Lifetime Fitness 2006 Annual Report Download - page 60

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
54
book value of $94.2 million on January 24, 2007, the revenues from the properties and all other tangible and
intangible property, and certain bank accounts belonging to the subsidiary that the lender has required pursuant to
the mortgage financing.
6. Income Taxes
The components of the provision for income taxes are as follows:
December 31,
2006 2005 2004
Current................................................................................. $ 30,348 $ 23,443 $ 5,843
Deferred............................................................................... 3,165 3,315 14,276
Provision for income taxes .................................................. $33,513 $26,758 $ 20,119
The provision for income taxes differs from the federal statutory rate as follows:
December 31,
2006 2005 2004
Income taxes computed at federal statutory rate ................. $ 29,428 $ 23,790 $ 17,159
State taxes, net of federal benefit......................................... 3,268 3,495 2,882
Other, net............................................................................. 817 (527) 78
$ 33,513 $ 26,758 $ 20,119
Deferred income taxes are the result of provisions of the tax laws that either require or permit certain items of
income or expense to be reported for tax purposes in different periods than they are reported for financial reporting.
The tax effect of temporary differences that gives rise to the deferred tax asset (liability) are as follows:
December 31,
2006 2005
Noncurrent deferred income tax liabilities:
Property and equipment............................................................................. $(39,830) $(34,379)
Accrued rent expense ................................................................................ 5,612 1,741
Internally developed software ................................................................... (3,258) (1,878)
Other, net .................................................................................................. (1,108) (903)
$(38,584) $(35,419)
Our income tax returns have been reviewed by the U.S. Internal Revenue Service (IRS), and the exams have been
closed related to all years through 2003. In addition to being subject to IRS exam, we operate within multiple state
tax jurisdictions and are subject to audits in these state jurisdictions. Upon audit, the IRS or these state taxing
jurisdictions could retroactively disagree with our treatment of certain items. Consequently, the actual liabilities with
respect to any year may be determined long after the financial statements have been issued. We establish tax
reserves for estimated tax exposures. These potential exposures result from varying applications of statutes, rules,
regulations, case law and interpretations. The settlement of these exposures primarily occurs upon finalization of tax
audits. However, the amount of the exposures can also be impacted by changes in tax laws and other factors. On a
quarterly basis, we evaluate the reserve amounts in light of any additional information and adjust the reserve
balances as necessary to reflect the best estimate of the probable outcomes. We believe that we have established the
appropriate reserves for these estimated exposures, however actual results may differ from these estimates. The