Lifetime Fitness 2007 Annual Report Download - page 42

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Interest on the amounts borrowed under the mortgage financing referenced above is 6.03% per annum, with a
constant monthly debt service payment of $0.6 million. Our subsidiary LTF CMBS I, LLC, as landlord, and LTF
Club Operations Company, Inc., another wholly owned subsidiary as tenant, entered into a lease agreement dated
January 24, 2007 with respect to the properties. The initial term of the lease ends in February 2022, but the lease
term may be extended at the option of LTF Club Operations Company, Inc. for two additional periods of five years
each. Our subsidiaries may not transfer any of the properties except as permitted under the loan agreement. We
guarantee the obligations of our subsidiary as tenant under the lease.
As additional security for LTF CMBS I, LLC’s obligations under the mortgage financing, the subsidiary granted a
security interest in all assets owned from time to time by the subsidiary including the properties which had a net
book value of $99.1 million on January 24, 2007, the revenues from the properties and all other tangible and
intangible property, and certain bank accounts belonging to the subsidiary that the lender has required pursuant to
the mortgage financing. As of December 31, 2007, $104.0 million remained outstanding on the loan.
On August 29, 2007, we closed on the public offering, issuance and sale of 1,500,000 shares of our common stock,
and on September 7, 2007, we closed on the issuance and sale of 175,000 shares of our common stock pursuant to
exercise of the underwriters’ over-allotment option. The shares were sold pursuant to an underwriting agreement
with Credit Suisse Securities (USA) LLC that was entered into on August 24, 2007. The shares were sold to the
public at $55.40 per share, and the resulting proceeds totaled $92.5 million, net of underwriting discounts and
commissions and offering expenses of $0.3 million. We used the net proceeds to repay a portion of the amounts
outstanding under our revolving credit facility.
We have financed two of our centers in Minnesota separately. These obligations bear interest at a fixed rate of
approximately 6.4% and are being amortized over a 10-year period. The obligations are due in full in January 2012
and October 2012. As security for the obligations, we have granted mortgages on these two centers. At December
31, 2007, $4.5 million was outstanding with respect to these obligations.
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 at 4.825% plus the applicable
spread (depending on cash flow leverage ratio) until October 2010. The contract has been designated a hedge against
interest rate volatility. Changes in the fair market value of the swap contract are recorded in accumulated other
comprehensive income (loss). As of December 31, 2007, the $2.0 million, net of tax, fair market value of the swap
contract was recorded as accumulated other comprehensive loss in the shareholder equity section and the $3.3
million gross fair market value of the swap contract was included in long-term debt.
On December 31, 2007, we borrowed $8.5 million. The loan is evidenced by a promissory note that matures in
January 2015, bears interest at 5.78% and is secured by an interest in certain personal property.
We have financed our purchase of some of our equipment through capital lease agreements with an agent and
lender, on behalf of itself and other lenders. The terms of such leases are typically 60 months and our interest rates
range from 5.5% to 10.0%. As security for the obligations owing under the capital lease agreements, we have
granted a security interest in the leased equipment to the lender or its assigns. At December 31, 2007, $2.7 million
was outstanding under these leases.
We are in compliance in all material respects with all restrictive and financial covenants under our various credit
facilities as of December 31, 2007.