Lifetime Fitness 2010 Annual Report Download - page 22

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Finally, if cash from available sources is insufficient or unavailable, 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.
Any inability to access existing credit facilities, raise additional capital when required or with favorable terms or
repay scheduled indebtedness at maturity could have an adverse effect on our business plans and operating results.
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 10 centers financed by Starwood Property Mortgage Sub-1, L.L.C.
(“Starwood”) that are subject to cross-default and cross-collateral provisions, which would allow the lender to
foreclose on each of these 10 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 $1.0 million and any default
that results in termination of acceleration of payments under any lease transaction involving annual payments in
excess of $1.0 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.
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, legal, marketing, sales and operations functions. These processes are time-
consuming and expensive, increase management responsibilities and 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.
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 and
health-related 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 evolving 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