##### Table of Contents



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, 2008
 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
    
    41-1689746(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)2902 Corporate Place 
Chanhassen, Minnesota
    
    55317
(Zip Code)(Address of principal executive offices)
 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
  Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o o þ




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DOCUMENTS INCORPORATED BY REFERENCE
  FORWARD-LOOKING STATEMENTS
  1




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##### 



TABLE OF CONTENTS
 PagePART I.Item 1.
    
    Business
    
    
    3Item 1A.
    
    Risk Factors
    
    
    15Item 1B.
    
    Unresolved Staff Comments
    
    
    19Item 2.
    
    Properties
    
    
    20Item 3.
    
    Legal Proceedings
    
    
    22Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    22PART II.Item 5.
    
    Market For Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
        
    
    22Item 6.
    
    Selected Financial Data
    
    
    24Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations

    
    
    27Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    40Item 8.
    
    Financial Statements and Supplementary Data
    
    
    41Item 9.
    
    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
        
    
    74Item 9A.
    
    Controls and Procedures
    
    
    74Item 9B.
    
    Other Information
    
    
    75PART III.Item 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    75Item 11.
    
    Executive Compensation
    
    
    76Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    76Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    76Item 14.
    
    Principal Accountant Fees and Services
    
    
    76PART IV.Item 15.
    
    Exhibits and Financial Statement Schedules
    
    
    77SIGNATURESEX-10.17EX-10.53EX-21EX-23EX-24EX-31.1EX-31.2EX-32
  2




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PART I
 
 Item 1. Business.
 Company Overview
 ®
    Our History
     3




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Our Competitive Strengths
 We offer comprehensive and convenient programs and services.
  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.
  4




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We believe we have a disciplined and sophisticated site selection and development process.
  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 Spa Centers
 Size and Location
  Center Environment
  6




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Equipment and Programs
  Amenities
    
    Services
    
    Activities and EventsBasketball/Volleyball Courts
    
    24-Hour Availability
    
    AquaticsCardiovascular, Resistance
    
    Fitness Assessments
    
    Athletic Leaguesand Free Weight Equipment
    
    Educational Seminars
    
    Birthday PartiesCycle Theatres
    
    Experience LifeMagazine
    
    Eastern/Martial ArtsGroup Fitness Studios
    
    Towel Service
    
    Kids ClubLap Pool
    
    Locker Service
    
    PilatesRacquetball/Squash Courts
    
    Massage Therapy
    
    Group Fitness ClassesChild Center
    
    Nutritional Products
    
    Scuba LessonsRock Climbing Cavern
    
    Personal Training
    
    Studio CyclingSaunas
    
    T.E.A.M. Programs
    
    Sports Training CampsTwo-story Waterslides
    
    Cardio O2 Run
    
    Summer CampsWhirlpool Spas
    
    Cardiovascular and Resistance Training
    
    Swimming LessonsZero-depth Entry Swimming Pools
    
    Metabolic Testing
    
    YogaLifeStudio
    
    Nutrition Coaching
    
    Educational CampsLifeCafe
    
    Endurance Coaching
    
    Dance ClassesLifeSpa
    
    Member Advantage
    
    Athletic EventsPool-side Bistro
    
    Total Health
    
    Run Club, Cycle-Club
and otherMens, Womens and Family
    
    myLT.com
    
    Interest driven clubsLocker Rooms
 Fitness Equipment and Facilities.
  Personalized Services for Individuals and Small Groups.
  7




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
    
    One-On-One sessions  an individual member meets directly with a personal
trainer or a registered dietician designed to help members achieve their healthy way of
life goals, including losing weight, gaining weight/muscle mass, or specific event
training.
    
    Small Group sessions  designed for a group of 2-4 members who meet directly
with a single personal trainer or a registered dietician designed to help members achieve
their goals with others.
    
    T.E.A.M. (Training  Education  Accountability  Motivation) programs   We
have developed a number of large group (typically 8-12 members) programs under our
proprietary T.E.A.M. platform. Our T.E.A.M. Weight Loss program focuses on exercise,
education and nutrition and provides the resources as well as support needed for long-term
weight loss success. The T.E.A.M. Fitness program combines cardio exercise with strength
training. Our Cardio O2 Run program focuses on training in the right heart rate
zones, for the right duration of time and at the right frequency to burn fat more
efficiently while improving overall health and wellness. Our T.E.A.M. Boot Camp challenges
our members to test their limits in strength, agility and stamina.
 Fitness Programs and Classes.
 Other Center Services.
    Memberships
   8




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Bronze
    
    Gold
    
    Platinum
    
    OnyxA great experience
at our most
affordable rate
    
    Many center choices
nationwide plus
benefits outside
the center
    
    Broader nationwide
center access,
premium partner
benefits and tennis
    
    The ultimate in
access, service,
amenities and
benefitsNumber of centers
designated
    
    
    11
    
    
    
    45
    
    
    
    16
    
    
    
    9Center access
    
    All bronze centers
    
    All Bronze and Gold
centers (56)
    
    All Bronze, Gold
and Platinum
centers (72)
    
    All Life Time
Fitness locations
nationwide,
including Life Time
Athletic centers
(81)In-center amenities
    
    Complimentary
towel and locker
service
    
    All Bronze benefits
plus: complimentary
climbing wall
access, free
racquetball and
squash court access
    
    All Gold benefits,
plus: access to
Platinum-level
tennis clubs,
fee-based tennis
court access
    
    All Platinum benefitsPartner benefits
    
    10+ local and
national partners
    
    500+ local and
national partners
    
    575+ local and
national partners
    
    575+ local and
national partners
   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.
 10




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Experience Life
 Grand Opening Phase.
 Membership Growth Phase.
 Leveraging the LIFE TIME FITNESS Brand
 Experience Life
 Centers.
 Education. Experience Life Experience Life Experience Life Experience Life
 Athletic Events.
 Nutritional Products.
 11




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Our Employees
    Information Systems
  12




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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 and small fitness clubs and studios, including Anytime Fitness, Curves
International and Snap Fitness;
    
    racquet, tennis and other athletic clubs;
    
    amenity and condominium clubs;
    
    country clubs; and
    
    the home-use fitness equipment industry.
  13




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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;
    
    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
 lifetimefitness.com.
 14




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Item 1A. Risk Factors.
 We may be unable to attract and retain members, which could have a negative effect on our business.
  Our debt levels may limit our ability to access additional funds under our existing credit
facilities and limit our flexibility in obtaining additional financing to pursue our growth
strategy and 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.
  If we fail to comply with any of the covenants in our financing documents, we may not be able to
access our existing credit facilities, we may be required to pay increased interest and our
obligations to repay our indebtedness may be accelerated.
  15




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Because of the capital-intensive nature of our business, we rely on our revolving credit facilities
and may have to incur additional indebtedness or issue new equity securities. If we are not able
to access our credit facilities or obtain additional capital, our ability to operate or expand our
business may be impaired and our operating results could be adversely affected.
  The health club industry is highly competitive and our competitors may have greater name
recognition than we have.
  If we are unable to identify and acquire suitable sites for new sports and athletic, professional
fitness, family recreation and spa centers, our revenue growth rate and profits may be negatively
impacted.
  16




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Delays in new center openings could have a material adverse effect 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.
   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.
  17




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If our founder and chief executive officer leaves our company for any reason, it could have a
material adverse effect on us.
  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.
  18




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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.
 ®
 
 Item 1B. Unresolved Staff Comments.
  19




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Item 2. Properties.
   Location
    
    Center Format
    
    Square Feet (1)
    
    
    Date Opened (2)83 Lake Houston, TX (Houston)
    
    Large/Current
    
    
    112,110
    
    
    Feb-0982 Berkeley Heights, NJ
    
    Large/Current
    
    
    112,110
    
    
    Feb-0981 Westminster, CO
    
    Large/Current
    
    
    112,110
    
    
    Nov-0880 Florham Park, NJ
    
    Large/Current
    
    
    109,995
    
    
    Nov-0879 Loudoun County, VA
    
    Large/Current
    
    
    112,110
    
    
    Oct-0878 Mansfield, TX (Dallas)
    
    Large/Current
    
    
    129,155
    
    
    Oct-0877 Vernon Hills, IL
    
    Large/Current
    
    
    140,495
    
    
    Sep-0876 Houston City Centre, TX
    
    Large/Current
    
    
    140,495
    
    
    Sep-0875 Rockville, MD
    
    Large
    
    
    66,700
    
    
    Sep-0874 Mountain Brook, GA
    
    Large/Current
    
    
    112,110
    
    
    Jun-0873 West County, MO
    
    Large/Current
    
    
    112,110
    
    
    Jun-0872 Johns Creek, GA
    
    Large/Current
    
    
    112,110
    
    
    May-0871 Parker, CO
    
    Large/Current
    
    
    129,155
    
    
    Jan-0870 NW San Antonio, TX
    
    Large/Current
    
    
    112,110
    
    
    Dec-0769 Sugarloaf, GA
    
    Large/Current
    
    
    112,110
    
    
    Nov-0768 South Austin, TX
    
    Large/Current
    
    
    109,045
    
    
    Oct-0767 Premier Place (Dallas), TX
    
    Large
    
    
    62,000
    
    
    Sep-0766 White Bear Lake, MN
    
    Large
    
    
    58,782
    
    
    Sep-0765 Deerfield Township, OH
    
    Large/Current
    
    
    127,040
    
    
    Jul-0764 Omaha, NE
    
    Large/Current
    
    
    115,030
    
    
    Jun-0763 Lakeville, MN
    
    Large/Current
    
    
    115,030
    
    
    Jun-0762 Cary, NC
    
    Large/Current
    
    
    109,995
    
    
    May-0761 Dublin, OH
    
    Large/Current
    
    
    109,045
    
    
    Apr-0760 Scottsdale, AZ
    
    Large/Current
    
    
    109,775
    
    
    Dec-0659 Alpharetta, GA
    
    Large/Current
    
    
    109,720
    
    
    Dec-0658 Goodyear  Palm Valley, AZ
    
    Large/Current
    
    
    109,775
    
    
    Oct-0657 Overland Park, KS
    
    Large/Current
    
    
    110,080
    
    
    Oct-0656 South Valley, UT
    
    Large/Current
    
    
    108,925
    
    
    Aug-0655 Boca Raton, FL
    
    Large
    
    
    73,688
    
    
    Jul-0654 Bloomington South, MN
    
    Large
    
    
    95,314
    
    
    Jul-0653 Eden Prairie, MN (4)
    
