Lifetime Fitness 2008 Annual Report Download - page 69

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
63
Included in the balance of unrecognized tax benefits at December 31, 2008 are $0.7 million of benefits that, if
recognized, would affect the effective tax rate.
We recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense. Related to
the uncertain tax benefits noted above, we accrued penalties and interest of $0.6 million during 2008 and in total, as
of December 31, 2008, has recognized a liability for penalties and interest of $1.1 million.
In addition, we believe that it is reasonably possible that approximately $4.4 million of our currently remaining
unrecognized tax positions, of which $3.6 million relates to depreciation related to property and equipment lives,
may be recognized by the end of 2009 as a result of a lapse of the statute of limitations and closure of examinations.
The balance of $18.8 million is included in other long-term liabilities on our consolidated balance sheet.
We are subject to taxation in the U.S. and various states. Our tax years 2005, 2006 and 2007 are subject to
examination by the tax authorities. With few exceptions, we are no longer subject to U.S. federal, state or local
examinations by tax authorities for years before 2005. We are currently under Federal examination for 2006.
6. Offering of Capital Stock
On August 29, 2007, we closed on the public offering, issuance and sale of 1,500,000 shares of our common stock,
and on September 7, 2007, we closed on the issuance and sale of 175,000 shares of our common stock pursuant to
exercise of the underwriters’ over-allotment option. The shares were sold pursuant to an underwriting agreement
with Credit Suisse Securities (USA) LLC that was entered into on August 24, 2007. The shares were sold to the
public at $55.40 per share, and the resulting proceeds totaled $92.5 million, net of underwriting discounts and
commissions and offering expenses of $0.3 million. We used the net proceeds to repay a portion of the amounts
outstanding under our revolving credit facility.
7. Share-Based Compensation
The FCA, Ltd. 1996 Stock Option Plan (the 1996 Plan) reserved up to 2,000,000 shares of our common stock for
issuance. Under the 1996 Plan, the Board of Directors had the authority to grant incentive and nonqualified options
to purchase shares of the our common stock to eligible employees, directors, and contractors at a price of not less
than 100% of the fair market value at the time of the grant. Incentive stock options expire no later than 10 years
from the date of grant, and nonqualified stock options expire no later than 15 years from the date of grant. As of
December 31, 2008, we had granted a total of 1,700,000 options to purchase common stock under the 1996 Plan, of
which none were outstanding. In connection with approval of the Life Time Fitness, Inc. 2004 Long-Term Incentive
Plan (the 2004 Plan), as discussed below, our Board of Directors approved a resolution to cease making additional
grants under the 1996 Plan.
The LIFE TIME FITNESS, Inc. 1998 Stock Option Plan (the 1998 Plan), reserved up to 1,600,000 shares of our
common stock for issuance. Under the 1998 Plan, the Board of Directors had the authority to grant incentive and
nonqualified options to purchase shares of our common stock to eligible employees, directors and contractors at a
price of not less than 100% of the fair market value at the time of the grant. Incentive stock options expire no later
than 10 years from the date of grant, and nonqualified stock options expire no later than 15 years from the date of
grant. The 1998 Plan was amended in December 2003 by our Board of Directors and shareholders to reserve an
additional 1,500,000 shares of our common stock for issuance. As of December 31, 2008, we had granted a total of
1,957,500 options to purchase common stock under the 1998 Plan, of which 220,625 were outstanding. In
connection with approval of the 2004 Plan, as discussed below, our Board of Directors approved a resolution to
cease making additional grants under the 1998 Plan.
The 2004 Plan reserved up to 3,500,000 shares of our common stock for issuance. Under the 2004 Plan, the
Compensation Committee of our Board of Directors administers the 2004 Plan and has the power to select the
persons to receive awards and determine the type, size and terms of awards and establish objectives and conditions
for earning awards. The types of awards that may be granted under the 2004 Plan include incentive and non-
qualified options to purchase shares of common stock, stock appreciation rights, restricted shares, restricted share