Lifetime Fitness 2008 Annual Report Download - page 43

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The weighted average interest rate and debt outstanding under the revolving credit facility for the year ended
December 31, 2008 was 4.4% and $366.2 million, respectively. 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.
Interest Rate Swap
On September 17, 2007, we entered into an interest rate swap contract with J.P. Morgan Chase Bank, N.A. that
effectively fixed the rates paid on a total of $125.0 million of variable rate borrowings from our revolving credit
facility at 4.825% plus the applicable spread (depending on cash flow leverage ratio) until October 2010. The spread
as of December 31, 2008 was 1.25%. The contract has been designated a hedge against interest rate volatility. We
currently apply this hedge to variable rate interest debt under the U.S. Bank Facility. Changes in the fair market
value of the swap contract are recorded in accumulated other comprehensive income (loss). As of December 31,
2008, the $4.7 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 $7.5 million gross fair market value of the swap
contract was included in long-term debt.
Term Notes Payable
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, Champions (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, 2008, $102.8 million remained outstanding on the loan.
Mortgage Notes Payable
We have financed two of our centers in Minnesota separately. These obligations bear interest at a fixed rate of
approximately 6.4% and are being amortized over a 10-year period. The obligations are due in full in January 2012
and October 2012. As security for the obligations, we have granted mortgages on these two centers. At December
31, 2008, $4.1 million was outstanding with respect to these obligations.
In November 2008, we financed one additional Minnesota center using an obligation bearing interest at a fixed rate
of 6.54% amortized over a 20 year period. This obligation is due in full November 2013. As security for the
obligation, we have granted a mortgage on this center. As of December 31, 2008 $5.7 million was outstanding with
respect to this obligation.
Promissory Note Payable to Lender
On December 31, 2007, we borrowed $8.5 million. The loan is evidenced by a promissory note that matures in
January 2015, bears fixed interest at 5.78% and is secured by an interest in certain personal property.
Variable Rate Demand Notes
On July 13, 2008, a wholly owned subsidiary issued variable rate demand notes in the principal amount of $34.2
million, the proceeds of which were used to provide permanent financing for our corporate headquarters and our
Overland Park, Kansas center. The notes, which mature on July 1, 2033, bear interest at a variable rate that is
adjusted weekly. The interest rate at December 31, 2008 was 1.75%. The notes are backed by a letter of credit from
General Electric Capital Corporation (GECC), for which we will pay GECC an annual fee of 1.40% of the
maximum amount available under the letter of credit, as well as other drawing and reimbursement fees. In