Lifetime Fitness 2012 Annual Report Download - page 35

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(9) EBITDA is a non-GAAP, non-cash measure which consists of net income plus interest expense, net,
provision for income taxes and depreciation and amortization. EBITDAR adds rent expense to EBITDA.
These terms, as we define them, may not be comparable to similarly titled measures used by other
companies and are not measures of performance presented in accordance with GAAP. We use EBITDA and
EBITDAR as measures of operating performance. EBITDA or EBITDAR should not be considered as a
substitute for net income, cash flows provided by operating activities or other income or cash flow data
prepared in accordance with GAAP. The funds depicted by EBITDA and EBITDAR are not necessarily
available for discretionary use if they are reserved for particular capital purposes, to maintain debt
covenants, to service debt or to pay taxes. Additional details related to EBITDA and EBITDAR are
provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations —
Non-GAAP Financial Measures.”
The following table provides a reconciliation of net income, the most directly comparable GAAP measure,
to EBITDA and EBITDAR:
For the Year Ended December 31,
2012 2011 2010 2009 2008
(In thousands)
Net income $ 111,538 $ 92,617 $ 80,692 $ 72,384 $ 71,821
Interest expense, net 25,475 20,138 27,795 30,338 29,552
Provision for income taxes 72,697 61,810 53,448 47,441 47,224
Depreciation and amortization 115,016 98,843 92,313 90,770 72,947
EBITDA $ 324,726 $ 273,408 $ 254,248 $ 240,933 $ 221,544
Rent expense 38,651 42,810 42,481 40,241 27,375
EBITDAR $ 363,377 $ 316,218 $ 296,729 $ 281,174 $ 248,919
(10) Capital expenditures represent investments in our new centers, costs related to updating and maintaining
our existing centers and other infrastructure investments. For purposes of deriving capital expenditures
from our cash flows statement, capital expenditures include our purchases of property and equipment,
excluding purchases of property and equipment in accounts payable at year-end, property and equipment
purchases financed through notes payable and capital lease obligations, and non-cash share-based
compensation capitalized to projects under development.
(11) Free cash flow is a non-GAAP measure consisting of net cash provided by operating activities, less
purchases of property and equipment, excluding acquisitions. This term, as we define it, may not be
comparable to a similarly titled measure used by other companies and does not represent the total increase
or decrease in the cash balance presented in accordance with GAAP. We use free cash flow to monitor cash
available for repayment of indebtedness and in discussions with the investment community. The funds
depicted by free cash flow are not necessarily available for discretionary use if they are reserved for
particular capital purposes, to maintain debt covenants, to service debt or to pay taxes. Free cash flow
should not be considered as a substitute for net cash provided by operating activities prepared in
accordance with GAAP. Additional details related to free cash flow are provided in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial
Measures.”
The following table provides a reconciliation of net cash provided by operating activities to free cash flow:
For the Year Ended December 31,
2012 2011 2010 2009 2008
(In thousands)
Net cash provided by operating
activities $ 255,745 $ 227,943 $ 192,265 $ 186,203 $ 183,066
Less: Purchases of property and
equipment 224,194 165,335 131,671 146,632 463,337
Free cash flow $ 31,551 $ 62,608 $ 60,594 $ 39,571 $ (280,271)