Lifetime Fitness 2006 Annual Report Download - page 51

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
45
Accrued Expenses — Accrued expenses consist of the following:
December 31,
2006 2005
Payroll related ..............................................................................
.
$ 7,092 $ 4,886
Real estate taxes ...........................................................................
.
8,120 6,027
Center operating costs .................................................................. 14,126 10,160
Insurance ......................................................................................
.
2,112 1,246
Other.............................................................................................
.
5,741 5,543
$37,191 $27,862
Income Taxes — We file consolidated federal and state income tax returns. Deferred income taxes are provided
following the provisions of SFAS No. 109 whereby deferred tax assets are recognized for deductible temporary
differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the reported amounts of assets and
liabilities and their tax bases at currently enacted tax rates. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
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 numerator is adjusted to add back any
redeemable preferred stock accretion and the denominator is increased for the conversion of any dilutive common
stock equivalents, such as redeemable preferred stock, the assumed exercise of dilutive stock options using the
treasury stock method and unvested restricted stock awards using the treasury stock method.
As a result of our initial public offering (see Note 7), the redeemable preferred stock converted to common stock and
the accretion on redeemable preferred stock discontinued. Prior to our initial public offering, accretion on
redeemable preferred stock was computed based on the per share annual return on the respective series of
redeemable preferred stock plus any accumulated but unpaid dividends. The discount on redeemable preferred stock
attributable to offering expenses was also accreted over the period to the mandatory redemption date. Accretion on
redeemable preferred stock was $0, $0 and $3,570 for the years ended December 31, 2006, 2005 and 2004,
respectively.