Lifetime Fitness 2009 Annual Report Download - page 42

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ended December 31, 2008 compared to the year ended December 31, 2007. Of the $112.6 million increase in total
center revenue,
x66.4% was from membership dues, which increased $74.8 million, or 17.2%, due to increased memberships
at new centers, junior membership programs and increased sales of value-added memberships. Our number of
memberships increased 13.6% to 567,110 at December 31, 2008 from 499,092 at December 31, 2007. Our
membership growth of 13.6% was up slightly from a membership growth rate of 12.5% in 2007. This rate
increase was driven by new center growth and included new, lower priced membership offerings in the
second half of 2008.
x32.0% was from in-center revenue, which increased $36.0 million primarily as a result of increased sales of
our personal training, member activities and LifeCafe products and services. As a result of this, in-center
revenue growth and our focus on broadening our offerings to our members, average in-center revenue per
membership increased from $387 for the year ended December 31, 2007 to $414 for the year ended
December 31, 2008. We began to see slower in-center revenue growth in the second half of the year due to
worsening economic conditions.
x1.6% was from enrollment fees, which are deferred until a center opens and recognized on a straight-line
basis over 36 months for the first quarter of 2008, 33 months for the second and third quarter of 2008 and 30
months for the fourth quarter of 2008. Enrollment fees increased $1.8 million for the year ended December
31, 2008 to $26.6 million. In 2008, we lowered our enrollment fees to stimulate new membership demand.
Other revenue increased $1.2 million, or 8.4%, to $15.9 million for the year ended December 31, 2008, which was
primarily due to increased advertising revenue from our media business.
Center operations expenses. Center operations expenses totaled $454.6 million, or 60.3% of total center revenue (or
59.1% of total revenue), for the year ended December 31, 2008 compared to $377.2 million, or 58.8% of total center
revenue (or 57.5% of total revenue), for the year ended December 31, 2007. This $77.4 million increase primarily
consisted of $38.9 million in additional payroll-related costs to support increased memberships at new centers and
increases in membership acquisition costs, an increase of $21.1 million in occupancy-related costs, including
utilities, real estate taxes, rent on leased centers and an increase in expenses to support in-center products and
services.
Advertising and marketing expenses. Advertising and marketing expenses were $31.5 million, or 4.1% of total
revenue, for the year ended December 31, 2008, compared to $25.0 million, or 3.8% of total revenue, for the year
ended December 31, 2007. These expenses increased primarily due to broader advertising for existing and new
centers and those centers engaging in presale activities to stimulate new membership demand.
General and administrative expenses. General and administrative expenses were $43.7 million, or 5.7% of total
revenue, for the year ended December 31, 2008, compared to $40.8 million, or 6.2% of total revenue, for the year
ended December 31, 2007. These expenses decreased as a percentage of revenue primarily due to increased
efficiencies and productivity improvements, as well as the elimination of lease costs for our former corporate office.
General and administrative expenses include approximately $3.9 million of expenses associated with plans to slow
the development of new centers mainly comprised of severance costs and write-offs associated with land
development cancelled in the fourth quarter of 2008.
Other operating expenses. Other operating expenses were $19.4 million for the year ended December 31, 2008,
compared to $16.3 million for the year ended December 31, 2007. This increase is primarily a result of start-up costs
associated with the expansion of our corporate wellness businesses and lower-of-cost-or-market adjustments in
connection with assets held for sale.
Depreciation and amortization. Depreciation and amortization was $72.9 million for the year ended December 31,
2008, compared to $59.0 million for the year ended December 31, 2007. This $13.9 million increase was due
primarily to depreciation on our new centers and new headquarters opened in 2007 and 2008, the completed
remodels of our leased centers acquired in July 2006 and lower-of-cost-or-market adjustments in connection with
assets held for sale.