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8-K - FORM 8-K - LIFE TIME FITNESS, INC.c63069e8vk.htm
Exhibit 99.1
(LIFETIME LOGO)
Investor Contact: John Heller – 952-229-7427 or ir@lifetimefitness.com
Media Contact: Jason Thunstrom – 952-229-7435 or pr@lifetimefitness.com
FOR IMMEDIATE RELEASE
LIFE TIME FITNESS ANNOUNCES FOURTH QUARTER AND
FULL-YEAR 2010 FINANCIAL RESULTS
    Revenue Growth for the Quarter and Full-Year were 9.8% and 9.1%, Respectively
 
    For the Quarter, Diluted EPS was $0.43 and Non-GAAP Diluted EPS was $0.52
 
    For the Full Year, Diluted EPS was $2.00 and Non-GAAP Diluted EPS was $2.08
CHANHASSEN, Minn. (February 17, 2011) – Life Time Fitness, Inc. (NYSE: LTM) today reported its financial results for the fourth quarter and full year ended December 31, 2010.
     Fourth quarter 2010 revenue grew 9.8% to $223.7 million from $203.7 million during the same period last year. Revenue for the year totaled $912.8 million, up 9.1% from $837.0 million during 2009.
     In June 2009, the Company granted performance-based restricted stock to its senior management team. In fourth quarter 2010, the Company determined that achieving the 2011 diluted earnings per share performance criteria required for vesting of 50% of the stock (representing approximately 450,000 shares of restricted stock) was probable. As a result, the Company recognized a cumulative, non-cash performance share-based compensation expense of $5.6 million (pretax) in the quarter. The Company anticipates recognizing the remaining portion of performance share-based compensation expense of approximately $4.0 million (pretax) ratably in 2011.
     Net income for the quarter was $17.6 million, including $5.6 million (pretax) of performance share-based compensation expense, or $0.43 per diluted share, compared to net income of $18.4 million, or $0.46 per diluted share, for 4Q 2009. Net income for the full year was $80.7 million, including $5.6 million (pretax) of performance share-based compensation expense, or $2.00 per diluted share, compared to $72.4 million, or $1.82 per diluted share, for 2009.
     Non-GAAP net income for the quarter, excluding $5.6 million (pretax) of performance share-based compensation expense, was $21.0 million, or $0.52 per diluted share. For the full year, non-GAAP net income, excluding $5.6 million (pretax) of performance share-based compensation expense, was $84.1 million, or $2.08 per diluted share.
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Life Time Fitness Fourth Quarter and Full-Year 2010 Results – Page 2
     “I am pleased with our 2010 operating results, which continue to demonstrate the differentiation and power of our business model,” said Bahram Akradi, Life Time Fitness chairman, president and chief executive officer. “We remained highly focused on increasing member retention and growing same center sales in 2010, and we delivered significant progress in both areas. In particular, I want to highlight our member connectivity and engagement initiatives in which we’ve invested over the last couple of years. Not only did these efforts contribute positively to our financial and member retention results, they also reinforce the uniqueness and value of our healthy way of life approach. By helping customers connect to and engage in their areas of interest, we help them achieve their health and fitness goals. We remain steadfast in our commitment to continually refine member connectivity and engagement in 2011. Furthermore, we are also focused on member retention and growth through the expansion of our member interest offerings. The fact that we have taken an expense in connection with the challenging performance-based restricted stock vesting metric reinforces our continued confidence, which is reflected in our 2011 business outlook.”
     During the quarter, Life Time opened its third planned large-format center for 2010 in Centennial, Colorado, marking the Company’s third location in the Denver market. In January 2011, the Company opened a large-format center in Syosset, New York, the first Life Time location in New York. In May, the Company plans to open its second and third large-format centers planned for 2011 in Colorado Springs, Colorado, and Summerlin, Nevada. These new centers will represent the fourth Life Time location in Colorado and first in the Las Vegas market, respectively.
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Life Time Fitness Fourth Quarter and Full-Year 2010 Results – Page 3
Three and Twelve Months Ended December 31, 2010, Financial Highlights:
Total revenue for the fourth quarter grew 9.8% to $223.7 million from $203.7 million. Total revenue for the full year grew 9.1% to $912.8 million from $837.0 million in 2009.
                     
