PLANET FITNESS, INC., 10-Q filed on 11/6/2020
Quarterly Report
v3.20.2
Cover Page - shares
9 Months Ended
Sep. 30, 2020
Oct. 30, 2020
Document Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2020  
Document Transition Report false  
Entity File Number 001-37534  
Entity Registrant Name PLANET FITNESS, INC.  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 38-3942097  
Entity Address, Address Line One 4 Liberty Lane West  
Entity Address, City or Town Hampton  
Entity Address, State or Province NH  
Entity Address, Postal Zip Code 03842  
City Area Code 603  
Local Phone Number 750-0001  
Title of 12(b) Security Class A common stock, $0.0001 Par Value  
Trading Symbol PLNT  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Amendment Flag false  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q3  
Entity Central Index Key 0001637207  
Current Fiscal Year End Date --12-31  
Class A Common Stock    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   81,815,125
Class B Common Stock    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   4,705,375
v3.20.2
Condensed consolidated balance sheets - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 419,658 $ 436,256
Restricted cash 81,944 42,539
Accounts receivable, net of allowance for bad debts of $65 and $111 at September 30, 2020 and December 31, 2019, respectively 11,899 42,268
Inventory 1,806 877
Prepaid expenses 15,274 8,025
Other receivables 20,513 9,226
Income tax receivables 10,036 947
Total current assets 561,130 540,138
Property and equipment, net of accumulated depreciation of $97,832 and $73,621 at September 30, 2020 and December 31, 2019, respectively 159,053 145,481
Right-of-use assets, net 163,119 155,633
Intangible assets, net 221,286 233,921
Goodwill 227,821 227,821
Deferred income taxes 467,229 412,293
Other assets, net 1,914 1,903
Total assets 1,801,552 1,717,190
Current liabilities:    
Current maturities of long-term debt 17,500 17,500
Accounts payable 19,783 21,267
Accrued expenses 25,669 31,623
Equipment deposits 1,522 3,008
Restricted liabilities – national advertising fund 3,446 0
Deferred revenue, current 23,921 27,596
Payable pursuant to tax benefit arrangements, current 8,027 26,468
Other current liabilities 20,497 18,016
Total current liabilities 120,365 145,478
Long-term debt, net of current maturities 1,679,191 1,687,505
Borrowings under Variable Funding Notes 75,000 0
Lease liabilities, net of current portion 165,372 152,920
Deferred revenue, net of current portion 33,002 34,458
Deferred tax liabilities 1,194 1,116
Payable pursuant to tax benefit arrangements, net of current portion 447,979 400,748
Other liabilities 2,368 2,719
Total noncurrent liabilities 2,404,106 2,279,466
Commitments and contingencies (Note 13)
Stockholders’ equity (deficit):    
Accumulated other comprehensive (loss) income (38) 303
Additional paid in capital 40,671 29,820
Accumulated deficit (760,268) (736,587)
Total stockholders’ deficit attributable to Planet Fitness Inc. (719,626) (706,455)
Non-controlling interests (3,293) (1,299)
Total stockholders’ deficit (722,919) (707,754)
Total liabilities and stockholders’ deficit 1,801,552 1,717,190
Class A Common Stock    
Stockholders’ equity (deficit):    
Common stock 8 8
Class B Common Stock    
Stockholders’ equity (deficit):    
Common stock $ 1 $ 1
v3.20.2
Condensed consolidated balance sheets (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Assets    
Accounts receivable, allowance for bad debts $ 65 $ 111
Accumulated depreciation $ 97,832 $ 73,621
Class A Common Stock    
Stockholders’ equity (deficit):    
Common stock, par value (in usd per share) $ 0.0001 $ 0.0001
Common stock, shares authorized (in shares) 300,000,000 300,000,000
Common stock, shares issued (in shares) 80,473,000 78,525,000
Common stock, shares outstanding (in shares) 80,473,000 78,525,000
Class B Common Stock    
Stockholders’ equity (deficit):    
Common stock, par value (in usd per share) $ 0.0001 $ 0.0001
Common stock, shares authorized (in shares) 100,000,000 100,000,000
Common stock, shares issued (in shares) 6,044,000 8,562,000
Common stock, shares outstanding (in shares) 6,044,000 8,562,000
v3.20.2
Condensed consolidated statements of operations - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Revenue:        
Revenue $ 105,383 $ 166,815 $ 272,847 $ 497,292
Operating costs and expenses:        
Cost of revenue 15,302 46,194 45,625 135,071
Store operations 21,371 22,295 62,209 63,363
Selling, general and administrative 18,295 20,928 51,143 57,944
National advertising fund expense 20,157 12,652 46,240 36,986
Depreciation and amortization 13,636 11,832 39,436 32,316
Other loss (gain) 580 (147) 606 99
Total operating costs and expenses 89,341 113,754 245,259 325,779
Income from operations 16,042 53,061 27,588 171,513
Other expense, net:        
Interest income 349 1,808 2,635 5,585
Interest expense (20,686) (14,807) (61,394) (44,192)
Other expense (24) (61) (784) (4,824)
Total other expense, net (20,361) (13,060) (59,543) (43,431)
(Loss) income before income taxes (4,319) 40,001 (31,955) 128,082
(Benefit) provision for income taxes (1,035) 10,309 (7,069) 26,924
Net (loss) income (3,284) 29,692 (24,886) 101,158
Less net (loss) income attributable to non-controlling interests (173) 3,915 (1,205) 13,128
Net (loss) income attributable to Planet Fitness, Inc. $ (3,111) $ 25,777 $ (23,681) $ 88,030
Class A Common Stock        
Net (loss) income per share of Class A common stock:        
Basic (in dollars per share) $ (0.04) $ 0.31 $ (0.30) $ 1.05
Diluted (in dollars per share) $ (0.04) $ 0.31 $ (0.30) $ 1.04
Weighted-average shares of Class A common stock outstanding:        
Basic (in shares) 80,220,503 83,157,430 79,763,279 83,699,609
Diluted (in shares) 80,220,503 83,806,906 79,763,279 84,354,172
Franchise        
Revenue:        
Revenue $ 47,171 $ 53,443 $ 112,296 $ 164,624
Commission income        
Revenue:        
Revenue 48 614 483 2,673
National advertising fund revenue        
Revenue:        
Revenue 12,538 12,652 26,509 36,986
Corporate-owned stores        
Revenue:        
Revenue 28,289 40,742 78,224 118,481
Equipment        
Revenue:        
Revenue $ 17,337 $ 59,364 $ 55,335 $ 174,528
v3.20.2
Condensed consolidated statements of comprehensive income (loss) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Statement of Comprehensive Income [Abstract]        
Net (loss) income including non-controlling interests $ (3,284) $ 29,692 $ (24,886) $ 101,158
Other comprehensive income (loss), net:        
Foreign currency translation adjustments 19 (62) (341) 95
Total other comprehensive income (loss), net 19 (62) (341) 95
Total comprehensive (loss) income including non-controlling interests (3,265) 29,630 (25,227) 101,253
Less: total comprehensive (loss) income attributable to non-controlling interests (173) 3,915 (1,205) 13,128
Total comprehensive (loss) income attributable to Planet Fitness, Inc. $ (3,092) $ 25,715 $ (24,022) $ 88,125
v3.20.2
Condensed consolidated statements of cash flows - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Cash flows from operating activities:    
Net (loss) income $ (24,886) $ 101,158
Adjustments to reconcile net (loss) income to net cash provided by operating activities:    
Depreciation and amortization 39,436 32,316
Amortization of deferred financing costs 4,801 4,014
Amortization of asset retirement obligations 48 178
Deferred tax (benefit) expense (7,506) 15,666
(Gain) loss on re-measurement of tax benefit arrangement (502) 4,638
Provision for bad debts (45) 13
Equity-based compensation 3,564 3,565
Other (93) (428)
Changes in operating assets and liabilities, excluding effects of acquisitions:    
Accounts receivable 28,146 12,779
Inventory (929) 2,509
Other assets and other current assets (11,364) (4,628)
National advertising fund 3,446 0
Accounts payable and accrued expenses (11,148) (12,939)
Other liabilities and other current liabilities 461 1,510
Income taxes (1,885) 3,047
Payable pursuant to tax benefit arrangements (18,396) (17,476)
Equipment deposits (1,486) 658
Deferred revenue (5,052) 6,103
Leases and deferred rent 1,275 54
Net cash (used in) provided by operating activities (2,115) 152,737
Cash flows from investing activities:    
Additions to property and equipment (36,719) (37,138)
Acquisition of franchises 0 (14,801)
Proceeds from sale of property and equipment 282 84
Purchase of intellectual property 0 (300)
Net cash used in investing activities (36,437) (52,155)
Cash flows from financing activities:    
Principal payments on capital lease obligations (118) (59)
Proceeds from borrowings under Variable Funding Notes 75,000 0
Repayment of long-term debt (13,125) (9,000)
Proceeds from issuance of Class A common stock 1,881 1,892
Repurchase and retirement of Class A common stock 0 (157,945)
Dividend equivalent payments (227) (229)
Distributions to Continuing LLC Members (1,658) (5,499)
Net cash provided by (used in) financing activities 61,753 (170,840)
Effects of exchange rate changes on cash and cash equivalents (394) 370
Net increase (decrease) in cash, cash equivalents and restricted cash 22,807 (69,888)
Cash, cash equivalents and restricted cash, beginning of period 478,795 320,139
Cash, cash equivalents and restricted cash, end of period 501,602 250,251
Supplemental cash flow information:    
Net cash paid for income taxes 2,319 9,061
Cash paid for interest 56,750 40,335
Non-cash investing activities:    
Non-cash additions to property and equipment $ 7,629 $ 4,837
v3.20.2
Condensed consolidated statement of changes in equity (deficit) - USD ($)
shares in Thousands, $ in Thousands
Total
Accumulated other comprehensive (loss) income
Additional paid- in capital
Accumulated deficit
Non-controlling interests
Class A common stock
Class A common stock
Common stock
Class B common stock
Class B common stock
Common stock
Beginning balance (in shares) at Dec. 31, 2018             83,584   9,448
Beginning balance at Dec. 31, 2018 $ (382,789) $ 94 $ 19,732 $ (394,410) $ (8,215)   $ 9   $ 1
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Net (loss) income 101,158     88,030 13,128        
Equity-based compensation expense 3,565   3,565            
Exchanges of Class B common stock (in shares)             886   (886)
Exchanges of Class B common stock     (1,172)   1,172        
Exercise of stock options, vesting of restricted share units and ESPP share purchase (in shares)             99    
Exercise of stock options, vesting of restricted share units and ESPP share purchase 2,035   2,035            
Repurchase and retirement of common stock (in shares)             (2,796)    
Repurchase and retirement of common stock (157,946)   273 (157,945) (273)   $ (1)    
Tax benefit arrangement liability and deferred taxes arising from exchanges of Class B common stock 2,807   2,807            
Non-cash adjustments to VIEs (3,836)       (3,836)        
Distributions paid to members of Pla-Fit Holdings (5,499)       (5,499)        
Cumulative effect adjustment (1,713)     (1,713)          
Forfeiture of dividend equivalents 6     6          
Other comprehensive income (loss) 95 95              
Ending balance (in shares) at Sep. 30, 2019             81,773   8,562
Ending balance at Sep. 30, 2019 (442,117) 189 27,240 (466,032) (3,523)   $ 8   $ 1
Beginning balance (in shares) at Jun. 30, 2019             83,995   8,582
Beginning balance at Jun. 30, 2019 (314,372) 251 24,495 (333,870) (5,257)   $ 8   $ 1
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Net (loss) income 29,692     25,777 3,915        
Equity-based compensation expense 1,286   1,286            
Exchanges of Class B common stock (in shares)             20   (20)
Exercise of stock options, vesting of restricted share units and ESPP share purchase (in shares)             30    
Exercise of stock options, vesting of restricted share units and ESPP share purchase 826   826            
Repurchase and retirement of common stock (in shares)             (2,272)    
Repurchase and retirement of common stock (157,945)   209 (157,945) (209)        
Tax benefit arrangement liability and deferred taxes arising from exchanges of Class B common stock 424   424            
Non-cash adjustments to VIEs (215)       (215)        
Distributions paid to members of Pla-Fit Holdings (1,757)       (1,757)        
Forfeiture of dividend equivalents 6     6          
Other comprehensive income (loss) (62) (62)              
Ending balance (in shares) at Sep. 30, 2019             81,773   8,562
Ending balance at Sep. 30, 2019 (442,117) 189 27,240 (466,032) (3,523)   $ 8   $ 1
Beginning balance (in shares) at Dec. 31, 2019           78,525 78,525 8,562 8,562
Beginning balance at Dec. 31, 2019 (707,754) 303 29,820 (736,587) (1,299)   $ 8   $ 1
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Net (loss) income (24,886)     (23,681) (1,205)        
Equity-based compensation expense 3,564   3,564            
Exchanges of Class B common stock (in shares)             2,518   (2,518)
Exchanges of Class B common stock     (1,526)   1,526        
Exercise of stock options, vesting of restricted share units and ESPP share purchase (in shares)             97    
Exercise of stock options, vesting of restricted share units and ESPP share purchase 2,153   2,153            
Repurchase and retirement of common stock (in shares)             (667)    
Repurchase and retirement of common stock 0                
Tax benefit arrangement liability and deferred taxes arising from exchanges of Class B common stock 6,660   6,660            
Non-cash adjustments to VIEs (657)       (657)        
Distributions paid to members of Pla-Fit Holdings (1,658)       (1,658)        
Other comprehensive income (loss) (341) (341)              
Ending balance (in shares) at Sep. 30, 2020           80,473 80,473 6,044 6,044
Ending balance at Sep. 30, 2020 (722,919) (38) 40,671 (760,268) (3,293)   $ 8   $ 1
Beginning balance (in shares) at Jun. 30, 2020             79,994   6,500
Beginning balance at Jun. 30, 2020 (721,700) (57) 38,900 (757,139) (3,413)   $ 8   $ 1
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Net (loss) income (3,284)     (3,111) (173)        
Equity-based compensation expense 1,071   1,071            
Exchanges of Class B common stock (in shares)             456   (456)
Exchanges of Class B common stock     (570)   570        
Exercise of stock options, vesting of restricted share units and ESPP share purchase (in shares)             23    
Exercise of stock options, vesting of restricted share units and ESPP share purchase 800   800            
Tax benefit arrangement liability and deferred taxes arising from exchanges of Class B common stock 470   470            
Non-cash adjustments to VIEs (219)       (219)        
Distributions paid to members of Pla-Fit Holdings (58)       (58)        
Other (18)     (18)          
Other comprehensive income (loss) 19 19              
Ending balance (in shares) at Sep. 30, 2020           80,473 80,473 6,044 6,044
Ending balance at Sep. 30, 2020 $ (722,919) $ (38) $ 40,671 $ (760,268) $ (3,293)   $ 8   $ 1
v3.20.2
Business Organization
9 Months Ended
Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Business Organization Business Organization
Planet Fitness, Inc. (the “Company”), through its subsidiaries, is a franchisor and operator of fitness centers, with more than 14.1 million members and 2,086 owned and franchised locations (referred to as stores) in 50 states, the District of Columbia, Puerto Rico, Canada, the Dominican Republic, Panama, Mexico and Australia as of September 30, 2020.
In March 2020, the Company proactively closed all of its stores system wide in response to the novel coronavirus disease (“COVID-19”) pandemic in order to promote the health and safety of its members, team members and their communities. As of September 30, 2020, 1,983 stores had reopened, of which 1,884 were franchisee-owned stores and 99 were corporate-owned stores.
The Company serves as the reporting entity for its various subsidiaries that operate three distinct lines of business:
Licensing and selling franchises under the Planet Fitness trade name.
Owning and operating fitness centers under the Planet Fitness trade name.
Selling fitness-related equipment to franchisee-owned stores.
The Company was formed as a Delaware corporation on March 16, 2015 for the purpose of facilitating an initial public offering (the “IPO”), which was completed on August 11, 2015 and related transactions in order to carry on the business of Pla-Fit Holdings, LLC and its subsidiaries (“Pla-Fit Holdings”). As of August 5, 2015, in connection with the recapitalization transactions that occurred prior to the IPO, the Company became the sole managing member and holder of 100% of the voting power of Pla-Fit Holdings. Pla-Fit Holdings owns 100% of Planet Intermediate, LLC, which has no operations but is the 100% owner of Planet Fitness Holdings, LLC, a franchisor and operator of fitness centers through its subsidiaries. With respect to the Company, Pla-Fit Holdings and Planet Intermediate, LLC, each entity owns nothing other than the respective entity below it in the corporate structure and each entity has no other material operations.
The Company is a holding company whose principal asset is a controlling equity interest in Pla-Fit Holdings. As the sole managing member of Pla-Fit Holdings, the Company operates and controls all of the business and affairs of Pla-Fit Holdings, and through Pla-Fit Holdings, conducts its business. As a result, the Company consolidates Pla-Fit Holdings’ financial results and reports a non-controlling interest related to the portion of limited liability company units of Pla-Fit Holdings (“Holdings Units”) not owned by the Company. Unless otherwise specified, “the Company” refers to both Planet Fitness, Inc. and Pla-Fit Holdings throughout the remainder of these notes.
As of September 30, 2020, Planet Fitness, Inc. held 100.0% of the voting interest and 93.0% of the economic interest of Pla-Fit Holdings and the holders of Holdings Units of Pla-Fit Holdings (the “Continuing LLC Owners”) held the remaining 7.0% economic interest in Pla-Fit Holdings.
v3.20.2
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies Summary of Significant Accounting Policies
(a) Basis of presentation and consolidation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these interim financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented have been reflected. All significant intercompany balances and transactions have been eliminated in consolidation.
The condensed consolidated financial statements as of and for the three and nine months ended September 30, 2020 and 2019 are unaudited. The condensed consolidated balance sheet as of December 31, 2019 has been derived from the audited financial statements at that date but does not include all of the disclosures required by U.S. GAAP. These interim condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “Annual Report”) filed with the SEC on February 28, 2020. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year.
As discussed in Note 1, Planet Fitness, Inc. consolidates Pla-Fit Holdings. The Company also consolidates entities in which it has a controlling financial interest, the usual condition of which is ownership of a majority voting interest. The Company also considers for consolidation certain interests where the controlling financial interest may be achieved through arrangements that do not involve voting interests. Such an entity, known as a variable interest entity (“VIE”), is required to be consolidated by its primary beneficiary. The primary beneficiary of a VIE is considered to possess the power to direct the activities of the VIE that most significantly impact its economic performance and has the obligation to absorb losses or the rights to receive benefits from the VIE that are significant to it. The principal entities in which the Company possesses a variable interest include franchise entities and certain other entities. The Company is not deemed to be the primary beneficiary for Planet Fitness franchise entities. Therefore, these entities are not consolidated.
The results of the Company have been consolidated with Matthew Michael Realty LLC (“MMR”), PF Melville LLC (“PF Melville”), and Planet Fitness NAF, LLC (the “NAF”) based on the determination that the Company is the primary beneficiary with respect to these VIEs. MMR and PF Melville are real estate holding companies that derive a majority of their financial support from the Company through lease agreements for corporate stores. See Note 3 for further information related to the Company’s VIEs. The NAF is an advertising fund on behalf of which the Company typically collects 2% of gross monthly membership dues from franchisees, in accordance with the provisions of the franchise agreements, and uses the amounts received to support our national marketing campaigns, its social media platforms and the development of local advertising materials.
(b) Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results. Significant areas where estimates and judgments are relied upon by management in the preparation of the consolidated financial statements include revenue recognition, valuation of assets and liabilities in connection with acquisitions, valuation of equity-based compensation awards, the evaluation of the recoverability of goodwill and long-lived assets, including intangible assets, income taxes, including deferred tax assets and liabilities and reserves for unrecognized tax benefits, the liability for the Company’s tax benefit arrangements, and the value of the lease liability and related right-of-use asset recorded in accordance with ASC 842 (see Note 7).
(c) Fair Value
ASC 820, Fair Value Measurements and Disclosures, establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:
Level 1—Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
 
