    
    
    
    737Additional paid-in capital
    
    
    370,675
    
    
    
    259,905Retained earnings
    
    
    180,840
    
    
    
    131,871Total shareholders equity
    
    
    552,298
    
    
    
    392,513TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    1,274,278
    
    
    $
    987,676
  3




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 For the Three
    
    
    For the NineMonths Ended
    
    
    Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006REVENUE:Membership dues
    
    $
    111,744
    
    
    $
    88,774
    
    
    $
    318,939
    
    
    $
    245,123Enrollment fees
    
    
    6,501
    
    
    
    6,073
    
    
    
    18,565
    
    
    
    16,717In-center revenue
    
    
    47,517
    
    
    
    36,319
    
    
    
    137,305
    
    
    
    102,440Total center revenue
    
    
    165,762
    
    
    
    131,166
    
    
    
    474,809
    
    
    
    364,280Other revenue
    
    
    3,688
    
    
    
    3,575
    
    
    
    9,879
    
    
    
    8,341Total revenue
    
    
    169,450
    
    
    
    134,741
    
    
    
    484,688
    
    
    
    372,621OPERATING EXPENSES:Center operations
    
    
    97,626
    
    
    
    77,711
    
    
    
    281,153
    
    
    
    211,344Advertising and marketing
    
    
    5,359
    
    
    
    4,933
    
    
    
    18,167
    
    
    
    15,504General and administrative
    
    
    9,750
    
    
    
    8,729
    
    
    
    30,931
    
    
    
    28,405Other operating
    
    
    4,255
    
    
    
    3,858
    
    
    
    11,371
    
    
    
    9,491Depreciation and amortization
    
    
    14,917
    
    
    
    11,716
    
    
    
    43,282
    
    
    
    35,381Total operating expenses
    
    
    131,907
    
    
    
    106,947
    
    
    
    384,904
    
    
    
    300,125Income from operations
    
    
    37,543
    
    
    
    27,794
    
    
    
    99,784
    
    
    
    72,496OTHER INCOME (EXPENSE):Interest expense, net of
interest income of $169, $49,
$324 and $198, respectively
    
    
    (7,135
    )
    
    
    (4,204
    )
    
    
    (19,032
    )
    
    
    (12,461
    )Equity in earnings of affiliate
    
    
    316
    
    
    
    188
    
    
    
    917
    
    
    
    682Total other income (expense)
    
    
    (6,819
    )
    
    
    (4,016
    )
    
    
    (18,115
    )
    
    
    (11,779
    )INCOME BEFORE INCOME TAXES
    
    
    30,724
    
    
    
    23,778
    
    
    
    81,669
    
    
    
    60,717PROVISION FOR INCOME TAXES
    
    
    12,374
    
    
    
    10,139
    
    
    
    32,700
    
    
    
    24,260NET INCOME
    
    $
    18,350
    
    
    $
    13,639
    
    
    $
    48,969
    
    
    $
    36,457BASIC EARNINGS PER COMMON SHARE
    
    $
    0.49
    
    
    $
    0.38
    
    
    $
    1.32
    
    
    $
    1.01DILUTED EARNINGS PER COMMON SHARE
    
    $
    0.48
    
    
    $
    0.37
    
    
    $
    1.30
    
    
    $
    0.99WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 
BASIC
    
    
    37,630
    
    
    
    36,172
    
    
    
    37,061
    
    
    
    36,006WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 
DILUTED
    
    
    38,309
    
    
    
    37,060
    
    
    
    37,651
    
    
    
    36,976
  4




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 For the Nine Months EndedSeptember 30,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    48,969
    
    
    $
    36,457Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    43,282
    
    
    
    35,381Deferred income taxes
    
    
    4,856
    
    
    
    3,549Loss on disposal of property and equipment, net
    
    
    281
    
    
    
    562Amortization of deferred financing costs
    
    
    628
    
    
    
    517Share-based compensation
    
    
    5,671
    
    
    
    6,169Excess tax benefit from stock option exercises
    
    
    (4,501
    )
    
    
    (5,406
    )Changes in operating assets and liabilities
    
    
    8,953
    
    
    
    25,653Other
    
    
    (795
    )
    
    
    127Net cash provided by operating activities
    
    
    107,344
    
    
    
    103,009CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (310,478
    )
    
    
    (172,598
    )Proceeds from sale of property and equipment
    
    
    4,664
    
    
    
    6,571Proceeds from property insurance settlement
    
    
    48
    
    
    
