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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
49
The basic and diluted earnings per share calculations are shown below:
For the Year Ended December 31,
2007 2006 2005
Net income ........................................................................................... $ 68,019 $ 50,565 $ 41,213
Weighted average number of common shares outstanding – basic ...... 37,518 36,118 34,592
Effect of dilutive stock options............................................................. 476 509 1,739
Effect of dilutive restricted stock awards ............................................. 133
152 8
Weighted average number of common shares outstanding –
diluted ........................................................................................... 38,127 36,779 36,339
Basic earnings per common share ........................................................ $ 1.81
$ 1.40 $ 1.19
Diluted earnings per common share ..................................................... $ 1.78
$ 1.37 $ 1.13
The number of total common shares outstanding at December 31, 2007 was 39,137,947.
Share-Based Compensation — We have stock option plans for employees and accounts for these option plans in
accordance with Statement of Financial Accounting Standards No. 123, Share-Based Payment (“SFAS 123(R)”).
Prior to January 1, 2006, we applied Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock
Issued to Employees. On January 1, 2006, we adopted the fair value recognition provisions of SFAS 123(R),
requiring us to recognize expense related to the fair value of our share-based compensation awards. We elected to
use the modified prospective transition method as permitted by SFAS 123(R). Under this method, share-based
compensation expense for the year ended December 31, 2006 included compensation expense for all share-based
compensation awards granted prior to, but not yet vested, as of January 1, 2006, based on the grant date fair value
estimated in accordance with the original provisions of SFAS 123, Accounting for Stock-Based Compensation. In
accordance with the modified prospective transition method of SFAS 123(R), financial results for the prior periods
have not been restated.
Had compensation cost for these plans been determined consistent with SFAS 123(R) for the year ended December
31, 2005, our net income applicable to common shareholders, basic EPS and diluted EPS would have been reduced
to the following pro forma amounts:
Net income applicable to common shareholders — basic:
As reported...............................................................................
.
$41,213
Pro forma..................................................................................
.
$35,870
Basic earnings per common share:
As reported...............................................................................
.
$ 1.19
Pro forma..................................................................................
.
$ 1.04
Net income applicable to common shareholders — diluted:
As reported...............................................................................
.
$41,213
Pro forma..................................................................................
.
$35,870
Diluted earnings per common share:
As reported...............................................................................
.
$ 1.13
Pro forma..................................................................................
.
$ 0.99