Document and Entity Information - USD ($) $ in Billions	12 Months Ended
Document and Entity Information - USD ($) $ in Billions	Dec. 31, 2018	Feb. 22, 2019	Jun. 30, 2018
Document Information [Line Items]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY
Trading Symbol	PLNT
Entity Registrant Name	PLANET FITNESS, INC.
Entity Central Index Key	0001637207
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 3.9
Class A Common Stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		83,600,812
Class B Common Stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		9,441,730

Consolidated balance sheets - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 289,431	$ 113,080
Restricted cash	30,708	0
Accounts receivable, net of allowance for bad debts of $84 and $32 at December 31, 2018 and 2017, respectively	38,960	37,272
Due from related parties	0	3,020
Inventory	5,122	2,692
Restricted assets – NAF (note 4)	0	499
Prepaid expenses	4,947	3,929
Other receivables	12,548	9,562
Income tax receivable	6,824	6,947
Total current assets	388,540	177,001
Property and equipment, net	114,367	83,327
Intangible assets, net	234,330	235,657
Goodwill	199,513	176,981
Deferred income taxes	414,841	407,782
Other assets, net	1,825	11,717
Total assets	1,353,416	1,092,465
Current liabilities:
Current maturities of long-term debt	12,000	7,185
Accounts payable	30,428	28,648
Accrued expenses	32,384	18,590
Equipment deposits	7,908	6,498
Restricted liabilities - NAF (note 4)	0	490
Deferred revenue, current	23,488	19,083
Payable pursuant to tax benefit arrangements, current	24,765	31,062
Other current liabilities	430	474
Total current liabilities	131,403	112,030
Long-term debt, net of current maturities	1,160,127	696,576
Deferred rent, net of current portion	10,083	6,127
Deferred revenue, net of current portion	26,374	8,440
Deferred tax liabilities	2,303	1,629
Payable pursuant to tax benefit arrangements, net of current portion	404,468	400,298
Other liabilities	1,447	4,302
Total noncurrent liabilities	1,604,802	1,117,372
Commitments and contingencies (note 15)
Stockholders' equity:
Accumulated other comprehensive gain (loss)	94	(648)
Additional paid in capital	19,732	12,118
Accumulated deficit	(394,410)	(130,966)
Total stockholders' deficit attributable to Planet Fitness, Inc.	(374,574)	(119,486)
Non-controlling interests	(8,215)	(17,451)
Total stockholders' deficit	(382,789)	(136,937)
Total liabilities and stockholders' deficit	1,353,416	1,092,465
Class A Common Stock
Stockholders' equity:
Common stock, value	9	9
Class B Common Stock
Stockholders' equity:
Common stock, value	$ 1	$ 1

Consolidated balance sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Accounts receivable, allowance for bad debts	$ 84	$ 32
Class A Common Stock
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)	83,584,000	87,188,000
Common stock, shares outstanding (in shares)	83,584,000	87,188,000
Class B Common Stock
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)	9,448,000	11,193,000
Common stock, shares outstanding (in shares)	9,448,000	11,193,000

Consolidated statements of operations - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Revenue:
Total revenue	$ 174,359	$ 136,656	$ 140,550	$ 121,333	$ 134,028	$ 97,496	$ 107,316	$ 91,102	$ 572,898	$ 429,942	$ 378,241
Operating costs and expenses:
Cost of revenue									162,646	129,266	122,317
Store operations									75,005	60,657	60,121
Selling, general and administrative									72,446	60,369	50,008
National advertising fund expense									42,619	0	0
Depreciation and amortization									35,260	31,761	31,502
Other (gain) loss									878	353	(1,369)
Total operating costs and expenses									388,854	282,406	262,579
Income from operations	52,742	43,573	48,811	38,918	42,277	33,954	38,250	33,055	184,044	147,536	115,662
Other income (expense), net:
Interest income									4,681	54	21
Interest expense									(50,746)	(35,337)	(27,146)
Other income (expense), net									(6,175)	316,928	1,371
Total other expense, net									(52,240)	281,645	(25,754)
Income before income taxes									131,804	429,181	89,908
Provision for income taxes									28,642	373,580	18,661
Net income	28,779	20,472	30,418	23,493	829	18,902	18,004	17,866	103,162	55,601	71,247
Less net income attributable to non-controlling interests									15,141	22,455	49,747
Net income attributable to Planet Fitness, Inc.	$ 24,796	$ 17,471	$ 25,874	$ 19,880	$ (3,453)	$ 15,345	$ 12,412	$ 8,842	$ 88,021	$ 33,146	$ 21,500
Class A Common Stock
Net income attributable to Planet Fitness, Inc.
Basic (usd per share)	$ 0.29	$ 0.20	$ 0.30	$ 0.23	$ (0.04)	$ 0.18	$ 0.16	$ 0.14	$ 1.01	$ 0.42	$ 0.50
Diluted (usd per share)	$ 0.29	$ 0.20	$ 0.29	$ 0.23	$ (0.04)	$ 0.18	$ 0.16	$ 0.14	$ 1.00	$ 0.42	$ 0.50
Weighted-average shares of Class A common stock outstanding:
Basic (shares)									87,235,021	78,910,390	43,300,288
Diluted (shares)									87,674,903	78,971,550	43,304,685
Franchise
Revenue:
Total revenue									$ 175,314	$ 131,983	$ 97,374
Commission income
Revenue:
Total revenue									6,632	18,172	19,114
National advertising fund revenue
Revenue:
Total revenue									42,194	0	0
Corporate-owned stores
Revenue:
Total revenue									138,599	112,114	104,721
Equipment
Revenue:
Total revenue									$ 210,159	$ 167,673	$ 157,032

Consolidated statements of comprehensive income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Statement of Comprehensive Income [Abstract]
Net income including non-controlling interests	$ 103,162	$ 55,601	$ 71,247
Net income including non-controlling interests
Unrealized gain (loss) on interest rate caps, net of tax	989	1,143	(78)
Foreign currency translation adjustments	(200)	26	(72)
Total other comprehensive income (loss), net	789	1,169	(150)
Total comprehensive income including non-controlling interests	103,951	56,770	71,097
Less: total comprehensive income attributable to non-controlling interests	15,189	22,707	49,560
Total comprehensive income attributable to Planet Fitness, Inc.	$ 88,762	$ 34,063	$ 21,537

Consolidated statements of cash flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Cash flows from operating activities:
Net income	$ 103,162	$ 55,601	$ 71,247
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	35,260	31,761	31,502
Amortization of deferred financing costs	3,400	1,935	1,544
Amortization of favorable leases and asset retirement obligations	375	334	392
Amortization and settlement of interest rate caps	1,170	1,755	797
Deferred tax expense	23,933	372,422	15,606
Loss (gain) on re-measurement of tax benefit arrangement	4,765	(317,354)	72
Provision for bad debts	19	(19)	59
Loss (gain) on disposal of property and equipment	462	(159)	(514)
Loss on extinguishment of debt	4,570	79	606
Third party debt refinancing expense	0	1,021	3,001
Loss on reacquired franchise rights	360	0	0
Equity-based compensation	5,479	2,531	1,728
Changes in operating assets and liabilities:
Accounts receivable	(1,923)	(10,481)	(7,754)
Due from related parties	3,598	(604)	1,897
Inventory	(2,430)	(890)	2,755
Other assets and other current assets	5,778	(2,981)	(7,944)
Accounts payable and accrued expenses	14,506	4,210	7,428
Other liabilities and other current liabilities	(2,835)	(470)	2,747
Income taxes	194	(3,027)	(5,993)
Payments pursuant to tax benefit arrangements	(30,493)	(11,446)	(6,922)
Equipment deposits	1,410	4,328	(3,417)
Deferred revenue	9,640	1,276	(652)
Deferred rent	3,999	1,199	632
Net cash provided by operating activities	184,399	131,021	108,817
Cash flows from investing activities:
Additions to property and equipment	(40,860)	(37,722)	(15,377)
Acquisitions of franchises	(45,752)	0	0
Proceeds from sale of property and equipment	196	680	683
Net cash used in investing activities	(86,416)	(37,042)	(14,694)
Cash flows from financing activities:
Proceeds from issuance of long-term debt	1,200,000	0	230,000
Proceeds from issuance of Class A common stock	1,209	480	136
Principal payments on capital lease obligations	(47)	(22)	(46)
Repayment of long-term debt	(712,469)	(7,185)	(5,621)
Payment of deferred financing and other debt-related costs	(27,133)	(1,278)	(5,220)
Premiums paid for interest rate caps	0	(366)	0
Dividend paid to holders of Class A common stock	0	0	(169,282)
Dividend equivalent paid to members of Pla-Fit Holdings	(957)	(1,974)	(101,729)
Distributions to members of Pla-Fit Holdings	(8,300)	(11,358)	(31,838)
Net cash provided by (used in) financing activities	109,920	(21,703)	(85,183)
Effects of exchange rate changes on cash and cash equivalents	(844)	411	23
Net increase in cash, cash equivalents and restricted cash	207,059	72,687	8,963
Cash, cash equivalents and restricted cash, beginning of period	113,080	40,393	31,430
Cash, cash equivalents and restricted cash, end of period	320,139	113,080	40,393
Supplemental cash flow information:
Net cash paid for income taxes	5,016	3,722	7,040
Cash paid for interest	38,624	31,418	24,302
Non-cash investing activities:
Non-cash additions to property and equipment	5,451	861	2,203
Non-cash financing activities:
Non-cash dividend equivalent payments	0	0	3,899
Class A Common Stock
Cash flows from financing activities:
Repurchase and retirement of common stock	(342,383)	0	0
Class B Common Stock
Cash flows from financing activities:
Repurchase and retirement of common stock	$ 0	$ 0	$ (1,583)

