Lifetime Fitness 2009 Annual Report Download - page 68

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
63
The following is a reconciliation of the total amounts of unrecognized tax benefits:
For the Year Ended December 31,
2009 2008 2007
Unrecognized tax benefit – beginning balance ..................................... $18,411 $12,892 $9,228
Gross increases – tax positions in current period ................................. 235 9,041 4,329
Settlements ........................................................................................... (9) — (161)
Prior year increases .............................................................................. 7 419 —
Prior year decreases ............................................................................. (15,346) (523) —
Lapse of statute of limitations .............................................................. (1,921) (3,418) (504)
Unrecognized tax benefit – ending balance .......................................... $ 1,377 $18,411 $12,892
Included in the balance of unrecognized tax benefits at December 31, 2009, 2008 and 2007 are $0.3 million, $0.7
million and $1.4 million, respectively, 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 2009 and in total, as
of December 31, 2009, has recognized a liability for penalties and interest of $0.1 million. During 2008, we accrued
penalties and interest of $0.6 million and in total, as of December 31, 2008 had recognized a liability for penalties
and interest of $1.1 million. During 2007, we accrued penalties and interest of $0.4 million and in total, as of
December 31, 2007 had recognized a liability for penalties and interest of $0.8 million.
We do not anticipate that the total amounts of unrecognized tax benefits will significantly increase or decrease in the
next 12 months.
We are subject to taxation in the U.S. and various states. Our tax years 2006, 2007 and 2008 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 2006.
7. 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.
8. Share-Based Compensation
Stock Option and Incentive Plans
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, 2009, 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