10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________

FORM 10-Q

_______________________________

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-32230

_______________________________

Life Time Fitness, Inc.

(Exact name of registrant as specified in its charter)

_______________________________

Minnesota (State or other jurisdiction of incorporation or organization)	41-1689746 (I.R.S. Employer Identification No.)
2902 Corporate Place Chanhassen, Minnesota (Address of principal executive offices)	55317 (Zip Code)

952-947-0000

(Registrant's telephone number, including area code)

_______________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.    

Large accelerated filer	þ	Accelerated filer	¨
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No þ

The number of shares outstanding of the registrant's common stock as of October 17, 2014 was 39,122,768 common shares.

TABLE OF CONTENTS

		Page
	PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013 (unaudited)	3
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2014 and 2013 (unaudited)	4
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2014 and 2013 (unaudited)	5
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2014 and 2013 (unaudited)	6
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28
Item 4.	Controls and Procedures	28
	PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	30
SIGNATURES		31

PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

LIFE TIME FITNESS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

	September 30,			December 31,
	2014			2013
ASSETS
Current assets:
Cash and cash equivalents	$	9,622		$	8,334
Accounts receivable, net	10,103			8,298
Center operating supplies and inventories	36,703			32,778
Prepaid expenses and other current assets	27,804			25,802
Deferred membership origination costs	9,375			9,945
Deferred income taxes	6,069			6,881
Income tax receivable	88			6,698
Total current assets	99,764			98,736
Property and equipment, net	2,335,498			2,105,077
Restricted cash	890			850
Deferred membership origination costs	6,316			5,210
Goodwill	57,478			49,195
Intangible assets, net	43,868			29,299
Other assets	43,811			42,684
Total assets	$	2,587,625		$	2,331,051
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	22,394		$	24,505
Accounts payable	35,709			28,645
Construction accounts payable	40,338			47,342
Accrued expenses	67,626			67,435
Deferred revenue	36,330			35,032
Total current liabilities	202,397			202,959
Long-term debt, net of current portion	1,152,567			824,093
Deferred rent liability	29,856			28,933
Deferred income taxes	92,258			100,504
Deferred revenue	6,369			5,246
Other liabilities	16,837			21,287
Total liabilities	1,500,284			1,183,022
Commitments and contingencies (Note 6)
Shareholders' equity:
Preferred stock: 10,000,000 shares authorized; 100,000 shares of Series A Junior Participating Preferred Stock designated and no shares designated, respectively; none issued or outstanding	—			—
Common stock, $.02 par value, 75,000,000 shares authorized; 39,123,068 and 42,115,549 shares issued and outstanding, respectively	783			843
Additional paid-in capital	249,478			402,147
Retained earnings	843,174			750,654
Accumulated other comprehensive loss	(6,094		)	(5,615		)
Total shareholders’ equity	1,087,341			1,148,029
Total liabilities and shareholders' equity	$	2,587,625		$	2,331,051

See notes to unaudited consolidated financial statements.

3

LIFE TIME FITNESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
Revenue:
Membership dues	$	208,233		$	195,657		$	610,212		$	576,847
Enrollment fees	3,086			3,598			9,228			10,567
In-center revenue	107,936			97,234			310,700			286,480
Total center revenue	319,255			296,489			930,140			873,894
Other revenue	17,590			19,522			45,224			40,972
Total revenue	336,845			316,011			975,364			914,866
Operating expenses:
Center operations	193,032			180,431			570,155			527,191
Advertising and marketing	9,611			9,758			31,683			30,346
General and administrative	15,921			14,531			46,281			45,600
Other operating	14,804			18,479			45,603			46,538
Depreciation and amortization	36,654			29,956			103,252			89,235
Total operating expenses	270,022			253,155			796,974			738,910
Income from operations	66,823			62,856			178,390			175,956
Other income (expense):
Interest expense, net of interest income	(9,828		)	(6,436		)	(26,331		)	(18,999		)
Equity in earnings of affiliate	255			379			822			1,103
Total other expense	(9,573		)	(6,057		)	(25,509		)	(17,896		)
Income before income taxes	57,250			56,799			152,881			158,060
Provision for income taxes	22,849			22,413			60,361			62,386
Net income	$	34,401		$	34,386		$	92,520		$	95,674
Basic earnings per common share	$	0.91		$	0.83		$	2.36		$	2.31
Diluted earnings per common share	$	0.91		$	0.83		$	2.35		$	2.30
Weighted average number of common shares outstanding – basic	37,755			41,307			39,165			41,353
Weighted average number of common shares outstanding – diluted	37,913			41,613			39,415			41,606

See notes to unaudited consolidated financial statements.

4

LIFE TIME FITNESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
Net income	$	34,401		$	34,386		$	92,520		$	95,674
Other comprehensive income (loss), net of income tax:
Foreign currency translation adjustments, net of income taxes of $526, $(251), $798 and $872, respectively	(797		)	349			(1,188		)	(1,357		)
Unrealized gains (losses) on cash flow hedges, net of income taxes of $(321), $147, $(473) and $(778), respectively	481			(221		)	709			1,167
Other comprehensive income (loss), net of income tax:	(316		)	128			(479		)	(190		)
Comprehensive income	$	34,085		$	34,514		$	92,041		$	95,484

See notes to unaudited consolidated financial statements.

5

LIFE TIME FITNESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	For the Nine Months Ended
	September 30,
	2014			2013
Cash flows from operating activities:
Net income	$	92,520		$	95,674
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	103,252			89,235
Deferred income taxes	(7,804		)	(583		)
Gain on disposal of property and equipment, net	(563		)	(100		)
Gain on land held for sale	(17		)	—
Amortization of deferred financing costs	1,918			1,635
Share-based compensation	9,879			9,410
Excess tax benefit related to share-based compensation	(1,073		)	(6,575		)
Changes in operating assets and liabilities	(4,058		)	2,726
Other	(4,744		)	(659		)
Net cash provided by operating activities	189,310			190,763
Cash flows from investing activities:
Purchases of property and equipment	(338,365		)	(224,542		)
Acquisitions, net of cash acquired	(12,400		)	(13,102		)
Proceeds from sale of property and equipment	1,146			1,116
Proceeds from sale of land held for sale	785			—
Proceeds from property insurance settlements	—			177
Decrease (increase) in other assets	1,906			(1,022		)
(Increase) decrease in restricted cash	(40		)	1,353
Net cash used in investing activities	(346,968		)	(236,020		)
Cash flows from financing activities:
Proceeds from long-term borrowings	161,750			125,000
Repayments of long-term borrowings	(26,192		)	(31,773		)
Proceeds from (repayments of) credit facility, net	191,500			(7,150		)
Increase in deferred financing costs	(4,684		)	(4,213		)
Excess tax benefit related to share-based compensation	1,073			6,575
Proceeds from stock option exercises	2,713			1,563
Proceeds from employee stock purchase plan	1,278			1,074
Stock purchased for employee stock purchase plan	(1,531		)	(1,309		)
Repurchases of common stock	(166,878		)	(40,272		)
Net cash provided by financing activities	159,029			49,495
Effect of exchange rates on cash and cash equivalents	(83		)	(1,018		)
Increase in cash and cash equivalents	1,288			3,220
Cash and cash equivalents – beginning of period	8,334			16,499
Cash and cash equivalents – end of period	$	9,622		$	19,719

See notes to unaudited consolidated financial statements.

6

LIFE TIME FITNESS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

1. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to fairly present our consolidated financial position, results of operations and cash flows for the periods have been included.

These interim consolidated financial statements and the related notes should be read in conjunction with the annual consolidated financial statements and notes included in the latest Form 10-K, as filed with the Securities and Exchange Commission (“SEC”), which includes audited consolidated financial statements for the three fiscal years ended December 31, 2013.

2. Share-Based Compensation

Stock Option and Incentive Plans

We have three share-based compensation plans: the Amended and Restated Life Time Fitness, Inc. 2004 Long-Term Incentive Plan (the “2004 Plan”); the Life Time Fitness, Inc. 2011 Long-Term Incentive Plan (the “2011 Plan”) and an Employee Stock Purchase Plan (the “ESPP”), collectively, the share-based compensation plans. We no longer make grants under the 2004 Plan. There are 2,500,000 shares of common stock reserved for grant under the 2011 Plan and, as of September 30, 2014, there were 898,925 shares available for grant. The types of awards that may be granted under the 2011 Plan include incentive and non-qualified options to purchase shares of common stock, stock appreciation rights, restricted shares, restricted share units, performance awards and other types of share-based awards.

As of September 30, 2014, we had granted a total of 1,929,665 options to purchase common stock under all of the share-based compensation plans, of which options to purchase 76,277 shares were outstanding and vested, and a total of 5,193,223 restricted shares were granted, of which 1,435,642 restricted shares were outstanding and unvested. We use the term “restricted shares” to define unvested shares granted to employees and non-employee directors. We use the term "vest" to define the lapse of vesting restrictions on restricted shares.

Total share-based compensation expense included in our consolidated statements of operations for the three and nine months ended September 30, 2014 and 2013, was as follows:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Share-based compensation expense related to restricted shares	$	3,072	$	3,094	$	9,789	$	9,320
Share-based compensation expense related to ESPP	30		30		90		90
Total share-based compensation expense	$	3,102	$	3,124	$	9,879	$	9,410

7

LIFE TIME FITNESS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

Summary of Restricted Stock Activity

	Shares		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2013	1,429,730		$44.19
Granted	452,652		$45.16
Canceled	(117,040	)	$45.30
Vested	(329,700	)	$40.64
Outstanding at September 30, 2014	1,435,642		$45.22

During the nine months ended September 30, 2014 and 2013, we issued 452,652 and 363,106 shares of restricted stock, respectively, with an aggregate grant date fair value of $20.4 million and $15.4 million, respectively. The grant date fair value of restricted shares that vested during the nine months ended September 30, 2014 and 2013 was $13.4 million and $21.7 million, respectively. The total value of each restricted stock grant, based on the fair value of the stock on the date of grant, is amortized to compensation expense on a straight-line basis over the related vesting period. As of September 30, 2014, there was $28.5 million of unrecognized compensation expense related to restricted stock that is expected to vest. We plan to recognize this amount over a weighted average period of 2.5 years.

Special 2012 Long-Term Performance-Based Restricted Stock Grant

In May, July and August 2012, the Compensation Committee of our Board of Directors approved the grant of a total of 658,500 shares of long-term performance-based restricted stock to serve as an incentive to our senior management team to achieve certain cumulative diluted earnings per share ("EPS") and return on invested capital ("ROIC") targets during performance periods that end on December 31, 2015 and December 31, 2016. On September 30, 2014, 565,500 shares remained outstanding under this grant.

The Compensation Committee set the cumulative diluted EPS targets at 1.5 times the compound annual growth rate under our then-current long range plan and the ROIC targets at 1.1 times the ROIC under our then-current long range plan. The following are the performance metrics underlying the targets:

	Cumulative Diluted EPS			ROIC
	Measurement Period	EPS Target		Measurement Period	ROIC Target
2015 Performance Period	4/1/2012			1/1/2015
50% vest if we achieve both performance targets	through			through
	12/31/2015	$	13.68	12/31/2015	8.9	%
2016 Performance Period	4/1/2012			1/1/2016
All/remaining vest if we achieve both performance targets	through			through
	12/31/2016	$	18.96	12/31/2016	9.0	%

A maximum of $26.0 million could be recognized as compensation expense under this grant if all cumulative diluted EPS and ROIC targets are met. We do not believe that achievement of either the cumulative diluted EPS or the ROIC targets is currently probable, and, therefore, we have not recognized any compensation expense associated with the grant.

If it becomes probable that the cumulative diluted EPS and ROIC performance targets will be achieved, a cumulative adjustment will be recorded and the remaining compensation expense will be recognized over the remaining performance period. If all of the targets had been considered probable at September 30, 2014, we would have recognized $15.2 million of non-cash performance share-based compensation expense during the period ended

8

LIFE TIME FITNESS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

September 30, 2014. The probability of reaching the targets is evaluated each reporting period. If we later determined that it is no longer probable that the minimum cumulative diluted EPS and ROIC performance targets for the grants will be met, no further compensation expense would be recognized and any previously recognized compensation expense would be reversed. In the event that we do not achieve the specified cumulative diluted EPS and ROIC targets for the performance period ending December 31, 2016, the restricted shares will be forfeited. None of these shares were included in our diluted common shares outstanding at September 30, 2014 or 2013.

Summary of Stock Option Activity

	Shares		Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2013	215,668		$25.64	1.1	$4,616
Exercised	(134,352	)	$20.20
Canceled	(5,039	)	$44.66
Outstanding at September 30, 2014	76,277		$33.97	1.0	$1,257
Vested at September 30, 2014	76,277		$33.97	1.0	$1,257

No stock options have been granted since 2007. As of September 30, 2014, there was no unrecognized compensation expense related to stock options.

The aggregate intrinsic values in the table above represent the total pretax intrinsic values (the differences between our closing stock price and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on that date. This amount changes based on the fair market value of our stock. Total intrinsic value of options exercised during the nine months ended September 30, 2014 and 2013 was $3.8 million and $1.6 million, respectively.

Our net cash proceeds from the exercise of stock options were $2.7 million and $1.6 million for the nine months ended September 30, 2014 and 2013, respectively. The excess income tax benefit realized from stock option exercises and restricted stock vesting was $1.1 million and $6.6 million, respectively, for those same periods. In accordance with the related accounting guidance, this tax benefit is presented as a financing cash inflow. There is a corresponding cash outflow included in cash flows from operating activities.

Employee Stock Purchase Plan

Our ESPP provides for the sale of up to 1,500,000 shares of our common stock to our employees at discounted purchase prices. The cost per share under this plan is 90% of the fair market value of our common stock on the last day of the purchase period, as defined. The current purchase period for employees under the ESPP began July 1, 2014 and ends December 31, 2014. Compensation expense under the ESPP is estimated based on the discount of 10% at the end of the purchase period. During the nine months ended September 30, 2014, $1.3 million was withheld from employees for the purpose of purchasing shares under the ESPP. There were 1,228,549 shares of common stock available for purchase under the ESPP as of September 30, 2014.

Share Repurchase Plans

In June 2006, our Board of Directors authorized the repurchase of up to 500,000 shares of our common stock from time to time in the open market or otherwise for the primary purpose of offsetting the dilutive effect of shares issued under our ESPP. During the nine months ended September 30, 2014, we repurchased 32,178 shares under this authorization for $1.5 million. As of September 30, 2014, there were 228,549 remaining shares authorized to be repurchased for this purpose.

In August 2013, our Board of Directors authorized the repurchase of up to $200.0 million of our outstanding common stock from time to time. During the nine months ended September 30, 2014, we repurchased 3,462,445

9

LIFE TIME FITNESS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

shares under this program for $166.9 million. This authorization terminated on July 22, 2014 with the authorization of a new share repurchase program.

In July 2014, our Board of Directors authorized the repurchase of up to $200.0 million of our outstanding common stock from time to time through open market or privately negotiated transactions. The authorization to repurchase shares terminates when the aggregate repurchase amount totals $200.0 million or at the close of business on June 30, 2016, whichever occurs first. The share repurchase program does not obligate us to repurchase any dollar amount or number of shares of our common stock and the program may be extended, modified, suspended or discontinued at any time. During the nine months ended September 30, 2014, we did not repurchase any shares under this program. As of September 30, 2014, there was $200.0 million remaining authorized under this program.

3.    Earnings per Share

Basic EPS is computed by dividing net income applicable to common shareholders by the weighted average number of shares of common stock outstanding for each year. Diluted EPS is computed similarly to basic EPS, except that the denominator is increased for the conversion of any dilutive common stock equivalents, the assumed exercise of dilutive stock options using the treasury stock method and unvested restricted stock awards using the treasury stock method. Stock options excluded from the calculation of diluted EPS because the option exercise price was greater than the average market price of the common share were 15,540 and 0 for the three months ended September 30,2014 and 2013, respectively and 15,540 and 2,477 for the nine months ended September 30,2014 and 2013, respectively.

The basic and diluted EPS calculations are shown below:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Net income	$	34,401	$	34,386	$	92,520	$	95,674
Weighted average number of common shares outstanding – basic	37,755		41,307		39,165		41,353
Effect of dilutive stock options	19		95		16		87
Effect of dilutive restricted stock awards	139		211		234		166
Weighted average number of common shares outstanding – diluted	37,913		41,613		39,415		41,606
Basic earnings per common share	$	0.91	$	0.83	$	2.36	$	2.31
Diluted earnings per common share	$	0.91	$	0.83	$	2.35	$	2.30

4. Operating Segment

Our operations are conducted mainly through our distinctive and large, multi-use sports and athletic, professional fitness, family recreation and spa centers in a resort-like environment. We aggregate the activities of our centers and other ancillary products and services into one reportable segment. Each of the centers has similar economic characteristics, services, product offerings and customers, and in-center revenues are derived primarily from services to our members. Each of the other ancillary products and services either directly or indirectly, through advertising or branding, complement the operations of the centers. Our chief operating decision maker uses EBITDA (a non-GAAP, non-cash measure which consists of net income plus interest expense, net, provision for income taxes and depreciation and amortization) as the primary measure of operating segment performance. Our chief operating decision maker is our Chief Executive Officer.

10

LIFE TIME FITNESS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

The following table presents revenue for the three and nine months ended September 30, 2014 and 2013:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Membership dues	$	208,233	$	195,657	$	610,212	$	576,847
Enrollment fees	3,086		3,598		9,228		10,567
Personal training	50,680		46,095		149,228		138,903
Other in-center revenue	57,256		51,139		161,472		147,577
Total center revenue	319,255		296,489		930,140		873,894
Other revenue	17,590		19,522		45,224		40,972
Total revenue	$	336,845	$	316,011	$	975,364	$	914,866

5. Supplemental Cash Flow Information

Decreases (increases) in operating assets and increases (decreases) in operating liabilities are as follows:

	For the Nine Months Ended
	September 30,
	2014			2013
Accounts receivable, net	$	(1,944	)	$	(657	)
Center operating supplies and inventories	(3,935		)	(3,458		)
Prepaid expenses and other current assets	(2,729		)	4,180
Deferred membership origination costs	6,610			1,718
Income tax receivable	(536		)	—
Accounts payable	(2,654		)	(3,585		)
Accrued expenses	1,189			8,604
Deferred revenue	(1,176		)	(6,762		)
Deferred rent liability	936			2,384
Other liabilities	181			302
Changes in operating assets and liabilities	$	(4,058	)	$	2,726

We made cash payments for income taxes of $59.2 million and $54.3 million for the nine months ended September 30, 2014 and 2013, respectively.

We made cash payments for interest, net of capitalized interest, of $23.8 million and $16.9 million for the nine months ended September 30, 2014 and 2013, respectively. Capitalized interest was $2.0 million for both periods.

Construction accounts payable was $40.3 million and $51.8 million at September 30, 2014 and 2013, respectively.