    Large
    
    
    89,011
    
    
    Jul-0652 St. Louis Park, MN
    
    Large
    
    
    189,496
    
    
    Jul-0651 Crosstown (Eden Prairie), MN
    
    Large
    
    
    145,896
    
    
    Jul-0650 Minneapolis  Target Center, MN
    
    Large
    
    
    170,925
    
    
    Jul-0649 Fridley, MN
    
    Large
    
    
    162,048
    
    
    Jul-0648 Allen-McKinney (Dallas), TX
    
    Large/Current
    
    
    125,475
    
    
    May-0647 Columbia, MD
    
    Large/Current
    
    
    110,563
    
    
    Feb-0646 Minnetonka, MN
    
    Other
    
    
    41,000
    
    
    Jan-0645 Maple Grove, MN
    
    Large
    
    
    72,500
    
    
    Dec-0544 San Antonio, TX
    
    Large/Current
    
    
    110,563
    
    
    Dec-0543 Romeoville, IL
    
    Large/Current
    
    
    110,563
    
    
    Sep-0542 Austin, TX
    
    Large/Current
    
    
    110,563
    
    
    Sep-0541 Chanhassen, MN
    
    Large/Current
    
    
    110,563
    
    
    Jul-0540 Cinco Ranch, TX (Houston)
    
    Large/Current
    
    
    108,890
    
    
    Jun-0539 Commerce Township, MI
    
    Large/Current
    
    
    108,890
    
    
    Mar-0538 Colleyville, TX (Dallas)
    
    Large/Current
    
    
    108,890
    
    
    Nov-04
 20




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Location
    
    Center Format
    
    Square Feet (1)
    
    
    Date Opened (2)37 Dallas, TX
    
    Large
    
    
    68,982
    
    
    Nov-0436 Flower Mound, TX (Dallas)
    
    Large/Current
    
    
    108,890
    
    
    Oct-0435 Sugar Land, TX (Houston)
    
    Large/Current
    
    
    108,890
    
    
    Oct-0434 Garland, TX (Dallas)
    
    Large/Current
    
    
    108,890
    
    
    Jul-0433 Champions, TX (Houston)
    
    Large/Current
    
    
    108,890
    
    
    Jun-0432 Plano, TX (Dallas)
    
    Large/Current
    
    
    108,890
    
    
    Nov-0331 New Hope, MN
    
    Other
    
    
    44,156
    
    
    Oct-0330 Gilbert, AZ
    
    Large/Current
    
    
    108,890
    
    
    Oct-0329 Tempe, AZ
    
    Large/Current
    
    
    108,890
    
    
    Apr-0328 Rochester Hills, MI
    
    Large/Current
    
    
    108,890
    
    
    Nov-0227 Canton Township, MI
    
    Large/Current
    
    
    105,010
    
    
    Sep-0226 Old Orchard (Skokie), IL
    
    Large/Current
    
    
    108,890
    
    
    Aug-0225 Savage, MN
    
    Large
    
    
    80,853
    
    
    Jun-0224 Burr Ridge, IL
    
    Large/Current
    
    
    105,562
    
    
    Feb-0223 Champlin, MN
    
    Large
    
    
    61,948
    
    
    Oct-0122 Fairfax City, VA
    
    Large
    
    
    67,467
    
    
    Oct-0121 Orland Park, IL
    
    Large/Current
    
    
    108,890
    
    
    Aug-0120 Algonquin, IL
    
    Large/Current
    
    
    108,890
    
    
    Apr-0119 Bloomingdale, IL (3)
    
    Large/Current
    
    
    108,890
    
    
    Feb-0118 Warrenville, IL
    
    Large/Current
    
    
    114,993
    
    
    Jan-0117 Schaumburg, IL
    
    Large/Current
    
    
    108,890
    
    
    Oct-0016 Minneapolis, MN (4)
    
    Other
    
    
    72,547
    
    
    Jul-0015 Shelby, MI
    
    Large
    
    
    101,680
    
    
    Mar-0014 Centreville, VA
    
    Large
    
    
    90,956
    
    
    Jan-0013 Novi, MI
    
    Large
    
    
    90,956
    
    
    Oct-9912 Indianapolis, IN
    
    Large
    
    
    90,956
    
    
    Aug-9911 Columbus, OH
    
    Large
    
    
    98,047
    
    
    Jul-9910 Apple Valley, MN
    
    Other
    
    
    10,375
    
    
    Jun-999 Troy, MI
    
    Large
    
    
    93,579
    
    
    Jan-998 St. Paul, MN
    
    Other
    
    
    85,630
    
    
    Dec-977 Plymouth, MN
    
    Large
    
    
    109,558
    
    
    Jun-976 Bloomington North, MN
    
    Other
    
    
    47,307
    
    
    Nov-965 Coon Rapids, MN
    
    Other
    
    
    90,262
    
    
    May-964 Highland Park, MN
    
    Other
    
    
    25,827
    
    
    Nov-953 Roseville, MN
    
    Other
    
    
    14,000
    
    
    Sep-952 Woodbury, MN
    
    Large
    
    
    73,050
    
    
    Sep-951 Eagan, MN
    
    Large
    
    
    64,415
    
    
    Sep-94
 
 (1)
    
    In a few of our centers, we sublease space to third parties who operate our pro shop, salon
or climbing wall or to hospitals or chiropractors 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)
    
    For acquired centers, date opened is the date we assumed operations of the center.(3)
    
    This center is a joint venture in which we have a one-third interest.(4)
    
    We operate two centers which include full-service restaurants; the square footage figures
include those restaurants. 
 21




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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, 2007:First Quarter (January 1, 2007  March 31, 2007)
    
    $
    54.92
    
    
    $
    46.47Second Quarter (April 1, 2007  June 30, 2007)
    
    
    55.40
    
    
    
    49.29Third Quarter (July 1, 2007  September 30, 2007)
    
    
    63.90
    
    
    
    50.26Fourth Quarter (October 1, 2007  December 31, 2007)
    
    
    65.09
    
    
    
    45.89Fiscal Year Ended December 31, 2008:First Quarter (January 1, 2008  March 31, 2008)
    
    $
    50.28
    
    
    $
    25.64Second Quarter (April 1, 2008  June 30, 2008)
    
    
    41.04
    
    
    
    28.12Third Quarter (July 1, 2008  September 30, 2008)
    
    
    41.50
    
    
    
    27.16Fourth Quarter (October 1, 2008  December 31, 2008)
    
    
    34.00
    
    
    
    8.03
 Holders
  22




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Performance Graph
  
 June 30, 2004
    
    December 31, 2004
    
    December 31, 2005
    
    December 31, 2006
    
    December 31, 2007
    
    December 31, 2008Life Time Fitness
(1)
    
    $
    100.00
    
    
    $
    123.24
    
    
    $
    181.38
    
    
    $
    231.00
    
    
    $
    236.57
    
    
    $
    61.67NYSE Composite Index
    
    
    100.00
    
    
    
    109.80
    
    
    
    117.43
    
    
    
    138.41
    
    
    
    147.51
    
    
    
    87.19Russell 2000 Index
    
    
    100.00
    
    
    
    110.15
    
    
    
    113.81
    
    
    
    133.16
    
    
    
    129.50
    
    
    
    84.44
 
 (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
  23




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Issuer Purchases of Equity Securities in Fourth Quarter 2008
  Equity Compensation Plan Information
  Certifications by CEO and CFO
  
 Item 6. Selected Financial Data.
  24




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##### Table of Contents



For the Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(In thousands, except per share, center and membership data)Statement of Operations Data:RevenueCenter revenueMembership dues
    
    $
    508,927
    
    
    $
    434,138
    
    
    $
    339,623
    
    
    $
    262,989
    
    
    $
    208,893Enrollment fees
    
    
    26,570
    
    
    
    24,741
    
    
    
    22,438
    
    
    
    20,341
    
    
    
    19,608In-center revenue (1)
    
    
    218,198
    
    
    
    182,215
    
    
    
    138,332
    
    
    
    97,710
    
    
    
    71,583Total center revenue
    
    
    753,695
    
    
    
    641,094
    
    
    
    500,393
    
    
    
    381,040
    
    
    
    300,084Other revenue
    
    
    15,926
    
    
    
    14,692
    
    
    
    11,504
    
    
    
    9,076
    
    
    
    11,949Total revenue
    
    
    769,621
    
    
    
    655,786
    
    
    
    511,897
    
    
    
    390,116
    
    
    
    312,033Operating expensesCenter operations
    
    
    454,645
    
    
    
    377,235
    
    
    
    292,273
    
    
    
    216,314
    
    
    
    164,764Advertising and marketing
    
    
    31,500
    
    
    
    24,967
    
    
    
    20,770
    
    
    
    14,446
    
    
    
    12,196General and administrative
    
    
    43,749
    
    
    
    40,820
    
    
    
    37,781
    
    
    
    27,375
    
    
    
    21,596Other operating
    
    
    19,426
    
    
    
    16,340
    
    
    
    12,998
    
    
    
    12,693
    
    
    
    18,256Depreciation and amortization
    
    
    72,947
    
    
    
    59,014
    
    
    
    47,560
    
    
    
    38,346
    
    
    
    29,655Total operating expenses (12)
    
    
    622,267
    
    
    
    518,376
    
    
    
    411,382
    
    
    
    309,174
    
    
    
    246,467Income from operations
    
    
    147,354
    
    
    
    137,410
    
    
    
    100,515
    
    
    
    80,942
    
    
    
    65,566Interest expense, net
    
    
    (29,552
    )
    
    
    (25,443
    )
    
    
    (17,356
    )
    
    
    (14,076
    )
    
    
    (17,573
    )Equity in earnings of affiliate (2)
    
    
    1,243
    
    
    
    1,272
    
    
    
    919
    
    
    
    1,105
    
    
    
    1,034Income before income taxes
    
    
    119,045
    
    
    
    113,239
    
    
    
    84,078
    
    
    
    67,971
    
    
    
    49,027Provision for income taxes
    
    
    47,224
    
    
    
    45,220
    
    
    
    33,513
    
    
    
    26,758
    
    
    
    20,119Net income
    
    
    71,821
    
    
    
    68,019
    
    
    
    50,565
    
    
    
    41,213
    
    
    
    28,908Accretion on redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,570Net income applicable to common shareholders
    
    $
    71,821
    
    
    $
    68,019
    
    
    $
    50,565
    
    
    $
    41,213
    
    
    $
    25,338Basic earnings per share
    
    $
    1.84
    
    
    $
    1.81
    
    
    $
    1.40
    
    
    $
    1.19
    
    
    $
    1.02Weighted average number of common shares
outstanding  basic
    
    
    39,002
    
    
    
    37,518
    
    
    
    36,118
    
    
    
    34,592
    
    
    
    24,727Diluted earnings per share
    
    $
    1.83
    
    
    $
    1.78
    
    
    $
    1.37
    
    
    $
    1.13
    
    
    $
    0.87Weighted average number of shares outstanding
 diluted (3)
    
    
    39,342
    
    
    
    38,127
    
    
    
    36,779
    
    
    
    36,339
    
    
    
    33,125Balance Sheet Data (end of period):Cash and cash equivalents
    
    $
    10,829
    
    
    $
    5,354
    
    
    $
    6,880
    
    
    $
    4,680
    
    
    $
    10,211Working capital
    
    
    (107,112
    )
    
    
    (100,281
    )
    
