Lifetime Fitness 2012 Annual Report Download - page 39

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33
We currently do not believe that achievement of either the cumulative diluted EPS or the ROIC targets is currently
probable, and, therefore, we did not recognize any compensation expense associated with the grant during the year
ended December 31, 2012. If all of the targets had been considered probable at December 31, 2012, we would have
recognized $4.6 million of non-cash performance share-based compensation expense during the year ended
December 31, 2012. If it becomes probable that the cumulative diluted EPS and ROIC performance targets will be
achieved, a cumulative adjustment will be recorded and the remaining compensation expense will be recognized
over the remaining performance period. The probability of reaching the targets is evaluated each reporting period.
Our 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.
A 10% change in our share-based compensation expense for the year ended December 31, 2012 would have affected
net income by approximately $0.9 million in fiscal 2012.
Impairment of Long-lived Assets. The carrying value of long-lived assets is reviewed annually and whenever events
or changes in circumstances indicate that such carrying values may not be recoverable. We consider a history of
consistent and significant operating losses, or the inability to recover net book value over the remaining useful life,
to be our primary indicator of potential impairment. Judgments regarding existence of impairment indicators are
based on factors such as operational performance (including revenue and expense growth rates), market conditions,
and expected holding period of each asset. We evaluate assets for impairment at the lowest levels for which there are
identifiable cash flows, which is generally at an individual center level. The determination of whether impairment
has occurred is based on an estimate of undiscounted future cash flows directly related to that center, compared to
the carrying value of these assets. If impairment has occurred, the amount of impairment recognized is determined
by estimating the fair value of these assets and recording a loss if the carrying value is greater than the fair value.
Worsening operational performance, market conditions or change in expected holding periods of each asset may
cause us to re-evaluate the assumptions used in management's analysis. If the estimate of our undiscounted future
cash flows at our center level had decreased by 5%, the impact of this change in accounting estimate would not have
resulted in impairment, and the change in accounting estimate would have had no impact on our net income or basic
and diluted earnings per common share. Based upon our review and analysis, no impairments on long-lived assets
were deemed to have occurred during 2012, 2011 or 2010.