Lifetime Fitness 2011 Annual Report Download - page 62

Download and view the complete annual report

Please find page 62 of the 2011 Lifetime Fitness annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 92

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
56
Fair Value of Financial Instruments — The carrying amounts related to cash and cash equivalents, accounts
receivable, income tax receivable, accounts payable and accrued liabilities approximate fair value due to the
relatively short maturities of such instruments. The fair value of our long-term debt and capital leases are estimated
based on estimated current rates for debt with similar terms, credit worthiness and the same remaining maturities.
The fair value estimates presented are based on information available to us as of December 31, 2011. These fair
value estimates have not been comprehensively revalued for purposes of these consolidated financial statements
since that date, and current estimates of fair values may differ significantly.
The following table presents the carrying value and the estimated fair value of long-term debt:
Fixed-rate debt
Obligations under capital leases
Floating-rate debt
Total
December 31, 2011
Carrying
Value
$ 401,789
16,617
267,892
$ 686,298
Estimated
Fair Value
$ 399,368
16,690
267,892
$ 683,950
Fair Value Measurements — The accounting guidance established a framework for measuring fair value and
expanded disclosures about fair value measurements. The guidance applies to all assets and liabilities that are
measured and reported on a fair value basis. This enables the reader of the financial statements to assess the inputs
used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the
information used to determine fair values. The guidance requires that each asset and liability carried at fair value be
classified into one of the following categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
We determined the fair value of the swap contract based upon current fair values as quoted by recognized dealers. As
prescribed by the guidance, we recognize the fair value of the swap liability as a Level 2 valuation.
Use of Estimates — The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Ultimate results could
differ from those estimates. In recording transactions and balances resulting from business operations, we use
estimates based on the best information available. We use estimates for such items as depreciable lives, probability
of meeting certain performance targets and tax provisions. We also use estimates for calculating the amortization
period for deferred enrollment fee revenue and associated direct costs, which are based on the historical estimated
average membership life. We revise the recorded estimates when better information is available, facts change or we
can determine actual amounts. These revisions can affect our consolidated operating results.