    
    (100,509
    )
    
    
    (66,123
    )
    
    
    (71,952
    )Total assets
    
    
    1,647,703
    
    
    
    1,386,533
    
    
    
    987,676
    
    
    
    723,460
    
    
    
    572,087Total debt
    
    
    712,904
    
    
    
    564,605
    
    
    
    389,555
    
    
    
    273,282
    
    
    
    209,244Total shareholders equity
    
    
    652,901
    
    
    
    572,557
    
    
    
    392,513
    
    
    
    307,844
    
    
    
    250,634Cash Flow Data:Net cash provided by operating activities
    
    $
    183,066
    
    
    $
    142,206
    
    
    $
    125,852
    
    
    $
    107,952
    
    
    $
    80,431Net cash used in investing activities
    
    
    (305,995
    )
    
    
    (417,207
    )
    
    
    (263,183
    )
    
    
    (180,850
    )
    
    
    (146,080
    )Net cash provided by financing activities
    
    
    128,404
    
    
    
    273,475
    
    
    
    139,531
    
    
    
    67,367
    
    
    
    57,414Other Data:Comparable center revenue growth (4)
    
    
    2.8
    %
    
    
    6.1
    %
    
    
    7.3
    %
    
    
    7.7
    %
    
    
    9.7
    %Average revenue per membership (5)
    
    $
    1,427
    
    
    $
    1,360
    
    
    $
    1,270
    
    
    $
    1,171
    
    
    $
    1,119Average in-center revenue per membership (6)
    
    
    414
    
    
    
    387
    
    
    
    351
    
    
    
    300
    
    
    
    267EBITDA (7)
    
    
    221,544
    
    
    
    197,696
    
    
    
    148,994
    
    
    
    120,393
    
    
    
    96,255EBITDA margin (8)
    
    
    28.9
    %
    
    
    30.1
    %
    
    
    29.1
    %
    
    
    30.9
    %
    
    
    30.8
    %Capital expenditures (9)
    
    $
    463,337
    
    
    $
    415,822
    
    
    $
    261,767
    
    
    $
    190,355
    
    
    $
    145,562Operating Data (10):Centers open at end of period
    
    
    81
    
    
    
    70
    
    
    
    60
    
    
    
    46
    
    
    
    39Number of memberships at end of period
    
    
    567,110
    
    
    
    499,092
    
    
    
    443,660
    
    
    
    358,384
    
    
    
    299,538Total center square footage (11)
    
    
    8,109,359
    
    
    
    6,832,814
    
    
    
    5,802,627
    
    
    
    4,077,918
    
    
    
    3,345,386
 
 (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.(2)
    
    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 25




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##### Table of Contents



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.(3)
    
    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, 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. 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 years ended December 31, 2005, 2006, 2007 and
2008, 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 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(In thousands)Weighted average number of common shares
outstanding  basic
    
    
    39,002
    
    
    
    37,518
    
    
    
    36,118
    
    
    
    34,592
    
    
    
    24,727Effect of dilutive stock options
    
    
    164
    
    
    
    476
    
    
    
    509
    
    
    
    1,739
    
    
    
    1,943Effect of dilutive restricted stock awards
    
    
    176
    
    
    
    133
    
    
    
    152
    
    
    
    8
    
    
    
    2Effect of dilutive redeemable preferred
shares outstanding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,453Weighted average number of common shares
outstanding  diluted
    
    
    39,342
    
    
    
    38,127
    
    
    
    36,779
    
    
    
    36,339
    
    
    
    33,125
 (4)
    
    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.(5)
    
    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.(6)
    
    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.(7)
    
    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. 26




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##### Table of Contents



The following table provides a reconciliation of net income, the most directly comparable GAAP
measure, to EBITDA: For the Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(In thousands)Net income
    
    $
    71,821
    
    
    $
    68,019
    
    
    $
    50,565
    
    
    $
    41,213
    
    
    $
    28,908Interest expense, net
    
    
    29,552
    
    
    
    25,443
    
    
    
    17,356
    
    
    
    14,076
    
    
    
    17,573Provision for income taxes
    
    
    47,224
    
    
    
    45,220
    
    
    
    33,513
    
    
    
    26,758
    
    
    
    20,119Depreciation and amortization
    
    
    72,947
    
    
    
    59,014
    
    
    
    47,560
    
    
    
    38,346
    
    
    
    29,655EBITDA
    
    $
    221,544
    
    
    $
    197,696
    
    
    $
    148,994
    
    
    $
    120,393
    
    
    $
    96,255
 (8)
    
    EBITDA margin is the ratio of EBITDA to total revenue.(9)
    
    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, property and equipment purchases financed through notes payable and
capital lease obligations, and non-cash share-based compensation capitalized to projects under
development.(10)
    
    The operating data 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.(11)
    
    The square footage presented in this table reflects fitness square footage which is the best
metric for the efficiencies of a facility. We exclude outdoor pool, outdoor play areas,
indoor/outdoor tennis elements and satellite facility square footage.(12)
    
    Total operating expenses in 2008 include expenses totaling $5.0 million associated with plans
to slow the development of new centers. These expenses include severance costs,
lower-of-cost-or-market adjustments in connection with assets held for sale and write-offs
associated with land development cancelled in the fourth quarter of 2008. 
 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 15 of this report.
 Overview
   27




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##### Table of Contents



Experience Life
   Critical Accounting Policies and Estimates
  28




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##### Table of Contents



Revenue recognition.
  Pre-opening operations.
 Impairment of long-lived assets.
 29




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##### Table of Contents



Results of Operations
  For
the Year Ended December 31,2008
    
    2007
    
    2006RevenueCenter revenueMembership dues
    
    
    66.1
    %
    
    
    66.2
    %
    
    
    66.4
    %Enrollment fees
    
    
    3.4
    
    
    
    3.8
    
    
    
    4.4In-center revenue
    
    
    28.4
    
    
    
    27.8
    
    
    
    27.0Total center revenue
    
    
    97.9
    
    
    
    97.8
    
    
    
    97.8Other revenue
    
    
    2.1
    
    
    
    2.2
    
    
    
    2.2Total revenue
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Operating expensesCenter operations
    
    
    59.1
    
    
    
    57.5
    
    
    
    57.1Advertising and marketing
    
    
    4.1
    
    
    
    3.8
    
    
    
    4.1General and administrative
    
    
    5.7
    
    
    
    6.2
    
    
    
    7.4Other operating
    
    
    2.5
    
    
    
    2.5
    
    
    
    2.5Depreciation and amortization
    
    
    9.5
    
    
    
    9.0
    
    
    
    9.3Total operating expenses
    
    
    80.9
    
    
    
    79.0
    
    
    
    80.4Income from operations
    
    
    19.1
    
    
    
    21.0
    
    
    
    19.6Other income (expense)Interest expense, net
    
    
    (3.8
    )
    
    
    (3.9
    )
    
    
    (3.4
    )Equity in earnings of affiliate
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.2Total other income (expense)
    
    
    (3.6
    )
    
    
    (3.7
    )
    
    
    (3.2
    )Income before income taxes
    
    
    15.5
    
    
    
    17.3
    
    
    
    16.4Provision for income taxes
    
    
    6.2
    
    
    
    6.9
    
    
    
    6.5Net income
    
    
    9.3
    %
    
    
    10.4
    %
    
    
    9.9
    %
 Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
 Total revenue.
  
    
    66.4% was from membership dues, which increased $74.8 million, or 17.2%, due to increased
memberships at new centers, junior membership programs and increased sales of value-added
memberships. Our number of memberships increased 13.6% to 567,110 at December 31, 2008 from
499,092 at December 31, 2007. Our membership growth of 13.6% was up slightly from a
membership growth rate of 12.5% in 2007. This rate increase was driven by new center growth
and included new, lower priced membership offerings in the second half of 2008.
 
    
    32.0% was from in-center revenue, which increased $36.0 million primarily as a result of
increased sales of our personal training, member activities and LifeCafe 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 $387 for
the year ended December 31, 2007 to
$414 for the year ended December 31, 2008.
 30




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##### Table of Contents



We began to see slower in-center revenue growth in the second half of the year due to
worsening economic conditions.
    
    1.6% was from enrollment fees, which are deferred until a center opens and recognized on a
straight-line basis over 36 months for the first quarter of 2008, 33 months for the second
and third quarter of 2008 and 30 months for the fourth quarter of 2008. Enrollment fees
increased $1.8 million for the year ended December 31, 2008 to $26.6 million. In 2008, we
lowered our enrollment fees to stimulate new membership demand.
  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.
 31




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##### Table of Contents



Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
 Total revenue.
  
    
    67.2% was from membership dues, which increased $94.5 million, or 27.8%, due to increased
memberships at new centers, junior membership programs and increased sales of value-added
memberships. Our number of memberships increased 12.5% to 499,092 at December 31, 2007 from
443,660 at December 31, 2006. Our membership growth of 12.5% was down from a membership
growth rate of 23.8% in 2006 primarily due to our anniversary of the acquisition of seven
leased centers in July 2006, our strategy to reduce memberships in centers where memberships
exceed our target capacity and the effects of a slower economy in the fourth quarter.
    
    31.2% was from in-center revenue, which increased $43.9 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 $351 for the year ended December 31, 2006 to $387 for the year ended December 31, 2007.
    
    1.6% was from enrollment fees, which are deferred until a center opens and recognized on a
straight-line basis over 36 months. Enrollment fees increased $2.3 million for the year ended
December 31, 2007 to $24.7 million.
  Center operations expenses.
 Advertising and marketing expenses.
 General and administrative expenses.
 Other operating expenses.
 32




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##### Table of Contents



Depreciation and amortization.
 Interest expense, net.
 Provision for income taxes.
 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.
  33




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##### Table of Contents



Seasonality of Business
  Liquidity and Capital Resources
 Liquidity
  Credit Rating.
  2008
    
    
    2007DebtLong-term
    
    $
    702,569
    
    
    $
    555,037Current maturities of long-term
    
    
    10,335
    
    
    
    9,568Total debt
    
    
    712,904
    
    
    
    564,605Shareholders EquityCommon stock
    
    
    793
    
    
    
    783Additional paid-in capital
    
    
    385,095
    
    
    
    373,910Retained earnings
    
    
    271,711
    
    
    
    199,890Accumulated other comprehensive loss
    
    
    (4,698
    )
    
    
    (2,026
    )Total shareholders equity
    
    
    652,901
    
    
    
    572,557Total capitalization
    
    $
    1,365,805
    
    
    $
    1,137,162
  2008
    
    2007Fixed-rate debt as a percent of total debt
    
    
    54.6
    %
    
    
    66.7
    %Weighted-average annual interest rate of total debt
    
    
    4.5
    %
    
    
    6.5
    %Total debt
(net of cash) as a percent of total capitalization (total debt(net of cash) and total shareholders equity)
    
