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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-K
 
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from ______ to ______
 Commission File No. 001-32230
 
 Life Time Fitness, Inc.
  Minnesota
(State or other jurisdiction of 
incorporation or organization)
    
    41-1689746
(I.R.S. Employer
Identification No.)6442 City West ParkwayEden Prairie, Minnesota
(Address of principal executive offices)
    
    55344
(Zip Code)
 952-947-0000
  Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock, $.02 par value
    
    New York Stock Exchange
  þ o
 o þ
 þ o
 o
  þ o o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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FORWARD-LOOKING STATEMENTS
  1




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TABLE OF CONTENTS
  
 PagePART I.Item 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    13Item 1B. Unresolved Staff Comments
    
    
    18Item 2. Properties
    
    
    18Item 3. Legal Proceedings
    
    
    20Item 4. Submission of Matters to a Vote of Security Holders
    
    
    20PART II.Item 5. Market For Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    20Item 6. Selected Financial Data
    
    
    22Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    36Item 8. Financial Statements and Supplementary Data
    
    
    37Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    65Item 9A. Controls and Procedures
    
    
    65Item 9B. Other Information
    
    
    66PART III.Item 10. Directors, Executive Officers and Corporate Governance
    
    
    66Item 11. Executive Compensation
    
    
    67Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    67Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    67Item 14. Principal Accountant Fees and Services
    
    
    67PART IV.Item 15. Exhibits and Financial Statement Schedules
    
    
    68SIGNATURESForm of Restricted Stock AgreementExecutive Nonqualified Excess PlanSubsidiaries of the RegistrantConsent of Deloitte & Touche LLPPowers of AttorneyCertification of Principal Executive OfficerCertification of Principal Financial OfficerSection 1350 Certification
 2




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PART I
 
 Item 1. Business.
 Company Overview
 ®
     Our Competitive Strengths
 We offer comprehensive and convenient programs and services.
  3




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We offer a value proposition that encourages membership loyalty.
 Experience Life
 We offer a product that is convenient for our members.
  We have an established and profitable economic model.
 th
 We believe we have a disciplined and sophisticated site selection and development process.
  4




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Our Growth Strategy
  Open new centers.
  Increase membership and optimize membership dues.
 th
  Increase in-center products and services revenue.
  Our Industry
  5




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Our Philosophy  A Healthy Way of Life Company
  Our Sports and Athletic, Professional Fitness, Family Recreation and Resort/Spa Centers
 Size and Location
  Center Environment
  6




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Equipment and Programs
  Large Format Centers, including Current Model Centers
 Facilities
    
    Amenities and Services
    
    Activities and EventsBasketball/Volleyball Courts
    
    24-Hour Availability
    
    AquaticsCardiovascular Training
    
    Fitness Assessments
    
    Athletic LeaguesChild Centers
    
    Child Center
    
    Birthday PartiesFree Weights
    
    Educational Seminars
    
    Eastern/Martial ArtsGroup Fitness Studios
    
    Subscription to Experience Life
    
    Kids ClubLap Pool
    
    Towel Service
    
    PilatesRacquetball/ Squash Courts
    
    Use of Lockers
    
    Running ClubResistance Training
    
    LifeCafe
    
    Scuba LessonsRock Climbing Cavern
    
    LifeSpa
    
    Studio CyclingSaunas
    
    Massage Therapy
    
    Sports-specific Training CampsTwo-story Waterslides
    
    Nutritional Products
    
    Summer CampsWhirlpools
    
    Personal Training
    
    Swimming LessonsZero-depth Entry Swimming Pools
    
    Pool-side Bistro
    
    YogaLifeStudio
    
    T.E.A.M. Programs
    
    Educational CampsO2 Cardio TrainingMetabolic TestingNutrition Coaching
 Other Centers
 Facilities
    
    Amenities and Services
    
    Activities and EventsCardiovascular Training
    
    Fitness Assessments
    
    PilatesChild Centers
    
    Child Center
    
    Running ClubFree Weights
    
    Educational Seminars
    
    Studio CyclingGroup Fitness Studios
    
    Subscription to Experience Life
    
    YogaLap Pool
    
    Towel ServiceResistance Training
    
    Use of LockersSaunas
    
    Massage TherapyNutritional ProductsPersonal TrainingNutrition CoachingT.E.A.M. ProgramsO2 Cardio TrainingMetabolic Testing
 Fitness Equipment and Facilities.
 7




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Personalized Services for Individuals and Small Groups. 2
 Fitness Programs and Classes.
 Other Center Services.
    8




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Membership
   Experience Life
  Usage
  New Center Site Selection and Construction
 Site Selection.
 9




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Design and Construction.
 Marketing and Sales
 Overview of Marketing.
 Overview of Sales.
 Pre-Opening Phase. Experience Life
 Grand Opening Phase.
 Membership Growth Phase.
 10




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Leveraging the LIFE TIME FITNESS Brand
 Experience Life
 Education. Experience Life
 Experience Life Experience Life Experience Life
 Athletic Events.
 Nutritional Products.
 Our Employees
   11




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Information Systems
  Competition
  
    
    health club operators, including 24 Hour Fitness Worldwide, Inc., Bally Total Fitness
Holding Corporation, Equinox Holdings, Inc., LA Fitness International, LLC and Town Sports
International, Inc.;
    
    the YMCA and similar non-profit organizations;
    
    physical fitness and recreational facilities established by local governments, hospitals and businesses;
    
    local salons, cafes and businesses offering similar ancillary services;
    
    exercise studios;
    
    racquet, tennis and other athletic clubs;
    
    amenity and condominium clubs;
    
    country clubs; and
    
    the home-use fitness equipment industry.
  Government Regulation
  
    
    giving the member the right under various state cooling-off statutes to cancel, in
most cases, within three to ten days after signing, his or her membership and receive a
refund of any enrollment fee paid;
 12




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
    
    requiring an escrow for funds received from pre-opening sales or the posting of a bond
or proof of financial responsibility; and
    
    establishing maximum prices and terms for membership contracts and limitations on the
financing term of contracts.
   Trademarks and Trade Names
   Available Information
 www.lifetimefitness.com.
 
 Item 1A. Risk Factors.
 If we are unable to identify and acquire suitable sites for new sports and athletic,
professional fitness, family recreation and resort/spa centers, our revenue growth rate and profits
may be negatively impacted.
  We may be unable to attract and retain members, which could have a negative effect on our business.
  13




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Delays in new center openings could have a material adverse affect on our financial performance.
  
    
    obtaining acceptable financing for construction of new sites;
    
    obtaining entitlements, permits and licenses necessary to complete construction of the new
center on schedule;
    
    recruiting, training and retaining qualified management and other personnel;
    
    securing access to labor and materials necessary to develop and construct our centers;
    
    delays due to material shortages, labor issues, weather conditions or other acts of god,
discovery of contaminants, accidents, deaths or injunctions; and
    
    general economic conditions.
 We may incur rising costs related to construction of new centers and maintaining our existing
centers. If we are not able to pass these cost increases through to our members, our returns may be
adversely affected.
  The opening of new centers in existing locations may negatively impact our same-center revenue
increases and our operating margins.
   14




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Our continued growth could place strains on our management, employees, information systems and
internal controls which may adversely impact our business and the value of your investment.
  The anticipated benefits of operating additional leased centers may not be realized.
  Our debt levels may limit our flexibility in obtaining additional financing and in pursuing other
business opportunities.
   
    
    our ability to obtain additional financing, if necessary, for capital expenditures,
working capital, acquisitions or other purposes may be impaired or such financing may not be
available on favorable terms;
    
    we will need a substantial portion of our cash flow to pay the principal of, and interest
on, our indebtedness, including indebtedness that we may incur in the future;
    
    payments on our indebtedness will reduce the funds that would otherwise be available for
our operations and future business opportunities;
    
    a substantial decrease in our cash flows from operations or a substantial increase in our
investment in new centers could make it difficult for us to meet our debt service
requirements and force us to modify our operations;
    
    we may be more highly leveraged than our competitors, which may place us at a competitive
disadvantage;
    
    our debt level may make us more vulnerable and less flexible than our competitors to a
downturn in our business or the economy in general; and
    
    some of our debt has a variable rate of interest, which increases our vulnerability to
interest rate fluctuations.
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Because of the capital-intensive nature of our business, we may have to incur additional
indebtedness or issue new equity securities and, if we are not able to obtain additional capital,
our ability to operate or expand our business may be impaired and our operating results could be
adversely affected.
  If our founder and chief executive officer leaves our company for any reason, it could have a
material adverse effect on us.
  The health club industry is highly competitive and our competitors may have greater name
recognition than we have.
  Competitors could copy our business model and erode our market share, brand recognition and
profitability.
  16




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We have significant operations concentrated in certain geographic areas, and any disruption in the
operations of our centers in any of these areas could harm our operating results.
  If we cannot retain our key personnel and hire additional highly qualified personnel, we may not be
able to successfully manage our operations and pursue our strategic objectives.
  We could be subject to claims related to health or safety risks at our centers.
  We are subject to extensive government regulation, and changes in these regulations could have a
negative effect on our financial condition and results of operations.
  
    
    general rules and regulations of the Federal Trade Commission, state and local consumer
protection agencies and state statutes that prescribe certain forms and provisions of
membership contracts and that govern the advertising, sale and collection of our memberships;
    
    state and local health regulations;
    
    federal regulation of health and nutritional products; and,
    
    regulation of rehabilitation service providers.
  We could be subject to claims related to our nutritional products.
  17




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If it becomes necessary to protect or defend our intellectual property rights or if we infringe on
the intellectual property rights of others, we may become involved in costly litigation or be
required to pay royalties or fees.
  Our business could be affected by acts of war or terrorism.
  
 Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties.
   Center
    
    Square FeetLocation
    
    Owned/Leased
    
    Format
    
    (1)
    
    Date Opened1. Eagan, MN
    
    Owned
    
    Large
    
    
    64,415
    
    
    September 19942. Woodbury, MN (2)
    
    Leased
    
    Large
    
    
    73,050
    
    
    September 19953. Roseville, MN
    
    Leased
    
    Other
    
    
    14,000
    
    
    September 19954. Highland Park, MN (3)
    
    Owned
    
    Other
    
    
    25,827
    
    
    November 19955. Coon Rapids, MN (4)
    
    Leased
    
    Other
    
    
    90,262
    
    
    May 19966. Bloomington, MN
    
    Owned
    
    Other
    
    
    47,307
    
    
    November 19967. Plymouth, MN
    
    Leased (Ground)
    
    Large
    
    
    109,558
    
    
    June 19978. St. Paul, MN
    
    Leased
    
    Other
    
    
    85,630
    
    
    December 19979. Troy, MI
    
    Owned
    
    Large
    
    
    93,579
    
    
    January 199910. Apple Valley, MN
    
    Leased
    
    Other
    
    
    10,375
    
    
    June 199911. Columbus, OH
    
    Leased (Ground)
    
    Large
    
    
    98,047
    
    
    July 199912. Indianapolis, IN
    
    Owned
    
    Large
    
    
    90,956
    
    
    August 199913. Novi, MI
    
    Owned
    
    Large
    
    
    90,956
    
    
    October 199914. Centreville, VA
    
    Owned
    
    Large
    
    
    90,956
    
    
    January 2000
 18




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Center
    
    Square FeetLocation
    
    Owned/Leased
    
    Format
    
    (1)
    
    Date Opened15. Shelby Township, MI
    
    Owned
    
    Large
    
    
    101,680
    
    
    March 200016. Minneapolis, MN (center and restaurant)
    
