1. L IFETIME F ITNESS (NYSE: LTM) April 17, 2014 1 Jason Chan Michael DeRenzo Jason Mudrock

2. A GENDA Introduction Company Overview Macroeconomic Outlook Relevant Stock Market Prospects Financial Analysis Valuation Recommendation 2

3. C OMPANY O VERVIEW 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 3 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION Sources: LTM Form 10-K

4. C OMPANY O VERVIEW 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 4 Continue to expand nationally and internationally Expand product line Management Outlook Sources: LTM Form 10-K F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

5. C OMPANY O VERVIEW 5 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION Sources: LTM Form 10-K

6. M ACROECONOMIC O UTLOOK – K EY E XTERNAL D RIVERS Disposable Income Time spent on leisure and sports Number of adults aged 20 to 64 Participation in sports Fighting Obesity 6 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION Sources: http://clients1.ibisworld.com/reports/us/industry/currentperformance.aspx?entid=1655

7. M ACROECONOMIC O UTLOOK – K EY E XTERNAL D RIVERS 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 7 Sources: http://www.cdc.gov/obesity/data/adult.html F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

8. M ACROECONOMIC O UTLOOK – K EY E XTERNAL D RIVERS Obesity Trends Among U.S. Adults 8 No Data <10% 10%–14% 15%–19% 20%–24% 25%–29% ≥30% 19902000 2010 Sources: http://www.cdc.gov/obesity/data/adult.html F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

9. I NDUSTRY O VERVIEW – H EALTH AND F ITNESS C LUBS 9 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION Sources: http://clients1.ibisworld.com/reports/us/industry/currentperformance.aspx?entid=169#CP 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

10. 10 I NDUSTRY A NALYSIS – H EALTH AND F ITNESS C LUBS RevenueRevenue Growth Stable positive projected growth rates Revenue forecasted to grow at a CAGR of 2.9% from 2013 to 2017 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION Sources: http://clients1.ibisworld.com/reports/us/industry/currentperformance.aspx?entid=1655

11. U NDERSTANDING M ARKET P OWER 11 StrengthsWeaknesses -Large variety of programs and services -Member loyalty -Convenient locations -Proven, consistent member growth -Cyclicality of the industry -Month to month memberships OpportunitiesThreats -Opening of new centers -Acquisitions of health clubs/fitness centers -Very intense competition -At home gyms/workout facilities -Sensitive to macroeconomic conditions F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION Source: http://advantage.marketline.com/Product?pid=MLIP0251-0001&view=d0e393

12. 12 C OMPANY A NALYSIS – L IFETIME F ITNESS RevenueRevenue Growth Revenue increased from 2010 to 2013 with a CAGR of 9.56% Significantly outperformed the industry by >400% from 2010 to 2013 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION Sources: http://clients1.ibisworld.com/reports/us/industry/currentperformance.aspx?entid=1655

13. P ORTERS ’ F IVE F ORCES 13 Power of Suppliers: MediumSubstitutes: Medium Switching costs are not high Quality of training of employees provided by third parties is vital Consumers can choose to find other means of fitness such as an in home gym, but standards are much worse Invest time in other activities – work, shopping, etc Barriers to Entry: MediumPower of Buyers: Medium Capital intensive industry Economies of scale Reputation of products is pertinent (safety, quality, etc) Large number of suppliers and buyers Switching costs are very low Changes in disposable income could lead to cautious spending on leisure activities Competition: High Very segmented market, even at the top Can differentiate through additional tailored services F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION Sources: http://advantage.marketline.com/Product?pid=MLIP0251-0001&view=d0e393

14. R ECENT S TOCK P ERFORMANCE 14 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION 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

15. F INANCIAL R ATIO A NALYSIS 15 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

16. F INANCIAL R ATIO A NALYSIS 16 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

17. R EVENUE P ROJECTIONS 17 Increasing the number of centers Sources: Form 10-K F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

18. R EVENUE P ROJECTIONS 18 Membership growth rates were 8.44%, 12.61%, 2.4%, and 0.24% from 2010 to 2013 respectively

19. D ISCOUNT R ATE C ALCULATION 19 80% weight applied to CAPM, 20% weight applied to ROE F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

20. DCF V ALUATION 20 F INANCIAL A NALYSIS C OMPANY O VERVIEW S TOCK M ARKET P ROSPECTS M ACRO O UTLOOK V ALUATION

21. C OMPARABLE C OMPANIES 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 21

22. R ECOMMENDATION 22 W ATCH L IST 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