Lifetime Fitness 2010 Annual Report Download - page 36

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reserved for particular capital purposes, to maintain debt covenants, to service debt or to pay taxes. Additional
details related to EBITDA and EBITDAR are provided in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Non-GAAP Financial Measures.”
The following table provides a reconciliation of net income, the most directly comparable GAAP measure, to
EBITDA and EBITDAR:
For the Year Ended December 31,
2010 2009 2008 2007 2006
(In thousands)
Net income ........................................
.
$ 80,692 $ 72,384 $ 71,821 $ 68,019 $ 50,565
Interest expense, net ..........................
.
27,795 30,338 29,552 25,443 17,356
Provision for income taxes ................
.
53,448 47,441 47,224 45,220 33,513
Depreciation and amortization ..........
.
92,313 90,770 72,947 59,014 47,560
EBITDA ............................................
.
$254,248 $240,933 $221,544 $197,696 $148,994
Rent expense .....................................
.
42,481 40,241 27,375 19,376 13,724
EBITDAR .........................................
.
$296,729 $281,174 $248,919 $217,072 $162,718
(10) Capital expenditures represent investments in our new centers, costs related to updating and maintaining our
existing centers and other infrastructure investments. For purposes of deriving capital expenditures from our
cash flows statement, capital expenditures include our purchases of property and equipment, excluding
purchases of property and equipment in accounts payable at year-end, property and equipment purchases
financed through notes payable and capital lease obligations, and non-cash share-based compensation
capitalized to projects under development.
(11) Free cash flow is a non-GAAP measure consisting of net cash provided by operating activities, less purchases
of property and equipment. This term, as we define it, may not be comparable to a similarly titled measure used
by other companies and does not represent the total increase or decrease in the cash balance presented in
accordance with GAAP. We use free cash flow as a measure of cash generated after spending on property and
equipment. The funds depicted by free cash flow are not necessarily available for discretionary use if they are
reserved for particular capital purposes, to maintain debt covenants, to service debt or to pay taxes. Free cash
flow should not be considered as a substitute for net cash provided by operating activities prepared in
accordance with GAAP. Additional details related to free cash flow are provided in “Management’s Discussion
and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures.”
The following table provides a reconciliation of net cash provided by operating activities to free cash flow:
For the Year Ended December 31,
2010 2009 2008 2007 2006
(In thousands)
Net cash provided by operating
activities .....................................
.
$192,265 $186,203 $183,066 $142,206 $125,852
Less: Purchases of property and
equipment ...................................
.
131,671 146,632 463,337 415,822 261,767
Free cash flow ...................................
.
$ 60,594 $ 39,571 ($280,271) ($273,616) ($135,915)
(12) The operating data presented in these items include the center owned by Bloomingdale LLC. The data
presented elsewhere in this section exclude the center owned by Bloomingdale LLC.
(13) The square footage presented in this table reflects fitness square footage which we believe is the best metric for
the efficiencies of a facility. We exclude outdoor swimming pools, outdoor play areas, tennis courts and satellite
facility square footage. These figures are approximations.
(14) EBITDA margin is the ratio of EBITDA to total revenue.