    Leased
    
    Other
    
    
    72,547
    
    
    July 200017. Schaumburg, IL
    
    Owned
    
    Large/Current
    
    
    108,890
    
    
    October 200018. Warrenville, IL
    
    Owned
    
    Large/Current
    
    
    114,993
    
    
    January 200119. Bloomingdale, IL (5)
    
    Owned
    
    Large/Current
    
    
    108,890
    
    
    February 200120. Algonquin, IL
    
    Owned
    
    Large/Current
    
    
    108,890
    
    
    April 200121. Orland Park, IL
    
    Owned
    
    Large/Current
    
    
    108,890
    
    
    August 200122. Fairfax City, VA
    
    Leased
    
    Large
    
    
    67,467
    
    
    October 200123. Champlin, MN
    
    Leased (Ground)
    
    Large
    
    
    61,948
    
    
    October 200124. Burr Ridge, IL
    
    Owned
    
    Large/Current
    
    
    105,562
    
    
    February 200225. Savage, MN
    
    Leased (Ground)
    
    Large
    
    
    80,853
    
    
    June 200226. Old Orchard (Skokie), IL
    
    Owned
    
    Large/Current
    
    
    108,890
    
    
    August 200227. Canton Township, MI (2)
    
    Leased
    
    Large/Current
    
    
    105,010
    
    
    September 200228. Rochester Hills, MI (2)
    
    Leased
    
    Large/Current
    
    
    108,890
    
    
    November 200229. Tempe, AZ
    
    Owned
    
    Large/Current
    
    
    108,890
    
    
    April 200330. Gilbert, AZ
    
    Owned
    
    Large/Current
    
    
    108,890
    
    
    October 200331. New Hope, MN
    
    Leased
    
    Other
    
    
    44,156
    
    
    October 200332. Plano, TX
    
    Owned
    
    Large/Current
    
    
    108,890
    
    
    November 200333. Willowbrook, TX
    
    Owned
    
    Large/Current
    
    
    108,890
    
    
    June 200434. Garland, TX
    
    Owned
    
    Large/Current
    
    
    108,890
    
    
    July 200435. Sugar Land, TX
    
    Owned
    
    Large/Current
    
    
    108,890
    
    
    October 200436. Flower Mound, TX
    
    Owned
    
    Large/Current
    
    
    108,890
    
    
    October 200437. North Dallas, TX
    
    Leased
    
    Large
    
    
    68,982
    
    
    November 200438. Colleyville, TX
    
    Owned
    
    Large/Current
    
    
    108,890
    
    
    November 200439. Commerce Township, MI
    
    Owned
    
    Large/Current
    
    
    108,890
    
    
    March 200540. Cinco Ranch, TX
    
    Owned
    
    Large/Current
    
    
    108,890
    
    
    June 200541. Chanhassen, MN
    
    Owned
    
    Large/Current
    
    
    110,563
    
    
    July 200542. Austin, TX
    
    Owned
    
    Large/Current
    
    
    110,563
    
    
    September 200543. Romeoville, IL
    
    Owned
    
    Large/Current
    
    
    110,563
    
    
    September 200544. San Antonio, TX
    
    Owned
    
    Large/Current
    
    
    110,563
    
    
    December 200545. Maple Grove, MN
    
    Owned
    
    Large
    
    
    72,500
    
    
    December 200546. Minnetonka, MN
    
    Owned
    
    Other
    
    
    41,000
    
    
    January 200647. Columbia, MD
    
    Owned
    
    Large/Current
    
    
    110,563
    
    
    February 200648. Allen-McKinney, TX
    
    Owned
    
    Large/Current
    
    
    125,475
    
    
    May 200649.
Moore Lake (Fridley), MN
    
    Leased
    
    Large
    
    
    162,048
    
    
    July 200650. Arena (Minneapolis), MN
    
    Leased
    
    Large
    
    
    170,925
    
    
    July 200651. Crosstown (Eden Prairie), MN
    
    Leased
    
    Large
    
    
    145,896
    
    
    July 200652. St. Louis Park, MN
    
    Leased
    
    Large
    
    
    189,496
    
    
    July 200653. Eden Prairie, MN
    
    Leased
    
    Large
    
    
    89,011
    
    
    July 200654. 98th Street (Bloomington), MN
    
    Leased
    
    Large
    
    
    95,314
    
    
    July 200655. Boca Raton, FL
    
    Leased
    
    Large
    
    
    73,688
    
    
    July 200656.
South Valley (South Jordan), UT
    
    Owned
    
    Large/Current
    
    
    108,925
    
    
    August 200657. Overland Park, KS
    
    Owned
    
    Large/Current
    
    
    110,080
    
    
    October 200658.
Palm Valley (Goodyear), AZ
    
    Owned
    
    Large/Current
    
    
    109,775
    
    
    October 200659. Alpharetta, GA
    
    Owned
    
    Large/Current
    
    
    109,720
    
    
    December 200660. Scottsdale, AZ
    
    Owned
    
    Large/Current
    
    
    109,775
    
    
    December 2006
 
 (1)
    
    In a few of our centers, we sublease space to third parties who operate our cafe, pro shop,
salon or climbing wall or to hospitals that use the space to provide physical therapy. The
square footage figures include those subleased areas. The square footage figures exclude areas
used for tennis courts and outdoor swimming pools. These figures are approximations.(2)
    
    We are the sole lessee of the center pursuant to the terms of a sale-leaseback transaction. 19




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(3)
    
    We are the owner of the 110,000 square foot office building where this center is located. The
square footage figure for the center excludes approximately 69,000 square feet that we
sublease to third parties and approximately 15,000 square feet of common areas for the
building.(4)
    
    The square footage figure excludes approximately 24,000 square feet that we sublease to third
parties.(5)
    
    This center is a joint venture in which we have a one-third interest. 
 Item 3. Legal Proceedings.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchaser of Equity Securities.
 Market Information
  High
    
    LowFiscal Year Ended December 31, 2005:First Quarter (January 1, 2005  March 31, 2005)
    
    $
    27.16
    
    
    $
    23.82Second Quarter (April 1, 2005  June 30, 2005)
    
    $
    33.99
    
    
    $
    24.73Third Quarter (July 1, 2005  September 30, 2005)
    
    $
    37.00
    
    
    $
    31.38Fourth Quarter (October 1, 2005  December 31, 2005)
    
    $
    40.70
    
    
    $
    30.93Fiscal Year Ended December 31, 2006:First Quarter (January 1, 2006  March 31, 2006)
    
    $
    46.85
    
    
    $
    37.84Second Quarter (April 1, 2006  June 30, 2006)
    
    $
    48.86
    
    
    $
    41.03Third Quarter (July 1, 2006  September 30, 2006)
    
    $
    47.73
    
    
    $
    41.75Fourth Quarter (October 1, 2006  December 31, 2006)
    
    $
    52.58
    
    
    $
    46.33
 Holders
  Performance Graph
  20




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Comparison of Total Return
 
 June 30,
    
    December 31,
    
    June 30,
    
    December 31,
    
    June 30,
    
    December 31,2004
    
    2004
    
    2005
    
    2005
    
    2006
    
    2006Life Time Fitness (1)
    
    $
    100.00
    
    
    $
    123.24
    
    
    $
    156.24
    
    
    $
    181.38
    
    
    $
    220.33
    
    
    $
    231.00NYSE Composite Index
    
    
    100.00
    
    
    
    109.80
    
    
    
    109.31
    
    
    
    117.43
    
    
    
    123.72
    
    
    
    138.41Russell 2000 Index
    
    
    100.00
    
    
    
    110.15
    
    
    
    108.41
    
    
    
    113.81
    
    
    
    122.51
    
    
    
    133.16
 
 (1)
    
    For purposes of this presentation, we have used $21.00, the closing price of our common
stock on June 30, 2004, the first day our common stock began to trade publicly. Dividends
  Issuer Purchases of Equity Securities in Fourth Quarter 2006
 Total
    
    
    
    
    
    Total Number of
    
    Maximum NumberNumber of
    
    Average
    
    Shares Purchased as
    
    of Shares that MayShares
    
    Price Paid
    
    Part of Publicly
    
    Yet be PurchasedPeriod
    
    Purchased
    
    per Share
    
    Announced Plan (1)
    
    Under the Plan (1)October 1  31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500,000November 1  30, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500,000December 1  31, 2006
    
    
    8,500
    
    
    $
    49.52
    
    
    
    8,500
    
    
    
    491,500Total
    
    
    8,500
    
    
    $
    49.52
    
    
    
    8,500
    
    
    
    491,500
 
 (1)
    
    In June 2006, our Board of Directors authorized the repurchase of 500,000 shares of our
common stock from time to time in the open market or otherwise for the primary purpose of
offsetting the dilutive effect of shares issued pursuant to our Employee Stock Purchase Plan. Equity Compensation Plan Information
  21




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Certifications by CEO and CFO
  
 Item 6. Selected Financial Data.
  22




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For the Year Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(In thousands, except per share, center and membership data)Statement of Operations Data:RevenueCenter revenueMembership dues
    
    $
    339,623
    
    
    $
    262,989
    
    
    $
    208,893
    
    
    $
    171,596
    
    
    $
    132,124Enrollment fees
    
    
    22,438
    
    
    
    20,341
    
    
    
    19,608
    
    
    
    19,198
    
    
    
    17,204In-center revenue (1)
    
    
    138,332
    
    
    
    97,710
    
    
    
    71,583
    
    
    
    55,633
    
    
    
    39,630Total center revenue
    
    
    500,393
    
    
    
    381,040
    
    
    
    300,084
    
    
    
    246,427
    
    
    
    188,958Other revenue
    
    
    11,504
    
    
    
    9,076
    
    
    
    11,949
    
    
    
    10,515
    
    
    
    6,208Total revenue
    
    
    511,897
    
    
    
    390,116
    
    
    
    312,033
    
    
    
    256,942
    
    
    
    195,166Operating expensesCenter operations
    
    
    292,273
    
    
    
    216,314
    
    
    
    164,764
    
    
    
    131,825
    
    
    
    102,343Advertising and marketing
    
    
    20,770
    
    
    
    14,446
    
    
    
    12,196
    
    
    
    11,045
    
    
    
    11,722General and administrative
    
    
    37,781
    
    
    
    27,375
    
    
    
    21,596
    
    
    
    18,554
    
    
    
    14,981Other operating
    
    
    12,998
    
    
    
    12,693
    
    
    
    18,256
    
    
    
    16,273
    
    
    
    10,358Depreciation and amortization
    
    
    47,560
    
    
    
    38,346
    
    
    
    29,655
    
    
    
    25,264
    
    
    
    20,801Impairment charge (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,952Total operating expenses
    
    
    411,382
    
    
    
    309,174
    
    
    
    246,467
    
    
    
    202,961
    
    
    
    167,157Income from operations
    
    
    100,515
    
    
    
    80,942
    
    
    
    65,566
    
    
    
    53,981
    
    
    
    28,009Interest expense, net
    
    
    (17,356
    )
    
    
    (14,076
    )
    
    
    (17,573
    )
    
    
    (19,132
    )
    
    
    (14,950
    )Equity in earnings of affiliate (3)
    
    
    919
    
    
    
    1,105
    
    
    
    1,034
    
    
    
    762
    
    
    
    333Income before income taxes
    
    
    84,078
    
    
    
    67,971
    
    
    
    49,027
    
    
    
    35,611
    
    
    
    13,392Provision for income taxes
    
    
    33,513
    
    
    
    26,758
    
    
    
    20,119
    
    
    
    15,006
    
    
    
    5,971Net income
    
    
    50,565
    
    
    
    41,213
    
    
    
    28,908
    
    
    
    20,605
    
    
    
    7,421Accretion on redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    3,570
    
    
    
    6,987
    
    
    