    
    51.8
    %
    
    
    49.4
    %Cash provided by operating activities as a percent of total debt
    
    
    25.7
    %
    
    
    25.2
    %
 34




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##### Table of Contents



Operating Activities
    Investing Activities
   For the Year Ended December 31,2008
    
    
    2007
    
    
    2006(In thousands)Purchases of property and equipment
    
    $
    463,337
    
    
    $
    415,822
    
    
    $
    261,767Non-cash property and equipment
purchases financed through capital
lease obligations
    
    
    9,910
    
    
    
    1,445
    
    
    
    Non-cash property purchases
financed through notes payable
obligation
    
    
    
    
    
    
    95
    
    
    
    1,620Non-cash property purchases in
construction accounts payable
    
    
    3,963
    
    
    
    10,218
    
    
    
    22,594Non-cash share-based compensation
capitalized to projects under
development
    
    
    641
    
    
    
    744
    
    
    
    1,055Total capital expenditures
    
    $
    477,851
    
    
    $
    428,324
    
    
    $
    287,036
  For the Year Ended December 31,2008
    
    
    2007
    
    
    2006(In thousands)New center building and construction on clubs opened
through the current calendar year
    
    $
    237,532
    
    
    $
    159,938
    
    
    $
    141,104New center land, building and construction on clubs to be
opened in the next calendar year
    
    
    106,474
    
    
    
    149,662
    
    
    
    102,949New center land, building and construction on clubs to be
opened beyond the calendar year
    
    
    36,421
    
    
    
    20,297
    
    
    
    9,866Acquisitions, updating existing centers and corporate
infrastructure
    
    
    (1)97,424
    
    
    
    (2)98,427
    
    
    
    33,117Total capital expenditures
    
    $
    477,851
    
    
    $
    428,324
    
    
    $
    287,036
 
 (1)
    
    In 2008, we incurred approximately $97.4 million of capital expenditures related to acquisitions,
updating existing centers and corporate infrastructure. This was comprised of approximately $23.2
million for the regular maintenance of our existing center base, $54.9 million for the remodels of
leased and acquired centers, and $19.3 million for acquisitions and
general corporate purposes.(2)
    
    In 2007, we incurred approximately $98.4 million of capital expenditures related to
acquisitions, updating existing centers and corporate infrastructure. This was comprised
of approximately $22.2 for the regular maintenance of our existing center base, $28.0
million for the remodels of the seven centers leased in July 2006, $23.4 million for the
construction of our corporate office building which we moved into in December 2007, and
$24.8 million for acquisitions and general corporate purposes. 35




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##### Table of Contents



Financing Activities
 Term
Notes Payable to Insurance Company
  Revolving
Credit Facility
     36




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##### Table of Contents



Interest Rate Swap
  Term Notes Payable
    Mortgage Notes Payable
   Promissory Note Payable to Lender
  Variable Rate Demand Notes
  37




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##### Table of Contents



Sale Leaseback Transactions
   Accounting for Leases. Accounting for Leases: Sale-Leaseback Transactions Involving Real
Estate.
 Capital Leases
   38




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##### Table of Contents



Debt Covenants
   Actual as of
    
    Actual as ofRequirement
    
    December 31, 2008
    
    December 31, 2007Total Consolidated Debt toEBITDAR
    
    not more than 4.0 to 1.0
    
    3.51 to 1.0
    
    3.22 to 1.0Senior Debt to EBITDA
    
    not more than 3.25 to 1.0
    
    2.22 to 1.0
    
    1.98 to 1.0Fixed Charge Coverage Ratio
    
    not less than 1.60
    
    3.16 to 1.0
    
    2.88 to 1.0
  39




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##### Table of Contents



Contractual Obligations
  Payments due by periodTotal
    
    
    2009
    
    
    2010 and 2011
    
    
    2012 and 2013
    
    
    After 2013(In thousands)Long-term debt obligations,
excluding capital lease
obligations
    
    $
    693,219
    
    
    $
    9,361
    
    
    $
    120,522
    
    
    $
    429,647
    
    
    $
    133,689Capital lease obligations
    
    
    19,683
    
    
    
    974
    
    
    
    2,056
    
    
    
    1,837
    
    
    
    14,816Interest (1)
    
    
    139,524
    
    
    
    31,913
    
    
    
    58,471
    
    
    
    22,709
    
    
    
    26,431Operating lease obligations
    
    
    800,648
    
    
    
    39,799
    
    
    
    76,815
    
    
    
    76,064
    
    
    
    607,970Purchase obligations (2)
    
    
    86,641
    
    
    
    73,057
    
    
    
    13,541
    
    
    
    43
    
    
    
    Other long-term liabilities (3)
    
    
    995
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    995Total contractual obligations
    
    $
    1,740,710
    
    
    $
    155,104
    
    
    $
    271,405
    
    
    $
    530,300
    
    
    
    783,901
 
 (1)
    
    Interest expense obligations were calculated holding floating rate debt balances and interest
rates constant at December 31, 2008 rates.(2)
    
    Purchase obligations consist primarily of our contracts with construction subcontractors for
the completion of the seven centers under construction as of December 31, 2008, as well as
contracts for the purchase of land.(3)
    
    Financial Interpretation No. 48 (FIN 48) obligations represent uncertain tax positions. In
addition to the other long-term liabilities presented in the table above, approximately $18.8
million of unrecognized tax benefits, including interest and penalties, have been recorded as
liabilities in accordance with FIN 48, and we are uncertain as to if or when such amounts may
be settled. Recent Accounting Pronouncements
  
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
  40




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##### Table of Contents



Item 8. Financial Statements and Supplementary Data.
 LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 December 31,2008
    
    
    2007(In thousands, except shareand per share data)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    10,829
    
    
    $
    5,354Accounts receivable, net
    
    
    6,114
    
    
    
    4,475Inventories and center operating supplies
    
    
    14,632
    
    
    
    14,324Prepaid expenses and other current assets
    
    
    10,994
    
    
    
    15,963Deferred membership origination costs
    
    
    19,877
    
    
    
    16,205Deferred income taxes
    
    
    1,365
    
    
    
    1,188Income tax receivable
    
    
    
    
    
    
    5,814Total current assets
    
    
    63,811
    
    
    
    63,323PROPERTY AND EQUIPMENT, net
    
    
    1,515,957
    
    
    
    1,259,271RESTRICTED CASH
    
    
    3,936
    
    
    
    6,767DEFERRED MEMBERSHIP ORIGINATION COSTS
    
    
    14,210
    
    
    
    14,367OTHER ASSETS
    
    
    49,789
    
    
    
    42,805TOTAL ASSETS
    
    $
    1,647,703
    
    
    $
    1,386,533LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Current maturities of long-term debt
    
    $
    10,335
    
    
    $
    9,568Accounts payable
    
    
    14,842
    
    
    
    12,872Construction accounts payable
    
    
    63,418
    
    
    
    59,261Accrued expenses
    
    
    46,230
    
    
    
    47,052Deferred revenue
    
    
    36,098
    
    
    
    34,851Total current liabilities
    
    
    170,923
    
    
    
    163,604LONG-TERM DEBT, net of current portion
    
    
    702,569
    
    
    
    555,037DEFERRED RENT LIABILITY
    
    
    27,925
    
    
    
    25,526DEFERRED INCOME TAXES
    
    
    51,982
    
    
    
    38,607DEFERRED REVENUE
    
    
    13,719
    
    
    
    17,529OTHER LIABILITIES
    
    
    27,684
    
    
    
    13,673Total liabilities
    
    
    994,802
    
    
    
    813,976COMMITMENTS
AND CONTINGENCIES (Note 9)SHAREHOLDERS EQUITY:Undesignated preferred stock, 10,000,000 shares authorized; none
issued or outstanding
    
    
    
    
    
    
    Common stock, $.02 par value, 50,000,000 shares authorized; 39,612,775
and 39,137,947 shares issued and outstanding, respectively
    
    
    793
    
    
    
    783Additional paid-in capital
    
    
    385,095
    
    
    
    373,910Retained earnings
    
    
    271,711
    
    
    
    199,890Accumulated other comprehensive loss
    
    
    (4,698
    )
    
    
    (2,026
    )Total shareholders equity
    
    
    652,901
    
    
    
    572,557TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    1,647,703
    
    
    $
    1,386,533
  41




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Year EndedDecember 31,2008
    
    
    2007
    
    
    2006(In thousands, except per share data)REVENUE:Membership dues
    
    $
    508,927
    
    
    $
    434,138
    
    
    $
    339,623Enrollment fees
    
    
    26,570
    
    
    
    24,741
    
    
    
    22,438In-center revenue
    
    
    218,198
    
    
    
    182,215
    
    
    
    138,332Total center revenue
    
    
    753,695
    
    
    
    641,094
    
    
    
    500,393Other revenue
    
    
    15,926
    
    
    
    14,692
    
    
    
    11,504Total revenue
    
    
    769,621
    
    
    
    655,786
    
    
    
    511,897OPERATING EXPENSES:Center operations
    
    
    454,645
    
    
    
    377,235
    
    
    
    292,273Advertising and marketing
    
    
    31,500
    
    
    
    24,967
    
    
    
    20,770General and administrative
    
    
    43,749
    
    
    
    40,820
    
    
    
    37,781Other operating
    
    
    19,426
    
    
    
    16,340
    
    
    
    12,998Depreciation and amortization
    
    
    72,947
    
    
    
    59,014
    
    
    
    47,560Total operating expenses
    
    
    622,267
    
    
    
    518,376
    
    
    
    411,382Income from operations
    
    
    147,354
    
    
    
    137,410
    
    
    
    100,515OTHER INCOME (EXPENSE):Interest expense, net of
interest income of $235, $438
and $269, respectively
    
    
    (29,552
    )
    
    
    (25,443
    )
    
    
    (17,356
    )Equity in earnings of affiliate
    
    
    1,243
    
    
    
    1,272
    
    
    
    919Total other income (expense)
    
    
    (28,309
    )
    
    
    (24,171
    )
    
    
    (16,437
    )INCOME BEFORE INCOME TAXES
    
    
    119,045
    
    
    
    113,239
    
    
    
    84,078PROVISION FOR INCOME TAXES
    
    
    47,224
    
    
    
    45,220
    
    
    
    33,513NET INCOME
    
    $
    71,821
    
    
    $
    68,019
    
    
    $
    50,565BASIC EARNINGS PER COMMON SHARE
    
    $
    1.84
    
    
    $
    1.81
    
    
    $
    1.40DILUTED EARNINGS PER COMMON SHARE
    
    $
    1.83
    
    
    $
    1.78
    
    
    $
    1.37WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 
BASIC
    
    
    39,002
    
    
    
    37,518
    
    
    
    36,118WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 
DILUTED
    
    
    39,342
    
    
    
    38,127
    
    
    
    36,779
  42




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 AccumulatedAdditional
    
    
    Deferred
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Compen-
    
    
    Comprehensive
    
    
    RetainedShares
    
    
    Amount
    
    
    Capital
    
    
    sation
    
    
    Loss
    
    
    Earnings
    
    
    Total(In thousands, except share data)BALANCE  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 expense related
to stock options and
restricted stock
    
