Lifetime Fitness 2009 Annual Report Download - page 63

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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
58
On January 24, 2008, we amended the facility to increase the amount of the accordion feature from $25.0 million to
$200.0 million and increase the senior secured operating company leverage ratio from not more than 2.50 to 1.00 to
not more than 3.25 to 1.00. The amendment also allows for the issuance of additional senior debt and sharing of
related collateral with lenders other than the existing bank syndicate. In the second quarter of 2008, we exercised
$70.0 million of the accordion feature with commitments from certain of our bank lenders, increasing the amount of
the facility from $400.0 million to $470.0 million. Under the terms of the amended credit facility, we may increase
the total amount of the facility up to $600.0 million through further exercise of the accordion feature by us and if
one or more lenders commit the additional $130.0 million. As of December 31, 2009, $358.1 million was outstanding
on the U.S. Bank Facility, plus $10.9 million related to letters of credit.
The weighted average interest rate and debt outstanding under the revolving credit facility for the year ended
December 31, 2009 was 2.0% and $376.1 million, respectively. The weighted average interest rate and debt
outstanding under the revolving credit facility for the year ended December 31, 2008 was 4.4% and $366.2 million,
respectively.
Interest Rate Swap
On September 17, 2007, we entered into an interest rate swap contract with J.P. Morgan Chase Bank, N.A. that
effectively fixed the rates paid on a total of $125.0 million of variable rate borrowings from our revolving credit
facility at 4.825% plus the applicable spread (depending on cash flow leverage ratio) until October 2010. Effective
July 10, 2009, we revised the terms of the swap, reducing the fixed rate to 4.715% plus the applicable spread. All
other terms of the swap remained the same. The spread as of December 31, 2009 was 1.25%. The contract has been
designated a hedge against interest rate volatility. We currently apply this hedge to variable rate interest debt under
the U.S. Bank Facility. Changes in the fair market value of the swap contract are recorded in accumulated other
comprehensive income (loss). As of December 31, 2009, the $2.6 million net of tax, fair market value of the swap
contract was recorded as accumulated other comprehensive loss in the shareholder equity section and the $4.2
million gross fair market value of the swap contract was included in long-term debt.
Mortgage Notes Payable to Insurance Company
We have financed 13 of our centers with Teachers Insurance and Annuity Association of America (“TIAA”)
pursuant to the terms of individual notes. The obligations under these notes are due in full in July 2011, at which
time we will owe approximately $100 million. These notes are secured by mortgages on each of the centers
specifically financed, and we maintain a letter of credit in the amount of $5.0 million in favor of the lender. The
obligations related to 10 of the notes are amortized over a 20-year period, while the obligations related to the other
three notes are being amortized over a 15-year period. The interest rate payable under these notes has been fixed at
8.25%. The loan documents provide that we will be in default if our Chief Executive Officer, Mr. Akradi, ceases to
be Chairman of the Board of Directors and Chief Executive Officer for any reason other than due to his death or
incapacity or as a result of his removal pursuant to our articles of incorporation or bylaws.
On November 10, 2008, we entered into an Omnibus Amendment with TIAA with respect to the terms of the
mortgages that secure our obligations to TIAA. Pursuant to the terms of the Omnibus Amendment, the equity
interest requirement applicable to our Chief Executive Officer was amended such that he must, at all times during
the loan, retain at least 1.8 million shares of our common stock (subject to appropriate adjustment for stock splits
and similar readjustments), which shares on and after November 30, 2008 must be owned unencumbered, and the
equity interest requirement applicable to our other employees was amended such that our employees must, in the
aggregate, hold shares or options representing at least 3% of our outstanding common stock.