    464Increase in other assets
    
    
    (6,568
    )
    
    
    (8,663
    )Increase in restricted cash
    
    
    (2,253
    )
    
    
    (1,264
    )Net cash used in investing activities
    
    
    (314,587
    )
    
    
    (175,490
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from long-term borrowings
    
    
    105,000
    
    
    
    1,650Repayments on long-term borrowings
    
    
    (9,279
    )
    
    
    (15,938
    )Proceeds from revolving credit facility, net
    
    
    2,800
    
    
    
    75,000Increase in deferred financing costs
    
    
    (2,008
    )
    
    
    (672
    )Proceeds from common stock offering, net of
underwriting discount and offering costs
    
    
    92,510
    
    
    
    Excess tax benefit from stock option exercises
    
    
    4,501
    
    
    
    5,406Proceeds from exercise of stock options
    
    
    7,612
    
    
    
    8,925Net cash provided by financing activities
    
    
    201,136
    
    
    
    74,371INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (6,107
    )
    
    
    1,890CASH AND CASH EQUIVALENTS  Beginning of period
    
    
    6,880
    
    
    
    4,680CASH AND CASH EQUIVALENTS  End of period
    
    $
    773
    
    
    $
    6,570SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash payments for interest, including capitalized
interest of $5,792 and $3,575, respectively
    
    $
    23,637
    
    
    $
    14,743Cash payments for income taxes
    
    $
    24,982
    
    
    $
    13,489SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:Purchases of property and equipment in accounts payable
    
    $
    2,548
    
    
    $
    10,198
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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 
 NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Basis of Presentation
   2. Share-Based Compensation
    Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Share-based compensation expense related to
stock options
    
    $
    705
    
    
    $
    821
    
    
    $
    2,406
    
    
    $
    5,045Share-based compensation expense related to
restricted shares
    
    
    1,120
    
    
    
    423
    
    
    
    3,174
    
    
    
    1,124Share-based compensation expense related to ESPP
    
    
    30
    
    
    
    
    
    
    
    91
    
    
    
    Total share-based compensation expense
    
    $
    1,855
    
    
    $
    1,244
    
    
    $
    5,671
    
    
    $
    6,169
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WeightedAverageWeighted
    
    
    Remaining
    
    
    AggregateAverage
    
    
    Contractual
    
    
    IntrinsicExercise
    
    
    Term (in
    
    
    Value (inOptions
    
    Shares
    
    
    Price
    
    
    years)
    
    
    thousands)Outstanding at December 31, 2006
    
    
    1,724,599
    
    
    $
    20.15Granted
    
    
    2,477
    
    
    
    50.85Exercised
    
    
    (454,439
    )
    
    
    16.75Canceled
    
    
    (22,800
    )
    
    
    25.21Outstanding at September 30, 2007
    
    
    1,249,837
    
    
    $
    21.36
    
    
    
    6.8
    
    
    $
    49,971Vested or Expected to Vest at
September 30, 2007
    
    
    1,195,809
    
    
    $
    21.18
    
    
    
    6.7
    
    
    $
    48,021Exercisable at September 30, 2007
    
    
    668,889
    
    
    $
    17.98
    
    
    
    6.3
    
    
    $
    29,004
   Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,Weighted Average Valuation Assumptions (1)
    
    2007
    
    2006
    
    2007
    
    2006Risk-free interest rate (2)
    
    
    
    
    4.7
    %
    
    
    4.7
    %
    
    
    4.9
    %Expected dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    Expected stock price volatility (3)
    
    
    
    
    36.0
    %
    
    
    36.9
    %
    
    
    36.0
    %Expected life of stock options (in years) (3)
    
    
    
    
    5.0
    
    
    
    5.0
    
    
    
    5.0
 
 (1)
    
    Forfeitures are estimated based on historical experience and projected employee
turnover.(2)
    
    Based on the five-year Treasury constant maturity interest rate with the term
that is consistent with the expected life of our stock options.(3)
    
    We estimate the expected life and volatility of stock options based on an
average of the expected lives and volatilities assumptions reported by a peer group of
publicly traded companies.(4)
    
    No options were granted in the three months ended September 30, 2007.   Restricted Shares
    
    Range of Market PriceOutstanding
    
    per Share on Grant DateBalance at December 31, 2006
    
    
    210,894
    
    
    $
    24.75-50.82Granted
    
    
    147,176
    
    
    
    49.06-53.95Canceled
    
    
    (3,020
    )
    
