Life Time Fitness Inc. (LTM - $18.91) July 15, 2009 Initiating Coverage STRONG BUY

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Consumer-Retail Life Time Fitness Inc. (LTM - $18.91) July 15, 2009 Initiating Coverage STRONG BUY

Financial Summary Key Points: Rev(mil) 2008A 2009E 2010E • We are initiating research coverage of Life Time Fitness (LTM) with a Strong

Mar $184.5 $206.4A $219.3E Buy rating and a $28 price target based on our 2010 EPS estimate of $1.88 and a Jun $192.4 $213.7E $226.2E P/E of 15 times.

Sep $198.8 $217.0E $233.8E • Life Time Fitness is the clear “category killer” in the health and fitness center Dec $194.0 $209.3E $230.0E industry. LTM’s centers offer the broadest array of services of any national or regional FY $769.6 $846.4E $909.3E chain, and the pricing of these services is extremely competitive. LTM now operates 84 P/Sales 1.0x 0.9x 0.8x centers in 16 states, and should generate 2009 sales of $846 million.

• Life Time Fitness stumbled in 2008-2009, as its aggressive growth strategy relying on EPS 2008A 2009E 2010E company-owned real estate ran smack into the recession, financing difficulties, and Mar $0.44 $0.38A $0.40E higher customer attrition. Jun $0.50 $0.42E $0.43E • Sep $0.55 $0.47E $0.53E We believe LTM’s 2009 second quarter results should be inline to better than Dec $0.33 $0.39E $0.48E Street expectations, and in particular the company will start to shift its tone from a focus on survival and crisis management to one that is more confident in regards to FY $1.83 $1.58E $1.88E earnings, cash flows, balance sheet issues, and eventual earnings growth. P/E 10.3x 12.0x 10.0x • Relative results should improve through the reminder of 2009. Specifically, our model provides negative EPS comparisons in 2009’s 2Q and 3Q, and positive Price: $18.91 comparisons starting in the 4Q. We are modeling EPS of $1.58 for 2009, inline with 52-Week Range: $41.50 -$7.07 consensus of $1.61. Target: $28 Rating: Strong Buy • Street estimates for 2010 EPS are too low. We are initiating with a 2010 EPS estimate of $1.88, well above the consensus 2010 EPS estimate of $1.71 and the highest Shares Outstanding: 40.27 mil Mkt. Capitalization: $762 mil current estimate of $1.81. We believe there is significant upside to our new Street-high Ave. Volume: 557,000 estimate. Instit. Ownership: 96% • LTM is about to become a significant cash generator. Management has BV / Share: $16.66 Debt / Tot. Cap.: 51% repositioned LTM to maximize cash flow instead of rapid unit growth. This transition Est. LT EPS Growth: 15% is about complete and should be visible in 2009 3Q results.

• Two interesting side stories could provide interesting positive spin. First, LTM is Company Description looking to develop opportunistic real estate at much lower investment levels, which

Life Time Fitness is the dominant “category would incrementally lift LTM’s performance. Second, its extensive portfolio of real killer” in the health and fitness center estate implies a significant liquidity opportunity in a healthy economy. industry. It operates 84 centers that • Rising interest rates present an intermediate-term risk. One risks to LTM’s generate an average $10.3 million each in balance sheet and profitability is the company’s revolving credit facility, which is tied to revenues and have contribution margins near LIBOR. If LIBOR rates rise faster than we have modeled, it could reduce earnings 40%, among the highest of all retail and expectations by 3% to 5% depending on the time horizon and magnitude of the change. service companies. The Company is headquartered in Chanhassen, Minnesota INVESTMENT THESIS:

and was founded in 1992. Life Time Fitness stumbled in 2008-2009 as its aggressive growth strategy proved unsustainable in the face of the recession, financing difficulties, and higher customer attrition. As a result, LTM has scaled back unit growth and is concentrating efforts on maximizing cash flow. This should result in an improving financial profile the next 12-18 months and position LTM for an acceleration of growth in 2011 and beyond. Our Strong Buy rating and $28 target price reflects an operational turnaround unfolding the remainder of this year and sharply improved EPS next year. Feltl and Company Research Department. Please see important disclosures on pages 14 to 16. 225 South Sixth Street, Suite 4200 Minneapolis, MN 55402 1-866-655-3431

COMPANY OVERVIEW Life Time Fitness has clearly emerged as the category dominant participant in the health and fitness center industry. LTM’s typical centers are bigger than those of any other major competitor, they offer more programs and services, and all of this at very competitive rates. As LTM works to further improve its value proposition with its members and improves cash flows and the balance sheet, the company should be positioned well to start accelerating growth in late 2010 and beyond.

Prototype Facility Life Time Fitness’s prototype facility offers a category dominant assortment of programs and services, including large indoor and outdoor recreational pools, climbing walls, basketball and other courts, 400 pieces of cardiovascular and resistance training equipment, extensive health and fitness classes, spas offering massage and beauty services, and cafes.

Life Time Fitness Amenities, Services, Activities, and Events

Amenities Services Activities and Events Basketball/Volleyball Courts 24-Hour Availability Aquatics Cardiovascular, Resistance, and Fitness Assessments Athletic Leagues Free Weight Equipment Educational Seminars Birthday Parties Cycle Theatres Experience Life Magazine Eastern/Martial Arts Group Fitness Studios Towel Service Kid's Clubs Lap Pool Locker Service Pilates Racquetball/Squash Courts Massage Therapy Group Fitness Classes Child Center Nutritional Products Scuba Lessons Rock Climbing Cavern Personal Training Studio Cycling Saunas T.E.A.M. Programs Sports Training Camps Two-story Waterslides Cardio O2 Run Summer Camps Whirlpool Spas Cardiovascular and Resistance Swimming Lessons Zero-Depth Entry Swimmings Pools Training Yoga LifeStudio Metabolic Testing Educational Camps LifeCafe Nutrition Coaching Dance Classes LifeSpa Endurance Coaching Athletic Events Pool-side Bistro Member Advantage Run Club, Cycle-Club and other Men's Women's and Family Total Health Interest-driven clubs Locker Rooms myLT.com

Source: Life Time Fitness 2008 10-K

Life Time Fitness’s prototype center averages 113,000 square feet, and is designed to accommodate a targeted capacity of 8,500 to 11,500 memberships. Prototype centers typically employ 200-300, and 75% of these positions are part-time. Approximately 60% of LTM’s centers are of the current model format. Total capital expenditure for a prototype center is $30 to $35 million, sales per prototype center average near $13.7 million (this is the average for the 22 “mature” clubs), and the typically center-level contribution margin of 44.4% provides an attractive 19% ROI on an unlevered center. If debt is used to fund 75% of the center, the equity ROI jumps to 51% - a level virtually unmatched by any other big box retailer. And these numbers should only get better: LTM’s historical data suggests centers will peak at revenues near $17 to $20 million per location.

Life Time Fitness Prototype Center Performance

Avg. 22 Mature Long-term $ in millions 2009E Centers Goal Revenues/center$ 10.3 $ 13.7 $ 18.5 Center contribution$ 3.9 $ 6.1 $ 9.0 Contribution margin 38.4% 44.4% 48.5% Center investment$ 22.0 $ 32.5 $ 32.5 ROI: 100% equity 17.9% 18.7% 27.6% 75% debt 47.6% 50.9% 86.4%

Source: Life Time Fitness and Feltl and Company estimates

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Life Time Fitness presently operates 84 centers in 18 states and 22 major markets. Its most developed areas include its home market of Minneapolis-St. Paul (24 locations, only two of which are the large format, current prototype), greater Chicago (9 units, all current prototype), Dallas-Ft. Worth (8 locations, 7 current prototype), Detroit (5 locations, 3 current prototype), and Houston (5 locations, all current prototype).

