Lifetime Fitness 2012 Annual Report Download - page 57

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
51
In 2011, we spent approximately $70.3 million in acquisition related costs including several athletic events related
businesses and a yoga business in Michigan. Also, in late 2011, we acquired nine centers from Lifestyle Family
Fitness ("LFF"); eight of the centers we leased and one we purchased.
In addition, in late 2011, we purchased six facilities which we had previously leased with borrowings from our credit
facility plus the assumption of $72.1 million of long-term debt.
Capitalized software includes our internally developed web-based systems to facilitate member enrollment and
management, marketing-based website development, as well as point of sale system enhancements and our payroll,
human resources and procure-to-pay software. Costs related to these projects have been capitalized in accordance
with accounting guidance.
We capitalize interest during the construction period of our centers and in accordance with accounting guidance this
capitalized interest is included in the cost of the building. We capitalized interest of $1.1 million and $1.2 million for
the years ended December 31, 2012 and 2011, respectively.
Other equipment consists primarily of café, spa, playground and laundry equipment.
Acquisitions — We account for business acquisitions in accordance with the Financial Accounting Standards Board
("FASB") Accounting Standards Codification Topic 805, Business Combinations. This standard requires the
acquiring entity in a business combination to recognize all the assets acquired and liabilities assumed in the
transaction and establishes the acquisition-date fair value as the measurement objective for all assets acquired and
liabilities assumed in a business combination. Certain provisions of this standard prescribe, among other things, the
determination of acquisition-date fair value of consideration paid in a business combination (including contingent
consideration) and the exclusion of transaction and acquisition-related restructuring costs from acquisition
accounting.
In April 2012, we acquired a race timing business. Simultaneous with the acquisition, we merged a race registration
business, in which we previously owned a majority equity interest, with the race timing business. The fair values
assigned to the acquired entity were approximately $11.2 million of identifiable intangible assets, $2.3 million of
identifiable assets and $5.7 million to goodwill.
Also during 2012, we acquired a tennis center in the Atlanta, Georgia market which we rebranded Life Time Tennis
Atlanta. The fair value assigned to this acquired business was approximately $4.0 million of identifiable intangible
assets. We also acquired certain athletic events which complement our existing portfolio of athletic events. We are
currently in the process of finalizing the valuation of the assets acquired and liabilities assumed. The fair values
assigned to the athletic events was approximately $3.9 million aggregate identifiable intangible assets.
In December 2011, we acquired nine centers from LFF. The centers are located in or near our existing markets, and
while smaller than our typical centers, they complement our current locations in these markets and allow us to reach
key demographics in areas we don't cover with our current centers, in addition to taking advantage of our brand in
these markets. We lease eight of the centers and acquired the property of one center. The centers are located in or
near our existing markets. The fair values assigned to the acquired entity were approximately $9.2 million of
goodwill and the remainder of the purchase price was related to identifiable assets.
In December 2011, we purchased the land and building of six of our existing centers we had previously leased. The
purchase was financed by borrowings from our credit facility and the assumption of a securitized commercial
mortgage-backed loan of approximately $72.1 million (see Note 4), which approximates fair value, based on an
independent assessment. Since we previously operated these centers, this was accounted for as a purchase of an asset
group. We allocated the purchase price to land and buildings acquired based on relative fair values as determined by
independent appraisals. Previously recorded deferred rent related to these properties was treated as a reduction of the
purchase price. Additionally, we reclassified unamortized leasehold improvements on these properties to the
purchased assets.