Lifetime Fitness 2012 Annual Report Download - page 36

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(12) The operating data presented in these items include the center owned by Bloomingdale LLC. The data
presented elsewhere in this section exclude the center owned by Bloomingdale LLC.
(13) The square footage presented in this table reflects fitness square footage which we believe is the best metric
for the efficiencies of a facility. We exclude outdoor swimming pools, outdoor play areas, tennis courts and
satellite facility square footage. These figures are approximations.
(14) EBITDA margin is the ratio of EBITDA to total revenue.
(15) EBITDAR margin is the ratio of EBITDAR to total revenue.
(16) Market capitalization is calculated by multiplying the year-end total common shares outstanding by the
year-end stock price.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
We operate distinctive and large, multi-use sports and athletic, professional fitness, family recreation and spa centers
in a resort-like environment. As of February 28, 2013, we operated 105 centers primarily in residential locations
across 22 states and one Canadian province under the LIFE TIME FITNESS® and LIFE TIME ATHLETICSM
brands.
We compare the results of our centers based on how long the centers have been open at the most recent measurement
period. We include a center for same center revenue purposes beginning on the first day of the thirteenth full
calendar month of the center’s operation, prior to which time we refer to the center as a new center. We include an
acquired center for same center revenue purposes beginning on the first day of the thirteenth full calendar month
after we assumed the center’s operations.
As we grow our presence in existing markets by opening new centers, we expect to attract some memberships away
from our other existing centers in those markets, reducing revenue and initially lowering the memberships of those
existing centers. In addition, as a result of new center openings in existing markets, and because older centers will
represent an increasing proportion of our center base over time, our same center revenue may be lower in future
periods than in the past. Of the three new large format centers we plan to open in 2013, two will be in existing
markets. We do not expect that operating costs of our planned new centers will be significantly higher than centers
opened in the past, and we also do not expect that the planned increase in the number of centers will have a material
adverse effect on the overall financial condition or results of operations of existing centers.
During 2011 and 2012, our center operating margins improved, primarily due to price and membership mix, which
have more than offset the growth of our in-center businesses which are lower-margin. In late 2011, we acquired six
previously leased centers, which we expect will result in lower occupancy costs and improved center operating
margins. This margin improvement is expected to more than offset lower margins we expect from our acquisition of
the nine LFF centers, which have higher occupancy costs as a result of lease expense.
Our categories of new centers and existing centers do not include the center owned by Bloomingdale, LLC because
it is accounted for as an investment in an unconsolidated affiliate and is not consolidated in our financial statements.
We measure performance using such key operating statistics as member satisfaction ratings, return on investment,
average revenue per membership, including membership dues and enrollment fees, average in-center revenue per
membership and center operating expenses, with an emphasis on payroll and occupancy costs, as a percentage of
sales and same center revenue growth. We use center revenue and EBITDA margins to evaluate overall performance
and profitability on an individual center basis. In addition, we focus on several membership statistics on a center-
level and system-wide basis. These metrics include change in center membership levels and growth of system-wide
memberships; percentage center membership to target capacity; center membership usage; center membership mix
among individual, couple and family memberships; non-access memberships and center attrition rates. During the
years ended December 31, 2010, 2011 and 2012, our annual attrition rate fluctuated between 35.0% and 38.2%,
resulting in the estimated average membership life remaining at 33 months during those periods. At December 31,
2012, our annual attrition rate was 38.2%, and the increase was primarily the result of the higher attrition rates
associated with the LFF clubs acquired in late 2011.