(Period-over-period growth)   4Q 2010 vs. 4Q 2009   2010 vs. 2009
  Membership dues     7.4 %     6.8 %
  Enrollment fees     (10.1 %)     (6.5 %)
  In-center revenue     16.3 %     14.4 %
  Same-center revenue (13th month of operation)     5.9 %     5.0 %
  Same-center revenue (37th month of operation)     4.0 %     2.3 %
  Average center revenue per membership     $362 – up 3.3%       $1,475 – up 4.3%  
  Average in-center revenue per membership     $104 – up 9.9%       $440 – up 10.0%  
Memberships grew 5.8% to 612,556 at December 31, 2010, from 578,937 at December 31, 2009.
    Attrition in 4Q 2010 was 9.9%, down from 10.8% in the prior-year period.
 
    Attrition improved to 36.3% in 2010 compared to 40.6% in 2009.
Total operating expenses during 4Q 2010 totaled $189.1 million compared to $165.6 million for 4Q 2009. Full-year operating expenses were $752.1 million compared with $688.1 million in 2009. Excluding the $5.6 million (pretax) of performance share-based compensation expense, 4Q 2010 and full-year operating expenses were $183.5 million and $746.5 million, respectively.
    Operating margin was 15.5% for 4Q 2010 compared to 18.7% in the prior-year period.
 
    Full-year operating margin was 17.6% compared to 17.8% in 2009.
 
    Excluding the performance share-based compensation expense, 4Q 2010 and full-year operating margin were 18.0% and 18.2%, respectively.
             
(Expense as a percent of total revenue)   4Q 2010 vs. 4Q 2009   2010 vs. 2009
 
Center operations (includes $1.2 million of performance share-based compensation expense in 4Q 2010 and 2010)
  60.9% vs. 60.4%   61.5% vs. 60.5%
 
Advertising and marketing
  3.6% vs. 3.0%   3.0% vs. 3.2%
 
General and administrative (includes $4.4 million of performance share-based compensation expense in 4Q 2010 and 2010)
  6.8% vs. 4.7%   5.2% vs. 5.1%
 
Other operating
  2.9% vs. 2.0%   2.6% vs. 2.6%
 
Depreciation and amortization
  10.3% vs. 11.1%   10.1% vs. 10.8%
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Life Time Fitness Fourth Quarter and Full-Year 2010 Results – Page 4
Net income for 4Q 2010 was $17.6 million, or $0.43 per diluted share, compared to net income of $18.4 million, or $0.46 per diluted share, for 4Q 2009. Net income for the full year was $80.7 million, or $2.00 per diluted share, compared to $72.4 million, or $1.82 per diluted share, for 2009.
Non-GAAP net income for the quarter, excluding the performance share-based compensation expense, was $21.0 million, or $0.52 per diluted share. For the full year, non-GAAP net income, excluding the performance share-based compensation expense, was $84.1 million, or $2.08 per diluted share.
The effective income tax rate for 2010 was 39.8% compared with 39.6% in 2009.
EBITDA for 4Q 2010 was $57.8 million compared with $61.1 million in 4Q 2009. Full-year EBITDA was $254.2 million compared with $240.9 million in 2009.
    As a percentage of total revenue, EBITDA in 4Q 2010 was 25.8% compared to 30.0% in 4Q 2009.
 
    EBITDA margin in 2010 was 27.9% compared to 28.8% in 2009.
Adjusted EBITDA for the quarter, excluding performance share-based compensation expense, was $63.4 million. Full-year adjusted EBITDA, excluding performance share-based compensation expense, was $259.9 million.
    As a percentage of total revenue, adjusted EBITDA in 4Q 2010 was 28.4%.
 