6. Commitments and Contingencies

TCPA Litigation — On April 17, 2014, a putative class action was filed against LTF Club Operations Company, Inc., a wholly-owned subsidiary of Life Time Fitness, Inc., in the Circuit Court of St. Louis County, Missouri. On June 13, 2014, LTF Club Operations Company, Inc. removed this action to the United States District Court for the Eastern District of Missouri, Eastern Division. On April 23, 2014, a second putative class action was filed against Life Time Fitness, Inc. in the U.S. District Court for the District of Minnesota. On April 23, 2014, a third putative class action was filed against Life Time Fitness, Inc. in the U.S. District Court for the Northern District of Illinois, Eastern

11

LIFE TIME FITNESS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

Division. On July 1, 2014, a fourth putative class action was filed against Life Time Fitness, Inc. in the United States District Court for the District of Minnesota. These actions are collectively referred to as the “TCPA Actions” or "TCPA Litigation."

The TCPA Actions allege that we violated the federal Telephone Consumer Protection Act (“TCPA”) when we, or a third party on our behalf, sent marketing text messages to plaintiffs’ cellular telephones using an automatic telephone dialing system without plaintiffs’ consent. We deny the allegations.

On October 15, 2014, the United States Judicial Panel on Multidistrict Litigation granted our motion to transfer the TCPA Actions to the United States District Court for the District of Minnesota for coordinated or consolidated pretrial proceedings.

We have not recorded an expense related to damages in connection with the TCPA Actions because any potential material loss is not currently probable or reasonably estimable under U.S. generally accepted accounting principles. Additionally, we cannot reasonably estimate the range of loss, if any, that may result from the TCPA Actions.

Other Litigation — We are also engaged in other proceedings incidental to the normal course of business. Due to their nature, such legal proceedings involve inherent uncertainties, including but not limited to court rulings, negotiations between affected parties and governmental intervention. We will establish reserves for matters that are probable and estimable in amounts we believe are adequate to cover reasonable adverse judgments. Based upon the information available to us and discussions with legal counsel, it is our opinion that the outcome of the various legal actions and claims that are incidental to our business will not have a material adverse impact on our consolidated financial position, results of operations or cash flows. Such matters are subject to many uncertainties, and the outcomes of individual matters are not predictable with assurance.

7. New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective. The new standard is effective for us in 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. We are in the process of selecting a transition method and determining the effect of the standard on our ongoing financial reporting.

8. Derivative Instruments

As part of our financial risk management program, we may periodically use interest rate swaps to manage known market exposures. Terms of derivative instruments are structured to match the terms of the risk being managed and are generally held to maturity.

In August 2011, we entered into an interest rate swap contract that effectively fixed the rates paid on a total of $200.0 million of variable rate borrowings at 1.32% plus the applicable spread (which depends on our EBITDAR leverage ratio) until June 2016. EBITDAR is a non-GAAP, non-cash measure which consists of net income plus interest expense, net, provision for income taxes, depreciation and amortization and rent expense. We pay 1.32% and receive LIBOR on the notional amount of $200.0 million. The contract has been designated a cash flow hedge against interest rate volatility. In accordance with applicable accounting guidance, changes in the fair value of the swap contract are recorded in accumulated other comprehensive loss, net of tax. As of September 30, 2014, the $1.5 million fair value loss, net of tax, of the swap contract was recorded as accumulated other comprehensive loss in the shareholders' equity section of our consolidated balance sheets and the $2.6 million gross fair value of the swap contract was included in long-term debt.

12

LIFE TIME FITNESS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

On an ongoing basis, we assess whether the interest rate swap used in this hedging transaction is “highly effective” in offsetting changes in the fair value or cash flow of the hedged item by comparing the current terms of the swap and the debt to assure they continue to coincide and through an evaluation of the continued ability of the counterparty to the swap to honor its obligations under the swap. No ineffectiveness was experienced in the interest rate swap during the nine months ended September 30, 2014 or September 30, 2013. If it is determined that the derivative is not highly effective as a hedge or hedge accounting is discontinued, any change in fair value of the derivative since the last date at which it was determined to be effective would be recognized in earnings.

For more information on the swap contract, see Notes 9 and 10.

9. Fair Value Measurements

The accounting guidance establishes a framework for measuring fair value and expanded disclosures about fair value measurements. The guidance applies to all assets and liabilities that are measured and reported on a fair value basis. This enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The guidance requires that each asset and liability carried at fair value be classified into one of the following categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

Fair Value Measurements on a Recurring Basis

The fair value of the interest rate swap is determined using observable current market information such as the prevailing Eurodollar interest rates, Eurodollar yield curve rates and current fair values as quoted by recognized dealers, and also includes consideration of counterparty credit risk. The following table presents the fair value of our derivative financial instrument as of September 30, 2014 and December 31, 2013:

		Fair Value Measurements Using:
		Quoted Prices in	Significant	Significant
	Total	Active Markets for	Other Observable	Unobservable
	Fair	Identical Assets	Inputs	Inputs
	Value	(Level 1)	(Level 2)	(Level 3)
Interest rate swap liability as of
September 30, 2014	$2,580	$—	$2,580	$—
Interest rate swap liability as of
December 31, 2013	$3,762	$—	$3,762	$—

Fair Value Measurements on a Nonrecurring Basis

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible fixed assets, goodwill and intangible assets, which are remeasured when the derived fair value is below carrying value on our consolidated balance sheets. For these assets, we do not periodically adjust carrying value to fair value except in the event of impairment. If we determine that impairment has occurred, the carrying value of the asset would be reduced to fair value and the difference would be recorded as a loss within operating income in our consolidated statements of operations.

We had no remeasurements of such assets or liabilities to fair value during the nine months ended September 30, 2014 or September 30, 2013.

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LIFE TIME FITNESS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

Financial Assets and Liabilities Not Measured at Fair Value

The carrying amounts related to cash and cash equivalents (Level 1), accounts receivable, income tax receivable, accounts payable and accrued liabilities approximate fair value due to the relatively short maturities of such instruments.

The fair value of our long-term debt and capital leases are estimated based on estimated current rates for debt with similar terms, credit worthiness and the same remaining maturities. For variable rate loans that re-price frequently, fair values are based on carrying values. The fair value of fixed rate loans is estimated based on the discounted cash flows of the loans using current market rates, which are estimated based on recent financing transactions (Level 3). The fair value estimates presented are based on information available to us as of September 30, 2014. These fair value estimates have not been comprehensively revalued for purposes of these consolidated financial statements since that date, and current estimates of fair values may differ significantly.

The following table presents the carrying value and the estimated fair value of long-term debt:

	September 30, 2014				December 31, 2013
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Fixed-rate debt	$	634,354	$	635,390	$	487,556	$	488,441
Obligations under capital leases	4,832		5,070		14,965		15,150
Floating-rate debt	535,775		535,775		346,077		346,077
Total	$	1,174,961	$	1,176,235	$	848,598	$	849,668

10. Changes in Accumulated Other Comprehensive Income (Loss) by Component

The following table presents information about accumulated other comprehensive income (loss) by component (net of tax):

	Gains (Losses) on Cash Flows Hedge			Foreign Currency Translation Adjustments			Accumulated Other Comprehensive Loss
Balance at December 31, 2013	$	(2,257	)	$	(3,358	)	$	(5,615	)
Other comprehensive income (loss)	215			(884		)	(669		)
Balance at March 31, 2014	(2,042		)	(4,242		)	(6,284		)
Other comprehensive income	13			493			506
Balance at June 30, 2014	(2,029		)	(3,749		)	(5,778		)
Other comprehensive income (loss)	481			(797		)	(316		)
Balance at September 30, 2014	$	(1,548	)	$	(4,546	)	$	(6,094	)

11. Long-Term Debt

In May 2014, we amended and extended our Third Amended and Restated Credit Agreement (the “Credit Agreement”) with U.S. Bank National Association, as administrative agent and lender, and other lenders from time to time a party thereto. The material amendments to the Credit Agreement are (i) an increase to the amount of the facility from $860.0 million to $1.20 billion; and (ii) an extension of the maturity of the facility to May 30, 2019. After giving effect to the amendments, the facility consists of a $100.0 million term loan and a $1.10 billion revolving credit facility ("credit facility"), which term loan amortizes at the rate of 5.0% on an annual basis. The credit facility may also be increased by an additional $500.0 million upon the exercise of an accordion feature if one

14

LIFE TIME FITNESS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

or more lenders commit the additional $500.0 million. The spreads under the leverage-based pricing grid in the credit facility remain unchanged, as do the financial covenant ratio thresholds.

In January 2014, a wholly owned subsidiary obtained a mortgage loan in the original principal amount of $80.0 million from Well Fargo Bank, N.A. pursuant to a promissory note and related agreements dated January 28, 2014. The mortgage financing is secured by mortgages on five properties and matures in February 2024. Interest on the amounts borrowed is 5.06% per annum, with a constant monthly debt service payment of $0.5 million.

In July 2014, a wholly owned subsidiary obtained a mortgage loan in the original principal amount of $78.0 million from ING Life Insurance and Annuity Company pursuant to a promissory note and related agreements dated July 29, 2014. The mortgage financing is secured by five properties and matures in August 2027. Interest on the amounts borrowed is 4.70% per annum, with a constant monthly debt service payment of $0.7 million.

12. Goodwill and Intangible Assets

The change in the gross amount of goodwill is as follows:

Balance at December 31, 2013	$	49,195
Goodwill acquired	8,283
Balance at September 30, 2014	$	57,478

The following table summarizes the changes in our gross intangibles balance:

Balance at December 31, 2013	$	33,978
Trade/brand names acquired	5,716
Customer relationships acquired	1,925
Leasehold rights acquired	9,759
Balance at September 30, 2014	$	51,378

The goodwill and intangible assets acquired during the nine months ended September 30, 2014 are related to the acquisition of certain athletic events and a ground lease for a club expected to open in 2015.

At September 30, 2014, intangible assets consisted of the following:

	Gross		Accumulated Amortization		Net
Leasehold rights	$	16,151	$	1,766	$	14,385
Trade/brand names	21,195		2,543		18,652
Curriculum- and technology-based intangibles	6,695		1,719		4,976
Customer relationships	7,337		1,482		5,855
Total intangible assets	$	51,378	$	7,510	$	43,868

The trade/brand names acquired during the nine months ended September 30, 2014 have a weighted average useful life of approximately 8 years. The customer relationships intangible acquired has a useful life of 10 years. The leasehold rights acquired have a useful life of 49 years based on the term of the related land lease. Amortization expense for intangible assets was $2.8 million and $1.5 million for the nine months ended September 30, 2014 and 2013, respectively.

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LIFE TIME FITNESS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

13. Potential Spin-Off of Real Estate Assets through a Real Estate Investment Trust

On August 25, 2014, we announced that our Board of Directors and senior management team have initiated a process to explore a potential conversion of real estate assets into a Real Estate Investment Trust (REIT).

In connection with our evaluation of a REIT conversion, our Board of Directors adopted a shareholder rights plan to prohibit ownership of more than 9.8% of our outstanding shares. The rights will expire upon the earlier of August 21, 2015, or the first business day after the closing of the proposed REIT conversion.

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can usually be identified by the use of terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “evolve,” “expect,” “forecast,” “intend,” “looking ahead,” “may,” “opinion,” “plan,” “possible,” “potential,” “project,” “should,” “will” and similar words or expressions. Forward-looking statements are subject to certain risks and uncertainties that could cause the Company’s actual results in the future to differ materially from its historical results and those presently anticipated or projected. Among these factors are attracting and retaining members, risks related to our debt levels and debt covenants, the ability to access our existing credit facility and obtain additional financing, strains on our business from continued and future growth, including potential acquisitions and other strategic initiatives, risks related to maintenance and security of our data, potential recognition of compensation expense related to performance-based stock grants, competition from other health and fitness centers, identifying and acquiring suitable sites for new centers, delays in opening new centers, unanticipated expenses relating to regulatory matters or litigation, the ability to convert our real estate assets into a REIT, the potential advantages, benefits and impact of, and opportunities created by, converting our real estate assets into a REIT, including potential tax benefits, and other factors set forth in the risk factor section of the Company’s annual report on Form 10-K filed with the SEC.

We caution investors not to place undue reliance on any such forward-looking statements, which speak only as of the date on which such statements were made. We undertake no obligation to update such statements to reflect events or circumstances arising after such date.

Overview

We operate distinctive and large, multi-use sports and athletic, professional fitness, family recreation and spa centers in a resort-like environment. As of October 30, 2014, we operated 112 centers in 25 states and one Canadian province under the LIFE TIME FITNESS® and LIFE TIME ATHLETIC® brands.

We compare the results of our centers based on how long the centers have been open at the most recent measurement period. We include a center for same-center revenue purposes beginning on the first day of the thirteenth full calendar month of the center’s operation, prior to which time we refer to the center as a new center. We include an acquired center for same-center revenue purposes beginning on the first day of the thirteenth full calendar month after we assumed the center’s operations.

Our new center expansion focuses on strategic locations which we believe will generate higher average dues, higher in-center revenue per membership and higher revenue per square foot. These locations typically represent our Life Time Athletic centers, which include all centers under our Onyx and Diamond membership plans, and will be located in areas with higher demographic profiles. All six of the new centers we plan to open in 2014, five of which are already open, are Life Time Athletic centers.

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As we grow our presence in existing markets by opening new centers, we anticipate attracting some memberships away from our other existing centers in those markets, reducing revenue and initially lowering the memberships of those existing centers. However, based on the strategic locations of the new Life Time Athletic centers in existing markets, we expect most of the new Athletic center memberships will be new Life Time members.

As a result of new center openings in existing markets, and because older centers will represent an increasing proportion of our center base over time, our same-center revenue may be lower in future periods than in the past. Of the six new centers we plan to open in 2014, five of which are already open, four are in existing markets. We do not expect operating costs of our planned new centers to be significantly higher than current centers, and we also do not expect the new centers to have a material adverse effect on the overall financial condition or results of operations of existing centers.

Although our overall membership growth rate may be less than in prior years, we expect our average dues and in-center revenue per membership to increase as a result of our focus on increasing our number of Life Time Athletic centers.

Our categories of new centers and existing centers do not include the center owned by Bloomingdale LIFE TIME FITNESS, L.L.C. ("Bloomingdale LLC") because it is accounted for as an investment in an unconsolidated affiliate and is not consolidated in our financial statements.

We measure performance using such key operating statistics as member satisfaction ratings, return on invested capital, average revenue per membership, average in-center revenue per membership and center operating expenses, with an emphasis on payroll, as a percentage of sales and same-center revenue growth. We use membership dues, total center revenue, average revenue per Access membership, EBITDA and EBITDA margins to evaluate overall performance and profitability on an individual center basis. In addition, we focus on several membership statistics on a center level and total center basis. These metrics include change in center Access membership levels and growth of total center memberships; percentage center Access membership to target capacity; center Access membership usage; and center attrition rates. In addition to our Access membership, we also offer a Non-Access membership option, which is for members who do not access the center, but still want to maintain certain member benefits.

Same-center revenue growth for mature centers (centers open 37 months or longer) for the three months ended September 30, 2014 was (0.9)% compared to 3.4% for the three months ended September 30, 2013. Same-center revenue growth for mature centers for the nine months ended September 30, 2014 was (0.3)% compared to 3.4% for the nine months ended September 30, 2013. These changes are driven primarily by a decrease in membership dues at some of our mature centers and lower average enrollment fees.

Attrition for the three months ended September 30, 2014 was 9.4% compared to 9.5% for the three months ended September 30, 2013. Attrition for the trailing 12-months ended September 30, 2014, was 35.7% compared to 35.0% for the trailing 12-months ended September 30, 2013. The increase in the trailing 12-months attrition rate was driven primarily by growth in Non-Access membership terminations and the impact of membership pricing adjustments.

We have three primary sources of revenue:

• First, our largest source of revenue is membership dues (62.6% of total revenue for the nine months ended September 30, 2014, compared to 63.1% for the nine months ended September 30, 2013) and enrollment fees (0.9% of total revenue for the nine months ended September 30, 2014, down from 1.1% for the nine months ended September 30, 2013).

• Second, we generate revenue within a center, which we refer to as in-center revenue or in-center businesses (31.9% of total revenue for the nine months ended September 30, 2014, compared to 31.3% for the nine months ended September 30, 2013), including fees for personal training, registered dietitians, group fitness training and other member activities, sales of products at our cafés, sales of products and services offered at our spas and tennis programs.

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• Third, we have expanded the LIFE TIME FITNESS® brand into two other offerings: health, and events and media. These offerings generate revenue, which we refer to as other revenue or ancillary businesses (4.6% of total revenue for the nine months ended September 30, 2014, up from 4.5% for the nine months ended September 30, 2013). Our health offering includes health promotion programs for members, non-members and corporations. Our events and media offerings include athletic events and related services, which includes our race registration and timing businesses, and media which includes our magazine, Experience Life®.

We have five primary sources of operating expenses:

• Center operations expenses (58.5% of total revenue for the nine months ended September 30, 2014, up from 57.6% for the nine months ended September 30, 2013) consist primarily of salaries, commissions, payroll taxes, benefits, real estate taxes and other occupancy costs, utilities, repairs and maintenance, supplies, administrative support and communications to operate our centers.

• Advertising and marketing expenses (3.2% of total revenue for the nine months ended September 30, 2014, compared to 3.3% for the nine months ended September 30, 2013) consist of our marketing department costs and media and advertising costs to support and grow center membership levels, in-center businesses, new center openings and our ancillary businesses.

• General and administrative expenses (4.7% of total revenue for the nine months ended September 30, 2014, down from 5.0% for the nine months ended September 30, 2013) include costs relating to our centralized support functions, such as accounting, information systems, procurement, real estate and development and member relations.

• Other operating expenses (4.7% of total revenue for the nine months ended September 30, 2014, down from 5.1% for the nine months ended September 30, 2013) include the costs associated with our health and our events and media businesses and other corporate expenses, as well as gains or losses on our disposal of assets.

• Depreciation and amortization (10.6% of total revenue for the nine months ended September 30, 2014, up from 9.8% for the nine months ended September 30, 2013) are computed primarily using the straight-line method over estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful life of the improvement.

Our total operating expenses may vary from period to period depending on the number of new centers opened during that period, the number of centers engaged in pre-opening activities and the performance of our in-center and ancillary businesses.

Our primary capital expenditures relate to the construction of new centers and updating and maintaining our existing centers. The land acquisition, construction and equipment costs for a current model center can vary considerably based on location, variability in land cost, the cost of construction labor and the size or amenities of the center, including the addition of tennis facilities, an expanded gymnasium or other facilities. We perform maintenance and make improvements on our centers and equipment throughout each year. We conduct a more thorough remodeling project at each center approximately every four to six years.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S., or GAAP, requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Ultimate results could differ from those estimates. In recording transactions and balances resulting from business operations, we use estimates based on the best information available. We use estimates for such items as depreciable lives, probability of meeting certain performance targets, tax provisions and deferred personal training revenue. We also use estimates for calculating the amortization period

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for deferred enrollment fee revenue and associated direct costs, which are based on the historical estimated average membership life. We revise the recorded estimates when better information is available, facts change or we can determine actual amounts. These revisions can affect operating results.

Our critical accounting policies and use of estimates are discussed in and should be read in conjunction with the annual consolidated financial statements and notes included in the latest Form 10-K, as filed with the SEC, which includes audited consolidated financial statements for our three fiscal years ended December 31, 2013.