    
    
    
    
    
    
    
    
    
    7,556
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,556Capitalized compensation
expense 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
    
    
    
    392,513Common stock issued upon
common stock offering
    
    
    1,675,000
    
    
    
    33
    
    
    
    92,469
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92,502Common stock issued upon
exercise of stock options
    
    
    487,075
    
    
    
    10
    
    
    
    8,444
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,454Grant of restricted stock
    
    
    162,393
    
    
    
    3
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeiture of restricted stock
    
    
    (3,720
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Compensation expense related
to stock options and
restricted stock
    
    
    
    
    
    
    
    
    
    
    7,746
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,746Capitalized compensation
expense related to stock
options and restricted stock
    
    
    
    
    
    
    
    
    
    
    744
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    744Tax benefit upon exercise of
stock options
    
    
    
    
    
    
    
    
    
    
    4,605
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,605Interest rate swap contract
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,026
    )
    
    
    
    
    
    
    (2,026
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,019
    
    
    
    68,019BALANCE  December 31, 2007
    
    
    39,137,947
    
    
    
    783
    
    
    
    373,910
    
    
    
    
    
    
    
    (2,026
    )
    
    
    199,890
    
    
    
    572,557Common stock issued upon
exercise of stock options
    
    
    185,453
    
    
    
    4
    
    
    
    2,991
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,995Grant of restricted stock
    
    
    434,180
    
    
    
    9
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeiture of restricted stock
    
    
    (144,805
    )
    
    
    (3
    )
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Compensation expense related
to stock options and
restricted stock
    
    
    
    
    
    
    
    
    
    
    7,456
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,456Capitalized compensation
expense related to stock
options and restricted stock
    
    
    
    
    
    
    
    
    
    
    641
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    641Tax benefit upon exercise of
stock options
    
    
    
    
    
    
    
    
    
    
    103
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103Interest rate swap contract
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,672
    )
    
    
    
    
    
    
    (2,672
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,821
    
    
    
    71,821BALANCE  December 31, 2008
    
    
    39,612,775
    
    
    $
    793
    
    
    $
    385,095
    
    
    $
    
    
    
    $
    (4,698
    )
    
    $
    271,711
    
    
    $
    652,901
  43




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Year Ended December 31,2008
    
    
    2007
    
    
    2006(In thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    71,821
    
    
    $
    68,019
    
    
    $
    50,565Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    72,947
    
    
    
    59,014
    
    
    
    47,560Deferred income taxes
    
    
    14,815
    
    
    
    11,505
    
    
    
    3,165Provision for doubtful accounts
    
    
    108
    
    
    
    345
    
    
    
    542Loss on disposal of property and equipment, net
    
    
    985
    
    
    
    354
    
    
    
    946Amortization of deferred financing costs
    
    
    1,663
    
    
    
    853
    
    
    
    696Share-based compensation
    
    
    7,456
    
    
    
    7,746
    
    
    
    7,556Excess tax benefit from stock option exercises
    
    
    (103
    )
    
    
    (4,605
    )
    
    
    (10,229
    )Equity in earnings of affiliate
    
    
    1,243
    
    
    
    1,272
    
    
    
    919Changes in operating assets and liabilities
    
    
    13,543
    
    
    
    (544
    )
    
    
    25,425Other
    
    
    (1,412
    )
    
    
    (1,753
    )
    
    
    (1,293
    )Net cash provided by operating activities
    
    
    183,066
    
    
    
    142,206
    
    
    
    125,852CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (463,337
    )
    
    
    (415,822
    )
    
    
    (261,767
    )Proceeds from sale of property and equipment
    
    
    161,888
    
    
    
    5,054
    
    
    
    6,629Proceeds from property insurance settlement
    
    
    318
    
    
    
    78
    
    
    
    581Increase in other assets
    
    
    (7,695
    )
    
    
    (4,488
    )
    
    
    (7,803
    )Decrease (increase) in restricted cash
    
    
    2,831
    
    
    
    (2,029
    )
    
    
    (823
    )Net cash used in investing activities
    
    
    (305,995
    )
    
    
    (417,207
    )
    
    
    (263,183
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from long-term borrowings
    
    
    43,272
    
    
    
    113,455
    
    
    
    Repayments of long-term borrowings
    
    
    (13,143
    )
    
    
    (11,181
    )
    
    
    (19,120
    )Proceeds from revolving credit facility, net
    
    
    101,800
    
    
    
    67,800
    
    
    
    134,000Increase in deferred financing costs
    
    
    (6,664
    )
    
    
    (2,160
    )
    
    
    (842
    )Proceeds from common stock offering, net of underwriting discount and
offering costs
    
    
    
    
    
    
    92,502
    
    
    
    Excess tax benefit from   stock option exercises
    
    
    103
    
    
    
    4,605
    
    
    
    10,229Proceeds from   stock option exercises
    
    
    3,036
    
    
    
    8,454
    
    
    
    15,264Net cash provided by financing activities
    
    
    128,404
    
    
    
    273,475
    
    
    
    139,531INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    5,475
    
    
    
    (1,526
    )
    
    
    2,200CASH AND CASH EQUIVALENTS  Beginning of period
    
    
    5,354
    
    
    
    6,880
    
    
    
    4,680CASH AND CASH EQUIVALENTS  End of period
    
    $
    10,829
    
    
    $
    5,354
    
    
    $
    6,880
  44




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts 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
 45




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
 Restricted Cash
 Accounts Receivable
 46




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
  December 31,2008
    
    
    2007
    
    
    2006Allowance for Doubtful Accounts:Balance, beginning of period
    
    $
    755
    
    
    $
    616
    
    
    $
    187Provisions
    
    
    108
    
    
    
    345
    
    
    
    542Write-offs against allowance
    
    
    (596
    )
    
    
    (206
    )
    
    
    (113
    )Balance, end of period
    
    $
    267
    
    
    $
    755
    
    
    $
    616Sales Returns and Allowances:Balance, beginning of period
    
    $
    
    
    
    $
    
    
    
    $
    134Provisions
    
    
    
    
    
    
    
    
    
    
    (52
    )Write-offs against allowance
    
    
    
    
    
    
    
    
    
    
    (82
    )Balance, end of period
    
    $
    
    
    
    $
    
    
    
    $
    
  Inventories and Center Operating Supplies
  December 31,2008
    
    
    2007Center operating supplies
    
    $
    5,434
    
    
    $
    4,232In-center businesses inventory
    
    
    7,122
    
    
    
    7,144Apparel and uniforms
    
    
    1,798
    
    
    
    2,693Other
    
    
    278
    
    
    
    255Total inventories and center operating supplies
    
    $
    14,632
    
    
    $
    14,324
 Prepaid Expenses and Other Current Assets
  December 31,2008
    
    
    2007Land held for sale
    
    $
    552
    
    
    $
    5,390Insurance deposits
    
    
    473
    
    
    
    2,664Deferred costs
    
    
    2,144
    
    
    
    1,928Prepaid lease obligations
    
    
    2,767
    
    
    
    1,232Due from affiliate
    
    
    
    
    
    
    490Other prepaid expenses and current assets
    
    
    5,058
    
    
    
    4,259Total prepaid expenses and other current assets
    
    $
    10,994
    
    
    $
    15,963
 47




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
 Property and Equipment
   Depreciable
    
    
    December 31,Lives
    
    
    2008
    
    
    2007Land
    
    
    
    
    
    $
    235,414
    
    
    $
    219,347Buildings and related fixtures
    
    3-40 years
    
    
    1,012,277
    
    
    
    869,365Leasehold improvements
    
    1-20 years
    
    
    110,900
    
    
    
    36,253Construction in progress
    
    
    
    
    
    
    154,119
    
    
    
    137,3351,512,710
    
    
    
    1,262,300Equipment:Fitness
    
    5-7 years
    
    
    91,457
    
    
    
    76,620Computer and telephone
    
    3-5 years
    
    
    44,554
    
    
    
    35,792Capitalized software
    
    5 years
    
    
    27,981
    
    
    
    21,884Decor and signage
    
    5 years
    
    
    13,323
    
    
    
    8,962Audio/visual
    
    3-5 years
    
    
    22,552
    
    
    
    15,319Furniture and fixtures
    
    7 years
    
    
    12,722
    
    
    
    9,300Other equipment
    
    3-7 years
    
    
    61,862
    
    
    
    48,135274,451
    
    
    
    216,012Property and equipment, gross
    
    
    
    
    
    
    1,787,161
    
    
    
    1,478,312Less accumulated depreciation
    
    
    
    
    
    
    271,204
    
    
    
    219,041Property and equipment, net
    
    
    
    
    
    $
    1,515,957
    
    
    $
    1,259,271
  Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use.
 Capitalization of Interest Cost,
  48




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
 Impairment of Long-lived Assets
 Derivative Instruments and Hedging Activities.
 Fair Value Measurements Fair
Value Measurements
 49




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
 Other Assets
 December 31,2008
    
    
    2007Financing costs, net
    
    $
    9,988
    
    
    $
    5,399Investment in unconsolidated affiliate (see Note 3)
    
    
    2,865
    
    
    
    2,636Site development costs
    
    
    618
    
    
    
    2,669Lease deposits
    
    
    2,527
    
    
    
    3,867Earnest money deposits
    
    
    1,739
    
    
    
    9,632Intangible assets
    
    
    8,596
    
    
    
    5,505Land held for sale
    
    
    21,105
    
    
    
    10,592Other
    
    
    2,351
    
    
    
    2,505Total other assets
    
    $
    49,789
    
    
    $
    42,805
   Goodwill and Other
Intangible Assets,
  50




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
  Balance at December 31, 2005
    
    $
    2,880Goodwill acquired
    
    
    1,272Trade name acquired
    
    
    100Balance at December 31, 2006
    
    
    4,252Purchase price adjustment (1)
    
    
    (1,346
    )Goodwill acquired
    
    
    2,599Balance at December 31, 2007
    
    
    5,505Purchase price adjustment (1)
    
    
    340Goodwill acquired
    
    
    2,751Balance at December 31, 2008
    
    $
    8,596
 
 (1)
    
    Includes adjustments related to the finalization of the purchase price allocation of
acquisition transactions.  December 31,2008
    
    
    2007Goodwill
    
    $
    5,690
    
    
    $
    2,599Leasehold rights
    
    
    2,318
    
    
    
    2,318Trade names
    
    
    588
    
    
    
    588Total intangible assets
    
    $
    8,596
    
    
    $
    5,505
 51




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
 Accrued Expenses
 December 31,2008
    
    
    2007Payroll related
    
    $
    9,063
    
    
    $
    8,129Real estate taxes
    
    
    13,557
    
    
    
    9,395Center operating costs
    
    
    11,167
    
    
    
    17,032Insurance
    
    
    2,659
    
    
    
    2,692Interest
    
    
    3,357
    
    
    
