Lifetime Fitness 2012 Annual Report Download - page 74

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
68
The following is a reconciliation of the total amounts of unrecognized tax benefits:
For the Year Ended December 31,
2012 2011 2010
Unrecognized tax benefit – beginning balance $ 868 $ 1,229 $ 1,377
Gross increases – tax positions in current period 300 100 199
Prior year increases — 46 23
Prior year decreases (150) — (21)
Lapse of statute of limitations (272)(507)(349)
Unrecognized tax benefit – ending balance $ 746 $ 868 $ 1,229
Included in the balance of unrecognized tax benefits at December 31, 2012, 2011 and 2010 are $0.5 million, $0.5
million and $0.7 million, respectively, of benefits that, if recognized, would affect the effective tax rate.
We recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense. Related to
the uncertain tax benefits noted above, we accrued penalties and interest of $0.1 million during 2012 and in total, as
of December 31, 2012, had recognized a liability for penalties and interest of $0.1 million. During 2011, we accrued
penalties and interest of $0.1 million and in total, as of December 31, 2011 had recognized a liability for penalties
and interest of $0.1 million. During 2010, we accrued penalties and interest of $0.1 million and in total, as of
December 31, 2010, had recognized a liability for penalties and interest of $0.1 million.
We do not anticipate that the total amounts of unrecognized tax benefits will significantly increase or decrease in the
next 12 months.
We are subject to taxation in the U.S., Canada and various states. Our tax years 2009, 2010 and 2011 are subject to
examination by the tax authorities. With few exceptions, we are no longer subject to U.S. federal, state or local
examinations by tax authorities for years before 2009.
We consider the undistributed earnings of our foreign subsidiaries as of December 31, 2012 to be indefinitely
reinvested and, accordingly, no U.S. income taxes have been provided thereon. We have not, nor do we anticipate
the need to, repatriate funds to the U.S. to satisfy domestic liquidity needs arising in the ordinary course of business,
including liquidity needs associated with our domestic debt service requirements.
7. Share-Based Compensation
Stock Option and Incentive Plans
The LIFE TIME FITNESS, Inc. 1998 Stock Option Plan (the 1998 Plan), reserved up to 1,600,000 shares of our
common stock for issuance. Under the 1998 Plan, the Board of Directors had the authority to grant incentive and
nonqualified options to purchase shares of our common stock to eligible employees, directors and contractors. The
1998 Plan was amended in December 2003 by our Board of Directors and shareholders to reserve an additional
1,500,000 shares of our common stock for issuance. As of December 31, 2012, we had granted a total of 1,957,500
options to purchase common stock under the 1998 Plan, of which 6,400 were outstanding. In connection with
approval of the 2004 Long-Term Incentive Plan (the 2004 Plan), as discussed below, our Board of Directors
approved a resolution to cease making additional grants under the 1998 Plan.
The 2004 Plan originally reserved 3,500,000 shares of our common stock for issuance. In 2009, our shareholders
authorized an additional 1,750,000 shares. The types of awards that could be granted under the 2004 Plan included
incentive and non-qualified options to purchase shares of common stock, stock appreciation rights, restricted shares,
restricted share units, performance awards and other types of stock-based awards. We use the term “restricted
shares” to define nonvested shares granted to employees, whereas applicable accounting guidance reserves that term