Consolidated statement of changes in equity - USD ($) shares in Thousands, $ in Thousands	Total	Accumulated other comprehensive income (loss)	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 at Dec. 31, 2015	$ (1,080)	$ (1,710)	$ 352	$ (14,032)	$ 14,300		$ 4		$ 6
Beginning balance (shares) at Dec. 31, 2015							36,598		62,112
Net income	71,247			21,500	49,747
Equity-based compensation expense	1,728		1,749	(21)
Repurchase and retirement of common stock (shares)									(222)
Repurchase and retirement of common stock	(1,583)		(441)	(1,142)
Exchanges of Class B common stock (shares)							24,705		(24,705)
Exchanges of Class B common stock	0	499	10,976		(11,475)		$ 2		$ (2)
Tax benefit arrangement liability and deferred taxes arising from secondary offerings and other exchanges	21,695		21,695
Exercise of stock options and vesting of restricted share units (shares)							11
Exercise of stock options and vesting of restricted share units	136		136
Dividend paid to holders of Class A common stock	(169,282)			(169,282)
Dividend equivalents paid or payable	(105,628)			(1,085)	(104,543)
Distributions paid to members of Pla-Fit Holdings	(31,838)				(31,838)
Other comprehensive loss	(150)	37			(187)
Ending balance at Dec. 31, 2016	(214,755)	(1,174)	34,467	(164,062)	(83,996)		$ 6		$ 4
Ending balance (shares) at Dec. 31, 2016							61,314		37,185
Net income	55,601			33,146	22,455
Equity-based compensation expense	2,531		2,565	(34)
Repurchase and retirement of common stock (shares)									(150)
Exchanges of Class B common stock (shares)							25,842		(25,842)
Exchanges of Class B common stock	0	(391)	(54,042)		54,433		$ 3		$ (3)
Tax benefit arrangement liability and deferred taxes arising from secondary offerings and other exchanges	28,648		28,648
Exercise of stock options and vesting of restricted share units (shares)							32
Exercise of stock options and vesting of restricted share units	480		480
Dividend paid to holders of Class A common stock	449			32	417
Dividend equivalents paid or payable	(11,060)			(48)	(11,012)
Distributions paid to members of Pla-Fit Holdings	1,169	917			252
Other comprehensive loss	1,169
Ending balance at Dec. 31, 2017	(136,937)	(648)	12,118	(130,966)	(17,451)		$ 9		$ 1
Ending balance (shares) at Dec. 31, 2017						87,188	87,188	11,193	11,193
Net income	103,162			88,021	15,141
Equity-based compensation expense	5,479		5,482	(3)
Repurchase and retirement of common stock (shares)							(5,431)		(9)
Repurchase and retirement of common stock	(342,383)		719	(342,383)	(719)
Exchanges of Class B common stock (shares)							1,736		(1,736)
Exchanges of Class B common stock	0	1	(3,067)		3,066				$ 0
Tax benefit arrangement liability and deferred taxes arising from secondary offerings and other exchanges	3,271		3,271
Exercise of stock options and vesting of restricted share units (shares)							91
Exercise of stock options and vesting of restricted share units	1,209		1,209
Forfeiture of dividend equivalents	113			113
Distributions paid to members of Pla-Fit Holdings	(8,300)				(8,300)
Cumulative effect adjustment (Note 10)	(9,192)			(9,192)
Other comprehensive loss	789	741			48
Ending balance at Dec. 31, 2018	$ (382,789)	$ 94	$ 19,732	$ (394,410)	$ (8,215)		$ 9		$ 1
Ending balance (shares) at Dec. 31, 2018						83,584	83,584	9,448	9,448

Business organization

12 Months Ended

Dec. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business organization

Planet Fitness, Inc. (the “Company”), through its subsidiaries, is a franchisor and operator of fitness centers, with approximately 12.5 million members and 1,742 owned and franchised locations (referred to as stores) in all 50 states, the District of Columbia, Puerto Rico, Canada, the Dominican Republic, Panama and Mexico as of December 31, 2018.

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; and


•	Selling fitness-related equipment to franchisee-owned stores.

In 2012 investment funds affiliated with TSG Consumer Partners, LLC (“TSG”), purchased interests in Pla-Fit Holdings.

The Company was formed as a Delaware corporation on March 16, 2015 for the purpose of facilitating an initial public offering (the “IPO”) 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, 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. 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 Holdings Units not owned by the Company.

The recapitalization transactions are considered transactions between entities under common control. As a result, the financial statements for periods prior to the IPO and the recapitalization transactions are the financial statements of Pla-Fit Holdings as the predecessor to the Company for accounting and reporting purposes. Unless otherwise specified, “the Company” refers to both Planet Fitness, Inc. and Pla-Fit Holdings throughout the remainder of these notes.

Secondary offerings

In June 2016, the Company completed a secondary offering (“June Secondary Offering”) of 11,500,000 shares of its Class A common stock at a price of $16.50 per share. All of the shares sold in the June Secondary Offering were offered by certain Continuing LLC Owners and TSG AIV II-A L.P and TSG PF Co-Investors A L.P. (“Direct TSG Investors”). The Company did not receive any proceeds from the sale of shares of Class A common stock offered by the Direct TSG Investors and the participating Continuing LLC Owners. The shares sold in the June Secondary Offering consisted of (i) 3,608,840 existing shares of Class A common stock held by the Direct TSG Investors and (ii) 7,891,160 newly-issued shares of Class A common stock issued in connection with the exercise of the exchange right by the Continuing LLC Owners that participated in the June Secondary Offering. Simultaneously, and in connection with the exchange, 7,891,160 shares of Class B common stock were surrendered by the Continuing LLC Owners that participated in the June Secondary Offering and canceled. Additionally, in connection with the exchange, Planet Fitness, Inc. received 7,891,160 Holdings Units, increasing its total ownership interest in Pla-Fit Holdings.

In September 2016, the Company completed a secondary offering (“September Secondary Offering”) of 8,000,000 shares of its Class A common stock at a price of $19.62 per share. All of the shares sold in the September Secondary Offering were offered by the Direct TSG Investors and participating Continuing LLC Owners. The Company did not receive any proceeds from the sale of shares of Class A common stock offered by the Direct TSG Investors and the Continuing LLC Owners that participating in the September Secondary Offering. The shares sold in the September Secondary Offering consisted of (i) 2,593,981 existing shares of Class A common stock held by the Direct TSG Investors and (ii) 5,406,019 newly-issued shares of Class A common stock issued in connection with the exercise of the exchange right by the Continuing LLC Owners that participated in the September Secondary offering. Simultaneously, and in connection with the exchange, 5,406,019 shares of Class B common stock were surrendered by the Continuing LLC Owners that participated in the September Secondary Offering and canceled. Additionally, in connection with the exchange, Planet Fitness, Inc. received 5,406,019 Holdings Units, increasing its total ownership interest in Pla-Fit Holdings.

In November 2016, the Company completed a secondary offering (“November Secondary Offering”) of 15,000,000 shares of its Class A common stock at a price of $23.22 per share. All of the shares sold in the November Secondary Offering were offered by the Direct TSG Investors and participating Continuing LLC Owners. The Company did not receive any proceeds from the sale of shares of Class A common stock offered by the Direct TSG Investors and the Continuing LLC Owners that participating in the September Secondary Offering. The shares sold in the November Secondary Offering consisted of (i) 4,863,715 existing shares of Class A common stock held by the Direct TSG Investors and (ii) 10,136,285 newly-issued shares of Class A common stock issued in connection with the exercise of the exchange right by the Continuing LLC Owners that participated in the November Secondary offering. Simultaneously, and in connection with the exchange, 10,136,285 shares of Class B common stock were surrendered by the Continuing LLC Owners that participated in the November Secondary Offering and canceled. Additionally, in connection with the exchange, Planet Fitness, Inc. received 10,136,285 Holdings Units, increasing its total ownership interest in Pla-Fit Holdings.

In March 2017, the Company completed a secondary offering (“March Secondary Offering”) of 15,000,000 shares of its Class A common stock at a price of $20.44 per share. All of the shares sold in the March Secondary Offering were offered by certain existing holders of Holdings Units and the Direct TSG Investors. The Company did not receive any proceeds from the sale of shares of Class A common stock offered by the Direct TSG Investors and the participating holders of Holdings Units. The shares sold in the March Secondary Offering consisted of (i) 4,790,758 existing shares of Class A common stock held by the Direct TSG Investors and (ii) 10,209,242 newly-issued shares of Class A common stock issued in connection with the exercise of the exchange right by the holders of Holdings Units that participated in the March Secondary Offering. Simultaneously, and in connection with the exchange, 10,209,242 shares of Class B common stock were surrendered by the holders of Holdings Units that participated in the March Secondary Offering and canceled. Additionally, in connection with the exchange, Planet Fitness, Inc. received 10,209,242 Holdings Units, increasing its total ownership interest in Pla-Fit Holdings.

In May 2017, the Company completed a secondary offering (“May Secondary Offering”) of 16,085,510 shares of its Class A common stock at a price of $20.28 per share. All of the shares sold in the May Secondary Offering were offered by certain existing holders of Holdings Units and the Direct TSG Investors. The Company did not receive any proceeds from the sale of shares of Class A common stock offered by the Direct TSG Investors and the participating holders of Holdings Units. The shares sold in the May Secondary Offering consisted of (i) 5,215,691 existing shares of Class A common stock held by the Direct TSG Investors and (ii) 10,869,819 newly-issued shares of Class A common stock issued in connection with the exercise of the exchange right by the holders of Holdings Units that participated in the May Secondary Offering. Simultaneously, and in connection with the exchange, 10,869,819 shares of Class B common stock were surrendered by the holders of Holdings Units that participated in the May Secondary Offering and canceled. Additionally, in connection with the exchange, Planet Fitness, Inc. received 10,869,819 Holdings Units, increasing its total ownership interest in Pla-Fit Holdings.

In addition to the secondary offering transactions described above, during the years ended December 31, 2018 and 2017, certain Continuing LLC Owners have exercised their exchange rights and exchanged 1,736,020 and 4,762,943 Holdings Units, respectively, for 1,736,020 and 4,762,943 newly-issued shares of Class A common stock, respectively. Simultaneously, and in connection with these exchanges, 1,736,020 and 4,762,943 shares of Class B common stock were surrendered by the Continuing LLC Owners that exercised their exchange rights and canceled during the years ended December 31, 2018 and 2017, respectively. Additionally, in connection with these exchanges, Planet Fitness, Inc. received 1,736,020 and 4,762,943 Holdings Units during the years ended December 31, 2018 and 2017, respectively, increasing its total ownership interest in Pla-Fit Holdings.