    7,085Net income applicable to common shareholders
    
    $
    50,565
    
    
    $
    41,213
    
    
    $
    25,338
    
    
    $
    13,618
    
    
    $
    336Basic earnings per share
    
    $
    1.40
    
    
    $
    1.19
    
    
    $
    1.02
    
    
    $
    0.85
    
    
    $
    0.02Weighted average number of common shares outstanding  basic
    
    
    36,118
    
    
    
    34,592
    
    
    
    24,727
    
    
    
    16,072
    
    
    
    15,054Diluted earnings per share
    
    $
    1.37
    
    
    $
    1.13
    
    
    $
    0.87
    
    
    $
    0.72
    
    
    $
    0.02Weighted average number of common shares outstanding  diluted (4)
    
    
    36,779
    
    
    
    36,339
    
    
    
    33,125
    
    
    
    28,612
    
    
    
    16,430Balance Sheet Data (end of period):Cash and cash equivalents
    
    $
    6,880
    
    
    $
    4,680
    
    
    $
    10,211
    
    
    $
    18,446
    
    
    $
    8,860Working capital
    
    
    (100,509
    )
    
    
    (66,123
    )
    
    
    (71,952
    )
    
    
    (15,340
    )
    
    
    (29,819
    )Total assets
    
    
    987,676
    
    
    
    723,460
    
    
    
    572,087
    
    
    
    453,346
    
    
    
    419,024Total debt
    
    
    389,555
    
    
    
    273,282
    
    
    
    209,244
    
    
    
    233,232
    
    
    
    231,320Total redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106,165
    
    
    
    99,179Total shareholders equity
    
    
    392,513
    
    
    
    307,844
    
    
    
    250,634
    
    
    
    32,792
    
    
    
    18,547Cash Flow Data:Net cash provided by operating activities
    
    $
    125,852
    
    
    $
    107,952
    
    
    $
    80,431
    
    
    $
    52,576
    
    
    $
    43,558Net cash used in investing activities
    
    
    (263,183
    )
    
    
    (180,850
    )
    
    
    (146,080
    )
    
    
    (24,476
    )
    
    
    (31,350
    )Net cash provided by (used in) financing activities
    
    
    139,531
    
    
    
    67,367
    
    
    
    57,414
    
    
    
    (18,514
    )
    
    
    (5,556
    )Other Data:Comparable center revenue growth (5)
    
    
    7.3
    %
    
    
    7.7
    %
    
    
    9.7
    %
    
    
    13.2
    %
    
    
    22.3
    %Average revenue per membership (6)
    
    $
    1,270
    
    
    $
    1,171
    
    
    $
    1,119
    
    
    $
    1,089
    
    
    $
    989Average in-center revenue per membership (7)
    
    
    351
    
    
    
    300
    
    
    
    267
    
    
    
    242
    
    
    
    207EBITDA (8)
    
    
    148,994
    
    
    
    120,393
    
    
    
    96,255
    
    
    
    80,007
    
    
    
    49,143EBITDA margin (9)
    
    
    29.1
    %
    
    
    30.9
    %
    
    
    30.8
    %
    
    
    31.1
    %
    
    
    25.2
    %Capital expenditures (10)
    
    $
    263,387
    
    
    $
    190,451
    
    
    $
    145,707
    
    
    $
    81,846
    
    
    $
    87,432Operating Data (11):Centers open at end of period
    
    
    60
    
    
    
    46
    
    
    
    39
    
    
    
    33
    
    
    
    29Number of memberships at end of period
    
    
    443,660
    
    
    
    358,384
    
    
    
    299,538
    
    
    
    249,192
    
    
    
    215,387
 
 (1)
    
    In-center revenue includes revenue generated at our centers from fees for personal
training, dieticians, group fitness training and other member activities, sales of products
offered at our LifeCafe, sales of products and services offered at our LifeSpa, tennis and
renting space in certain of our centers. 23




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(2)
    
    For the year ended December 31, 2002, we recorded an asset impairment charge of $7.0 million
related to our only executive facility, which is located in downtown Minneapolis, Minnesota,
and a restaurant that we operate separately in the same building. This executive facility and
restaurant differ significantly from our standard model and the initial cash flow results have
not been as high as projected. Additionally, this facility and restaurant are located in a
more costly geographic area of downtown Minneapolis. The charge represents the difference
between the fair value of the assets as determined by discounted estimated future cash flows
and the carrying amount of the assets.(3)
    
    In 1999, we formed Bloomingdale LIFE TIME Fitness, L.L.C. (Bloomingdale LLC) with two
unrelated organizations for the purpose of constructing, owning and operating a center in
Bloomingdale, Illinois. Each member made an initial capital contribution of $2.0 million and
owns a one-third interest in Bloomingdale LLC. The center commenced operations in February
2001. The terms of the relationship among the members are governed by an operating agreement.
Bloomingdale LLC is accounted for as an investment in an unconsolidated affiliate and is not
consolidated in our financial statements.(4)
    
    The diluted weighted average number of common shares outstanding is the weighted average
number of common shares plus the weighted average conversion of any dilutive common stock
equivalents, such as redeemable preferred stock, the assumed weighted average exercise of
dilutive stock options using the treasury stock method, and unvested restricted stock awards
using the treasury stock method. For the year ended December 31, 2002, only the shares
issuable upon the exercise of stock options were dilutive. For the year ended December 31,
2003, the shares issuable upon the exercise of stock options and the conversion of redeemable
preferred stock were dilutive. As a result of our initial public offering, the redeemable preferred stock
converted to common stock and the accretion on redeemable preferred stock discontinued. For the year ended December 31, 2004, the shares issuable upon
the exercise of stock options, the conversion of redeemable preferred stock and the vesting of
all restricted stock awards were dilutive. For the years ended December 31, 2005 and December
31, 2006, the shares issuable upon the exercise of stock options and the vesting of all
restricted stock awards were dilutive.The following table summarizes the weighted average number of common shares for basic and diluted
earnings per share computations: December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002(In thousands)Weighted average number of common
shares outstanding  basic
    
    
    36,118
    
    
    
    34,592
    
    
    
    24,727
    
    
    
    16,072
    
    
    
    15,054Effect of dilutive stock options
    
    
    509
    
    
    
    1,739
    
    
    
    1,943
    
    
    
    1,522
    
    
    
    1,376Effect of dilutive restricted stock awards
    
    
    152
    
    
    
    8
    
    
    
    2
    
    
    
    
    
    
    
    Effect of dilutive redeemable preferred
shares outstanding
    
    
    
    
    
    
    
    
    
    
    6,453
    
    
    
    11,018
    
    
    
    Weighted average number of common shares
outstanding  diluted
    
    
    36,779
    
    
    
    36,339
    
    
    
    33,125
    
    
    
    28,612
    
    
    
    16,430
 
 (5)
    
    Membership dues, enrollment fees and in-center revenue for a center are included in
comparable center revenue growth beginning on the first day of the thirteenth full calendar
month of the centers operation.(6)
    
    Average revenue per membership is total center revenue for the period divided by an average
number of memberships for the period, where average number of memberships for the period is
derived from dividing the sum of the total memberships outstanding at the end of each month
during the period by the total number of months in the period.(7)
    
    Average in-center revenue per membership is total in-center revenue for the period divided by
the average number of memberships for the period, where the average number of memberships for
the period is derived from dividing the sum of the total memberships outstanding at the end of
each month during the period by the total number of months in the period.(8)
    
    EBITDA consists of net income plus interest expense, net, provision for income taxes and
depreciation and amortization. This term, as we define it, may not be comparable to a
similarly titled measure used by other companies and is not a measure of performance presented
in accordance with GAAP. We use EBITDA as a 24




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measure of operating performance. EBITDA should not be considered as a substitute for net
income, cash flows provided by operating activities or other income or cash flow data prepared
in accordance with GAAP. The funds depicted by EBITDA 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. Additional details related to EBITDA are provided
in Managements Discussion and Analysis of Financial Condition and Results of Operations 
Non-GAAP Financial Measures.The following table provides a reconciliation of net income, the most directly comparable GAAP
measure, to EBITDA: For the Year Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(In thousands)Net income
    
    $
    50,565
    
    
    $
    41,213
    
    
    $
    28,908
    
    
    $
    20,605
    
    
    $
    7,421Interest expense, net
    
    
    17,356
    
    
    
    14,076
    
    
    
    17,573
    
    
    
    19,132
    
    
    
    14,950Provision for income taxes
    
    
    33,513
    
    
    
    26,758
    
    
    
    20,119
    
    
    
    15,006
    
    
    
    5,971Depreciation and amortization
    
    
    47,560
    
    
    
    38,346
    
    
    
    29,655
    
    
    
    25,264
    
    
    
    20,801EBITDA
    
    $
    148,994
    
    
    $
    120,393
    
    
    $
    96,255
    
    
    $
    80,007
    
    
    $
    49,143
 
 (9)
    
    EBITDA margin is the ratio of EBITDA to total revenue.(10)
    
    Capital expenditures represent investments in our new centers, costs related to updating and
maintaining our existing centers and other infrastructure investments. For purposes of
deriving capital expenditures from our cash flows statement, capital expenditures include our
purchases of property and equipment, excluding purchases of property and equipment in accounts
payable at year-end, and property and equipment purchases financed through notes payable and
capital lease obligations.(11)
    
    The operating data being presented in these items include the center owned by Bloomingdale
LLC. The data presented elsewhere in this section exclude the center owned by Bloomingdale
LLC. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 The following discussion of our historical results of operations and our liquidity and capital
resources should be read in conjunction with the consolidated financial statements and related
notes that appear elsewhere in this report. This discussion contains forward-looking statements
that involve risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors, including those
discussed in Risk Factors beginning on page 13 of this report.
 Overview
   25




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Experience Life
   Critical Accounting Policies and Estimates
  26




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Revenue recognition.
  Pre-opening operations.
 Impairment of long-lived assets.
 27




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Results of Operations
  For the Year EndedDecember 31,2006
    
    2005
    
    2004RevenueCenter revenueMembership dues
    
    
    66.4
    %
    
    
    67.5
    %
    
    
    66.9
    %Enrollment fees
    
    
    4.4
    
    
    
    5.2
    
    
    
    6.4In-center revenue
    
    
    27.0
    
    
    
    25.0
    
    
    
    22.9Total center revenue
    
    
    97.8
    
    
    
    97.7
    
    
    
    96.2Other revenue
    
    
    2.2
    
    
    
    2.3
    
    
    
    3.8Total revenue
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Operating expensesCenter operations (including 0.4%, 0.0% and 0.0%
related to share-based compensation expense,
respectively)
    
    
    57.1
    
    
    
    55.4
    
    
    
    52.8Advertising and marketing
    
    
    4.1
    
    
    
    3.7
    
    
    
    3.9General and administrative (including 1.1%, 0.1% and
0.0% related to share-based compensation expense,
respectively)
    
    
    7.4
    
    
    
    7.0
    
    
    
    6.9Other operating
    
    
    2.5
    
    
    
    3.3
    
    
    
    5.9Depreciation and amortization
    
    
    9.3
    
    
    
    9.9
    
    
    
    9.5Total operating expenses
    
    
    80.4
    
    
    
    79.3
    
    
    
    79.0Income from operations
    
    
    19.6
    
    
    
    20.7
    
    
    
    21.0Other income (expense)Interest expense, net
    
    
    (3.4
    )
    
    
    (3.6
    )
    
    
    (5.6
    )Equity in earnings of affiliate
    
    
    0.2
    
    
    
    0.3
    
    
    
    0.3Total other income (expense)
    
    
    (3.2
    )
    
    
    (3.3
    )
    
    
    (5.3
    )Income before income taxes
    
    
    16.4
    
    
    
    17.4
    
    
    
    15.7Provision for income taxes
    
    
    6.5
    
    
    
    6.8
    
    
    
    6.4Net income
    
    
    9.9
    %
    
    
    10.6
    %
    
    
    9.3
    %
 Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
 Total revenue.
  