The carrying value and estimated fair value of long-term debt as of September 30, 2020 and December 31, 2019 were as follows:
September 30, 2020December 31, 2019
Carrying value
Estimated fair value(1)
Carrying value
Estimated fair value(1)
Long-term debt$1,721,875 $1,672,404 $1,735,000 $1,765,805 
Variable Funding Notes$75,000 $75,000 $— $— 
(1) The Company’s Variable Funding Notes are a variable rate loan and the fair value of this loan approximates book value based on the borrowing rates currently available for variable rate loans obtained from third party lending institutions. The estimated fair value of our fixed rate long-term debt is estimated primarily based on current bid prices for our long-term debt. Judgment is required to develop these estimates. As such, the fair value of our long-term debt is classified within Level 2, as defined under U.S. GAAP.
As a result of the COVID-19 pandemic, the fair value of our long-term debt has fluctuated significantly and may continue to fluctuate based on market conditions and other factors, including changes in the target federal funds rate.
(d) Recent accounting pronouncements
The FASB issued ASU No. 2017-4, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, in January 2017. This guidance eliminates the requirement to calculate the implied fair value, essentially eliminating step two from the goodwill impairment test. The new standard requires goodwill impairment to be based upon the results of step one of the impairment test, which is defined as the excess of the carrying value of a reporting unit over its fair value. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The Company adopted this guidance on January 1, 2020 noting no material impact on the Company’s consolidated financial statements.
The FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, in August 2018. The guidance helps align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company adopted this guidance on January 1, 2020 on a prospective basis, noting no material impact on the Company’s consolidated financial statements.
The FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, in December 2019. The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This guidance will be effective for fiscal years beginning after December 15, 2020, and early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
v3.20.2
Variable Interest Entities
9 Months Ended
Sep. 30, 2020
Variable Interest Entity, Consolidated, Carrying Amount, Assets and Liabilities, Net [Abstract]  
Variable Interest Entities Variable Interest Entities
The carrying values of VIEs included in the consolidated financial statements as of September 30, 2020 and December 31, 2019 are as follows: 
 September 30, 2020December 31, 2019
 AssetsLiabilitiesAssetsLiabilities
PF Melville$2,563 $— $2,682 $— 
MMR2,126 — 2,206 — 
Total$4,689 $— $4,888 $— 
 