The long-term opportunity for new centers remains immense. Its penetration in markets like Dallas-Ft. Worth suggests a nationwide opportunity of 500 or more units, roughly one unit for every 450,000 people living in Metropolitan Statistical Areas. The number of units in Minneapolis-St. Paul may be misleadingly high at 24, but the combined 2.0+ million square feet of these units may also prove illustrative of the opportunity. With a population of roughly 3 million, Minneapolis-St. Paul has 0.57 square feet of center space per capita. Cutting this penetration in to 0.30 square feet per capita for the metropolitan population of the U.S. still yields a national opportunity of near 70 million square feet of center space, or roughly 600 total units based on the present prototype size of 113,000 square feet.

LTM Positioned as Value and Convenience Leader Life Time Fitness primarily positions its centers to be a value leader. Membership costs of $50 to $80 a month for individuals or $100 to $150 a month for a couple or family membership compares favorably to the membership costs at most other competitors, despite the fact LTM offers a vastly greater array of programs and services. Children under the age of 12 can be added at a nominal cost, and complimentary services include group fitness classes, educational seminars and fitness assessments, towel and locker service, and a subscription to LTM’s magazine, Experience Life. LTM’s centers are typically open 24 hours a day, seven days a week. The breadth and depth of equipment and facilities helps to ensure little or no waiting time for users. And customers can use child center services up to two hours per day.

Growth Strategy LTM’s historical growth has been driven three ways. First, LTM aggressively opened new centers, adding as many as 11 in one year (2008). Second, LTM sought to increase membership at existing centers and optimize membership dues. Third, LTM tried to increase in-center products and service revenue. This strategy served LTM well until the financial and economic crisis of 2008-2009 made financing difficult, drove member attrition rates higher, and consumers turned more frugal on spending.

Growth is slowing considerably in 2009-2010 as LTM works to more effectively manage its cash flows and improves its financial structure. Unit growth has slowed from mid-teens last year to mid-single digits this year and next. LTM has stated it plans to keep a slower growth rate intact as it works to grow cash flow, reduce debt, and position the company for faster growth with internally generated funds rather than external borrowings. We believe eventually LTM will be able to increase its unit growth to the high-single digit rate, which combined with positive comps should position the company for long-term EPS growth of 15% to 20%.

Customer Service Initiatives Life Time Fitness is putting significant effort into customer service initiatives to try and drive better performance and lower customer attrition in this difficult economic environment. Management is seeking to improve the value proposition for Life Time Fitness members by enhancing and expanding activities and perks in the centers, sales, membership and online areas.

The Big 16 is becoming an important focus in the centers. Each center develops monthly 16 events marketed to local members, creating excitement and increasing LTM’s relative importance to members. One LTM general manager we spoke to described a recent candlelit date night at his center that drew 250 members. The July 2009 calendar for another facility (Cary, N.C.) listed the following activities for this month:

July 4: Tour de France Celebration Ride [cycling]

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July 9: Mountain Strategy Guide [climbing wall] July 10: Moonlight Masters Swim and Summer Shootout [squash] July 11: T.E.A.M. Texas Hold’em [weight loss] July 12: General Manager’s Ice Cream Social July 15: Run into Zen July 18: Tribute to the Tour [group fitness] July 21: Nutrition Smart Shopping July 23: Summer Shootout [racquetball] July 24: Take a Peak Into Pilates [Lifestudio] July 25: Family Summer Camp [kids] and Ultimate Hoopshoot [basketball] July 26: Strongest Person Challenge [personal training] July 27: SPArty [LifeSpa and Salon] July 31: Junior Tennis Rocks! [tennis]

LTM is also trying to leverage its customer relationships by changing its sales culture. LTM historically rewarded salespeople for each “unit” or membership added. Now the emphasis is on adding customers to each unit, i.e., spouses and children. LTM has found that the greater the number of members per membership, the less likely a membership is to lapse. LTM is also seeking to add customer value by enhancing its Members Advantage program. Through this LTM offers discounts on services and retailers like Costco, Verizon Wireless, The Sports Authority, US Bank, and Marriott, as well as things like lift tickets at ski hills and greens fees at golf courses.

MyLT.com is Life Time Fitness’s connection with individual members. Through this site members can access a variety of information about their center, its activities, and their personal fitness. LTM has recently launched a second release of this site (in early July), and management hopes to make this a more effective tool at strengthening connections with members.

Management LTM’s management team is led by Bahram Akradi, the company’s founder and visionary leader. Mr. Akradi understands the health and fitness industry exceptionally well, knows what his members want, and consistently strives to position Life Time Fitness to meet these needs. His team includes a combination of internally-developed and externally sourced senior management. We believe this team is intensely focused on improving operational performance and cash flows, which should drive a stronger financial structure and eventual return to substantial growth.

Bahram Akradi, Chairman of the Board of Directors and CEO. Mr. Akradi founded Lifetime Fitness in 1992 and has been a director since the company’s inception. He was named to both of his current roles in May of 1996. Prior to Lifetime Fitness Mr. Akradi was the co-founder and Executive Vice President of U.S. Swim & Fitness Corporation from 1984-1989. Mr. Akradi has over 25 years of experience in Healthy Way of Life initiatives.

Michael Robinson, Executive Vice President and CFO. Mr. Robinson joined Lifetime Fitness in his current role in March of 2002, from Next Generation Network, Inc. where he was the Executive Vice President and CFO from April 2000 to March 2002. Prior to that he spent 17 years with Honeywell International, Inc. in various positions.

Eric Buss, Executive Vice President, General Counsel and Secretary. Mr. Buss joined Lifetime Fitness in September 1999 as Vice President of Finance and General Counsel. Mr. Buss was elected Secretary in September 2001 and Executive Vice President in August 2005. Prior to Lifetime Fitness Mr. Buss was and associate the law firm Faegre & Benson LLP from 1996 to August 1999.

Scott Lutz, Executive Vice President and CMO. Mr. Lutz joined Lifetime Fitness in his current role in May of 2009, from Best Buy Co. where he was a Senior Vice President of New Business Development and Marketing since 2006. Prior to that he held executive management positions at Procter & Gamble, General Mills, and ConAgra.

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Mark Zaebst, Executive Vice President. Mr. Zaebst joined Lifetime Fitness in January of 1996 as Director, Real Estate, and was named Senior Vice President of Real Estate and Development in December 2001. Mr. Zaebst was name Executive Vice President in March 2006.

INDUSTRY OVERVIEW Lifetime Fitness operates in the $17.6 billion health and fitness industry which has doubled in size over the past 10 years. Working out at a health club is said to be the number one sporting activity in the United States according to the National Sporting Goods Association. According to IHRSA, there are currently 30,022 health clubs employing 266,000 people and there are currently 45.5 million health club members in the U.S. The industry’s goal is to reach 50 million health club members by 2010. Currently club memberships are 48% male and 52% female, and nearly 90% of America has yet to join a health club. Health club members attend their club 92 days a year on average and have an annual income of $76,000. Industry demand is typically driven by demographic changes, consumer confidence, available free time, and the level and growth rate for disposable income.

We expect favorable trends will drive the health and fitness industry for many years. First, the baby boom generation of 78 million people between the ages of 44-64 is the most health-conscious generation in U.S. history. Over the past 15 years the fastest-growing segment of club memberships has been seniors as exercise has shown to help prevent disease, reduce stress, and live a happier, healthy life. With a large number of baby boomers moving into this age bracket we look for this trend to continue. 34% of U.S. adults are overweight and 27% are obese. This represents an increase of more than 60% over the past ten years, with an average health care cost of $100 billion. Due to the health effects and costs we expect increased awareness of health and fitness for consumers by healthcare companies through special promotions using health clubs to get people to work out more and live healthier lives. Only 10% of the population today is seeking their fitness needs in health clubs, which leaves a large population for future expansion.