As of December 31, 2018, the Company held 100% of the voting interest, and approximately 89.8% of the economic interest in Pla-Fit Holdings and the Continuing LLC Owners held the remaining 10.2% economic interest in Pla-Fit Holdings. As future exchanges of Holdings Units occur, the economic interest in Pla-Fit Holdings held by Planet Fitness, Inc. will increase.

Summary of significant accounting policies

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Summary of significant accounting policies

(a) Basis of presentation and consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). All significant intercompany balances and transactions have been eliminated in consolidation.

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 collects 2% of gross monthly membership fees from franchisees, in accordance with the provisions of the franchise agreements, and uses the amounts received to increase sales and further enhance the public reputation of the Planet Fitness brand. See Note 4 for further information related to the NAF.

(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 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, and the liability for the Company’s tax benefit arrangements.

(c) Concentrations

Cash and cash equivalents are financial instruments, which potentially subject the Company to a concentration of credit risk. The Company invests its excess cash in several major financial institutions, which are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The Company maintains balances in excess of these limits, but does not believe that such deposits with its banks are subject to any unusual risk.

The credit risk associated with trade receivables is mitigated due to the large number of customers, generally our franchisees, and their broad dispersion over many different geographic areas. We do not have any concentrations with respect to our revenues.

The Company purchases equipment, both for corporate-owned stores and for sales to franchisee-owned stores from various equipment vendors. For the year ended December 31, 2018 purchases from two equipment vendors comprised 76% and 13%, respectively, of total equipment purchases. For the year ended December 31, 2017 purchases from one equipment vendor comprised 91% of total equipment purchases and for the year ended December 31, 2016 purchases from two equipment vendors comprised 83% and 13%, respectively, of total equipment purchases.

The Company, including the NAF, uses one primary vendor for advertising services. For the year ended December 31, 2018, purchases from this vendor comprised 65% of total advertising purchases. For the year ended December 31, 2017 purchases from one vendor comprised 63% of total advertising purchases and for the year ended December 31, 2016 purchases from two vendors comprised 25% and 16% of total advertising purchases, respectively. (see Note 4 for further discussion of the NAF).

(d) Cash, cash equivalents and restricted cash

The Company considers all highly liquid investments purchased with an original maturity of 90 days or less to be cash equivalents. Cash held within the NAF is recorded as a restricted asset (see Note 4).

In accordance with the Company’s securitized financing facility, certain cash accounts have been established in the name of Citibank, N.A. (the “Trustee”). The Company holds restricted cash which primarily represents cash collections held by the Trustee, which includes interest, principal, and commitment fee reserves. As of December 31, 2018, the Company had restricted cash held by the Trustee of $30,708. 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.

(e) Revenue recognition

Revenue from Contracts with Customers

We transitioned to FASB Accounting Standards Codification (“ASC”) Topic 606, Revenue From Contracts with Customers (“ASC 606”), from ASC Topic 605, Revenue Recognition and ASC Subtopic 952-605, Franchisors - Revenue Recognition (together, the “Previous Standards”) on January 1, 2018 using the modified retrospective transition method. Our Financial Statements reflect the application of ASC 606 guidance beginning in 2018, while our consolidated financial statements for prior periods were prepared under the guidance of Previous Standards. The $9,192 cumulative effect of our transition to ASC 606 is reflected as an adjustment to January 1, 2018 stockholders' deficit (see Note 10).

Our transition to ASC 606 represents a change in accounting principle. ASC 606 eliminates industry-specific guidance and provides a single revenue recognition model for recognizing revenue from contracts with customers. The core principle of ASC 606 is that a reporting entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the reporting entity expects to be entitled in exchange for those goods or services.

Revenue Recognition Significant Accounting Policies under ASC 606

The Company's revenues are comprised of franchise revenue, equipment revenue, and corporate-owned stores revenue.

Franchise revenue

Franchise revenues consist primarily of royalties, NAF contributions, initial and successor franchise fees and upfront fees from area development agreements ("ADAs"), transfer fees, equipment placement revenue, other fees and commission income.

The Company's primary performance obligation under the franchise license is granting certain rights to use the Company's intellectual property, and all other services the Company provides under the ADA and franchise agreement are highly interrelated, not distinct within the contract, and therefore accounted for under ASC 606 as a single performance obligation, which is satisfied by granting certain rights to use our intellectual property over the term of each franchise agreement.

Royalties, including franchisee contributions to national advertising funds, are calculated as a percentage of franchise monthly dues and annual fees over the term of the franchise agreement. Under our franchise agreements, advertising contributions paid by franchisees must be spent on advertising, marketing and related activities. Initial and successor franchise fees are payable by the franchisee upon signing a new franchise agreement or successor franchise agreement, and transfer fees are paid to the Company when one franchisee transfers a franchise agreement to a different franchisee. Our franchise royalties, as well as our NAF contributions, represent sales-based royalties that are related entirely to our performance obligation under the franchise agreement and are recognized as franchise sales occur.

Additionally, under ASC 606, initial and successor franchise fees, as well as transfer fees, are recognized as revenue on a straight-line basis over the term of the respective franchise agreement. Under the Previous Standards, initial franchise fees were recognized as revenue when the related franchisees signed a lease and completed the Company's new franchisee training. Successor franchise fees and transfer fees were recognized as revenue upon execution of a new franchise agreement. Our ADAs generally consist of an obligation to grant geographic exclusive area development rights. These development rights are not distinct from franchise agreements, so upfront fees paid by franchisees for exclusive development rights are deferred and apportioned to each franchise agreement signed by the franchisee. The pro-rata amount apportioned to each franchise agreement is accounted for identically to the initial franchise fee.

The Company is generally responsible for assembly and placement of equipment it sells to U.S. based franchisee-owned stores. Placement revenue is recognized upon completion and acceptance of the services at the franchise location.

The Company recognizes commission income from certain of its franchisees’ use of certain preferred vendor arrangements. Commissions are recognized when amounts have been earned and collectability from the vendor is reasonably assured.

Online member join fees are paid to the Company by franchisees for processing new membership transactions when a new member signs up for a membership to a franchisee-owned store through the Company’s website. These fees are recognized as revenue as each transaction occurs.

Billing transaction fees are paid to the Company by certain of its franchisees for the processing of franchisee membership dues and annual fees through the Company’s third-party hosted point-of-sale system and are recognized as revenue as they are earned.

Equipment revenue

The Company sells and delivers equipment purchased from third-party equipment manufacturers to U.S. based franchisee-owned stores. Revenue is recognized upon transfer of control of ordered items, generally upon delivery to the customer, which is when the customer obtains physical possession of the goods, legal title is transferred, the customer has all risks and rewards of ownership and an obligation to pay for the goods is created. Franchisees are charged for all freight costs incurred for the delivery of equipment. Freight revenue is recorded within equipment revenue and freight costs are recorded within cost of revenue. In most instances, the Company recognizes equipment revenue on a gross basis as management has determined the Company to be the principal in these transactions. Management determined the Company to be the principal in the transaction because the Company controls the equipment prior to delivery to the final customer as evidenced by its pricing discretion over the goods, inventory transfer of title and risk of loss while the inventory is in transit, and having the primary responsibility to fulfill the customer order and direct the third-party vendor.

Corporate-owned stores revenue

The following revenues are generated from stores owned and operated by the Company.

Membership dues revenue

Customers are offered multiple membership choices varying in length. Membership dues are earned and recognized over the membership term on a straight-line basis.

Enrollment fee revenue

Enrollment fees are charged to new members at the commencement of their membership. The Company recognizes enrollment fees ratably over the estimated duration of the membership life, which is generally two years.

Annual membership fee revenue

Annual membership fees are annual fees charged to members in addition to and in order to maintain low monthly membership dues. The Company recognizes annual membership fees ratably over the 12-month membership period.

Retail sales

The Company sells Planet Fitness branded apparel, food, beverages, and other accessories. The revenue for these items is recognized at the point of sale.

Sales tax

All revenue amounts are recorded net of applicable sales tax.

Revenue Recognition Significant Accounting Policies under Previous Standards, prior to January 1, 2018 if different than under ASC 606

Franchise revenue

The following revenues are generated as a result of transactions with or related to the Company’s franchisees.

Area development fees

ADA fees collected in advance are deferred until the Company provides substantially all required obligations pursuant to the ADA. As the efforts and total cost relating to initial services are affected significantly by the number of stores opened in an area, the respective ADA is treated as a divisible contract. As each new site is accepted under an ADA, a franchisee signs a franchise operating agreement for the respective franchise location. As each store opened under an ADA typically has performance obligations associated with it, the Company recognizes ADA revenue as each individual franchise location is developed in proportion to the total number of stores to be developed under the ADA. These obligations are typically completed once the store is opened or the franchisee executes the individual property lease. ADAs generally have an initial term equal to the number of years over which the franchisee is required to open franchise stores, which is typically 5 to 10 years. There is no right of refund for an executed ADA. Upon default, as defined in the agreement, the Company may reacquire the rights pursuant to an ADA, and all remaining deferred revenue is recognized at that time.

Franchise fees and performance fees

Nonrefundable franchise fees are typically deferred until the franchisee executes a lease and receives initial training for the location, which is the point at which the Company has determined it has provided all of its material obligations required to recognize revenue. These amounts are included in deferred revenue on our consolidated balance sheets.

The individual franchise agreements typically have a 10-year initial term, but provide the franchisee with an opportunity to enter into successive renewals subject to certain conditions.

Transfer fees

The Company’s current franchise agreement provides that upon the transfer of a Planet Fitness store to a different franchisee, the Company is entitled to a transfer fee in the amount of the greater of $25, or $10 per store being transferred, if more than one, in addition to reimbursement of out-of-pocket expenses, including external legal and administrative costs incurred in connection with the transfer. Transfer-related fees and expenses are due, payable, and recognized at the time the transfer is effectuated.

Royalties

Royalties, which represent recurring fees paid by franchisees based on the franchisee-owned stores’ monthly and annual membership billings, are recognized on a monthly basis over the term of the franchise agreement. As specified under certain franchise agreements, the Company recognizes additional royalty fees as the franchisee-owned stores attain contractual monthly membership billing threshold amounts.