The Company also has variable interests in certain franchisees mainly through the guarantee of lease agreements up to a maximum period of ten years with earlier expiration dates possible if certain conditions are met. The Company’s maximum obligation, as a result of its guarantees of leases, is approximately $14,345 and $10,309 as of September 30, 2020 and December 31, 2019, respectively.
The amount of the Company’s maximum obligation represents a loss that the Company could incur from the variability in credit exposure without consideration of possible recoveries through insurance or other means. In addition, the amount bears no relation to the estimated fair value of the guarantees, which is not material.
v3.20.2
Acquisitions
9 Months Ended
Sep. 30, 2020
Business Combinations [Abstract]  
Acquisitions Acquisitions
New Jersey Acquisition
On December 16, 2019, the Company purchased from one of its franchisees certain assets associated with twelve franchisee-owned stores in New Jersey for a cash payment of $37,812. As a result of the transaction, the Company incurred a loss on unfavorable reacquired franchise rights of $1,810. The loss incurred reduced the net purchase price to $36,002. The Company financed the purchase through cash on hand. The acquired stores are included in the Corporate-owned stores segment.
The purchase consideration was allocated as follows:
Amount
Fixed assets$3,044 
Reacquired franchise rights9,480 
Customer relationships940 
Favorable leases, net1,508 
Reacquired area development rights90 
Other assets314 
Goodwill21,069 
Liabilities assumed, including deferred revenues(443)
$36,002 
The goodwill created through the purchase is attributable to the assumed future value of the cash flows from the stores acquired. The goodwill is amortizable and deductible for tax purposes over 15 years.
The acquisition was not material to the results of operations of the Company.
Maine Acquisition
On May 30, 2019, the Company purchased from one of its franchisees certain assets associated with four franchisee-owned stores in Maine for a cash payment of $14,801. The Company financed the purchase through cash on hand. The acquired stores are included in the Corporate-owned stores segment.
The purchase consideration was allocated as follows:
Amount
Fixed assets$999 
Reacquired franchise rights6,740 
Customer relationships30 
Unfavorable leases, net(140)
Other assets78 
Goodwill7,239 
Liabilities assumed, including deferred revenues(145)
$14,801 
The goodwill created through the purchase is attributable to the assumed future value of the cash flows from the stores acquired. The goodwill is amortizable and deductible for tax purposes over 15 years.
The acquisition was not material to the results of operations of the Company.
v3.20.2
Goodwill and Intangible Assets
9 Months Ended
Sep. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible assets Goodwill and Intangible Assets
A summary of goodwill and intangible assets at September 30, 2020 and December 31, 2019 is as follows: 
September 30, 2020Weighted
average
amortization
period (years)
Gross
carrying
amount
Accumulated
amortization
Net carrying
Amount
Customer relationships11.0$174,033 $(121,709)$52,324 
Reacquired franchise rights8.037,660 (15,298)22,362 
 211,693 (137,007)74,686 
Indefinite-lived intangible:
Trade and brand namesN/A146,600 — 146,600 
Total intangible assets$358,293 $(137,007)$221,286 
Goodwill$227,821 $— $227,821 
 