    
    46.51-49.06Vested
    
    
    (63,682
    )
    
    
    24.75-50.82Balance at September 30, 2007
    
    
    291,368
    
    
    $
    24.75-53.95
 7




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3. Earnings per Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net income
    
    $
    18,350
    
    
    $
    13,639
    
    
    $
    48,969
    
    
    $
    36,457Weighted average number of
common shares outstanding 
basic
    
    
    37,630
    
    
    
    36,172
    
    
    
    37,061
    
    
    
    36,006Effect of dilutive stock options
and restricted stock awards
    
    
    679
    
    
    
    888
    
    
    
    590
    
    
    
    970Weighted average number of
common shares outstanding 
diluted
    
    
    38,309
    
    
    
    37,060
    
    
    
    37,651
    
    
    
    36,976Basic earnings per common share
    
    $
    0.49
    
    
    $
    0.38
    
    
    $
    1.32
    
    
    $
    1.01Diluted earnings per common share
    
    $
    0.48
    
    
    $
    0.37
    
    
    $
    1.30
    
    
    $
    0.99
 4. Common Stock Offering
  8




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5. Operating Segments
   Centers
    
    
    All Other
    
    
    ConsolidatedThree months ended September 30, 2007:Revenue
    
    $
    165,762
    
    
    $
    3,688
    
    
    $
    169,450Net income (loss)
    
    $
    20,877
    
    
    $
    (2,527
    )
    
    $
    18,350Provision (benefit) for income taxes
    
    
    14,059
    
    
    
    (1,685
    )
    
    
    12,374Interest expense, net
    
    
    4,590
    
    
    
    2,545
    
    
    
    7,135Depreciation and amortization
    
    
    13,327
    
    
    
    1,590
    
    
    
    14,917EBITDA
    
    $
    52,853
    
    
    $
    (77
    )
    
    $
    52,776Total assets
    
    $
    1,136,862
    
    
    $
    137,416
    
    
    $
    1,274,278Three months ended September 30, 2006:Revenue
    
    $
    131,166
    
    
    $
    3,575
    
    
    $
    134,741Net income (loss)
    
    $
    15,302
    
    
    $
    (1,663
    )
    
    $
    13,639Provision (benefit) for income taxes
    
    
    11,248
    
    
    
    (1,109
    )
    
    
    10,139Interest expense, net
    
    
    3,126
    
    
    
    1,078
    
    
    
    4,204Depreciation and amortization
    
    
    10,250
    
    
    
    1,466
    
    
    
    11,716EBITDA
    
    $
    39,926
    
    
    $
    (228
    )
    
    $
    39,698Total assets
    
    $
    779,345
    
    
    $
    116,526
    
    
    $
    895,871Nine months ended September 30, 2007:Revenue
    
    $
    474,809
    
    
    $
    9,879
    
    
    $
    484,688Net income (loss)
    
    $
    55,057
    
    
    $
    (6,088
    )
    
    $
    48,969Provision (benefit) for income taxes
    
    
    36,759
    
    
    
    (4,059
    )
    
    
    32,700Interest expense, net
    
    
    13,382
    
    
    
    5,650
    
    
    
    19,032Depreciation and amortization
    
    
    38,447
    
    
    
    4,835
    
    
    
    43,282EBITDA
    
    $
    143,645
    
    
    $
    338
    
    
    $
    143,983Total assets
    
    $
    1,136,862
    
    
    $
    137,416
    
    
    $
    1,274,278Nine months ended September 30, 2006:Revenue
    
    $
    364,280
    
    
    $
    8,341
    
    
    $
    372,621Net income (loss)
    
    $
    40,971
    
    
    $
    (4,514
    )
    
    $
    36,457Provision (benefit) for income taxes
    
    
    27,270
    
    
    
    (3,010
    )
    
    
    24,260Interest expense, net
    
    
    9,659
    
    
    
    2,802
    
    
    
    12,461Depreciation and amortization
    
    
    30,913
    
    
    
    4,468
    
    
    
    35,381EBITDA
    
    $
    108,813
    
    
    $
    (254
    )
    
    $
    108,559Total assets
    
    $
    779,345
    
    
    $
    116,526
    
    
    $
    895,871
 9




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6. Income Taxes
     7. Supplementary Cash Flow Information
  For the Nine Months EndedSeptember 30,2007
    
    
    2006Accounts receivable
    
    $
    (1,241
    )
    