    
    64.2% was from membership dues, which increased $76.7 million, due to increased
memberships at new and existing centers, the introduction of junior membership programs and
increased sales of Sports and other value-added memberships.
    
    34.0% was from in-center revenue, which increased $40.6 million primarily as a result of
our members increased use of our personal training, member activities, LifeCafe and LifeSpa
products and services. As a result of this in-center revenue growth and our focus on
broadening our offerings to our members, average in-center revenue per membership increased
from $300 to $351 for the year ended December 31, 2006.
    
    1.8% was from enrollment fees, which are deferred until a center opens and recognized on a
straight-line basis over 36 months. Enrollment fees increased $2.1 million for the year ended
December 31, 2006 to $22.4 million. Our number of memberships increased 23.8% to 443,660 at
December 31, 2006 from 358,384 at December 31, 2005.
 28




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##### Table of Contents



Center operations expenses.
 Advertising and marketing expenses.
 General and administrative expenses.
 Other operating expenses.
 Depreciation and amortization.
 Interest expense, net.
 Provision for income taxes.
 Net income.
 Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
 Total revenue.
  
    
    66.8% was from membership dues, which increased $54.1 million, due to increased
memberships at new and existing centers.
    
    32.3% was from in-center revenue, which increased $26.1 million primarily as a result of
our members increased use of our personal training, LifeCafe and LifeSpa products and
services. As a result of this in-
 29




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center revenue growth and our focus on broadening our offerings to our members, average
in-center revenue per membership increased from $267 to $300 for the year ended December 31,
2005.
    
    0.9% was from enrollment fees, which are deferred until a center opens and recognized on a
straight-line basis over 36 months. Enrollment fees increased $0.7 million for the year ended
December 31, 2005 to $20.3 million. Our number of memberships increased 19.6% to 358,384 at
December 31, 2005 from 299,538 at December 31, 2004.
  Center operations expenses.
 Advertising and marketing expenses.
 General and administrative expenses.
 Other operating expenses.
 Depreciation and amortization.
 Interest expense, net.
 Provision for income taxes.
 30




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##### Table of Contents



Net income.
 Interest in an Unconsolidated Affiliated Entity
  Non-GAAP Financial Measures
   
    
    it is a widely accepted financial indicator of a companys ability to service its debt and
we are required to comply with certain covenants and borrowing limitations that are based on
variations of EBITDA in certain of our financing documents; and
    
    it is widely used to measure a companys operating performance without regard to items
such as depreciation and amortization, which can vary depending upon accounting methods and
the book value of assets, and to present a meaningful measure of corporate performance
exclusive of our capital structure and the method by which assets were acquired.
  
    
    as a measurement of operating performance because it assists 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.
  Seasonality of Business
  31




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Liquidity and Capital Resources
 Liquidity
  Operating Activities
    Investing Activities
   For the Year Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Purchases of property and equipment
    
    $
    261,767
    
    
    $
    190,355
    
    
    $
    145,562Non-cash property and equipment
purchases financed through capital
lease obligations
    
    
    
    
    
    
    96
    
    
    
    145Non-cash property purchase financed
through notes payable obligation
    
    
    1,620
    
    
    
    
    
    
    
    Total capital expenditures
    
    $
    263,387
    
    
    $
    190,451
    
    
    $
    145,707
 32




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##### Table of Contents



For the Year Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Capital expenditures for new center land, building and
construction
    
    $
    230,270
    
    
    $
    166,244
    
    
    $
    127,846Capital expenditures for updating existing centers,
assumption of leased centers and corporate infrastructure
    
    
    33,117
    
    
    
    24,207
    
    
    
    17,861Total capital expenditures
    
    $
    263,387
    
    
    $
    190,451
    
    
    $
    145,707
   Financing Activities
     33




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34




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##### Table of Contents



Contractual Obligations
  Payments due by periodLess than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 years(In thousands)Long-term debt obligations
    
    $
    376,695
    
    
    $
    10,204
    
    
    $
    12,681
    
    
    $
    351,289
    
    
    $
    2,521Capital lease obligations
    
    
    12,860
    
    
    
    5,024
    
    
    
    1,552
    
    
    
    429
    
    
    
    5,855Interest (1)
    
    
    52,348
    
    
    
    11,604
    
    
    
    20,267
    
    
    
    15,991
    
    
    
    4,486Operating lease obligations
    
    
    321,802
    
    
    
    17,768
    
    
    
    34,332
    
    
    
    34,197
    
    
    
    235,505Purchase obligations (2)
    
    
    164,541
    
    
    
    152,681
    
    
    
    11,731
    
    
    
    129
    
    
    
    Other long-term liabilities
    
    
    264
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    264Total contractual obligations
    
    $
    928,510
    
    
    $
    197,281
    
    
    $
    80,563
    
    
    $
    402,035
    
    
    $
    248,631
 
 (1)
    
    Interest expense obligations were calculated holding interest rates constant at December 31,
2006 rates.(2)
    
    Purchase obligations consist primarily of our contracts with construction subcontractors for
the completion of eight of our centers in 2007 and contracts for the purchase of land.(3)
    
    On January 24, 2007 a wholly owned subsidiary obtained a
commercial mortgage-backed loan in the
original principal amount of $105.0 million. Interest on the amounts borrowed under the
mortgage financing is 6.03% per annum, with a constant monthly debt service payment of $0.6
million through February 2017. Recent Accounting Pronouncements
   Impact of Inflation
  35




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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
  36




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Item 8. Financial Statements and Supplementary Data.
 LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 December 31,2006
    
    
    2005(In thousands, except share and per share data)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    6,880
    
    
    $
    4,680Accounts receivable, net
    
    
    2,320
    
    
    
    4,267Inventories
    
    
    8,773
    
    
    
    5,669Prepaid expenses and other current assets
    
    
    9,201
    
    
    
    7,187Deferred membership origination costs
    
    
    12,575
    
    
    
    10,082Income tax receivable
    
    
    97
    
    
    
    3,510Total current assets
    
    
    39,846
    
    
    
    35,395PROPERTY AND EQUIPMENT, net
    
    
    902,122
    
    
    
    661,371RESTRICTED CASH
    
    
    4,738
    
    
    
    3,915DEFERRED MEMBERSHIP ORIGINATION COSTS
    
    
    10,875
    
    
    
    8,410OTHER ASSETS
    
    
    30,095
    
    
    
    14,369TOTAL ASSETS
    
    $
    987,676
    
    
    $
    723,460LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Current maturities of long-term debt
    
    $
    15,228
    
    
    $
    14,447Accounts payable
    
    
    8,878
    
    
    
    9,964Construction accounts payable
    
    
    49,285
    
    
    
    25,811Accrued expenses
    
    
    37,191
    
    
    
    27,862Deferred revenue
    
    
    29,773
    
    
    
    23,434Total current liabilities
    
    
    140,355
    
    
    
    101,518LONG-TERM DEBT, net of current portion
    
    
    374,327
    
    
    
    258,835DEFERRED RENT LIABILITY
    
    
    25,716
    
    
    
    5,492DEFERRED INCOME TAXES
    
    
    38,584
    
    
    
    35,419DEFERRED REVENUE
    
    
    15,917
    
    
    
    14,352OTHER LIABILITIES
    
    
    264
    
    
    
    Total liabilities
    
    
    595,163
    
    
    
    415,616COMMITMENTS AND CONTINGENCIES (Note 10)SHAREHOLDERS EQUITY:Undesignated preferred stock, 10,000,000 shares authorized; none issued
or outstanding
    
    
    
    
    
    
    Common stock, $.02 par value, 50,000,000 shares authorized; 36,817,199
and 35,570,567 shares issued and outstanding, respectively
    
    
    737
    
    
    
    712Additional paid-in capital
    
    
    259,905
    
    
    
    228,132Deferred compensation
    
    
    
    
    
    
    (2,306
    )Retained earnings
    
    
    131,871
    
    
    
    81,306Total shareholders equity
    
    
    392,513
    
    
    
    307,844TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    987,676
    
    
    $
    723,460
  37




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Year EndedDecember 31,2006
    
    
    2005
    
    
    2004(In thousands, except per share data)REVENUE:Membership dues
    
    $
    339,623
    
    
    $
    262,989
    
    
    $
    208,893Enrollment fees
    
    
    22,438
    
    
    
    20,341
    
    
    
    19,608In-center revenue
    
    
    138,332
    
    
    
    97,710
    
    
    
    71,583Total center revenue
    
    
    500,393
    
    
    
    381,040
    
    
    
    300,084Other revenue
    
    
    11,504
    
    
    
    9,076
    
    
    
    11,949Total revenue
    
    
    511,897
    
    
    
    390,116
    
    
    
    312,033OPERATING EXPENSES:Center operations (including $2,179, $0
and $0 related to share-based
compensation expense, respectively)
    
    
    292,273
    
    
    
    216,314
    
    
    
    164,764Advertising and marketing
    
    
    20,770
    
    
    
    14,446
    
    
    
    12,196General and administrative (including
$5,377, $388 and $0 related to
share-based compensation expense,
respectively)
    
    
    37,781
    
    
    
    27,375
    
    
    
    21,596Other operating
    
    
    12,998
    
    
    
    12,693
    
    
    
    18,256Depreciation and amortization
    
    
    47,560
    
    
    
    38,346
    
    
    
    29,655Total operating expenses
    
    
    411,382
    
    
    
    309,174
    
    
    
    246,467Income from operations
    
    
    100,515
    
    
    
    80,942
    
    
    
    65,566OTHER INCOME (EXPENSE):Interest expense, net of interest income
of $269, $259 and $312, respectively
    
    
    (17,356
    )
    
    
    (14,076
    )
    
    
    (17,573
    )Equity in earnings of affiliate
    
    
    919
    
    
    
    1,105
    
    
    
    1,034Total other income (expense)
    
    
    (16,437
    )
    
    
    (12,971
    )
    
    
    (16,539
    )INCOME BEFORE INCOME TAXES
    
    
    84,078
    
    
    
    67,971
    
    
    
    49,027PROVISION FOR INCOME TAXES
    
    
    33,513
    
    
    
    26,758
    
    
    
    20,119NET INCOME
    
    
    50,565
    
    
    
    41,213
    
    
    
    28,908ACCRETION ON REDEEMABLE PREFERRED STOCK
    
    
    
    
    
    
    
    
    
    
    3,570NET INCOME APPLICABLE TO COMMON SHAREHOLDERS
    
    $
    50,565
    
    
    $
    41,213
    
    
    $
    25,338BASIC EARNINGS PER COMMON SHARE
    
    $
    1.40
    
    
    $
    1.19
    
    
    $
    1.02DILUTED EARNINGS PER COMMON SHARE
    
    $
    1.37
    
    
    $
    1.13
    
    
    $
    0.87WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING  BASIC
    
    
    36,118
    
    
    
    34,592
    
    
    
    24,727WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING  DILUTED
    
    
    36,779
    
    
    
    36,339
    
    
    
    33,125
  38




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 AdditionalCommon Stock
    
    
    Paid-In
    
    
    Deferred
    
    
    RetainedShares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Earnings
    
    
    Total(In thousands, except share data)BALANCE  December 31, 2003
    
    
    16,146,607
    
    
    $
    323
    
    
    $
    17,714
    
    
    $
    
    
    
    $
    14,755
    
    
    $
    32,792Common stock issued upon initial public
offering
    
    
    4,774,941
    
    
    
    95
    
    
    
