Lifetime Fitness 2010 Annual Report Download - page 59

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
53
Accrued Expenses — Accrued expenses consist of the following:
December 31,
2010 2009
Payroll related ............................................................................................................. $ 10,335 $ 9,222
Real estate taxes .......................................................................................................... 16,617 16,291
Center operating costs ................................................................................................. 11,580 11,385
Insurance ..................................................................................................................... 3,507 2,847
Interest ........................................................................................................................ 1,122 1,792
Income taxes ............................................................................................................... – 1,117
Marketing and information technology accruals ........................................................ 2,963 544
Other ........................................................................................................................... 4,678 5,037
Total accrued expenses ............................................................................................... $50,802 $48,235
Income Taxes — We account for income taxes under the asset and liability method, which requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the
financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences
between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities
is recognized in income in the period that includes the enactment date.
We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In
making such determination, we consider all available positive and negative evidence, including scheduled reversals
of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In
the event we were to determine that we would be able to realize our deferred income tax assets in the future in
excess of their net recorded amount, we would record a valuation allowance, which would reduce the provision for
income taxes.
We follow the applicable accounting guidance related to income taxes to recognize, measure, present and disclose
uncertain tax positions that we have taken or expect to take in our income tax returns. In accordance with this
guidance we recognize a tax position when it is more likely than not that the position will be sustained upon
examination, including resolutions of any related appeals or litigation processes, based on the technical merits.
We recognize interest and penalties related to unrecognized tax benefits within the income tax expense line in the
accompanying consolidated statement of operations. Accrued interest and penalties are included within the related
tax liability line in the consolidated balance sheet.
Earnings per Common Share — Basic earnings per common share (“EPS”) is computed by dividing net income
applicable to common shareholders by the weighted average number of shares of common stock outstanding for
each year. Diluted EPS is computed similarly to basic EPS, except that the denominator is increased for the
conversion of any dilutive common stock equivalents, the assumed exercise of dilutive stock options using the
treasury stock method and unvested restricted stock awards using the treasury stock method. Stock options excluded
from the calculation of diluted EPS because the option exercise price was greater than the average market price of
the common share were 54,527 and 435,128 for the years ended December 31, 2010 and 2009, respectively and
136,003 for the year ended December 31, 2008.