Lifetime Fitness 2009 Annual Report Download - page 23

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If we fail to properly maintain the integrity of our data or to strategically implement new or upgrade or
consolidate existing information systems, our reputation and business could be materially adversely affected.
As we grow our business, we increasingly use electronic means to interact with our customers and collect, maintain
and store individually identifiable information, including but not limited to personal financial information. Despite
the security measures we have in place to ensure compliance with applicable laws and rules, our facilities and
systems, and those of our third party service providers may be vulnerable to security breaches, acts of cyber
terrorism, vandalism or theft, computer viruses, misplaced or lost data, programming and/or human errors or other
similar events. Additionally, the collection, maintenance, use, disclosure and disposal of individually identifiable
data by our businesses are regulated at the federal and state levels as well as by certain financial industry groups,
such as the Payment Card Industry organization. Such federal, state and financial industry groups may also consider
from time to time new privacy and security requirements that may apply to our businesses. Compliance with such
privacy and security laws, requirements, and regulations may result in cost increases due to necessary systems
changes, new limitations or constraints on our business models and the development of new administrative
processes. They also may impose further restrictions on our collection, disclosure and use of individually
identifiable information that are housed in one or more of our databases. Noncompliance with any privacy laws, any
financial industry group requirements or any security breach involving the misappropriation, loss or other
unauthorized disclosure of sensitive or confidential member information, whether by us or by one of our vendors,
could have a material adverse effect on our business, reputation and results of operations, including: material fines
and penalties; increased financial processing fees; compensatory, special, punitive, and statutory damages; consent
orders regarding our privacy and security practices; adverse actions against our licenses to do business; and
injunctive relief.
The health club industry is highly competitive and our competitors may have greater name recognition than we
have.
We compete with other health and fitness centers, physical fitness and recreational facilities established by local
non-profit organizations, governments, hospitals, and businesses, local salons, cafes and businesses offering similar
ancillary services, and to a lesser extent, amenity and condominium clubs and similar non-profit organizations,
exercise studios, racquet, tennis and other athletic clubs, country clubs, online personal training and fitness coaching
and the home fitness equipment industry. We cannot assure you that our competitors will not attempt to copy our
business model, or portions thereof, and that this will not erode our market share and brand recognition and impair
our growth rate and profitability. Competitors, which may have greater name recognition than we have, may
compete with us to attract members in our markets. Non-profit and government organizations in our markets may be
able to obtain land and construct centers at a lower cost than us and may be able to collect membership fees without
paying taxes, thereby allowing them to lower their prices. Furthermore, due to the increased number of low cost
health club and fitness center alternatives, we may face increased competition during periods when discretionary
spending declines or unemployment remains high. This competition may limit our ability to increase membership
fees, retain members, attract new members and retain qualified personnel.
Delays in new center openings could have a material adverse effect on our financial performance.
In order to meet our objectives, it is important that we open new centers on schedule. A significant amount of time
and expenditure of capital is required to develop and construct new centers. If we are significantly delayed in
opening new centers, our competitors may be able to open new clubs in the same market before we open our centers
or improve centers currently open. This change in the competitive landscape could negatively impact our pre-
opening sales of memberships and increase our investment costs. In addition, delays in opening new centers could
hurt our ability to meet our growth objectives. Our ability to open new centers on schedule depends on a number of
factors, many of which are beyond our control. These factors include:
x obtaining acceptable financing for construction of new sites;
x obtaining entitlements, permits and licenses necessary to complete construction of the new center on
schedule;
x recruiting, training and retaining qualified management and other personnel;
x securing access to labor and materials necessary to develop and construct our centers;