Lifetime Fitness 2008 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)
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Dividends — We have not declared or paid any cash dividends on our common stock in the past. As discussed in
Note 4, the terms of our revolving credit facility and certain debt financing agreements prohibit us from paying
dividends without the consent of the lenders.
Fair Value of Financial Instruments — The carrying amounts related to cash and cash equivalents, accounts
receivable, accounts payable and accrued liabilities approximate fair value due to the relatively short maturities of
such instruments. The fair value of the term notes payable and capital leases approximated $208.4 million and $17.1
million, respectively, as of December 31, 2008. The fair value of our other long-term debt approximates the carrying
value and is based on variable rates or interest rates for the same or similar debt offered to us having the same or
similar remaining maturities and collateral requirements.
Fair Value Measurements—We adopted SFAS 157, subject to the deferral provisions of FASB Staff Position 157-2,
Effective Date of FASB Statement No. 157, as of January 1, 2008. SFAS 157 established a framework for measuring
fair value and expanded disclosures about fair value measurements. The adoption of SFAS 157 had no impact on our
financial position or results of operations. SFAS 157 applies to all assets and liabilities that are measured and
reported on a fair value basis. This enables the reader of the financial statements to assess the inputs used to develop
those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to
determine fair values. The statement requires that each asset and liability carried at fair value be classified into one
of the following categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
Use of Estimates — The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Ultimate results could
differ from those estimates. In recording transactions and balances resulting from business operations, we use
estimates based on the best information available. We use estimates for such items as depreciable lives, volatility
factors and expected life in determining fair value of option grants, tax provisions and provisions for uncollectible
receivables. We also use estimates for calculating the amortization period for deferred enrollment fee revenue and
associated direct costs, which are based on the historical average expected life of center memberships. We revise the
recorded estimates when better information is available, facts change or we can determine actual amounts. These
revisions can affect operating results.