December 31, 2019Weighted
average
amortization
period (years)
Gross
carrying
amount
Accumulated
amortization
Net carrying
Amount
Customer relationships11.0$174,033 $(112,114)$61,919 
Reacquired franchise rights8.037,660 (12,258)25,402 
 211,693 (124,372)87,321 
Indefinite-lived intangible:
Trade and brand namesN/A146,600 — 146,600 
Total intangible assets $358,293 $(124,372)$233,921 
Goodwill $227,821 $— $227,821 
 The Company determined that no impairment charges were required during any periods presented.
Amortization expense related to the intangible assets totaled $4,222 and $4,160 for the three months ended September 30, 2020 and 2019, respectively and $12,666 and $12,186 for the nine months ended September 30, 2020 and 2019, respectively. The anticipated annual amortization expense related to intangible assets to be recognized in future years as of September 30, 2020 is as follows:
 Amount
Remainder of 2020$4,211 
202116,636 
202216,728 
202316,558 
202414,067 
Thereafter6,486 
Total$74,686 
v3.20.2
Long-Term Debt
9 Months Ended
Sep. 30, 2020
Debt Disclosure [Abstract]  
Long-Term Debt Long-Term Debt
Long-term debt as of September 30, 2020 and December 31, 2019 consists of the following: 
 September 30, 2020December 31, 2019
2018-1 Class A-2-I notes$563,500 $567,813 
2018-1 Class A-2-II notes612,500 617,187 
2019-1 Class A-2 notes545,875 550,000 
Borrowings under Variable Funding Notes75,000 — 
Total debt, excluding deferred financing costs1,796,875 1,735,000 
Deferred financing costs, net of accumulated amortization(25,184)(29,995)
Total debt1,771,691 1,705,005 
Current portion of long-term debt17,500 17,500 
Long-term debt and borrowings under Variable Funding Notes, net of current portion$1,754,191 $1,687,505 
Future annual principal payments of long-term debt as of September 30, 2020 are as follows: 
 Amount
Remainder of 2020$4,375 
202117,500 
2022568,063 
202386,750 
202411,750 
Thereafter1,108,437 
Total$1,796,875 
On August 1, 2018, Planet Fitness Master Issuer LLC (the “Master Issuer”), a limited-purpose, bankruptcy remote, wholly-owned indirect subsidiary of Pla-Fit Holdings, LLC, entered into a base indenture and a related supplemental indenture (collectively, the “2018 Indenture”) under which the Master Issuer may issue multiple series of notes. On the same date, the Master Issuer issued Series 2018-1 4.262% Fixed Rate Senior Secured Notes, Class A-2-I (the “2018 Class A-2-I Notes”) with an initial principal amount of $575,000 and Series 2018-1 4.666% Fixed Rate Senior Secured Notes, Class A-2-II (the “2018 Class A-2-II Notes” and, together with the 2018 Class A-2-I Notes, the “2018 Notes”) with an initial principal amount of $625,000. In connection with the issuance of the 2018 Notes, the Master Issuer also entered into a revolving financing facility that allows for the incurrence of up to $75,000 in revolving loans and/or letters of credit under the Master Issuer’s Series 2018-1 Variable Funding Senior Notes, Class A-1 (the “Variable Funding Notes”). The Company fully drew down on the Variable Funding Notes on March 20, 2020. Outstanding amounts under the Variable Funding Notes bear interest at a variable rate, which is currently 2.28%. On December 3, 2019 the Master Issuer issued Series 2019-1 3.858% Fixed Rate Senior Secured Notes, Class A-2 (the “2019 Notes” and, together with the 2018 Notes, the “Notes”) with an initial principal amount of $550,000. The 2019 Notes were issued under the 2018 Indenture and a related supplemental indenture dated December 3, 2019 (together, the “Indenture”). Together the Notes and Variable Funding Notes will be referred to as the “Securitized Senior Notes”.
The Notes were issued in a securitization transaction pursuant to which most of the Company’s domestic revenue-generating assets, consisting principally of franchise-related agreements, certain corporate-owned store assets, equipment supply agreements and intellectual property and license agreements for the use of intellectual property, were assigned to the Master Issuer and certain other limited-purpose, bankruptcy remote, wholly-owned indirect subsidiaries of the Company that act as guarantors of the Securitized Senior Notes and that have pledged substantially all of their assets to secure the Securitized Senior Notes.
Interest and principal payments on the Notes are payable on a quarterly basis. The requirement to make such quarterly principal payments on the Notes is subject to certain financial conditions set forth in the Indenture. The legal final maturity date of the 2018 Notes is in September 2048, but it is anticipated that, unless earlier prepaid to the extent permitted under the Indenture, the 2018 Class A-2-I Notes will be repaid in September 2022 and the 2018 Class A-2-II Notes will be repaid in September 2025. The legal final maturity date of the 2019 Notes is in December 2049, but it is anticipated that, unless earlier prepaid to the extent permitted under the Indenture, the 2019 Notes will be repaid in December 2029 (together, the “Anticipated Repayment
Dates”). If the Master Issuer has not repaid or refinanced the Notes prior to the respective Anticipated Repayment Dates, additional interest will accrue pursuant to the Indenture.

As noted above, the Company borrowed the full $75,000 in Variable Funding Notes on March 20, 2020. The Variable Funding Notes accrue interest at a variable interest rate based on (i) the prime rate, (ii) overnight federal funds rates, (iii) the London interbank offered rate for U.S. Dollars, or (iv) with respect to advances made by conduit investors, the weighted average cost of, or related to, the issuance of commercial paper allocated to fund or maintain such advances, in each case plus any applicable margin and as specified in the Variable Funding Notes. As of September 30, 2020, the applicable borrowing rate is 2.28%. There is a commitment fee on the unused portion of the Variable Funding Notes of 0.5% based on utilization. It is anticipated that the principal and interest on the Variable Funding Notes will be repaid in full on or prior to September 2023, subject to two additional one-year extension options. Following the anticipated repayment date (and any extensions thereof) additional interest will accrue on the Variable Funding Notes equal to 5.0% per year.

In connection with the issuance of the 2018 Notes and 2019 Notes, the Company incurred debt issuance costs of $27,133 and $10,577, respectively. The debt issuance costs are being amortized to “Interest expense” through the Anticipated Repayment Dates of the Notes utilizing the effective interest rate method.
The Securitized Senior Notes are subject to covenants and restrictions customary for transactions of this type, including (i) that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Securitized Senior Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments in the case of the Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the assets pledged as collateral for the Securitized Senior Notes are in stated ways defective or ineffective, (iv) a cap on non-securitized indebtedness of $50,000 (provided that the Company may incur non-securitized indebtedness in excess of such amount, subject to the leverage ratio cap described below, under certain conditions, including if the relevant lenders execute a non-disturbance agreement that acknowledges the bankruptcy-remote status of the Master Issuer and its subsidiaries and of their respective assets), (v) a leverage ratio cap incurrence test on the Company of 7.0x (calculated without regard for any indebtedness subject to the $50,000 cap) and (vi) covenants relating to recordkeeping, access to information and similar matters.
Pursuant to a parent company support agreement, the Company has agreed to cause its subsidiary to perform each of its obligations (including any indemnity obligations) and duties under the Management Agreement and under the contribution agreements entered into in connection with the securitized financing facility, in each case as and when due. To the extent that such subsidiary has not performed any such obligation or duty within the prescribed time frame after such obligation or duty was required to be performed, the Company has agreed to either (i) perform such obligation or duty or (ii) cause such obligations or duties to be performed on the Company’s behalf.
The Securitized Senior Notes are also subject to customary rapid amortization events provided for in the Indenture, including events tied to failure to maintain stated debt service coverage ratios, certain manager termination events, an event of default, and the failure to repay or refinance the Notes on the applicable scheduled Anticipated Repayment Dates. The Securitized Senior Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal, or other amounts due on or with respect to the Securitized Senior Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective, and certain judgments.
In accordance with the Indenture, certain cash accounts have been established with the Indenture trustee (the “Trustee”) for the benefit of the trustee and the noteholders, and are restricted in their use. The Company holds restricted cash which primarily represents cash collections held by the Trustee, interest, principal, and commitment fee reserves held by the Trustee related to the Securitized Senior Notes. As of September 30, 2020, the Company had restricted cash held by the Trustee of $65,936, which includes pre-funding of principal and interest payments through the March 5, 2021 payment date. Restricted cash has been combined with cash and cash equivalents when reconciling the beginning and end of period balances in the consolidated statements of cash flows.
v3.20.2
Leases
9 Months Ended
Sep. 30, 2020
Leases [Abstract]  
Leases LeasesThe Company leases space to operate corporate-owned stores, equipment, office, and warehouse space. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For leases beginning in 2019 and later, we account for fixed lease and non-lease components together
as a single, combined lease component. Variable lease costs, which may include common area maintenance, insurance, and taxes are not included in the lease liability and are expensed in the period incurred.
Our corporate-owned store leases generally have remaining terms of one to ten years, and typically include one or more renewal options, with renewal terms that can generally extend the lease term from three to ten years or more. The exercise of lease renewal options is at our sole discretion. The Company includes options to renew in the expected term when they are reasonably certain to be exercised. The depreciable life of assets and leasehold improvements are limited by the expected lease term.
Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease ROU assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs and lease incentives. To determine the present value of lease payments not yet paid, we estimate incremental secured borrowing rates corresponding to the maturities of the leases based upon interpolated rates using our Class A-2 Notes.
The Company has certain non-real estate leases that are accounted for as finance leases under ASC 842, which is similar to the accounting for capital leases under the previous standard. These leases are immaterial, and therefore the Company has not included them in them in the tables below, except for their location on the consolidated balance sheet.
Our leases typically contain rent escalations over the lease term. We recognize expense for these leases on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce our ROU asset related to the lease. These tenant incentives are amortized as reduction of rent expense over the lease term.
Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
LeasesClassificationSeptember 30, 2020December 31, 2019
Assets
Operating lease assetsRight of use asset, net$163,119 $155,633 
Finance lease assetsProperty and equipment, net of accumulated depreciation269 309 
Total lease assets$163,388 $155,942 
Liabilities
Current:
OperatingOther current liabilities$18,402 $16,755 
Noncurrent:
OperatingLease liabilities, net of current portion165,372 152,920 
FinancingOther liabilities293 333 
Total lease liabilities$184,067 $170,008 
Weighted-average remaining lease term (years) - operating leases8.8
Weighted-average discount rate - operating leases5.1 %

