Lifetime Fitness 2013 Annual Report Download - page 35

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(7) Average in-center revenue per Access membership is total in-center revenue for the period divided by the
average number of Access memberships for the period, where the average number of Access memberships
for the period is an average derived from dividing the sum of the total Access memberships outstanding at
the beginning of the period and at the end of each month during the period by one plus the number of
months in each period.
(8) Annual attrition rate (or trailing 12 month attrition rate) is calculated as follows: total membership
terminations for the trailing 12 months divided into the average beginning month total membership balance
for the trailing 12 months. The annual attrition rate for the years ended December 31, 2010 and 2011
includes a small positive impact due to a change in calculation methodology adopted April 1, 2010 in
which we exclude potential memberships who elect to cancel during their 14-day trial as members. Our
calculation methodology changed in 2013 to better reflect our business by redefining membership as either
Non-Access or Access. Our attrition calculation then had total terminations in the numerator and total
memberships in the denominator, and the 2010 through 2012 numbers above are recalculated under the new
methodology. The bifurcated membership data needed for the new calculation methodology is not available
for 2009. The 2009 annual attrition rate was calculated as follows: total terminations for the trailing 12
months (excluding frozen memberships) divided into the average beginning month Access membership
balance for the trailing 12 months.
(9) EBITDA is a non-GAAP, non-cash measure which consists of net income plus interest expense, net,
provision for income taxes and depreciation and amortization. EBITDAR adds rent expense to EBITDA.
These terms, as we define them, may not be comparable to similarly titled measures used by other
companies and are not measures of performance presented in accordance with GAAP. We use EBITDA and
EBITDAR as measures of operating performance. EBITDA or EBITDAR should not be considered as a
substitute for net income, cash flows provided by operating activities or other income or cash flow data
prepared in accordance with GAAP. The funds depicted by EBITDA and EBITDAR are not necessarily
available for discretionary use if they are reserved for particular capital purposes, to maintain debt
covenants, to service debt or to pay taxes. Additional details related to EBITDA and EBITDAR are
provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations —
Non-GAAP Financial Measures.”
The following table provides a reconciliation of net income, the most directly comparable GAAP measure,
to EBITDA and EBITDAR:
For the Year Ended December 31,
2013 2012 2011 2010 2009
(In thousands)
Net income $ 121,712 $ 111,538 $ 92,617 $ 80,692 $ 72,384
Interest expense, net 25,656 25,475 20,138 27,795 30,338
Provision for income taxes 78,655 72,697 61,810 53,448 47,441
Depreciation and amortization 118,972 115,016 98,843 92,313 90,770
EBITDA $ 344,995 $ 324,726 $ 273,408 $ 254,248 $ 240,933
Rent expense 40,265 38,651 42,810 42,481 40,241
EBITDAR $ 385,260 $ 363,377 $ 316,218 $ 296,729 $ 281,174
(10) Capital expenditures represent investments in our new centers, costs related to updating and maintaining
our existing centers and other infrastructure investments. For purposes of deriving capital expenditures
from our cash flows statement, capital expenditures include our purchases of property and equipment,
excluding purchases of property and equipment in accounts payable at year-end, property and equipment
purchases financed through notes payable and capital lease obligations, and non-cash share-based
compensation capitalized to projects under development.
(11) Free cash flow is a non-GAAP measure consisting of net cash provided by operating activities, less
purchases of property and equipment, excluding acquisitions. This term, as we define it, may not be
comparable to a similarly titled measure used by other companies and does not represent the total increase
or decrease in the cash balance presented in accordance with GAAP. We use free cash flow to monitor cash
available for repayment of indebtedness and in discussions with the investment community. The funds