    80,303
    
    
    
    
    
    
    
    
    
    
    
    80,398Tax benefit from expenses incurred upon
initial public offering
    
    
    
    
    
    
    
    
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    88Conversion of redeemable preferred stock
to common stock upon initial public
offering
    
    
    12,629,233
    
    
    
    253
    
    
    
    109,482
    
    
    
    
    
    
    
    
    
    
    
    109,735Common stock issued upon exercise of
stock options
    
    
    233,801
    
    
    
    5
    
    
    
    1,056
    
    
    
    
    
    
    
    
    
    
    
    1,061Grant of restricted stock
    
    
    7,028
    
    
    
    
    
    
    
    142
    
    
    
    (142
    )
    
    
    
    
    
    
    Compensation related to stock options and
restricted stock
    
    
    
    
    
    
    
    
    
    
    277
    
    
    
    76
    
    
    
    
    
    
    
    353Tax benefit upon exercise of stock options
    
    
    
    
    
    
    
    
    
    
    869
    
    
    
    
    
    
    
    
    
    
    
    869Accretion on redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,570
    )
    
    
    (3,570
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,908
    
    
    
    28,908BALANCE  December 31, 2004
    
    
    33,791,610
    
    
    
    676
    
    
    
    209,931
    
    
    
    (66
    )
    
    
    40,093
    
    
    
    250,634Common stock issued upon exercise of
stock options
    
    
    1,698,714
    
    
    
    34
    
    
    
    6,149
    
    
    
    
    
    
    
    
    
    
    
    6,183Grant of restricted stock
    
    
    80,243
    
    
    
    2
    
    
    
    2,625
    
    
    
    (2,627
    )
    
    
    
    
    
    
    Compensation related to stock options and
restricted stock
    
    
    
    
    
    
    
    
    
    
    255
    
    
    
    387
    
    
    
    
    
    
    
    642Tax benefit upon exercise of stock options
    
    
    
    
    
    
    
    
    
    
    9,172
    
    
    
    
    
    
    
    
    
    
    
    9,172Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,213
    
    
    
    41,213BALANCE  December 31, 2005
    
    
    35,570,567
    
    
    
    712
    
    
    
    228,132
    
    
    
    (2,306
    )
    
    
    81,306
    
    
    
    307,844Reclassification of deferred compensation
to additional
 paid-in capital
    
    
    
    
    
    
    
    
    
    
    (2,306
    )
    
    
    2,306
    
    
    
    
    
    
    
    Common stock issued upon exercise of
stock options
    
    
    1,090,788
    
    
    
    22
    
    
    
    15,242
    
    
    
    
    
    
    
    
    
    
    
    15,264Grant of restricted stock
    
    
    156,164
    
    
    
    3
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    Forfeiture of restricted stock
    
    
    (320
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Compensation related to stock options and
restricted stock
    
    
    
    
    
    
    
    
    
    
    7,556
    
    
    
    
    
    
    
    
    
    
    
    7,556Capitalized compensation related to stock
options and restricted stock
    
    
    
    
    
    
    
    
    
    
    1,055
    
    
    
    
    
    
    
    
    
    
    
    1,055Tax benefit upon exercise of stock options
    
    
    
    
    
    
    
    
    
    
    10,229
    
    
    
    
    
    
    
    
    
    
    
    10,229Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,565
    
    
    
    50,565BALANCE  December 31, 2006
    
    
    36,817,199
    
    
    $
    737
    
    
    $
    259,905
    
    
    $
    
    
    
    $
    131,871
    
    
    $
    392,513
  39




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Year EndedDecember 31,2006
    
    
    2005
    
    
    2004(In thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    50,565
    
    
    $
    41,213
    
    
    $
    28,908Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    47,560
    
    
    
    38,346
    
    
    
    29,655Deferred income taxes
    
    
    3,165
    
    
    
    3,315
    
    
    
    14,276Loss on disposal of property and equipment, net
    
    
    946
    
    
    
    539
    
    
    
    543Amortization of deferred financing costs
    
    
    696
    
    
    
    1,025
    
    
    
    1,035Share-based compensation
    
    
    7,556
    
    
    
    388
    
    
    
    76Excess tax benefit from exercise of stock options
    
    
    (10,229
    )
    
    
    
    
    
    
    Changes in operating assets and liabilities
    
    
    25,425
    
    
    
    22,870
    
    
    
    5,661Other
    
    
    168
    
    
    
    256
    
    
    
    277Net cash provided by operating activities
    
    
    125,852
    
    
    
    107,952
    
    
    
    80,431CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment (excluding non-cash
purchases supplementally noted below)
    
    
    (261,767
    )
    
    
    (190,355
    )
    
    
    (145,562
    )Proceeds from sale of property and equipment
    
    
    6,629
    
    
    
    4,411
    
    
    
    2,139Proceeds from property insurance settlement
    
    
    581
    
    
    
    
    
    
    
    Increase in other assets
    
    
    (7,803
    )
    
    
    (3,083
    )
    
    
    (1,537
    )Decrease (increase) in restricted cash
    
    
    (823
    )
    
    
    8,177
    
    
    
    (1,120
    )Net cash used in investing activities
    
    
    (263,183
    )
    
    
    (180,850
    )
    
    
    (146,080
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from long-term borrowings
    
    
    
    
    
    
    5,652
    
    
    
    44,853Repayments on long-term borrowings
    
    
    (19,120
    )
    
    
    (23,971
    )
    
    
    (68,986
    )Proceeds from revolving credit facility, net
    
    
    134,000
    
    
    
    80,678
    
    
    
    Increase in deferred financing costs
    
    
    (842
    )
    
    
    (1,175
    )
    
    
    Excess tax benefit from exercise of stock options
    
    
    10,229
    
    
    
    
    
    
    
    Proceeds from exercise of stock options
    
    
    15,264
    
    
    
    6,183
    
    
    
    1,061Proceeds from initial public offering, net of underwriting
discounts and offering costs
    
    
    
    
    
    
    
    
    
    
    80,398Tax benefit from expenses incurred upon initial public offering
    
    
    
    
    
    
    
    
    
    
    88Net cash provided by financing activities
    
    
    139,531
    
    
    
    67,367
    
    
    
    57,414INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    2,200
    
    
    
    (5,531
    )
    
    
    (8,235
    )CASH AND CASH EQUIVALENTS  Beginning of period
    
    
    4,680
    
    
    
    10,211
    
    
    
    18,446CASH AND CASH EQUIVALENTS  End of period
    
    $
    6,880
    
    
    $
    4,680
    
    
    $
    10,211SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash payments for interest, net of capitalized interest of
$5,308, $3,965 and $1,443, respectively
    
    $
    22,183
    
    
    $
    17,212
    
    
    $
    17,789Cash payments for income taxes
    
    $
    17,005
    
    
    $
    13,227
    
    
    $
    8,986SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:Property and equipment purchases financed through capital
lease obligations
    
    $
    
    
    
    $
    96
    
    
    $
    145Property purchase financed through note payable
    
    $
    1,620
    
    
    $
    
    
    
    $
    Conversion of redeemable preferred stock to common stock upon
initial public offering
    
    $
    
    
    
    $
    
    
    
    $
    109,735
  40




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
 1. Nature of Business
  2. Significant Accounting Policies
 Principles of Consolidation
 Revenue Recognition 
  Pre-Opening Operations
 Cash and Cash Equivalents
 Restricted Cash
 Accounts Receivable
 41




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
  December 31,2006
    
    
    2005
    
    
    2004Allowance for Doubtful Accounts:Balance, beginning of period
    
    $
    187
    
    
    $
    435
    
    
    $
    541Provisions
    
    
    542
    
    
    
    126
    
    
    
    108Write-offs against allowance
    
    
    (113
    )
    
    
    (374
    )
    
    
    (214
    )Balance, end of period
    
    $
    616
    
    
    $
    187
    
    
    $
    435Sales Returns and Allowances:Balance, beginning of period
    
    $
    134
    
    
    $
    289
    
    
    $
    136Provisions
    
    
    (52
    )
    
    
    255
    
    
    
    563Write-offs against allowance
    
    
    (82
    )
    
    
    (410
    )
    
    
    (410
    )Balance, end of period
    
    $
    
    
    
    $
    134
    
    
    $
    289
 Inventories
 Prepaid Expenses and Other Current Assets
 Property and Equipment
  42




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
  Depreciable
    
    
    December 31,Lives
    
    
    2006
    
    
    2005Land
    
    
    
    
    
    $
    154,680
    
    
    $
    118,686Buildings
    
    3-40 years
    
    
    630,565
    
    
    
    460,382Leasehold improvements
    
    1-20 years
    
    
    34,695
    
    
    
    32,997Construction in progress
    
    
    
    
    
    
    82,589
    
    
    
    47,084902,529
    
    
    
    659,149Equipment:Fitness
    
    5-7 years
    
    
    59,559
    
    
    
    49,428Computer and telephone
    
    3-5 years
    
    
    32,335
    
    
    
    25,042Capitalized software
    
    5 years
    
    
    17,345
    
    
    
    12,581Decor and signage
    
    5 years
    
    
    7,018
    
    
    
    5,324Audio/visual
    
    3-5 years
    
    
    11,349
    
    
    
    7,923Furniture and fixtures
    
    7 years
    
    
    7,579
    
    
    
    6,583Other equipment
    
    3-7 years
    
    
    33,965
    
    
    
    28,586169,150
    
    
    
    135,467Property and equipment, gross
    
    
    
    
    
    
    1,071,679
    
    
    
    794,616Less accumulated depreciation
    
    
    
    
    
    
    169,557
    
    
    
    133,245Property and equipment, net
    
    
    
    
    
    $
    902,122
    
    
    $
    661,371
  Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.
  Impairment of Long-lived Assets
 43




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
 Other Assets
 December 31,2006
    
    
    2005Financing costs, net
    
    $
    4,093
    
    
    $
    3,947Investment in unconsolidated affiliate (see Note 3)
    
    
    2,400
    
    
    
    2,150Site development costs
    
    
    2,371
    
    
    
    1,594Lease deposits
    
    
    2,340
    
    
    
    2,396Earnest money deposits
    
    
    8,984
    
    
    
    1,327Intangibles
    
    
    4,252
    
    
    
    2,880Property held for sale
    
    
    5,655
    
    
    
    Other
    
    
    
    
    
    
    75$
    30,095
    
    
    $
    14,369
    44




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
 Accrued Expenses
 December 31,2006
    
    
    2005Payroll related
    
    $
    7,092
    
    
    $
    4,886Real estate taxes
    
    
    8,120
    
    
    
    6,027Center operating costs
    
    
    14,126
    
    
    
    10,160Insurance
    
    
    2,112
    
    
    
    1,246Other
    
    
    5,741
    
    
    
    5,543$
    37,191
    
    
    $
    27,862
 Income Taxes
 Earnings per Common Share
  45




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
  For the Year Ended December 31,2006
    
    
    2005
    
    
    2004Net income applicable to common shareholders  basic
    
    $
    50,565
    
    
    $
    41,213
    
    
    $
    25,338Add back accretion on redeemable preferred shares
    
    
    
    
    
    
    
    
    
    
    3,570Net income applicable to common shareholders  diluted
    
    $
    50,565
    
    
    $
    41,213
    
    
    $
    28,908Weighted average number of common shares outstanding 
basic
    
    
    36,118
    
    
    
    34,592
    
    
    
    24,727Effect of dilutive stock options
    
    
    509
    
    
    
    1,739
    
    
    
    1,943Effect of dilutive restricted stock awards
    
    
    152
    
    
    
    8
    
    
    
    2Effect of dilutive redeemable preferred shares outstanding
    
    
    
    
    
    
    
    
    