Industry demand over the past year has slowed due to the decline in consumer spending and rising unemployment. In addition to continued declines in consumer spending and unemployment there are other near term negatives that could affect the industry: 1) Lower membership dues because of pressure by consumers and increased competition; 2) Difficulty for companies to raise capital to continue expansion; 3) The ability to select the best building; and 4) Membership attrition is becoming a major problem

Competition The competitive landscape within the health and fitness industry is highly fragmented. According to First Research, the largest 50 companies hold only 30 percent of the market and only a dozen companies own more than 10 centers. A typical large fitness center has about $3 million of annual revenue and 65 employees. Each company is fighting for any competitive advantage dealing with brand recognition because of the benefits that come from it and small companies are just trying to make a differentiated product. Because of this competition marketing plays a large role in the overall traffic and success of a company. Demand is driven primarily by demographic trends and consumer income.

Much like the overall industry, the home fitness equipment industry is also highly fragmented, although consolidation has been considerable in recent years. At the moment there are about 100 manufactures in the U.S. with combined annual sales of $3 billion. The home fitness equipment industry allows individuals to exercise by themselves in a very limited space often from inside their house. This can be appealing to anyone with a busy work schedule or for someone who is trying to avoid the cost of paying the monthly dues to a full service club membership. In a recession like we are experiencing in our economy today where disposable income is down, home fitness equipment may be a viable option for someone trying to save money.

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Town Sports International Holdings, Inc. (CLUB) is the fourth largest operator of fitness centers in the U.S. and second largest in the Northeast and Mid-Atlantic regions with over 166 clubs under four key names; “New York Sports Clubs,” “Boston Sports Clubs,” “Philadelphia Sports Clubs,” and “Washington Sports Clubs”. Town Sports focuses on offering clubs close to member’s workplaces and homes and target the upper market segment, comprising individuals between 21 and 60 with incomes between $50,000 and $150,000. Town Sport’s clubs are 26,000 square feet on average and provide a broad array of exercise and strength equipment. Their goal is to become the most recognized brand health club in the four regions they serve. Currently there are 510,000 members and 2008 revenue was $506.7 million.

24 Hour Fitness (private) is the world’s largest privately-held fitness center chain in terms of memberships with over 3 million members and 400 clubs in 16 states, and over 20 clubs in five Asian countries. 24 Hour Fitness employs over 20,000 people and their most recent revenues were $1.2 billion. 24 Hour Fitness focuses on round-the-clock availability as well as convenient locations to compensate for those with busy schedules. However not all the clubs are the same so some people may have to choose a location that is further away to get all the amenities needed. They offer 6 levels of clubs: Fit-Lite, Express, Active, Sport, Super-Sport, and Ultra Sport. The largest clubs are the Ultra-Sport with over 100,000 square feet and the smallest is Fit-Lite which contains only cardio and light weight machines. Single memberships run about $30 a month with a $30 enrollment fee and $120 a month with a $120 enrollment fee for a family of four. 24 Hour Fitness has been heavily focused on the west coast, primarily its home state of California, but they have started expanding further across the U.S. to 16 states.

Gold’s Gym (private) is the largest chain of co-ed clubs in the world with more than 600 facilities in 43 states and 25 countries. Commonly referred to as “the Mecca of Bodybuilding”, Gold’s Gym is appealing to bodybuilders and those seeking pure strength. Gold’s Gym received a lot of recognition by being featured in the 1977 documentary movie Pumping Iron and that starred Arnold Schwarzenegger. Over the years Gold’s Gym has expanded from being a bodybuilding club and now offers a variety of amenities such as the latest cardiovascular and strength equipment, as well as classes like yoga, group cycling, mixed martial arts, muscle endurance, and Pilates. Single memberships run about $49 a month with a $99 enrollment fee and $82 a month with a $99 enrollment fee for a family of four and a 12 month contract.

Bally Total Fitness is the largest commercial operator of fitness centers in North America with over 3.5 million members and 400 clubs in the U.S., the Caribbean, Mexico, S. Korea, and China. Bally filed for bankruptcy due to $761 million of outstanding debt in August of 2007 and announced emergence from bankruptcy, 100% owned by a hedge fund, Harbinger Capital in October of 2007. Bally once again filed for bankruptcy due to the credit crises in December of 2008, and is still in this state. Bally focuses on providing a full-service club at an affordable price and at its peak Bally arguably had the #1 recognized fitness brand with over 440 clubs located in 29 states. Bally’s clubs are 30,000 sq. ft on average and single memberships run about $38 a month with a $75 enrollment fee and $99 a month with a $192 enrollment fee for a family of four.

LA Fitness (private) is one of the more popular up-and-coming fitness companies based in Irvine, California with over one hundred locations across the U.S. LA fitness’s original strategy was to purchase and operate underperforming clubs, but recently developed a 45,000 square foot health and fitness club as their prototype. Single memberships run about $35 a month with a $99 enrollment fee and $30 a month with a $396 enrollment fee for a family of four. The company has said they plan expansion of at least a dozen new locations over the next few years, focusing on large urban areas and investing seven to eight million dollars per site. LA Fitness focuses on providing a wide variety of amenities at an affordable price and delivery excellent customer service.

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WHIP ACT/PHIT ACT IMPLICATIONS Life Time Fitness would benefit from two pieces of recently introduced legislation, the Workplace Health Improvement Program (WHIP) Act (H.R. 2106) and the Personal Health Investment Today (PHIT) Act (H.R. 2105). The first act would allow employers expense deductibility of payments for employee wellness programs, including some or all fees associated with health and fitness club memberships. The second act would allow individuals to pay for these same items through a flexible spending account or health services account. Obviously, passage of either act would be favorable for the industry and LTM.

EARNINGS OUTLOOK We believe that Life Time is seeing a trough in its performance from a variety of measures, including comps, margins, EPS comparisons, cash flows and, inversely, debt levels. Over the next several quarters we expect all of these items will reverse as LTM’s initiatives and an improving economy drive stronger performance.

2009 Second Quarter Our model provides continued negative comps in the 2009 2Q, levels that should be similar to the -2.7% experienced in the 2009 1Q. One new center opened during the quarter, and no additional centers are planned until next year. Total revenue growth will continue to slow as lower unit development and negative comps continue to influence operations. We model the center contribution margin will continue to fall, and that advertising and marketing expenses will grow as a percent of revenue as LTM seeks to reverse its membership attrition trends. We model EPS of $0.42 versus $0.50. Most notable on the balance sheet should be total debt of $720-$740 million, likely the peak before a long period of debt reduction starting in the 2009 3Q.

2009 Second Half LTM’s comps will likely remain negative in the 2009 3Q and 4Q periods, but we believe the negative comp trend should start working back towards positive numbers. We also expect operational and expense focus and slight improvements on attrition to flatten center contribution comparisons compared to recent negative comparisons. Debt levels should start to decline substantially in the 2009 3Q as the lower number of openings and increased corporate emphasis on cash generation is realized, and then this trend should continue through 2010 with minor exceptions (mainly related to the timing on 2010 openings of three new centers). Our model has EPS still down in year-over-year comparisons in the 3Q, but we believe the 2009 4Q will be the first to exhibit a resumed and sustainable return to growth.

2010 and Beyond We believe 2010 EPS estimates for Life Time Fitness are too low. LTM’s financial performance should improve considerably in 2010 as the focus on improving operations and cash flows should drive a significant and sustainable rebound in EPS: we are modeling $1.88, a 19% increase from our 2009 EPS estimate of $1.58 (consensus estimates are $1.60 in 2009 and $1.71 in 2010, and Street-high estimate for 2010 is $1.81). Longer-term we believe LTM will be able to deliver 15% to 20% EPS growth. Several factors will likely combine to help drive this acceleration, which we have listed below.

Opportunistic Real Estate Strategy. Life Time Fitness is evaluating opportunities to grow in new ways. One that intrigues us is developing an opportunistic real estate strategy that would focus on leasing existing facilities that would be renovated to give the look and feel of a traditional LTM center at a fraction of the typical investment. Specifically, this would involve the lease of a building formerly anchored by a grocery store (like Albertson’s) or a discount store (like Kmart). This building would be remodeled and renovated to look like a LTM’s traditional design-build facilities. The advantages of this strategy are lower capital investment (leased building versus owned), a strong ROI, and much faster unit development times (6-12 months versus 2 years or more). The primary risk is branding and customer

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experience, i.e., does this facility capture enough of the look and feel of the design-build centers?