During the three and nine months ended September 30, 2020 and 2019, the components of lease cost were as follows:
Three months ended September 30,Nine months ended September 30,
2020201920202019
Operating lease cost$6,717 $5,317 $19,065 $15,117 
Variable lease cost2,795 2,118 7,625 6,091 
Total lease cost$9,512 $7,435 $26,690 $21,208 
The Company’s costs related to short-term leases, those with a duration between one and twelve months, were immaterial.

Supplemental disclosures of cash flow information related to leases were as follows:
Three months ended September 30,Nine months ended
September 30,
2020201920202019
Cash paid for lease liabilities$6,177 $4,958 $17,575 $14,323 
Operating assets obtained in exchange for operating lease liabilities$20,261 $16,173 $29,483 $19,154 

As of September 30, 2020, maturities of lease liabilities were as follows:
Amount
Remainder of 2020$6,395 
202128,027 
202228,606 
202328,150 
202426,636 
Thereafter117,980 
Total lease payments$235,794 
Less: imputed interest51,727 
Present value of lease liabilities$184,067 

As of September 30, 2020, operating lease payments exclude approximately $4,777 of legally binding minimum lease payments for leases signed but not yet commenced.
Leases LeasesThe Company leases space to operate corporate-owned stores, equipment, office, and warehouse space. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For leases beginning in 2019 and later, we account for fixed lease and non-lease components together
as a single, combined lease component. Variable lease costs, which may include common area maintenance, insurance, and taxes are not included in the lease liability and are expensed in the period incurred.
Our corporate-owned store leases generally have remaining terms of one to ten years, and typically include one or more renewal options, with renewal terms that can generally extend the lease term from three to ten years or more. The exercise of lease renewal options is at our sole discretion. The Company includes options to renew in the expected term when they are reasonably certain to be exercised. The depreciable life of assets and leasehold improvements are limited by the expected lease term.
Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease ROU assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs and lease incentives. To determine the present value of lease payments not yet paid, we estimate incremental secured borrowing rates corresponding to the maturities of the leases based upon interpolated rates using our Class A-2 Notes.
The Company has certain non-real estate leases that are accounted for as finance leases under ASC 842, which is similar to the accounting for capital leases under the previous standard. These leases are immaterial, and therefore the Company has not included them in them in the tables below, except for their location on the consolidated balance sheet.
Our leases typically contain rent escalations over the lease term. We recognize expense for these leases on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce our ROU asset related to the lease. These tenant incentives are amortized as reduction of rent expense over the lease term.
Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
LeasesClassificationSeptember 30, 2020December 31, 2019
Assets
Operating lease assetsRight of use asset, net$163,119 $155,633 
Finance lease assetsProperty and equipment, net of accumulated depreciation269 309 
Total lease assets$163,388 $155,942 
Liabilities
Current:
OperatingOther current liabilities$18,402 $16,755 
Noncurrent:
OperatingLease liabilities, net of current portion165,372 152,920 
FinancingOther liabilities293 333 
Total lease liabilities$184,067 $170,008 
Weighted-average remaining lease term (years) - operating leases8.8
Weighted-average discount rate - operating leases5.1 %

During the three and nine months ended September 30, 2020 and 2019, the components of lease cost were as follows:
Three months ended September 30,Nine months ended September 30,
2020201920202019
Operating lease cost$6,717 $5,317 $19,065 $15,117 
Variable lease cost2,795 2,118 7,625 6,091 
Total lease cost$9,512 $7,435 $26,690 $21,208 
The Company’s costs related to short-term leases, those with a duration between one and twelve months, were immaterial.

Supplemental disclosures of cash flow information related to leases were as follows:
Three months ended September 30,Nine months ended
September 30,
2020201920202019
Cash paid for lease liabilities$6,177 $4,958 $17,575 $14,323 
Operating assets obtained in exchange for operating lease liabilities$20,261 $16,173 $29,483 $19,154 

As of September 30, 2020, maturities of lease liabilities were as follows:
Amount
Remainder of 2020$6,395 
202128,027 
202228,606 
202328,150 
202426,636 
Thereafter117,980 
Total lease payments$235,794 
Less: imputed interest51,727 
Present value of lease liabilities$184,067 