    Adjusted EBITDA margin in 2010 was 28.5%.
Cash flows from operations for the full year 2010 totaled $192.3 million compared to $186.2 million in 2009.
Weighted average fully diluted shares for 4Q 2010 totaled 40.6 million compared to 40.3 million in 4Q 2009. For the full year 2010, weighted average fully diluted shares totaled 40.4 million compared to 39.9 million in 2009.
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Life Time Fitness Fourth Quarter and Full-Year 2010 Results – Page 5
2011 Business Outlook:
The following statements are based on the Company’s current expectations for fiscal year 2011, which incorporate 2010 operating trends and are subject to the risks and uncertainties described below:
    Revenue is expected to be up 6-8%, or $970-990 million, driven primarily by growth in in-center revenue and corporate businesses, as well as membership growth in new and ramping centers.
 
    Net income is expected to be up 13-18%, or $91.0-95.0 million, driven by revenue growth and cost efficiencies.
 
    Non-GAAP net income (excluding the impact of performance share-based compensation expense) is expected to be $93.5-97.5 million.
 
    Diluted earnings per common share is expected to be $2.19-2.29.
 
    Non-GAAP diluted earnings per common share (excluding the impact of performance share-based compensation expense) is expected to be $2.25-2.35.
          As announced on February 10, 2011, the Company will hold a conference call today at 10:00 a.m. ET to discuss its fourth quarter and full-year 2010 results. Bahram Akradi, Michael Robinson, executive vice president and chief financial officer, and John Heller, senior director, investor relations & treasurer, will host the conference call. The conference call will be webcast and may be accessed via the Company’s Investor Relations section of its website at lifetimefitness.com. A replay of the call will be available the same day via the Company’s website beginning at approximately 1:00 p.m. ET.
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About Life Time Fitness, Inc.
As the Healthy Way of Life Company, Life Time Fitness (NYSE: LTM) delivers the certified professionals, comprehensive businesses and incredible destinations that help people positively change their lives every day. The Company’s healthy way of life approach enables its customers to achieve their health and fitness goals by engaging in their areas of interest — or discovering new passions — both inside and outside of Life Time’s distinctive and large sports, professional fitness, family recreation and spa destinations. As of February 17, 2011, the Company operated 90 centers under the LIFE TIME FITNESS® and LIFE TIME ATHLETICSM brands primarily in suburban locations in 20 states and 24 major markets. Additional information about Life Time centers, programs and services is available at lifetimefitness.com.
Forward-Looking Statements
Certain information contained in this press release may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause the Company’s actual results in the future to differ materially from its historical results and those presently anticipated or projected. Among these factors are attracting and retaining members, risks related to our debt levels and debt covenants, our ability to access existing credit facilities and obtain additional financing, strains on our business from continued growth, risks related to maintenance of our data, competition from other health and fitness centers, identifying and acquiring suitable sites for new centers, delays in opening new centers and other factors set forth in the Company’s filings with the Securities and Exchange Commission. Diluted earnings per common share could also be affected by the number of shares outstanding, which depends on factors such as the number of shares issued upon exercise of stock options and future grants of awards pursuant to equity-based incentive plans as well as stock offerings. The Company’s expectations for fiscal year 2011 exclude any unusual items that might occur during the fiscal year, such as litigation matters or the potential recognition of other performance share-based compensation expense related to the June 2009 grants. While the Company has determined that 2011 earnings per common share performance criteria required for vesting of 50% of the stock is probable and anticipates recognizing additional performance share-based compensation expense in 2011, the Company may not be able to meet those criteria due to risks and uncertainties, including those factors described above.
The Company cautions investors not to place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update such statement to reflect events or circumstances arising after such date. All remarks made during the Company’s financial results conference call will be current at the time of the call and the Company undertakes no obligation to update the replay.

 


 

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
                 
    December 31,     December 31,  
    2010     2009  
    (Unaudited)          
ASSETS
               
CURRENT ASSETS:
               
Cash and cash equivalents
  $ 12,227     $ 6,282  
Accounts receivable, net
    5,806       4,026  
Center operating supplies and inventories
    17,281       14,621  
Prepaid expenses and other current assets
    13,318       12,938  
Deferred membership origination costs
    14,728       20,278  
Deferred income taxes
    1,463       660  
Income tax receivable
    12,081        
 
