Lifetime Fitness 2008 Annual Report Download - page 33

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27
The following table provides a reconciliation of net income, the most directly comparable GAAP measure, to
EBITDA:
For the Year Ended December 31,
2008 2007 2006 2005 2004
(In thousands)
Net income .........................................
.
$ 71,821 $ 68,019 $ 50,565 $ 41,213 $28,908
Interest expense, net ...........................
.
29,552 25,443 17,356 14,076 17,573
Provision for income taxes .................
.
47,224 45,220 33,513 26,758 20,119
Depreciation and amortization ...........
.
72,947 59,014 47,560 38,346 29,655
EBITDA .............................................
.
$221,544 $197,696 $148,994 $120,393 $96,255
(8) EBITDA margin is the ratio of EBITDA to total revenue.
(9) Capital expenditures represent investments in our new centers, costs related to updating and maintaining our
existing centers and other infrastructure investments. For purposes of deriving capital expenditures from our
cash flows statement, capital expenditures include our purchases of property and equipment, excluding
purchases of property and equipment in accounts payable at year-end, property and equipment purchases
financed through notes payable and capital lease obligations, and non-cash share-based compensation
capitalized to projects under development.
(10) The operating data presented in these items include the center owned by Bloomingdale LLC. The data
presented elsewhere in this section exclude the center owned by Bloomingdale LLC.
(11) The square footage presented in this table reflects fitness square footage which is the best metric for the
efficiencies of a facility. We exclude outdoor pool, outdoor play areas, indoor/outdoor tennis elements and
satellite facility square footage.
(12) Total operating expenses in 2008 include expenses totaling $5.0 million associated with plans to slow the
development of new centers. These expenses include severance costs, lower-of-cost-or-market adjustments in
connection with assets held for sale and write-offs associated with land development cancelled in the fourth
quarter of 2008.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of our historical results of operations and our liquidity and capital resources should be
read in conjunction with the consolidated financial statements and related notes that appear elsewhere in this
report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results
could differ materially from those anticipated in these forward-looking statements as a result of various factors,
including those discussed in “Risk Factors” beginning on page 15 of this report.
Overview
We operate distinctive and large, multi-use sports and athletic, professional fitness, family recreation and spa centers
in a resort-like environment. As of February 27, 2009, we operated 83 centers primarily in residential locations
across 18 states under the LIFE TIME FITNESS brand.
We compare the results of our centers based on how long the centers have been open at the most recent
measurement period. We include a center for comparable center revenue purposes beginning on the first day of the
thirteenth full calendar month of the center’s operation, prior to which time we refer to the center as a new center.
We include an acquired center for comparable center revenue purposes beginning on the first day of the thirteenth
full calendar month after we assumed the center’s operations. As we grow our presence in existing markets by
opening new centers, we expect to attract some memberships away from our other existing centers already in those
markets, reducing revenue and initially lowering the memberships of those existing centers. In addition, as a result
of new center openings in existing markets, and because older centers will represent an increasing proportion of our
center base over time, our comparable center revenue may be lower in future periods than in the past. Of the up to
six new centers we have opened or plan to open in 2009, three will be in existing markets. We do not expect that
operating costs of our planned new centers will be significantly higher than centers opened in the past, and we also
do not expect that the planned increase in the number of centers will have a material adverse effect on the overall