Lifetime Fitness 2008 Annual Report Download - page 38

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Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
Total revenue. Total revenue increased $143.9 million, or 28.1%, to $655.8 million for the year ended December 31,
2007 from $511.9 million for the year ended December 31, 2006.
Total center revenue grew $140.7 million, or 28.1%, to $641.1 million from $500.4 million, driven by a 6.1%
increase in comparable center revenue, opening of eight new centers and the assumption of operations of one leased
facility and the purchase of one existing facility in 2007 and the full-year contribution of 15 centers we opened or
assumed operations of in 2006. Of the $140.7 million increase in total center revenue,
x 67.2% was from membership dues, which increased $94.5 million, or 27.8%, due to increased memberships
at new centers, junior membership programs and increased sales of value-added memberships. Our number of
memberships increased 12.5% to 499,092 at December 31, 2007 from 443,660 at December 31, 2006. Our
membership growth of 12.5% was down from a membership growth rate of 23.8% in 2006 primarily due to
our anniversary of the acquisition of seven leased centers in July 2006, our strategy to reduce memberships in
centers where memberships exceed our target capacity and the effects of a slower economy in the fourth
quarter.
x 31.2% was from in-center revenue, which increased $43.9 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 from $351 for the year ended December 31, 2006 to $387 for the
year ended December 31, 2007.
x 1.6% was from enrollment fees, which are deferred until a center opens and recognized on a straight-line
basis over 36 months. Enrollment fees increased $2.3 million for the year ended December 31, 2007 to $24.7
million.
Other revenue increased $3.2 million, or 27.7%, to $14.7 million for the year ended December 31, 2007 from $11.5
million for the year ended December 31, 2006, which was primarily due to increased advertising revenue from our
media business.
Center operations expenses. Center operations expenses were $377.2 million, or 58.8% of total center revenue (or
57.5% of total revenue), for the year ended December 31, 2007 compared to $292.3 million, or 58.4% of total center
revenue (or 57.1% of total revenue), for the year ended December 31, 2006. This $84.9 million increase primarily
consisted of $49.5 million in additional payroll-related costs to support increased memberships at new centers, an
increase of $18.2 million in facility-related costs, including incremental lease expense for the seven leased centers
for which we assumed operating in late July 2006, utilities and real estate taxes, and an increase in expenses to
support in-center products and services. As a percent of total center revenue, center operations expense increased
slightly due to lower center operating margins associated with new centers including the leased centers.
Advertising and marketing expenses. Advertising and marketing expenses were $25.0 million, or 3.8% of total
revenue, for the year ended December 31, 2007 compared to $20.8 million, or 4.1% of total revenue, for the year
ended December 31, 2006. These expenses increased primarily due to advertising for our new centers and those
centers engaging in presale activities. As a percent of total revenue, advertising and marketing expenses decreased
primarily due to fewer and more efficient marketing campaigns.
General and administrative expenses. General and administrative expenses were $40.8 million, or 6.2% of total
revenue, for the year ended December 31, 2007 compared to $37.8 million, or 7.4% of total revenue, for the year
ended December 31, 2006. This $3.0 million increase was primarily due to increased costs to support the growth in
membership and the center base. As a percent of total revenue, general and administrative expense decreased
primarily due to increased efficiencies and productivity improvements.
Other operating expenses. Other operating expenses were $16.3 million for the year ended December 31, 2007
compared to $13.0 million for the year ended December 31, 2006. This 25.7% increase is a result of the growth in
other revenue.