           
Total current assets
    76,904       58,805  
PROPERTY AND EQUIPMENT, net
    1,570,234       1,512,993  
RESTRICTED CASH
    2,572       2,941  
DEFERRED MEMBERSHIP ORIGINATION COSTS
    7,251       8,716  
GOODWILL
    14,617       5,690  
OTHER ASSETS
    46,902       42,380  
 
           
TOTAL ASSETS
  $ 1,718,480     $ 1,631,525  
 
           
 
               
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
CURRENT LIABILITIES:
               
Current maturities of long-term debt
  $ 7,265     $ 16,716  
Accounts payable
    18,913       14,429  
Construction accounts payable
    24,342       9,882  
Accrued expenses
    50,802       48,235  
Deferred revenue
    32,095       36,939  
 
           
Total current liabilities
    133,417       126,201  
LONG-TERM DEBT, net of current portion
    605,279       643,630  
DEFERRED RENT LIABILITY
    32,187       29,048  
DEFERRED INCOME TAXES
    89,839       77,189  
DEFERRED REVENUE
    7,279       8,819  
OTHER LIABILITIES
    9,901       9,207  
 
           
Total liabilities
    877,902       894,094  
 
           
SHAREHOLDERS’ EQUITY:
               
Common stock
    839       829  
Additional paid-in capital
    414,922       395,121  
Retained earnings
    424,787       344,095  
Accumulated other comprehensive loss
    30       (2,614 )
 
           
Total shareholders’ equity
    840,578       737,431  
 
           
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
  $ 1,718,480     $ 1,631,525  
 
           

 


 

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
                                 
    For the     For the  
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2010     2009     2010     2009  
    (Unaudited)     (Unaudited)     (Unaudited)          
REVENUE:
                               
Membership dues
  $ 149,899     $ 139,535     $ 603,231     $ 564,605  
Enrollment fees
    5,849       6,508       24,426       26,138  
In-center revenue
    62,984       54,153       266,426       232,834  
 
                       
Total center revenue
    218,732       200,196       894,083       823,577  
Other revenue
    4,941       3,502       18,761       13,424  
 
                       
Total revenue
    223,673       203,698       912,844       837,001  
 
                       
OPERATING EXPENSES:
                               
Center operations
    136,130       123,130       561,070       506,443  
Advertising and marketing
    8,158       6,154       27,098       26,299  
General and administrative
    15,454       9,604       48,060       42,776  
Other operating
    6,398       4,061       23,544       21,852  
Depreciation and amortization
    22,928       22,643       92,313       90,770  
 
                       
Total operating expenses
    189,068       165,592       752,085       688,140  
 
                       
Income from operations
    34,605       38,106       160,759       148,861  
 
                       
OTHER INCOME (EXPENSE):
                               
Interest expense, net
    (5,989 )     (7,333 )     (27,795 )     (30,338 )
Equity in earnings of affiliate
    270       317       1,176       1,302  
 
                       
Total other income (expense)
    (5,719 )     (7,016 )     (26,619 )     (29,036 )
 
                       
INCOME BEFORE INCOME TAXES
    28,886       31,090       134,140       119,825  
PROVISION FOR INCOME TAXES
    11,292       12,713       53,448       47,441  
 
                       
NET INCOME
  $ 17,594     $ 18,377     $ 80,692     $ 72,384  
 
                       
BASIC EARNINGS PER COMMON SHARE
  $ 0.44     $ 0.47     $ 2.03     $ 1.84  
 
                       
DILUTED EARNINGS PER COMMON SHARE
  $ 0.43     $ 0.46     $ 2.00     $ 1.82  
 
                       
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC
    40,010       39,444       39,809       39,297  
 
                       
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED
    40,619       40,331       40,385       39,870  
 
                       

 


 

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
                 
    For the  
    Year Ended  
    December 31,  
    2010     2009  
    (Unaudited)        
CASH FLOWS FROM OPERATING ACTIVITIES:
               
Net income
  $ 80,692     $ 72,384  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    92,313       90,770  
Deferred income taxes
    6,162       23,270  
Loss on disposal of property and equipment, net
    2,001       1,229  
Gain on sale of land held for sale
    (527 )     (1,132 )
Amortization of deferred financing costs
    2,706       2,544  
Share-based compensation
    12,835       8,082  
Excess tax benefit related to share-based payment arrangements
    (2,453 )     (507 )
Changes in operating assets and liabilities
    (1,207 )     (10,951 )
Other
    (257 )     514  
 
