Lifetime Fitness 2009 Annual Report Download - page 22

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In addition to the amount of indebtedness outstanding as of December 31, 2009, we had access to an additional
$101.0 million under our credit facilities. We also have the ability to incur new debt, subject to limitations under our
existing credit facilities and in our debt financing agreements. If we incur additional debt, the risks associated with
our leverage, including our ability to service our debt, could intensify.
If we fail to comply with any of the covenants in our financing documents, we may not be able to access our
existing credit facilities, we may be required to pay increased interest and our obligations to repay our
indebtedness may be accelerated.
We have entered into several financing transactions to finance the development of our centers. Certain of the loan
documents contain financial and other covenants applicable to us, and certain of these loan documents contain cross-
default provisions. For example, we have 13 centers financed by Teachers Insurance and Annuity Association of
America (“TIAA”) that are subject to cross-default and cross-collateral provisions, which would allow the lender to
foreclose on each of these 13 centers if there is an event of default related to one or more of these centers. In
addition, any default or acceleration of payments under any loan facility of more than $1 million and any default that
results in termination of acceleration of payments under any lease transaction involving annual payments in excess
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. See footnote 5, “Subsequent Event” to our consolidated financial statements
for a description of a partial prepayment on this obligation.
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,
obtain additional capital or refinance existing debt, 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, the
construction of our centers and repayment of indebtedness at maturity. 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, raise additional capital when required or
repay scheduled indebtedness at maturity could have an adverse effect on our business plans and operating results.
Our continued growth could place strains on our management, employees, information systems and internal
controls which may adversely impact our business.
Over the past several years, we have experienced significant growth in our business activities and operations,
including an increase in the number of our centers. Our past expansion has placed, and any accelerated future
expansion may place, significant demands on our administrative, operational, financial and other resources. Any
failure to manage growth effectively could seriously harm our business. To be successful, we will need to continue
to implement management information systems and improve our operating, administrative, financial and accounting
systems and controls. We will also need to train new employees and maintain close coordination among our
executive, accounting, finance, marketing, sales and operations functions. These processes are time-consuming and
expensive, will increase management responsibilities and will divert management attention. In addition, if we seek
to grow our business through acquisition, we will face risks related to identifying appropriate targets, conducting
effective due diligence and integrating the acquired businesses in order for any acquisitions to be accretive to
earnings over the long term.