Lifetime Fitness 2008 Annual Report Download - page 40

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Seasonality of Business
Seasonal trends have a limited effect on our overall business. Generally, we have experienced greater membership
growth at the beginning of the year and we have not experienced an increased rate of membership attrition during
any particular season of the year. During the summer months, we have experienced a slight increase in operating
expenses due to our outdoor aquatics operations.
Liquidity and Capital Resources
Liquidity
Historically, we have satisfied our liquidity needs through various debt arrangements, sales of equity and cash flow
provided by operations. Principal liquidity needs have included the development of new centers, debt service
requirements and expenditures necessary to maintain and update our existing centers and associated fitness
equipment. We believe that we can satisfy our current and longer-term debt service obligations and capital
expenditure requirements with cash flow from operations, by the extension of the terms of or refinancing our
existing debt facilities, through sale-leaseback transactions and by continuing to raise long-term debt or equity
capital, although there can be no assurance that such actions can or will be completed. Our business model operates
with negative working capital because we carry minimal accounts receivable due to our ability to have monthly
membership dues paid by electronic draft, we defer enrollment fee revenue and we fund the construction of our new
centers under standard arrangements with our vendors that are paid with proceeds from long-term debt.
Credit Rating. We have never had public debt. Accordingly, we do not have, nor have we had, a credit rating as
stated through Standard and Poor’s Rating Services or Moody’s Investor Service.
The following table summarizes our capital structure as of December 31, 2008 and 2007.
December 31,
2008 2007
Debt
Long-term ..................................................................................................... $ 702,569 $ 555,037
Current maturities of long-term .................................................................... 10,335 9,568
Total debt ...................................................................................................... 712,904 564,605
Shareholders’ Equity
Common stock .............................................................................................. 793 783
Additional paid-in capital ............................................................................. 385,095 373,910
Retained earnings .......................................................................................... 271,711 199,890
Accumulated other comprehensive loss ........................................................ (4,698) (2,026)
Total shareholders’ equity ............................................................................. 652,901 572,557
Total capitalization ........................................................................................... $1,365,805 $1,137,162
Debt highlights, as of December 31, 2008 and 2007:
December 31,
2008 2007
Fixed-rate debt as a percent of total debt ....................................................... 54.6% 66.7%
Weighted-average annual interest rate of total debt ....................................... 4.5% 6.5%
Total debt (net of cash) as a percent of total capitalization
(total debt (net of cash) and total shareholders’ equity) .............................. 51.8% 49.4%
Cash provided by operating activities as a percent of total debt .................... 25.7% 25.2%