    
    6,453Weighted average number of common shares outstanding 
diluted
    
    
    36,779
    
    
    
    36,339
    
    
    
    33,125Basic earnings per common share
    
    $
    1.40
    
    
    $
    1.19
    
    
    $
    1.02Diluted earnings per common share
    
    $
    1.37
    
    
    $
    1.13
    
    
    $
    0.87
  Share-Based Compensation
 46




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
  For the Year EndedDecember 31,2005
    
    
    2004Net income applicable to common shareholders  basic:As reported
    
    $
    41,213
    
    
    $
    25,338Pro forma
    
    $
    35,870
    
    
    $
    23,463Basic earnings per common share:As reported
    
    $
    1.19
    
    
    $
    1.02Pro forma
    
    $
    1.04
    
    
    $
    0.95Net income applicable to common shareholders  diluted:As reported
    
    $
    41,213
    
    
    $
    28,908Pro forma
    
    $
    35,870
    
    
    $
    27,033Diluted earnings per common share:As reported
    
    $
    1.13
    
    
    $
    0.87Pro forma
    
    $
    0.99
    
    
    $
    0.82
   December 31,2006
    
    2005
    
    2004Risk-free interest rate
    
    
    4.8
    %
    
    
    4.0
    %
    
    
    3.8
    %Expected dividend yield
    
    
    
    
    
    
    
    
    
    
    Expected life in years
    
    
    5
    
    
    
    6
    
    
    
    6Volatility
    
    
    35.9
    %
    
    
    42.7
    %
    
    
    50.5
    %
   Dividends
 47




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
 Fair Value of Financial Instruments
 Use of Estimates
 Supplemental Cash Flow Information
 For the Year Ended December 31,2006
    
    
    2005
    
    
    2004Accounts receivable
    
    $
    1,947
    
    
    $
    (3,080
    )
    
    $
    30Income tax receivable
    
    
    13,643
    
    
    
    1,068
    
    
    
    (2,032
    )Inventories
    
    
    (3,104
    )
    
    
    (698
    )
    
    
    (317
    )Prepaid expenses and other current assets
    
    
    (2,014
    )
    
    
    88
    
    
    
    (298
    )Deferred membership origination costs
    
    
    (4,958
    )
    
    
    (3,159
    )
    
    
    (2,027
    )Accounts payable
    
    
    (132
    )
    
    
    12,623
    
    
    
    460Accrued expenses
    
    
    9,329
    
    
    
    8,711
    
    
    
    6,047Deferred revenue
    
    
    7,904
    
    
    
    5,503
    
    
    
    2,780Deferred rent
    
    
    2,546
    
    
    
    1,814
    
    
    
    1,018Other liabilities
    
    
    264
    
    
    
    
    
    
    
    $
    25,425
    
    
    $
    22,870
    
    
    $
    5,661
 48




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
  For the Year Ended December 31,2006
    
    
    2005
    
    
    2004Purchases of property and equipment
    
    $
    261,767
    
    
    $
    190,355
    
    
    $
    145,562Non-cash property purchase
financed through notes payable
obligations
    
    
    1,620
    
    
    
    
    
    
    
    Non-cash property and
equipment purchases financed
through capital lease obligations
    
    
    
    
    
    
    96
    
    
    
    145Total capital expenditures
    
    $
    263,387
    
    
    $
    190,451
    
    
    $
    145,707
 New Accounting Pronouncements Share-Based Compensation
  Comprehensive Income
 Reclassifications
 3. Investment in Unconsolidated Affiliate
   49




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
    50




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
 4. Long-Term Debt
  December 31,2006
    
    
    2005Term notes payable to insurance company, monthly
interest and principal payments totaling $1,273
including interest at 8.25% to June 2011,
collateralized by certain related real estate and
buildings
    
    $
    122,498
    
    
    $
    127,439Revolving credit facility, interest only due monthly
at interest rates ranging from LIBOR plus 0.75% to
1.75% or base plus 0.0% to 0.25%, facility expires
April 2011, collateralized by certain personal
property
    
    
    245,000
    
    
    
    111,000Mortgage notes payable to bank, due in monthly
installments of $51 through August 2007, including
interest at 6.0%, collateralized by certain interests
in related two centers
    
    
    4,707
    
    
    
    5,018Promissory note payable to bank, monthly interest
payments at LIBOR plus 1.50%, expiring April 2010,
collateralized by a certain interest in secured
property, debt retired June 2006
    
    
    
    
    
    
    5,342Promissory note payable to a municipality,
collateralized by a mortgage on the underlying
property, due in two equal payments through June 2013,
including interest of 0.0%, (balance shown net of
imputed interest of $533)
    
    
    1,118
    
    
    
    Unsecured promissory note, due in various unequal
installments, expiring December 2010, including
interest at 5.6% (balance shown net of imputed
interest of $48)
    
    
    502
    
    
    
    Special assessments payable, due in variable
semiannual installments through September 2028,
including interest at 4.25% to 7.00%, secured by the
related real estate and buildings
    
    
    2,870
    
    
    
    3,096Total debt (excluding obligations under capital leases)
    
    
    376,695
    
    
    
    251,895Obligations under capital leases (see below)
    
    
    12,860
    
    
    
    21,387Total debt
    
    
    389,555
    
    
    
    273,282Less current maturities
    
    
    15,228
    
    
    
    14,447Total long-term debt
    
    $
    374,327
    
    
    $
    258,835
  51




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
       2007
    
    $
    10,2042008
    
    
    6,0662009
    
    
    6,6152010
    
    
    8,0442011
    
    
    343,245Thereafter
    
    
    2,521$
    376,695
 52




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
  December 31,2006
    
    
    2005Land and buildings
    
    $
    6,622
    
    
    $
    6,622Equipment
    
    
    35,863
    
    
    
    36,50742,485
    
    
    
    43,129Less accumulated amortization
    
    
    27,548
    
    
    
    23,609$
    14,937
    
    
    $
    19,520
  2007
    
    $
    6,3922008
    
    
    2,1712009
    
    
    8802010
    
    
    8802011
    
    
    937Thereafter
    
    
    9,52020,780Less amounts representing interest
    
    
    7,920Present value of net minimum lease payments
    
    
    12,860Current portion
    
    
    5,024$
    7,836
 5. Subsequent Event
    53




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
  6. Income Taxes
  December 31,2006
    
    
    2005
    
    
    2004Current
    
    $
    30,348
    
    
    $
    23,443
    
    
    $
    5,843Deferred
    
    
    3,165
    
    
    
    3,315
    
    
    
    14,276Provision for income taxes
    
    $
    33,513
    
    
    $
    26,758
    
    
    $
    20,119
  December 31,2006
    
    
    2005
    
    
    2004Income taxes computed at federal statutory rate
    
    $
    29,428
    
    
    $
    23,790
    
    
    $
    17,159State taxes, net of federal benefit
    
    
    3,268
    
    
    
    3,495
    
    
    
    2,882Other, net
    
    
    817
    
    
    
    (527
    )
    
    
    78$
    33,513
    
    
    $
    26,758
    
    
    $
    20,119
  December 31,2006
    
    
    2005Noncurrent deferred income tax liabilities:Property and equipment
    
    $
    (39,830
    )
    
    $
    (34,379
    )Accrued rent expense
    
    
    5,612
    
    
    
    1,741Internally developed software
    
    
    (3,258
    )
    
    
    (1,878
    )Other, net
    
    
    (1,108
    )
    
    
    (903
    )$
    (38,584
    )
    
    $
    (35,419
    )
  54




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
  7. Initial Public Offering and Capital Stock
   8. Share-Based Compensation
    55




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
   For the Year Ended December 31,2006
    
    
    2005Share-based compensation expense related to stock options
    
    $
    5,671
    
    
    $
    388Share-based compensation expense related to restricted shares
    
    
    1,833
    
    
    
    Share-based compensation expense related to ESPP
    
    
    52
    
    
    
    Total share-based compensation expense
    
    $
    7,556
    
    
    $
    388
  Restricted
    
    
    Range of MarketShares
    
    
    Price Per ShareOutstanding
    
    
    on Grant DateBalance  December 31, 2004
    
    
    7,028
    
    
    $
    26.23Granted
    
    
    80,243
    
    
    
    24.75-33.14Vested
    
    
    (3,637
    )
    
    
    25.47-26.23Balance  December 31, 2005
    
    
    83,634
    
    
    
    24.75-33.14Granted
    
    
    156,164
    
    
    
    42.72-50.82Canceled
    
    
    (320
    )
    
    
    46.51Vested
    
    
    (28,584
    )
    
    
    24.75-42.72Balance  December 31, 2006
    
    
    210,894
    
    
    $
    24.75-50.82
  56




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
  WeightedWeighted-
    
    AverageAverage
    
    Remaining
    
    AggregateExercise
    
    Contractual
    
    Intrinsic ValueOptions
    
    Shares
    
    Price
    
    Term (in years)
    
    (in thousands)Outstanding at December 31, 2003
    
    
    3,031,475Granted
    
    
    1,096,334Exercised
    
    
    (233,801
    )Canceled
    
    
    (62,900
    )Outstanding at December 31, 2004
    
    
    3,831,108Granted
    
    
    758,900Exercised
    
    
    (1,698,714
    )Canceled
    
    
    (133,628
    )Outstanding at December 31, 2005
    
    
    2,757,666
    
    
    $
    17.01Granted
    
    
    71,954
    
    
    
    46.57Exercised
    
    
    (1,090,788
    )
    
    
    14.00Canceled
    
    
    (14,233
    )
    
    
    16.41Outstanding at December 31, 2006
    
    
    1,724,599
    
    
    $
    20.15
    
    
    
    7.2
    
    
    $
    48,902Vested or Expected to Vest at December 31, 2006
    
    
    1,645,608
    
    
    $
    19.93
    
    
    
    7.2
    
    
    $
    47,025Exercisable at December 31, 2006
    
    
    761,855
    
    
    $
    15.92
    
    
    
    6.4
    
    
    $
    24,826
  57




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
  WeightedAverage
    
    Weighted
    
    
    
    
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    AverageNumber
    
    Contractual Life
    
    Exercise
    
    Number
    
    ExerciseRange of Exercise Prices
    
    Outstanding
    
    (Years )
    
    Price
    
    Exercisable
    
    Price$1.66 to $8.00
    
    
    392,050
    
    
    
    4.63
    
    
    $
    7.19
    
    
    
    244,650
    
    
    $
    6.70$12.00 to $18.50
    
    
    511,357
    
    
    
    7.35
    
    
    
    16.75
    
    
    
    328,557
    
    
    
    17.09$22.15 to $25.47
    
    
    573,823
    
    
    
    8.09
    
    
    
    25.14
    
    
    
    149,800
    
    
    
    24.40$26.15 to $48.59
    
    
    247,369
    
    
    
    8.89
    
    
    
    36.17
    
    
    
    38,848
    
    
    
    31.46$1.66 to $48.59
    
    
    1,724,599
    
    
    
    7.20
    
    
    $
    20.15
    
    
    
    761,855
    
    
    $
    15.92
    9. Operating Segments
  58




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
  Centers
    
    
    All Other
    
    
    ConsolidatedSegment reporting:Year ended December 31, 2006:Revenue
    
    $
    500,393
    
    
    $
    11,504
    
    
    $
    511,897Net income (loss)
    
    $
    56,507
    
    
    $
    (5,942
    )
    
    $
    50,565Provision (benefit) for income taxes
    
    
    37,475
    
    
    
    (3,962
    )
    
    
    33,513Interest expense, net
    
    
    12,747
    
    
    
    4,609
    
    
    
    17,356Depreciation and amortization
    
    
    42,250
    
    
    
    5,310
    
    
    