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Results of Operations

The following table sets forth our statements of operations data as a percentage of total revenue and also sets forth other financial and operating data:

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
REVENUE:
Membership dues	61.9		%	61.9		%	62.6		%	63.1		%
Enrollment fees	0.9			1.1			0.9			1.1
In-center revenue	32.0			30.8			31.9			31.3
Total center revenue	94.8			93.8			95.4			95.5
Other revenue	5.2			6.2			4.6			4.5
Total revenue	100.0			100.0			100.0			100.0
OPERATING EXPENSES:
Center operations	57.3			57.1			58.5			57.6
Advertising and marketing	2.9			3.1			3.2			3.3
General and administrative	4.7			4.6			4.7			5.0
Other operating	4.4			5.8			4.7			5.1
Depreciation and amortization	10.9			9.5			10.6			9.8
Total operating expenses	80.2			80.1			81.7			80.8
Income from operations (operating profit)	19.8			19.9			18.3			19.2
OTHER INCOME (EXPENSE):
Interest expense, net	(2.9		)	(2.0		)	(2.7		)	(2.1		)
Equity in earnings of affiliate	0.1			0.1			0.1			0.1
Total other expense	(2.8		)	(1.9		)	(2.6		)	(2.0		)
INCOME BEFORE INCOME TAXES	17.0			18.0			15.7			17.2
PROVISION FOR INCOME TAXES	6.8			7.1			6.2			6.8
NET INCOME	10.2		%	10.9		%	9.5		%	10.4		%
Other financial data:
Same-center revenue growth (open 13 months or longer) (1)	(0.5		)%	4.2		%	0.1		%	4.2		%
Same-center revenue growth (open 37 months or longer) (1)	(0.9		)%	3.4		%	(0.3		)%	3.4		%
Average center revenue per Access membership (2)	$	452		$	421		$	1,325		$	1,243
Average in-center revenue per Access membership (3)	$	155		$	140		$	449		$	412
Trailing 12-month attrition rate (4)	35.7		%	35.0		%	35.7		%	35.0		%
Quarterly attrition rate (5)	9.4		%	9.5		%	N/A			N/A
EBITDA (in thousands) (6)	$	103,732		$	93,191		$	282,464		$	266,294
EBITDA margin (7)	30.8		%	29.5		%	29.0		%	29.1		%
EBITDAR (in thousands) (6)	$	113,481		$	103,497		$	313,304		$	296,027
EBITDAR margin (8)	33.7		%	32.8		%	32.1		%	32.4		%
Capital expenditures (in thousands) (9)	$	84,954		$	87,109		$	338,365		$	224,542

20

Results of Operations (continued)	As of September 30,
	2014	2013
Operating data (10):
Centers open (11)	112	107
Center square footage (12)	10,713,505	10,119,196
Memberships:
Access memberships	697,167	695,923
Non-Access memberships	120,333	105,928
Total memberships	817,500	801,851

(1) Membership dues, enrollment fees and in-center revenue for a center are included in same-center revenue growth – 13 month beginning on the first day of the thirteenth full calendar month of the center’s operation and are included in same-center revenue growth – 37 month beginning on the first day of the thirty-seventh full calendar month of the center’s operation.

(2) Average center revenue per Access membership is total center revenue derived from Access memberships for the period divided by the average number of Access memberships for the period, where the average number of Access memberships for the period is an average derived from dividing the sum of the total Access memberships outstanding at the beginning of the period and at the end of each month during the period by one plus the number of months in each period.

(3) Average in-center revenue per Access membership is total in-center revenue derived from Access memberships for the period divided by the average number of Access memberships for the period, where the average number of Access memberships for the period is an average derived from dividing the sum of the total Access memberships outstanding at the beginning of the period and at the end of each month during the period by one plus the number of months in each period.

(4) Trailing 12-month attrition rate (or annual attrition rate) is calculated as follows: total membership terminations (Access and Non-Access) for the trailing 12 months divided into the average beginning month total membership (Access and Non-Access) balance for the trailing 12 months.

(5) Quarterly attrition rate is calculated as follows: total membership terminations (Access and Non-Access) for the quarter divided into the average beginning month total membership (Access and Non-Access) balance for the quarter.

(6) EBITDA is a non-GAAP, non-cash measure which consists of net income plus interest expense, net, provision for income taxes and depreciation and amortization. EBITDAR adds rent expense to EBITDA. These terms, as we define them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with GAAP. We use EBITDA and EBITDAR as measures of operating performance. EBITDA or EBITDAR 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 and EBITDAR 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.

The following table provides a reconciliation of net income, the most directly comparable GAAP measure, to EBITDA and EBITDAR (in thousands):

21

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Net income	$	34,401	$	34,386	$	92,520	$	95,674
Interest expense, net	9,828		6,436		26,331		18,999
Provision for income taxes	22,849		22,413		60,361		62,386
Depreciation and amortization	36,654		29,956		103,252		89,235
EBITDA	$	103,732	$	93,191	$	282,464	$	266,294
Rent expense	9,749		10,306		30,840		29,733
EBITDAR	$	113,481	$	103,497	$	313,304	$	296,027

(7) EBITDA margin is the ratio of EBITDA to total revenue.

(8) EBITDAR margin is the ratio of EBITDAR 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 period-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 includes the center owned by Bloomingdale LLC, which is jointly-owned with two unrelated organizations. The data presented elsewhere in this section excludes the center owned by Bloomingdale LLC.

(11) During the first quarter of 2014, we closed one small, leased Minneapolis center and transferred all member programming and equipment to our other Minneapolis centers.

(12) The square footage presented in this table reflects fitness square footage, which we believe is the best metric for the efficiencies of a facility. We exclude outdoor swimming pools, outdoor play areas, tennis courts and satellite facility square footage. These figures are approximations.

Three Months Ended September 30,2014 Compared to Three Months Ended September 30,2013

Total revenue. Total revenue increased $20.8 million, or 6.6%, to $336.8 million for the three months ended September 30, 2014 from $316.0 million for the three months ended September 30, 2013.

Total center revenue grew $22.8 million, or 7.7%, to $319.3 million for the three months ended September 30, 2014 from $296.5 million for the three months ended September 30, 2013. Of the $22.8 million increase in total center revenue,

• 55.2% was from membership dues, which increased $12.5 million, or 6.4%, due primarily to higher average dues. Our number of Access memberships increased 0.2% to 697,167 at September 30, 2014, from 695,923 at September 30, 2013.

• 47.0% was from in-center revenue, which increased $10.7 million, or 11.0%, primarily as a result of a $4.6 million increase in personal training revenue, a $2.3 million increase in our member activities revenue and a $2.1 million increase in sales of our café products. Average in-center revenue per Access membership increased to $155 for the three months ended September 30, 2014 from $140 for the three months ended September 30, 2013.

• (2.2)% was from enrollment fees, which declined $0.5 million to $3.1 million. Enrollment fees are deferred until a center opens and recognized on a straight-line basis over our estimated average membership life of 33

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months. The revenue recognized from enrollment fees was lower in the third quarter of 2014 as compared to the third quarter of 2013 primarily due to lower average enrollment fees over the deferral period.

Other revenue decreased $1.9 million, or 9.9%, to $17.6 million for the three months ended September 30, 2014 from $19.5 million for the three months ended September 30, 2013. This decrease was primarily due to the timing of certain contract revenue recognized in our health business.

Center operations expenses. Center operations expenses totaled $193.0 million, or 60.5% of total center revenue (or 57.3% of total revenue), for the three months ended September 30, 2014 compared to $180.4 million, or 60.9% of total center revenue (or 57.1% of total revenue), for the three months ended September 30, 2013. This $12.6 million increase primarily consisted of an increase of $6.9 million in additional payroll-related costs, primarily for the two centers which opened in the second half of 2013 and the five centers which opened in the first nine months of 2014. The increase in center operations expenses as a percent of total revenue was due primarily to centers under one year old operating at lower margins as they build their membership base.

Advertising and marketing expenses. Advertising and marketing expenses were $9.6 million, or 2.9% of total revenue, for the three months ended September 30, 2014 compared to $9.8 million, or 3.1% of total revenue, for the three months ended September 30, 2013.

General and administrative expenses. General and administrative expenses were $15.9 million, or 4.7% of total revenue, for the three months ended September 30, 2014 compared to $14.5 million, or 4.6% of total revenue, for the three months ended September 30, 2013. This increase is primarily due to costs of $1.9 million associated with our exploration of a conversion of our real estate assets into a REIT incurred in the three months ended September 30, 2014.

Other operating expenses. Other operating expenses were $14.8 million for the three months ended September 30, 2014 compared to $18.5 million for the three months ended September 30, 2013. This decrease is primarily due to a $4.1 million reduction of a contingent consideration liability associated with a prior acquisition taken in the third quarter of 2014.

Depreciation and amortization. Depreciation and amortization was $36.7 million for the three months ended September 30, 2014 compared to $30.0 million for the three months ended September 30, 2013. This increase was primarily due to the depreciation on the two new facilities opened in the second half of 2013 and the five new facilities opened in the first nine months of 2014.

Interest expense, net. Interest expense, net of interest income, was $9.8 million for the three months ended September 30, 2014 compared to $6.4 million for the three months ended September 30, 2013. This $3.4 million increase was primarily a result of an increase in debt levels during 2013 and 2014 to fund future center expansion, other growth initiatives and share repurchases.

Provision for income taxes. The provision for income taxes was $22.8 million for the three months ended September 30, 2014 compared to $22.4 million for the three months ended September 30, 2013. The effective tax rate for the three months ended September 30, 2014 was 39.9% compared to 39.5% for the three months ended September 30, 2013.

Net income. As a result of the factors described above, net income was $34.4 million, or 10.2% of total revenue, for the three months ended September 30, 2014 compared to $34.4 million, or 10.9% of total revenue, for the three months ended September 30, 2013.

Nine Months Ended September 30,2014 Compared to Nine Months Ended September 30,2013

Total revenue. Total revenue increased $60.5 million, or 6.6%, to $975.4 million for the nine months ended September 30, 2014 from $914.9 million for the nine months ended September 30, 2013.

Total center revenue grew $56.2 million, or 6.4%, to $930.1 million for the nine months ended September 30, 2014 from $873.9 million for the nine months ended September 30, 2013. Of the $56.2 million increase in total center revenue,

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• 59.3% was from membership dues, which increased $33.4 million, or 5.8%, due primarily to higher average dues. Our number of Access memberships increased 0.2% to 697,167 at September 30, 2014, from 695,923 at September 30, 2013.

• 43.1% was from in-center revenue, which increased $24.2 million, or 8.5%, primarily as a result of a $10.3 million increase in personal training revenue, a $5.5 million increase in sales of our café products and a $4.3 million increase in our member activities revenue. Average in-center revenue per Access membership increased to $449 for the nine months ended September 30, 2014 from $412 for the nine months ended September 30, 2013.

• (2.4)% was from enrollment fees, which declined $1.3 million to $9.2 million. Enrollment fees are deferred until a center opens and recognized on a straight-line basis over our estimated average membership life. The estimated average membership life is 33 months. The revenue recognized from enrollment fees was lower in the first nine months of 2014 as compared to the first nine months of 2013 primarily due to lower average enrollment fees over the deferral period.

Other revenue increased $4.2 million, or 10.4%, to $45.2 million for the nine months ended September 30, 2014 from $41.0 million for the nine months ended September 30, 2013. This increase was primarily due to athletic events acquired during the first quarter of 2014.

Center operations expenses. Center operations expenses totaled $570.2 million, or 61.3% of total center revenue (or 58.5% of total revenue), for the nine months ended September 30, 2014 compared to $527.2 million, or 60.3% of total center revenue (or 57.6% of total revenue), for the nine months ended September 30, 2013. This $43.0 million increase primarily consisted of an increase of $24.9 million in additional payroll-related costs, primarily for the three centers which opened in 2013 and the five centers which opened in the first nine months of 2014 and a $1.5 million increase in pre-opening center related costs. The increase in center operations expenses as a percent of total revenue was due primarily to centers under one year old operating at lower margins as they build their membership base.

Advertising and marketing expenses. Advertising and marketing expenses were $31.7 million, or 3.2% of total revenue, for the nine months ended September 30, 2014 compared to $30.3 million, or 3.3% of total revenue, for the nine months ended September 30, 2013. These expenses increased primarily due to increased marketing activity to drive memberships and athletic events businesses.

General and administrative expenses. General and administrative expenses were $46.3 million, or 4.7% of total revenue, for the nine months ended September 30, 2014 compared to $45.6 million, or 5.0% of total revenue, for the nine months ended September 30, 2013. This increase is primarily due to costs of $1.9 million associated with our exploration of a conversion of our real estate assets into a REIT incurred in the third quarter 2014.

Other operating expenses. Other operating expenses were $45.6 million for the nine months ended September 30, 2014 compared to $46.5 million for the nine months ended September 30, 2013. This decrease is primarily due to a $4.1 million reduction of a contingent consideration liability associated with a prior acquisition taken in the third quarter of 2014, partially offset by a $6.5 million increase in costs to support the athletic events acquired during the first quarter of 2014.

Depreciation and amortization. Depreciation and amortization was $103.3 million for the nine months ended September 30, 2014 compared to $89.2 million for the nine months ended September 30, 2013. This increase was primarily due to the depreciation on the three new facilities opened in 2013 and five new facilities opened in the first nine months of 2014.

Interest expense, net. Interest expense, net of interest income, was $26.3 million for the nine months ended September 30, 2014 compared to $19.0 million for the nine months ended September 30, 2013. This $7.3 million increase was primarily a result of an increase in debt levels during 2013 and 2014 to fund future center expansion, other growth initiatives and share repurchases.

Provision for income taxes. The provision for income taxes was $60.4 million for the nine months ended September 30, 2014 compared to $62.4 million for the nine months ended September 30, 2013. The effective tax rate was 39.5% for both periods.

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Net income. As a result of the factors described above, net income was $92.5 million, or 9.5% of total revenue, for the nine months ended September 30, 2014 compared to $95.7 million, or 10.4% of total revenue, for the nine months ended September 30, 2013.

Liquidity and Capital Resources

Liquidity

Historically, we have satisfied our liquidity needs through cash flow provided by operations, various debt arrangements and sales of equity. Our principal liquidity needs have included the development of new centers, debt service requirements, share repurchases and expenditures necessary to maintain and update our existing centers and associated fitness equipment and may include the acquisition and remodeling of centers we acquire from time to time, as well as acquisitions to support our in-center and ancillary businesses. We believe that we can satisfy our current and longer-term debt service obligations and capital expenditure requirements primarily with cash flow from operations, with existing available capacity of our revolver, by the extension of the terms of or refinancing our existing debt facilities, through sale-leaseback transactions and by continuing to raise long-term debt or equity capital, although there can be no assurance that such actions can or will be completed.

In July 2014, we obtained a mortgage loan in the original principal amount of $78.0 million on five of our facilities. In May 2014, we amended, enlarged and extended our credit facility, previously scheduled to mature in July 2018, now scheduled to mature in May 2019. In January 2014, we obtained a mortgage loan in the original principal amount of $80.0 million on five of our facilities. We expect to use the proceeds from the amended credit facility and the mortgage financings for general corporate purposes, future center expansion and to help fund other growth initiatives.

Our business model operates with negative working capital primarily for two reasons. First, we carry minimal accounts receivable due to our members' monthly membership dues paid by electronic draft. Second, we fund the construction of our new centers under standard arrangements with our vendors that are paid with cash flows from operations or the credit facility.

As of September 30, 2014, we had total cash and cash equivalents of $9.6 million. We also had $481.6 million available under the existing terms of our credit facility as of September 30, 2014.

The following table summarizes our capital structure as of September 30, 2014 and December 31, 2013.

	September 30,		December 31,
	2014		2013
	(In thousands)
Long-term debt	$	1,152,567	$	824,093
Current maturities of long-term debt	22,394		24,505
Total debt	1,174,961		848,598
Total shareholders’ equity	1,087,341		1,148,029
Total capitalization	$	2,262,302	$	1,996,627

Operating Activities

Net cash provided by operating activities was $189.3 million for the nine months ended September 30, 2014, compared to $190.8 million for the nine months ended September 30, 2013. This change is primarily due to a decrease of $7.2 million in deferred income taxes and a decrease of $6.8 million in working capital, partially offset by a $14.0 million increase in depreciation and amortization expense.

Investing Activities

Investing activities consist primarily of purchasing real property, constructing new centers, acquisitions and purchasing new fitness equipment. In addition, we invest in capital expenditures to maintain and update our existing

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centers. We finance the purchase of our property and equipment by cash payments or by financing through notes payable or capital lease obligations.

Net cash used in investing activities was $347.0 million for the nine months ended September 30, 2014, compared to $236.0 million for the nine months ended September 30, 2013. The increase of $110.9 million was primarily due to an increase in capital expenditures related to new center construction and the purchase of two of our centers previously sold in a sale leaseback transaction in 2003.

Our capital expenditures were as follows:

	For the Nine Months Ended
	September 30,
	2014			2013
	(In thousands)
Cash purchases of property and equipment	$	338,365		$	224,542
Non-cash change in construction accounts payable	(7,004		)	26,612
Other non-cash changes to property and equipment	3,331			2,195
Total capital expenditures	$	334,692		$	253,349

The following schedule reflects capital expenditures by type of expenditure:

	For the Nine Months Ended
	September 30,
	2014		2013
	(In thousands)
New center land and construction, growth initiatives, major remodels, remodels of acquired centers and the purchase of previously leased centers	$	262,174	$	192,641
Maintenance of existing facilities and corporate capital expenditures	72,518		60,708
Total capital expenditures	$	334,692	$	253,349

At September 30, 2014, we had purchased the real property for three centers we plan to open in 2014, two of which have opened, and five centers we plan to open after 2014. We had also entered into a ground lease for one center and leases for two centers that we opened during 2014, and three ground leases for centers we plan to open after 2014. Construction in progress, including land purchased for future development, totaled $168.4 million and $202.8 million at September 30, 2014 and December 31, 2013, respectively.

During the nine month period ended September 30, 2014, we spent $16.0 million to acquire several major-market athletic events.

We expect our cash capital expenditures to be approximately $425 million to $445 million in 2014, including approximately $87 million to $107 million in the remaining three months of 2014. Of this approximately $87 million to $107 million, we expect to incur approximately $80 million to $90 million for new center construction and approximately $7 million to $17 million for the updating of existing centers and corporate infrastructure. The second quarter 2014 purchase of two of our centers previously sold in a sale leaseback transaction is included in the total 2014 capital expenditures expectation above. We plan to fund these capital expenditures primarily with cash flow from operations and our credit facility.

Financing Activities

Financing activities consist primarily of proceeds from long-term debt, repayments of and proceeds from our credit facility, payments on debt obligations and repurchases of common stock.

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Net cash provided by financing activities was $159.0 million for the nine months ended September 30, 2014 compared to $49.5 million for the nine months ended September 30, 2013. This change of $109.5 million was primarily due to an increase of $198.7 million in proceeds from our credit facility, net and an increase of $36.8 million in other long-term debt. These proceeds funded the increase in capital expenditures and an increase of $126.6 million in share repurchases.

