Lifetime Fitness 2011 Annual Report Download - page 61

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
55
The basic and diluted earnings per share calculations are shown below:
Net income
Weighted average number of common shares
outstanding – basic
Effect of dilutive stock options
Effect of dilutive restricted stock awards
Weighted average number of common shares
outstanding – diluted
Basic earnings per common share
Diluted earnings per common share
For the Year Ended December 31,
2011
$ 92,617
40,358
132
440
40,930
$ 2.29
$ 2.26
2010
$ 80,692
39,809
156
420
40,385
$ 2.03
$ 2.00
2009
$ 72,384
39,297
69
504
39,870
$ 1.84
$ 1.82
The number of total common shares outstanding at December 31, 2011 was 42,428,265.
Dividends — We have not declared or paid any cash dividends on our common stock in the past. The terms of our
revolving credit facility do not prohibit us from paying dividends so long as we are not in default and the payment
would not otherwise cause us to be noncompliant with our fixed charge coverage ratio financial covenant.
Share-Based Compensation — We maintain share-based incentive plans. Under applicable accounting standards, the
fair value of share-based compensation is determined at the grant date and the recognition of the related expense is
recorded over the period in which the share-based compensation vests.
The Compensation Committee of our Board of Directors has the power to select the persons to receive awards and
determine the type, size and terms of awards and establish objectives and conditions for earning awards. The types
of awards that may be granted include incentive and non-qualified options to purchase shares of common stock,
stock appreciation rights, restricted shares, restricted share units, performance awards and other types of stock-based
awards. The value of restricted shares was based upon the closing price of our stock on the dates of issue. The
restricted shares generally vest over periods ranging from one to four years. As of December 31, 2011, we had
2,477,922 shares remain available for grant.
We also have a performance-based incentive plan. In June 2009 and August 2010, the Compensation Committee
approved the grant of 996,000 and 20,000 shares, respectively, of long-term performance-based restricted stock to
serve as an incentive to our senior management team to achieve certain diluted earnings per share (“EPS”) targets in
2011 and 2012. As of December 31, 2011, 907,000 of these shares were still outstanding. A specified EPS target was
achieved for fiscal 2011 and 50% of the restricted shares vested. Since the grant was not fully vested after fiscal
2011, 50% of the shares will vest if a specified EPS target is achieved for fiscal 2012. In the event that we do not
achieve the specified EPS target for fiscal 2012, the remaining restricted stock will be forfeited. The probability of
reaching the targets is evaluated each reporting period. As of December 31, 2011 we determined that the second
50% vesting was probable. We anticipate recognizing the remaining portion of performance share-based
compensation expense of approximately $2.7 million (pretax) ratably in 2012. If we later determine that it is not
probable that the minimum diluted EPS performance threshold for 2012 will be met, no further compensation cost
will be recognized and any recognized compensation cost relating to the shares that have not vested will be reversed.
Our employee stock purchase plan (“ESPP”) provides for the sale of shares of our common stock to our employees
at discounted purchase prices. The cost per share under this plan is 90% of the fair market value of our common
stock on the last day of the purchase period, as defined. Compensation expense under the ESPP is based on the
discount of 10% at the end of the purchase period.
For more information on our share-based compensation, see Note 6.