Lifetime Fitness 2008 Annual Report Download - page 22

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of $1 million, constitutes an event of default under our revolving credit facility. If we fail to comply with any of the
covenants, it may cause a default under one or more of our loan documents, which could limit our ability to obtain
additional financing under our existing credit facilities, require us to pay higher levels of interest or accelerate our
obligations to repay our indebtedness.
Because of the capital-intensive nature of our business, we rely on our revolving credit facilities and may have to
incur additional indebtedness or issue new equity securities. If we are not able to access our credit facilities or
obtain additional capital, our ability to operate or expand our business may be impaired and our operating results
could be adversely affected.
Our business requires significant levels of capital to finance the development of additional sites for new centers and
the construction of our centers. If cash from available sources is insufficient or unavailable due to restrictive credit
markets, or if cash is used for unanticipated needs, we may require additional capital sooner than anticipated. In the
event that we are required or choose to raise additional funds, we may be unable to do so on favorable terms or at
all. Furthermore, the cost of debt financing could significantly increase, making it cost-prohibitive to borrow, which
could force us to issue new equity securities. If we issue new equity securities, existing shareholders may experience
additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing
holders of common stock. If we cannot access existing credit facilities, raise funds on acceptable terms, or utilize
cash flow from operations, we may not be able to execute on current growth plans, complete projects we have
commenced, take advantage of future opportunities or respond to competitive pressures. Any inability to access
existing credit facilities or raise additional capital when required could have an adverse effect on our business plans
and operating results.
The health club industry is highly competitive and our competitors may have greater name recognition than we
have.
We compete with other health and fitness centers, physical fitness and recreational facilities established by local
non-profit organizations, governments, hospitals, and businesses, local salons, cafes and businesses offering similar
ancillary services, and to a lesser extent, amenity and condominium clubs and similar non-profit organizations,
exercise studios, racquet, tennis and other athletic clubs, country clubs and the home fitness equipment industry. We
cannot assure you that our competitors will not attempt to copy our business model, or portions thereof, and that this
will not erode our market share and brand recognition and impair our growth rate and profitability. Competitors,
which may have greater name recognition than we have, may compete with us to attract members in our markets.
Non-profit and government organizations in our markets may be able to obtain land and construct centers at a lower
cost than us and may be able to collect membership fees without paying taxes, thereby allowing them to lower their
prices. Furthermore, due to the increased number of low cost health club and fitness center alternatives, we may face
increased competition during periods when discretionary spending declines. This competition may limit our ability
to increase membership fees, retain members, attract new members and retain qualified personnel.
If we are unable to identify and acquire suitable sites for new sports and athletic, professional fitness, family
recreation and spa centers, our revenue growth rate and profits may be negatively impacted.
To successfully expand our business, we must identify and acquire sites that meet the site selection criteria we have
established. In addition to finding sites with the right demographic and other measures we employ in our selection
process, we also need to evaluate the penetration of our competitors in the market. We face significant competition
for sites that meet our criteria, and as a result we may lose those sites, our competitors could copy our format or we
could be forced to pay significantly higher prices for those sites. If we are unable to identify and acquire sites for
new centers, our revenue growth rate and profits may be negatively impacted. Additionally, if our analysis of the
suitability of a site is incorrect, we may not be able to recover our capital investment in developing and building the
new center. Due to the current credit environment, we have chosen to slow down our new center expansion plans in
2009 and 2010. Accordingly, we expect our revenue growth rate and profits to decelerate near-term.