Strengthened Cash Flows. Cash flows should improve immensely in 2010 as LTM realizes multiple operational and financial benefits. First, we predict EBITDA will increase to $257 million from $235 million in 2009, while Cap Ex will likely remain flat to slightly down from year-earlier levels. This should translate into a meaningful reduction in debt and with that increasing operational and growth flexibility. We believe that as Life Time Fitness demonstrates the success of its efforts it will gradually start to accelerate its unit development, something we would expect by late 2010. Hence, 2011 and beyond should show accelerating sales growth that will help sustainably deliver EPS growth in the 15% to 20% range.

Earnings Model Leverage. LTM management is working on multiple fronts to drive the earnings model. Management is committed to enhancing its already powerful value proposition through center-level efforts as well as enhancing online connections through MyLT.com. As these and other efforts succeed and the economy stabilizes and recovers, LTM’s attrition rates should return to historical levels and sales and marketing expenses should decline as a percent of sales.

Stock Grant Implications. LTM’s compensation committee recently approved a new stock grant incentive program that we believe has substantial implications relative to most analyst expectations on this stock. This grant, approved June 11, 2009, will reward management (a total of 53 employees) with 991,000 shares if the company achieves 2011 and 2012 EPS that are “significantly in excess of our [LTM] baseline expectations.”

LTM is not releasing what these targets are for competitive reasons. We note that the Company had EPS of $1.02 in 2004, LTM’s first year as a public company. This grew to $1.84 in 2008, representing a compound annual growth rate of 16% for EPS over the five- year period. We would assume the reference to growth in excess of “baseline” expectations reflects some sort of return to this type of norm. Using the 2009 consensus estimate of $1.60 as a base implies possible earnings potential of $2.15 or more in 2011, and upwards of $2.50 in 2012. At a minimum, we believe this supports substantial acceleration in EPS growth from the 7% being modeled in the 2010 consensus of $1.71 versus $1.60 in 2009.

BALANCE SHEET Life Time Fitness is working to improve its financial management, critically important in its asset-heavy business model. Shifting management’s efforts from growth to cash generation could be a watershed event. With exceptional margins, strong growth, and easy financing, LTM grew somewhat complacent. We believe the tougher operating and financial environment will bring discipline to the company that will have long-lasting effects: leverage will decrease and return on investment should improve, leading to a long-term resumption of more sustainable growth starting in 2011.

Focus in 2009-2010 is Cash Generation and Debt Reduction Life Time Fitness has historically relied on significant amounts of new debt to fund its growth. With prototype centers typically requiring capital expenditures of $30 to $35 million a unit, the recent pace of opening 10 or more units annually vastly exceeded LTM’s internally generated funds. As a result, LTM’s rapid growth forced it to borrow extensively to fund its growth.

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Life Time Fitness Total Debt at Year-End ($ in millions)

800

700

600

500

400

300

200

100

0 2006 2007 2008 2009E 2010E

Management is now refocusing company efforts on slower unit growth and maximized cash flows as a result of the worsening economy and difficult credit markets. Slowing new unit development to three each this year and next will reduce capital expenditures by nearly $280 million compared to 2008 levels. By 2010 capital expenditures should drop to near $100- $125 million from a peak of $478 million.

Slower growth and maximizing cash flows should lead to rapidly lower debt levels. Each newly opened center requires about $30 to $35 million in capital expenditures, so three annually will require $90 to $100 million. Maintenance cap ex on existing centers should total about $35 million, meaning total Cap Ex will likely total near $125 million. In contrast, EBITDA should grow from $235 million in 2009 to $257 in 2010, with much of the excess cash flow being used to reduce debt.

Life Time Fitness EBITDA, Cap Ex, and Total Debt 2008-2010E

800.0 700.0 600.0 500.0 EBITDA 400.0 Cap Ex 300.0 Total Debt 200.0 Total Debt 100.0 Cap Ex - EBITDA 2008 2009E 2010E

Post-2009 Cash Generation Should Support Growth Acceleration The second half of 2009 should demonstrate to investors the initial success of LTM’s cash generation efforts. Debt will start declining markedly and improved cash generation should become even more visible in 2010, and with this we believe LTM may start to plan a gradual acceleration in new unit development starting 2011. Long-term we believe LTM will be position to grow unit expansion at up to 10% annually all from internally funded sources. This in turn should drive 12%-15% sales growth and long-term EPS growth of 15%-20%.

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Real Estate Opportunities Life Time Fitness will likely augment its planned growth of three units annually in 2009-2010 with opportunistic openings that will require much less Cap Ex (typically $1 to $2 million per location) and a rapid and significant return on investment. We believe LTM will open one or more of these locations annually starting in 2010.

LTM’s 56 company-owned centers present a variety of liquidity opportunities. LTM could eventually liquefy these assets by selling them to piecemeal or entirely to a REIT or creating a REIT to hold them. The likely value would be near $35 million per center, suggesting nearly $2 billion in possible proceeds at some point in LTM’s future.

LIBOR Issue The largest component of LTM’s debt structure is a revolving credit facility, which totaled $414.3 million at the end of the 2009 1Q (all other debt – excluding capitalized leases – totaled $704.9 million). The revolving credit facility is priced at LIBOR plus 60 to 150 bps. The significant decline in interest rates this past year has provided significant benefit: we predict interest expense will be up 7% on average debt level that will be nearly 11% higher.

Higher interest rates accompanying a recovering economy will drive this expense higher. If the outstanding loan volume remains near $400 million, each percentage increase in LIBOR will reduce pretax income at LTM by $4 million and EPS by $0.06 a share. Obviously, the economic recovery would likely help lift LTM’s operating performance, so this interest rate impact would be partially offset by other factors.

Managing the revolving line-of-credit is critically important to LTM’s operations (as is investor awareness): we assume LIBOR will increase 50 bps a quarter in our model, and that this credit source is decreased from $414 million at the end of the first quarter to approximately $290-$300 million by the end of 2010. If LIBOR rates rise faster than we have modeled, it could reduce earnings expectations by 3% to 5% depending on the time horizon and magnitude of the change.

VALUATION Life Time Fitness presently trades at a discount to specialty, hardlines and discount retailers, a clear reflection of the difficult credit markets, slowed unit development and depressed earnings. However, we believe investor sentiment will start to improve markedly on this company starting soon. First, despite massive disruptions to LTM’s operations, unit development, and funding sources, it remains immensely profitable and is within a few quarters of seeing resumed positive EPS comparisons. Second, we believe the magnitude of LTM’s cash generation capabilities will gather significant investor interest as this becomes visible the next 2-3 quarters. Third, analyst expectations grew understandably bearish on this stock the past year, but as LTM approaches 2010 we believe it is clear estimates are too low for this company.

Our 12-month target price of $28 is predicated on a multiple of 15 times our 2010 EPS estimate of $1.88. Valuations for retailers in general are presently near 15-16 times the current year EPS estimate and 12-14 times next year’s EPS. We believe that Life Time Fitness’s reviving financial profile and still substantial growth opportunity will allow it to achieve at minimum the industry average P/E. If investors become convinced that LTM will once again become a viable growth story with sustained EPS growth of 15% to 20% annually, the multiple could easily move to a substantial premium to the industry average.

Comparing LTM on a price-to-sales ratio basis is difficult as its margins and profitability are virtually unmatched in the consumer sector. We estimate LTM’s operating margin at 16.6% this year and 17.6% in 2010. Conversely, LTM is attractively valued at 1.0 times book value, well below the average of 1.7 times for our broad group of retailing comparables. It is important to remember that this book value is comprised primarily of hard assets: real estate that could likely be sold for a meaningful premium to its value on the balance sheet.