    3,185Other
    
    
    6,427
    
    
    
    6,619Total accrued expenses
    
    $
    46,230
    
    
    $
    47,052
 Income Taxes
   ,
  Earnings per Common Share
 52




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
  For the Year Ended December 31,2008
    
    
    2007
    
    
    2006Net income
    
    $
    71,821
    
    
    $
    68,019
    
    
    $
    50,565Weighted average number of common shares outstanding  basic
    
    
    39,002
    
    
    
    37,518
    
    
    
    36,118Effect of dilutive stock options
    
    
    164
    
    
    
    476
    
    
    
    509Effect of dilutive restricted stock awards
    
    
    176
    
    
    
    133
    
    
    
    152Weighted average number of common shares outstanding 
diluted
    
    
    39,342
    
    
    
    38,127
    
    
    
    36,779Basic earnings per common share
    
    $
    1.84
    
    
    $
    1.81
    
    
    $
    1.40Diluted earnings per common share
    
    $
    1.83
    
    
    $
    1.78
    
    
    $
    1.37
  Share-Based Compensation
  December 31,2008 (1)
    
    2007
    
    2006Risk-free interest rate
    
    
    
    
    
    
    4.7
    %
    
    
    4.8
    %Expected dividend yield
    
    
    
    
    
    
    
    
    
    
    Expected
life in years (2)
    
    
    
    
    
    
    5
    
    
    
    5Volatility (2)
    
    
    
    
    
    
    36.9
    %
    
    
    35.9
    %
 
 (1)
    
    No stock options were granted in 2008.(2)
    
    The volatility and expected life assumptions presented are based on an average of the
volatility assumptions reported by a peer group of publicly traded companies.  Dividends
 53




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
 Fair Value of Financial Instruments
 Fair Value Measurements Effective Date of FASB Statement No. 157
    Use of Estimates
 54




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
 Supplemental Cash Flow Information
 For the Year Ended December 31,2008
    
    
    2007
    
    
    2006Accounts receivable
    
    $
    (1,747
    )
    
    $
    (2,155
    )
    
    $
    1,947Income tax receivable
    
    
    5,917
    
    
    
    (1,112
    )
    
    
    13,643Inventories
and center operating supplies
    
    
    (308
    )
    
    
    (5,551
    )
    
    
    (3,104
    )Prepaid expenses and other current assets
    
    
    5,028
    
    
    
    (6,762
    )
    
    
    (2,014
    )Deferred membership origination costs
    
    
    (3,515
    )
    
    
    (7,122
    )
    
    
    (4,958
    )Accounts payable
    
    
    (5,364
    )
    
    
    4,895
    
    
    
    (132
    )Accrued expenses
    
    
    (315
    )
    
    
    9,861
    
    
    
    9,329Deferred revenue
    
    
    (2,190
    )
    
    
    6,690
    
    
    
    7,904Deferred rent
    
    
    2,399
    
    
    
    (190
    )
    
    
    2,546Other liabilities
    
    
    13,638
    
    
    
    902
    
    
    
    264Changes in operating assets and liabilities
    
    $
    13,543
    
    
    $
    (544
    )
    
    $
    25,425
  For the Year Ended December 31,2008
    
    
    2007
    
    
    2006Purchases of property and equipment
    
    $
    463,337
    
    
    $
    415,822
    
    
    $
    261,767Non-cash property and equipment purchases
financed through capital lease obligations
    
    
    9,910
    
    
    
    1,445
    
    
    
    Non-cash property purchases financed through
notes payable obligations
    
    
    
    
    
    
    95
    
    
    
    1,620Non-cash property purchases in accounts payable
    
    
    3,963
    
    
    
    10,218
    
    
    
    22,594Non-cash share-based compensation capitalized
to projects under development
    
    
    641
    
    
    
    744
    
    
    
    1,055Total capital expenditures
    
    $
    477,851
    
    
    $
    428,324
    
    
    $
    287,036
   New Accounting Pronouncements 
 55




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
 Comprehensive Income 
 3. Investment in Unconsolidated Affiliate
    56




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
 4. Long-Term Debt
  December 31,2008
    
    
    2007Term 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
    
    $
    111,812
    
    
    $
    117,597Revolving credit facility, interest only due monthly
at interest rates ranging from LIBOR plus 0.625% to
1.50% or base plus 0.0%, facility expires May 2012,
collateralized by certain personal property
    
    
    414,600
    
    
    
    312,800Variable Rate Demand Notes, interest due monthly at a
variable rate resetting weekly, principal due annually
according to an agreement with a Letter of Credit
provider that secures the notes, notes mature in 2023
    
    
    34,235
    
    
    
    Mortgage note payable to bank with monthly interest
and principal payments totaling $43
including interest at 6.54% to November 2013
collateralized by certain related real estate and
building
    
    
    5,738
    
    
    
    Term notes payable with monthly interest and principal
payments totaling $632 including interest at 6.03% to
February 2017, collateralized by certain related real
estate and buildings
    
    
    102,752
    
    
    
    103,990Mortgage notes payable to bank, due in monthly
installments of $52 through October 2012, including
interest at approximately 6.4%, collateralized by
certain interests in related two centers
    
    
    4,103
    
    
    
    4,461Promissory note payable to lender, monthly interest
and principal payments totaling $80 including interest
at 5.78% to January 2015, collateralized by a certain
interest in secured property
    
    
    8,013
    
    
    
    8,455Interest rate swap on notional amount of $125,000 at a
fixed annual rate of 4.825%, expiring October 2010
    
    
    7,541
    
    
    
    3,252Other debt including promissory note payable,
unsecured promissory note and special assessments
payable
    
    
    4,426
    
    
    
    4,768Total debt (excluding obligations under capital leases)
    
    
    693,220
    
    
    
    555,323Obligations under capital leases (see below)
    
    
    19,684
    
    
    
    9,282Total debt
    
    
    712,904
    
    
    
    564,605Less current maturities
    
    
    10,335
    
    
    
    9,568Total long-term debt
    
    $
    702,569
    
    
    $
    555,037
 57




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
 Term Notes Payable to Insurance Company
  Revolving Credit Facility
     Interest Rate Swap
  58




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
  Term Notes Payable
    Mortgage Notes Payable
   Promissory Note Payable to Lender
  Variable Rate Demand Notes
  59




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
  Sale Leaseback Transactions
   Accounting for Leases. Accounting for Leases: Sale-Leaseback Transactions Involving Real Estate.
 Capital Leases
   60




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
  Debt Covenants
   2009
    
    $
    9,3612010
    
    
    10,9712011
    
    
    109,5512012
    
    
    420,5772013
    
    
    9,071Thereafter
    
    
    133,689Total future maturities of long-term debt (excluding capital leases)
    
    $
    693,220
  December 31,2008
    
    
    2007Land and buildings
    
    $
    16,912
    
    
    $
    6,622Equipment
    
    
    16,946
    
    
    
    26,078Gross property and equipment under capital lease
    
    
    33,858
    
    
    
    32,700Less accumulated amortization
    
    
    18,007
    
    
    
    21,937Net property and equipment under capital lease
    
    $
    15,851
    
    
    $
    10,763
  2009
    
    $
    2,5602010
    
    
    2,5752011
    
    
    2,4772012
    
    
    2,5532013
    
    
    1,912Thereafter
    
    
    17,46629,543Less amounts representing interest
    
    
    9,859Present value of net minimum lease payments
    
    
    19,684Current portion
    
    
    1,016$
    18,668
 61




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
 5. Income Taxes
  December 31,2008
    
    
    2007
    
    
    2006Current tax expense
    
    $
    26,445
    
    
    $
    33,358
    
    
    $
    30,348Deferred tax expense
    
    
    14,833
    
    
    
    8,297
    
    
    
    3,165Non-current tax expense
    
    
    5,946
    
    
    
    3,565
    
    
    
    Income tax provision
    
    $
    47,224
    
    
    $
    45,220
    
    
    $
    33,513
   December 31,2008
    
    
    2007
    
    
    2006Income tax provision at federal statutory rate
    
    $
    41,666
    
    
    $
    39,634
    
    
    $
    29,428State and local income taxes, net of federal tax benefit
    
    
    5,236
    
    
    
    4,837
    
    
    
    3,268Other, net
    
    
    322
    
    
    
    749
    
    
    
    817Income tax provision
    
    $
    47,224
    
    
    $
    45,220
    
    
    $
    33,513
  December 31,2008
    
    
    2007Property and equipment
    
    $
    (58,002
    )
    
    $
    (32,274
    )Partnership interest
    
    
    (8,475
    )
    
    
    (8,967
    )Accrued rent expense
    
    
    14,071
    
    
    
    2,618Other comprehensive income
    
    
    2,843
    
    
    
    1,226Costs related to deferred revenue
    
    
    (7,965
    )
    
    
    (3,280
    )Other, net
    
    
    6,911
    
    
    
    3,258Net deferred tax liability
    
    $
    (50,617
    )
    
    $
    (37,419
    )
  Unrecognized tax benefit  beginning balance
    
    $
    12,892Gross increases  tax positions in current period
    
    
    9,041Prior year increases
    
    
    419Prior year decreases
    
    
    (523
    )Lapse of statute of limitations
    
    
    (3,418
    )Unrecognized tax benefit  ending balance
    
    $
    18,411
 62




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
     6. Offering of Capital Stock
  7. Share-Based Compensation
    63




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
   For the Year Ended December 31,2008
    
    
    2007
    
    
    2006Share-based compensation expense related to stock options
    
    $
    2,536
    
    
    $
    3,206
    
    
    $
    5,671Share-based compensation expense related to restricted shares
    
    
    4,796
    
    
    
    4,410
    
    
    
    1,833Share-based compensation expenses related to employee stock
purchase program (ESPP)
    
    
    124
    
    
    
    130
    
    
    
    52Total share-based compensation expense
    
    $
    7,456
    
    
    $
    7,746
    
    
    $
    7,556
  Range ofRestricted
    
    Market PriceShares
    
    Per Share onOutstanding
    
    Grant DateBalance  December 31, 2006
    
    
    210,894
    
    
    
    24.75-50.82Granted
    
    
    162,393
    
    
    
    49.06-53.95Canceled
    
    
    (3,720
    )
    
    
    46.51-53.95Vested
    
    
    (67,222
    )
    
    
    24.75-50.85Balance  December 31, 2007
    
    
    302,345
    
    
    
    24.75-53.95Granted
    
    
    434,180
    
    
    
    14.31-35.77Canceled
    
    
    (144,805
    )
    
    
    26.46-51.15Vested
    
    
    (104,517
    )
    
    
    24.75-53.95Balance  December 31, 2008
    
    
    487,203
    
    
    $
    14.31-53.95
  64




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
   WeightedWeighted-
    
    AverageAverage
    
    Remaining
    
    AggregateExercise
    
    Contractual
    
    IntrinsicOptions
    
    Shares
    
    Price
    
    Term (in years)
    
    ValueOutstanding 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
    
    
    
