Lifetime Fitness 2011 Annual Report Download - page 67

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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On June 30, 2011, we entered into a Third Amended and Restated Credit Agreement with U.S. Bank National
Association, as administrative agent, and the other lenders from time to time party thereto, which amended and
restated our Credit Agreement. The material changes to the revolving credit facility were an increase in the amount
of the facility from $470.0 million to $660.0 million, which may be increased by an additional $240.0 million upon
the exercise of an accordion feature by us if one or more lenders commit the additional $240.0 million, an extension
of the term of the facility to June 30, 2016 and a change in the interest rate and a change in the primary financial
covenants under the facility.
As of December 31, 2011, $432.0 million was outstanding on the U.S. Bank Facility, plus $7.9 million related to
letters of credit.
The weighted average interest rate and debt outstanding under the revolving credit facility for the year ended
December 31, 2011 was 2.0% and $355.1 million, respectively. The weighted average interest rate and debt
outstanding under the revolving credit facility for the year ended December 31, 2010 was 2.8% and $347.8 million,
respectively.
Interest Rate Swap
On September 17, 2007, we entered into an interest rate swap contract with J.P. Morgan Chase Bank, N.A. that
effectively fixed the rates paid on a total of $125.0 million of variable rate borrowings from our revolving credit
facility at 4.825% plus the applicable spread (depending on cash flow leverage ratio) until October 2010. Effective
July 10, 2009, we revised the terms of the swap, reducing the fixed rate to 4.715% plus the applicable spread. All
other terms of the swap remained the same. The contract was designated a hedge against interest rate volatility. We
applied this hedge to variable rate interest debt under the U.S. Bank credit facility. In accordance with applicable
accounting guidance, changes in the fair market value of the swap contract were recorded in accumulated other
comprehensive (loss) income. On October 10, 2010, our interest rate swap contract expired without renewal.
On August 8, 2011, we entered into an interest rate swap contract with J.P. Morgan Chase Bank, N.A. that
effectively fixed the rates paid on a total of $200.0 million of variable rate borrowings from our revolving credit
facility at 1.32% plus the applicable spread (which depends on our EBITDAR leverage ratio) until June 2016. We
pay 1.32% and receive LIBOR on the notional amount of $200.0 million. The contract was designated a hedge
against interest rate volatility. We applied this hedge to variable rate interest debt under the U.S. Bank credit facility.
In accordance with applicable accounting guidance, changes in the fair market value of the swap contract were
recorded in accumulated other comprehensive (loss) income. As of December 31, 2011, the $1.8 million fair market
value loss, net of tax, of the swap contract was recorded as accumulated other comprehensive loss in the
shareholders’ equity section of our consolidated balance sheets and the $3.0 million gross fair market value of the
swap contract was included in long-term debt.
Mortgage Notes Payable to Real Estate Investment Trust
In 2001 and 2002, we financed 13 of our centers with Teachers Insurance and Annuity Association of America
(“TIAA”) pursuant to the terms of individual notes. These notes were secured by mortgages on each of the centers
specifically financed, and we maintained a letter of credit in the amount of $5.0 million in favor of the lender. The
obligations related to 10 of the notes were amortized over a 20-year period, while the obligations related to the other
three notes were amortized over a 15-year period. The interest rate payable under these notes was fixed at 8.25%.