Lifetime Fitness 2006 Annual Report Download - page 38

32
Liquidity and Capital Resources
Liquidity
Historically, we have satisfied our liquidity needs through various debt arrangements, sales of equity and cash
provided by operations. Principal liquidity needs have included the development of new centers, debt service
requirements and expenditures necessary to maintain and update our existing centers and their related fitness
equipment. We believe that we can satisfy our current and longer-term debt service obligations and capital
expenditure requirements with cash flow from operations, by the extension of the terms of or refinancing our
existing debt facilities, through sale-leaseback transactions and by continuing to raise long-term debt or equity
capital, although there can be no assurance that such actions can or will be completed. Our business model operates
with negative working capital because we carry minimal accounts receivable due to our ability to have monthly
membership dues paid by electronic draft, we defer enrollment fee revenue and we fund the construction of our new
centers under standard arrangements with our vendors that are paid with proceeds from long-term debt.
Operating Activities
As of December 31, 2006, we had total cash and cash equivalents of $6.9 million and $4.7 million of restricted cash
that serves as collateral for certain of our debt arrangements. We also had $36.2 million available under the terms of
our revolving credit facility as of December 31, 2006.
Net cash provided by operating activities was $125.9 million for 2006 compared to $108.0 million for 2005. The
increase of $17.9 million was primarily due to an $8.5 million increase in net income adjusted for non-cash charges.
Net cash provided by operating activities was $108.0 million for 2005 compared to $80.4 million for 2004. The
increase of $27.6 million was primarily due to a $15.3 million increase in net income adjusted for non-cash charges.
Investing Activities
Investing activities consist primarily of purchasing real property, constructing new centers and purchasing new
fitness equipment. In addition, we invest in capital expenditures to maintain and update our existing centers. We
finance the purchase of our property and equipment by cash payments or by financing through notes payable or
capital lease obligations. For current model centers, our investment, through 2006, has ranged from approximately
$18 to $34 million, which includes the land, the building and approximately $3 million of exercise equipment,
furniture and fixtures. We expect the average cost of new centers constructed in 2007 to range from $28 to $30
million.
Our total capital expenditures were as follows:
For the Year Ended December 31,
2006 2005 2004
(In thousands)
Purchases of property and equipment............................................ $261,767 $190,355 $145,562
Non-cash property and equipment purchases financed through
capital lease obligations.............................................................. — 96 145
Non-cash property purchase financed through notes payable
obligation.................................................................................... 1,620 —
—
Total capital expenditures.............................................................. $263,387 $190,451 $145,707