Lifetime Fitness 2006 Annual Report Download - page 39

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The following schedule reflects capital expenditures by type of expenditure:
For the Year Ended December 31,
2006 2005 2004
(In thousands)
Capital expenditures for new center land, building and
construction ................................................................................ $230,270
$166,244
$127,846
Capital expenditures for updating existing centers, assumption
of leased centers and corporate infrastructure. ............................
33,117
24,207 17,861
Total capital expenditures............................................................... $263,387 $190,451 $145,707
At December 31, 2006, we had purchased the real property for the eight new centers that we plan to open in 2007,
and we had entered into agreements to purchase real property for the development of seven of the nine new centers
that we plan to open in 2008.
We expect our capital expenditures to be approximately $330 to $350 million in 2007, of which we expect
approximately $45 to $50 million to be one-time in nature for the remodel of the seven centers leased in July 2006
and the completion of a new office building we plan to move into in the fourth quarter of 2007. In addition, we
expect to incur approximately $260 to $270 million for new center construction and approximately $25 to $30
million for the updating of existing centers and corporate infrastructure. We plan to fund these capital expenditures
with cash from operations, our revolving line of credit and additional mortgage financing.
Financing Activities
On April 15, 2005, we entered into a Credit Agreement, with U.S. Bank National Association, as administrative
agent and lead arranger, J.P. Morgan Securities, Inc., as syndication agent, and the banks party thereto from time to
time (the “U.S. Bank Facility”). On April 26, 2006, we entered into an Amended and Restated Credit Agreement
effective April 28, 2006 to amend and restate the U.S. Bank Facility. The significant changes to the U.S. Bank
Facility increased the amount of the facility from $200.0 million to $300.0 million, which replaced the prior $50.0
million accordion feature, and extended the term for the facility by approximately one year to April 28, 2011. As of
December 31, 2006, $245.0 million was outstanding on the U.S. Bank Facility, plus $18.8 million related to letters
of credit.
Interest on the amounts borrowed under the U.S. Bank Facility continues to be based on (i) a base rate, which is the
greater of (a) U.S. Bank’s prime rate and (b) the federal funds rate plus 50 basis points, or (ii) an adjusted Eurodollar
rate, plus, in either case (i) or (ii), the applicable margin within a range based on our consolidated leverage ratio. In
connection with the amendment and restatement of the U.S. Bank Facility, the applicable margin ranges were
decreased to 0 to 25 basis points (from 0 to 50 basis points) for base rate borrowings and to 75 to 175 basis points
(from 100 to 200 basis points) for Eurodollar borrowings. Additionally, we are restricted in our borrowings and in
general under the Amended and Restated Credit Agreement by certain financial covenants. We are required to
maintain a fixed coverage ratio of not less than 1.60 to 1.00, a consolidated leverage ratio of not more than 3.75 to
1.00 and a senior secured operating company leverage ratio of not more than 2.25 to 1.00. The Amended and
Restated Credit Agreement also contains covenants that, among other things, restrict our ability to enter into certain
business combinations, dispose of assets, make certain acquisitions, pay dividends, incur certain additional debt and
create certain liens.
The weighted average interest rate and debt outstanding under the revolving credit facility for the year ended
December 31, 2006 was 6.8% and $140.0 million, respectively. The weighted average interest rate and debt
outstanding under the revolving credit facility for the year ended December 31, 2005 was 5.7% and $44.5 million,
respectively.
We have financed 13 of our centers with Teachers Insurance and Annuity Association of America pursuant to the
terms of individual notes. The obligations under these notes are due in full in September 2011, and are secured by
mortgages on each of the centers specifically financed, and we maintain a letter of credit in the amount of $5.0
million in favor of the lender. The obligations related to 10 of the notes are being amortized over a 20-year period,
while the obligations related to the other three notes are being amortized over a 15-year period. The interest rate