Lifetime Fitness (NYSE: LTM)

1. Lifetime Fitness (NYSE: LTM) Jason Chan Michael DeRenzo Jason Mudrock April 17, 2014

2. Agenda • Introduction • Company Overview • Macroeconomic Outlook • Relevant Stock Market Prospects • Financial Analysis • Valuation • Recommendation

3. Company Overview • Headquarters: Chanhassen, Minnesota • IPO in 2004 • Market Cap: 2.03 Billion, Price: $50.55 as of April 16, 2014 • “The Healthy Way of Life” Company • Built around achieving health objectives & fitness goals • Sports, professional fitness, family recreation, and spa destinations • Operates 109 centers (as of Feb 28th 2014) • 29 major markets in the USA and Canada • 64 are current model design, 6.5-10.5k memberships (114k sq feet) • Opening a Des Moines two-floor, 166k sq feet facility in Summer 2014 Sources: LTM Form 10-K Company Overview Macro Outlook Stock Market Prospects Financial Analysis Valuation

4. Company Overview • Wide variety of programs for adults and children • Individual/team sports, yoga, personal training, spa, etc • Other sources of income include • Line of nutritional products and supplements • Magazine, Experience Life • Athletic events division (holds running, cycling, and triathlon events) • Health programs/assessments • Corporate/Insurance partnerships • Management Outlook • Continue to expand nationally and internationally • Expand product line Sources: LTM Form 10-K Company Overview Macro Outlook Stock Market Prospects Financial Analysis Valuation

5. Company Overview Sources: LTM Form 10-K Company Overview Macro Outlook Stock Market Prospects Financial Analysis Valuation

6. Macroeconomic Outlook– Key External Drivers • Disposable Income • Time spent on leisure and sports • Number of adults aged 20 to 64 • Participation in sports • Fighting Obesity Sources: http://clients1.ibisworld.com/reports/us/industry/currentperformance.aspx?entid=1655 Company Overview Macro Outlook Stock Market Prospects Financial Analysis Valuation

7. Macroeconomic Outlook– Key External Drivers • Fighting Obesity • Fighting fat is a major factor • 35.7% of U.S. adults • 17% (or 12.5 million) of children/adolescents aged 2—19 years • 42% of adults are expected to be obese by 2030 Sources: http://www.cdc.gov/obesity/data/adult.html Company Overview Macro Outlook Stock Market Prospects Financial Analysis Valuation

8. Macroeconomic Outlook– Key External Drivers • Obesity Trends Among U.S. Adults 2010 2000 1990 No Data <10% 10%–14% 15%–19% 20%–24% 25%–29% ≥30% Sources: http://www.cdc.gov/obesity/data/adult.html Company Overview Macro Outlook Stock Market Prospects Financial Analysis Valuation

9. Industry Overview – Health and Fitness Clubs Current Performance • Improved sales over the past 5 years • Smaller gyms have benefited from the recession – low cost • Consumers desire for 24/7 operating hours Keys to Success • High consumer discretionary income • Capturing population growth and demographic changes • Fighting obesity, diabetes and other aliments Industry Trends • Smaller gyms attempting to steal market share in niche markets • Moving from low-cost to higher quality fitness centers • Public health campaigns • Consumer target is 18 to 54 years old Sources: http://clients1.ibisworld.com/reports/us/industry/currentperformance.aspx?entid=169#CP Company Overview Macro Outlook Stock Market Prospects Financial Analysis Valuation

10. Industry Analysis – Health and Fitness Clubs Revenue Revenue Growth • Stable positive projected growth rates • Revenue forecasted to grow at a CAGR of 2.9% from 2013 to 2017 Sources: http://clients1.ibisworld.com/reports/us/industry/currentperformance.aspx?entid=1655 Company Overview Macro Outlook Stock Market Prospects Financial Analysis Valuation

11. Understanding Market Power Source: http://advantage.marketline.com/Product?pid=MLIP0251-0001&view=d0e393 Company Overview Macro Outlook Stock Market Prospects Financial Analysis Valuation

12. Company Analysis – Lifetime Fitness Revenue Revenue Growth • Revenue increased from 2010 to 2013 with a CAGR of 9.56% • Significantly outperformed the industry by >400% from 2010 to 2013 Sources: http://clients1.ibisworld.com/reports/us/industry/currentperformance.aspx?entid=1655 Company Overview Macro Outlook Stock Market Prospects Financial Analysis Valuation

13. Porters’ Five Forces Sources: http://advantage.marketline.com/Product?pid=MLIP0251-0001&view=d0e393 Company Overview Macro Outlook Stock Market Prospects Financial Analysis Valuation

14. Recent Stock Performance • Currently Lifetime’s stock price is above both the 20 and 200 day moving average • Sell-off in February 2013 attributed to missed estimates Source: Yahoo Finance Company Overview Macro Outlook Stock Market Prospects Financial Analysis Valuation

15. Financial Ratio Analysis Company Overview Macro Outlook Stock Market Prospects Financial Analysis Valuation

16. Financial Ratio Analysis Company Overview Macro Outlook Stock Market Prospects Financial Analysis Valuation

17. Revenue Projections • Increasing the number of centers Sources: Form 10-K Company Overview Macro Outlook Stock Market Prospects Financial Analysis Valuation

18. Revenue Projections • Membership growth rates were 8.44%, 12.61%, 2.4%, and 0.24% from 2010 to 2013 respectively

19. Discount Rate Calculation 80% weight applied to CAPM, 20% weight applied to ROE Company Overview Macro Outlook Stock Market Prospects Financial Analysis Valuation

20. DCF Valuation Company Overview Macro Outlook Stock Market Prospects Financial Analysis Valuation

21. Comparable Companies • There is only one publicly traded company (Town Sports International) that is operated in the United States. • Negative equity • Resorted to looking at international companies • Vastly different Market Cap, Leverage, TEV, Revenue

22. Recommendation • Lifetime Fitness is currently trading at $50.55, as of April 16th • Lifetime Fitness’s DCF intrinsic value: $49.14 • Membership growth is optimistic relative to projected industry growth • No comparable companies WATCH LIST