Lifetime Fitness 2007 Annual Report Download - page 60

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
54
over one year to May 31, 2012. Interest on the amounts borrowed under the U.S. Bank Facility continues to be based
on (i) a base rate, which is the greater of (a) U.S. Bank’s prime rate and (b) the federal funds rate plus 50 basis
points, or (ii) an adjusted Eurodollar rate, plus, in either case (i) or (ii), the applicable margin within a range based
on our consolidated leverage ratio. In connection with the amendment and restatement of the U.S. Bank Facility, the
applicable margin ranges were reduced to zero at all times (from zero to 25 basis points) for base rate borrowings
and decreased to 62.5 to 150 basis points (from 75 to 175 basis points) for Eurodollar borrowings. As of December
31, 2007, $312.8 million was outstanding on the U.S. Bank Facility, plus $20.5 million related to letters of credit.
The weighted average interest rate and debt outstanding under the revolving credit facility for the year ended
December 31, 2007 was 6.7% and $230.2 million, respectively. The weighted average interest rate and debt
outstanding under the revolving credit facility for the year ended December 31, 2006 was 6.8% and $140.0 million,
respectively.
On January 24, 2008, we amended the facility to increase the amount of the accordion feature from $25.0 million to
$200.0 million and increase the senior secured operating company leverage ratio from not more than 2.50 to 1.00 to
not more than 3.25 to 1.00. The amendment also allows for the issuance of additional senior debt and sharing of
related collateral with lenders other than the existing bank syndicate.
On January 24, 2007, LTF CMBS I, LLC, a wholly owned subsidiary, obtained a commercial mortgage-backed loan
in the original principal amount of $105.0 million from Goldman Sachs Commercial Mortgage Capital, L.P.
pursuant to a loan agreement dated January 24, 2007. The mortgage financing is secured by six properties owned by
the subsidiary and operated as Life Time Fitness centers located in Tempe, Arizona, Commerce Township,
Michigan, and Garland, Flower Mound, Willowbrook and Sugar Land, Texas. The mortgage financing matures in
February 2017.
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 September 17, 2007, we entered into a three-year floating-to-fixed interest rate swap contract, effective October
10, 2007, with J.P. Morgan Chase Bank, N.A. that effectively fixed the rates paid on $125.0 million of variable rate
borrowings. Under the terms of the agreement we pay J.P. Morgan interest on a notional amount of $125.0 million at
a fixed annual rate of 4.825%. In return we receive interest payments on the same notional amount at the 90 day
LIBOR rate resetting every three months. The contract has been designated a hedge against interest rate volatility.
Consequently, 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.