Lifetime Fitness 2009 Annual Report Download - page 70

Download and view the complete annual report

Please find page 70 of the 2009 Lifetime Fitness annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 92

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
65
Summary of Restricted Stock Activity
Restricted Shares
Outstanding
Range of Market Price
per Share on Grant Date
Balance – December 31, 2007 ................................................... 302,345 $24.75-53.95
Granted ................................................................................. 434,180 14.31-35.77
Canceled ............................................................................... (144,805) 26.46-51.15
Vested ................................................................................... (104,517) 24.75-53.95
Balance – December 31, 2008 ................................................... 487,203 14.31-53.95
Granted ................................................................................. 1,698,194 9.72-24.95
Canceled ............................................................................... (67,552) 9.72-51.15
Vested ................................................................................... (151,173) 9.72-53.95
Balance – December 31, 2009 ................................................... 1,966,672 $9.72-53.95
During the years ended December 31, 2009 and 2008, we issued 1,698,194 and 434,180 shares of restricted stock,
respectively, with an aggregate fair value of $27.6 million and $11.6 million, respectively. The fair market value of
restricted shares that became vested during the year ended December 31, 2009 was $5.6 million. The total value of
each restricted stock grant, based on the fair market value of the stock on the date of grant, is amortized to
compensation expense on a straight-line basis over the related vesting period. As of December 31, 2009, there was
$17.4 million of unrecognized compensation expense related to restricted stock that is expected to be recognized
over a weighted average period of 2.7 years.
Special 2009 Restricted Stock Grant
In June 2009, the Compensation Committee of our Board of Directors approved the grant of 996,000 shares of long-
term performance-based restricted stock to serve as an incentive to our senior management team to achieve certain
diluted earnings per share (“EPS”) targets in 2011 and 2012. These shares were included in the overall grant of
1,698,194 restricted shares granted in 2009. If a specified EPS target is achieved for fiscal 2011, 50% of the
restricted shares will vest. If a higher EPS target is achieved for fiscal 2011, 100% of the restricted shares will vest.
If the grant has not fully vested after fiscal 2011, 50% of the shares will vest if a specified EPS target is achieved for
fiscal 2012. If none of the shares vested after fiscal 2011, 100% of the shares will vest if a higher EPS target is
achieved for fiscal 2012. In the event that we do not achieve the required EPS targets, the restricted stock will be
forfeited. A maximum of $20.4 million could be recognized as compensation expense under this grant if all EPS
targets are met.
We consider the specific EPS targets to be competitively sensitive information during the performance period. We believe
these targets, inclusive of compensation expense under this grant, to be aggressive goals in excess of our current baseline
expectations, and therefore, we did not recognize any compensation expense associated with the grant during the year ended
December 31, 2009, nor has any share amount been included in our total diluted shares. If all of the targets had been
considered probable at December 31, 2009, we would have recognized $4.3 million of compensation cost during the year
ended December 31, 2009. If it becomes probable that certain of the EPS performance targets will be achieved, the
corresponding estimated cost of the grant will be recorded as compensation expense over the performance period. The
probability of reaching the targets is revaluated each reporting period. If it becomes probable that certain of the target
performance levels will be achieved, a cumulative adjustment will be recorded and future compensation expense will
increase based on the currently projected performance levels. If we later determine that it is not probable that the minimum
EPS performance threshold for the grants will be met, no further compensation cost will be recognized and any previously
recognized compensation cost will be reversed.