Lifetime Fitness 2006 Annual Report Download - page 71

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The following table provides a reconciliation of net income to EBITDA:
2006 2005
1st
Quarter 2nd
Quarter
3rd
Quarter
4th
Quarter
1st
Quarter
2nd
Quarter 3rd
Quarter 4th Quarter
(In thousands)
Net income ...................... $10,433 $12,385 $13,639 $14,108 $8,121 $10,287 $10,737 $12,068
Interest expense, net......... 4,117 4,140 4,204 4,895 3,826 3,243 3,278 3,729
Provision for income
taxes.............................. 6,865 7,256 10,139 9,253 5,643 7,150 7,443 6,522
Depreciation and
amortization.................. 11,519 12,146 11,716 12,179 8,734 9,190 10,095 10,327
EBITDA........................... $32,934 $35,927 $39,698 $40,435 $26,324 $29,870 $31,553 $32,646
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures. As of December 31, 2006, an evaluation was carried out under the supervision
and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-
15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation, the Chief Executive Officer and the Chief
Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective
to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act
is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms.
Management’s Annual Report on Internal Control Over Financial Reporting. Our management is responsible for
establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a and 15d – 15f
under the Exchange Act. Our internal control system is designed to provide reasonable assurance to our management
and board of directors regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. Our internal control over financial
reporting includes those policies and procedures that:
• Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company;
• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures
of the company are being made only in accordance with authorizations of management and directors of the
company; and
• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2006. In
making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control – Integrated Framework. Based on management's assessment
and those criteria, they believe that, as of December 31, 2006, we maintained effective internal control over financial
reporting.