Lifetime Fitness 2007 Annual Report Download - page 36

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30
x31.2% was from in-center revenue, which increased $43.9 million primarily as a result of our members’
increased use of our personal training, member activities, LifeCafe and LifeSpa products and services. As a
result of this in-center revenue growth and our focus on broadening our offerings to our members, average in-
center revenue per membership increased from $351 for the year ended December 31, 2006 to $387 for the
year ended December 31, 2007.
x1.6% was from enrollment fees, which are deferred until a center opens and recognized on a straight-line
basis over 36 months. Enrollment fees increased $2.3 million for the year ended December 31, 2007 to $24.7
million.
Other revenue increased $3.2 million, or 27.7%, to $14.7 million for the year ended December 31, 2007 from $11.5
million for the year ended December 31, 2006, which was primarily due to increased advertising revenue from our
media business.
Center operations expenses. Center operations expenses were $377.2 million, or 58.8% of total center revenue (or
57.5% of total revenue), for the year ended December 31, 2007 compared to $292.3 million, or 58.4% of total center
revenue (or 57.1% of total revenue), for the year ended December 31, 2006. This $84.9 million increase primarily
consisted of $49.5 million in additional payroll-related costs to support increased memberships at new centers, an
increase of $18.2 million in facility-related costs, including incremental lease expense for the seven leased centers
for which we assumed operating in late July 2006, utilities and real estate taxes, and an increase in expenses to
support in-center products and services. As a percent of total center revenue, center operations expense increased
slightly due to lower center operating margins associated with new centers including the leased centers.
Advertising and marketing expenses. Advertising and marketing expenses were $25.0 million, or 3.8% of total
revenue, for the year ended December 31, 2007 compared to $20.8 million, or 4.1% of total revenue, for the year
ended December 31, 2006. These expenses increased primarily due to advertising for our new centers and those
centers engaging in presale activities. As a percent of total revenue, advertising and marketing expenses decreased
primarily due to fewer and more efficient marketing campaigns.
General and administrative expenses. General and administrative expenses were $40.8 million, or 6.2% of total
revenue, for the year ended December 31, 2007 compared to $37.8 million, or 7.4% of total revenue, for the year
ended December 31, 2006. This $3.0 million increase was primarily due to increased costs to support the growth in
membership and the center base. As a percent of total revenue, general and administrative expense decreased
primarily due to increased efficiencies and productivity improvements.
Other operating expenses. Other operating expenses were $16.3 million for the year ended December 31, 2007
compared to $13.0 million for the year ended December 31, 2006. This 25.7% increase is a result of the growth in
other revenue.
Depreciation and amortization. Depreciation and amortization was $59.0 million for the year ended December 31,
2007 compared to $47.6 million for the year ended December 31, 2006. This $11.4 million increase was due
primarily to depreciation on our centers opened in 2006 and 2007.
Interest expense, net. Interest expense, net of interest income, was $25.4 million for the year ended December 31,
2007 compared to $17.4 million for the year ended December 31, 2006. This $8.0 million increase was primarily the
result of increased average debt balances and increased interest rates on floating debt.
Provision for income taxes. The provision for income taxes was $45.2 million for the year ended December 31, 2007
compared to $33.5 million for the year ended December 31, 2006. This $11.7 million increase was due to an
increase in income before income taxes of $29.2 million.
Net income. As a result of the factors described above, net income was $68.0 million, or 10.4% of total revenue, for
the year ended December 31, 2007 compared to $50.6 million, or 9.9% of total revenue, for the year ended
December 31, 2006.