Lifetime Fitness 2013 Annual Report Download - page 44

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Our management uses EBITDA and/or EBITDAR:
• as measurements of operating performance because they assist us in comparing our performance on a
consistent basis;
• in presentations to the members of our Board of Directors to enable our board to have the same consistent
measurement basis of operating performance used by management; and
• as the basis for incentive bonuses paid to selected members of senior and center-level management.
We have provided reconciliations of EBITDA and EBITDAR to net income in the “Selected Financial Data” section.
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. The funds depicted by free cash flow 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. We use free cash flow as a measure of cash generated after spending on property and equipment. Free
cash flow should not be considered as a substitute for net cash provided by operating activities prepared in
accordance with GAAP. Additional details related to free cash flow are provided in Item 6, the "Selected Financial
Data" section.
We believe free cash flow is useful to an investor in understanding our cash flow generation and liquidity because:
• free cash flow allows us to evaluate the cash generated by operations and the ability of our operations to
fund investment items related to purchases of property and equipment, repay indebtedness, add to our cash
balance, or to use in other discretionary activities; and
• if negative, free cash flow reflects the need for incremental financing activities or use of existing cash
balances.
Our management uses the measure of free cash flow:
• to monitor cash available for repayment of indebtedness; and
• in discussions with the investment community.
We have provided reconciliations of free cash flow to cash flows from operations in the “Selected Financial Data”
section.
Liquidity and Capital Resources
Liquidity
Historically, we have satisfied our liquidity needs through cash flow provided by operations, various debt
arrangements and sales of equity. Our principal liquidity needs have included the development of new centers, debt
service requirements and expenditures necessary to maintain and update our existing centers and associated fitness
equipment and may include the acquisition and remodeling of centers we acquire from time to time, as well as
acquisitions to support our in-center and ancillary businesses. We believe that we can satisfy our current and longer-
term debt service obligations and capital expenditure requirements primarily with cash flow from operations, by the
extension of the terms of or refinancing our existing debt facilities, through sale-leaseback transactions and by
continuing to raise long-term debt or equity capital, although there can be no assurance that such actions can or will
be completed.
In February 2013, we obtained a mortgage loan in the original principal amount of $75.0 million on five of our
facilities. In April 2013 we retired mortgage debt scheduled to mature in November 2014 and prepaid one
promissory note payable on certain personal property scheduled to mature in January 2015. In June 2013 we retired
mortgage debt scheduled to mature in November 2013 and March 2014. In July 2013, we amended, enlarged and
extended our revolving credit facility, previously scheduled to mature in June 2016, now scheduled to mature in July
2018. In August 2013, we obtained a mortgage loan in the original principal amount of $50.0 million on three of our
facilities. Additionally, in January 2014, we obtained a mortgage loan in the original principal amount of $80.0