Lifetime Fitness 2013 Annual Report Download - page 24

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If we fail to comply with any of the covenants in our financing documents, we may not be able to access our
existing credit facility, and we may face an accelerated obligation to repay our indebtedness.
We have entered into several financing transactions to finance the development of our centers. Certain of the loan
documents contain financial and other covenants applicable to us, and certain of these loan documents contain cross-
default provisions. If we fail to comply with any of the covenants, it may cause a default under one or more of our
loan documents, which could limit our ability to obtain additional financing under our existing credit facility, require
us to pay higher levels of interest or accelerate our obligations to repay our indebtedness.
If we are unable to identify and acquire suitable sites for centers, our revenue growth rate and profits may be
negatively impacted.
To successfully expand our business, we must identify and acquire sites that meet the site selection criteria we have
established. In addition to finding sites with the right demographic and other measures we employ in our selection
process, we also need to evaluate the penetration of our competitors in the market. We face significant competition
for sites that meet our criteria, and as a result we may lose those sites, our competitors could copy our format or we
could be forced to pay significantly higher prices for those sites. If we are unable to identify and acquire sites for
new centers, our revenue growth rate and profits may be negatively impacted. Additionally, if our analysis of the
suitability of a site is incorrect, we may not be able to recover our capital investment in developing and building the
new center.
We may incur rising costs related to construction of new centers and maintenance of our existing centers. If we
are not able to pass these cost increases through to our members, our financial results may be adversely affected.
Our centers require significant upfront and ongoing investment. If our investment is higher than we had planned, we
may need to outperform our operational plan to achieve our targeted return. Over the longer term, we believe that we
can offset cost increases by increasing our membership dues and other fees and improving profitability through cost
efficiencies, but higher costs in regions where we are opening new centers may be difficult to offset in the short
term.
We have significant operations concentrated in certain geographic areas, and any disruption in the operations of
our centers in any of these areas could harm our operating results.
At February 28, 2014, we operated multiple centers in several metropolitan areas, including 24 in the Minneapolis/
St. Paul market, nine in the Chicago market, eight in the Dallas market, six in the Atlanta, Detroit and Houston
markets and five in the Phoenix and greater New York markets, with future planned expansion in current and new
markets. As a result, any prolonged disruption in the operations of our centers in any of these markets, whether due
to technical difficulties, power failures or destruction or damage to the centers as a result of a natural disaster, fire or
any other reason, could harm our operating results. In addition, our concentration in these markets increases our
exposure to adverse developments related to competition, as well as economic and demographic changes in these
areas.
If we cannot retain our key employees and hire additional highly qualified employees, we may not be able to
successfully manage our businesses and pursue our strategic objectives.
We are highly dependent on the services of our senior management team and other key employees at both our
corporate headquarters and our centers, and on our ability to recruit, retain and motivate key employees.
Competition for such employees is intense, and the inability to attract and retain the additional qualified employees
required to expand our activities, or the loss of current key employees, could adversely affect our operating
efficiency and consolidated financial results.
The opening of new centers may negatively impact our operating margins. In addition, the opening of new
centers in existing markets may negatively impact our same-center revenues.
A result of opening new centers is that our center operating margins may be lower than they have been historically
while the centers build membership base. We expect both the addition of pre-opening expenses and the lower
revenue volumes characteristic of newly opened centers to affect our center operating margins at these new centers.
We also expect certain operating costs, particularly those related to occupancy, to be higher than in the past in some