    $
    2,330Income taxes receivable
    
    
    1,843
    
    
    
    7,255Inventories
    
    
    (3,964
    )
    
    
    (1,275
    )Prepaids and other current assets
    
    
    (2,619
    )
    
    
    (2,357
    )Deferred membership origination costs
    
    
    (5,663
    )
    
    
    (3,005
    )Accounts payable
    
    
    6,189
    
    
    
    1,415Accrued expenses
    
    
    7,539
    
    
    
    11,063Deferred revenue
    
    
    6,595
    
    
    
    7,640Deferred rent
    
    
    (165
    )
    
    
    2,587Other liabilities
    
    
    439
    
    
    
    $
    8,953
    
    
    $
    25,653
 8. Commitments and Contingencies
 Litigation
 10




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




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Experience Life
   Critical Accounting Policies and Estimates
   12




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##### Table of Contents



Results of Operations
  For the Three
    
    For the NineMonths Ended
    
    Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006RevenueCenter revenue:Membership dues
    
    
    66.0
    %
    
    
    65.9
    %
    
    
    65.8
    %
    
    
    65.8
    %Enrollment fees
    
    
    3.8
    
    
    
    4.5
    
    
    
    3.8
    
    
    
    4.5In-center revenue
    
    
    28.0
    
    
    
    27.0
    
    
    
    28.4
    
    
    
    27.5Total center revenue
    
    
    97.8
    
    
    
    97.4
    
    
    
    98.0
    
    
    
    97.8Other revenue
    
    
    2.2
    
    
    
    2.6
    
    
    
    2.0
    
    
    
    2.2Total revenue
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Operating expensesCenter operations
    
    
    57.6
    
    
    
    57.7
    
    
    
    58.0
    
    
    
    56.7Advertising and marketing
    
    
    3.2
    
    
    
    3.6
    
    
    
    3.8
    
    
    
    4.2General and administrative
    
    
    5.8
    
    
    
    6.5
    
    
    
    6.4
    
    
    
    7.5Other operating
    
    
    2.5
    
    
    
    2.9
    
    
    
    2.3
    
    
    
    2.6Depreciation and amortization
    
    
    8.8
    
    
    
    8.7
    
    
    
    8.9
    
    
    
    9.5Total operating expenses
    
    
    77.9
    
    
    
    79.4
    
    
    
    79.4
    
    
    
    80.5Income from operations
    
    
    22.1
    
    
    
    20.6
    
    
    
    20.6
    
    
    
    19.5Other income (expense)Interest expense, net
    
    
    (4.2
    )
    
    
    (3.1
    )
    
    
    (3.9
    )
    
    
    (3.3
    )Equity in earnings of affiliate
    
    
    0.2
    
    
    
    0.1
    
    
    
    0.2
    
    
    
    0.1Total other income (expense)
    
    
    (4.0
    )
    
    
    (3.0
    )
    
    
    (3.7
    )
    
    
    (3.2
    )Income before income taxes
    
    
    18.1
    
    
    
    17.6
    
    
    
    16.9
    
    
    
    16.3Provision for income taxes
    
    
    7.3
    
    
    
    7.5
    
    
    
    6.8
    
    
    
    6.5Net income
    
    
    10.8
    %
    
    
    10.1
    %
    
    
    10.1
    %
    
    
    9.8
    %Other financial and operating data:Average center revenue per membership
    
    $
    345
    
    
    $
    328
    
    
    $
    1,016
    
    
    $
    958Average in-center revenue per membership
    
    $
    99
    
    
    $
    91
    
    
    $
    294
    
    
    $
    269Centers open at end of period
    
    
    67
    
    
    
    56
    
    
    
    67
    
    
    
    56Number of memberships at end of period
    
    
    492,410
    
    
    
    427,765
    
    
    
    492,410
    
    
    
    427,765
 Three months ended September 30, 2007, Compared to Three months ended September 30, 2006
 Total revenue.
  
    
    66.4% was from membership dues, which increased $23.0 million, due to increased
memberships at new centers, junior membership programs and increased sales of Sports,
Advantage and other value-added memberships.
    
