Lifetime Fitness 2013 Annual Report Download - page 48

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(3) Purchase obligations consist primarily of our contracts with construction subcontractors for the completion
of the six centers under construction as of December 31, 2013, all of which we plan to open in 2014, as
well as contracts for the purchase of land for centers to be opened after 2014. All construction subcontracts
contain clauses that allow us to terminate any project. Therefore, we have the ability to cancel any project
and, in the event of such a cancellation, we will only be obligated to pay for work actually performed up to
the date of cancellation.
(4) Other obligations consists of deferred compensation obligations and payments owed in connection with
certain acquisitions. In addition to the other long-term liabilities presented in the table above,
approximately $0.8 million of unrecognized tax benefits, including interest and penalties, have been
recorded as liabilities, and we are uncertain as to if or when such amounts may be settled.
Recent Accounting Pronouncements
In July 2012, the Financial Accounting Standards Board ("FASB") updated guidance on intangible asset impairment
testing. The guidance became effective for us in fiscal 2013. The amendments in this update allow companies to first
assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. Under the
update, a company will not be required to calculate the fair value of an indefinite-lived intangible asset unless the
company determines, based on qualitative assessment, that it is not more likely than not, that the indefinite-lived
intangible asset is impaired. The amendments include a number of events and circumstances for an entity to consider
in conducting the qualitative assessment. The implementation of the guidance did not have a material impact on our
consolidated financial statements.
In February 2013, the FASB issued guidance adding new disclosure requirements for items reclassified out of
accumulated other comprehensive income ("AOCI"), which became effective for us in fiscal 2013. The guidance is
intended to help entities improve the transparency of changes in other comprehensive income ("OCI") and items
reclassified out of AOCI in their financial statements. It does not amend any existing requirements for reporting net
income or OCI in the financial statements. The implementation of the guidance did not have a material impact on
our consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We invest our excess cash in highly liquid short-term investments. These investments are not held for trading or
other speculative purposes. Changes in interest rates affect the investment income we earn on our cash and cash
equivalents and, therefore, impact our consolidated cash flows and consolidated results of operations. As of
December 31, 2013, our net floating rate indebtedness was approximately $346.1 million. If long-term floating
interest rates were to have increased by 100 basis points during the year ended December 31, 2013, our interest costs
would have increased by approximately $2.6 million. If short-term interest rates were to have increased by 100 basis
points during the year ended December 31, 2013, our interest income from cash equivalents would have increased
by less than $0.1 million. These amounts are determined by considering the impact of the hypothetical interest rates
on our floating rate indebtedness and cash equivalents balances at December 31, 2013.