Lifetime Fitness 2011 Annual Report Download - page 36

30
(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.
(15) EBITDAR margin is the ratio of EBITDAR to total revenue.
(16) Market capitalization is calculated by multiplying the year-end total common shares outstanding by the
year-end stock price.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
We operate distinctive and large, multi-use sports and athletic, professional fitness, family recreation and spa centers
in a resort-like environment. As of February 28, 2012, we operated 102 centers primarily in residential locations
across 21 states under the LIFE TIME FITNESS® and LIFE TIME ATHLETICSM brands.
We compare the results of our centers based on how long the centers have been open at the most recent measurement
period. We include a center for same center revenue purposes beginning on the first day of the thirteenth full
calendar month of the center’s operation, prior to which time we refer to the center as a new center. We include an
acquired center for same center revenue purposes beginning on the first day of the thirteenth full calendar month
after we assumed the center’s operations.
As we grow our presence in existing markets by opening new centers, we expect to attract some memberships away
from our other existing centers in those markets, reducing revenue and initially lowering the memberships of those
existing centers. In addition, as a result of new center openings in existing markets, and because older centers will
represent an increasing proportion of our center base over time, our same center revenue may be lower in future
periods than in the past. Of the three new large format centers we plan to open in 2012, one will be in an existing
market. In addition, in January 2012, we acquired Racquet Club of the South, a tennis facility in the Atlanta market,
which we rebranded as Life Time Tennis Atlanta. We do not expect that operating costs of our planned new centers
will be significantly higher than centers opened in the past, and we also do not expect that the planned increase in
the number of centers will have a material adverse effect on the overall financial condition or results of operations of
existing centers.
During 2011, we began to see improved center operating margins, primarily due to price and membership mix,
which have more than offset the growth of our in-center businesses which are lower-margin. In late 2011, we
acquired six previously leased centers, which we expect will result in lower occupancy costs and improved center
operating margins. This margin improvement is expected to more than offset lower margins we expect from our
acquisition of the nine Lifestyle Family Fitness ("LFF") centers, which have higher occupancy costs as a result of
lease expense.
In 2008 and 2009, we experienced increased member attrition and lower revenue per membership as well as higher
membership acquisition costs compared to historical levels due to the challenging economic environment. Although
attrition levels improved in 2010 and 2011, if the challenging economic conditions were to continue, we may face
continued lower revenue and operating profit in affected centers and on a consolidated basis. Certain of our markets
may be impacted more severely than others as a result of regional economic factors such as housing, competition or
unemployment rates.
Our categories of new centers and existing centers do not include the center owned by Bloomingdale, LLC because
it is accounted for as an investment in an unconsolidated affiliate and is not consolidated in our financial statements.
We measure performance using such key operating statistics as member satisfaction ratings, return on investment,
average revenue per membership, including membership dues and enrollment fees, average in-center revenue per
membership and center operating expenses, with an emphasis on payroll and occupancy costs, as a percentage of
sales and same center revenue growth. We use center revenue and EBITDA margins to evaluate overall performance