Equipment revenue

Equipment revenue is recognized upon the equipment being delivered to and assembled at each store and accepted by the franchisee. Franchisees are charged for all freight costs incurred for the delivery of equipment. Freight revenue is recorded within equipment revenue and freight costs are recorded within cost of revenue. The Company recognizes revenue on a gross basis in these transactions as management has determined the Company to be the principal in these transactions. Management determined the Company to be the principal because the Company is the primary obligor in these transactions, the Company has latitude in establishing prices for the equipment sales to franchisees, the Company has supplier selection discretion and is involved in determination of product specifications, and the Company bears all credit risk associated with obligations to the equipment manufacturers.

Equipment deposits are recognized as a liability on the accompanying consolidated balance sheets until delivery, assembly (if required), and acceptance by the franchisee.

(f) Deferred revenue

Subsequent to the adoption of ASC 606 franchise deferred revenue results from initial and successor franchise fees and 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 and under the Previous Standard franchise deferred revenue represents cash received from franchisees for ADAs and franchise fees for which revenue recognition criteria has not yet been met. Deferred revenue is also recognized in our corporate-owned stores segment for cash received from members for enrollment fees, membership dues and annual fees for the portion not yet earned based on the membership period under both ASC 606 and the Previous Standard.

(g) Cost of revenue

Cost of revenue consists primarily of direct costs associated with equipment sales (including freight costs) and the cost of retail merchandise sold in corporate-owned stores. Costs related to retail merchandise sales were immaterial in all periods presented. Rebates from equipment vendors where the Company has recognized the related equipment revenue and costs are recorded as a reduction to the cost of revenue.

(h) Store operations

Store operations consists of the direct costs related to operating corporate-owned stores, including our store management and staff, rent expense, utilities, supplies, maintenance, and local advertising.

(i) Selling, general and administrative

Selling, general and administrative expenses consist of costs associated with administrative and franchisee support functions related to our existing business as well as growth and development activities. These costs primarily consist of payroll, IT related, marketing, legal and accounting expenses. These expenses include costs related to placement services of $5,397, $4,601, and $3,970, for the years ended December 31, 2018, 2017 and 2016, respectively.

(j) Accounts receivable

Accounts receivable is primarily comprised of amounts owed to the Company resulting from equipment, placement, and commission revenue. The Company evaluates its accounts receivable on an ongoing basis and may establish an allowance for doubtful accounts based on collections and current credit conditions. Accounts are written off as uncollectible when it is determined that further collection efforts will be unsuccessful. Historically, the Company has not had a significant amount of write-offs.

(k) Leases and asset retirement obligations

The Company recognizes rent expense related to leased office and operating space on a straight-line basis over the term of the lease. The difference between rent expense and rent paid, if any, as a result of escalation provisions and lease incentives, such as tenant improvements provided by lessors, and is recorded as deferred rent in the Company’s consolidated balance sheets.

In accordance with ASC Topic 410, Asset Retirement and Environmental Obligations, the Company establishes assets and liabilities for the present value of estimated future costs to return certain leased facilities to their original condition. Such assets are depreciated on a straight-line basis over the lease period into operating expense, and the recorded liabilities are accreted to the future value of the estimated restoration costs.

(l) Property and equipment

Property and equipment is recorded at cost and depreciated using the straight-line method over its related estimated useful life. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the related asset, whichever is shorter. Upon sale or retirement, the asset cost and related accumulated depreciation are removed from the respective accounts, and any related gain or loss is reflected in the consolidated statements of operations. Ordinary maintenance and repair costs are expensed as incurred. The estimated useful lives of the Company’s fixed assets by class of asset are as follows:



	Years
Buildings and building improvements	20–40
Information technology and systems	3-5
Furniture and fixtures	5
Leasehold improvements	Useful life or term of lease whichever is shorter
Fitness equipment	5–7
Vehicles	5

(m) Advertising expenses

The Company expenses advertising costs as incurred. Advertising expenses, net of amounts reimbursed by franchisees, are included within store operations and selling, general and administrative expenses and totaled $12,101, $9,906, and $8,270 for the years ended December 31, 2018, 2017 and 2016, respectively. See Note 4 for discussion of the national advertising fund.

(n) Goodwill, long-lived assets, and other intangible assets

Goodwill and other intangible assets that arise from acquisitions are recorded in accordance with ASC Topic 350, Intangibles—Goodwill and Other. In accordance with this guidance, specifically identified intangible assets must be recorded as a separate asset from goodwill if either of the following two criteria is met: (1) the intangible asset acquired arises from contractual or other legal rights; or (2) the intangible asset is separable. Intangibles are typically trade and brand names, customer relationships, noncompete agreements, reacquired franchise rights, and favorable or unfavorable leases. Transactions are evaluated to determine whether any gain or loss on reacquired franchise rights, based on their fair value, should be recognized separately from identified intangibles. Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination.

Goodwill and indefinite-lived intangible assets are not amortized, but are reviewed annually for impairment or more frequently if impairment indicators arise. Separable intangible assets that are not deemed to have an indefinite life are amortized over their estimated useful lives on either a straight-line or accelerated basis as deemed appropriate, and are reviewed for impairment when events or circumstances suggest that the assets may not be recoverable.

The Company performs its annual test for impairment of goodwill and indefinite lived intangible assets on December 31 of each year. For goodwill, the first step of the impairment test is to determine whether the carrying amount of a reporting unit exceeds the fair value of the reporting unit. If the carrying amount of the reporting unit exceeds the reporting unit’s fair value, the Company would be required to perform a second step of the impairment test as this is an indication that the reporting unit’s goodwill may be impaired. The second step compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. Any impairment loss would be recognized in an amount equal to the excess of the carrying value of the goodwill over the implied fair value of the goodwill. The Company is also permitted to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test. If the Company concludes it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it need not perform the two-step impairment test.

For indefinite lived intangible assets, the impairment assessment consists of comparing the carrying value of the asset to its estimated fair value. To the extent that the carrying value exceeds the fair value of the asset, an impairment is recorded to reduce the carrying value to its fair value. The Company is also permitted to make a qualitative assessment of whether it is more likely than not an indefinite lived intangible asset’s fair value is less than its carrying value prior to applying the quantitative assessment. If based on the Company’s qualitative assessment it is not more likely than not that the carrying value of the asset is less than its fair value, then a quantitative assessment is not required.

The Company determined that no impairment charges were required during any periods presented.

The Company applies the provisions of ASC Topic 360, Property, Plant and Equipment, which requires that long-lived assets, including amortizable intangible assets, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group to be tested for impairment, then assets are required to be grouped and evaluated at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to the undiscounted future net cash flows expected to be generated by the asset or asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. There were no events or changes in circumstances that required the Company to test for impairment during any of the periods presented.

(o) Income taxes

The Company accounts for income taxes using the asset and liability method. Deferred income taxes are recognized for the expected future tax consequences attributable to temporary differences between the carrying amount of the existing tax assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied in the years in which temporary differences are expected to be recovered or settled. The principal items giving rise to temporary differences are the use of accelerated depreciation and certain basis differences resulting from acquisitions and the recapitalization transactions. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Planet Fitness, Inc. is the sole managing member of Pla-Fit Holdings, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. 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 Planet Fitness, Inc. following the recapitalization transactions, 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 is also subject to taxes in foreign jurisdictions.

The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs (see Note 14).

(p) 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, LLC who are unaffiliated with TSG (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 sales 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 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. Also, pursuant to the exchange agreement, to the extent an exchange results in Pla-Fit Holdings, LLC incurring a current tax liability relating to the New Hampshire business profits tax, the TRA Holders have agreed that they will contribute to Pla-Fit Holdings, LLC an amount sufficient to pay such tax liability (up to 3.5% of the value received upon exchange). If and when the Company subsequently realizes a related tax benefit, Pla-Fit Holdings, LLC will distribute the amount of any such tax benefit to the relevant Continuing LLC Owner in respect of its contribution. Due to changes in New Hampshire tax law, the Company no longer expects to incur any such liability under the New Hampshire business profits tax.

Based on current projections, the Company anticipates having sufficient taxable income to utilize these tax attributes and receive corresponding tax deductions in future periods. Accordingly, as of December 31, 2018 the Company has recorded a liability of $429,233 payable to the TRA Holders under the tax benefit obligations, representing approximately 85% of the calculated tax savings based on the original basis adjustments the Company anticipates being able to utilize in future years. Changes in the projected liability resulting from these tax benefit arrangements may occur based on changes in anticipated future taxable income, changes in applicable tax rates or other changes in tax attributes that may occur and impact the expected future tax benefits to be received by the Company. Changes in the projected liability under these tax benefit arrangements will be recorded as a component of other income (expense) each period. The projection of future taxable income involves significant judgment. Actual taxable income may differ from estimates, which could significantly impact the liability under the tax benefit arrangements and the Company’s consolidated results of operations.

(q) 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 table below presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2018 and December 31, 2017:



	Total fair value at December 31, 2018		Quoted prices in active markets markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Interest rate caps	$	—	$	—	$	—	$	—

	Total fair value at December 31, 2017		Quoted prices in active markets markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Interest rate caps	$	340	$	—	$	340	$	—

The carrying value and estimated fair value of long-term debt as of December 31, 2018 and December 31, 2017 were as follows:



	December 31, 2018				December 31, 2017
	Carrying value		Estimated fair value⁽¹⁾		Carrying value		Estimated fair value⁽²⁾
Long-term debt	$	1,197,000	$	1,188,985	$	709,470	$	709,470

(1) The estimated fair value of our 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.

(2) The carrying value of the Term Loan B debt approximated fair value as of December 31, 2017 as it was variable rate debt.

(r) Financial instruments

The carrying values of cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value because of the short-term nature of these instruments.

(s) Derivative instruments and hedging activities

The Company recognizes all derivative instruments as either assets or liabilities in the balance sheet at their respective fair values. For derivatives designated in hedging relationships, changes in the fair value are either offset through earnings against the change in fair value of the hedged item attributable to the risk being hedged or recognized in accumulated other comprehensive income, to the extent the derivative is effective at offsetting the changes in cash flows being hedged until the hedged item affects earnings.