As of September 30, 2020, operating lease payments exclude approximately $4,777 of legally binding minimum lease payments for leases signed but not yet commenced.
v3.20.2
Revenue recognition
9 Months Ended
Sep. 30, 2020
Revenue from Contract with Customer [Abstract]  
Revenue recognition Revenue recognition
Contract Liabilities
Contract liabilities consist primarily of deferred revenue resulting from initial and renewal franchise fees and area development agreement (“ADA”) fees paid by franchisees, as well as transfer fees, which are generally recognized on a straight-line basis over the term of the underlying franchise agreement. Also included are corporate-owned store enrollment fees, annual fees and monthly fees as well as deferred equipment rebates relating to our equipment business. We classify these contract liabilities as deferred revenue in our condensed consolidated balance sheets.
Additionally, as of September 30, 2020, due to temporary store closures in March as a result of the COVID-19 pandemic, approximately $2,200 remains of deferred revenue from March related to monthly membership billings of corporate-owned store and franchise revenue that the Company will recognize as the stores reopen.
The following table reflects the change in contract liabilities between December 31, 2019 and September 30, 2020.
Contract liabilities
Balance at December 31, 2019$62,054 
Revenue recognized that was included in the contract liability at the beginning of the year(21,994)
Increase, excluding amounts recognized as revenue during the period16,863 
Balance at September 30, 2020$56,923 
The following table illustrates estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2020. The Company has elected to exclude short term contracts, sales and usage based royalties and any other variable consideration recognized on an “as invoiced” basis.
Contract liabilities to be recognized in:Amount
Remainder of 2020$16,902 
20217,995 
20223,670 
20233,536 
20243,288 
Thereafter21,532 
Total$56,923 
v3.20.2
Related Party Transactions
9 Months Ended
Sep. 30, 2020
Related Party Transactions [Abstract]  
Related Party Transactions Related Party Transactions
Activity with entities considered to be related parties is summarized below: 
 For the three months ended
September 30,
For the nine months ended
September 30,
 2020201920202019
Franchise revenue$224 $505 $724 $1,735 
Equipment revenue— 883 93 2,325 
Total revenue from related parties$224 $1,388 $817 $4,060 
Additionally, the Company had deferred franchise agreement and area development agreement revenue from related parties of $185 and $256 as of September 30, 2020 and December 31, 2019, respectively.
The Company had payables to related parties pursuant to tax benefit arrangements of $32,960 and $53,491, as of September 30, 2020 and December 31, 2019, respectively (see Note 12).
The Company provides administrative services to the NAF and typically charges NAF a fee for providing these services, but temporarily suspended charging them in June 2020 for the remainder of the year as a result of COVID-19. The services provided include accounting services, information technology, data processing, product development, legal and administrative support, and other operating expenses, which amounted to $0 and $402 for the three months ended September 30, 2020 and 2019, respectively, and $793 and $1,771 for the nine months ended September 30, 2020 and 2019, respectively.
In the three and nine months ended September 30, 2020, the Company incurred approximately $0 and $60, respectively, which is included within selling, general and administrative expense on the consolidated statements of operations, for corporate travel to a third-party company which is affiliated with our Chief Executive Officer.
In May 2020, the Company provided a short-term loan of approximately $8,950 to its third party payment processor related to amounts drafted by franchisee-owned stores in March that were not collected as part of the typical monthly process as a result of the impact of COVID-19. The third party payment processor has begun its repayment of this loan and the Company expects repayment will occur over several months. As of September 30, 2020, approximately $6,762 of the loan balance is outstanding and is included within other receivables on the balance sheet.
v3.20.2
Stockholder's Equity
9 Months Ended
Sep. 30, 2020
Equity [Abstract]  
Stockholder's Equity Stockholder’s Equity
Pursuant to the exchange agreement between the Company and the Continuing LLC Owners, the Continuing LLC Owners (or certain permitted transferees thereof) have the right, from time to time and subject to the terms of the exchange agreement, to exchange their Holdings Units, along with a corresponding number of shares of Class B common stock, for shares of Class A common stock (or cash at the option of the Company) on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends, reclassifications and similar transactions. In connection with any exchange of Holdings Units for shares of Class A common stock by a Continuing LLC Owner, the number of Holdings Units held by the Company is correspondingly increased as it acquires the exchanged Holdings Units, and a corresponding number of shares of Class B common stock are canceled.
During the nine months ended September 30, 2020, certain existing holders of Holdings Units exercised their exchange rights and exchanged 2,517,659 Holdings Units for 2,517,659 newly-issued shares of Class A common stock. Simultaneously, and in connection with these exchanges, 2,517,659 shares of Class B common stock were surrendered by the holders of Holdings Units that exercised their exchange rights and canceled. Additionally, in connection with these exchanges, Planet Fitness, Inc. received 2,517,659 Holdings Units, increasing its total ownership interest in Pla-Fit Holdings.
As a result of the above transactions, as of September 30, 2020:
Holders of our Class A common stock owned 80,473,011 shares of our Class A common stock, representing 93.0% of the voting power in the Company and, through the Company, 80,473,011 Holdings Units representing 93.0% of the economic interest in Pla-Fit Holdings; and
the Continuing LLC Owners collectively owned 6,044,261 Holdings Units, representing 7.0% of the economic interest in Pla-Fit Holdings, and 6,044,261 shares of our Class B common stock, representing 7.0% of the voting power in the Company.
Share repurchase program
2019 share repurchase program
On November 5, 2019, our board of directors approved a share repurchase program of up to $500,000.
On December 4, 2019, the Company entered into a $300,000 accelerated share repurchase agreement (the “2019 ASR Agreement”) with JPMorgan Chase Bank, N.A. (“JPMC”). Pursuant to the terms of the 2019 ASR Agreement, on December 5, 2019, the Company paid JPMC $300,000 upfront in cash and received 3,289,924 shares of the Company’s Class A common stock, which were retired, and the Company elected to record as a reduction to retained earnings of $240,000. Final settlement of the ASR Agreement occurred on March 2, 2020. At final settlement, JPMC delivered 666,961 additional shares of the Company’s Class A common stock, based on a weighted average cost per share of $75.82 over the term of the 2019 ASR Agreement, which were retired. This had been evaluated as an unsettled forward contract indexed to our own stock, with $60,000 classified as a reduction to retained earnings at the original date of payment.
On March 18, 2020, the Company announced the suspension of its 2019 share repurchase program. If the 2019 share repurchase program is reinstated, the timing of purchases and amount of stock repurchased will be subject to the Company’s discretion and will depend on market and business conditions, the Company’s general working capital needs, stock price, applicable legal requirements and other factors. Our ability to repurchase shares at any particular time is also subject to the terms of the Indenture governing the Securitized Senior Notes. Purchases may be effected through one or more open market transactions, privately negotiated transactions, transactions structured through investment banking institutions, or a combination of the foregoing. The Company may reinstate or terminate the program at any time.
2018 share repurchase program
On August 3, 2018, our board of directors approved an increase to the total amount of the previously approved share repurchase program to $500,000.
On November 13, 2018, the Company entered into a $300,000 accelerated share repurchase agreement (the “2018 ASR Agreement”) with Citibank, N.A. (“Citibank”). Pursuant to the terms of the 2018 ASR Agreement, on November 14, 2018, the Company paid Citibank $300,000 upfront in cash and received 4,607,410 shares of the Company’s Class A common stock, which were retired, and the Company elected to record as a reduction to retained earnings of $240,000. Final settlement of the 2018 ASR Agreement occurred on April 30, 2019. At final settlement, Citibank delivered 524,124 additional shares of the Company’s Class A common stock, based on a weighted average cost per share of $58.46 over the term of the 2018 ASR agreement, which were retired. This had been evaluated as an unsettled forward contract indexed to our own stock, with $60,000 classified as a reduction to retained earnings at the original date of payment.
During the three months ended September 30, 2019, the Company purchased 2,272,001 shares of its Class A common stock for an average purchase price of $69.51 per share, completing its previously approved $500,000 share repurchase program.
Preferred stock
The Company had 50,000,000 shares of preferred stock authorized and none issued or outstanding for the nine months ended September 30, 2020 and 2019.
v3.20.2
Earnings Per Share
9 Months Ended
Sep. 30, 2020
Earnings Per Share [Abstract]  
Earnings Per Share Earnings Per ShareBasic earnings per share of Class A common stock is computed by dividing net income attributable to Planet Fitness, Inc. by the weighted-average number of shares of Class A common stock outstanding during the same period. Diluted earnings per share of Class A common stock is computed by dividing net income attributable to Planet Fitness, Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.
Shares of the Company’s Class B common stock do not share in the earnings or losses attributable to Planet Fitness, Inc. and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented. Shares of the Company’s Class B common stock are, however, considered potentially dilutive shares of Class A common stock because shares of Class B common stock, together with the related Holdings Units, are exchangeable into shares of Class A common stock on a one-for-one basis.
The following table sets forth reconciliations used to compute basic and diluted earnings per share of Class A common stock:  
 Three months ended
September 30,
Nine months ended
September 30,
 2020201920202019
Numerator  
Net (loss) income$(3,284)$29,692 $(24,886)$101,158 
Less: net (loss) income attributable to non-controlling interests(173)3,915 (1,205)13,128 
Net (loss) income attributable to Planet Fitness, Inc.$(3,111)$25,777 $(23,681)$88,030 
Denominator
Weighted-average shares of Class A common stock outstanding - basic80,220,503 83,157,430 79,763,279 83,699,609 
Effect of dilutive securities:
Stock options— 606,888 — 609,788 
Restricted stock units— 42,588 — 44,775 
Weighted-average shares of Class A common stock outstanding - diluted80,220,503 83,806,906 79,763,279 84,354,172 
(Loss) earnings per share of Class A common stock - basic$(0.04)$0.31 $(0.30)$1.05 
(Loss) earnings per share of Class A common stock - diluted$(0.04)$0.31 $(0.30)$1.04 
Potentially dilutive stock options of 486,255 and 525,697 for the three and nine months ended September 30, 2020 and restricted stock units of 36,431 and 38,737 for the three and nine months ended September 30, 2020 were not included in the computation of diluted loss per share because the inclusion thereof would be antidilutive.
Weighted average shares of Class B common stock of 6,291,348 and 8,579,094 for the three months ended September 30, 2020 and 2019, respectively, and 6,854,501 and 8,798,695 for the nine months ended September 30, 2020 and 2019, respectively, were evaluated under the if-converted method for potential dilutive effects and were determined to be anti-dilutive. Weighted average stock options outstanding of 177,970 and 76,455 for the three months ended September 30, 2020 and 2019, respectively, and 158,304 and 50,063 for the nine months ended September 30, 2020 and 2019, respectively, were evaluated under the treasury stock method for potential dilutive effects and were determined to be anti-dilutive. Weighted average restricted stock units outstanding of 0 and 713 for the three months ended September 30, 2020 and 2019, respectively, and 170 and 1,688 for the nine months ended September 30, 2020 and 2019, respectively, were evaluated under the treasury stock method for potential dilutive effects and were determined to be anti-dilutive.
v3.20.2
Income Taxes
9 Months Ended
Sep. 30, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company is the sole managing member of Pla-Fit Holdings, which is treated as a partnership for U.S. federal and certain state and local income taxes. As a partnership, Pla-Fit Holdings is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Pla-Fit Holdings is passed through to and included in the taxable income or loss of its members, including the Company, on a pro-rata basis.
Planet Fitness, Inc. is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to our allocable share of any taxable income of Pla-Fit Holdings. The Company’s effective tax rate was 24.0% and 25.8% for the three months ended September 30, 2020 and 2019, respectively. The effective tax rate for the three months ended September 30, 2020 and 2019 differed from the U.S. federal statutory rate of 21% primarily due to state and local taxes, partially offset by income attributable to non-controlling interests. The Company’s effective tax rate was 22.1% and 21.0% for the nine months ended September 30, 2020 and 2019, respectively. The effective tax rate for the nine months ended September 30, 2020 and 2019 differed from the U.S. federal statutory rate of 21% primarily due to state and local taxes, the recognition of a tax expense from the remeasurement of the Company's net deferred tax assets, partially offset by income attributable to non-controlling interests. The Company was also subject to taxes in foreign jurisdictions.
Net deferred tax assets of $466,035 and $411,177 as of September 30, 2020 and December 31, 2019, respectively, relate primarily to the tax effects of temporary differences in the book basis as compared to the tax basis of our investment in Pla-Fit Holdings as a result of the secondary offerings, other exchanges, recapitalization transactions and the IPO.
As of September 30, 2020 and December 31, 2019, the total liability related to uncertain tax positions was $420. The Company recognizes interest accrued and penalties, if applicable, related to unrecognized tax benefits in income tax expense. Interest and penalties for the three and nine months ended September 30, 2020 and 2019 were not material.
Tax benefit arrangements
The Company’s acquisition of Holdings Units in connection with the IPO and future and certain past exchanges of Holdings Units for shares of the Company’s Class A common stock (or cash at the option of the Company) are expected to produce and have produced favorable tax attributes. In connection with the IPO, the Company entered into two tax receivable agreements. Under the first of those agreements, the Company generally is required to pay to certain existing and previous equity owners of Pla-Fit Holdings (the “TRA Holders”) 85% of the applicable tax savings, if any, in U.S. federal and state income tax that the Company is deemed to realize as a result of certain tax attributes of their Holdings Units sold to the Company (or exchanged in a taxable sale) and that are created as a result of (i) the exchanges of their Holdings Units for shares of Class A common stock and (ii) tax benefits attributable to payments made under the tax receivable agreement (including imputed interest). Under the second tax receivable agreement, the Company generally is required to pay to TSG AIV II-A L.P and TSG PF Co-Investors A L.P. (the “Direct TSG Investors”) 85% of the amount of tax savings, if any, that the Company is deemed to realize as a result of the tax attributes of the Holdings Units held in respect of the Direct TSG Investors’ interest in the Company, which resulted from the Direct TSG Investors’ purchase of interests in Pla-Fit Holdings in 2012, and certain other tax benefits. Under both agreements, the Company generally retains the benefit of the remaining 15% of the applicable tax savings.
During the nine months ended September 30, 2020, 2,517,659 Holdings Units were exchanged by the TRA Holders for newly issued shares of Class A common stock, resulting in an increase in the tax basis of the net assets of Pla-Fit Holdings subject to the provisions of the tax receivable agreements. As a result of the change in Planet Fitness, Inc.’s ownership percentage of Pla-Fit Holdings, we recorded a decrease to our net deferred tax assets of $1,828 during the nine months ended September 30, 2020. As a result of these exchanges, during the nine months ended September 30, 2020, we also recognized deferred tax assets in the amount of $56,177, and corresponding tax benefit arrangement liabilities of $47,689, representing approximately 85% of the tax benefits due to the TRA Holders. The offset to the entries recorded in connection with exchanges was to equity.
As of September 30, 2020 and December 31, 2019, the Company had a liability of $456,006 and $427,216, respectively, related to its projected obligations under the tax benefit arrangements. Projected future payments under the tax benefit arrangements are as follows:
 Amount
Remainder of 2020$8,027 
2021— 
202222,202 
202328,088 
202435,545 
Thereafter362,144 
Total$456,006 
v3.20.2
Commitments and contingencies
9 Months Ended
Sep. 30, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments and contingencies Commitments and contingencies
From time to time, and in the ordinary course of business, the Company is subject to various claims, charges, and litigation, such as employment-related claims and slip and fall cases.
On September 3, 2020, the Company and other defendants received a final amendment to the joint and several judgment against them in the amount of $5,426, inclusive of accrued interest, in a civil action brought by a former employee. As of September 30, 2020, the Company has estimated its obligation related to this matter to be approximately $1,956, which is included in other current liabilities on the condensed consolidated balance sheet. In connection with 2012 acquisition of Pla-Fit Holdings on November 8, 2012, the sellers are obligated to indemnify the Company related to this specific matter. The Company has therefore recorded an offsetting indemnification receivable of $1,956 in other receivables on the Company’s condensed consolidated balance sheet, for which it has determined to record a full reserve as a result of potential uncertainty around collectability. The Company has incurred, and may incur in the future, legal costs on behalf of the defendants in the case, which
include a related party. These costs have not been and are not expected to be material in the future. The Company notes that one of the defendants is a current executive of the Company and as such has determined to include this as a related party transaction.
The Company is not currently aware of any other legal proceedings or claims that the Company believes will have, individually or in the aggregate, a material adverse effect on the Company’s financial position or result of operations.
Mexico Acquisition
On March 19, 2020, a franchisee in Mexico exercised a put option that requires the Company to acquire their franchisee-owned stores in Mexico. The transaction has not closed as of September 30, 2020 as the parties are in dispute over the final terms of the transaction and related matters. The Company analyzed the contract and estimates that the purchase price will approximate fair value of the acquired assets.
v3.20.2
Segments
9 Months Ended
Sep. 30, 2020
Segment Reporting [Abstract]  
Segments Segments
The Company has three reportable segments: (i) Franchise; (ii) Corporate-owned stores; and (iii) Equipment.  
The Company’s operations are organized and managed by type of products and services and segment information is reported accordingly. The Company’s chief operating decision maker (the “CODM”) is its Chief Executive Officer. The CODM reviews financial performance and allocates resources by reportable segment. There have been no operating segments aggregated to arrive at the Company’s reportable segments.
The Franchise segment includes operations related to the Company’s franchising business in the United States, Puerto Rico, Canada, the Dominican Republic, Panama, Mexico and Australia, including revenues and expenses from the NAF. The Corporate-owned stores segment includes operations with respect to all corporate-owned stores throughout the United States and Canada. The Equipment segment primarily includes the sale of equipment to our United States franchisee-owned stores.
The accounting policies of the reportable segments are the same as those described in Note 2. The Company evaluates the performance of its segments and allocates resources to them based on revenue and earnings before interest, taxes, depreciation, and amortization, referred to as Segment EBITDA. Revenues for all operating segments include only transactions with unaffiliated customers and include no intersegment revenues.
The tables below summarize the financial information for the Company’s reportable segments for the three and nine months ended September 30, 2020 and 2019. The “Corporate and other” category, as it relates to Segment EBITDA, primarily includes corporate overhead costs, such as payroll and related benefit costs and professional services which are not directly attributable to any individual segment.
 