Page 10 Life Time Fitness Inc. (LTM) 7/15/09

Life Time Fitness Feltl and Company Income Statement and Balance Sheet Summary Brent R. Rystrom $ in millions except per share Director of Research Years Ending December 31 612-492-8810 [email protected]

1Q-08 2Q-08 3Q-08 4Q-08 1Q-09 2Q-09(E) 3Q-09(E) 4Q-09(E) 1Q-10(E) 2Q-10(E) 3Q-10(E0 4Q-10(E) 2007 2008 2009(E) 2010(E) Revenue: Membership dues$ 119.6 $ 126.1 $ 131.2 $ 131.9 $ 137.4 $ 144.4 $ 146.6 $ 144.7 $ 145.9 $ 151.6 $ 156.2 $ 157.4 $ 434.1 $ 508.9 $ 573.1 $ 611.1 Enrollment fees 6.5 6.6 6.8 6.6 6.5 6.1 6.1 6.0 6.3 6.5 6.5 6.5 24.7 26.6 24.7 25.8 In-center revenue 55.3 56.0 56.2 50.8 59.3 59.7 60.3 54.0 63.8 64.7 67.1 61.6 182.2 218.2 233.3 257.2 Total center revenue 181.4 188.7 194.2 189.3 203.2 210.2 213.0 204.8 216.0 222.7 229.8 225.5 641.1 753.7 831.1 894.0 Other revenue 3.0 3.7 4.6 4.6 3.3 3.5 4.0 4.5 3.3 3.5 4.0 4.5 14.7 15.9 15.3 15.3 Total revenue 184.5 192.4 198.8 194.0 206.4 213.7 217.0 209.3 219.3 226.2 233.8 230.0 655.8 769.6 846.4 909.3 Operating expenses: Center operations 107.6 113.3 116.3 117.5 127.0 130.3 129.4 125.2 135.0 137.0 138.6 136.8 377.2 454.6 511.8 547.4 Advertising and marketing 9.5 6.8 7.3 7.9 8.3 8.4 8.6 9.0 8.8 8.9 9.3 9.9 25.0 31.5 34.2 36.8 General and administrative 10.7 10.6 9.5 13.0 11.7 11.5 9.6 11.0 11.8 11.6 9.7 11.1 40.8 43.7 43.9 44.3 Other operating 4.1 4.7 4.9 5.7 4.9 5.0 5.1 6.8 5.4 5.9 6.5 6.1 16.3 19.4 21.8 23.9 Depreciation and amortization 16.6 17.2 18.7 20.4 22.1 23.4 25.4 23.2 22.9 24.8 24.7 24.6 59.0 72.9 94.1 97.0 Total operating expenses 148.4 152.5 156.7 164.6 173.9 178.6 178.1 175.2 183.9 188.2 188.8 188.6 518.4 622.3 705.8 749.5 Income from operations 36.0 39.9 42.1 29.3 32.5 35.1 38.9 34.1 35.4 38.0 45.0 41.4 137.4 147.4 140.6 159.8 Other income (expenses): Interest expense, net (7.2) (6.9) (7.2) (8.3) (7.5) (7.4) (8.0) (8.6) (9.1) (9.5) (9.8) (10.0) (25.4) (29.6) (31.5) (38.4) Equity in earnings of affiliate 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.2 0.3 0.3 0.3 0.3 1.3 1.2 1.2 1.2 Total other income (expense) (6.9) (6.6) (6.8) (8.0) (7.1) (7.1) (7.7) (8.4) (8.8) (9.2) (9.5) (9.7) (24.2) (28.3) (30.3) (37.2) Income before income taxes 29.1 33.3 35.3 21.3 25.4 28.1 31.2 25.7 26.6 28.8 35.6 31.7 113.2 119.0 110.3 122.6 Provision for income taxes 11.7 13.5 13.7 8.3 10.3 11.2 12.5 10.3 10.6 11.5 14.2 12.7 45.2 47.2 47.2 47.2 Net income$ 17.40 $ 19.83 $ 21.57 $ 13.02 $ 15.11 $ 16.84 $ 18.73 $ 15.41 $ 15.95 $ 17.26 $ 21.34 $ 19.00 $ 68.02 $ 71.82 $ 63.10 $ 75.36 Basic earnings per common share$ 0.45 $ 0.51 $ 0.55 $ 0.33 $ 0.39 $ 0.43 $ 0.47 $ 0.39 $ 0.40 $ 0.44 $ 0.54 $ 0.48 $ 1.81 $ 1.84 $ 1.60 $ 1.91 Diluted earnings per common share$ 0.44 $ 0.50 $ 0.55 $ 0.33 $ 0.38 $ 0.42 $ 0.47 $ 0.39 $ 0.40 $ 0.43 $ 0.53 $ 0.48 $ 1.78 $ 1.83 $ 1.58 $ 1.88 WASO - Basic 38.9 39.0 39.0 39.1 39.2 39.5 39.5 39.5 39.5 39.5 39.5 39.5 37.5 39.0 39.4 39.5 WASO - Diluted 39.4 39.3 39.4 39.3 39.4 40.0 40.0 40.0 40.0 40.0 40.0 40.0 38.1 39.3 39.8 40.0

Sales Model: Centers open at period-end 71 74 77 81 83 84 84 84 85 86 87 87 70 81 84 87 Total center square footage (millions) 6.963 7.298 7.646 8.109 8.341 8.457 8.457 8.457 8.573 8.689 8.805 8.805 6.833 8.109 8.457 8.805 Comparable center revenue growth 4.3% 3.3% 3.9% 0.0% -2.7% -3.3% -1.4% 1.7% 3.2% 3.5% 4.8% 6.3% 6.1% 2.8% 0.9% 3.8%