The Company only enters into derivative contracts that it intends to designate as a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). For all hedging relationships, the Company formally documents the hedging relationship and its risk-management objective and strategy for undertaking the hedge, the hedging instrument, the hedged transaction, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method used to measure ineffectiveness. The Company also formally assesses, both at the inception of the hedging relationship and on an ongoing basis, whether the derivatives that are used in hedging relationships are highly effective in offsetting changes in cash flows of hedged transactions. For derivative instruments that are designated and qualify as part of a cash flow hedging relationship, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. See Note 8 for further information.

(t) Equity-based compensation

The Company has an equity-based compensation plan under which it receives services from employees and directors as consideration for equity instruments of the Company. The compensation expense is determined based on the fair value of the award as of the grant date. Compensation expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are satisfied. For awards with graded vesting, the fair value of each tranche is recognized over its respective vesting period. The Company accounts for forfeitures as they occur by reversing compensation cost for unvested awards when the award is forfeited. See Note 13 for further information.

(u) Guarantees

The Company, as a guarantor, is required to recognize, at inception of the guaranty, a liability for the fair value of the obligation undertaken in issuing the guarantee. See Notes 3 and 16 for further discussion of such obligations guaranteed.

(v) Contingencies

The Company records estimated future losses related to contingencies when such amounts are probable and estimable. The Company includes estimated legal fees related to such contingencies as part of the accrual for estimated future losses.

(w) Reclassifications

Certain amounts have been reclassified to conform to current year presentation.

(x) Recent accounting pronouncements

The FASB issued Accounting Standards Update (ASU) No. 2014-9, Revenue from Contracts with Customers, in September 2014. This guidance requires that an entity recognize revenue to depict the transfer of a promised good or service to its customers in an amount that reflects consideration to which the entity expects to be entitled in exchange for such transfer. This guidance also specifies accounting for certain costs incurred by an entity to obtain or fulfill a contract with a customer and provides for enhancements to revenue specific disclosures intended to allow users of the financial statements to clearly understand the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with its customers. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017 for public companies. The Company adopted this new guidance in fiscal year 2018 utilizing the modified retrospective method. See above for revenue recognition policies and Note 10.

In February 2016, the FASB established Topic 842, Leases, by issuing ASU No. 2016-02, Leases, in February 2016. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. This guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The new guidance requires lessees to recognize the assets and liabilities on the balance sheet for the rights and obligations created by leases with lease terms of more than 12 months, amends various other aspects of accounting for leases by lessees and lessors, and requires enhanced disclosures. Leases will be classified as finance or operating, with the classification affecting the pattern and classification of expense recognition within the income statement.

The new guidance is effective for fiscal years beginning after December 15, 2018 and requires a modified retrospective transition approach with application in all comparative periods presented (the “comparative method”), or alternatively, as of the effective date as the date of initial application without restating comparative period financial statements (the “effective date method”). The Company expects to adopt the new standard on January 1, 2019 and use the effective date as our date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. The new guidance also provides several practical expedients and policies that companies may elect upon transition. The Company has elected the package of practical expedients under which we will not reassess the classification of our existing leases, reevaluate whether any expired or existing contracts are or contain leases or reassess initial direct costs under the new guidance. The Company does not expect to elect the practical expedient pertaining to land easements, as it is not applicable to its leases. Additionally, the Company elected to use the practical expedient that permits a reassessment of lease terms for existing leases using hindsight.

The new standard also provides practical expedients for an entity’s ongoing accounting. The Company currently expects to elect the short-term lease recognition exemption. This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also currently expect to elect the practical expedient to not separate lease and non-lease components.

The Company performed an analysis of the impact of the new lease guidance and are in the process of completing the final phase of a comprehensive plan for our implementation of the new guidance. The project plan includes analyzing the impact of the new guidance on our current lease contracts, reviewing the completeness of our existing lease portfolio, comparing our accounting policies under current accounting guidance to the new accounting guidance and identifying potential differences from applying the requirements of the new guidance to our lease contracts. Upon transition to the new guidance on January 1, 2019, the Company currently expects to recognize between $125 million and $135 million of operating lease liabilities. Additionally, the Company expects to record right-of-use assets in a corresponding amount, net of amounts reclassified from other assets and liabilities, as specified by the new lease guidance.

The FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, in August 2016. This guidance is intended to reduce diversity in practice of the classification of certain cash receipts and cash payments. This guidance will be effective for fiscal years beginning after December 15, 2017, including interim periods within that year. The Company has adopted the guidance as of January 1, 2018 on a prospective basis, noting no material impact on its consolidated financial statements.

The FASB issued ASU No. 2017-4, 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. This guidance will be effective for fiscal years beginning after December 15, 2019, including interim periods within that year. This new guidance is not expected to have a material impact on the Company’s consolidated financial statements.

The FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, in August 2017. The guidance simplifies the application of hedge accounting in certain situations and amends the hedge accounting model to enable entities to better portray the economics of their risk management activities in the financial statements. This guidance will be effective for fiscal years beginning after December 15, 2018, including interim periods within that year. The Company does not expect the adoption of this guidance to have an impact on its 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). This guidance will be effective for fiscal years beginning after December 15, 2019, including interim periods within that year, but allows for early adoption. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

Variable interest entities

12 Months Ended

Dec. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Variable interest entities

The carrying values of VIEs included in the consolidated financial statements as of December 31, 2018 and December 31, 2017 are as follows:



	December 31, 2018				December 31, 2017
	Assets		Liabilities		Assets		Liabilities
PF Melville	$	4,787	$	—	$	4,420	$	—
MMR	$	3,563	—		$	3,360	—
Total	$	8,350	$	—	$	7,780	$	—

The Company also has variable interests in certain franchisees through the guarantee of certain lease agreements. The Company’s maximum obligation, as a result of its guarantees of leases, is approximately $732 and $979 as of December 31, 2018 and 2017, 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 ultimate settlement anticipated to be incurred from the Company’s involvement with these entities, which is estimated at $0.

National advertising fund	12 Months Ended
National advertising fund	Dec. 31, 2018
Related Party Transactions [Abstract]
National advertising fund	National advertising fund On July 26, 2011, the Company established the NAF for the creation and development of marketing, advertising, and related programs and materials for all Planet Fitness stores located in the United States and Puerto Rico. On behalf of the NAF, the Company collects 2% of gross monthly membership billings from franchisees, in accordance with the provisions of the franchise agreements, which subsequent to the adoption of ASC 606 is reflected on January 1, 2018, is reflected as NAF revenue on the consolidated statements of operations (see Note 2 and Note 10). The Company also contributes 2% of monthly membership billings from stores owned by the Company to the NAF, which is reflected in store operations expense in the consolidated statements of operations. The use of amounts received by the NAF is restricted to advertising, product development, public relations, merchandising, and administrative expenses and programs to increase sales and further enhance the public reputation of the Planet Fitness brand. The Company consolidates and reports all assets and liabilities held by the NAF within the consolidated financial statements. Amounts received or receivable by NAF are reported as restricted assets and restricted liabilities within current assets and current liabilities on the consolidated balance sheets. Beginning in 2018 with the adoption of ASC 606, the Company records all revenues of the NAF within franchise revenue and all expenses of the NAF within the operating expenses on the consolidated statement of operations (see Note 2 and Note 10). The Company provides administrative services to the NAF and charges the NAF a fee for providing those services. These services include accounting, information technology, data processing, product development, legal and administrative support, and other operating expenses, which amounted $2,472, $2,150 and $1,700 for the years ended December 31, 2018, 2017 and 2016, respectively. For the year ended December 31, 2018, subsequent to the adoption of ASC 606, the fees paid to the Company by the NAF are reflected as expense in the NAF expense line, and reflected as a corresponding reduction in general and administrative expenses in the consolidated statements of operations (see Note 2 and Note 10). For the years ended December 31, 2017 and 2016 the fees paid to the Company by the NAF are included in the consolidated statements of operations as a reduction in general and administrative expense, where the expense incurred by the Company was initially recorded.

Acquisition

12 Months Ended

Dec. 31, 2018

Business Combinations [Abstract]

Acquisition

Colorado Acquisition

On August 10, 2018, the Company purchased from one of its franchisees certain assets associated with four franchisee-owned stores in Colorado for a cash payment of $17,249. As a result of the transaction, the Company incurred a loss on unfavorable reacquired franchise rights of $10, which has been reflected in other operating costs in the statement of operations. The loss incurred reduced the net purchase price to $17,239. 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	3,873
Reacquired franchise rights	4,610
Customer relationships	140
Favorable leases, net	80
Other assets	143
Goodwill	8,476
Liabilities assumed, including deferred revenues	(83	)
	17,239

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.

Long Island Acquisition

On January 1, 2018, the Company purchased from one of its franchisees certain assets associated with six franchisee-owned stores in New York for a cash payment of $28,503. As a result of the transaction, the Company incurred a loss on unfavorable reacquired franchise rights of $350, which has been reflected in other operating costs in the statement of operations. The loss incurred reduced the net purchase price to $28,153. 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	$	4,672
Reacquired franchise rights	7,640
Customer relationships	1,150
Favorable leases, net	520
Reacquired area development rights	150
Other assets	275
Goodwill	14,056
Liabilities assumed, including deferred revenues	(310		)
	$	28,153

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.

Property and equipment

12 Months Ended

Dec. 31, 2018

Property, Plant and Equipment [Abstract]

Property and equipment

Property and equipment as of December 31, 2018 and 2017 consists of the following:



	December 31, 2018			December 31, 2017
Land	$	1,341		$	910
Equipment	40,895			32,403
Leasehold improvements	76,832			60,181
Buildings and improvements	8,632			5,107
Furniture & fixtures	13,827			9,790
Information technology and systems assets	17,238			6,449
Other	1,593			1,474
Construction in progress	7,095			3,241
	167,453			119,555
Accumulated Depreciation	(53,086		)	(36,228		)
Total	$	114,367		$	83,327

The Company recorded depreciation expense of $19,540, $13,886, and $12,131 for the years ended December 31, 2018, 2017 and 2016, respectively.

