Lifetime Fitness 2010 Annual Report Download - page 55

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
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Depreciation is computed primarily using the straight-line method over estimated useful lives of the assets.
Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the
estimated useful life of the improvement. Accelerated depreciation methods are used for tax reporting purposes.
Property and equipment consist of the following:
Depreciable December 31,
Lives 2010 2009
Land ............................................................................................. $ 232,757 $ 231,304
Buildings and related fixtures ...................................................... 3-40 years 1,220,581 1,117,857
Leasehold improvements ............................................................. 1-20 years 122,887 118,686
Construction in progress .............................................................. 101,714 99,923
1,677,939 1,567,770
Equipment:
Fitness ...................................................................................... 5-7 years 99,387 96,045
Computer and telephone .......................................................... 3-5 years 53,499 47,846
Capitalized software ................................................................ 5 years 43,866 35,388
Decor and signage .................................................................... 5 years 15,888 14,985
Audio/visual ............................................................................. 3-5 years 27,767 26,047
Furniture and fixtures ............................................................... 7 years 13,554 13,074
Other equipment ...................................................................... 3-7 years 68,897 66,626
322,858 300,011
Property and equipment, gross ..................................................... 2,000,797 1,867,781
Less accumulated depreciation ................................................ 430,563 354,788
Property and equipment, net......................................................... $1,570,234 $1,512,993
At December 31, 2010, we had four large format centers under construction, of which three are planned to open in
2011. Construction in progress, including land for future development totaled $120.3 million at December 31, 2010
and $132.3 million at December 31, 2009.
Included in the construction in progress balances are site development costs which consist of legal, engineering,
architectural, environmental, feasibility and other direct expenditures incurred for certain new center projects.
Capitalization commences when acquisition of a particular property is deemed probable by management. Should a
specific project be deemed not viable for construction, any capitalized costs related to that project are charged to
operations at the time of that determination. Costs incurred prior to the point at which the acquisition is deemed
probable are expensed as incurred. Upon completion of a project, the site development costs are classified as
property and depreciated over the useful life of the asset. Site development costs were $154 and $40 at December
31, 2010 and 2009, respectively.
Capitalized software includes our internally developed web-based systems to facilitate member enrollment and
management, as well as point of sale system enhancements and our payroll and human resources software. Costs
related to these projects have been capitalized in accordance with accounting guidance.
We capitalize interest during the construction period of our centers and in accordance with accounting guidance on
the capitalization of interest costs,this capitalized interest is included in the cost of the building. We capitalized
interest of $2.8 million and $3.6 million for the years ended December 31, 2010 and 2009, respectively.
Other equipment consists primarily of cafe, spa and playground and laundry equipment.