Lifetime Fitness 2006 Annual Report Download - page 52

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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
46
The basic and diluted earnings per share calculations are shown below:
For the Year Ended December 31,
2006 2005 2004
Net income applicable to common shareholders – basic.................. $ 50,565 $ 41,213 $ 25,338
Add back accretion on redeemable preferred shares ........................ —
— 3,570
Net income applicable to common shareholders – diluted............... $ 50,565 $ 41,213 $ 28,908
Weighted average number of common shares outstanding –
basic..............................................................................................
36,118
34,592
24,727
Effect of dilutive stock options ........................................................ 509 1,739 1,943
Effect of dilutive restricted stock awards......................................... 152 8 2
Effect of dilutive redeemable preferred shares outstanding............. —
— 6,453
Weighted average number of common shares outstanding –
diluted ...........................................................................................
36,779
36,339
33,125
Basic earnings per common share .................................................... $ 1.40
$ 1.19 $ 1.02
Diluted earnings per common share................................................. $ 1.37
$ 1.13 $ 0.87
The number of total common shares outstanding at December 31, 2006 was 36,817,199. There were no equivalent
shares excluded from the computation of diluted EPS for the years ended December 31, 2006, 2005, and 2004.
Share-Based Compensation — We have stock option plans for employees and accounts for these option plans in
accordance with Statement of Financial Accounting Standards No. 123, Share-Based Payment (“SFAS 123(R)”).
Prior to January 1, 2006, we applied Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees. On January 1, 2006, we adopted the fair value recognition provisions of SFAS 123(R),
requiring us to recognize expense related to the fair value of our share-based compensation awards. We elected to
use the modified prospective transition method as permitted by SFAS 123(R). Under this method, share-based
compensation expense for the year ended December 31, 2006 included compensation expense for all share-based
compensation awards granted prior to, but not yet vested, as of January 1, 2006, based on the grant date fair value
estimated in accordance with the original provisions of SFAS 123, Accounting for Stock-Based Compensation. In
accordance with the modified prospective transition method of SFAS 123(R), financial results for the prior periods
have not been restated.