Balance Sheet: Cash and equivalents$ 2.46 $ 3.67 $ 7.12 $ 10.83 $ 10.58 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 5.35 $ 10.83 $ 10.00 $ 10.00 Accounts receivable, net 3.3 3.8 5.3 6.1 3.5 3.8 4.0 3.9 4.1 4.3 4.3 4.2 4.5 6.1 3.9 4.2 Inventories and center supplies 13.9 14.2 14.7 14.6 14.1 14.7 15.5 15.5 15.7 15.9 16.1 16.1 14.3 14.6 15.5 16.1 Prepaid expenses & other current' 13.2 18.5 15.5 11.0 14.3 15.0 15.4 15.8 16.0 16.2 16.5 16.8 16.0 11.0 15.8 16.8 Deferred membership orig. costs 17.3 18.3 19.3 19.9 21.0 22.7 24.4 24.1 24.5 25.5 26.0 26.0 16.2 19.9 24.1 26.0 Deferred income taxes 1.2 1.4 2.1 1.4 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.2 1.4 1.7 1.7 Income tax receivable ------5.8 - - - Total current assets 51.4 59.8 64.1 63.8 65.1 67.9 71.0 70.9 72.1 73.6 74.6 74.8 63.3 63.8 70.9 74.8 Property and equipment, net 1,360.4 1,494.8 1,451.6 1,516.0 1,523.3 1,524.8 1,509.4 1,487.3 1,489.4 1,482.6 1,477.9 1,445.2 1,259.3 1,516.0 1,487.3 1,445.2 Restricted cash 3.5 9.0 9.3 3.9 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.8 6.8 3.9 3.8 3.8 Deferred membership orig. costs 15.2 15.7 14.9 14.2 14.2 15.0 17.1 16.9 17.2 17.9 18.2 18.2 14.4 14.2 16.9 18.2 Other assets 52.7 54.6 56.0 49.8 50.9 50.9 50.9 50.9 50.9 50.9 50.9 50.9 42.8 49.8 50.9 50.9 TOTAL ASSETS$ 1,483.1 $ 1,633.9 $1,595.9 $ 1,647.7 $ 1,657.3 $ 1,662.5 $ 1,652.2 $ 1,629.8 $ 1,633.4 $ 1,628.7 $1,625.4 $ 1,593.0 $ 1,386.5 $ 1,647.7 $ 1,629.8 $ 1,593.0 Current maturities of LTD$ 9.3 $ 10.0 $ 10.2 $ 10.3 $ 10.7 $ 10.4 $ 10.9 $ 10.7 $ 10.3 $ 9.9 $ 9.4 $ 9.0 $ 9.6 $ 10.3 $ 10.7 $ 9.0 Accounts payable 12.1 14.4 15.9 14.5 14.2 16.0 15.2 14.6 15.3 15.8 16.4 16.1 12.9 14.8 14.6 16.1 Construction accounts payable 64.5 76.7 86.7 63.4 43.3 22.5 7.5 - 7.5 15.0 15.0 7.5 59.3 63.4 - 7.5 Accrued expenses 48.1 56.8 55.4 46.2 54.6 53.4 54.2 52.3 54.8 56.5 58.5 57.5 47.1 46.2 52.3 57.5 Deferred revenue 38.2 41.2 37.1 36.1 39.3 36.3 36.9 35.6 37.3 38.5 39.8 39.1 34.9 36.1 35.6 39.1 Total current liabilities 172.3 199.0 205.5 170.6 162.1 138.7 124.7 113.2 125.3 135.8 139.0 129.2 163.6 170.9 113.2 129.2 Long-term debt net of current 622.1 712.8 636.9 702.6 703.7 718.1 702.6 678.0 651.9 618.4 589.2 548.6 555.0 702.6 678.0 548.6 Deferred rent liability 25.8 26.4 26.9 27.9 27.3 27.1 26.9 26.7 26.5 26.3 26.1 25.9 25.5 27.9 26.7 25.9 Deferred income taxes 39.5 46.5 48.9 52.0 51.5 51.5 51.5 51.5 51.5 51.5 51.5 51.5 38.6 52.0 51.5 51.5 Deferred revenue 18.6 17.8 15.4 13.7 13.1 12.8 13.0 12.6 13.2 13.6 14.0 13.8 17.5 13.7 12.6 13.8 Other liabilities 14.8 16.1 21.9 27.7 28.9 26.7 27.1 26.2 27.4 28.3 29.2 28.7 13.7 27.7 26.2 28.7 Total liabilities 893.2 1,018.6 955.5 994.4 986.5 974.9 945.9 908.1 895.7 873.8 849.1 797.7 814.0 994.8 908.1 797.7 Shareholders' equity 590.0 615.3 640.4 652.9 670.8 687.6 706.3 721.7 737.7 755.0 776.3 795.3 572.6 652.9 721.7 795.3 TOTAL Page LIAB. 11AND EQUITY $ 1,483.1 $ 1,633.9 $ 1,595.9 Life$ 1,647.3 Time$ 1,657.3 Fitness$ 1,662.5 Inc. $ (LTM) 1,652.2 $ 1,629.8 $ 1,633.4 $ 1,628.7 $1,625.4 $ 1,593.0 $ 1,386.5 7/15/09$ 1,647.7 $ 1,629.8 $ 1,593.0

Life Time Fitness Feltl and Company Earnings Model Brent R. Rystrom $ in millions except per share Director of Research Years Ending December 31 612-492-8810 [email protected]

4Q-08 1Q-09 2Q-09(E) 3Q-09(E) 4Q-09(E) 1Q-10(E) 2Q-10(E) 3Q-10(E0 4Q-10(E) 2007 2008 2009(E) 2010(E) Term notes (1)$ 111.8 $ 110.3 $ 108.8 $ 107.3 $ 105.8 $ 104.3 $ 102.8 $ 101.3 $ 99.8 $ 117.6 $ 111.8 $ 105.8 $ 99.8 Revolving credit facility (2) 414.6 414.3 449.9 437.1 414.3 389.9 358.1 330.6 291.6 312.8 414.6 414.3 291.6 Variable rate demand notes (3) 34.2 34.2 34.2 34.2 34.2 34.2 34.2 34.2 34.2 - 34.2 34.2 34.2 Mortgage note payable (4) 5.7 5.7 5.6 5.5 5.4 5.3 5.2 5.1 5.0 - 5.7 5.4 5.0 Term notes (5) 102.8 102.4 102.1 101.8 101.4 101.1 100.8 100.5 100.1 104.0 102.8 101.4 100.1 Mortgage notes (6) 4.1 4.1 4.1 4.0 4.0 3.9 3.9 3.8 3.8 4.5 4.1 4.0 3.8 Promissary note (7) 8.0 8.0 7.9 7.8 7.7 7.5 7.4 7.3 7.2 8.5 8.0 7.7 7.2 Interest rate swap (8) 7.5 6.9 6.9 6.9 6.9 6.9 6.9 6.9 6.9 3.3 7.5 6.9 6.9 Other debt 4.4 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 4.8 4.4 9.0 9.0 Total debt (excl. cap. Leases) 693.2 694.9 728.5 713.5 688.7 662.2 628.3 598.7 557.6 555.3 693.2 688.7 557.6 Obligations under capital leases 19.7 19.5 19.2 19.0 18.7 18.5 18.2 18.0 17.7 9.3 19.7 18.7 17.7 Total debt 712.9 714.4 747.7 732.5 707.4 680.7 646.5 616.6 575.3 564.6 712.9 707.4 575.3 Less current maturities 10.3 10.7 10.0 10.0 10.0 10.0 10.0 10.0 10.0 9.6 10.3 10.0 10.0 Total long-term debt$ 723.2 $ 703.7 $ 737.7 $ 722.5 $ 697.4 $ 670.7 $ 636.5 $ 606.6 $ 565.3 $ 574.2 $ 723.2 $ 697.4 $ 565.3

Interest expense assumptions Term notes (1) 8.25% 8.25% 8.25% 8.25% 8.25% 8.25% 8.25% Term note interest$ 2.3 $ 2.2 $ 2.2 $ 2.2 $ 2.2 $ 2.1 $ 2.1 LIBOR (at period end) 0.53% 1.03% 1.53% 2.03% 2.53% 3.03% 3.53% LIBOR stepup 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% Revolving credit facility interest rate 2.03% 2.28% 2.78% 3.28% 3.78% 4.28% 4.78% Revolving credit note interest 2.1 2.6 3.0 3.4 3.7 3.8 4.0 Variable rate demand notes 3.15% 3.65% 4.15% 4.65% 5.15% 5.65% 6.15% Var. rate demand note interest$ 1.1 $ 1.2 $ 1.4 $ 1.6 $ 1.8 $ 1.9 $ 2.1 Term notes (5) 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% Term note (5) interest$ 1.5 $ 1.5 $ 1.5 $ 1.5 $ 1.5 $ 1.5 $ 1.5 All other debt 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% All other debt interest$ 0.4 $ 0.4 $ 0.4 $ 0.4 $ 0.4 $ 0.4 $ 0.4 Interest expense$ 7.4 $ 8.0 $ 8.6 $ 9.1 $ 9.5 $ 9.8 $ 10.0

(1) Monthly principal and interest of $1.273 million at 8.25% interest, to June 2011 (2) Interest only with rates ranging from LIBOR plus 0.625% to 1.50%, expires May 2012; line $470 million on 12-31-08 and expandable to $6000 million with accordion feature. (3) Interest due monthly, rates resetting weekly, note matures 2023 (4) Interest and principal due monthly, interest at 6.54% to November 2013 (5) Term notes payable monthly with interest at 6.03% and monthly principal/interest, mature 2017 (6) Monthly payments of $52,000 through October 2012, interest at 6.4% (7) Monthly principal and interest payments of $80,000, interest of 5.78% to January 2015 (8) On notional amount of $125 million at fixed annual rate of 4.825% and expiring October 2010

