Lifetime Fitness 2013 Annual Report Download - page 61

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
55
Accrued Expenses — Accrued expenses consist of the following:
December 31,
2013 2012
Payroll related $ 14,410 $ 12,255
Real estate taxes 18,939 18,549
Center operating costs 15,868 14,239
Insurance 6,495 6,911
Interest 1,469 888
Income taxes 59 137
Marketing and information technology accruals 1,642 1,780
Other 8,553 8,574
Total accrued expenses $ 67,435 $ 63,333
Litigation — We are engaged in proceedings incidental to the normal course of business. Due to their nature, such
legal proceedings involve inherent uncertainties, including, but not limited to, court rulings, negotiations between
affected parties and governmental intervention. We have established reserves for matters that are probable and
estimable in amounts we believe are adequate to cover reasonable adverse judgments not covered by insurance.
These reserves are not material to our consolidated financial statements.
Income Taxes — We account for income taxes under the asset and liability method, which requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the
financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences
between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities
is recognized in income in the period that includes the enactment date.
We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In
making such determination, we consider all available positive and negative evidence, including scheduled reversals
of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In
the event we were to determine that we would be able to realize our deferred income tax assets in the future in
excess of their net recorded amount, we would record a valuation allowance, which would reduce the provision for
income taxes.
We recognize, measure, present and disclose uncertain tax positions that we have taken or expect to take in our
income tax returns. We recognize a tax position when it is more likely than not that the position will be sustained
upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits.
We recognize interest and penalties related to unrecognized tax benefits within the income tax expense line in the
accompanying consolidated statement of operations. Accrued interest and penalties are included within the related
tax liability line in the consolidated balance sheet.
Earnings per Common Share — Basic earnings per common share (“EPS”) is computed by dividing net income
applicable to common shareholders by the weighted average number of shares of common stock outstanding for
each year. Diluted EPS is computed similarly to basic EPS, except that the denominator is increased for the
conversion of any dilutive common stock equivalents, the assumed exercise of dilutive stock options using the
treasury stock method and unvested restricted stock awards using the treasury stock method. Stock options excluded
from the calculation of diluted EPS because the option exercise price was greater than the average market price of
the common share were 2,477 and 15,540 for the years ended December 31, 2013 and 2012, respectively, and
42,227 for the year ended December 31, 2011.