    47,560EBITDA
    
    $
    148,979
    
    
    $
    15
    
    
    $
    148,994Total assets
    
    $
    877,818
    
    
    $
    109,858
    
    
    $
    987,676Year ended December 31, 2005:Revenue
    
    $
    381,040
    
    
    $
    9,076
    
    
    $
    390,116Net income (loss)
    
    $
    46,714
    
    
    $
    (5,501
    )
    
    $
    41,213Provision (benefit) for income taxes
    
    
    30,425
    
    
    
    (3,667
    )
    
    
    26,758Interest expense, net
    
    
    12,288
    
    
    
    1,788
    
    
    
    14,076Depreciation and amortization
    
    
    32,004
    
    
    
    6,342
    
    
    
    38,346EBITDA
    
    $
    121,431
    
    
    $
    (1,038
    )
    
    $
    120,393Total assets
    
    $
    634,789
    
    
    $
    88,671
    
    
    $
    723,460Year ended December 31, 2004:Revenue
    
    $
    300,084
    
    
    $
    11,949
    
    
    $
    312,033Net income (loss)
    
    $
    35,918
    
    
    $
    (7,010
    )
    
    $
    28,908Provision (benefit) for income taxes
    
    
    24,792
    
    
    
    (4,673
    )
    
    
    20,119Interest expense, net
    
    
    15,760
    
    
    
    1,813
    
    
    
    17,573Depreciation and amortization
    
    
    24,013
    
    
    
    5,642
    
    
    
    29,655EBITDA
    
    $
    100,483
    
    
    $
    (4,228
    )
    
    $
    96,255Total assets
    
    $
    486,975
    
    
    $
    85,112
    
    
    $
    572,087
 10. Commitments and Contingencies
 Lease Commitments
 2007
    
    $
    17,7682008
    
    
    17,0902009
    
    
    17,2422010
    
    
    17,1642011
    
    
    17,033Thereafter
    
    
    235,505$
    321,802
 59




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
   Litigation
 401(k) Savings and Investment Plan
 11. Related Party Transactions
     60




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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
  12. Executive Nonqualified Plan
   13. Quarterly Financial Data (Unaudited)
  2006
    
    20051st
    
    2nd
    
    3rd
    
    4th
    
    1st
    
    2nd
    
    3rd
    
    4thQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter(In thousands, except for per share data)Total revenue
    
    $
    115,425
    
    
    $
    122,455
    
    
    $
    134,741
    
    
    $
    139,276
    
    
    $
    89,328
    
    
    $
    95,607
    
    
    $
    101,612
    
    
    $
    103,569Income from operations
    
    
    21,172
    
    
    
    23,530
    
    
    
    27,794
    
    
    
    28,019
    
    
    
    17,303
    
    
    
    20,414
    
    
    
    21,175
    
    
    
    22,050Net income
    
    
    10,433
    
    
    
    12,385
    
    
    
    13,639
    
    
    
    14,108
    
    
    
    8,121
    
    
    
    10,287
    
    
    
    10,737
    
    
    
    12,068Earnings per share (1)Basic
    
    $
    0.29
    
    
    $
    0.34
    
    
    $
    0.38
    
    
    $
    0.39
    
    
    $
    0.24
    
    
    $
    0.30
    
    
    $
    0.31
    
    
    $
    0.34Diluted
    
    
    0.28
    
    
    
    0.33
    
    
    
    0.37
    
    
    
    0.39
    
    
    
    0.23
    
    
    
    0.28
    
    
    
    0.29
    
    
    
    0.33
 
 (1)
    
    See Note 2 for discussion on the computation of earnings per share. 61




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     Internal ControlIntegrated Framework
  
 62




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Managements Annual Report on
Internal Control Over Financial Reporting Internal ControlIntegrated Framework
    Internal ControlIntegrated Framework Internal ControlIntegrated Framework
   
 63




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##### Table of Contents



Quarterly Results (Unaudited)
   2006
    
    20051st
    
    2nd
    
    3rd
    
    4th
    
    1st
    
    2nd
    
    3rd
    
    4thQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter(In thousands, except for number of centers and per share data)Total revenue
    
    $
    115,425
    
    
    $
    122,455
    
    
    $
    134,741
    
    
    $
    139,276
    
    
    $
    89,328
    
    
    $
    95,607
    
    
    $
    101,612
    
    
    $
    103,569Income from operations
    
    
    21,172
    
    
    
    23,530
    
    
    
    27,794
    
    
    
    28,019
    
    
    
    17,303
    
    
    
    20,414
    
    
    
    21,175
    
    
    
    22,050Net income
    
    
    10,433
    
    
    
    12,385
    
    
    
    13,639
    
    
    
    14,108
    
    
    
    8,121
    
    
    
    10,287
    
    
    
    10,737
    
    
    
    12,068Earnings per shareBasic
    
    $
    0.29
    
    
    $
    0.34
    
    
    $
    0.38
    
    
    $
    0.39
    
    
    $
    0.24
    
    
    $
    0.30
    
    
    $
    0.31
    
    
    $
    0.34Diluted
    
    
    0.28
    
    
    
    0.33
    
    
    
    0.37
    
    
    
    0.39
    
    
    
    0.23
    
    
    
    0.28
    
    
    
    0.29
    
    
    
    0.33Cash Flow Data:Net cash provided by (used in):Operating activities
    
    
    33,813
    
    
    
    27,168
    
    
    
    42,028
    
    
    
    22,843
    
    
    
    25,001
    
    
    
    29,035
    
    
    
    26,066
    
    
    
    27,850Investing activities
    
    
    (48,149
    )
    
    
    (56,464
    )
    
    
    (70,877
    )
    
    
    (87,693
    )
    
    
    (33,164
    )
    
    
    (33,774
    )
    
    
    (48,905
    )
    
    
    (65,007
    )Financing activities
    
    
    12,204
    
    
    
    26,748
    
    
    
    35,419
    
    
    
    65,160
    
    
    
    2,001
    
    
    
    1,036
    
    
    
    23,416
    
    
    
    40,914EBITDA (1)
    
    $
    32,934
    
    
    $
    35,927
    
    
    $
    39,698
    
    
    $
    40,435
    
    
    $
    26,324
    
    
    $
    29,870
    
    
    $
    31,553
    
    
    $
    32,646Centers open at end of quarter
(2)
    
    
    48
    
    
    
    49
    
    
    
    56
    
    
    
    60
    
    
    
    40
    
    
    
    41
    
    
    
    44
    
    
    
    46
 
 (1)
    
    EBITDA consists of net income plus interest expense, net, provision for income taxes and
depreciation and amortization. This term, as we define it, may not be comparable to a similarly
titled measure used by other companies and is not a measure of performance presented in accordance
with GAAP. We use EBITDA as a measure of operating performance. EBITDA should not be considered as
a substitute for net income, cash flows provided by operating activities, or other income or cash
flow data prepared in accordance with GAAP. The funds depicted by EBITDA 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. Additional details related to EBITDA are provided
in Managements Discussion and Analysis of Financial Condition and Results of Operations 
Non-GAAP Financial Measures.(2)
    
    The data being presented include the center owned by Bloomingdale LLC. 64




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2006
    
    
    20051st
    
    
    2nd
    
    
    3rd
    
    
    4th
    
    
    1st
    
    
    2nd
    
    
    3rd
    
    
    4thQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(In thousands)Net income
    
    $
    10,433
    
    
    $
    12,385
    
    
    $
    13,639
    
    
    $
    14,108
    
    
    $
    8,121
    
    
    $
    10,287
    
    
    $
    10,737
    
    
    $
    12,068Interest expense, net
    
    
    4,117
    
    
    
    4,140
    
    
    
    4,204
    
    
    
    4,895
    
    
    
    3,826
    
    
    
    3,243
    
    
    
    3,278
    
    
    
    3,729Provision for income
taxes
    
    
    6,865
    
    
    
    7,256
    
    
    
    10,139
    
    
    
    9,253
    
    
    
    5,643
    
    
    
    7,150
    
    
    
    7,443
    
    
    
    6,522Depreciation and
amortization
    
    
    11,519
    
    
    
    12,146
    
    
    
    11,716
    
    
    
    12,179
    
    
    
    8,734
    
    
    
    9,190
    
    
    
    10,095
    
    
    
    10,327EBITDA
    
    $
    32,934
    
    
    $
    35,927
    
    
    $
    39,698
    
    
    $
    40,435
    
    
    $
    26,324
    
    
    $
    29,870
    
    
    $
    31,553
    
    
    $
    32,646
 
 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
  
 Item 9A. Controls and Procedures.
 Disclosure Controls and Procedures .
 Managements Annual Report on Internal Control Over Financial Reporting.
 
    
    Pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company;
    
    Provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and
    
    Provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the companys assets that could have a material effect
on the financial statements.
   65




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##### Table of Contents



Changes in Internal Control Over Financial Reporting.
 
 Item 9B. Other Information.
  
 PART III
  
 Item 10. Directors, Executive Officers and Corporate Governance.
   Name
    
    Age
    
    PositionBahram Akradi
    
    
    45
    
    
    Chairman of the Board of Directors, President and
Chief Executive OfficerMichael J. Gerend
    
    
    42
    
    
    Executive Vice President and Chief Operating OfficerMichael R. Robinson
    
    
    47
    
    
    Executive Vice President and Chief Financial OfficerEric J. Buss
    
    
    40
    
    
    Executive Vice President, General Counsel and
SecretaryMark L. Zaebst
    
    
    47
    
    
    Executive Vice PresidentMichael P. Brown
    
    
    49
    
    
    Senior Vice President, OperationsJeffrey G. Zwiefel
    
    
    44
    
    
    Senior Vice President, Life Time University
 Bahram Akradi
 Michael J. Gerend
 66




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##### Table of Contents



Michael R. Robinson
 Eric J. Buss
 Mark L. Zaebst
 Michael P. Brown
 Jeffrey G. Zwiefel
 
 Item 11. Executive Compensation.
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence.
  
 Item 14. Principal Accountant Fees and Services.
  67




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##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules.
  
 
  ExhibitNo.
    
    Description
    
    Method of Filing3.1
    
    Amended and Restated Articles of
Incorporation of the Registrant.
    
    Incorporated by
reference to
Exhibit 3.1 to the
Registrants Form
10-Q for the
quarter ended June
30, 2004 (File No.
001-32230).3.2
    
    Amended and Restated Bylaws of the Registrant.
    
    Incorporated by
reference to
Exhibit 3.4 to
Amendment No. 2 to
the Registrants
Form S-1 (File No.
333-113764), filed
with the Commission
on May 21, 2004.4
    
    Specimen of common stock certificate.
    
    Incorporated by
reference to
Exhibit 4 to
Amendment No. 4 to
the Registrants
Registration
Statement of Form
S-1 (File No.
333-113764), filed
with the Commission
on June 23, 2004.10.1#
    
    FCA, Ltd. 1996 Stock Option Plan.
    
    Incorporated by
reference to
Exhibit 10.1 to the
Registrants
Registration
Statement of Form
S-1 (File No.
333-113764), filed
with the Commission
on March 19, 2004.10.2#
    
    LIFE TIME FITNESS, Inc. 1998 Stock Option
Plan, as amended and restated.
    
    Incorporated by
reference to
Exhibit 10.2 to the
Registrants
Registration
Statement of Form
S-1 (File No.
333-113764), filed
with the Commission
on March 19, 2004.10.3
    
    Form of Promissory Note made in favor of
Teachers Insurance and Annuity Association of
America.
    
    Incorporated by
reference to
Exhibit 10.16 to
the Registrants
Registration
Statement of Form
S-1 (File No.
333-113764), filed
with the Commission
on March 19, 2004.
 68




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##### Table of Contents



ExhibitNo.
    
