Lifetime Fitness 2010 Annual Report Download - page 75

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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initial rent will be approximately $5.7 million per year, increased after every year during the initial term and each
year of any renewal option, if exercised, by an amount equal to 2% of the rent paid in the calendar year immediately
before the effective date of the rent increase. The Lease is an “absolute net” lease requiring our subsidiary to
maintain the Properties and to pay all operating expenses including real estate taxes and insurance for the benefit of
W.P. Carey. Pursuant to the terms of a Guaranty and Suretyship Agreement, we have guaranteed the subsidiary’s
obligations under the Lease. At December 31, 2010, the future minimum lease payments due under the lease
amounted to $126.8 million.
We account for the sale-leaseback transactions as operating leases in accordance with the applicable accounting
guidance.The gains we recognized upon completion of the sale-leaseback transactions, a total of $7.4 million, have
been deferred and are being recognized over the lease term.
Purchase Commitments — We contract in advance for land purchases and construction services and materials,
among other things. The purchase commitments were $29.3 million, $44.6 million and $86.7 million at December
31, 2010, 2009 and 2008, respectively.
Litigation — We are engaged in proceedings incidental to the normal course of business. Due to their nature, such
legal proceedings involve inherent uncertainties, including but not limited to, court rulings, negotiations between
affected parties and governmental intervention. We have established reserves for matters that are probable and
estimable in amounts we believe are adequate to cover reasonable adverse judgments not covered by insurance.
Based upon the information available to us and discussions with legal counsel, it is our opinion that the outcome of
the various legal actions and claims that are incidental to the our business will not have a material adverse impact on
the consolidated financial position, results of operations or cash flows; however, such matters are subject to many
uncertainties, and the outcome of individual matters are not predictable with assurance.
401(k) Savings and Investment Plan — We offer a 401(k) savings and investment plan (the 401(k) Plan) to
substantially all full-time employees who have at least six months of service and are at least 21 years of age. We
made discretionary contributions to the 401(k) Plan in the amount of $2.0 million, $1.6 million and $1.5 million for
the years ended December 31, 2010, 2009 and 2008, respectively.
Letters of Credit — As of December 31, 2010, we had $12.0 million in irrevocable standby letters of credit
outstanding, which were issued primarily to certain insurance carriers to guarantee payments of deductibles for
various insurance programs, such as workers’ compensation, commercial liability insurance, and as security for our
indebtedness to Starwood. Such letters of credit are secured by the collateral under our senior secured credit facility.
As of December 31, 2010, no amounts had been drawn on any of these irrevocable standby letters of credit.
As of December 31, 2010, we had posted bonds totaling $25.9 million related to construction activities and
operational licensing.
Guarantee — 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.