 Three months ended
September 30,
Nine months ended
September 30,
 2020201920202019
Revenue  
Franchise segment revenue - U.S.$58,615 $65,494 $136,776 $200,111 
Franchise segment revenue - International1,142 1,215 2,512 4,172 
Franchise segment total59,757 66,709 139,288 204,283 
Corporate-owned stores - U.S.27,806 39,637 76,616 115,178 
Corporate-owned stores - International483 1,105 1,608 3,303 
Corporate-owned stores total28,289 40,742 78,224 118,481 
Equipment segment - U.S.17,337 59,364 55,335 174,528 
Equipment segment total17,337 59,364 55,335 174,528 
Total revenue$105,383 $166,815 $272,847 $497,292 
Franchise segment revenue includes franchise revenue, NAF revenue, and commission income.
Franchise revenue includes revenue generated from placement services of $1,455 and $4,277 for the three months ended September 30, 2020 and 2019, respectively, and $4,335 and $12,112 for the nine months September 30, 2020 and 2019, respectively.
 Three months ended
September 30,
Nine months ended
September 30,
 2020201920202019
Segment EBITDA  
Franchise$31,111 $44,328 $71,386 $141,548 
Corporate-owned stores5,711 16,799 11,376 50,505 
Equipment2,271 13,741 9,948 40,920 
Corporate and other(9,439)(10,036)(26,470)(33,968)
Total Segment EBITDA$29,654 $64,832 $66,240 $199,005 
 