Long-term debt consisted of the following:

	September 30,		December 31,
	2014		2013
	(In thousands)
Credit facility, interest only due monthly at interest rates ranging from LIBOR plus 1.25% to 2.25% or base plus 0.25% to 1.25%, facility expires May 2019	$	702,000	$	510,500
Mortgage notes payable with monthly interest and principal payments totaling $632 including interest at 6.03% to February 2017	93,865		95,207
Mortgage notes payable with monthly interest and principal payments totaling $531 including interest at 5.06% to February 2024	78,652		—
Mortgage notes payable with monthly interest and principal payments totaling $669 including interest at 4.70% to August 2027	77,636		—
Mortgage notes payable with monthly interest and principal payments totaling $775 including interest at 4.45% to March 2023	65,760		70,457
Mortgage notes payable with monthly interest and principal payments totaling $503 including interest at 5.75% to December 2016	66,596		68,173
Mortgage notes payable with monthly interest and principal payments totaling $423 including interest at 4.48% to September 2026	47,100		49,287
Other	38,520		40,009
Total debt (excluding obligations under capital leases)	1,170,129		833,633
Obligations under capital leases	4,832		14,965
Total debt	1,174,961		848,598
Less current maturities	22,394		24,505
Total long-term debt	$	1,152,567	$	824,093

Credit Facility

In May 2014, we amended, enlarged and extended our credit facility. The amount of our credit facility was increased from $860.0 million to $1.20 billion. We may increase the facility by an additional $500.0 million through the exercise of an accordion feature if one or more lenders commit the additional $500.0 million. The term of the facility was extended to May 2019.

As of September 30, 2014, $702.0 million was outstanding on the credit facility at a weighted average interest rate of 2.4%, plus $13.9 million related to letters of credit, leaving $481.6 million available for additional borrowing under the credit facility. The weighted average interest rate and debt outstanding under the credit facility for the nine months ended September 30, 2014 was 2.4% and $567.5 million, respectively. The maximum month-end balance during the nine months ended September 30, 2014 was $715.2 million.

As of September 30, 2013, $446.9 million was outstanding on the credit facility at a weighted average interest rate of 2.4%. The weighted average interest rate and debt outstanding under the credit facility for the nine months ended September 30, 2013 was 2.4% and $399.1 million, respectively. The maximum month-end balance during the nine months ended September 30, 2013 was $479.6 million.

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Other Financing

In July 2014, a wholly owned subsidiary obtained a mortgage loan in the original principal amount of $78.0 million from ING Life Insurance and Annuity Company pursuant to a promissory note and related agreements. The mortgage financing is secured by five properties and matures in August 2027. Interest on the amounts borrowed is 4.70% per annum, with a constant monthly debt service payment of $0.7 million.

In January 2014, a wholly owned subsidiary obtained a mortgage loan in the original principal amount of $80.0 million from Well Fargo Bank, N.A. pursuant to a promissory note and related agreements dated January 28, 2014. The mortgage financing is secured by mortgages on five properties and matures in February 2024. Interest on the amounts borrowed is 5.06% per annum, with a constant monthly debt service payment of $0.5 million.

Debt Covenants

We are in compliance in all material respects with all restrictive and financial covenants under our various credit facilities as of September 30, 2014.

Our primary financial covenants under the credit facility are:

		Actual as of	Actual as of
		September 30,	December 31,
Covenant	Requirement	2014	2013
Total Consolidated Debt to Adjusted EBITDAR	Not more than 4.00 to 1.00	3.47 to 1.00	2.79 to 1.00
Fixed Charge Coverage Ratio	Not less than 1.50 to 1.00	3.19 to 1.00	3.58 to 1.00
Unencumbered Asset Ratio	Not less than 1.30 to 1.00	1.97 to 1.00	2.62 to 1.00

The formulas for these covenants are specifically defined in the credit agreement for our credit facility and include, among other things, an add back of share-based compensation expense to EBITDAR.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We invest our excess cash in highly liquid short-term investments. These investments are not held for trading or other speculative purposes. Changes in interest rates affect the investment income we earn on our cash and cash equivalents and, therefore, impact our consolidated cash flows and consolidated results of operations. As of September 30, 2014 and December 31, 2013, our net floating rate indebtedness was $535.8 million and $346.1 million, respectively. If long-term floating interest rates were to have increased by 100 basis points during the nine months ended September 30, 2014, our interest costs would have increased by approximately $3.0 million. If short-term interest rates were to have increased by 100 basis points during the nine months ended September 30, 2014, our interest income from cash equivalents would have increased by less than $0.1 million. These amounts are determined by considering the impact of the hypothetical interest rates on our floating rate indebtedness and cash equivalents balances at September 30, 2014.

Item 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15 or 15d-15 of

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the Exchange Act that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 6 to the financial statements included in this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities in Third Quarter 2014

In June 2006, our Board of Directors authorized the repurchase of 500,000 shares of our common stock from time to time in the open market or otherwise for the primary purpose of offsetting the dilutive effect of shares issued under our ESPP (the "ESPP Authorization"). From June 2006 through September 30, 2014, we repurchased 271,451 shares pursuant to the ESPP Authorization, of which 32,178 shares were repurchased during the first nine months of 2014. The shares repurchased to date have been purchased in the open market and, upon repurchase, became unissued shares of our common stock.

The following table presents the repurchases of stock under the ESPP Authorization in the third quarter of 2014:

Period	Total Number of Shares Purchased		Average Price Paid per Share	Maximum Number of Shares that May Yet be Purchased
July 1-31, 2014		17,032	$48.75	228,549
August 1-31, 2014		—	$—	228,549
September 1-30, 2014		—	$—	228,549
Total		17,032	$48.75	228,549

On August 15, 2013, our Board of Directors authorized the repurchase of up to $200.0 million of our outstanding common stock from time to time through open market or privately negotiated transactions (the "Stock Repurchase Authorization.") through July 22, 2014. As of September 30, 2014, a total of 4,109,146 shares were repurchased under this program for $197.8 million. During the nine months ended September 30, 2014, 3,462,445 shares were repurchased for $166.9 million. The shares repurchased were purchased in the open market and, upon repurchase, became unissued shares of our common stock. This authorization terminated on July 22, 2014 with the authorization of a new share repurchase program.

The following table presents the repurchases of stock under the Stock Repurchase Authorization in the third quarter of 2014:

Period	Total Number of Shares Purchased		Average Price Paid per Share	Maximum Dollar Value of Shares that May Yet be Purchased (1)
July 1-31, 2014		551,499	$48.75	$—
August 1-31, 2014		—	$—	$—
September 1-30, 2014		—	$—	$—
Total		551,499	$48.75	$—

(1) This authorization terminated on July 22, 2014 with the authorization of a new share repurchase program.

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On July 22, 2014, our Board of Directors authorized the repurchase of up to $200.0 million of our outstanding common stock from time to time through open market or privately negotiated transactions. The authorization to repurchase shares terminates when the aggregate repurchase amount totals $200.0 million or at the close of business on June 30, 2016, whichever occurs first. The share repurchase program does not obligate us to repurchase any dollar amount or number of shares of our common stock and the program may be extended, modified, suspended or discontinued at any time. As of September 30, 2014, no shares have been repurchased under this program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

Exhibits filed with this report

Exhibit No.	Description	Method of Filing
3.1	Amended and Restated Articles of Incorporation of the Registrant, as amended.	Filed Electronically.
3.2	Amended and Restated By-Laws of the Registrant.	Incorporated by reference to Exhibit 3.1 to the Registrant's Form 8-K dated July 17, 2012 (File No. 001-32230).
4.1	Specimen of common stock certificate.	Incorporated by reference to Exhibit 4 to Amendment No. 4 to the Registrant's Registration Statement on Form S-1 (File No. 333-113764), filed with the Commission on June 23, 2004.
4.2	Rights Agreement, dated as of August 22, 2014, between Life Time Fitness, Inc. and Wells Fargo Bank, N.A., as Rights Agent.	Incorporated by reference to Exhibit 1 to the Registrant’s Registration Statement on Form 8-A filed with the Commission on August 25, 2014 (File No. 001-32230).
10.1	Transition Agreement between Life Time Fitness, Inc. and Michael R. Robinson, dated July 8, 2014.	Filed Electronically.
31.1	Rule 13a-14(a)/15d-14(a) Certification by Principal Executive Officer.	Filed Electronically.
31.2	Rule 13a-14(a)/15d-14(a) Certification by Principal Financial Officer.	Filed Electronically.
32	Section 1350 Certifications.	Filed Electronically.
101	The following materials from Life Time Fitness's Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, formatted in eXtensible Business Reporting Language (XBRL): (i) consolidated balance sheets, (ii) consolidated statements of operations, (iii) consolidated statements of comprehensive income, (iv) consolidated statements of cash flows, and (v) notes to the unaudited consolidated financial statements.	Filed Electronically.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Life Time Fitness, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on October 30, 2014.

LIFE TIME FITNESS, INC.
By:	/s/ Bahram Akradi
	Name: Bahram Akradi Title: Chairman of the Board of Directors, President and Chief Executive Officer (Principal Executive Officer and Director)
By:	/s/ Eric J. Buss
	Name: Eric J. Buss Title: Executive Vice President and Chief Financial Officer (Principal Financial Officer)
By:	/s/ John M. Hugo
	Name: John M. Hugo Title: Senior Vice President and Corporate Controller (Principal Accounting Officer)

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INDEX TO EXHIBITS

Exhibit No.	Description	Method of Filing
3.1	Amended and Restated Articles of Incorporation of the Registrant, as amended.	Filed Electronically.
3.2	Amended and Restated By-Laws of the Registrant.	Incorporated by reference to Exhibit 3.1 to the Registrant's Form 8-K dated July 17, 2012 (File No. 001-32230).
4.1	Specimen of common stock certificate.	Incorporated by reference to Exhibit 4 to Amendment No. 4 to the Registrant's Registration Statement on Form S-1 (File No. 333-113764), filed with the Commission on June 23, 2004.
4.2	Rights Agreement, dated as of August 22, 2014, between Life Time Fitness, Inc. and Wells Fargo Bank, N.A., as Rights Agent.	Incorporated by reference to Exhibit 1 to the Registrant’s Registration Statement on Form 8-A filed with the Commission on August 25, 2014 (File No. 001-32230).
10.1	Transition Agreement between Life Time Fitness, Inc. and Michael R. Robinson, dated July 8, 2014.	Filed Electronically.
31.1	Rule 13a-14(a)/15d-14(a) Certification by Principal Executive Officer.	Filed Electronically.
31.2	Rule 13a-14(a)/15d-14(a) Certification by Principal Financial Officer.	Filed Electronically.
32	Section 1350 Certifications.	Filed Electronically.
101	The following materials from Life Time Fitness's Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, formatted in eXtensible Business Reporting Language (XBRL): (i) consolidated balance sheets, (ii) consolidated statements of operations, (iii) consolidated statements of comprehensive income, (iv) consolidated statements of cash flows, and (v) notes to the unaudited consolidated financial statements.	Filed Electronically.

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EX-3.1

EXHIBIT 3.1

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

OF

LIFE TIME FITNESS, INC.

The undersigned, Eric J. Buss, Secretary of LIFE TIME FITNESS, Inc., a Minnesota corporation (the “Corporation”), hereby certifies that:

(1) The name of the Corporation is LIFE TIME FITNESS, Inc.

(2) The Corporation’s Articles of Incorporation have been Amended and Restated to read in their entirety as follows:

ARTICLE I

NAME

The name of the Corporation is Life Time Fitness, Inc.

ARTICLE II

ADDRESS

The registered office of the Corporation is located at 6442 City West Parkway, Eden Prairie, Minnesota 55344.

ARTICLE III

CAPITAL STOCK

(a) General. The aggregate number of shares of stock that the Corporation is authorized to issue is 60,000,000 shares, par value $.02 per share, of which 50,000,000 shares are designated as common stock (the “Common Stock”), and 10,000,000 shares are undesignated (the “Undesignated Capital Stock”). The shares of Common Stock and Undesignated Capital Stock are referred to collectively as the “capital stock.”

(b) Authority Relative to Undesignated Capital Stock. Authority is hereby expressly vested in the Board of Directors of the Corporation, subject to limitations prescribed by law, to authorize the issuance from time to time of one or more classes or series of Undesignated Capital Stock and, with respect to each such class or series, to determine or fix the voting powers, full or limited, if any, of the shares of such class or series and the designations, preferences and relative, participating, optional or other special rights and the qualifications, limitations or restrictions thereof, including, without limitation, the determination or fixing of the rates of and terms and conditions upon which any dividends shall be payable on such class or series, any terms under or conditions on which the shares of such class or series may be redeemed, any provision made for the conversion or exchange of the shares of such class or series for shares of any other class or classes or of any other series of the same or any other class or classes of the Corporation’s capital stock, and any rights of the holders of the shares of such class or series upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation.

ARTICLE IV

NO CUMULATIVE VOTING

No holder of shares of capital stock of the Corporation shall have any cumulative voting rights.

ARTICLE V

NO PREEMPTIVE RIGHTS

No holder of shares of capital stock of the Corporation shall be entitled as such, as a matter of right, to subscribe for, purchase or receive any part of any new or additional issue of stock of any class or series whatsoever or other securities, or of securities convertible into or exchangeable for or carrying any other right to acquire any stock of any class or series whatsoever or other securities, whether now or hereafter authorized and whether issued for cash or other consideration or by way of dividend. The Corporation shall have the power, however, in its discretion to grant such rights by agreement or other instrument to any person or persons (whether or not they are shareholders).

ARTICLE VI

CONTROL SHARE ACQUISITION STATUTE NOT APPLICABLE

Neither Section 302A.671 of the Minnesota Statutes nor any successor statute thereto shall apply to, or govern in any manner, the Corporation or any control share acquisition of shares of capital stock of the Corporation or limit in any respect the voting or other rights of any existing or future shareholder of the Corporation or entitle the Corporation or its shareholders to any redemption or other rights with respect to outstanding capital stock of the Corporation that the Corporation or its shareholders would not have in the absence of Section 302A.671 of the Minnesota Statutes or any successor statute thereto.

ARTICLE VII

DISSENTERS’ RIGHTS

To the extent permitted by Chapter 302A of the Minnesota Statutes, no action set forth in paragraph (a) of Section 302A.471, subdivision 1, of the Minnesota Statutes (including any amendment or successor statute thereto) shall create any right of any shareholder of the Corporation to dissent from, and obtain the fair value of the shareholder’s shares in the event of, any such action.

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ARTICLE VIII

WRITTEN ACTION OF THE BOARD OF DIRECTORS

Any action required or permitted to be taken at a meeting of the Board of Directors of the Corporation not needing approval by the shareholders under Chapter 302A of the Minnesota Statutes may be taken by written action signed by the number of directors that would be required to take such action at a meeting of the Board of Directors at which all directors are present.

ARTICLE IX

To the full extent that Chapter 302A of the Minnesota Statutes, as it exists on the effective date of this Article IX or may hereafter be amended, permits the limitation or elimination of the liability of directors, a director of the Corporation shall not be liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director. Any amendment to or repeal of this Article IX shall not adversely affect any right or protection as a director of the Corporation for or with respect to any acts or omission of such director occurring prior to such amendment or repeal.

* * *

(3) The foregoing amendment and restatement has been adopted pursuant to Chapter 302A of the Minnesota Statutes.

IN WITNESS WHEREOF, I have hereunto set my hand this 6th day of July, 2004.

/s/ Eric J. Buss    

Eric J. Buss

Secretary

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ARTICLES OF AMENDMENT

OF

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

OF

LIFE TIME FITNESS, INC.

The undersigned, Eric J. Buss, Secretary of Life Time Fitness, Inc., a Minnesota corporation, (the “Company”), hereby certifies that:

(i) The name of the Company is Life Time Fitness, Inc.

(ii) Article III(a) of the Company’s Amended and Restated Articles of Incorporation has been amended to read in its entirety as follows:

(a) General. The aggregate number of shares of stock that the Corporation is authorized to issue is 85,000,000 shares, par value $.02 per share, of which 75,000,000 shares are designated as common stock (the “Common Stock”), and 10,000,000 shares are undesignated (the “Undesignated Capital Stock”). The shares of Common Stock and Undesignated Capital Stock are referred to collectively as the “capital stock.”

(iii) The foregoing amendment has been adopted pursuant to Chapter 302A of the Minnesota Statutes.

IN WITNESS WHEREOF, I have subscribed my name this 23rd day of April, 2009.

/s/ Eric J. Buss    

Eric J. Buss

Secretary

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Certificate of Designation

of

Series A Junior Participating Preferred Stock

of

Life Time Fitness, Inc.

Pursuant to, and in accordance with the requirements of, Section 302A.401 of the Minnesota Business Corporation Act, the undersigned Secretary of Life Time Fitness, Inc., a Minnesota Corporation (the “Company”), does hereby certify that, under the authority conferred on the Board of Directors of the Company by the Amended and Restated Articles of Incorporation of the Company, as amended, the Board of Directors of the Company on August 22, 2014, adopted the following resolutions creating a series of preferred stock designated as Series A Junior Participating Preferred Stock:

“RESOLVED, that under the authority vested in the Board of Directors of the Company in accordance with the provisions of its Amended and Restated Articles of Incorporation, as amended, a series of preferred stock of the Company be, and it hereby is, created, and that the designation thereof and the relative rights and preferences thereof are as follows:

1. Designation and Amount. The shares of such series shall be designated as “Series A Junior Participating Preferred Stock” (the “Series A Preferred Stock”) and the number of shares constituting such series shall be 100,000.

2. Dividends and Distributions.

(i) The holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the 15th day of March, June, September, and December in each year (each such date being a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock of the Company or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. If the Company at any time after September 4, 2014, declares or pays any dividend on Common Stock payable in shares of Common Stock, or effects a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately before such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately before such event.

(ii) The Company shall declare a dividend or distribution on the Series A Preferred Stock as provided in subparagraph (i) of this paragraph 2 simultaneously with its declaration of a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock), provided that in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

(iii) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Preferred Stock, unless the date of issue of such shares is before the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days before the date fixed for the payment thereof.

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3. Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights:

(i) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the shareholders of the Company. In the event the Company shall at any time after September 4, 2014, declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately before such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately before such event.

(ii) Except as otherwise provided herein, in any other Certificate of Designation of the Company, in the Amended and Restated Articles of Incorporation of the Company, as amended, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Company having general voting rights shall vote together as one class on all matters submitted to a vote of shareholders of the Company.

(iii) Except as otherwise provided herein or by law, the holders of shares of Series A Preferred Stock shall have no special voting rights and their consent shall not be required for taking any corporate action.

4. Certain Restrictions.

(i) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in paragraph 2 of this Certificate of Designation are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Company shall not:

(a) declare or pay dividends on, or make any other distributions on, any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock;

(b) declare or pay dividends on, or make any other distributions on, any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

(c) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Company may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Company ranking junior (both as to dividends and upon liquidation, dissolution or winding up) to the Series A Preferred Stock; or

(d) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

(ii) The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under subparagraph (i) of this paragraph 4, purchase or otherwise acquire such shares at such time and in such manner.

5. Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall constitute authorized but unissued shares of preferred stock and may be reissued as part of a new series of preferred stock to be created by resolution or resolutions of the Board of Directors subject to the conditions and restrictions on issuance set forth herein or in the Amended and Restated Articles of Incorporation of the Company, as amended.

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6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Company, (a) no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $1,000 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that if such amount shall be less than 1,000 times the aggregate amount to be distributed per share to holders of Common Stock, then the holders of Series A Preferred Stock shall instead participate with the Common Stock in such a manner that the holders of Series A Preferred Stock shall receive 1,000 times the aggregate amount that is distributed per share to holders of Common Stock, and (b) no distribution shall be made to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Company shall at any time after September 4, 2014, declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately at the time of such event under the proviso of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately before such event.

7. Consolidation, Merger, Exchange, etc. In case the Company shall enter into any consolidation, merger, combination, statutory share exchange or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Company shall at any time after September 4, 2014, declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately before such event.

8. No Redemption. The shares of Series A Preferred Stock shall not be redeemable.

9. Rank. The Series A Preferred Stock shall rank junior with respect to payment of dividends and on liquidation, dissolution and winding up to all series of the Company’s preferred stock hereafter issued that specifically provide that they shall rank senior to the Series A Preferred Stock.

10. Fractional Shares. Series A Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder’s fractional shares, to receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Preferred Stock.”

IN WITNESS WHEREOF, the undersigned has executed this Certificate, this 22nd day of August, 2014.

/s/ James N. Spolar 

James N. Spolar

Vice President, Senior Associate General Counsel and Secretary

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EX-10.1

TRANSITION AGREEMENT

This Transition Agreement (this “Agreement”) is entered into by and between Life Time Fitness, Inc. (the “Company”), and Michael R. Robinson (“Executive”), effective as of March 1, 2014 (“Effective Date”).

Background

A.    Executive has been employed by the Company as its Executive Vice President and Chief Financial Officer.

B.    Executive has expressed his interest in resigning from his position as Executive Vice President and Chief Financial Officer in the near future, with such resignation voluntary and without Good Reason (as defined in the Employment Agreement).

C.    The Company desires to retain Executive with the Company for a transition period and Executive desires to continue his employment during a transition period in accordance with the terms and conditions hereof.

NOW THEREFORE, in consideration of the mutual promises and provisions contained in this Agreement, the parties, intending to be legally bound, agree as follows:

Agreement

1. Resignation and Transition Period. Executive confirms his resignation from his position as Executive Vice President and Chief Financial Officer of the Company, effective as of the end of business on March 1, 2014. Notwithstanding the foregoing, and subject to the terms and conditions of this Agreement, the Company hereby agrees to continue Executive’s employment, and Executive hereby accepts continued employment with the Company, for the period (the “Transition Period”) commencing on the Effective Date and continuing until the earlier of (i) September 1, 2015(the “Resignation Date”), at which time Executive’s employment will terminate due to Executive’s voluntary resignation and without further action by either party, or (ii) the date on which Executive’s employment is terminated for Cause (defined below) or due to Executive’s death. For purposes of this Agreement, “Cause” means if the Company determines in good faith that Executive has (a) engaged in willful and deliberate acts of dishonesty, fraud or unlawful behavior against or at the expense of the Company, which adversely affects the business affairs of the Company; (b) been convicted of, or pleaded nolo contendere, to any felony; or (c) breached or failed to perform any material term(s) or material condition(s) of this Agreement.

2. Services. During the Transition Period, Executive shall perform the following services: (i) cooperate in connection with the transition of his duties and responsibilities with the Company; (ii) periodically consult with the Company regarding business matters; and (iii) provide complete and truthful information to, and otherwise cooperate fully with, the Company and any of its agents in connection with any investigations, litigation or other matters relating to the Company in which Executive may have relevant information. Notwithstanding the foregoing, nothing in

this Section 2 will require Executive to take any action that he reasonably believes to be unlawful or unethical or to make any inaccurate statement of actual facts.

3. Salary and Benefits. During the Transition Period, the Company will provide the salary and benefits set forth in Sections 3(a) through 3(e) below if (i) Executive has signed and has not rescinded this Agreement within periods set forth below, and (ii) Executive is in compliance with the terms of this Agreement as of the date of such payment(s). For purposes of clarity, effective as of March 2, 2014, Executive will experience a “separation from service” for purposes of Internal Revenue Code (the “Code”) section 409A as it is anticipated that the level of services provided by Executive to the Company will permanently decrease to no more than 20% of the average level of services performed for the immediately preceding 36-month period.

(a) Short-Term Deferral Payments. The Company shall pay to Executive a monthly salary of $45,833.33, less regular withholdings, prorated for any partial month and paid in equal bi-weekly installments pursuant to the normal payroll practices and procedures of the Company during the period from the Effective Date through March 15, 2015. The Company and Executive intend the salary payments under this Section 3(a) to constitute a short-term deferral under Treas. Reg. § 1.409A-1(b)(4). Each installment of the salary payments under this Section 3(a) shall be considered a separate payment, as described in Treas. Reg. § 1.409A-2(b)(2), for purposes of Section 409A of the Code.

(b) Deferred Compensation Payments. The Company shall pay to Executive a monthly salary of $45,833.33, less regular withholdings, prorated for any partial month and paid in equal bi-weekly installments pursuant to the normal payroll practices and procedures of the Company for the period from March 16, 2015 through September 1, 2015. The Company and Executive intend the monthly payments under this Section 3(b) to satisfy the requirements of Section 409A(a)(2), (3) and (4) of the Internal Revenue Code, to the extent applicable, including current and future guidance and regulations interpreting such provisions.

(c) Benefits Continuation. As long as Executive remains eligible during the Transition Period for group health insurance under the Company’s plan, the Company shall continue to pay the employer portion of the monthly premium for Executive’s group health coverage at the same level of coverage in effect as of the Effective Date. Notwithstanding the foregoing, if at any time during the Transition Period Executive is no longer eligible for the Company’s group health insurance, then subject to Executive properly electing to continue his group health coverage pursuant to COBRA, the Company shall pay the employer portion of the monthly premium for Executive’s group health coverage at the same level of coverage in effect as of the Effective Date until the expiration of the Transition Period or until Executive becomes eligible for other coverage, whichever occurs first.

(d) Vehicle and Phone Allowance. During the Transition Period, the Company will continue to pay to Executive a monthly car allowance of $750 and a monthly home connectivity and phone allowance of $300.

(e) Club Membership. During the Transition Period, the Company will provide to Executive membership privileges at health and fitness clubs owned and operated by the

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Company. Such membership privileges shall be at the Diamond level or such comparable level as may be in effect from time to time pursuant to the Company’s normal membership policies and procedures.

4. Stock Options and Forfeiture of Restricted Stock. Executive agrees and acknowledges that as of the Effective Date the Options listed below reflect his only options to purchase shares of common stock of the Company, with such Options governed by the terms of the Amended and Restated 2004 Long-Term Incentive Plan (the “2004 LTIP”).

Grant Date	Number of Vested Shares	Exercise Price Per Share
3/1/2005	20,000	$25.47
6/29/2004	67,500	$18.50

Notwithstanding any agreement to the contrary, Executive’s unvested restricted shares are forfeited as of March 2, 2014. For the avoidance of doubt, the options referenced in the table above are not forfeited so long Executive remains an employee pursuant to Section 1 of this Agreement.

5. Return of Records and Property. Executive confirms that no later than August 31, 2015, he will deliver to the Company any and all Company records and any and all Company property in his possession or under his control, including without limitation manuals, books, blank forms, documents, letters, memoranda, notes, notebooks, reports, printouts, computer disks, computer tapes, source codes, data, tables or calculations and all copies thereof, documents that in whole or in part contain any trade secrets or confidential, proprietary or other secret information of the Company and all copies thereof, and keys, access cards, access codes, passwords, credit cards, personal computers, telephones and other electronic equipment belonging to the Company. The Company is not aware that any such Company records or Company property have not been so delivered.

6. Confidential Information. Executive shall not divulge, furnish or make accessible to anyone or use in any way, other than in the ordinary course of the business of the Company, any confidential, proprietary or secret knowledge or information of the Company, whether developed by Executive or others, including but not limited to (i) Company trade secrets, (ii) confidential and proprietary plans, developments, research, processes, designs, methods or material (whether or not patented or patentable), (iii) customer and supplier lists, (iv) strategic or other business, marketing or sales plans, and (v) financial data and plans. Executive shall refrain from any intentional acts or omissions that would reduce the value of such knowledge or information to the Company. Executive acknowledges that the above-described knowledge and information constitutes a unique and valuable asset of the Company and represents a substantial investment of time and expense by the Company, and that any disclosure or other use of such knowledge or information other than for the sole benefit of the Company would be wrongful and would cause irreparable harm to the Company. The foregoing obligations of confidentiality shall not apply to any knowledge or information that (i) is now or subsequently becomes generally publicly known for reasons other than Executive’s violation of this Agreement, (ii) is independently made

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available to Executive in good faith by a third party who has not violated a confidential relationship with the Company, or (iii) is required to be disclosed by legal process, other than as a direct or indirect result of the breach of this Agreement by Executive.

7. Restrictive Covenants

(a) Agreement Not to Compete. From the Effective Date through the Resignation Date, Executive shall not, directly or indirectly, engage in any manner or capacity (including without limitation as a proprietor, principal, agent, partner, officer, director, employee, member of any association, consultant or otherwise) in any “Company Business” in the “Territory” without prior consent from the Chief Executive Officer of the Company. For purposes of this Section 7(a), “Company Business” means (i) the design, development, management or marketing of health and fitness clubs, and/or health and fitness club memberships and services, and/or nutritional supplements, (ii) the publication of any health and fitness publications and/or (iii) the sale, design or promotion of athletic events and health and wellness businesses as of the Effective Date. “Territory” means any of the United States or in any other country in which the Company is then doing Company Business as of the Effective Date.

(b) Agreement Not to Hire. From the Effective Date through the Resignation Date, Executive shall not, directly or indirectly, hire, engage or solicit any person who is then an employee of the Company or who was an employee of the Company as of the Effective Date, in any manner or capacity, including without limitation as a proprietor, principal, agent, partner, officer, director, stockholder, employee, member of any association, consultant or otherwise.

(c) Agreement Not to Solicit. From the Effective Date through the Resignation Date, Executive shall not, directly or indirectly, solicit, request, advise or induce any current or potential customer, supplier or other business contact of the Company to cancel, curtail or otherwise change its relationship with the Company, in any manner or capacity, including without limitation as a proprietor, principal, agent, partner, officer, director, stockholder, employee, member of any association, consultant or otherwise.

(d) Blue Pencil Doctrine. If the duration of, the scope of or any business activity covered by any provision of this Section 7 is in excess of what is valid and enforceable under applicable law, such provision shall be construed to cover only that duration, scope or activity that is valid and enforceable. Executive hereby acknowledges that this Section 7 shall be given the construction that renders its provisions valid and enforceable to the maximum extent, not exceeding its express terms, possible under applicable law.

(e) Remedies. Executive acknowledges that the provisions of this Section 7 are reasonable and necessary to protect the legitimate interests of the Company, and that any violation of those provisions by Executive would cause substantial and irreparable harm to the Company to such an extent that monetary damages alone would be an inadequate remedy. Therefore, in the event of any actual or threatened breach of any such provisions, the Company shall, in addition to any other remedies it may have, be entitled to seek injunctive and other equitable relief to enforce such provisions and to restrain Executive from violating or continuing to violate such provisions, and such relief may be granted without the necessity of proving actual monetary damages. The

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preceding sentence shall not be construed to prevent Executive from disputing the factual basis of any remedies or defenses asserted by the Company.

8. Non-Disparagement. Executive will not malign, defame or disparage the reputation, character, image, products or services of the Company, or the reputation or character of the Company’s directors, officers, employees or agents. The Company agrees that it will instruct its Executive Vice Presidents and Officers not to malign, defame or disparage Executive’s reputation or character. Notwithstanding the foregoing, nothing in this Section 8 shall be construed to limit or restrict the Company or Executive from providing truthful information in connection with any legal proceeding, government investigation or other legal matter.

9. Release of Claims. In exchange for the consideration provided for in this Agreement, Executive hereby gives up and releases all of his rights that he now has to any relief of any kind from the Company (including without limitation, its predecessors, parents, subsidiaries, affiliates, and divisions), its present and past officers, directors, committees, shareholders and employees and anyone who acted on behalf of the Company or on instructions from the Company, including without limitation, (i) all claims arising out of or relating to his employment with the Company or his resignation from that employment; (ii) all claims arising out of or relating to the statements, actions, or omissions of the Company; (iii) all claims for any alleged unlawful discrimination, harassment, retaliation or reprisal, or other alleged unlawful practices arising under the laws of the United States or any other country or of any state, province, municipality, or other unit of government, including without limitation, claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Family and Medical Leave Act,42 U.S.C. § 1981, the Employee Retirement Income Security Act, the Equal Pay Act, the Worker Adjustment and Retraining Notification Act, the Sarbanes-Oxley Act, the Lilly Ledbetter Fair Pay Act of 2009, the Minnesota Human Rights Act, the Genetic Information Nondiscrimination Act, the Fair Credit Reporting Act, and workers’ compensation non-interference or non-retaliation statutes (such as Minn. Stat. § 176.82); (iv) all claims for breach of contract, breach of implied contract, failure to keep any promise, breach of a covenant of good faith and fair dealing, breach of fiduciary duty, estoppel, defamation, infliction of emotional distress, fraud, misrepresentation, negligence, constructive discharge, assault, battery, false imprisonment, invasion of privacy, interference with contractual or business relationships, any other wrongful employment practices, and violation of any other principle of common law; (v) all claims for back pay, front pay, reinstatement, other equitable relief, compensatory damages, damages for alleged personal injury, liquidated damages, and punitive damages; and (vi) all claims for attorneys’ fees, costs, and interest (collectively, “Executive’s Claims”). Executive agrees that he will not make any demands or claims against the Company for compensation or damages relating to Executive’s Claims. Notwithstanding the foregoing, Executive’s Claims do not include any claims that the law does not allow to be waived, any claims for breach of this Agreement, or any claims that may arise after the date on which Executive sign this Agreement.

10. Time to Consider Agreement. Executive understands that he may take twenty-one (21) calendar days from the day that Executive receives this Agreement, not counting

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the day upon which he receives it, to decide whether to sign this Agreement. Executive represents that if he signs this Agreement before the expiration of the 21-day period, it is because he has decided that he does not need any additional time to decide whether to sign this Agreement.

11. Right to Rescind or Revoke. Executive understands that he has the right to rescind or revoke this Agreement for any reason within fifteen (15) calendar days after he signs it. Executive understands that this Agreement will not become effective or enforceable unless and until he has not rescinded this Agreement and the rescission period has expired. Executive understands that if he wishes to rescind, the rescission must be in writing and hand-delivered or mailed to the Company. If hand-delivered, the rescission must be (a) addressed to General Counsel, Life Time Fitness, Inc., 2902 Corporate Place, Chanhassen, MN 55317, and (b) delivered to Life Time Fitness, Inc. within the fifteen-day period. If mailed, the rescission must be (a) postmarked within the fifteen-day period and (b) addressed to General Counsel, Life Time Fitness, Inc., 2902 Corporate Place, Chanhassen, MN 55317.

12. Indemnification.With respect to events that occurred during Executive’s tenure as an employee or officer of the Company, Executive will be entitled to the same rights that are afforded to other current or former employees or officers of the Company, now or in the future, to indemnification and advancement of expenses to the extent provided in the charter documents of the Company and under applicable law, and to indemnification and a legal defense to the extent provided from time to time to current officers by any applicable general liability and/or directors’ and officers’ liability insurance policies maintained by the Company.

13. Miscellaneous.

(a) Withholding of Taxes. The Company may withhold from amounts payable under this Agreement such federal, state and local income and employment taxes as the Company shall determine are required to be withheld pursuant to any applicable law or regulation. The Company makes no assurances to Executive as to the tax treatment of any payments hereunder and, except with respect to tax amounts withheld by the Company, Executive will be responsible for payment and remittance of all taxes due with respect to compensation received or imputed under this Agreement.

(b) Section 409A. This Agreement and the payments hereunder are intended to be exempt from or to satisfy the requirements of Section 409A(a)(2), (3) and (4) of the Code, including current and future guidance and regulations interpreting such provisions, and should be interpreted accordingly.

(c)     No Admission of Wrongdoing. This Agreement does not constitute an admission that Executive or the Company or any of its directors, officers, employees, or agents has violated any local ordinance, state or federal statute, or principle of common law, or that Executive or the Company or any of its directors, officers, employees, or agents has engaged in any unlawful or improper conduct toward Executive. Executive will not characterize this Agreement or the payment of any money or other consideration in accordance with this Agreement as an admission that the Company has engaged in any unlawful or improper conduct toward him or treated him unfairly.

6

(d) LegalRepresentation. Executive acknowledges that he has been advised by the Company to consult with his own attorney before executing this Agreement, that he has had a full opportunity to consider this Agreement, that he has had a full opportunity to ask any questions that he may have concerning this Agreement and the settlement of his potential claims against the Company and others, and that he has not relied upon any statements or representations made by the Company or its agents, written or oral, other than the statements and representations that are explicitly set forth in this Agreement.

(e) Assignment. This Agreement shall not be assignable, in whole or in part, by either party without the prior written consent of the other.

(f) Entire Agreement. This Agreement and the 2004 LTIP, as amended (including the award agreements issued thereunder) are intended to define the full extent of the legally enforceable undertakings of the parties, and no promises or representations, written or oral, that are not set forth explicitly in this Agreement or the 2004 LTIP, as amended (including the award agreements issued thereunder) are intended by either party to be legally binding. All other agreements and understandings between Executive and the Company, including without limitation the Executive Employment Agreement entered into on December 29, 2008, are hereby cancelled, terminated, and superseded.

(g) Headings. The descriptive headings of the paragraphs and subparagraphs of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

(h) Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

(i) Governing Law. This Agreement will be interpreted and construed in accordance with, and any dispute or controversy arising from any breach or asserted breach of this Agreement will be governed by, the laws of the State of Minnesota.

IN WITNESS WHEREOF, Executive and the Company have executed this Agreement as of July 8, 2014.

Life Time Fitness, Inc.

/s/ Eric J. Buss

By Eric J. Buss
Its Executive Vice President and Chief Financial Officer

/s/ Michael R. Robinson

Michael R. Robinson

7

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Bahram Akradi, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Life Time Fitness, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4.    The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the Company and we have:

a)    designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)    designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)    evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)    disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5.    The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

a)    all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date:	October 30, 2014
		/s/ Bahram Akradi
		Bahram Akradi
		Chairman of the Board of Directors, President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Eric J. Buss, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Life Time Fitness, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4.    The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the Company and we have:

a)    designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)    designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)    evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)    disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5.    The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

a)    all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date:	October 30, 2014
		/s/ Eric J. Buss
		Eric J. Buss
		Executive Vice President and Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1) this periodic report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in this periodic report fairly presents, in all material respects, the financial condition and results of operations of Life Time Fitness, Inc.

