Lifetime Fitness 2011 Annual Report Download - page 53

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
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1. Nature of Business
Life Time Fitness, Inc., a Minnesota corporation, and our subsidiaries are primarily engaged in designing, building
and operating distinctive and large, multi-use sports and athletic, professional fitness, family recreation and spa
centers in a resort-like environment, principally in residential locations of major metropolitan areas. As of
December 31, 2011, we operated 101 centers, including 24 in Minnesota, 18 in Texas, nine in Illinois, six in
Michigan, North Carolina and Ohio, five in Arizona, four in Colorado and Georgia, three in Indiana and Virginia,
two in Kansas, Maryland and New Jersey and one each in Florida, Missouri, Nebraska, Nevada, New York,
Tennessee and Utah.
2. Significant Accounting Policies
Principles of Consolidation — The consolidated financial statements include the accounts of Life Time Fitness, Inc.
and our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in
consolidation.
Revenue Recognition — We generally receive a one-time enrollment fee (including an administrative fee) at the time
a member joins and monthly membership dues for usage from our members. The enrollment fees are nonrefundable
after 14 days. Enrollment fees and related direct expenses, primarily sales commissions, are deferred and recognized
on a straight-line basis over an estimated average membership life of 33 months, which is based on historical
membership experience. Our attrition rate in 2009 improved slightly from a high of 42.7% at the end of first quarter
to 40.6% at year-end, and our estimated average membership life was 30 months. During 2010, our annual attrition
rate decreased from 40.6% to 36.3%. During the fourth quarter of 2010, we changed our estimated average
membership life from 30 months to 33 months. In 2011, our annual attrition rate decreased from 36.3% to 35.0%,
and our estimated average membership life remained at 33 months.
If the direct expenses related to the enrollment fees exceed the enrollment fees for any center, the amount of direct
expenses in excess of the enrollment fees are expensed in the current period instead of deferred over the estimated
average membership life. The amount of direct expenses in excess of enrollment fees totaled $14.9 million, $14.9
million and $8.4 million for the years ended December 31, 2011, 2010 and 2009 respectively. In addition, monthly
membership dues paid in advance of a center’s opening are deferred until the center opens. We offer members
month-to-month memberships and recognize as revenue the monthly membership dues in the month to which they
pertain.
We provide a wide range of services at each of our centers, including personal training, spa, café and other member
offerings. The revenue associated with these services is recognized at the time the service is performed. Personal
training revenue received in advance of training sessions and the related commissions are deferred and recognized
when services are performed. Other revenue includes revenue from our media, athletic events and restaurant. Media
advertising revenue is recognized over the duration of the advertising placement. For athletic events, revenue is
generated primarily through sponsorship sales and registration fees. Athletic event revenue is recognized upon the
completion of the event. Restaurant revenue and spa and café products are recognized at the point of sale to the
customer.