Goodwill and intangible assets

12 Months Ended

Dec. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and intangible assets

A summary of goodwill and intangible assets at December 31, 2018 and 2017 is as follows:



December 31, 2018	Weighted average amortization period (years)	Gross carrying amount		Accumulated amortization			Net carrying Amount
Customer relationships	11.0	$	173,063	(99,439		)	$	73,624
Noncompete agreements	5.0	14,500		(14,500		)	—
Favorable leases	8.0	4,017		(2,345		)	1,672
Order backlog	0.4	3,400		(3,400		)	—
Reacquired franchise rights	7.0	21,349		(8,615		)	12,734
		216,329		(128,299		)	88,030
Indefinite-lived intangible:
Trade and brand names	N/A	146,300		—			146,300
Total intangible assets		$	362,629	$	(128,299	)	$	234,330
Goodwill		$	199,513	$	—		$	199,513



December 31, 2017	Weighted average amortization period (years)	Gross carrying amount		Accumulated amortization			Net carrying Amount
Customer relationships	11.1	$	171,782	(86,501		)	$	85,281
Noncompete agreements	5.0	14,500		(14,500		)	—
Favorable leases	7.5	2,935		(1,972		)	963
Order backlog	0.4	3,400		(3,400		)	—
Reacquired franchise rights	5.8	8,950		(5,837		)	3,113
		201,567		(112,210		)	89,357
Indefinite-lived intangible:
Trade and brand names	N/A	146,300		—			146,300
Total intangible assets		$	347,867	$	(112,210	)	$	235,657
Goodwill		$	176,981	$	—		$	176,981

A rollforward of goodwill during the years ended December 31, 2018 or 2017 is as follows:



	Franchise	Corporate-owned stores	Equipment	Total
As of December 31, 2016	16,938	67,377	92,666	176,981
Additions	—	—	—	—
As of December 31, 2017	16,938	67,377	92,666	176,981
Acquisition of franchisee-owned stores	—	22,532	—	22,532
As of December 31, 2018	16,938	89,909	92,666	199,513

Amortization expense related to the intangible assets totaled $16,089, $18,205, and $19,757 for the years ended December 31, 2018, 2017 and 2016, respectively. Included within these total amortization expense amounts are $369, $330, and $386 related to amortization of favorable and unfavorable leases for the years ended December 31, 2018, 2017 and 2016, respectively. Amortization of favorable and unfavorable leases is recorded within store operations as a component of rent expense in the consolidated statements of operations. The anticipated annual amortization expense to be recognized in future years as of December 31, 2018 is as follows:



	Amount
2019	$	16,153
2020	14,302
2021	14,276
2022	14,467
2023	14,316
Thereafter	14,516
Total	$	88,030

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details

Long-term debt

12 Months Ended

Dec. 31, 2018

Debt Disclosure [Abstract]

Long-term debt

Long-term debt as of December 31, 2018 and 2017 consists of the following:



	December 31, 2018			December 31, 2017
Class A-2-I notes	$	573,563		$	—
Class A-2-II notes	623,437			—
Term loan B, repaid August 2018	—			709,470
Total debt, excluding deferred financing costs	1,197,000			709,470
Deferred financing costs, net of accumulated amortization	(24,873		)	(5,709		)
Total debt	1,172,127			703,761
Current portion of long-term debt and Variable Funding Note	12,000			7,185
Long-term debt, net of current portion	$	1,160,127		$	696,576

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 “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 “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 “Class A-2-II Notes” and, together with the Class A-2-I Notes, the “Class A-2 Notes”) with an initial principal amount of $625,000. In connection with the issuance of the Class A-2 Notes, the Master Issuer also entered into a revolving financing facility that allows for the issuance of up to $75,000 in Series 2018-1 Variable Funding Senior Notes, Class A-1 (the “Variable Funding Notes” and together with the Class A-2 Notes, the “Series 2018-1 Senior Notes”), and certain letters of credit, all of which is currently undrawn. The Class A-2 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 Series 2018-1 Senior Notes and that have pledged substantially all of their assets to secure the Series 2018-1 Senior Notes.

Interest and principal payments on the Class A-2 Notes are payable on a quarterly basis. The requirement to make such quarterly principal payments on the Class A-2 Notes is subject to certain financial conditions set forth in the Indenture. The legal final maturity date of the Class A-2 Notes is in September 2048, but it is anticipated that, unless earlier prepaid to the extent permitted under the Indenture, the Class A-2-I Notes will be repaid in September 2022 and the Class A-2-II Notes will be repaid in September 2025 (together, the "Anticipated Repayment Dates"). If the Master Issuer has not repaid or refinanced the Class A-2 Notes prior to the respective Anticipated Repayment Dates, additional interest will accrue pursuant to the Indenture.

The Variable Funding Notes will 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 Note agreement. 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 extensions. 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 Series 2018-1 Senior Notes, the Company incurred debt issuance costs of $27,133. The debt issuance costs are being amortized to “Interest expense” through the Anticipated Repayment Dates of the Class A-2 Notes utilizing the effective interest rate method.

The Series 2018-1 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 Series 2018-1 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 Class A-2 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the assets pledged as collateral for the Series 2018-1 Senior Notes are in stated ways defective or ineffective, and (iv) covenants relating to recordkeeping, access to information and similar matters. The Series 2018-1 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 Class A-2 Notes on the applicable scheduled Anticipated Repayment Dates. The Series 2018-1 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 Series 2018-1 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 Company’s Series 2018-1 Senior Notes. As of December 31, 2018, the Company had restricted cash held by the Trustee of $30,708. 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.

The proceeds from the issuance of the Class A-2 Notes were used to repay all amounts outstanding on the Term Loan B under the Company’s prior credit facility. As a result, the Company recorded a loss on early extinguishment of debt of $4,570 within interest expense on the consolidated statement of operations, primarily consisting of the write-off of deferred costs related to the prior credit facility. In connection with the repayment of the Term Loan B, the Company terminated the related interest rate caps with notional amounts totaling $219,837, which had been designated as a cash flow hedge. See Note 8 for more information on the interest rate caps.

On November 10, 2016, the Company amended its credit facility to increase the Revolving Credit Facility to $75,000, reduce the interest rate margin for term loan borrowings by 25 basis points, and increase the Term Loan to $718,450 primarily in order to fund a cash dividend and other equivalent payments totaling $271,011. In connection with the amendment, during the year ended December 31, 2016, the Company capitalized and deferred financing costs of $2,219, recorded expense of $3,001 related to certain third party fees included in other expense on the consolidated statement of operations, and a loss on extinguishment of debt of $606 included in interest expense on the consolidated statement of operations.

On May 26, 2017, the Company amended the credit facility to reduce the applicable interest rate margin for term loan borrowings by 50 basis points, to LIBOR plus 300 basis points, with an additional 25 basis point reduction in applicable interest rate possible in the future so long as the Total Net Leverage Ratio (as defined in the credit agreement) is less than 3.50 to 1.00. The amendment to the credit agreement also reduced the interest rate margin for revolving loan borrowings by 25 basis points. In connection with the amendment to the credit agreement, in the year ended December 31, 2017, the Company capitalized deferred financing costs of $257, recorded expense of $1,021 related to certain third party fees included in other expense on the consolidated statement of operations, and a loss on extinguishment of debt of $79 included in interest expense on the consolidated statement of operations.

Future annual principal payments of long-term debt as of December 31, 2018 are as follows:



	Amount
2019	$	12,000
2020	12,000
2021	12,000
2022	562,563
2023	6,250
Thereafter	592,187
Total	$	1,197,000

Derivative instruments and hedging activities	12 Months Ended
Derivative instruments and hedging activities	Dec. 31, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Derivative instruments and hedging activities	Derivative instruments and hedging activities Prior to the refinancing transactions described in Note 8, the Company used interest-rate-related derivative instruments to manage its exposure related to changes in interest rates on its variable-rate debt instruments. The Company does not enter into derivative instruments for any purpose other than cash flow hedging. The Company does not speculate using derivative instruments. In order to manage the market risk arising from the previously outstanding term loans, the Company entered into a series of interest rate caps. As of December 31, 2018, the Company had no interest rate cap agreements outstanding. In connection with the issuance of the Class A-2 Notes, the Company terminated the interest rate caps it had entered into in order to hedge one month LIBOR greater than 2.5% through March 31, 2019. The interest rate cap balances of $0 and $340 were recorded within other assets in the consolidated balance sheets as of December 31, 2018 and 2017, respectively. These amounts have been measured at fair value and are considered to be a Level 2 fair value measurement. During the year ended December 31, 2018, the Company has reversed all historical unrealized gains and losses associated with its interest rate caps due to the termination or maturity of all previously outstanding caps. The Company recorded an increase to the value of its interest rate caps of $1,143 net of tax of $280 for the year ended December 31, 2017, and a reduction to the value of its interest rate caps of $78, net of tax of $35, during the years ended December 31, 2016, within other comprehensive income (loss).

Revenue recognition

12 Months Ended

Dec. 31, 2018

Revenue from Contract with Customer [Abstract]

Revenue recognition

Revenue from Contracts with Customers

We transitioned to FASB Accounting Standards Codification (“ASC”) Topic 606, Revenue From Contracts with Customers (“ASC 606”), from ASC Topic 605, Revenue Recognition and ASC Subtopic 952-605, Franchisors - Revenue Recognition (together, the “Previous Standards”) on January 1, 2018 using the modified retrospective transition method. Our Financial Statements reflect the application of ASC 606 guidance beginning in 2018, while our consolidated financial statements for prior periods were prepared under the guidance of Previous Standards. The $9,192 cumulative effect of our transition to ASC 606 is reflected as an adjustment to January 1, 2018 stockholders' deficit.

Our transition to ASC 606 represents a change in accounting principle. ASC 606 eliminates industry-specific guidance and provides a single revenue recognition model for recognizing revenue from contracts with customers. The core principle of ASC 606 is that a reporting entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the reporting entity expects to be entitled in exchange for those goods or services.

