Lifetime Fitness 2010 Annual Report Download - page 69

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
63
The following is a reconciliation of the total amounts of unrecognized tax benefits:
For the Year Ended December 31,
2010 2009 2008
Unrecognized tax benefit – beginning balance ..................................... $1,377 $18,411 $12,892
Gross increases – tax positions in current period ................................. 199 235 9,041
Settlements ........................................................................................... – (9) –
Prior year increases .............................................................................. 23 7 419
Prior year decreases ............................................................................. (21) (15,346) (523)
Lapse of statute of limitations .............................................................. (349) (1,921) (3,418)
Unrecognized tax benefit – ending balance .......................................... $1,229 $ 1,377 $18,411
Included in the balance of unrecognized tax benefits at December 31, 2010, 2009 and 2008 are $0.7 million, $0.3
million and $0.7 million, respectively, of benefits that, if recognized, would affect the effective tax rate.
We recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense. Related to
the uncertain tax benefits noted above, we accrued penalties and interest of $0.1 million during 2010 and in total, as
of December 31, 2010, has recognized a liability for penalties and interest of $0.1 million. During 2009, we accrued
penalties and interest of $0.6 million and in total, as of December 31, 2009 had recognized a liability for penalties
and interest of $0.1 million. During 2008, we accrued penalties and interest of $0.6 million and in total, as of
December 31, 2008 had recognized a liability for penalties and interest of $1.1 million.
We do not anticipate that the total amounts of unrecognized tax benefits will significantly increase or decrease in the
next 12 months.
We are subject to taxation in the U.S. and various states. Our tax years 2007, 2008 and 2009 are subject to
examination by the tax authorities. With few exceptions, we are no longer subject to U.S. federal, state or local
examinations by tax authorities for years before 2007.
6. Share-Based Compensation
Stock Option and Incentive Plans
The FCA, Ltd. 1996 Stock Option Plan (the 1996 Plan) reserved up to 2,000,000 shares of our common stock for
issuance. Under the 1996 Plan, the Board of Directors had the authority to grant incentive and nonqualified options
to purchase shares of our common stock to eligible employees, directors, and contractors at a price of not less than
100% of the fair market value at the time of the grant. Incentive stock options expire no later than 10 years from the
date of grant, and nonqualified stock options expire no later than 15 years from the date of grant. As of December
31, 2010, we had granted a total of 1,700,000 options to purchase common stock under the 1996 Plan, of which none
were outstanding. In connection with approval of the Life Time Fitness, Inc. 2004 Long-Term Incentive Plan (the
2004 Plan), as discussed below, our Board of Directors approved a resolution to cease making additional grants
under the 1996 Plan.
The LIFE TIME FITNESS, Inc. 1998 Stock Option Plan (the 1998 Plan), reserved up to 1,600,000 shares of our
common stock for issuance. Under the 1998 Plan, the Board of Directors had the authority to grant incentive and
nonqualified options to purchase shares of our common stock to eligible employees, directors and contractors at a
price of not less than 100% of the fair market value at the time of the grant. Incentive stock options expire no later
than 10 years from the date of grant, and nonqualified stock options expire no later than 15 years from the date of
grant. The 1998 Plan was amended in December 2003 by our Board of Directors and shareholders to reserve an
additional 1,500,000 shares of our common stock for issuance. As of December 31, 2010, we had granted a total of