The following table reconciles total Segment EBITDA to (loss) income before taxes:
 Three months ended
September 30,
Nine months ended
September 30,
 2020201920202019
Total Segment EBITDA$29,654 $64,832 $66,240 $199,005 
Less:
Depreciation and amortization13,636 11,832 39,436 32,316 
Other expense(24)(61)(784)(4,824)
Income from operations16,042 53,061 27,588 171,513 
Interest income349 1,808 2,635 5,585 
Interest expense(20,686)(14,807)(61,394)(44,192)
Other expense(24)(61)(784)(4,824)
(Loss) income before income taxes$(4,319)$40,001 $(31,955)$128,082 
The following table summarizes the Company’s assets by reportable segment: 
 September 30, 2020December 31, 2019
Franchise$174,700 $193,504 
Corporate-owned stores466,179 471,234 
Equipment171,224 197,656 
Unallocated989,449 854,796 
Total consolidated assets$1,801,552 $1,717,190 
The table above includes $850 and $1,039 of long-lived assets located in the Company’s international corporate-owned stores as of September 30, 2020 and December 31, 2019, respectively. All other assets are located in the U.S.
The following table summarizes the Company’s goodwill by reportable segment: 
 September 30, 2020December 31, 2019
Franchise$16,938 $16,938 
Corporate-owned stores118,217 118,217 
Equipment92,666 92,666 
Consolidated goodwill$227,821 $227,821 
v3.20.2
Corporate-Owned and Franchisee-Owned Stores
9 Months Ended
Sep. 30, 2020
Franchisors [Abstract]  
Corporate-Owned and Franchisee-Owned Stores Corporate-Owned and Franchisee-Owned Stores
The following table shows changes in our corporate-owned and franchisee-owned stores for the three and nine months ended September 30, 2020 and 2019:
 For the three months ended
September 30,
For the nine months ended
September 30,
 2020201920202019
Franchisee-owned stores:    
Stores operated at beginning of period1,960 1,779 1,903 1,666 
New stores opened27 39 86 157 
Stores debranded, sold or consolidated(1)
(2)(1)(4)(6)
Stores operated at end of period(2)
1,985 1,817 1,985 1,817 
Corporate-owned stores:
Stores operated at beginning of period99 80 98 76 
New stores opened
Stores acquired from franchisees— — — 
Stores operated at end of period(2)
101 82 101 82 
Total stores:
Stores operated at beginning of period2,059 1,859 2,001 1,742 
New stores opened29 41 89 159 
Stores acquired, debranded, sold or consolidated(1)
(2)(1)(4)(2)
Stores operated at end of period(2)
2,086 1,899 2,086 1,899 
 (1)     The term “debrand” refers to a franchisee-owned store whose right to use the Planet Fitness brand and marks has been terminated in accordance with the franchise agreement. The Company retains the right to prevent debranded stores from continuing to operate as fitness centers. The term “consolidated” refers to the combination of a franchisee’s store with another store located in close proximity with our prior approval. This often coincides with an enlargement, re-equipment and/or refurbishment of the remaining store.
(2)    The “stores operated” include stores that have closed temporarily related to the COVID-19 pandemic. All stores were closed in March 2020 in response to COVID-19, and as of September 30, 2020 1,983 were re-opened and operating, of which 1,884 were franchisee-owned stores and 99 were corporate-owned stores.
v3.20.2
Summary of significant accounting policies (Policies)
9 Months Ended
Sep. 30, 2020
Accounting Policies [Abstract]  
Basis of presentation and consolidation Basis of presentation and consolidation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these interim financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented have been reflected. All significant intercompany balances and transactions have been eliminated in consolidation.
The condensed consolidated financial statements as of and for the three and nine months ended September 30, 2020 and 2019 are unaudited. The condensed consolidated balance sheet as of December 31, 2019 has been derived from the audited financial statements at that date but does not include all of the disclosures required by U.S. GAAP. These interim condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “Annual Report”) filed with the SEC on February 28, 2020. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year.
As discussed in Note 1, Planet Fitness, Inc. consolidates Pla-Fit Holdings. The Company also consolidates entities in which it has a controlling financial interest, the usual condition of which is ownership of a majority voting interest. The Company also considers for consolidation certain interests where the controlling financial interest may be achieved through arrangements that do not involve voting interests. Such an entity, known as a variable interest entity (“VIE”), is required to be consolidated by its primary beneficiary. The primary beneficiary of a VIE is considered to possess the power to direct the activities of the VIE that most significantly impact its economic performance and has the obligation to absorb losses or the rights to receive benefits from the VIE that are significant to it. The principal entities in which the Company possesses a variable interest include franchise entities and certain other entities. The Company is not deemed to be the primary beneficiary for Planet Fitness franchise entities. Therefore, these entities are not consolidated.The results of the Company have been consolidated with Matthew Michael Realty LLC (“MMR”), PF Melville LLC (“PF Melville”), and Planet Fitness NAF, LLC (the “NAF”) based on the determination that the Company is the primary beneficiary with respect to these VIEs. MMR and PF Melville are real estate holding companies that derive a majority of their financial support from the Company through lease agreements for corporate stores. See Note 3 for further information related to the Company’s VIEs. The NAF is an advertising fund on behalf of which the Company typically collects 2% of gross monthly membership dues from franchisees, in accordance with the provisions of the franchise agreements, and uses the amounts received to support our national marketing campaigns, its social media platforms and the development of local advertising materials.
Use of estimates Use of estimatesThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results. Significant areas where estimates and judgments are relied upon by management in the preparation of the consolidated financial statements include revenue recognition, valuation of assets and liabilities in connection with acquisitions, valuation of equity-based compensation awards, the evaluation of the recoverability of goodwill and long-lived assets, including intangible assets, income taxes, including deferred tax assets and liabilities and reserves for unrecognized tax benefits, the liability for the Company’s tax benefit arrangements, and the value of the lease liability and related right-of-use asset recorded in accordance with ASC 842 (see Note 7).
Fair Value Fair Value
ASC 820, Fair Value Measurements and Disclosures, establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:
Level 1—Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
Recent accounting pronouncements Recent accounting pronouncements
The FASB issued ASU No. 2017-4, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, in January 2017. This guidance eliminates the requirement to calculate the implied fair value, essentially eliminating step two from the goodwill impairment test. The new standard requires goodwill impairment to be based upon the results of step one of the impairment test, which is defined as the excess of the carrying value of a reporting unit over its fair value. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The Company adopted this guidance on January 1, 2020 noting no material impact on the Company’s consolidated financial statements.
The FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, in August 2018. The guidance helps align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company adopted this guidance on January 1, 2020 on a prospective basis, noting no material impact on the Company’s consolidated financial statements.
The FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, in December 2019. The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This guidance will be effective for fiscal years beginning after December 15, 2020, and early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
v3.20.2
Summary of Significant Accounting Policies (Tables)
9 Months Ended
Sep. 30, 2020
Accounting Policies [Abstract]  
Summary of Company's Liabilities Measured at Fair Value
The carrying value and estimated fair value of long-term debt as of September 30, 2020 and December 31, 2019 were as follows:
September 30, 2020December 31, 2019
Carrying value
Estimated fair value(1)
Carrying value
Estimated fair value(1)
Long-term debt$1,721,875 $1,672,404 $1,735,000 $1,765,805 
Variable Funding Notes$75,000 $75,000 $— $— 
(1) The Company’s Variable Funding Notes are a variable rate loan and the fair value of this loan approximates book value based on the borrowing rates currently available for variable rate loans obtained from third party lending institutions. The estimated fair value of our fixed rate long-term debt is estimated primarily based on current bid prices for our long-term debt. Judgment is required to develop these estimates. As such, the fair value of our long-term debt is classified within Level 2, as defined under U.S. GAAP.
v3.20.2
Variable Interest Entities (Tables)
9 Months Ended
Sep. 30, 2020
Variable Interest Entity, Consolidated, Carrying Amount, Assets and Liabilities, Net [Abstract]  
Carrying Value of Variable Interest Entities of Consolidated Financial Statements
The carrying values of VIEs included in the consolidated financial statements as of September 30, 2020 and December 31, 2019 are as follows: 
 September 30, 2020December 31, 2019
 AssetsLiabilitiesAssetsLiabilities
PF Melville$2,563 $— $2,682 $— 
MMR2,126 — 2,206 — 
Total$4,689 $— $4,888 $—