Dated:	October 30, 2014
		/s/ Bahram Akradi
		Bahram Akradi
		Chairman of the Board of Directors, President and Chief Executive Officer
		/s/ Eric J. Buss
		Eric J. Buss
		Executive Vice President and Chief Financial Officer

XML

Carrying Value and Estimated Fair Value of Long-Term Debt (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Fair Value, Measurement Inputs, Disclosure [Line Items]
Fair market value of swap contract	$ 2,580	$ 3,762
Carrying Value
Fair Value, Measurement Inputs, Disclosure [Line Items]
Fixed-rate debt	634,354	487,556
Obligations under capital leases	4,832	14,965
Floating-rate debt	535,775	346,077
Total	1,174,961	848,598
Estimated Fair Value
Fair Value, Measurement Inputs, Disclosure [Line Items]
Fixed-rate debt	635,390	488,441
Obligations under capital leases	5,070	15,150
Floating-rate debt	535,775	346,077
Total	1,176,235	849,668
(Level 1)
Fair Value, Measurement Inputs, Disclosure [Line Items]
Fair market value of swap contract	0	0
(Level 2)
Fair Value, Measurement Inputs, Disclosure [Line Items]
Fair market value of swap contract	2,580	3,762
(Level 3)
Fair Value, Measurement Inputs, Disclosure [Line Items]
Fair market value of swap contract	$ 0	$ 0

XML

Earnings per Share - Additional Information (Detail) (Stock Options)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Stock Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options excluded from the calculation of diluted EPS (shares)	15,540	0	15,540	2,477

XML

Supplementary Cash Flow Information (Tables)

9 Months Ended

Sep. 30, 2014

Supplemental Cash Flow Information [Abstract]

Decreases (Increases) in Operating Assets and Increases (Decreases) in Operating Liabilities

Decreases (increases) in operating assets and increases (decreases) in operating liabilities are as follows:

	For the Nine Months Ended
	September 30,
	2014			2013
Accounts receivable, net	$	(1,944	)	$	(657	)
Center operating supplies and inventories	(3,935		)	(3,458		)
Prepaid expenses and other current assets	(2,729		)	4,180
Deferred membership origination costs	6,610			1,718
Income tax receivable	(536		)	—
Accounts payable	(2,654		)	(3,585		)
Accrued expenses	1,189			8,604
Deferred revenue	(1,176		)	(6,762		)
Deferred rent liability	936			2,384
Other liabilities	181			302
Changes in operating assets and liabilities	$	(4,058	)	$	2,726

XML

Goodwill and Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014
Goodwill
Balance at December 31, 2013	$ 49,195
Goodwill acquired	8,283
Balance at September 30, 2014	57,478
Finite-lived Intangible Assets [Rollforward]
Balance at December 31, 2013	33,978
Balance at September 30, 2014	51,378
Trade/brand names
Finite-lived Intangible Assets [Rollforward]
Intangible assets acquired	5,716
Customer relationships
Finite-lived Intangible Assets [Rollforward]
Intangible assets acquired	1,925
Leasehold rights
Finite-lived Intangible Assets [Rollforward]
Intangible assets acquired	$ 9,759

XML

Supplementary Cash Flow Information - Additional Information (Detail) (USD $)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Supplemental Cash Flow Information [Abstract]
Cash payments for income taxes	$ 59,200,000	$ 54,300,000
Cash payments for interest, net of capitalized interest	23,800,000	16,900,000
Capitalized interest	2,000,000	2,000,000
Construction accounts payable	$ 40,338,000	$ 51,800,000	$ 47,342,000

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Share-Based Compensation

9 Months Ended

Sep. 30, 2014

Share-based Compensation [Abstract]

Share-Based Compensation

Share-Based Compensation

Stock Option and Incentive Plans

We have three share-based compensation plans: the Amended and Restated Life Time Fitness, Inc. 2004 Long-Term Incentive Plan (the “2004 Plan”); the Life Time Fitness, Inc. 2011 Long-Term Incentive Plan (the “2011 Plan”) and an Employee Stock Purchase Plan (the “ESPP”), collectively, the share-based compensation plans. We no longer make grants under the 2004 Plan. There are 2,500,000 shares of common stock reserved for grant under the 2011 Plan and, as of September 30, 2014, there were 898,925 shares available for grant. The types of awards that may be granted under the 2011 Plan include incentive and non-qualified options to purchase shares of common stock, stock appreciation rights, restricted shares, restricted share units, performance awards and other types of share-based awards.

As of September 30, 2014, we had granted a total of 1,929,665 options to purchase common stock under all of the share-based compensation plans, of which options to purchase 76,277 shares were outstanding and vested, and a total of 5,193,223 restricted shares were granted, of which 1,435,642 restricted shares were outstanding and unvested. We use the term “restricted shares” to define unvested shares granted to employees and non-employee directors. We use the term "vest" to define the lapse of vesting restrictions on restricted shares.

Total share-based compensation expense included in our consolidated statements of operations for the three and nine months ended September 30, 2014 and 2013, was as follows:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Share-based compensation expense related to restricted shares	$	3,072	$	3,094	$	9,789	$	9,320
Share-based compensation expense related to ESPP	30		30		90		90
Total share-based compensation expense	$	3,102	$	3,124	$	9,879	$	9,410

Summary of Restricted Stock Activity

	Shares		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2013	1,429,730		$44.19
Granted	452,652		$45.16
Canceled	(117,040	)	$45.30
Vested	(329,700	)	$40.64
Outstanding at September 30, 2014	1,435,642		$45.22

During the nine months ended September 30, 2014 and 2013, we issued 452,652 and 363,106 shares of restricted stock, respectively, with an aggregate grant date fair value of $20.4 million and $15.4 million, respectively. The grant date fair value of restricted shares that vested during the nine months ended September 30, 2014 and 2013 was $13.4 million and $21.7 million, respectively. The total value of each restricted stock grant, based on the fair value of the stock on the date of grant, is amortized to compensation expense on a straight-line basis over the related vesting period. As of September 30, 2014, there was $28.5 million of unrecognized compensation expense related to restricted stock that is expected to vest. We plan to recognize this amount over a weighted average period of 2.5 years.

Special 2012 Long-Term Performance-Based Restricted Stock Grant

In May, July and August 2012, the Compensation Committee of our Board of Directors approved the grant of a total of 658,500 shares of long-term performance-based restricted stock to serve as an incentive to our senior management team to achieve certain cumulative diluted earnings per share ("EPS") and return on invested capital ("ROIC") targets during performance periods that end on December 31, 2015 and December 31, 2016. On September 30, 2014, 565,500 shares remained outstanding under this grant.

The Compensation Committee set the cumulative diluted EPS targets at 1.5 times the compound annual growth rate under our then-current long range plan and the ROIC targets at 1.1 times the ROIC under our then-current long range plan. The following are the performance metrics underlying the targets:

	Cumulative Diluted EPS			ROIC
	Measurement Period	EPS Target		Measurement Period	ROIC Target
2015 Performance Period	4/1/2012			1/1/2015
50% vest if we achieve both performance targets	through			through
	12/31/2015	$	13.68	12/31/2015	8.9	%
2016 Performance Period	4/1/2012			1/1/2016
All/remaining vest if we achieve both performance targets	through			through
	12/31/2016	$	18.96	12/31/2016	9.0	%

A maximum of $26.0 million could be recognized as compensation expense under this grant if all cumulative diluted EPS and ROIC targets are met. We do not believe that achievement of either the cumulative diluted EPS or the ROIC targets is currently probable, and, therefore, we have not recognized any compensation expense associated with the grant.

If it becomes probable that the cumulative diluted EPS and ROIC performance targets will be achieved, a cumulative adjustment will be recorded and the remaining compensation expense will be recognized over the remaining performance period. If all of the targets had been considered probable at September 30, 2014, we would have recognized $15.2 million of non-cash performance share-based compensation expense during the period ended September 30, 2014. The probability of reaching the targets is evaluated each reporting period. If we later determined that it is no longer probable that the minimum cumulative diluted EPS and ROIC performance targets for the grants will be met, no further compensation expense would be recognized and any previously recognized compensation expense would be reversed. In the event that we do not achieve the specified cumulative diluted EPS and ROIC targets for the performance period ending December 31, 2016, the restricted shares will be forfeited. None of these shares were included in our diluted common shares outstanding at September 30, 2014 or 2013.

Summary of Stock Option Activity

	Shares		Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2013	215,668		$25.64	1.1	$4,616
Exercised	(134,352	)	$20.20
Canceled	(5,039	)	$44.66
Outstanding at September 30, 2014	76,277		$33.97	1.0	$1,257
Vested at September 30, 2014	76,277		$33.97	1.0	$1,257

No stock options have been granted since 2007. As of September 30, 2014, there was no unrecognized compensation expense related to stock options.

The aggregate intrinsic values in the table above represent the total pretax intrinsic values (the differences between our closing stock price and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on that date. This amount changes based on the fair market value of our stock. Total intrinsic value of options exercised during the nine months ended September 30, 2014 and 2013 was $3.8 million and $1.6 million, respectively.

Our net cash proceeds from the exercise of stock options were $2.7 million and $1.6 million for the nine months ended September 30, 2014 and 2013, respectively. The excess income tax benefit realized from stock option exercises and restricted stock vesting was $1.1 million and $6.6 million, respectively, for those same periods. In accordance with the related accounting guidance, this tax benefit is presented as a financing cash inflow. There is a corresponding cash outflow included in cash flows from operating activities.

Employee Stock Purchase Plan

Our ESPP provides for the sale of up to 1,500,000 shares of our common stock to our employees at discounted purchase prices. The cost per share under this plan is 90% of the fair market value of our common stock on the last day of the purchase period, as defined. The current purchase period for employees under the ESPP began July 1, 2014 and ends December 31, 2014. Compensation expense under the ESPP is estimated based on the discount of 10% at the end of the purchase period. During the nine months ended September 30, 2014, $1.3 million was withheld from employees for the purpose of purchasing shares under the ESPP. There were 1,228,549 shares of common stock available for purchase under the ESPP as of September 30, 2014.

Share Repurchase Plans

In June 2006, our Board of Directors authorized the repurchase of up to 500,000 shares of our common stock from time to time in the open market or otherwise for the primary purpose of offsetting the dilutive effect of shares issued under our ESPP. During the nine months ended September 30, 2014, we repurchased 32,178 shares under this authorization for $1.5 million. As of September 30, 2014, there were 228,549 remaining shares authorized to be repurchased for this purpose.

In August 2013, our Board of Directors authorized the repurchase of up to $200.0 million of our outstanding common stock from time to time. During the nine months ended September 30, 2014, we repurchased 3,462,445 shares under this program for $166.9 million. This authorization terminated on July 22, 2014 with the authorization of a new share repurchase program.

In July 2014, our Board of Directors authorized the repurchase of up to $200.0 million of our outstanding common stock from time to time through open market or privately negotiated transactions. The authorization to repurchase shares terminates when the aggregate repurchase amount totals $200.0 million or at the close of business on June 30, 2016, whichever occurs first. The share repurchase program does not obligate us to repurchase any dollar amount or number of shares of our common stock and the program may be extended, modified, suspended or discontinued at any time. During the nine months ended September 30, 2014, we did not repurchase any shares under this program. As of September 30, 2014, there was $200.0 million remaining authorized under this program.

XML

Goodwill and Intangible Assets- Schedule Of Carrying Value of Intangible Assets, Excluding Goodwill (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014
Schedule Of Carrying Value Of Intangible Assets Excluding Goodwill [Line Items]
Gross	$ 51,378
Accumulated Amortization	7,510
Net	43,868
Leasehold rights
Schedule Of Carrying Value Of Intangible Assets Excluding Goodwill [Line Items]
Gross	16,151
Accumulated Amortization	1,766
Net	14,385
Trade/brand names
Schedule Of Carrying Value Of Intangible Assets Excluding Goodwill [Line Items]
Gross	21,195
Accumulated Amortization	2,543
Net	18,652
Curriculum- and technology-based intangibles
Schedule Of Carrying Value Of Intangible Assets Excluding Goodwill [Line Items]
Gross	6,695
Accumulated Amortization	1,719
Net	4,976
Customer relationships
Schedule Of Carrying Value Of Intangible Assets Excluding Goodwill [Line Items]
Gross	7,337
Accumulated Amortization	1,482
Net	$ 5,855

XML

Share-Based Compensation (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014 share_based_compensation_plan	Sep. 30, 2013	Sep. 30, 2014 share_based_compensation_plan	Sep. 30, 2013	Dec. 31, 2013
Compensation Related Costs Share Based Payments Disclosure [Line Items]
Number of share-based compensation plans (plans)	3		3
Common stock reserved for grant (shares)	2,500,000		2,500,000
Common stock available for grant (shares)	898,925		898,925
Options to purchase common stock granted under the share-based compensation plans to date (shares)	1,929,665		1,929,665
Options outstanding (shares)	76,277		76,277		215,668
Share-based compensation	$ 3,102	$ 3,124	$ 9,879	$ 9,410
Restricted Stock
Compensation Related Costs Share Based Payments Disclosure [Line Items]
Restricted shares granted (shares)	5,193,223		5,193,223
Nonvested stock outstanding (shares)	1,435,642		1,435,642		1,429,730
Share-based compensation	3,072	3,094	9,789	9,320
Employee Stock Purchase Plan
Compensation Related Costs Share Based Payments Disclosure [Line Items]
Share-based compensation	$ 30	$ 30	$ 90	$ 90

XML

Goodwill and Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Changes In Goodwill

The change in the gross amount of goodwill is as follows:

Balance at December 31, 2013	$	49,195
Goodwill acquired	8,283
Balance at September 30, 2014	$	57,478

Schedule Of Changes In Intangible Assets Excluding Goodwill

The following table summarizes the changes in our gross intangibles balance:

Balance at December 31, 2013	$	33,978
Trade/brand names acquired	5,716
Customer relationships acquired	1,925
Leasehold rights acquired	9,759
Balance at September 30, 2014	$	51,378

Schedule Of Carrying Value Of Intangible Assets Excluding Goodwill

At September 30, 2014, intangible assets consisted of the following:

	Gross		Accumulated Amortization		Net
Leasehold rights	$	16,151	$	1,766	$	14,385
Trade/brand names	21,195		2,543		18,652
Curriculum- and technology-based intangibles	6,695		1,719		4,976
Customer relationships	7,337		1,482		5,855
Total intangible assets	$	51,378	$	7,510	$	43,868

XML

Goodwill and Intangible Assets-Intangible Assets- Text (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Finite-Lived Intangible Assets [Line Items]
Amortization of intangible assets	$ 2.8	$ 1.5
Trade/brand names
Finite-Lived Intangible Assets [Line Items]
Useful life	8 years
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Useful life	10 years
Leasehold rights
Finite-Lived Intangible Assets [Line Items]
Useful life	49 years

XML

Summary of Restricted Stock Activity (Details) (USD $) In Millions, except Share data, unless otherwise specified	9 Months Ended		4 Months Ended	9 Months Ended
	Sep. 30, 2014 Restricted Stock	Sep. 30, 2013 Restricted Stock	Aug. 31, 2012 Performance Based Restricted Stock	Sep. 30, 2014 Performance Based Restricted Stock
Shares
Outstanding at beginning of period (in shares)	1,429,730
Granted (in shares)	452,652	363,106	658,500
Canceled (in shares)	(117,040)
Vested (in shares)	(329,700)
Outstanding at end of period (in shares)	1,435,642			565,500
Weighted Average Grant Date Fair Value
Outstanding at beginning of period (in dollars per share)	$ 44.19
Granted (in dollars per share)	$ 45.16
Canceled (in dollars per share)	$ 45.30
Vested (in dollars per share)	$ 40.64
Outstanding at end of period (in dollars per share)	$ 45.22
Equity instruments other than options - aggregate fair value of grant during period	$ 20.4	$ 15.4
Equity instruments other than options - vested in period	13.4	21.7
Unrecognized compensation expense	28.5			26.0
Unrecognized compensation, weighted average period of recognition	2 years 5 months 24 days
The number times the compound annual growth rate under current long rang plan for the earning per share target.				1.5
The number times the return on invested capital for the return on invested capital target				1.1
Additional share based compensation expense recognized at balance sheet date if all performance targets were probable at balance sheet date				$ 15.2

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Performance Metrics Table (Details) (Performance Shares, USD $)	9 Months Ended
	Sep. 30, 2014
April 1, 2012 Through 2015 | 2015 Performance Period
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Cumulative dilutive EPS, target earnings per share (usd per share)	$ 13.68
2015 Member | 2015 Performance Period
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Return on invested capital, target earnings per share (usd per share)	8.90%
April 1, 2012 Through 2016 | 2016 Performance Period
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Cumulative dilutive EPS, target earnings per share (usd per share)	$ 18.96
2016 Member | 2016 Performance Period
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Return on invested capital, target earnings per share (usd per share)	9.00%

XML

Basis of Presentation

9 Months Ended

Sep. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to fairly present our consolidated financial position, results of operations and cash flows for the periods have been included.

These interim consolidated financial statements and the related notes should be read in conjunction with the annual consolidated financial statements and notes included in the latest Form 10-K, as filed with the Securities and Exchange Commission (“SEC”), which includes audited consolidated financial statements for the three fiscal years ended December 31, 2013.

