Lifetime Fitness 2013 Annual Report Download - page 62

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
56
The basic and diluted earnings per share calculations are shown below:
For the Year Ended December 31,
2013 2012 2011
Net income $ 121,712 $ 111,538 $ 92,617
Weighted average number of common shares
outstanding – basic 41,263 41,345 40,358
Effect of dilutive stock options 85 116 132
Effect of dilutive restricted stock awards 134 511 440
Weighted average number of common shares
outstanding – diluted 41,482 41,972 40,930
Basic earnings per common share $ 2.95 $ 2.70 $ 2.29
Diluted earnings per common share $ 2.93 $ 2.66 $ 2.26
The number of total common shares outstanding at December 31, 2013 was 42,115,549.
Dividends — We have never declared or paid any cash dividends on our common stock. We currently intend to
invest all future earnings into the operation and expansion of our business or the repurchase of shares and do not
anticipate declaring or paying any cash dividends on our common stock in the foreseeable future. In addition, the
terms of our revolving credit facility limits the amount of dividends we may pay without the consent of the lenders.
The payment of any dividends in the future will be at the discretion of our Board of Directors and will depend upon
our results of operations, earnings, capital requirements, contractual restrictions, outstanding indebtedness and other
factors deemed relevant by our board.
Share-Based Compensation — We maintain share-based incentive plans. Under applicable accounting standards, the
fair value of share-based compensation is determined at the grant date and the recognition of the related expense is
recorded over the period in which the share-based compensation vests.
The Compensation Committee of our Board of Directors has the authority to select the persons to receive awards
and determine the type, size and terms of awards and establish objectives and conditions for earning awards, and the
authority to delegate that authority. The types of awards that may be granted include incentive and non-qualified
options to purchase shares of common stock, stock appreciation rights, restricted shares, restricted share units,
performance awards and other types of stock-based awards. The value of restricted shares was based upon the
closing price of our stock on the dates of issue. The restricted shares generally vest over periods ranging from one to
four years. As of December 31, 2013, we had 1,234,537 shares available for grant.
We also have performance-based incentive plans. In June 2009 and August 2010, the Compensation Committee
approved the grant of a total of 1,016,000 shares of long-term performance-based restricted stock to serve as an
incentive to our senior management team to achieve certain diluted EPS targets in 2011 and 2012. A specified EPS
target was achieved for fiscal 2011 and 50% of the restricted shares vested. A specified EPS target was achieved for
fiscal 2012 and the remaining 50% of the restricted shares vested. The probability of reaching the targets was
evaluated each reporting period. A total of $18.8 million (pretax) was recognized as compensation expense with
respect to this grant.
In May, July and August 2012, the Compensation Committee approved the grant of a total of 658,500 shares of
long-term performance-based restricted stock to serve as an incentive to our senior management team to achieve
certain cumulative diluted EPS and return on invested capital (“ROIC”) targets during performance periods that end
on December 31, 2015 and December 31, 2016. The cumulative diluted EPS target measures cumulative diluted
EPS for each quarter during the period from April 1, 2012 to the end of the applicable performance period. These
targets are $13.68 cumulative diluted EPS through 2015 and $18.96 cumulative diluted EPS through 2016. The
ROIC target is measured in the last year of the applicable performance period. These targets are 8.9% for 2015 and