Lifetime Fitness 2006 Annual Report Download - page 55

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
49
Our capital expenditures were as follows:
For the Year Ended December 31,
2006 2005 2004
Purchases of property and equipment................................... $ 261,767 $ 190,355 $ 145,562
Non-cash property purchase financed through notes
payable obligations............................................................
1,620 — —
Non-cash property and equipment purchases financed
through capital lease obligations ....................................... — 96 145
Total capital expenditures..................................................... $ 263,387 $ 190,451 $ 145,707
New Accounting Pronouncements — In December 2004, the Financial Accounting Standards Board (“FASB”)
issued a revision of Statement of Financial Accounting Standards No. 123, “Share-Based Payment” (“SFAS
123(R)”). This accounting standard revises SFAS No. 123 and requires entities to recognize compensation expense
in an amount equal to the fair value of share-based payments granted to employees. SFAS 123(R) was effective for
us on January 1, 2006. As of the required effective date, we applied SFAS 123(R) using the modified prospective
method, recognizing compensation expense for all awards granted after the date of adoption of SFAS 123(R) and for
the unvested portion of previously granted awards that remain outstanding at the date of adoption. For more
information on the adoption of SFAS 123(R), see previous Share-Based Compensation section of Note 2.
In July 2006, the FASB issued Financial Interpretation No. 48 (“FIN 48”). FIN 48 clarifies the application of SFAS
No. 109 by defining a criterion that an individual tax position must meet for any part of the benefit of that position to
be recognized in an enterprise’s financial statements. The criterion allows for recognition in the financial statements
of a tax position when it is more likely than not that the position will be sustained upon examination. FIN 48 was
effective for us on January 1, 2007. We are still evaluating the impact FIN 48 will have on our consolidated
financial position and consolidated results of operations.
Comprehensive Income — We follow the provisions of SFAS No. 130 “Reporting Comprehensive Income,” which
established standards for reporting and displaying of comprehensive income (loss) and its components.
Comprehensive income (loss) reflects the change in equity of a business enterprise during a period from transactions
and other events and circumstances from nonowner sources. For us, there is no difference between net income as
reported on the consolidated statements of operations and comprehensive income.
Reclassifications— Certain prior period amounts have been reclassified to conform with the current period
presentation.
3. Investment in Unconsolidated Affiliate
In December 1999, we, together with two unrelated organizations, formed an Illinois limited liability company
named LIFE TIME Fitness Bloomingdale L.L.C. (“Bloomingdale LLC”) for the purpose of constructing and
operating a center in Bloomingdale, Illinois. The center opened for business in February 2001. Each of the three
members maintains an equal interest in Bloomingdale LLC. Pursuant to the terms of the agreement that governs the
formation and operation of Bloomingdale LLC (the “Operating Agreement”), each of the three members contributed
$2,000 to Bloomingdale LLC. We have no unilateral control of the center, as all decisions essential to the
accomplishments of the purpose of Bloomingdale LLC require the consent of the other members of Bloomingdale
LLC. The Operating Agreement expires on the earlier of December 2039 or the liquidation of Bloomingdale LLC.
We account for our interest in Bloomingdale LLC using the equity method.
In December 1999, Bloomingdale LLC entered into a management agreement with us, pursuant to which we agreed
to manage the day-to-day operations of the center, subject to the overall supervision by the management committee