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Summary of Stock Option Activity (Details) (USD $)	0 Months Ended	9 Months Ended		12 Months Ended		9 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013	Jul. 31, 2014	Sep. 30, 2014 Employee Stock Purchase Plan	Jun. 01, 2006 Employee Stock Purchase Plan	Sep. 30, 2014 2013 Share Repurchase Program	Aug. 31, 2014 2013 Share Repurchase Program
Shares
Outstanding at beginning of period (in shares)	76,277	215,668
Exercised (in shares)		(134,352)
Canceled (in shares)		(5,039)
Outstanding at end of period (in shares)		76,277		215,668
Vested at period end (in shares)		76,277
Weighted Average Exercise Price
Outstanding at beginning of period (in dollars per share)	$ 33.97	$ 25.64
Exercised (in dollars per share)		$ 20.20
Canceled (in dollars per share)		$ 44.66
Outstanding at end of period (in dollars per share)		$ 33.97		$ 25.64
Vested at end of period (in dollars per share)		$ 33.97
Weighted Average Remaining Contractual Term In Years
Weighted average remaining contractual term (in years)	1 year			1 year 1 month 6 days
Vested at end of period (in years)	1 year
Aggregate Intrinsic Value
Outstanding at beginning of period (in dollars)	$ 1,257,000	$ 4,616,000
Outstanding at end of period (in dollars)		1,257,000		4,616,000
Vested at end of period (in dollars)		1,257,000
Total intrinsic value of options exercised (in dollars)		3,800,000	1,600,000
Net cash proceeds from the exercise of stock options (in dollars)		2,713,000	1,563,000
Income tax benefit from share-based payment arrangements (in dollars)		1,073,000	6,575,000
Employee Stock Purchase Plan [Abstract]
Maximum ESPP common stock shares that can be sold to employees (shares)						1,500,000
Percentage of fair market value cost per share under the plan (percent)						90.00%
Discount percentage under the plan (percent)						10.00%
Employee withholding for the purchase of shares						1,300,000
ESPP common stock available for purchase (shares)						1,228,549
Board of Directors authorized the repurchase of common stock (shares)							500,000
Share repurchases (shares)						32,178		3,462,445
Value of shares repurchased						1,500,000		166,900,000
Remaining shares authorized for repurchase (shares)						228,549
Stock repurchase program, authorized amount		$ 200,000,000			$ 200,000,000				$ 200,000,000

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Changes in Accumulated Other Comprehensive Income (Loss) by Component (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended		3 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014 Gains (Losses) on Cash Flows Hedge	Jun. 30, 2014 Gains (Losses) on Cash Flows Hedge	Mar. 31, 2014 Gains (Losses) on Cash Flows Hedge	Sep. 30, 2014 Foreign Currency Translation Adjustments	Jun. 30, 2014 Foreign Currency Translation Adjustments	Mar. 31, 2014 Foreign Currency Translation Adjustments	Sep. 30, 2014 Accumulated Other Comprehensive Loss	Jun. 30, 2014 Accumulated Other Comprehensive Loss	Mar. 31, 2014 Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Income [Roll Forward]
Beginning Balance			$ (5,615)		$ (2,029)	$ (2,042)	$ (2,257)	$ (3,749)	$ (4,242)	$ (3,358)	$ (5,778)	$ (6,284)	$ (5,615)
Other comprehensive income (loss)	(316)	128	(479)	(190)	481	13	215	(797)	493	(884)	(316)	506	(669)
Ending Balance	$ (6,094)		$ (6,094)		$ (1,548)	$ (2,029)	$ (2,042)	$ (4,546)	$ (3,749)	$ (4,242)	$ (6,094)	$ (5,778)	$ (6,284)

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 9,622	$ 8,334
Accounts receivable, net	10,103	8,298
Center operating supplies and inventories	36,703	32,778
Prepaid expenses and other current assets	27,804	25,802
Deferred membership origination costs	9,375	9,945
Deferred income taxes	6,069	6,881
Income tax receivable	88	6,698
Total current assets	99,764	98,736
Property and equipment, net	2,335,498	2,105,077
Restricted cash	890	850
Deferred membership origination costs	6,316	5,210
Goodwill	57,478	49,195
Intangible assets, net	43,868	29,299
Other assets	43,811	42,684
Total assets	2,587,625	2,331,051
Current liabilities:
Current maturities of long-term debt	22,394	24,505
Accounts payable	35,709	28,645
Construction accounts payable	40,338	47,342
Accrued expenses	67,626	67,435
Deferred revenue	36,330	35,032
Total current liabilities	202,397	202,959
Long-term debt, net of current portion	1,152,567	824,093
Deferred rent liability	29,856	28,933
Deferred income taxes	92,258	100,504
Deferred revenue	6,369	5,246
Other liabilities	16,837	21,287
Total liabilities	1,500,284	1,183,022
Commitments and contingencies (Note 6)
Shareholders' equity:
Preferred stock: 10,000,000 shares authorized; 100,000 shares of Series A Junior Participating Preferred Stock designated and no shares designated, respectively; none issued or outstanding	0	0
Common stock, $.02 par value, 75,000,000 shares authorized; 39,123,068 and 42,115,549 shares issued and outstanding, respectively	783	843
Additional paid-in capital	249,478	402,147
Retained earnings	843,174	750,654
Accumulated other comprehensive loss	(6,094)	(5,615)
Total shareholders’ equity	1,087,341	1,148,029
Total liabilities and shareholders' equity	$ 2,587,625	$ 2,331,051

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Potential Spin-Off of Real Estate Assets through a Real Estate Investment Trust (Details)	0 Months Ended
	Aug. 25, 2014
Real Estate [Abstract]
Maximum number of shares outstanding, ownership percentage	9.80%

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Consolidated Statements of Comprehensive Income (parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Statement of Comprehensive Income [Abstract]
Foreign currency translation adjustments, tax	$ 526	$ (251)	$ 798	$ 872
Unrealized gains (losses) on cash flow hedges, tax	$ (321)	$ 147	$ (473)	$ (778)

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Operating Segment (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Revenue from External Customer [Line Items]
Membership dues	$ 208,233	$ 195,657	$ 610,212	$ 576,847
Enrollment fees	3,086	3,598	9,228	10,567
Other in-center revenue	107,936	97,234	310,700	286,480
Total center revenue	319,255	296,489	930,140	873,894
Other revenue	17,590	19,522	45,224	40,972
Total revenue	336,845	316,011	975,364	914,866
Personal Training
Revenue from External Customer [Line Items]
Other in-center revenue	50,680	46,095	149,228	138,903
Other in-center revenue
Revenue from External Customer [Line Items]
Other in-center revenue	$ 57,256	$ 51,139	$ 161,472	$ 147,577

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Share-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2014

Share-based Compensation [Abstract]

Total Share-Based Compensation Expense Included in our Consolidated Statements of Operations

Total share-based compensation expense included in our consolidated statements of operations for the three and nine months ended September 30, 2014 and 2013, was as follows:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Share-based compensation expense related to restricted shares	$	3,072	$	3,094	$	9,789	$	9,320
Share-based compensation expense related to ESPP	30		30		90		90
Total share-based compensation expense	$	3,102	$	3,124	$	9,879	$	9,410

Summary of Restricted Stock Activity

Summary of Restricted Stock Activity

	Shares		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2013	1,429,730		$44.19
Granted	452,652		$45.16
Canceled	(117,040	)	$45.30
Vested	(329,700	)	$40.64
Outstanding at September 30, 2014	1,435,642		$45.22

Performance Shares Award Measurement Target Metrics

The following are the performance metrics underlying the targets:

	Cumulative Diluted EPS			ROIC
	Measurement Period	EPS Target		Measurement Period	ROIC Target
2015 Performance Period	4/1/2012			1/1/2015
50% vest if we achieve both performance targets	through			through
	12/31/2015	$	13.68	12/31/2015	8.9	%
2016 Performance Period	4/1/2012			1/1/2016
All/remaining vest if we achieve both performance targets	through			through
	12/31/2016	$	18.96	12/31/2016	9.0	%

Summary of Stock Option Activity

Summary of Stock Option Activity

	Shares		Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2013	215,668		$25.64	1.1	$4,616
Exercised	(134,352	)	$20.20
Canceled	(5,039	)	$44.66
Outstanding at September 30, 2014	76,277		$33.97	1.0	$1,257
Vested at September 30, 2014	76,277		$33.97	1.0	$1,257

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Supplementary Cash Flow Information- Decreases (Increases) in Operating Assets and Increases (Decreases) in Operating Liabilities (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Supplemental Cash Flow Information [Abstract]
Accounts receivable, net	$ (1,944)	$ (657)
Center operating supplies and inventories	(3,935)	(3,458)
Prepaid expenses and other current assets	(2,729)	4,180
Deferred membership origination costs	6,610	1,718
Income tax receivable	(536)	0
Accounts payable	(2,654)	(3,585)
Accrued expenses	1,189	8,604
Deferred revenue	(1,176)	(6,762)
Deferred rent liability	936	2,384
Other liabilities	181	302
Changes in operating assets and liabilities	$ (4,058)	$ 2,726

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Operating Segment (Tables)

9 Months Ended

Sep. 30, 2014

Segment Reporting [Abstract]

Revenue from External Customers by Products and Services

The following table presents revenue for the three and nine months ended September 30, 2014 and 2013:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Membership dues	$	208,233	$	195,657	$	610,212	$	576,847
Enrollment fees	3,086		3,598		9,228		10,567
Personal training	50,680		46,095		149,228		138,903
Other in-center revenue	57,256		51,139		161,472		147,577
Total center revenue	319,255		296,489		930,140		873,894
Other revenue	17,590		19,522		45,224		40,972
Total revenue	$	336,845	$	316,011	$	975,364	$	914,866

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Cash flows from operating activities:
Net income	$ 92,520	$ 95,674
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	103,252	89,235
Deferred income taxes	(7,804)	(583)
Gain on disposal of property and equipment, net	(563)	(100)
Gain on land held for sale	(17)	0
Amortization of deferred financing costs	1,918	1,635
Share-based compensation	9,879	9,410
Excess tax benefit related to share-based compensation	(1,073)	(6,575)
Changes in operating assets and liabilities	(4,058)	2,726
Other	(4,744)	(659)
Net cash provided by operating activities	189,310	190,763
Cash flows from investing activities:
Purchases of property and equipment	(338,365)	(224,542)
Acquisitions, net of cash acquired	(12,400)	(13,102)
Proceeds from sale of property and equipment	1,146	1,116
Proceeds from sale of land held for sale	785	0
Proceeds from property insurance settlements	0	177
Decrease (increase) in other assets	1,906	(1,022)
(Increase) decrease in restricted cash	(40)	1,353
Net cash used in investing activities	(346,968)	(236,020)
Cash flows from financing activities:
Proceeds from long-term borrowings	161,750	125,000
Repayments of long-term borrowings	(26,192)	(31,773)
Proceeds from (repayments of) credit facility, net	191,500	(7,150)
Increase in deferred financing costs	(4,684)	(4,213)
Excess tax benefit related to share-based compensation	1,073	6,575
Proceeds from stock option exercises	2,713	1,563
Proceeds from employee stock purchase plan	1,278	1,074
Stock purchased for employee stock purchase plan	(1,531)	(1,309)
Repurchases of common stock	(166,878)	(40,272)
Net cash provided by financing activities	159,029	49,495
Effect of exchange rates on cash and cash equivalents	(83)	(1,018)
Increase in cash and cash equivalents	1,288	3,220
Cash and cash equivalents – beginning of period	8,334	16,499
Cash and cash equivalents – end of period	$ 9,622	$ 19,719

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Consolidated Balance Sheets Parenthetical (USD $)	Sep. 30, 2014	Dec. 31, 2013
Shareholders' equity:
Preferred stock authorized (shares)	10,000,000	10,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common stock par value (USD per share)	$ 0.02	$ 0.02
Common stock, shares authorized (shares)	75,000,000	75,000,000
Common Stock, Shares, Issued (shares)	39,123,068	42,115,549
Common Stock, Shares, Outstanding (shares)	39,123,068	42,115,549
Series A Junior Participating
Shareholders' equity:
Preferred stock authorized (shares)	100,000	0

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Changes in Accumulated Other Comprehensive Income (loss) by Component

9 Months Ended

Sep. 30, 2014

Equity [Abstract]

Changes in Accumulated Other Comprehensive Income (Loss) by Component

Changes in Accumulated Other Comprehensive Income (Loss) by Component

The following table presents information about accumulated other comprehensive income (loss) by component (net of tax):

	Gains (Losses) on Cash Flows Hedge			Foreign Currency Translation Adjustments			Accumulated Other Comprehensive Loss
Balance at December 31, 2013	$	(2,257	)	$	(3,358	)	$	(5,615	)
Other comprehensive income (loss)	215			(884		)	(669		)
Balance at March 31, 2014	(2,042		)	(4,242		)	(6,284		)
Other comprehensive income	13			493			506
Balance at June 30, 2014	(2,029		)	(3,749		)	(5,778		)
Other comprehensive income (loss)	481			(797		)	(316		)
Balance at September 30, 2014	$	(1,548	)	$	(4,546	)	$	(6,094	)

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Document and Entity Information Document	9 Months Ended
	Sep. 30, 2014	Oct. 17, 2014
Nonprinting Document and Entity Information [Abstract]
Entity Registrant Name	Life Time Fitness, Inc.
Entity Central Index Key	0001076195
Trading Symbol	LTM
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		39,122,768

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Long-Term Debt

9 Months Ended

Sep. 30, 2014

Debt Disclosure [Abstract]

Long-term Debt

Long-Term Debt

In May 2014, we amended and extended our Third Amended and Restated Credit Agreement (the “Credit Agreement”) with U.S. Bank National Association, as administrative agent and lender, and other lenders from time to time a party thereto. The material amendments to the Credit Agreement are (i) an increase to the amount of the facility from $860.0 million to $1.20 billion; and (ii) an extension of the maturity of the facility to May 30, 2019. After giving effect to the amendments, the facility consists of a $100.0 million term loan and a $1.10 billion revolving credit facility ("credit facility"), which term loan amortizes at the rate of 5.0% on an annual basis. The credit facility may also be increased by an additional $500.0 million upon the exercise of an accordion feature if one or more lenders commit the additional $500.0 million. The spreads under the leverage-based pricing grid in the credit facility remain unchanged, as do the financial covenant ratio thresholds.

In January 2014, a wholly owned subsidiary obtained a mortgage loan in the original principal amount of $80.0 million from Well Fargo Bank, N.A. pursuant to a promissory note and related agreements dated January 28, 2014. The mortgage financing is secured by mortgages on five properties and matures in February 2024. Interest on the amounts borrowed is 5.06% per annum, with a constant monthly debt service payment of $0.5 million.

In July 2014, a wholly owned subsidiary obtained a mortgage loan in the original principal amount of $78.0 million from ING Life Insurance and Annuity Company pursuant to a promissory note and related agreements dated July 29, 2014. The mortgage financing is secured by five properties and matures in August 2027. Interest on the amounts borrowed is 4.70% per annum, with a constant monthly debt service payment of $0.7 million.

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Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Revenue:
Membership dues	$ 208,233	$ 195,657	$ 610,212	$ 576,847
Enrollment fees	3,086	3,598	9,228	10,567
In-center revenue	107,936	97,234	310,700	286,480
Total center revenue	319,255	296,489	930,140	873,894
Other revenue	17,590	19,522	45,224	40,972
Total revenue	336,845	316,011	975,364	914,866
Operating expenses:
Center operations	193,032	180,431	570,155	527,191
Advertising and marketing	9,611	9,758	31,683	30,346
General and administrative	15,921	14,531	46,281	45,600
Other operating	14,804	18,479	45,603	46,538
Depreciation and amortization	36,654	29,956	103,252	89,235
Total operating expenses	270,022	253,155	796,974	738,910
Income from operations	66,823	62,856	178,390	175,956
Other income (expense):
Interest expense, net of interest income	(9,828)	(6,436)	(26,331)	(18,999)
Equity in earnings of affiliate	255	379	822	1,103
Total other expense	(9,573)	(6,057)	(25,509)	(17,896)
Income before income taxes	57,250	56,799	152,881	158,060
Provision for income taxes	22,849	22,413	60,361	62,386
Net income	$ 34,401	$ 34,386	$ 92,520	$ 95,674
Basic earnings per common share (in dollars per share)	$ 0.91	$ 0.83	$ 2.36	$ 2.31
Diluted earnings per common share (in dollars per share)	$ 0.91	$ 0.83	$ 2.35	$ 2.30
Weighted average number of common shares outstanding – basic (shares)	37,755	41,307	39,165	41,353
Weighted average number of common shares outstanding – diluted (shares)	37,913	41,613	39,415	41,606

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Supplementary Cash Flow Information

9 Months Ended

Sep. 30, 2014

Supplemental Cash Flow Information [Abstract]

Supplementary Cash Flow Information

Supplemental Cash Flow Information

Decreases (increases) in operating assets and increases (decreases) in operating liabilities are as follows:

	For the Nine Months Ended
	September 30,
	2014			2013
Accounts receivable, net	$	(1,944	)	$	(657	)
Center operating supplies and inventories	(3,935		)	(3,458		)
Prepaid expenses and other current assets	(2,729		)	4,180
Deferred membership origination costs	6,610			1,718
Income tax receivable	(536		)	—
Accounts payable	(2,654		)	(3,585		)
Accrued expenses	1,189			8,604
Deferred revenue	(1,176		)	(6,762		)
Deferred rent liability	936			2,384
Other liabilities	181			302
Changes in operating assets and liabilities	$	(4,058	)	$	2,726

We made cash payments for income taxes of $59.2 million and $54.3 million for the nine months ended September 30, 2014 and 2013, respectively.

We made cash payments for interest, net of capitalized interest, of $23.8 million and $16.9 million for the nine months ended September 30, 2014 and 2013, respectively. Capitalized interest was $2.0 million for both periods.

Construction accounts payable was $40.3 million and $51.8 million at September 30, 2014 and 2013, respectively.

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Operating Segment

9 Months Ended

Sep. 30, 2014

Segment Reporting [Abstract]

Operating Segment

Operating Segment

Our operations are conducted mainly through our distinctive and large, multi-use sports and athletic, professional fitness, family recreation and spa centers in a resort-like environment. We aggregate the activities of our centers and other ancillary products and services into one reportable segment. Each of the centers has similar economic characteristics, services, product offerings and customers, and in-center revenues are derived primarily from services to our members. Each of the other ancillary products and services either directly or indirectly, through advertising or branding, complement the operations of the centers. Our chief operating decision maker uses EBITDA (a non-GAAP, non-cash measure which consists of net income plus interest expense, net, provision for income taxes and depreciation and amortization) as the primary measure of operating segment performance. Our chief operating decision maker is our Chief Executive Officer.

The following table presents revenue for the three and nine months ended September 30, 2014 and 2013:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Membership dues	$	208,233	$	195,657	$	610,212	$	576,847
Enrollment fees	3,086		3,598		9,228		10,567
Personal training	50,680		46,095		149,228		138,903
Other in-center revenue	57,256		51,139		161,472		147,577
Total center revenue	319,255		296,489		930,140		873,894
Other revenue	17,590		19,522		45,224		40,972
Total revenue	$	336,845	$	316,011	$	975,364	$	914,866

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Earnings per Share (Tables)

9 Months Ended

Sep. 30, 2014

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The basic and diluted EPS calculations are shown below:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Net income	$	34,401	$	34,386	$	92,520	$	95,674
Weighted average number of common shares outstanding – basic	37,755		41,307		39,165		41,353
Effect of dilutive stock options	19		95		16		87
Effect of dilutive restricted stock awards	139		211		234		166
Weighted average number of common shares outstanding – diluted	37,913		41,613		39,415		41,606
Basic earnings per common share	$	0.91	$	0.83	$	2.36	$	2.31
Diluted earnings per common share	$	0.91	$	0.83	$	2.35	$	2.30

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Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill and Intangible Assets

The change in the gross amount of goodwill is as follows:

Balance at December 31, 2013	$	49,195
Goodwill acquired	8,283
Balance at September 30, 2014	$	57,478

The following table summarizes the changes in our gross intangibles balance:

Balance at December 31, 2013	$	33,978
Trade/brand names acquired	5,716
Customer relationships acquired	1,925
Leasehold rights acquired	9,759
Balance at September 30, 2014	$	51,378

The goodwill and intangible assets acquired during the nine months ended September 30, 2014 are related to the acquisition of certain athletic events and a ground lease for a club expected to open in 2015.

At September 30, 2014, intangible assets consisted of the following:

	Gross		Accumulated Amortization		Net
Leasehold rights	$	16,151	$	1,766	$	14,385
Trade/brand names	21,195		2,543		18,652
Curriculum- and technology-based intangibles	6,695		1,719		4,976
Customer relationships	7,337		1,482		5,855
Total intangible assets	$	51,378	$	7,510	$	43,868

The trade/brand names acquired during the nine months ended September 30, 2014 have a weighted average useful life of approximately 8 years. The customer relationships intangible acquired has a useful life of 10 years. The leasehold rights acquired have a useful life of 49 years based on the term of the related land lease. Amortization expense for intangible assets was $2.8 million and $1.5 million for the nine months ended September 30, 2014 and 2013, respectively.