Contract Liabilities

Contract liabilities consist of deferred revenue resulting from initial and successor franchise fees and 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. We classify these contract liabilities as deferred revenue in our condensed consolidated balance sheets. The following table reflects the change in contract liabilities between the date of adoption (January 1, 2018) and December 31, 2018,



	Contract liabilities
Balance at January 1, 2018	$	40,000
Revenue recognized that was included in the contract liability at the beginning of the year	(20,439		)
Increase, excluding amounts recognized as revenue during the period	30,301
Balance at December 31, 2018	$	49,862

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 December 31, 2018. 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
2019	$	23,606
2020	2,797
2021	2,432
2022	2,345
2023	2,261
Thereafter	16,421
Total	$	49,862

The summary set forth below represents the balances in deferred revenue as of December 31, 2018 and 2017:



	December 31, 2018		December 31, 2017
Prepaid membership fees	$	6,085	$	5,198
Enrollment fees	1,104		1,014
Equipment discount	3,855		2,567
Annual membership fees	10,142		8,113
Area development and franchise fees	28,676		10,631
Total deferred revenue	49,862		27,523
Long-term portion of deferred revenue	26,374		8,440
Current portion of deferred revenue	$	23,488	$	19,083

Equipment deposits received in advance of delivery as of December 31, 2018 and 2017 were $7,908 and $6,498, respectively and are expected to be recognized as revenue in the next twelve months.

Financial Statement Impact of Transition to ASC 606

As noted above, we transitioned to ASC 606 using the modified retrospective method on January 1, 2018. The cumulative effect of this transition to applicable contracts with customers that were not completed as of January 1, 2018 was recorded as an adjustment to stockholders' deficit as of that date. As a result of applying the modified retrospective method to transition to ASC 606, the following adjustments were made to the consolidated balance sheet as of January 1, 2018:



	As Reported December 31,			Total adjustments			Adjusted January 1,
	2017						2018
Assets
Current assets:
Cash and cash equivalents	$	113,080		$	—		$	113,080
Accounts receivable, net	37,272			—			37,272
Due from related parties	3,020			—			3,020
Inventory	2,692			—			2,692
Restricted assets – national advertising fund	499			—			499
Prepaid expenses	3,929			—			3,929
Other receivables	9,562			—			9,562
Other current assets	6,947			—			6,947
Total current assets	177,001			—			177,001
Property and equipment, net	83,327			—			83,327
Intangible assets, net	235,657			—			235,657
Goodwill	176,981			—			176,981
Deferred income taxes	407,782			3,285			411,067
Other assets, net	11,717			—			11,717
Total assets	$	1,092,465		$	3,285		$	1,095,750
Liabilities and stockholders' equity (deficit)
Current liabilities:
Current maturities of long-term debt	$	7,185		$	—		$	7,185
Accounts payable	28,648			—			28,648
Accrued expenses	18,590			—			18,590
Equipment deposits	6,498			—			6,498
Restricted liabilities – national advertising fund	490			—			490
Deferred revenue, current	19,083			(764		)	18,319
Payable pursuant to tax benefit arrangements, current	31,062			—			31,062
Other current liabilities	474			—			474
Total current liabilities	112,030			(764		)	111,266
Long-term debt, net of current maturities	696,576			—			696,576
Deferred rent, net of current portion	6,127			—			6,127
Deferred revenue, net of current portion	8,440			13,241			21,681
Deferred tax liabilities	1,629			—			1,629
Payable pursuant to tax benefit arrangements, net of current portion	400,298			—			400,298
Other liabilities	4,302			—			4,302
Total noncurrent liabilities	1,117,372			13,241			1,130,613
Stockholders' equity (deficit):
Class A common stock	9			—			9
Class B common stock	1			—			1
Accumulated other comprehensive loss	(648		)	—			(648		)
Additional paid in capital	12,118			—			12,118
Accumulated deficit	(130,966		)	(9,192		)	(140,158		)
Total stockholders' deficit attributable to Planet Fitness Inc.	(119,486		)	(9,192		)	(128,678		)
Non-controlling interests	(17,451		)	—			(17,451		)
Total stockholders' deficit	(136,937		)	(9,192		)	(146,129		)
Total liabilities and stockholders' deficit	$	1,092,465		$	3,285		$	1,095,750

Franchise Fees

The cumulative adjustment for franchise fees, including ADA fees, successor fees and transfer fees which will all be recognized over the franchise contract term consist of the following:

•

An increase in deferred revenue, net of $12,477 for the cumulative reversal and deferral of previously recognized fees related to franchise agreements in effect at January 1, 2018 that were entered into subsequent to the acquisition of Pla-Fit Holdings on November 8, 2012 by TSG Consumer Partners, LLC (the “2012 Acquisition”) (net of the cumulative revenue attributable for the period through January 1, 2018), with a corresponding decrease to Shareholders’ equity.


•	An increase to deferred income taxes, net of $3,285 for the tax effects of the adjustment noted above, with a corresponding increase to stockholders' equity.

Comparison to Amounts if Previous Standards Had Been in Effect

The following tables reflect the impact of adoption of ASC 606 on our consolidated statements of operations for the year ended December 31, 2018, cash flows from operating activities for the year ended December 31, 2018 and our condensed consolidated balance sheet as of December 31, 2018 and the amounts as if the Previous Standards were in effect (“Amounts Under Previous Standards”):



	As reported for the year ended December 31, 2018			Total adjustments			Amounts under Previous Standards
Revenue:
Franchise	$	175,314		$	5,666		$	180,980
Commission income	6,632			—			6,632
National advertising fund revenue	42,194			(42,194		)	—
Corporate-owned stores	138,599			—			138,599
Equipment	210,159			—			210,159
Total revenue	572,898			(36,528		)	536,370
Operating costs and expenses:
Cost of revenue	162,646			—			162,646
Store operations	75,005			—			75,005
Selling, general and administrative	72,446			—			72,446
National advertising fund expense	42,619			(42,619		)	—
Depreciation and amortization	35,260			—			35,260
Other loss (gain)	878			—			878
Total operating costs and expenses	388,854			(42,619		)	346,235
Income from operations	184,044			6,091			190,135
Other expense, net:
Interest income	4,681			—			4,681
Interest expense	(50,746		)	—			(50,746		)
Other (expense) income	(6,175		)	—			(6,175		)
Total other expense, net	(52,240		)	—			(52,240		)
Income before income taxes	131,804			6,091			137,895
Provision for income taxes	28,642			1,437			30,079
Net income	103,162			4,654			107,816
Less net income attributable to non-controlling interests	15,141			642			15,783
Net income attributable to Planet Fitness, Inc.	$	88,021		$	4,012		$	92,033
Net income per share of Class A common stock:
Basic	$	1.01					$	1.06
Diluted	$	1.00					$	1.05

Consolidated Statement of Cash Flows



	As reported December 31, 2018			Total adjustments			Amounts under Previous Standards
Cash flows from operating activities:
Net income	$	103,162		$	4,654		$	107,816
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	35,260			—			35,260
Amortization of deferred financing costs	3,400			—			3,400
Amortization of favorable leases and asset retirement obligations	375			—			375
Amortization of interest rate caps	1,170			—			1,170
Deferred tax expense	23,933			—			23,933
Loss (gain) on re-measurement of tax benefit arrangement	4,765			—			4,765
Provision for bad debts	19			—			19
Gain on disposal of property and equipment	462			—			462
Loss on extinguishment of debt	4,570			—			4,570
Third party debt refinancing expense	—			—			—
Loss on reacquired franchise rights	360			—			360
Equity-based compensation	5,479			—			5,479
Changes in operating assets and liabilities:	—						—
Accounts receivable	(1,923		)	—			(1,923		)
Due from related parties	3,598			—			3,598
Inventory	(2,430		)	—			(2,430		)
Other assets and other current assets	5,778			—			5,778
National advertising fund	—			(425		)	(425		)
Accounts payable and accrued expenses	14,506			—			14,506
Other liabilities and other current liabilities	(2,835		)	—			(2,835		)
Income taxes	194			1,437			1,631
Payments pursuant to tax benefit arrangements	(30,493		)	—			(30,493		)
Equipment deposits	1,410			—			1,410
Deferred revenue	9,640			$	(5,666	)	3,974
Deferred rent	3,999			—			3,999
Net cash provided by operating activities	$	184,399		$	—		$	184,399

Consolidated Balance Sheet



	As reported December 31, 2018			Total adjustments			Amounts under Previous Standards
Assets
Current assets:
Cash and cash equivalents	$	289,431		$	—		$	289,431
Restricted cash	30,708			—			30,708
Accounts receivable, net	38,960			—			38,960
Due from related parties	—			—			—
Inventory	5,122			—			5,122
Restricted assets – national advertising fund	—			425			425
Prepaid expenses	4,947			—			4,947
Other receivables	12,548			—			12,548
Income tax receivable	6,824			(1,437		)	5,387
Total current assets	388,540			(1,012		)	387,528
Property and equipment, net	114,367			—			114,367
Intangible assets, net	234,330			—			234,330
Goodwill	199,513			—			199,513
Deferred income taxes	414,841			(3,285		)	411,556
Other assets, net	1,825			—			1,825
Total assets	$	1,353,416		$	(4,297	)	$	1,349,119
Liabilities and stockholders' equity (deficit)
Current liabilities:
Current maturities of long-term debt	$	12,000		$	—		$	12,000
Accounts payable	30,428			—			30,428
Accrued expenses	32,384			—			32,384
Equipment deposits	7,908			—			7,908
Restricted liabilities – national advertising fund	—			—			—
Deferred revenue, current	23,488			118			23,606
Payable pursuant to tax benefit arrangements, current	24,765			—			24,765
Other current liabilities	430			—			430
Total current liabilities	131,403			118			131,521
Long-term debt, net of current maturities	1,160,127			—			1,160,127
Deferred rent, net of current portion	10,083			—			10,083
Deferred revenue, net of current portion	26,374			(18,448		)	7,926
Deferred tax liabilities	2,303			—			2,303
Payable pursuant to tax benefit arrangements, net of current portion	404,468			—			404,468
Other liabilities	1,447			—			1,447
Total noncurrent liabilities	1,604,802			(18,448		)	1,586,354
Commitments and contingencies (note 11)
Stockholders' equity (deficit):
Class A common stock	9			—			9
Class B common stock	1			—			1
Accumulated other comprehensive income	94			—			94
Additional paid in capital	19,732			—			19,732
Accumulated deficit	(394,410		)	13,391			(381,019		)
Total stockholders' deficit attributable to Planet Fitness Inc.	(374,574		)	13,391			(361,183		)
Non-controlling interests	(8,215		)	642			(7,573		)
Total stockholders' deficit	(382,789		)	14,033			(368,756		)
Total liabilities and stockholders' deficit	$	1,353,416		$	(4,297	)	$	1,349,119

Related party transactions

12 Months Ended

Dec. 31, 2018

Related party transactions

Amounts due from related parties of $0 and $3,020 as of December 31, 2018 and 2017, respectively, primarily relate to currently due or potential reimbursements for certain taxes accrued or paid by the Company (see note 15).

