Lifetime Fitness 2006 Annual Report Download - page 54

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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
48
Fair Value of Financial Instruments — The carrying amounts related to cash and cash equivalents, accounts
receivable, inventory, accounts payable and accrued liabilities approximate fair value due to the relatively short
maturities of such instruments. The fair value of the term notes payable and capital leases approximated $381.0
million and $12.9 million, respectively, as of December 31, 2006. The fair value of our other long-term debt
approximates the carrying value and is based on variable rates or interest rates for the same or similar debt offered to
us having the same or similar remaining maturities and collateral requirements.
Use of Estimates — The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Ultimate results could
differ from those estimates. In recording transactions and balances resulting from business operations, we use
estimates based on the best information available. We use estimates for such items as depreciable lives, volatility
factors and expected life in determining fair value of option grants, tax provisions, provisions for uncollectible
receivables and for calculating the amortization period for deferred enrollment fee revenue and associated direct
costs (based on the historical average expected life of center memberships). We revise the recorded estimates when
better information is available, facts change, or we can determine actual amounts. Those revisions can affect
operating results.
Supplemental Cash Flow Information — Decreases (increases) in operating assets and increases (decreases) in
operating liabilities are as follows:
For the Year Ended December 31,
2006 2005 2004
Accounts receivable............................................................ $ 1,947 $ (3,080) $ 30
Income tax receivable......................................................... 13,643 1,068 (2,032)
Inventories.......................................................................... (3,104) (698) (317)
Prepaid expenses and other current assets.......................... (2,014) 88 (298)
Deferred membership origination costs.............................. (4,958) (3,159) (2,027)
Accounts payable ............................................................... (132) 12,623 460
Accrued expenses ............................................................... 9,329 8,711 6,047
Deferred revenue ................................................................ 7,904 5,503 2,780
Deferred rent ...................................................................... 2,546 1,814 1,018
Other liabilities .................................................................. 264 — —
$25,425 $22,870 $ 5,661