           
Net cash provided by operating activities
    192,265       186,203  
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchases of property and equipment
    (131,671 )     (146,632 )
Acquisitions, net of cash acquired
    (16,659 )      
Proceeds from sale of property and equipment
    851       8  
Proceeds from sale of land held for sale
    1,019       1,954  
Decrease (increase) in other assets
    (2,943 )     390  
Decrease in restricted cash
    369       995  
 
           
Net cash used in investing activities
    (149,034 )     (143,285 )
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from long-term borrowings
          18,151  
Repayments of long-term borrowings
    (40,394 )     (11,001 )
Repayments of revolving credit facility, net
    (3,900 )     (56,500 )
Increase in deferred financing costs
    (499 )     (1,092 )
Excess tax benefit related to share-based payment arrangements
    2,453       507  
Proceeds from exercise of stock options
    5,142       2,470  
Proceeds from employee stock purchase plan
    907        
Stock purchased for employee stock purchase plan
    (995 )      
 
           
Net cash used in financing activities
    (37,286 )     (47,465 )
 
           
 
               
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    5,945       (4,547 )
CASH AND CASH EQUIVALENTS — Beginning of period
    6,282       10,829  
 
           
CASH AND CASH EQUIVALENTS — End of period
  $ 12,227     $ 6,282  
 
           

 


 

Non-GAAP Financial Measures This release and the related conference call disclose certain non-GAAP financial measures.
EBITDA and Adjusted EBITDA. Earnings Before Interest, Income Taxes and Depreciation and Amortization (EBITDA) is a non-GAAP disclosure consisting of net income plus interest expense, net, provision for income taxes and depreciation and amortization. This term, as the Company defines it, may not be comparable to a similarly titled measure used by other companies and is not a measure of performance presented in accordance with GAAP. The Company uses EBITDA as a measure of operating performance. The funds depicted by EBITDA are not necessarily available for discretionary use if they are reserved for particular capital purposes, to maintain compliance with debt covenants, to service debt or to pay taxes. EBITDA should not be considered as a substitute for net income, net cash provided by operating activities or other income or cash flow data prepared in accordance with GAAP. Additional details related to EBITDA are provided in the Form 8-K that the Company filed with the Securities and Exchange Commission on the date of this press release.
In 4Q 2010, the Company determined that achieving a 2011 earnings per common share performance criteria required for the vesting of 50% of performance share-based restricted stock granted in June 2009 was probable. As a result, the Company recognized a cumulative performance share-based compensation expense of $5.6 million (pretax) in 4Q 2010. Adjusted EBITDA is the Company’s EBITDA excluding the above compensation expense.
Additional details related to EBITDA and Adjusted EBITDA are provided in the Form 8-K that the Company filed with the Securities and Exchange Commission on the date of this press release.
The following table provides a reconciliation of net income, the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA:
RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
(In thousands, except margin percentage data)
(Unaudited)
                                 
    For the Three Months Ended     For the Year Ended  
    December 31,     December 31,  
    2010     2009     2010     2009  
Net income
  $ 17,594     $ 18,377     $ 80,692     $ 72,384  
Interest expense, net
    5,989       7,333       27,795       30,338  
Provision for income taxes
    11,292       12,713       53,448       47,441  
Depreciation and amortization
    22,928       22,643       92,313       90,770  
 
                       
EBITDA
    57,803       61,066       254,248       240,933  
Performance share-based compensation expense
    5,611             5,611        
 
                       
Adjusted EBITDA
  $ 63,414     $ 61,066     $ 259,859     $ 240,933  
 
                       
 
                               
EBITDA margin as a percentage of total revenue
    25.8 %     30.0 %     27.9 %     28.8 %
Performance share-based compensation expense
    2.6 %     0.0 %     0.6 %     0.0 %
 
                       
Adjusted EBITDA margin as a percentage of total revenue
    28.4 %     30.0 %     28.5 %     28.8 %
 
