Lifetime Fitness 2013 Annual Report Download - page 40

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34
identifiable cash flows, which is generally at an individual center level or ancillary business. 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 2013, 2012 or 2011.
Impairment of Goodwill and Intangible Assets. We assess the recoverability of goodwill and intangible assets on an
annual basis or more often if indicators warrant, by determining whether the fair value of each reporting unit
supports its carrying value. The valuation of goodwill and intangible assets requires assumptions and estimates of
many critical factors, including revenue and market growth, operating cash flows and discount rates. A significant
change in the factors noted above could cause us to reduce the estimated fair value of some or all of our reporting
units and recognize a corresponding impairment of our goodwill or other intangible assets in connection with a
future impairment test. Adverse changes in strategy, market conditions or assumed market capitalization may result
in an impairment of goodwill or intangible assets. Based upon our review and analysis, no impairments on goodwill
or intangible assets were deemed to have occurred during 2013, 2012 or 2011.
Results of Operations
The following table sets forth our consolidated statements of operations data as a percentage of total revenue for the
periods indicated:
For the Year Ended December 31,
2013 2012 2011
REVENUE:
Membership dues 63.6% 64.6% 65.5%
Enrollment fees 1.2 1.4 1.8
In-center revenue 31.1 30.8 30.4
Total center revenue 95.9 96.8 97.7
Other revenue 4.1 3.2 2.3
Total revenue 100.0 100.0 100.0
OPERATING EXPENSES:
Center operations 57.7 58.2 60.7
Advertising and marketing 3.6 3.5 3.5
General and administrative 4.9 5.0 5.4
Other operating 5.3 4.6 3.5
Depreciation and amortization 9.9 10.2 9.8
Total operating expenses 81.4 81.5 82.9
Income from operations 18.6 18.5 17.1
OTHER INCOME (EXPENSE):
Interest expense, net (2.1 ) (2.3 ) (2.0)
Equity in earnings of affiliate 0.1 0.1 0.1
Total other income (expense) (2.0 ) (2.2 ) (1.9)
INCOME BEFORE INCOME TAXES 16.6 16.3 15.2
PROVISION FOR INCOME TAXES 6.5 6.5 6.1
NET INCOME 10.1% 9.8% 9.1%