Lifetime Fitness 2010 Annual Report Download - page 21

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Item 1A. Risk Factors.
We may be unable to attract and retain members, which could have a negative effect on our business.
The success of our business depends on our ability to attract and retain members, and we cannot assure you that we
will be successful in our marketing efforts or that the membership levels at our centers will not materially decline,
especially at those centers that have been in operation for an extended period of time. All of our members can cancel
their membership at any time upon providing advance notice. In addition, we experience attrition and must
continually engage existing members and attract new members in order to maintain our membership levels and sales
from in-center services. There are numerous factors that could lead to a decline in membership levels or sales of in-
center services in mature centers or that could prevent us from increasing membership and in-center service revenue
at newer centers where membership is generally not yet at a targeted capacity. These factors include changing
desires and behaviors of consumers, changes in discretionary spending trends and general economic conditions,
market maturity or saturation, a decline in our ability to deliver quality service at a competitive price, direct and
indirect competition in the areas where our centers are located, advances in medical care that lead to less interest in
health and fitness activities and a decline in the public’s interest in health and fitness as well as social fears such as
terror or health threats which could reduce the desire to be in a concentrated public venue. In order to increase
membership levels, we may from time to time offer lower membership rates and enrollment fees. Any decrease in
our average dues, reduction in enrollment fees or higher membership acquisition costs may adversely impact our
operating margins.
We rely heavily on our revolving credit facility and our ability to access additional capital. If we are not able to
access our credit facility, obtain additional capital or refinance existing debt, our ability to operate our business
and pursue our growth strategy may be impaired.
As of December 31, 2010, we had total consolidated indebtedness of $612.5 million, of which $387.6 million was
floating rate debt, consisting principally of obligations under term notes that are secured by certain of our properties,
borrowings under our revolving credit facility that are secured by certain personal property, mortgage notes that are
secured by certain of our centers, and obligations under capital leases.
The credit markets generally and our level of indebtedness could have important consequences to us, including the
following:
xOur ability to obtain the appropriate levels of capital for working capital purposes or to finance the
development of additional sites, construction of new centers or acquisitions, which may limit our growth
strategy and future business opportunities;
xA significant portion of our debt has a variable rate of interest, which increases our vulnerability to interest
rate fluctuations;
xWe will need a substantial portion of our cash flow to pay the principal of, and interest on, our indebtedness,
including indebtedness that we may incur in the future, which may reduce the funds that would otherwise be
available for our operations or to pursue our growth strategy and future business opportunities;
xA substantial decrease in our cash flows from operations or a substantial increase in our investment in new
centers could make it difficult for us to meet our debt service requirements and force us to modify our
operations;
xWe may be more highly leveraged than our competitors, which may place us at a competitive disadvantage;
and
xOur debt level may make us more vulnerable and less flexible than our competitors to a downturn in our
business or the economy in general
In addition to the amount of indebtedness outstanding as of December 31, 2010, we had access to an additional
$103.8 million under our credit facilities. We also have the ability to incur new debt, subject to limitations under our
existing credit facilities and in our debt financing agreements. If we incur additional debt, the risks associated with
our leverage, including our ability to service our debt, could intensify, and we may have to change our growth
strategies as a consequence.