    20.15Granted
    
    
    2,477
    
    
    
    50.85Exercised
    
    
    (487,075
    )
    
    
    17.34Canceled
    
    
    (31,734
    )
    
    
    26.82Outstanding at December 31, 2007
    
    
    1,208,267
    
    
    
    21.17Granted
    
    
    
    
    
    
    Exercised
    
    
    (185,453
    )
    
    
    16.43Canceled
    
    
    (41,885
    )
    
    
    30.87Outstanding at December 31, 2008
    
    
    980,929
    
    
    $
    21.65
    
    
    
    5.6
    
    
    $
    (8,538
    )Vested or Expected to Vest at December 31, 2008
    
    
    957,823
    
    
    $
    21.51
    
    
    
    5.6
    
    
    $
    (8,186
    )Exercisable at December 31, 2008
    
    
    754,402
    
    
    $
    19.69
    
    
    
    5.4
    
    
    $
    (5,082
    )
  65




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Table amounts in thousands, except share and per share data)
  Weighted Average
    
    
    
    
    
    
    
    
    
    WeightedRemaining
    
    Weighted
    
    
    
    
    
    AverageNumber
    
    Contractual Life
    
    Average
    
    Number
    
    ExerciseRange of Exercise Prices
    
    Outstanding
    
    (Years)
    
    Exercise Price
    
    Exercisable
    
    Price$8.00 to $12.00
    
    
    220,625
    
    
    
    4.14
    
    
    $
    9.69
    
    
    
    220,625
    
    
    $
    9.69$18.50 to $21.25
    
    
    305,551
    
    
    
    5.50
    
    
    
    18.54
    
    
    
    269,888
    
    
    
    18.52$25.47 to $27.25
    
    
    318,750
    
    
    
    6.19
    
    
    
    25.63
    
    
    
    185,934
    
    
    
    25.68$31.40 to $50.85
    
    
    136,003
    
    
    
    7.04
    
    
    
    38.74
    
    
    
    77,955
    
    
    
    37.70$8.00 to $50.85
    
    
    980,929
    
    
    
    5.63
    
    
    $
    21.65
    
    
    
    754,402
    
    
    $
    19.69
    8. Operating Segments
  66




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
  For the Year Ended December 31,2008
    
    
    2007
    
    
    2006Membership dues
    
    $
    508,927
    
    
    $
    434,138
    
    
    $
    339,623Enrollment fees
    
    
    26,570
    
    
    
    24,741
    
    
    
    22,438Personal training
    
    
    106,802
    
    
    
    88,278
    
    
    
    65,191Other in-center
    
    
    111,396
    
    
    
    93,937
    
    
    
    73,141Other
    
    
    15,926
    
    
    
    14,692
    
    
    
    11,504Total revenue
    
    $
    769,621
    
    
    $
    655,786
    
    
    $
    511,897
 9. Commitments and Contingencies
 Lease Commitments
 2009
    
    $
    39,7992010
    
    
    38,4152011
    
    
    38,3992012
    
    
    37,8832013
    
    
    38,181Thereafter
    
    
    607,970Total minimum annual payments under all noncancelable operating leases
    
    $
    800,647
  Purchase Commitments
 Litigation
 4 01(k) Savings and Investment Plan
 67




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
 Letters of Credit
  10. Related Party Transactions
     11. Executive Nonqualified Plan
   68




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##### Table of Contents



LIFE TIME FITNESS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
  12. Quarterly Financial Data (Unaudited)
  2007
    
    20081st
    
    2nd
    
    3rd
    
    4th
    
    1st
    
    2nd
    
    3rd
    
    4thQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    QuarterTotal revenue
    
    $
    153,101
    
    
    $
    162,137
    
    
    $
    169,450
    
    
    $
    171,098
    
    
    $
    184,451
    
    
    $
    192,407
    
    
    $
    198,809
    
    
    $
    193,954Income from
operations (1)
    
    
    28,741
    
    
    
    33,500
    
    
    
    37,543
    
    
    
    37,626
    
    
    
    36,016
    
    
    
    39,878
    
    
    
    42,123
    
    
    
    29,337Net income
    
    
    14,134
    
    
    
    16,485
    
    
    
    18,350
    
    
    
    19,050
    
    
    
    17,404
    
    
    
    19,828
    
    
    
    21,574
    
    
    
    13,015Earnings per share
(2)Basic (3)
    
    $
    0.39
    
    
    $
    0.45
    
    
    $
    0.49
    
    
    $
    0.48
    
    
    $
    0.45
    
    
    $
    0.51
    
    
    $
    0.55
    
    
    $
    0.33Diluted (3)
    
    
    0.38
    
    
    
    0.44
    
    
    
    0.48
    
    
    
    0.48
    
    
    
    0.44
    
    
    
    0.50
    
    
    
    0.55
    
    
    
    0.33
 
 (1)
    
    Total operating expenses in the fourth quarter of  2008 include expenses totaling $5.0 million associated with
plans to slow the development of new centers. These expenses include severance costs,
lower-of-cost-or-market adjustments in connection with assets held for sale and write-offs
associated with land development cancelled in the fourth quarter of 2008.(2)
    
    See Note 2 for discussion on the computation of earnings per share.(3)
    
    The basic and diluted earnings per share by quarter include the impact of rounding
within each quarter. 69




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Internal ControlIntegrated Framework
 DELOITTE & TOUCHE LLP
 
 70




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal Control  Integrated Framework Managements Annual Report
on Internal Control Over Financial Reporting
    Internal Control
 Integrated Framework
  DELOITTE & TOUCHE LLP
 
 71




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##### Table of Contents



Quarterly Results (Unaudited)
   2007
    
    20081st
    
    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
    
    $
    153,101
    
    
    $
    162,137
    
    
    $
    169,450
    
    
    $
    171,098
    
    
    $
    184,451
    
    
    $
    192,407
    
    
    $
    198,809
    
    
    $
    193,954Income from
operations (1)
    
    
    28,741
    
    
    
    33,500
    
    
    
    37,543
    
    
    
    37,626
    
    
    
    36,016
    
    
    
    39,878
    
    
    
    42,123
    
    
    
    29,337Net income
    
    
    14,134
    
    
    
    16,485
    
    
    
    18,350
    
    
    
    19,050
    
    
    
    17,404
    
    
    
    19,828
    
    
    
    21,574
    
    
    
    13,015Earnings per shareBasic (2)
    
    $
    0.39
    
    
    $
    0.45
    
    
    $
    0.49
    
    
    $
    0.48
    
    
    $
    0.45
    
    
    $
    0.51
    
    
    $
    0.55
    
    
    $
    0.33Diluted (2)
    
    
    0.38
    
    
    
    0.44
    
    
    
    0.48
    
    
    
    0.48
    
    
    
    0.44
    
    
    
    0.50
    
    
    
    0.55
    
    
    
    0.33Cash Flow Data:Net cash provided by
(used in):Operating activities
    
    $
    39,027
    
    
    
    27,150
    
    
    
    41,167
    
    
    
    34,862
    
    
    
    49,322
    
    
    
    56,338
    
    
    
    37,852
    
    
    
    39,554Investing activities
    
    
    (85,189
    )
    
    
    (125,727
    )
    
    
    (103,671
    )
    
    
    (102,620
    )
    
    
    (104,056
    )
    
    
    (145,260
    )
    
    
    42,006
    
    
    
    (98,685
    )Financing activities
    
    
    45,197
    
    
    
    100,925
    
    
    
    55,014
    
    
    
    72,339
    
    
    
    51,839
    
    
    
    90,137
    
    
    
    (76,413
    )
    
    
    62,841EBITDA (3)
    
    $
    42,744
    
    
    $
    48,463
    
    
    $
    52,776
    
    
    $
    53,713
    
    
    $
    52,929
    
    
    $
    57,394
    
    
    $
    61,179
    
    
    $
    50,042Centers open at end of
quarter (4)
    
    
    60
    
    
    
    64
    
    
    
    67
    
    
    
    70
    
    
    
    71
    
    
    
    74
    
    
    
    77
    
    
    
    81
 
 (1)
    
    Total operating expenses in the fourth quarter of 2008 include expenses totaling
$5.0 million associated with plans to slow the development of new
centers. These expenses include severance costs,
lower-of-cost-or-market adjustments in connection with assets held for sale and write-offs
associated with land development cancelled in the fourth quarter of 2008.(2)
    
    The basic and diluted earnings per share by quarter include the impact of rounding
within each quarter.(3)
    
    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.(4)
    
    The data being presented includes the center owned by Bloomingdale LLC. 72




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2007
    
    
    20081st
    
    
    2nd
    
    
    3rd
    
    
    4th
    
    
    1st
    
    
    2nd
    
    
    3rd
    
    
    4thQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(In thousands)Net income
    
    $
    14,134
    
    
    $
    16,485
    
    
    $
    18,350
    
    
    $
    19,050
    
    
    $
    17,404
    
    
    $
    19,828
    
    
    $
    21,574
    
    
    $
    13,015Interest expense, net
    
    
    5,528
    
    
    
    6,369
    
    
    
    7,135
    
    
    
    6,411
    
    
    
    7,211
    
    
    
    6,905
    
    
    
    7,185
    
    
    
    8,251Provision for income taxes
    
    
    9,395
    
    
    
    10,931
    
    
    
    12,374
    
    
    
    12,520
    
    
    
    11,724
    
    
    
    13,471
    
    
    
    13,700
    
    
    
    8,329Depreciation and
amortization
    
    
    13,687
    
    
    
    14,678
    
    
    
    14,917
    
    
    
    15,732
    
    
    
    16,590
    
    
    
    17,190
    
    
    
    18,720
    
    
    
    20,447EBITDA
    
    $
    42,744
    
    
    $
    48,463
    
    
    $
    52,776
    
    
    $
    53,713
    
    
    $
    52,929
    
    
    $
    57,394
    
    
    $
    61,179
    
    
    $
    50,042
 73




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##### Table of Contents



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.
    Changes in Internal Control Over Financial Reporting.
 74




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##### Table of Contents



Item 9B. Other Information.
  
 PART III
  
 Item 10. Directors, Executive Officers and Corporate Governance.
   Name
    
    Age
    
    PositionBahram Akradi
    
    
    47
    
    
    Chairman of the Board of Directors and Chief
Executive OfficerMichael J. Gerend
    
    
    44
    
    
    President and Chief Operating OfficerMichael R. Robinson
    
    
    49
    
    
    Executive Vice President and Chief Financial OfficerEric J. Buss
    
    
    42
    
    
    Executive Vice President, General Counsel and
SecretaryScott C. Lutz
    
    
    50
    
    
    Executive Vice President, Chief Marketing OfficerMark L. Zaebst
    
    
    49
    
    
    Executive Vice PresidentJeffrey G. Zwiefel
    
    
    46
    
    
    Senior Vice President
 Bahram Akradi
 Michael J. Gerend
 Michael R. Robinson
 75




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##### Table of Contents



Eric J. Buss
 Scott C. Lutz th
 Mark L. Zaebst
 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.
  76




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##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules.
  