    32.4% was from in-center revenue, which increased $11.2 million primarily as a result of
our members increased use of our personal training, member activities, LifeCafe and
LifeSpa products and services. As a result of this in-center revenue growth and our focus
on broadening our offerings to our members, average in-center revenue per membership
increased to $99 for the three months ended September 30, 2007, from $91 for the three
months ended September 30, 2006.
 13




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##### Table of Contents




    
    1.2% 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 September 30, 2007 to $6.5 million. Our number of memberships increased 15.1% to
492,410 at September 30, 2007, from 427,765 at September 30, 2006.
  Center operations expenses.
 Advertising and marketing expenses.
 General and administrative expenses.
 Other operating expenses.
 Depreciation and amortization.
 Interest expense, net.
 Provision for income taxes.
 Net income.
 Nine months ended September 30, 2007, Compared to Nine months ended September 30, 2006
 Total revenue.
  14




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##### Table of Contents




    
    66.8% was from membership dues, which increased $73.8 million, due to increased
memberships at new centers, junior membership programs and increased sales of Sports,
Advantage and other value-added memberships.
    
    31.5% was from in-center revenue, which increased $34.9 million primarily as a result of
our members increased use of our personal training, member activities, LifeCafe and
LifeSpa products and services. As a result of this in-center revenue growth and our focus
on broadening our offerings to our members, average in-center revenue per membership
increased to $294 for the nine months ended September 30, 2007, from $269 for the nine
months ended September 30, 2006.
    
    1.7% was from enrollment fees, which are deferred until a center opens and recognized on
a straight-line basis over 36 months. Enrollment fees increased $1.8 million for the nine
months ended September 30, 2007 to $18.6 million. Our number of memberships increased 15.1%
to 492,410 at September 30, 2007, from 427,765 at September 30, 2006.
  Center operations expenses.
 Advertising and marketing expenses.
 General and administrative expenses.
 Other operating expenses.
 Depreciation and amortization.
 Interest expense, net.
 Provision for income taxes.
 Net income.
 15




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##### Table of Contents



Liquidity and Capital Resources
 Liquidity
  Operating Activities
   Investing Activities
    For the Nine Months EndedSeptember 30,2007
    
    
    2006Capital expenditures for new center land, building and construction
    
    $
    245,981
    
    
    $
    148,667Capital expenditures for updating existing centers, center
acquisitions and corporate infrastructure
    
    
    64,497
    
    
    
    23,931Total capital expenditures
    
    $
    310,478
    
    
    $
    172,598
   16




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##### Table of Contents



Financing Activities
          17




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##### Table of Contents



Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 4. CONTROLS AND PROCEDURES
  
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Issuer Purchases of Equity Securities in Third Quarter 2007
 Total Number
    
    
    MaximumOf Shares
    
    
    Number ofTotal
    
    
    
    
    
    
    Purchased as
    
    
    Shares thatNumber of
    
    
    Average
    
    
    Part of Publicly
    
    
    May Yet beShares
    
    
    Price Paid
    
    
    Announced
    
    
    Purchased UnderPeriod
    
    Purchased
    
    
    per Share
    
    

Plan (1)
    
    

the Plan (1)July 1  31, 2007
    
    
    10,400
    
    
    $
    53.37
    
    
    
    10,400
    
    
    
    478,865August 1  31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    478,865September 1  30, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    478,865Total
    
    
    10,400
    
    
    $
    53.37
    
    
    
    10,400
    
    
    
    478,865
 (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. 18




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##### Table of Contents



ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 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 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
    
    Underwriting Agreement dated August
24, 2007, among the Registrant and
Credit Suisse Securities (USA) LLC
    
    Incorporated by
reference to Item
1.01 to the
Registrants Form
8-K dated August
24, 2007 (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 and Accounting Officer
    
    Filed Electronically32
    
    Section 1350 Certifications
    
    Filed Electronically
 19




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##### Table of Contents



SIGNATURES
  LIFE TIME FITNESS, INC.By:/s/ Bahram AkradiName: Bahram Akradi
Title: Chairman of the Board of Directors, President and
Chief Executive Officer
(Principal Executive Officer and Director)By:/s/ Michael R. RobinsonName: Michael R. Robinson
Title: Executive Vice President and Chief Financial Officer
(Principal Financial Officer)By:/s/ John M. HugoName: John M. HugoTitle: Controller(Principal Accounting Officer)
 20




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##### Table of Contents



INDEX TO EXHIBITS
 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 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
    
    Underwriting Agreement dated August
24, 2007, among the Registrant and
Credit Suisse Securities (USA) LLC
    
    Incorporated by
reference to Item
1.01 to the
Registrants Form
8-K dated August
24, 2007 (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 and Accounting Officer
    
    Filed Electronically32
    
    Section 1350 Certifications
    
    Filed Electronically
 21