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Derivative Instruments

9 Months Ended

Sep. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

As part of our financial risk management program, we may periodically use interest rate swaps to manage known market exposures. Terms of derivative instruments are structured to match the terms of the risk being managed and are generally held to maturity.

In August 2011, we entered into an interest rate swap contract that effectively fixed the rates paid on a total of $200.0 million of variable rate borrowings at 1.32% plus the applicable spread (which depends on our EBITDAR leverage ratio) until June 2016. EBITDAR is a non-GAAP, non-cash measure which consists of net income plus interest expense, net, provision for income taxes, depreciation and amortization and rent expense. We pay 1.32% and receive LIBOR on the notional amount of $200.0 million. The contract has been designated a cash flow hedge against interest rate volatility. In accordance with applicable accounting guidance, changes in the fair value of the swap contract are recorded in accumulated other comprehensive loss, net of tax. As of September 30, 2014, the $1.5 million fair value loss, net of tax, of the swap contract was recorded as accumulated other comprehensive loss in the shareholders' equity section of our consolidated balance sheets and the $2.6 million gross fair value of the swap contract was included in long-term debt.

On an ongoing basis, we assess whether the interest rate swap used in this hedging transaction is “highly effective” in offsetting changes in the fair value or cash flow of the hedged item by comparing the current terms of the swap and the debt to assure they continue to coincide and through an evaluation of the continued ability of the counterparty to the swap to honor its obligations under the swap. No ineffectiveness was experienced in the interest rate swap during the nine months ended September 30, 2014 or September 30, 2013. If it is determined that the derivative is not highly effective as a hedge or hedge accounting is discontinued, any change in fair value of the derivative since the last date at which it was determined to be effective would be recognized in earnings.

For more information on the swap contract, see Notes 9 and 10.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

TCPA Litigation — On April 17, 2014, a putative class action was filed against LTF Club Operations Company, Inc., a wholly-owned subsidiary of Life Time Fitness, Inc., in the Circuit Court of St. Louis County, Missouri. On June 13, 2014, LTF Club Operations Company, Inc. removed this action to the United States District Court for the Eastern District of Missouri, Eastern Division. On April 23, 2014, a second putative class action was filed against Life Time Fitness, Inc. in the U.S. District Court for the District of Minnesota. On April 23, 2014, a third putative class action was filed against Life Time Fitness, Inc. in the U.S. District Court for the Northern District of Illinois, Eastern Division. On July 1, 2014, a fourth putative class action was filed against Life Time Fitness, Inc. in the United States District Court for the District of Minnesota. These actions are collectively referred to as the “TCPA Actions” or "TCPA Litigation."

The TCPA Actions allege that we violated the federal Telephone Consumer Protection Act (“TCPA”) when we, or a third party on our behalf, sent marketing text messages to plaintiffs’ cellular telephones using an automatic telephone dialing system without plaintiffs’ consent. We deny the allegations.

On October 15, 2014, the United States Judicial Panel on Multidistrict Litigation granted our motion to transfer the TCPA Actions to the United States District Court for the District of Minnesota for coordinated or consolidated pretrial proceedings.

We have not recorded an expense related to damages in connection with the TCPA Actions because any potential material loss is not currently probable or reasonably estimable under U.S. generally accepted accounting principles. Additionally, we cannot reasonably estimate the range of loss, if any, that may result from the TCPA Actions.

Other Litigation — We are also engaged in other proceedings incidental to the normal course of business. Due to their nature, such legal proceedings involve inherent uncertainties, including but not limited to court rulings, negotiations between affected parties and governmental intervention. We will establish reserves for matters that are probable and estimable in amounts we believe are adequate to cover reasonable adverse judgments. Based upon the information available to us and discussions with legal counsel, it is our opinion that the outcome of the various legal actions and claims that are incidental to our business will not have a material adverse impact on our consolidated financial position, results of operations or cash flows. Such matters are subject to many uncertainties, and the outcomes of individual matters are not predictable with assurance.

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New Accounting Pronouncements

9 Months Ended

Sep. 30, 2014

New Accounting Pronouncements [Abstract]

New Accounting Pronouncements

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective. The new standard is effective for us in 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. We are in the process of selecting a transition method and determining the effect of the standard on our ongoing financial reporting.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The accounting guidance establishes a framework for measuring fair value and expanded disclosures about fair value measurements. The guidance applies to all assets and liabilities that are measured and reported on a fair value basis. This enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The guidance requires that each asset and liability carried at fair value be classified into one of the following categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

Fair Value Measurements on a Recurring Basis

The fair value of the interest rate swap is determined using observable current market information such as the prevailing Eurodollar interest rates, Eurodollar yield curve rates and current fair values as quoted by recognized dealers, and also includes consideration of counterparty credit risk. The following table presents the fair value of our derivative financial instrument as of September 30, 2014 and December 31, 2013:

		Fair Value Measurements Using:
		Quoted Prices in	Significant	Significant
	Total	Active Markets for	Other Observable	Unobservable
	Fair	Identical Assets	Inputs	Inputs
	Value	(Level 1)	(Level 2)	(Level 3)
Interest rate swap liability as of
September 30, 2014	$2,580	$—	$2,580	$—
Interest rate swap liability as of
December 31, 2013	$3,762	$—	$3,762	$—

Fair Value Measurements on a Nonrecurring Basis

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible fixed assets, goodwill and intangible assets, which are remeasured when the derived fair value is below carrying value on our consolidated balance sheets. For these assets, we do not periodically adjust carrying value to fair value except in the event of impairment. If we determine that impairment has occurred, the carrying value of the asset would be reduced to fair value and the difference would be recorded as a loss within operating income in our consolidated statements of operations.

We had no remeasurements of such assets or liabilities to fair value during the nine months ended September 30, 2014 or September 30, 2013.

Financial Assets and Liabilities Not Measured at Fair Value

The carrying amounts related to cash and cash equivalents (Level 1), accounts receivable, income tax receivable, accounts payable and accrued liabilities approximate fair value due to the relatively short maturities of such instruments.

The fair value of our long-term debt and capital leases are estimated based on estimated current rates for debt with similar terms, credit worthiness and the same remaining maturities. For variable rate loans that re-price frequently, fair values are based on carrying values. The fair value of fixed rate loans is estimated based on the discounted cash flows of the loans using current market rates, which are estimated based on recent financing transactions (Level 3). The fair value estimates presented are based on information available to us as of September 30, 2014. These fair value estimates have not been comprehensively revalued for purposes of these consolidated financial statements since that date, and current estimates of fair values may differ significantly.

The following table presents the carrying value and the estimated fair value of long-term debt:

	September 30, 2014				December 31, 2013
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Fixed-rate debt	$	634,354	$	635,390	$	487,556	$	488,441
Obligations under capital leases	4,832		5,070		14,965		15,150
Floating-rate debt	535,775		535,775		346,077		346,077
Total	$	1,174,961	$	1,176,235	$	848,598	$	849,668

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Basic and Diluted Earnings Per Share Calculations (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
Net income	$ 34,401	$ 34,386	$ 92,520	$ 95,674
Weighted average number of common shares outstanding - basic (shares)	37,755	41,307	39,165	41,353
Weighted average number of common shares outstanding - diluted (shares)	37,913	41,613	39,415	41,606
Basic earnings per common share (in dollars per share)	$ 0.91	$ 0.83	$ 2.36	$ 2.31
Diluted earnings per common share (in dollars per share)	$ 0.91	$ 0.83	$ 2.35	$ 2.30
Stock Options
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
Effect of dilutive share based compensation (shares)	19	95	16	87
Restricted Stock
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
Effect of dilutive share based compensation (shares)	139	211	234	166

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Basis of Presentation Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Stock Option and Incentive Plans

The probability of reaching the targets is evaluated each reporting period. If we later determined that it is no longer probable that the minimum cumulative diluted EPS and ROIC performance targets for the grants will be met, no further compensation expense would be recognized and any previously recognized compensation expense would be reversed.

The total value of each restricted stock grant, based on the fair value of the stock on the date of grant, is amortized to compensation expense on a straight-line basis over the related vesting period.

The types of awards that may be granted under the 2011 Plan include incentive and non-qualified options to purchase shares of common stock, stock appreciation rights, restricted shares, restricted share units, performance awards and other types of share-based awards.

We use the term “restricted shares” to define unvested shares granted to employees and non-employee directors. We use the term "vest" to define the lapse of vesting restrictions on restricted shares.

If it becomes probable that the cumulative diluted EPS and ROIC performance targets will be achieved, a cumulative adjustment will be recorded and the remaining compensation expense will be recognized over the remaining performance period.

Earnings Per Share

Basic EPS is computed by dividing net income applicable to common shareholders by the weighted average number of shares of common stock outstanding for each year. Diluted EPS is computed similarly to basic EPS, except that the denominator is increased for the conversion of any dilutive common stock equivalents, the assumed exercise of dilutive stock options using the treasury stock method and unvested restricted stock awards using the treasury stock method.

Operating Segment

Our operations are conducted mainly through our distinctive and large, multi-use sports and athletic, professional fitness, family recreation and spa centers in a resort-like environment. We aggregate the activities of our centers and other ancillary products and services into one reportable segment. Each of the centers has similar economic characteristics, services, product offerings and customers, and in-center revenues are derived primarily from services to our members. Each of the other ancillary products and services either directly or indirectly, through advertising or branding, complement the operations of the centers. Our chief operating decision maker uses EBITDA (a non-GAAP, non-cash measure which consists of net income plus interest expense, net, provision for income taxes and depreciation and amortization) as the primary measure of operating segment performance. Our chief operating decision maker is our Chief Executive Officer.

Commitments and contingencies

We are also engaged in other proceedings incidental to the normal course of business. Due to their nature, such legal proceedings involve inherent uncertainties, including but not limited to court rulings, negotiations between affected parties and governmental intervention. We will establish reserves for matters that are probable and estimable in amounts we believe are adequate to cover reasonable adverse judgments.

Derivatives

As part of our financial risk management program, we may periodically use interest rate swaps to manage known market exposures. Terms of derivative instruments are structured to match the terms of the risk being managed and are generally held to maturity.

On an ongoing basis, we assess whether the interest rate swap used in this hedging transaction is “highly effective” in offsetting changes in the fair value or cash flow of the hedged item by comparing the current terms of the swap and the debt to assure they continue to coincide and through an evaluation of the continued ability of the counterparty to the swap to honor its obligations under the swap. No ineffectiveness was experienced in the interest rate swap during the nine months ended September 30, 2014 or September 30, 2013. If it is determined that the derivative is not highly effective as a hedge or hedge accounting is discontinued, any change in fair value of the derivative since the last date at which it was determined to be effective would be recognized in earnings.

In accordance with applicable accounting guidance, changes in the fair value of the swap contract are recorded in accumulated other comprehensive loss, net of tax.

Fair Value Measurements

The accounting guidance establishes a framework for measuring fair value and expanded disclosures about fair value measurements. The guidance applies to all assets and liabilities that are measured and reported on a fair value basis. This enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The guidance requires that each asset and liability carried at fair value be classified into one of the following categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

Fair Value Measurements on a Recurring Basis

The fair value of the interest rate swap is determined using observable current market information such as the prevailing Eurodollar interest rates, Eurodollar yield curve rates and current fair values as quoted by recognized dealers, and also includes consideration of counterparty credit risk. The following table presents the fair value of our derivative financial instrument as of September 30, 2014 and December 31, 2013:

		Fair Value Measurements Using:
		Quoted Prices in	Significant	Significant
	Total	Active Markets for	Other Observable	Unobservable
	Fair	Identical Assets	Inputs	Inputs
	Value	(Level 1)	(Level 2)	(Level 3)
Interest rate swap liability as of
September 30, 2014	$2,580	$—	$2,580	$—
Interest rate swap liability as of
December 31, 2013	$3,762	$—	$3,762	$—

Fair Value Measurements on a Nonrecurring Basis

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible fixed assets, goodwill and intangible assets, which are remeasured when the derived fair value is below carrying value on our consolidated balance sheets. For these assets, we do not periodically adjust carrying value to fair value except in the event of impairment. If we determine that impairment has occurred, the carrying value of the asset would be reduced to fair value and the difference would be recorded as a loss within operating income in our consolidated statements of operations.

We had no remeasurements of such assets or liabilities to fair value during the nine months ended September 30, 2014 or September 30, 2013.

Financial Assets and Liabilities Not Measured at Fair Value

The carrying amounts related to cash and cash equivalents (Level 1), accounts receivable, income tax receivable, accounts payable and accrued liabilities approximate fair value due to the relatively short maturities of such instruments.

The fair value of our long-term debt and capital leases are estimated based on estimated current rates for debt with similar terms, credit worthiness and the same remaining maturities. For variable rate loans that re-price frequently, fair values are based on carrying values. The fair value of fixed rate loans is estimated based on the discounted cash flows of the loans using current market rates, which are estimated based on recent financing transactions (Level 3). The fair value estimates presented are based on information available to us as of September 30, 2014. These fair value estimates have not been comprehensively revalued for purposes of these consolidated financial statements since that date, and current estimates of fair values may differ significantly.

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2014

Fair Value Disclosures [Abstract]

Schedule of Fair Value of Derivative Financial Instrument

The following table presents the fair value of our derivative financial instrument as of September 30, 2014 and December 31, 2013:

		Fair Value Measurements Using:
		Quoted Prices in	Significant	Significant
	Total	Active Markets for	Other Observable	Unobservable
	Fair	Identical Assets	Inputs	Inputs
	Value	(Level 1)	(Level 2)	(Level 3)
Interest rate swap liability as of
September 30, 2014	$2,580	$—	$2,580	$—
Interest rate swap liability as of
December 31, 2013	$3,762	$—	$3,762	$—

Carrying Value and Estimated Fair Value of Financial Liabilities

The following table presents the carrying value and the estimated fair value of long-term debt:

	September 30, 2014				December 31, 2013
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Fixed-rate debt	$	634,354	$	635,390	$	487,556	$	488,441
Obligations under capital leases	4,832		5,070		14,965		15,150
Floating-rate debt	535,775		535,775		346,077		346,077
Total	$	1,174,961	$	1,176,235	$	848,598	$	849,668

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Long-Term Debt Long-Term Debt (Details) (USD $)	0 Months Ended
	Jul. 29, 2014 properties	Jan. 28, 2014 properties	Jul. 29, 2014	May 31, 2014	Jan. 28, 2014	Jul. 31, 2013
Long-term Debt, Unclassified [Abstract]
Maximum borrowing capacity				$ 1,200,000,000		$ 860,000,000
Line of Credit Facility, Non-term portion				1,100,000,000
Additional borrowings				100,000,000
Stated amortization rate (percent)				5.00%
Potential increase to borrowing capacity				500,000,000
Face amount			78,000,000.0		80,000,000
Number of centers financed through debt (properties)	5	5
Stated interest rate (percent)			4.70%		5.06%
Periodic payment	$ 700,000	$ 500,000

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Statement of Comprehensive Income [Abstract]
Net income	$ 34,401	$ 34,386	$ 92,520	$ 95,674
Other comprehensive income (loss), net of income tax:
Foreign currency translation adjustments, net of income taxes of $526, $(251), $798 and $872, respectively	(797)	349	(1,188)	(1,357)
Unrealized gains (losses) on cash flow hedges, net of income taxes of $(321), $147, $(473) and $(778), respectively	481	(221)	709	1,167
Other comprehensive income (loss), net of income tax:	(316)	128	(479)	(190)
Comprehensive income	$ 34,085	$ 34,514	$ 92,041	$ 95,484

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Earnings per Share

9 Months Ended

Sep. 30, 2014

Earnings Per Share [Abstract]

Earnings per Share

Earnings per Share

Basic EPS is computed by dividing net income applicable to common shareholders by the weighted average number of shares of common stock outstanding for each year. Diluted EPS is computed similarly to basic EPS, except that the denominator is increased for the conversion of any dilutive common stock equivalents, the assumed exercise of dilutive stock options using the treasury stock method and unvested restricted stock awards using the treasury stock method. Stock options excluded from the calculation of diluted EPS because the option exercise price was greater than the average market price of the common share were 15,540 and 0 for the three months ended September 30,2014 and 2013, respectively and 15,540 and 2,477 for the nine months ended September 30,2014 and 2013, respectively.

The basic and diluted EPS calculations are shown below:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Net income	$	34,401	$	34,386	$	92,520	$	95,674
Weighted average number of common shares outstanding – basic	37,755		41,307		39,165		41,353
Effect of dilutive stock options	19		95		16		87
Effect of dilutive restricted stock awards	139		211		234		166
Weighted average number of common shares outstanding – diluted	37,913		41,613		39,415		41,606
Basic earnings per common share	$	0.91	$	0.83	$	2.36	$	2.31
Diluted earnings per common share	$	0.91	$	0.83	$	2.35	$	2.30

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Changes in Accumulated Other Comprehensive Income (Loss) by Component (Tables)

9 Months Ended

Sep. 30, 2014

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

The following table presents information about accumulated other comprehensive income (loss) by component (net of tax):

	Gains (Losses) on Cash Flows Hedge			Foreign Currency Translation Adjustments			Accumulated Other Comprehensive Loss
Balance at December 31, 2013	$	(2,257	)	$	(3,358	)	$	(5,615	)
Other comprehensive income (loss)	215			(884		)	(669		)
Balance at March 31, 2014	(2,042		)	(4,242		)	(6,284		)
Other comprehensive income	13			493			506
Balance at June 30, 2014	(2,029		)	(3,749		)	(5,778		)
Other comprehensive income (loss)	481			(797		)	(316		)
Balance at September 30, 2014	$	(1,548	)	$	(4,546	)	$	(6,094	)

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Derivative Instruments (Details) (USD $)	Sep. 30, 2014	Dec. 31, 2013	Aug. 31, 2011 Interest Rate Swap	Aug. 31, 2011 Interest Rate Swap Cash Flow Hedging
Derivative [Line Items]
Derivative, notional amount			$ 200,000,000
Derivative, fixed interest rate (in percent)				1.32%
Accumulated other comprehensive loss, net of tax	(1,500,000)
Fair market value of swap contract	$ 2,580,000	$ 3,762,000

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Potential Spin-Off of Real Estate Assets through a Real Estate Investment Trust (Notes)

9 Months Ended

Sep. 30, 2014

Real Estate [Abstract]

Potential Spin-Off of Real Estate Assets through a Real Estate Investment Trust

Potential Spin-Off of Real Estate Assets through a Real Estate Investment Trust

On August 25, 2014, we announced that our Board of Directors and senior management team have initiated a process to explore a potential conversion of real estate assets into a Real Estate Investment Trust (REIT).

In connection with our evaluation of a REIT conversion, our Board of Directors adopted a shareholder rights plan to prohibit ownership of more than 9.8% of our outstanding shares. The rights will expire upon the earlier of August 21, 2015, or the first business day after the closing of the proposed REIT conversion.