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LIFETIME FITNESS

LIFETIME FITNESS. Longyan Yao (Maggie) Su Chen Meechai Taychapipranai (Bo) 26 APR 2012. Overview.

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LIFETIME FITNESS

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  1. LIFETIME FITNESS Longyan Yao (Maggie) Su Chen Meechai Taychapipranai (Bo) 26 APR 2012

  2. Overview • Life Time Fitness operates multi-use sports and athletic, professional fitness, family recreation and spa centers in a resort-like environment in U.S. The fitness centers are located among the residential, business and shopping districts of the surrounding community. • GICS Code: 25301030 Leisure Facilities Source: Google Finance

  3. Stock Market Performance Source: Google Finance

  4. U.S Obesity and Overweight Obesity Overweight Source: Centers for Disease Control and Prevention, CDC

  5. Obesity Cost American Government: 190 Billion COST Corporation: 45 Billion Source: Merriman Curhan Ford, Fitness and Wellness Report

  6. Government Role Currently two bills are before Congress, each encourage exercise and promote healthier lifestyles pre-tax dollars is allowed to pay for physical fitness tax deduction for employers on fitness membership fees Personal Health Investment Today Act of 2011 Workforce Health Improvement Program Act of 2011 Source: Merriman Curhan Ford, Fitness and Wellness Report

  7. Corporation Wellness Program 56% 65% of major U.S corporations provide employer-sponsored wellness program such as gym membership or discounts 41% 27% 66% of companies who provided wellness program also offered to spouses or dependents. 8% 8% 8% Increased Employee Morale Improved Employee Health Reduced Health Care Cost Reduced accidents on the job Reduce Absence Increase Productivity Source: IHRSA Success by Association

  8. Insurance company • Health insurance company provide incentives to exercise, such as discount for gym membership, offer gym membership credit if policy holder exercise at certain level. Source: Merriman Curhan Ford, Fitness and Wellness Report

  9. Market Drivers More people aware of the importance of exercise that will drive demand for fitness industry Households with higher incomes are able to spend more on gym or fitness club Source: IBIS World

  10. U.S Kids 1 hr 50 min Online 2 hr 40 min TV 1 hr 20 min Phone 5hr 50 min Media Day • 1/3 American kids are overweight or obese • No. 1 Health concern among American parents 4hr Sporting activities Week Source: kids health Organization http://kidshealth.org/parent/positive/family/tv_affects_child.html

  11. Industry Overview # $ Source: IHRSA Success by Association

  12. Exercise, exercise, exercise $ $ $ Group fitness classes Multiple equipments Motivated Baby sitting program Variety Workout DVD Limit Equipment Less motivation Distraction

  13. Competitor Comparison - Outside Source: Google

  14. Competitor Comparison - Inside Source: Google

  15. Competitor Comparison - Program Source: each company website

  16. Sports Source: LTM Website

  17. Fitness Source: LTM Website

  18. Lifestyle, Family & Total Health Lifestyle Family Health Source: LTM Website

  19. Membership Monthly Fee Source: LTM IR Page 6

  20. LTM Customers Source: LTM IR Page 6

  21. LTM Location Source: Lifetime Investor Presentation page 5

  22. Store Status Source: Lifetime Investor Presentation page 5

  23. Source of Revenue Source: Lifetime Investor Presentation page 5

  24. Growing membership base Business Model Strong revenue per membership metric Solid same store sales metrics High member utilization and customer satisfaction Solid attrition improvement

  25. Growing Membership Base Source: LTM 2012 10K

  26. Solid Store Sale & Attrition Improvement Source: LTM 2012 10K

  27. High member utilization & satisfaction Source: LTM 2012 10K

  28. Strong revenue per membership Source: LTM 2012 10K

  29. Consistent growth Source: LTM 2012 10K

  30. DuPont Analysis Source: LTM 2012 10K

  31. Ratio Analysis Source: LTM 2012 10K

  32. Cost Structure Source: LTM 2012 10K

  33. Risk Factors • Ability to access additional capital through credit facility • Failure to manage growth effectively • Delay in new center openings • Fail to pass the rising cost related to constructions to customers • New centers in existing location may negatively impact operating margins • Fail to maintain the reputation of our brand Source: LTM 2012 10K

  34. Comparable Source: Bloomberg UK – GOAL, Mexico – SPORTS, US – CLUB, Canada – ICE, Japan – Central Sports, Tosho, Megalos, Renaissance

  35. Multiple Valuation Canada Company’s equivalent P/E Canada Market P/E USA Market P/E Company P/E

  36. Multiple Valuation Comparable company USA Company – CLUB Canada Company – ICE UK Company – GOAL Mexico Company – SPORTS EV/Revenue 1.15x EV/EBIT 15.11x P/E 19.7 Price per share 40.8 Source: Bloomberg UK – GOAL, Mexico – SPORTS, US – CLUB, Canada – ICE, Japan – Central Sports, Tosho, Megalos, Renaissance

  37. Revenue

  38. Recommendation DCF Valuation $29.0 per share Multiple Valuation $40.8 per share Current Stock Price $44.9 per share Watch List

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