Lifetime Fitness 2010 Annual Report Download - page 62

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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We made cash payments for interest, net of capitalized interest, for each of the three years ended December 31,
2010, 2009 and 2008 of $24.9 million, $29.9 million and $35.6 million, respectively. Capitalized interest was of
$2.8 million, $3.6 million and $9.1 million during those same periods, respectively.
Construction accounts payable and accounts payable related to property and equipment was $20.5 million at
December 31, 2010 and $9.9 million at December 31, 2009.
New Accounting Pronouncements —In June 2009, the Financial Accounting Standards Board issued new guidance
on the consolidation of variable interest entities, which was effective for us beginning January 1, 2010. The
guidance amends the consolidation guidance applicable to variable interest entities to require revised evaluations of
whether entities represent variable interest entities, ongoing assessments of control over such entities, and additional
disclosures for variable interests. The implementation did not have an impact on our consolidated financial
statements.
Comprehensive Income — We follow the accounting guidance which established standards for reporting and
displaying of comprehensive income (loss) and its components. Comprehensive income (loss) reflects the change in
equity of a business enterprise during a period from transactions and other events and circumstances from nonowner
sources. At December 31, 2009, the difference between net income as reported on the consolidated statements of
operations and comprehensive income is a gain of $3.4 million, net of tax of $1.3 million, related to the interest rate
swap contract. For more information on that swap contract that expired in October 2010, see Note 4. At December
31, 2010, the difference between net income as reported on the consolidated statements of operations and
comprehensive income is a loss of less than $0.1 million, net of tax of less than $0.1 million, related to foreign
currency translation due to expenditures for initial construction costs for the construction of a center in Toronto,
Canada, our first international location.
3. Investment in Unconsolidated Affiliate
In December 1999, we, together with two unrelated organizations, formed an Illinois limited liability company
named LIFE TIME Fitness Bloomingdale L.L.C. (“Bloomingdale LLC”) for the purpose of constructing and
operating a center in Bloomingdale, Illinois. The center opened for business in February 2001. Each of the three
members maintains an equal interest in Bloomingdale LLC. Pursuant to the terms of the agreement that governs the
formation and operation of Bloomingdale LLC (the “Operating Agreement”), each of the three members contributed
$2.0 million to Bloomingdale LLC. We have no unilateral control of the center, as all decisions essential to the
accomplishments of the purpose of Bloomingdale LLC require the consent of the other members of Bloomingdale
LLC. The Operating Agreement expires on the earlier of December 2039 or the liquidation of Bloomingdale LLC.
We account for our interest in Bloomingdale LLC using the equity method.
Bloomingdale LLC issued indebtedness in June 2000 in a taxable bond financing that is secured by a letter of credit
in an amount not to exceed $14.7 million. All of the members separately guaranteed one-third of these obligations to
the bank for the letter of credit and pledged their membership interest to the bank as security for the guarantee. The
letter of credit runs through June 7, 2010 subsequently extended to June 7, 2011 by the bank as of February 24, 2010. As of
December 31, 2010, the maximum amount of future payments under our one-third of the guarantee was $2.6 million. We
have the right to recover from Bloomingdale LLC any amounts paid under the terms of the guarantee, but only after
Bloomingdale LLC’s obligations to the bank have been satisfied.
Pursuant to the terms of the Operating Agreement, beginning in March 2002 and continuing throughout the term of
such agreement, each of the other two members are guaranteed to receive cash distributions from Bloomingdale
LLC. The amount of these aggregated distributions is, and will continue to be throughout the term of the agreement,
approximately $0.7 million annually per member. A determination will be made on an annual basis regarding the
distribution of any net cash flow to each of the members in addition to the guaranteed payments. We are entitled to
receive annual distributions once guaranteed payments and truing up payments have been made. In the event that
Bloomingdale LLC does not generate sufficient cash flow through its own operations to make the required monthly