Lifetime Fitness 2010 Annual Report Download - page 64

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
58
Facility, the applicable margin ranges were reduced to zero at all times (from zero to 25 basis points) for base rate
borrowings and decreased to 62.5 to 150 basis points (from 75 to 175 basis points) for Eurodollar borrowings.
On January 24, 2008, we amended the facility to increase the amount of the accordion feature from $25.0 million to
$200.0 million and increase the senior secured operating company leverage ratio from not more than 2.50 to 1.00 to
not more than 3.25 to 1.00. The amendment also allows for the issuance of additional senior debt and sharing of
related collateral with lenders other than the existing bank syndicate. In the second quarter of 2008, we exercised
$70.0 million of the accordion feature with commitments from certain of our bank lenders, increasing the amount of
the facility from $400.0 million to $470.0 million. Under the terms of the amended credit facility, we may increase
the total amount of the facility up to $600.0 million through further exercise of the accordion feature by us and if
one or more lenders commit the additional $130.0 million. As of December 31, 2010, $354.2 million was outstanding
on the U.S. Bank Facility, plus $12.0 million related to letters of credit.
On December 6, 2010, we received a consent from the majority of the banks party to the U.S. Bank revolving credit
facility allowing us to prepay in full the Starwood notes on or after April 1, 2011. The consent also allows us to use
the U.S. Bank revolving credit facility to finance all or part of the prepayment in an amount not to exceed $69.5
million. As a result of our intent and ability to refinance the Starwood notes payable with proceeds from our
revolving credit facility, the balance at December 31, 2010 is classified as long-term debt.
The weighted average interest rate and debt outstanding under the revolving credit facility for the year ended
December 31, 2010 was 2.8% and $347.8 million, respectively. The weighted average interest rate and debt
outstanding under the revolving credit facility for the year ended December 31, 2009 was 3.3% and $376.1 million,
respectively.
Interest Rate Swap
On September 17, 2007, we entered into an interest rate swap contract with J.P. Morgan Chase Bank, N.A. that
effectively fixed the rates paid on a total of $125.0 million of variable rate borrowings from our revolving credit
facility at 4.825% plus the applicable spread (depending on cash flow leverage ratio) until October 2010. Effective
July 10, 2009, we revised the terms of the swap, reducing the fixed rate to 4.715% plus the applicable spread. All
other terms of the swap remained the same. The contract was designated a hedge against interest rate volatility. We
applied this hedge to variable rate interest debt under the U.S. Bank Facility. Changes in the fair market value of the
swap contract were recorded in accumulated other comprehensive income (loss).
On October 10, 2010, our interest rate swap contract expired without renewal.
Mortgage Notes Payable to Real Estate Investment Trust
In 2001 and 2002, we financed 13 of our centers with Teachers Insurance and Annuity Association of America
(“TIAA”) pursuant to the terms of individual notes. These notes are secured by mortgages on each of the centers
specifically financed, and we maintain a letter of credit in the amount of $5.0 million in favor of the lender. The
obligations related to 10 of the notes are amortized over a 20-year period, while the obligations related to the other
three notes are amortized over a 15-year period. The interest rate payable under these notes has been fixed at 8.25%.
The loan documents provide that we will be in default if our Chief Executive Officer, Mr. Akradi, ceases to be
Chairman of the Board of Directors and Chief Executive Officer for any reason other than due to his death or
incapacity or as a result of his removal pursuant to our articles of incorporation or bylaws.
On November 10, 2008, we entered into an Omnibus Amendment with TIAA with respect to the terms of the
mortgages that secure our obligations to TIAA. Pursuant to the terms of the Omnibus Amendment, the equity
interest requirement applicable to our Chief Executive Officer was amended such that he must, at all times during
the loan, retain at least 1.8 million shares of our common stock (subject to appropriate adjustment for stock splits
and similar readjustments), which shares on and after November 30, 2008 must be owned unencumbered, and the