                       

 


 

Free Cash Flow. Free cash flow is a non-GAAP measure consisting of net cash provided by operating activities, less purchases of property and equipment. This term, as the Company defines it, may not be comparable to a similarly titled measure used by other companies and does not represent the total increase or decrease in the cash balance presented in accordance with GAAP. The Company uses free cash flow as a measure of cash generated after spending on property and equipment. Free cash flow should not be considered as a substitute for net cash provided by operating activities prepared in accordance with GAAP. Additional details related to free cash flow are provided in the Form 8-K that the Company filed with the Securities and Exchange Commission on the date of this press release.
The following table provides a reconciliation of net cash provided by operating activities, the most directly comparable GAAP measure, to free cash flow:
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(In thousands)
(Unaudited)
                                 
    For the Three Months Ended     For the Year Ended  
    December 31,     December 31,  
    2010     2009     2010     2009  
Net cash provided by operating activities
  $ 46,118     $ 47,652     $ 192,265     $ 186,203  
Less: Purchases of property and equipment
    (45,539 )     (29,779 )     (131,671 )     (146,632 )
 
                       
Free cash flow
  $ 579     $ 17,873     $ 60,594     $ 39,571  
 
                       
Additional Non-GAAP Financial Measures. In 4Q 2010, the Company determined that achieving a 2011 earnings per common share performance criteria required for the vesting of 50% of performance-based restricted stock granted in June 2009 was probable. As a result, the Company recognized a cumulative performance share-based compensation expense of $5.6 million (pretax) in 4Q 2010. The Company believes that in order to properly understand its short-term and long-term financial trends from operations, investors may find it useful to exclude the impact of this expense from net income, diluted earnings per common share, operating margin and operating expenses. The resulting non-GAAP financial measures may also provide useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and may be useful for period over period comparisons of such operations. Each of the tables below reconciles these non-GAAP financial measures to the most directly comparable GAAP financial measures.

 


 

Non-GAAP Net Income. Non-GAAP net income is a non-GAAP financial measure consisting of net income excluding the performance share-based compensation expense recognized in 4Q 2010. The following table provides a reconciliation of net income, the most directly comparable GAAP measure, to non-GAAP net income.
RECONCILIATION OF CONSOLIDATED NET INCOME
TO CONSOLIDATED NON-GAAP NET INCOME
(In thousands)
                                 
    For the Three Months Ended     For the Year Ended  
    December 31,     December 31,  
    2010     2009     2010     2009  
Net income
  $ 17,594     $ 18,377     $ 80,692     $ 72,384  
Performance share-based compensation expense
    3,446             3,446        
 
                       
Non-GAAP net income
  $ 21,040     $ 18,377     $ 84,138     $ 72,384  
 
                       
Non-GAAP Diluted Earnings Per Common Share. Non-GAAP diluted earnings per common share is a non-GAAP financial measure consisting of diluted earnings per common share excluding the per common share impact of the performance share-based compensation expense recognized in 4Q 2010. The following table provides a reconciliation of diluted earnings per common share, the most directly comparable GAAP measure, to non-GAAP diluted earnings per common share.
RECONCILIATION OF CONSOLIDATED DILUTED EARNINGS PER COMMON SHARE
TO CONSOLIDATED NON-GAAP DILUTED EARNINGS PER COMMON SHARE
                                 
    For the Three Months Ended     For the Year Ended  
    December 31,     December 31,  
    2010     2009     2010     2009  
Diluted earnings per common share
  $ 0.43     $ 0.46     $ 2.00     $ 1.82  
Performance share-based compensation expense
    0.08             0.08        
 
                       
Non-GAAP diluted earnings per common share
  $ 0.52 *   $ 0.46     $ 2.08     $ 1.82  
 
                       
 
*   rounding

 


 

Non-GAAP Operating Margin. Non-GAAP operating margin is a non-GAAP financial measure consisting of operating margin excluding the performance share-based compensation expense recognized in 4Q 2010. The following table provides a reconciliation of operating margin, the most directly comparable GAAP measure, to non-GAAP operating margin.
RECONCILIATION OF CONSOLIDATED OPERATING MARGIN
TO CONSOLIDATED NON-GAAP OPERATING MARGIN
(In thousands, except margin percentages)
                                 