Page 12 Life Time Fitness Inc. (LTM) 7/15/09

July 15, 2009

(prev close) 52-Week Market Year Trail 12m Price / Shares Book Price /First Call - EPS Estimates Operating P/E EBITA Enterprise EV/EBITA NY price Ticker Company Name Price High Low Value End Revenue Sales Out Value Book Trail TY NY Margin Trail TY NY Trail TY NY Value Trail TY NY Revenue NY rev Discount/ Extreme Value WMT WAL-MART STORES INC 48.13 63.85 46.25 187,544.2 01 400,699.0 0.47 3,896.6 16.57 2.9 3.49 3.56 3.89 4.59 13.8 13.5 12.4 29,897.0 30,560.6 33,002.3 214,818.22 7.2 7.0 6.5 439462.2 0.4 TGT TARGET CORPORATION 38.57 59.55 25.00 29,015.4 01 64,979.0 0.45 752.3 18.58 2.1 2.86 2.85 3.14 6.78 13.5 13.5 12.3 6,228.0 6,187.8 6,614.7 46,017.44 7.4 7.4 7.0 67583.3 0.4 COST COSTCO WHOLESALE CORP 45.03 74.26 30.70 19,582.6 08 73,068.5 0.27 434.9 20.87 2.2 2.50 2.46 2.69 2.73 18.0 18.3 16.7 2,637.8 2,479.1 2,659.7 18,513.59 7.0 7.5 7.0 75209.8 0.3 DLTR DOLLAR TREE INC 43.72 46.74 27.61 3,930.3 01 4,794.7 0.82 89.9 14.40 3.0 2.75 2.97 3.30 7.90 15.9 14.7 13.2 527.5 594.9 631.8 3,815.85 7.2 6.4 6.0 5542.3 0.7 FDO FAMILY DLR STORES INC 30.67 35.00 19.70 4,301.1 08 7,054.4 0.61 139.7 10.05 3.1 2.02 2.06 2.27 5.23 15.1 14.9 13.5 514.9 615.0 659.4 4,392.60 8.5 7.1 6.7 7796.7 0.6 NDN 99 CENTS ONLY STORES 13.17 13.99 5.37 900.9 03 1,211.3 0.74 68.4 7.58 1.7 0.35 0.50 0.61 1.78 37.3 26.6 21.7 62.7 81.5 96.6 786.46 12.5 9.6 8.1 1430.1 0.6 BIG BIG LOTS INC 20.73 35.33 12.62 1,711.2 01 4,635.4 0.37 82.5 9.78 2.1 1.91 1.93 2.09 5.49 10.9 10.7 9.9 -- 335.0 354.9 1,676.47 5.0 4.7 4760.7 0.4 - Group Average 0.53 2.44 17.78 16.03 14.25 - 0.48

Lifestyle Retailing - CAB CABELAS INC 12.13 15.75 4.18 812.2 12 2,556.7 0.32 67.0 13.81 0.9 1.14 1.12 1.20 5.53 10.6 10.8 10.1 205.7 202.2 203.1 781.44 3.8 3.9 3.8 2608.7 0.3 DKS DICK'S SPORTING GOODS INC 17.91 27.00 9.21 1,561.3 01 4,177.7 0.37 112.4 8.06 2.2 1.09 0.99 1.14 5.80 16.5 18.2 15.7 327.9 294.5 328.3 1,667.71 5.1 5.7 5.1 4457.4 0.4 HIBB HIBBETT SPORTS INC 17.4 25.75 10.06 498.2 01 576.1 0.86 28.6 5.11 3.4 1.07 1.12 1.25 8.50 16.3 15.6 13.9 62.3 65.9 72.9 477.32 7.7 7.2 6.5 639.6 0.8 GMTN GANDER MOUNTAIN CO 6.05 6.49 0.97 146.4 01 1,084.6 0.13 24.2 6.67 0.9 - 0.16 0.42 0.90 37.8 14.4 34.2 50.2 61.7 195.13 5.7 3.9 3.2 1185.2 0.1 BGIV BIG 5 SPORTING GOODS CORP 11.46 13.49 3.02 246.5 12 862.1 0.29 21.5 5.15 2.2 0.68 0.70 0.84 3.19 17.0 16.4 13.6 46.7 45.6 50.2 336.92 7.2 7.4 6.7 907.7 0.3 LTM LIFE TIME FITNESS INC 18.91 41.50 7.07 761.5 12 791.6 0.96 40.3 16.64 1.1 1.83 1.58 1.88 19.15 10.3 12.0 10.1 225.3 226.4 241.2 1,453.23 6.5 6.4 6.0 882.9 0.9 TSCO TRACTOR SUPPLY COMPANY 46 47.50 27.75 1,650.9 12 3,081.9 0.54 35.9 16.75 2.7 2.58 2.87 3.15 4.51 17.8 16.1 14.6 196.3 242.6 268.2 1,615.46 8.2 6.7 6.0 3452.1 0.5 HZO MARINEMAX INC 3.29 9.66 1.19 60.9 09 770.4 0.08 18.5 11.64 0.3 (1.99) (2.20) (0.81) (1.38) na na na (0.1) (11.6) 5.0 30.64 (2.7) 6.1 548.4 0.1 BKS BARNES & NOBLE INC. 20.99 33.64 10.77 1,197.3 01 5,083.9 0.24 57.0 15.57 1.3 1.41 1.27 1.28 3.03 14.8 16.6 16.4 331.6 302.8 306.1 915.68 2.8 3.0 3.0 4848.3 0.2 JAS JO-ANN STORES INC 21.32 27.00 10.31 563.9 01 1,915.0 0.29 26.4 18.83 1.1 0.88 0.99 1.30 2.25 24.3 21.5 16.4 94.9 104.7 116.2 549.29 5.8 5.2 4.7 2035.2 0.3 RGS REGIS CORP 12.35 31.96 8.21 541.7 06 2,751.6 0.20 43.8 18.42 0.7 1.67 1.71 1.25 6.75 7.4 7.2 9.9 304.7 254.0 254.7 948.62 3.1 3.7 3.7 2420.5 0.2 PETM PETSMART INC 22.07 28.86 13.27 2,781.5 01 5,179.9 0.54 126.0 9.22 2.4 1.52 1.52 1.63 7.30 14.5 14.5 13.5 594.9 603.3 622.9 3,208.99 5.4 5.3 5.2 5541.6 0.5 SBH SALLY BEAUTY HOLDINGS INC 6.49 10.50 2.66 1,181.6 09 2,638.0 0.45 182.1 (3.86) (1.7) 0.50 0.52 0.61 10.68 13.0 12.6 10.6 331.4 337.3 359.4 2,806.46 8.5 8.3 7.8 2795.0 0.4 BBY BEST BUY INCORPORATED 34.41 100.66 16.42 14,324.2 02 41,086.0 0.35 416.4 12.46 2.8 2.87 2.85 3.09 4.47 12.0 12.1 11.1 2,807.0 2,906.7 3,071.9 14,941.19 5.3 5.1 4.9 50717.7 0.3 - Group Average 0.40 1.46 14.54 16.24 13.09 - 0.30

Home - BBBY BED BATH & BEYOND INC 31.29 34.00 16.23 8,162.2 02 7,144.1 1.14 261.9 11.58 2.7 1.69 1.77 1.99 9.35 18.5 17.7 15.7 849.5 922.9 983.6 7,491.98 8.8 8.1 7.6 7916.0 1.0 WSM WILLIAMS SONOMA INC 11.43 21.49 4.35 1,208.5 01 3,191.3 0.38 105.7 10.53 1.1 0.19 0.03 0.32 2.17 60.4 35.3 200.9 156.4 188.8 1,069.91 5.3 6.8 5.7 2916.4 0.4 HD HOME DEPOT INC 23.68 30.74 17.05 40,336.4 01 69,556.0 0.58 1,703.4 10.56 2.2 1.60 1.42 1.56 6.11 14.8 16.7 15.1 7,212.0 6,157.3 6,375.4 49,478.39 6.9 8.0 7.8 66203.8 0.6 LOW LOWE'S COMPANIES INC 19.57 28.49 13.00 28,895.6 01 48,053.0 0.60 1,476.5 12.52 1.6 1.36 1.23 1.38 7.91 14.4 15.9 14.2 5,455.0 4,855.8 5,086.4 33,273.57 6.1 6.9 6.5 49735.0 0.6 ETH ETHAN ALLEN INTERIORS INC 11.2 34.02 6.98 324.3 06 937.2 0.35 29.0 11.19 1.0 (0.22) (0.27) 0.29 10.49 na na 39.0 -- 29.3 45.3 452.90 15.4 10.0 634.2 0.5 - Group Average 0.61 1.72 27.02 16.78 23.87 - 0.63