    Description
    
    Method of Filing10.4
    
    Schedule of terms to Form of Promissory Note
made in favor of Teachers Insurance and
Annuity Association of America.
    
    Incorporated by
reference to Exhibit
10.17 to the
Registrants
Registration
Statement of Form
S-1 (File No.
333-113764), filed
with the Commission
on March 19, 2004.10.5
    
    Open-End Leasehold Mortgage, Assignment of
Leases and Rents, Security Agreement and
Fixtures Filing Statement made by LTF USA Real
Estate, LLC for the benefit of Teachers
Insurance and Annuity Association of America.
    
    Incorporated by
reference to Exhibit
10.18 to the
Registrants
Registration
Statement of Form
S-1 (File No.
333-113764), filed
with the Commission
on March 19, 2004.10.6
    
    Form of Mortgage, Assignment of Leases and
Rents, Security Agreement and Fixture Filing
Statement made for the benefit of Teachers
Insurance and Annuity Association of America.
    
    Incorporated by
reference to Exhibit
10.19 to the
Registrants
Registration
Statement of Form
S-1 (File No.
333-113764), filed
with the Commission
on March 19, 2004.10.7
    
    Schedule of terms to Form of Mortgage,
Assignment of Leases and Rents, Security
Agreement and Fixture Filing Statement made
for the benefit of Teachers Insurance and
Annuity Association of America.
    
    Incorporated by
reference to Exhibit
10.20 to the
Registrants
Registration
Statement of Form
S-1 (File No.
333-113764), filed
with the Commission
on March 19, 2004.10.8
    
    Form of Second Mortgage, Assignment of Leases
and Rents, Security Agreement and Fixture
Filing Statement made for the benefit of
Teachers Insurance and Annuity Association of
America.
    
    Incorporated by
reference to Exhibit
10.21 to the
Registrants
Registration
Statement of Form
S-1 (File No.
333-113764), filed
with the Commission
on March 19, 2004.10.9
    
    Schedule of terms to Form of Second Mortgage,
Assignment of Leases and Rents, Security
Agreement and Fixture Filing Statement made
for the benefit of Teachers Insurance and
Annuity Association of America.
    
    Incorporated by
reference to Exhibit
10.22 to the
Registrants
Registration
Statement of Form
S-1 (File No.
333-113764), filed
with the Commission
on March 19, 2004.10.10
    
    Lease Agreement dated as of September 30,
2003, by and between LT Fitness (DE) QRS
15-53, Inc., as landlord, and Life Time
Fitness, Inc., as tenant.
    
    Incorporated by
reference to Exhibit
10.23 to the
Registrants
Registration
Statement of Form
S-1 (File No.
333-113764), filed
with the Commission
on March 19, 2004.10.11
    
    Series A Stock Purchase Agreement dated May 7,
1996, including amendments thereto.
    
    Incorporated by
reference to Exhibit
10.25 to the
Registrants
Registration
Statement of Form
S-1 (File No.
333-113764), filed
with the Commission
on March 19, 2004.10.12
    
    Series B Stock Purchase Agreement dated
December 8, 1998, including amendments
thereto.
    
    Incorporated by
reference to Exhibit
10.26 to the
Registrants
Registration
Statement of Form
S-1 (File No.
333-113764), filed
with the Commission
on March 19, 2004.10.13
    
    Series C Stock Purchase Agreement dated August
16, 2000, including amendments thereto.
    
    Incorporated by
reference to Exhibit
10.27 to the
Registrants
Registration
Statement of Form
S-1 (File No.
333-113764), filed
with the Commission
on March 19, 2004.10.14
    
    Series D Stock Purchase Agreement dated July
19, 2001, including amendments thereto.
    
    Incorporated by
reference to Exhibit
10.28 to the
Registrants
Registration
Statement of Form
S-1 (File No.
333-113764), filed
with the Commission
on March 19, 2004.
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##### Table of Contents



ExhibitNo.
    
    Description
    
    Method of Filing10.15
    
    Operating Agreement of Life Time, BSC Land,
DuPage Health Services Fitness Center 
Bloomingdale L.L.C. dated December 1, 1999 by
and between the Registrant, Bloomingdale
Sports Center Land Company and Central DuPage
Health.
    
    Incorporated by
reference to Exhibit
10.29 to Amendment
No. 2 to the
Registrants Form
S-1 (File No.
333-113764), filed
with the Commission
on May 21, 2004.10.16#
    
    Life Time Fitness, Inc. 2004 Long-Term
Incentive Plan.
    
    Incorporated by
reference to Exhibit
10.30 to Amendment
No. 2 to the
Registrants Form
S-1 (File No.
333-113764), filed
with the Commission
on May 21, 2004.10.17#
    
    Form of Executive Employment Agreement.
    
    Incorporated by
reference to Exhibit
10.32 to Amendment
No. 3 to the
Registrants
Registration
Statement of Form
S-1 (File No.
333-113764), filed
with the Commission
on June 9, 2004.10.18
    
    Schedule of parties to Executive Employment
Agreements.
    
    Incorporated by reference to
Exhibit 10.1 to the Registrants Form 10-Q for the
quarter ended September 30, 2004 (File No. 001-32230).10.19#
    
    Form of Incentive Stock Option for 2004
Long-Term Incentive Plan.
    
    Incorporated by
reference to Exhibit
10.19 to the
Registrants
Form10-K for the
year ended December
31, 2006 (File No.
001-32230).10.20#
    
    Form of Non-Incentive Stock Option Agreement
for 2004 Long-Term Incentive Plan.
    
    Incorporated by
reference to Exhibit
10.20 to the
Registrants
Form10-K for the
year ended December
31, 2006 (File No.
001-32230).10.21#
    
    Summary of Non-Employee Director Compensation.
    
    Incorporated by
reference to Exhibit
10.1 to the
Registrants Form
8-K dated October
24, 2006 (File No.
001-32230).10.22#
    
    2006 Key Executive Incentive Compensation Plan.
    
    Incorporated by
reference to Exhibit
10.1 to the
Registrants Form
8-K dated May 1,
2006 (File No.
001-32230).10.23
    
    Amended and Restated Credit Agreement, dated
as of April 28, 2006, among the Company, U.S.
Bank National Association, as administrative
agent and lead arranger, J.P. Morgan
Securities, Inc., as syndication agent, and
the banks party thereto from time to time.
    
    Incorporated by
reference to Exhibit
10.1 to the
Registrants
Form10-Q for the
quarter ended June
30, 2006 (File No.
001-32230).10.24
    
    Security Agreement, dated as of April 15,
2005, among the Company and U.S. Bank National
Association, as administrative agent.
    
    Incorporated by
reference to Exhibit
10.2 to the
Registrants Form
8-K dated April 15,
2005 (File No.
001-32230).10.25#
    
    Form of Restricted Stock Agreement (Employee)
for 2004 Long-Term Incentive Plan.
    
    Incorporated by
reference to Exhibit
10.26 to the
Registrants
Form10-K for the
year ended December
31, 2006 (File No.
001-32230).10.26#
    
    Form of Restricted Stock Agreement
(Non-Employee Director) for 2004 Long-Term
Incentive Plan.
    
    Incorporated by
reference to Exhibit
10.27 to the
Registrants
Form10-K for the
year ended December
31, 2006 (File No.
001-32230).10.27
    
    Lease Agreement with Well-Prop (Multi) LLC
dated July 26, 2006.
    
    Incorporated by
reference to Exhibit
10.1 to the
Registrants Form
10-Q for the quarter
ended September 30,
2006 (File No.
001-32230).
 70




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##### Table of Contents



ExhibitNo.
    
    Description
    
    Method of Filing10.28
    
    Guaranty and Suretyship Agreement
with Well-Prop (Multi) LLC dated July
26, 2006.
    
    Incorporated by
reference to Exhibit
10.2 to the
Registrants Form 10-Q
for the quarter ended
September 30, 2006
(File No. 001-32230).10.29
    
    Purchase and Sale Agreement with
Well-Prop (Multi) LLC dated July 26,
2006.
    
    Incorporated by
reference to Exhibit
10.3 to the
Registrants Form 10-Q
for the quarter ended
September 30, 2006
(File No. 001-32230).10.30#
    
    Modification to 2006 Key Executive
Incentive Compensation Plan dated
September 19, 2006.
    
    Incorporated by
reference to Item 10.1
to the Registrants
Form 8-K dated
September 19, 2006
(File No. 001-32230).10.31#
    
    Form of Restricted Stock Agreement
(Executive) for 2004 Long-Term
Incentive Plan with performance-based
vesting component.
    
    Filed Electronically.10.32#
    
    Executive Nonqualified Excess Plan.
    
    Filed Electronically.10.33
    
    Loan Agreement dated January 24, 2007
among the Borrower, the Company and
Lender.
    
    Incorporated by
reference to Item 10.1
to the Registrants
Form 8-K dated January
24, 2007 (File No.
001-32230).10.34
    
    Lease Agreement dated January 24,
2007 among Borrower and LTF Club
Operations Company, Inc.
    
    Incorporated by
reference to Item 10.2
to the Registrants
Form 8-K dated January
24, 2007 (File No.
001-32230).10.35
    
    Guaranty of the Loan Agreement dated
January 24, 2007 for the benefit of
Lender executed by the Company.
    
    Incorporated by
reference to Item 10.3
to the Registrants
Form 8-K dated January
24, 2007 (File No.
001-32230).10.36
    
    Lease Guaranty dated January 24, 2007
for the benefit of Borrower executed
by the Company.
    
    Incorporated by
reference to Item 10.4
to the Registrants
Form 8-K dated January
24, 2007 (File No.
001-32230).21
    
    Subsidiaries of the Registrant.
    
    Filed Electronically.23
    
    Consent of Deloitte & Touche LLP.
    
    Filed Electronically.24
    
    Powers of Attorney.
    
    Filed Electronically.31.1
    
    Rule 13a-14(a)/15d-14(a)
Certification by Principal Executive
Officer.
    
    Filed Electronically.31.2
    
    Rule 13a-14(a)/15d-14(a)
Certification by Principal Financial
Officer.
    
    Filed Electronically.32
    
    Section 1350 Certifications.
    
    Filed Electronically.
 
 #
    
    Management contract, compensatory plan or arrangement required to be filed as an exhibit to
this Annual Report on Form 10-K. 71




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##### Table of Contents



SIGNATURES
  LIFE TIME FITNESS, INC.By:
    
    /s/ Bahram AkradiName: Bahram Akradi 

Title: Chairman of the Board of Directors, President andChief Executive Officer(Principal Executive Officer and Director)By:
    
    /s/ Michael R. RobinsonName: Michael R. RobinsonTitle: Executive Vice President and Chief Financial Officer(Principal Financial Officer)By:
    
    /s/ John M. HugoName: John M. HugoTitle: Controller(Principal Accounting Officer)
  Signature
    
    Title/s/ Giles H. Bateman *

               Giles H. Bateman
    
    Director/s/ James F. Halpin*

               James F. Halpin
    
    Director/s/ Guy C. Jackson *

               Guy C. Jackson
    
    Director/s/ John B. Richards*

               John B. Richards
    
    Director/s/ Stephen R. Sefton*

               Stephen R. Sefton
    
    Director/s/ Joseph S. Vassalluzzo*

               Joseph S. Vassalluzzo
    
    Director
 
 *
    
    Michael R. Robinson, by signing his name hereto, does hereby sign this document on behalf of
each of the above-named officers and/or directors of the Registrant pursuant to powers of
attorney duly executed by such persons. By
    /s/  Michael R. RobinsonMichael R. Robinson, Attorney-in-Fact 72