    For the Three Months Ended     For the Year Ended  
    December 31,     December 31,  
    2010     2009     2010     2009  
Operating margin
  $ 34,605     $ 38,106     $ 160,759     $ 148,861  
Performance share-based compensation expense
    5,611             5,611        
 
                       
Non-GAAP operating margin
  $ 40,216     $ 38,106     $ 166,370     $ 148,861  
 
                       
 
                               
Operating margin as a percentage of total revenue
    15.5 %     18.7 %     17.6 %     17.8 %
Performance share-based compensation expense
    2.5 %     0.0 %     0.6 %     0.0 %
 
                       
Non-GAAP operating margin as a percentage of total revenue
    18.0 %     18.7 %     18.2 %     17.8 %
 
                       
Non-GAAP Operating Expenses. Non-GAAP operating expenses is a non-GAAP financial measure consisting of operating expenses excluding the performance share-based compensation expense recognized in 4Q 2010. The following table provides a reconciliation of operating expenses, the most directly comparable GAAP measure, to non-GAAP operating expenses.
RECONCILIATION OF CONSOLIDATED OPERATING EXPENSES
TO CONSOLIDATED NON-GAAP OPERATING EXPENSES
(In thousands)
                                 
    For the Three Months Ended     For the Year Ended  
    December 31,     December 31,  
    2010     2009     2010     2009  
Operating expenses
  $ 189,068     $ 165,592     $ 752,085     $ 688,140  
Performance share-based compensation expense
    5,611             5,611        
 
                       
Non-GAAP operating expenses
  $ 183,457     $ 165,592     $ 746,474     $ 688,140  
 
                       
Reconciliation of 2011 Business Outlook. In 4Q 2010, the Company determined that achieving a 2011 diluted earnings per common share performance criteria required for the vesting of 50% of performance-based restricted stock granted in June 2009 was probable. As a result, the Company anticipates recognizing approximately $4.0 million (pretax) of performance share-based compensation expense in 2011 relating to the June 2009 grants. The Company believes that in order to properly understand its short-term and long-term financial trends from operations, investors may find it useful to exclude the impact of this expense from the Company’s 2011 business outlook. The resulting non-GAAP financial measures may also provide useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations and may be useful for period-over-period comparisons of such operations.

 


 

As a consequence, the Company’s 2011 business outlook included a non-GAAP net income range, which excludes the anticipated recognition of approximately $4.0 million (pretax) of performance share-based compensation expense. The following table provides a reconciliation of the Company’s anticipated range of 2011 net income to the non-GAAP net income range.
RECONCILIATION OF 2011 BUSINESS OUTLOOK RELATED TO CONSOLIDATED NET INCOME RANGE
TO CONSOLIDATED NON-GAAP NET INCOME RANGE
(In millions)
                 
    For the Year Ended  
    December 31, 2011  
    Low     High  
Net income
  $ 91.0     $ 95.0  
Performance share-based compensation expense
    2.5       2.5  
 
           
Non-GAAP net income
  $ 93.5     $ 97.5  
 
           
Similarly, the Company’s 2011 business outlook also included a non-GAAP diluted earnings per common share range, which excludes the per common share impact of the anticipated recognition of approximately $4.0 million (pretax) of performance share-based compensation expense. The following table provides a reconciliation of the Company’s anticipated range of 2011 diluted earnings per common share to the non-GAAP diluted earnings per common share range.
RECONCILIATION OF 2011 BUSINESS OUTLOOK RELATED TO CONSOLIDATED DILUTED EARNINGS
PER COMMON SHARE RANGE TO CONSOLIDATED NON-GAAP DILUTED EARNINGS PER COMMON SHARE RANGE
                 
    For the Year Ended  
    December 31, 2011  
    Low     High  
Diluted earnings per common share
  $ 2.19     $ 2.29  
Performance share-based compensation expense
    0.06       0.06  
 
           
Non-GAAP diluted earnings per common share
  $ 2.25     $ 2.35