 
  3.1
    
    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, 2004.10.4
    
    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.
 77




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##### Table of Contents



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, 2004.10.15
    
    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#
    
    Amended and Restated Life Time Fitness,
Inc. 2004 Long-Term Incentive Plan
(effective as of April 24, 2008).
    
    Incorporated by
reference to
Appendix B to the
Registrants proxy
statement for its
2008 Annual Meeting
of Shareholders
(File No.
001-32230), filed
with the Commission
on March 6, 2008.10.17#
    
    Form of Executive Employment Agreement.
    
    Filed Electronically.
 78




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##### Table of Contents



10.18#
    
    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).10.19#
    
    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).10.20#
    
    2008 Key Executive Incentive Compensation Plan.
    
    Incorporated by reference to Exhibit 10.1 to the
Registrants Form 8-K dated March 14, 2008 (File
No. 001-32230).10.21
    
    Second Amended and Restated Credit Agreement, dated as
of May 31, 2007, among the Company, U.S. Bank National
Association, as administrative agent and lead
arranger, J.P. Morgan Securities, Inc. and Royal Bank
of Canada, as co-syndication agents, BMO Capital
Markets, as documentation 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, 2007 (File No. 001-32230).10.22
    
    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).10.23#
    
    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).10.24#
    
    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).10.25
    
    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).10.26
    
    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).10.27
    
    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).10.28#
    
    Form of 2006 Restricted Stock Agreement (Executive)
for 2004 Long-Term Incentive Plan with
performance-based vesting component.
    
    Incorporated by reference to Exhibit 10.31 to the
Registrants Form 10-K for the year ended December
31, 2006 (File No. 001-32230).10.29#
    
    Form of 2007 Restricted Stock Agreement (Executive)
for 2004 Long-Term Incentive Plan with
performance-based vesting component.
    
    Incorporated by reference to Exhibit 10.2 to the
Registrants Form 8-K dated March 14, 2007 (File
No. 001-32230).10.30#
    
    Executive Nonqualified Excess Plan.
    
    Incorporated by reference to Exhibit 10.32to the
Registrants Form 10-K for the year ended December
31, 2006 (File No. 001-32230).
 79




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10.31
    
    Loan Agreement dated January 24, 2007 among LTF CMBS
I, LLC, the Company and Goldman Sachs Commercial
Mortgage Capital, L.P.
    
    Incorporated by reference to Exhibit 10.1 to the
Registrants Form 8-K dated January 24, 2007 (File
No. 001-32230).10.32
    
    Lease Agreement dated January 24, 2007 among LTF CMBS
I, LLC and LTF Club Operations Company, Inc.
    
    Incorporated by reference to Exhibit 10.2 to the
Registrants Form 8-K dated January 24, 2007 (File
No. 001-32230).10.33
    
    Guaranty of the Loan Agreement dated January 24, 2007
for the benefit of Goldman Sachs Commercial Mortgage
Capital, L.P. executed by the Company.
    
    Incorporated by reference to Exhibit 10.3 to the
Registrants Form 8-K dated January 24, 2007 (File
No. 001-32230).10.34
    
    Lease Guaranty dated January 24, 2007 for the benefit
of LTF CMBS I, LLC executed by the Company.
    
    Incorporated by reference to Exhibit 10.4 to the
Registrants Form 8-K dated January 24, 2007 (File
No. 001-32230).10.35
    
    Amendment No. 1 to Second Amended and Restated Credit
Agreement, dated as of January 24, 2008, among the
Company, U.S. Bank National Association, as
administrative agent and lead arranger, J.P. Morgan
Securities, Inc. and Royal Bank of Canada, as
co-syndication agents, BMO Capital Markets, as
documentation agent, and the banks party thereto from
time to time.
    
    Incorporated by reference to Exhibit 10.37 to the
Registrants Form 10-K for the year ended December
31, 2007 (File No. 001-32230).10.36#
    
    Form of 2008 Restricted Stock Agreement (Executive) for
2004 Long-Term Incentive Plan with performance-based
vesting component.
    
    Incorporated by reference to Exhibit 10.2 to the Registrants Form 8-K dated March 14,
2008 (File No.
001-32230).10.37#
    
    Form of Restricted Stock Unit Agreement issued to
Bahram Akradi.
    
    Incorporated by
reference to Exhibit
10.3 to the
Registrants Form
8-K dated March 14,
2008 (File No.
001-32230).10.38#
    
    Life Time Fitness, Inc. Executive Cash Bonus Plan.
    
    Incorporated by
reference to
Appendix A to the
Registrants proxy
statement for its
2008 Annual Meeting
of Shareholders
(File No.
001-32230), filed
with the Commission
on March 6, 2008.10.39
    
    Indenture of Trust between LTF Real Estate VRDN I, LLC,
as Borrower, and Manufacturers and Traders Trust
Company, as Trustee for the LTF Real Estate VRDN I, LLC
$34,235,000 Variable Rate Demand Notes, Series 2008,
dated as of June 1, 2008.
    
    Incorporated by
reference to Exhibit
10.4 to the
Registrants Form
10-Q for the quarter
ended June 30, 2008
(File No.
001-32230).10.40
    
    Reimbursement Agreement among General Electric Capital
Corporation, GE Government Finance, Inc., and LTF Real
Estate VRDN I, LLC for the LTF Real Estate VRDN I, LLC
$34,235,000 Variable Rate Demand Notes, Series 2008,
dated as of June 1, 2008.
    
    Incorporated by
reference to Exhibit
10.5 to the
Registrants Form
10-Q for the quarter
ended June 30, 2008
(File No.
001-32230).10.41
    
    Lease Agreement between LTF Real Estate VRDN I, LLC and
LTF Club Operations Company, Inc. dated as of June 13,
2008 (Chanhassen, MN  Headquarters).
    
    Incorporated by
reference to Exhibit
10.6 to the
Registrants Form
10-Q for the quarter
ended June 30, 2008
(File No.
001-32230).
 80




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##### Table of Contents



10.42
    
    Lease Agreement between LTF Real Estate VRDN I, LLC and
LTF Club Operations Company, Inc. dated as of June 13,
2008 (Overland Park, KS).
    
    Incorporated by
reference to Exhibit
10.7 to the
Registrants Form
10-Q for the quarter
ended June 30, 2008
(File No.
001-32230).10.43
    
    Lease Guaranty and Negative Pledge Agreement dated as
of June 1, 2008 by Life Time Fitness, Inc. in favor of
LTF Real Estate VRDN I, LLC.
    
    Incorporated by
reference to Exhibit
10.8 to the
Registrants Form
10-Q for the quarter
ended June 30, 2008
(File No.
001-32230).10.44
    
    Mortgage, Security Agreement, Assignment of Leases and
Rents and Fixture Filing dated as of June 1, 2008 by
LTF Real Estate VRDN I, LLC in favor of General
Electric Capital Corporation (Chanhassen, MN).
    
    Incorporated by
reference to Exhibit
10.9 to the
Registrants Form
10-Q for the quarter
ended June 30, 2008
(File No.
001-32230).10.45
    
    Mortgage, Security Agreement, Assignment of Leases and
Rents and Fixture Filing dated as of June 1, 2008 by
LTF Real Estate VRDN I, LLC in favor of General
Electric Capital Corporation (Overland Park, KS).
    
    Incorporated by
reference to Exhibit
10.10 to the
Registrants Form
10-Q for the quarter
ended June 30, 2008
(File No.
001-32230).10.46
    
    Subordination, Attornment and Lessee-Lessor Estoppel
Agreement dated as of June 1, 2008 by and among LTF
Real Estate VRDN I, LLC, LTF Club Operations Company,
Inc. and General Electric Capital Corporation
(Chanhassen, MN).
    
    Incorporated by
reference to Exhibit
10.11 to the
Registrants Form
10-Q for the quarter
ended June 30, 2008
(File No.
001-32230).10.47
    
    Subordination, Attornment and Lessee-Lessor Estoppel
Agreement dated as of June 1, 2008 by and among LTF
Real Estate VRDN I, LLC, LTF Club Operations Company,
Inc. and General Electric Capital Corporation (Overland
Park, KS).
    
    Incorporated by
reference to Exhibit
10.12 to the
Registrants Form
10-Q for the quarter
ended June 30, 2008
(File No.
001-32230).10.48
    
    Purchase and Sale Agreement by and among Life Time
Fitness, Inc. and LTF Real Estate Company, Inc., as
Seller, and Senior Housing Properties Trust, as
Purchaser, dated as of August 21, 2008.
    
    Incorporated by
reference to Exhibit
10.1 to the
Registrants Form
10-Q for the quarter
ended September 30,
2008 (File No.
001-32230).10.49
    
    Lease Agreement dated as of August 21, 2008 by and
among SNH LTF Properties LLC, as Landlord, and LTF Real
Estate Company, Inc., as Tenant.
    
    Incorporated by
reference to Exhibit
10.2 to the
Registrants Form
10-Q for the quarter
ended September 30,
2008 (File No.
001-32230).10.50
    
    Guaranty Agreement dated as of August 21, 2008 by Life
Time Fitness, Inc. for the benefit of SNH LTF
Properties LLC.
    
    Incorporated by
reference to Exhibit
10.3 to the
Registrants Form
10-Q for the quarter
ended September 30,
2008 (File No.
001-32230).10.51
    
    Lease Agreement between LT FIT (AZ-MD) LLC (an
affiliate of W.P. Carey & Col, LLC), as Landlord, and
LTF Real Estate Company, Inc., as Tenant dated
September 26, 2008.
    
    Incorporated by
reference to Exhibit
10.4 to the
Registrants Form
10-Q for the quarter
ended September 30,
2008 (File No.
001-32230).10.52
    
    Guaranty and Suretyship Agreement dated as of September
26, 2008 made by Life Time Fitness, Inc. to LT FIT
(AZ-MD) LLC.
    
    Incorporated by
reference to Exhibit
10.5 to the
Registrants Form
10-Q for the quarter
ended September 30,
2008 (File No.
001-32230).
 81




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##### Table of Contents



10.53
    
    Form of Omnibus Amendment to Loan Documents with
Teachers Insurance and Annuity Association of America
dated November 10, 2008.
    
    Filed Electronically.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 and 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. 82




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##### Table of Contents



SIGNATURES
  LIFE TIME FITNESS, INC.By:
    /s/ Bahram AkradiName:
    Bahram AkradiTitle:
    Chairman of the Board of Directors and Chief
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:
    Vice President and Corporate Controller
(Principal Accounting Officer)  Signature
    
    Title/s/ Giles H. Bateman *
 Giles H. Bateman
    
    Director/s/ Guy C. Jackson *

Guy C. Jackson
    
    Director/s/ Martha A. Morfitt*

Martha A. Morfitt
    
    Director/s/ John B. Richards*

John B. Richards
    
    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 83