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Life Time Fitness (LTM)Andrea Lucido, Jennifer Qiao, and Connie Liu

Yale University

smart woman securities11/7/2010


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L ife Time FitnessOverview


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L ife Time Fitness: Ticker: LTM Fast-growing, resort-like recreation center 12 month target price: $64 71% upside from most recent closing

Snapshot of Stock Pitch


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R eason 1: LTM targets niche market R eason 2: Fast growing health and fitness

industry R eason 3: LTM's unique services gives it

competitive edge over peersR eason 4: Undervalued compared topeers

Investment Thesis


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Industry: High-end, health and wellness industry W hy high-end = attractive now ?

E conomic downturn increased free time of

the affluent without decreasing their spendingpower by much W hy fitness center = attractive now ?

Obsession with fitness and body image: bothfemales and males, from teens to adults

National epidemic in obesity, diabetes, andheart diseases leads to increasing attention to

health

Industry Overview


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LTM Overview C E O and founder: Bahram Akradi

Ex pansive selection of premiumamenities and services from childcare centers to cafes

89 centers in 1 9 states As of Dec. 31, 200 9 :

$8 37 million in revenues17,400 employees

C losing Price (11/3/2010): 37.77Market cap: 1.53B

Average 3-month trading volume:36 8 ,964Forward P/ E : 16.27


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LTM E conomic Model

Attracting large membership base within first threeyears after new center is opened, and retaining thosemembers and maintaining tight e x pense control

R evenue growth: 9% , 200 9 R evenue: $8 37 MillionE BITDA growth: 9% , E BITDA: 240.0 millionNet Income growth: 1 % , Net Income: $72.4 millionNo required long-term member contracts, providemembers fle x ibility


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Ex perienced senior management team

C omprehensive and convenient programs andservices A value proposition that encouragesmembership loyalty

LTM C ompetitive Strengths


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Investment Details


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Fast Growing Industry

LTM is situated in a strong, continuouslygrowing industry

I ncreasing risk of disease related to obesity, mediapresence, national health trends

Exp enses % of Readers NOT willing toCut Exp ense out of Budget

Gym Membership 4 8%

Ex tra C ar 35 %

Premium C able 30 %

E ating Out 41 %

Big vacations 27 %

Sporting E vents 13 %Source: Money Magazine, 200 8


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Fast Growing IndustryIm p act of Media

Increased awarenessof e x ercise as anintegral component tohealth and fitnessFree promotion frompublications to tabloidse.g. Journal of

American Media

AssociationC onstant reports onnew research,prominent celebrities


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Fast Growing Industry

National TrendsGrowing consciousness with staying healthyR elated industries also show increase insales, e.g. organic foods consumptionU.S. sales of organic food and beverageshave grown from $1 billion in 1 99 0 to $24. 8

billion in 2009

.Sales in 200 9 represented 5.1 percent growthover 200 8 sales.Source: Orga nic T rade Associ at ions 2010 Orga nic In du s try S urvey


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Projected Industry Growth

29% growth rate from 200 8 to 201 9

Health club memberships projected to reach 50 million by 2010 i.e. 25 %

growth rate from 20063From 2004 to 200 8 :

Memberships of U.S. health clubs increased 10 %

U.S. health club industry revenues increased 2 9%


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Mission:To p r ov i de a n edu c at ion al, e n terta inin g, f r i e ndly, inv i t ing, f unc t ion a nd inno vat i ve

ex p er i e nc e of uncomp r omisin g qual i ty that meet s the health a nd fi t ne ss n eed s of the

e n t i re f a mi ly

Not Just a Gym


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Family-Oriented C hild centers, family lessons, summer

camps Family Membership Plans

C ommunity-Oriented

Involved in wide range of communityevents e.g. L ife Time Fitness Triathlon,Healthy cook-offs U.S. Women'sTriathlon series, R ace to Toyota C up

Not Just a Gym


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R esort quality: L ife Spa and Salon L ife C afe Ex perience L ife Magazine Indoor and outdoor swimming and

golfing facilities Squash and rock climbing facilities

Not Just a Gym


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E ducational Personal trainers L ife L ab: personal health and fitness

assessments Group fitness programs

Nutritional Seminars

Not Just a Gym


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Niche Market Targeting

Affluent are increasing their lu x ury and discretionaryspending

2010 Survey of Affluence and W ealth in America:

6-8% increase in lu x ury spending since 2007Higher-income individuals are enjoying benefits of their wealth

0 2 4 6 8 10 12


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Provision of value-added services is attractive toaffluent

65 % say they have become smarter shoppers W e have t wo c hoic e s. W e c a n redu c e due s , c ut

p r ic e s l ik e everyb ody el s e, a nd c ut s erv ic e s a nd p r ogra ms...Ins tead, w e have de ci ded t o add value no t by c utt ing pr ic e s , but by add ing pr ogra mmin g

Bahram Akradi, C E O, 3Q C onference C allL ife Time Bucks


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Family-oriented approach is attractive at thistime

C h i ldre n's opinions are p lay ing a greater r o le in the f a mi ly 's d isc ret ion ary sp e nd ing Dr. Taylor, Vice- C hairman of the Harrison Group, which conducted affluence survey

Value-price additional services for children of

membersSummer programs for children provideincreased seasonal revenue



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Discounted C ash Flow

Based on Discounted C ash Flow, 71 % upside fromclosing price of 37.77To be more conservative, 47 % upside from closingprice


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L ife Time Fitness vs. Peers

Price/E arnings

Price/ProjectedE arnings

Price/ Book Price/ Sales

L ife TimeFitness 17.7 9 15.34 1. 83 1.67

Peers 31.65 27.45 6.30 3.03


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Member attrition rates historically high C oncerns about overcrowding 2010 key goal to reduce attrition

Potentially low liquidity due to large size of branches

C ash flow

Too high-end for many consumersC oncentration of branches in theMinneapolis region

Investment R isks


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Fast growing, competitively strongcompany in fast growing industry

12 month target price: $ 6471 % upside from most recent closing

R ecap


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Q&A

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