Other - SPLS STAPLES INC 20.03 26.57 13.57 14,328.1 01 24,016.8 0.60 715.3 7.79 2.6 1.21 1.13 1.37 6.69 16.6 17.8 14.6 2,094.4 2,061.7 2,288.6 15,663.29 7.5 7.6 6.8 24453.0 0.6 TITN TITAN MACHINERY INC 11.6 29.80 7.50 205.7 01 704.2 0.29 17.7 9.94 1.2 1.01 0.93 1.08 4.77 11.5 12.5 10.7 37.5 36.1 38.9 134.42 3.6 3.7 3.5 788.3 0.3 TIF TIFFANY AND COMPANY 27 45.80 16.70 3,350.0 01 2,714.9 1.23 124.1 12.67 2.1 1.95 1.56 1.75 17.08 13.9 17.3 15.4 630.5 502.6 545.6 3,614.97 5.7 7.2 6.6 2571.1 1.3 - Group Average 0.71 1.96 14.00 15.85 13.59 - 0.69

Overall Average 0.50 1.79 17.27 16.20 15.36 6.49 6.32 5.98 0.71

**Feltl and Company EPS Estimates for CAB and LTM**

Page 13 Life Time Fitness Inc. (LTM) 7/15/09

Analyst Certification I, Brent R. Rystrom, certify that the views expressed in this research report accurately reflect my personal views about the subject company and its securities. I also certify that I have not been, am not, and will not be receiving direct or indirect compensation related to the specific recommendations expressed in this report.

Important Disclosures:

The analyst or a member of his/her household does hold a long or short position, options, warrants, rights or futures of this security in their personal account(s).

As of the end of the month preceding the date of publication of this report, Feltl and Company did not beneficially own 1% or more of any class of common equity securities of the subject company.

There is not any actual material conflict of interest that either the analyst or Feltl and Company is aware of.

The analyst has not received any compensation for any investment banking business with this company in the past twelve months and does not expect to receive any in the next three months.

Feltl and Company has not been engaged for investment banking services with the subject company during the past twelve months and does not anticipate receiving compensation for such services in the next three months.

Feltl and Company has not served as a broker, either as agent or principal, buying back stock for the subject company’s account as part of the company’s authorized stock buy-back program in the last twelve months.

No director, officer or employee of Feltl and Company serves as a director, officer or advisory board member to the subject company.

Feltl and Company Rating System: Feltl and Company utilizes a four tier rating system for potential total returns over the next 12 months. Strong Buy: The stock is expected to have total return potential of at least 30%. Catalysts exist to generate higher valuations, and positions should be initiated at current levels. Buy: The stock is expected to have total return potential of at least 15%. Near term catalysts may not exist and the common stock needs further time to develop. Investors requiring time to build positions may consider current levels attractive. Hold: The stock is expected to have total return potential of less than 15%. Fundamental events are not present to make it either a Buy or a Sell. The stock is an acceptable longer-term holding. Sell: Expect a negative total return. Current positions may be used as a source of funds.

Page 14 Life Time Fitness Inc. (LTM) 7/15/09

7/15/2009 Ratings Distribution for Feltl and Company ------Investment Banking ------Number of Percent Number of Percent of Rating Stocks of Total Stocks Rating category SB/Buy 21 66% 2 10% Hold 9 28% 0 0% Sell 2 6% 0 0% 32 100% 2 6% The above represents our ratings distribution on the stocks in the Feltl and Company research universe, together with the number in (and percentage of) each category for which Feltl and Company provided investment-banking services in the previous twelve months.

07/15/09 Strong Buy Target: $28

Page 15 Life Time Fitness Inc. (LTM) 7/15/09

Date Nature of Report Rating Price Target 07/15/09 Initiation @18.91 StrongBuy $28.00

Feltl and Company does make a market in the subject security at the date of publication of this report. As a market maker, Feltl and Company could act as principal or agent with respect to the purchase or sale of those securities.

Valuation and Price Target Methodology: We considered price-to-earnings ratio, price-to-sales ratio, and price to book value in appraising the valuation of Life Time Fitness and arriving at our target price. Our price target relies significantly on a price-to-earnings ratio that compares LTM to a variety of other consumer retail and service companies, with greatest emphasis placed on those in the lifestyle retailing category.

Risks to Achievement of Estimates and Price Target: • Life Time Fitness is a consumer-focused company operating in a difficulty environment for consumers. If economic conditions weaken further this could push consumer spending lower yet and further hurt LTM’s relative performance. • Life Time Fitness relies extensively on debt to fund its growth and operations. Restrictive debt markets or significantly higher interest rates could substantially hurt LTM’s prospects and/or profitability. • Life Time Fitness faces particular risk in relation to its revolving credit facilities, which are priced relative to LIBOR and could have significantly higher interest expense if interest rates move higher with an economic recovery. • The health club industry is extremely competitive, with tens of thousands of competitors, many of which are non-profit entities with lower operating costs and relatively less Cap Ex. This could make it difficult for Life Time Fitness to compete from a pricing and development perspective. • Life Time Fitness has recently slowed its new unit expansion, and eliminated a significant portion of its center development team. It may prove difficult to rebuild and expand this team if the decision is made to accelerate growth levels in the future. • Life Time Fitness’s involvement in the health and fitness industry exposes it to regulatory and legal liability issues, from individuals, groups, and government entities. • Readers should recognize that the risks noted here do not represent a comprehensive list of all risk factors or potential issues, nor all factors that may preclude achievement of our forecast or price target. Additional risk factors exist and are outlined in the Company’s SEC filings

Other Disclosures: The information contained in this report is based on sources considered to be reliable, but not guaranteed, to be accurate or complete. Any opinions or estimates expressed herein reflect a judgment made as of this date, and are subject to change without notice. This report has been prepared solely for informative purposes and is not a solicitation or an offer to buy or sell any security. The securities described may not be qualified for purchase in all jurisdictions. Because of individual requirements, advice regarding securities mentioned in this report should not be construed as suitable for all accounts. This report does not take into account the investment objectives, financial situation and needs of any particular client of Feltl and Company. Some securities mentioned herein relate to small speculative companies that may not be suitable for some accounts. Feltl and Company suggests that prior to acting on any of the recommendations herein, the recipient should consider whether such a recommendation is appropriate given their investment objectives and current financial circumstances. Past performance does not guarantee future results. Additional information is available upon request.

Page 16 Life Time Fitness Inc. (LTM) 7/15/09 EQUITY CAPITAL MARKETS DIRECTORY

RESEARCH DEPARTMENT INSTITUTIONAL SALES: (866) 338-3522

Brent R. Rystrom Thomas Pierce Director of Equity Research Senior Vice President – Institutional Sales 612-492-8810 (612) 492-8817

Ernest W. Andberg, CFA Mark Hagen (612) 492-8836 (612) 492-8846

Jay M. Meier Ryan Quade (612) 492-8847 (612) 492-8807 TRADING: (866) 777-9862 Mark E. Smith Brandt Wendland (612) 492-8806 William W. Koop (612) 492-8855 Director of Equity Trading Joshua J. Elving (612) 492-8830 (612) 492-8872 Thomas Walters Shawn P. Bitzan (612) 492-8829 (612) 492-8816 Elliott Randolph Institutional Sales Trading (612) 492-8867

Cory Carlson Institutional Sales Trading (612) 492-8858

Luke J. Weimerskirch Institutional Sales Trading (612)492-8832

225 SOUTH SIXTH STREET• SUITE 4200 • MINNEAPOLIS, MINNESOTA 55402-1834 (612) 492 8800 • (866) 655 – 3431 MEMBER SIPC & NASD