Activity with franchisees considered to be related parties is summarized below.



	For the Year Ended December 31,
	2018		2017		2016
Franchise revenue	$	3,179	$	2,130	$	1,760
Equipment revenue	3,977		3,464		1,338
Total revenue from related parties	$	7,156	$	5,594	$	3,098

Additionally, the Company had deferred ADA revenue from related parties of $779 and $389 as of December 31, 2018 and 2017, respectively.

The Company entered into a consulting agreement that terminated on December 31, 2018 with a shareholder and former executive officer of the Company.

The Company paid rent and lease termination costs for its former headquarters to MMC Fox Run, LLC, which was owned by Chris Rondeau, our CEO, and Marc Grondahl, a shareholder and former executive officer and former member of our board of directors, in the amounts of $0, $898, and $406, for the years ended December 31, 2018, 2017 and 2016, respectively.

As of December 31, 2018 and 2017, the Company had $59,458 and $44,794, respectively, payable to related parties pursuant to tax benefit arrangements, see Note 15.

A member of the Company’s board of directors, who is also a franchisee, holds an approximate 10.5% ownership of a company that sells amenity tracking compliance software to Planet Fitness stores. As of December 31, 2018, the software was being utilized at 35 corporate-owned stores and approximately 400 franchise stores.

Stockholder's equity

12 Months Ended

Dec. 31, 2018

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.

June 2016 Secondary Offering

As described in Note 1, on June 28, 2016 the Company completed the June Secondary Offering of 11,500,000 shares of our Class A common stock at a price of $16.50 per share. All of the shares sold in the offering were offered by Direct TSG Investors and the participating Continuing LLC Owners. The Company did not receive any proceeds from the sale of shares of Class A common stock offered by the Direct TSG Investors and the participating Continuing LLC Owners. The shares sold in the offering consisted of (i) 3,608,840 existing shares of Class A common stock held by the Direct TSG Investors and (ii) 7,891,160 newly-issued shares of Class A common stock issued in connection with the exercise of the exchange right by the Continuing LLC Owners that participated in the June Secondary Offering. Simultaneously, and in connection with the exchange, 7,891,160 shares of Class B common stock were surrendered by the Continuing LLC Owners that participated in the June Secondary Offering and canceled. Additionally, in connection with the exchange, Planet Fitness, Inc. received 7,891,160 Holdings Units, increasing its total ownership interest in Pla-Fit Holdings.

September 2016 Secondary Offering

As described in Note 1, on September 28, 2016, the Company completed the September Secondary Offering of 8,000,000 shares of our Class A common stock at a price of 19.62 per share. All of the shares sold in the offering were offered by the Direct TSG Investors and participating Continuing LLC Owners. The Company did not receive any proceeds from the sale of shares of Class A common stock offered by the Direct TSG Investors and the participating Continuing LLC Owners. The shares sold in the offering consisted of (i) 2,593,981 existing shares of Class A common stock held by the Direct TSG Investors and (ii) 5,406,019 newly-issued shares of Class A common stock issued in connection with the exercise of the exchange right by the Continuing LLC Owners that participated in the September Secondary Offering. Simultaneously, and in connection with the exchange, 5,406,019 shares of Class B common stock were surrendered by the Continuing LLC Owners that participated in the September Secondary Offering and canceled. Additionally, in connection with the exchange, Planet Fitness, Inc. received 5,406,019 Holdings Units, increasing its total ownership interest in Pla-Fit Holdings.

November 2016 Secondary Offering

As described in Note 1, on November 22, 2016, the Company completed the November Secondary Offering of 15,000,000 shares of our Class A common stock at a price of $23.22 per share. All of the shares sold in the offering were offered by the Direct TSG Investors and participating Continuing LLC Owners. The Company did not receive any proceeds from the sale of shares of Class A common stock offered by the Direct TSG Investors and the participating Continuing LLC Owners. The shares sold in the offering consisted of (i) 4,863,715 existing shares of Class A common stock held by the Direct TSG Investors and (ii) 10,136,285 newly-issued shares of Class A common stock issued in connection with the exercise of the exchange right by the Continuing LLC Owners that participated in the November Secondary Offering. Simultaneously, and in connection with the exchange, 10,136,285 shares of Class B common stock were surrendered by the Continuing LLC Owners that participated in the November Secondary Offering and canceled. Additionally, in connection with the exchange, Planet Fitness, Inc. received 10,136,285 Holdings Units, increasing its total ownership interest in Pla-Fit Holdings.

March 2017 Secondary Offering

As described in Note 1, on March 14, 2017, the Company completed the March Secondary Offering of 15,000,000 shares of its Class A common stock at a price of $20.44 per share. All of the shares sold in the March Secondary Offering were offered by certain existing holders of Holdings Units and the Direct TSG Investors. The Company did not receive any proceeds from the sale of shares of Class A common stock offered by the Direct TSG Investors and the participating holders of Holdings Units. The shares sold in the March Secondary Offering consisted of (i) 4,790,758 existing shares of Class A common stock held by the Direct TSG Investors and (ii) 10,209,242 newly-issued shares of Class A common stock issued in connection with the exercise of the exchange right by the holders of Holdings Units that participated in the March Secondary Offering. Simultaneously, and in connection with the exchange, 10,209,242 shares of Class B common stock were surrendered by the holders of Holdings Units that participated in the March Secondary Offering and canceled. Additionally, in connection with the exchange, Planet Fitness, Inc. received 10,209,242 Holdings Units, increasing its total ownership interest in Pla-Fit Holdings.

May 2017 Secondary Offering

As described in Note 1, on May 10, 2017, the Company completed the May Secondary Offering of 16,085,510 shares of its Class A common stock at a price of $20.28 per share. All of the shares sold in the May Secondary Offering were offered by certain existing holders of Holdings Units and the Direct TSG Investors. The Company did not receive any proceeds from the sale of shares of Class A common stock offered by the Direct TSG Investors and the participating holders of Holdings Units. The shares sold in the May Secondary Offering consisted of (i) 5,215,691 existing shares of Class A common stock held by the Direct TSG Investors and (ii) 10,869,819 newly-issued shares of Class A common stock issued in connection with the exercise of the exchange right by the holders of Holdings Units that participated in the May Secondary Offering. Simultaneously, and in connection with the exchange, 10,869,819 shares of Class B common stock were surrendered by the holders of Holdings Units that participated in the May Secondary Offering and canceled. Additionally, in connection with the exchange, Planet Fitness, Inc. received 10,869,819 Holdings Units, increasing its total ownership interest in Pla-Fit Holdings.

Other Exchanges

In addition to the secondary offerings mentioned above, during the years ended December 31, 2018 and 2017, respectively, certain Continuing LLC Owners have exercised their exchange right and exchanged 1,736,020 and 4,762,943 Holdings Units for 1,736,020 4,762,943 newly-issued shares of Class A common stock. Simultaneously, and in connection with these exchanges, 1,736,020 and 4,762,943 shares of Class B common stock were surrendered by the Continuing LLC Owners that exercised their exchange right and canceled in the years ended December 31, 2018 and 2017, respectively. Additionally, in connection with these exchanges, Planet Fitness, Inc. received 1,736,020 and 4,762,943 Holdings Units, during the years ended December 31, 2018 and 2017 respectively, increasing its total ownership in Pla-Fit Holdings. Future exchanges of Holdings Units by the Continuing LLC Owners will result in a change in ownership and reduce the amount recorded as non-controlling interest and increase additional paid-in capital on our consolidated balance sheets.

As a result of the recapitalization transactions, the IPO, completion of our secondary offerings, and other exchanges and equity activity, as of December 31, 2018:


•	the public investors collectively owned 83,583,860 shares of our Class A common stock, representing 89.8% of the voting power in the Company and, through the Company, 89.8% of the economic interest in Pla-Fit Holdings; and


•	the Continuing LLC Owners collectively hold 9,447,730 Holdings Units, representing 10.2% of the economic interest in Pla-Fit Holdings and 9,447,730 shares of our Class B common stock, representing 10.2% of the voting power in the Company;

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 “ASR Agreement”) with Citibank, N.A. (“the Bank”). Pursuant to the terms of the ASR Agreement, on November 14, 2018, the Company paid the Bank $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. The final number of shares to be repurchased will be determined based on the volume-weighted average stock price of our common stock during the term of the transaction, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR Agreement, and will also be retired upon delivery to us . This has been evaluated as an unsettled forward contract indexed to our own stock, with $60,000 classified as a reduction to retained earnings. Final settlement of the ASR Agreement is expected to be completed during the second quarter of 2019, although the settlement may be accelerated at the Bank's option. At final settlement, the Bank may be required to deliver additional shares to the Company, or, under certain circumstances, the Company may be required to deliver shares of its Class A common stock or may elect to make a cash payment to the Bank. The ASR Agreement contains provisions customary for agreements of this type, including provisions for adjustments to the transaction terms, the circumstances generally under which the ASR Agreement may be accelerated, extended or terminated early by the Bank and various acknowledgments, representations and warranties made by the parties to one another.

Additionally, prior to the ASR Agreement, during the year ended December 31, 2018, the Company repurchased at market value and retired 824,312 shares of Class A common stock for a total cost of $42,090.

The timing of the purchases and the amount of stock repurchased is subject to the Company’s discretion and depends 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 Series 2018-1 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. Planet Fitness is not obligated under the program to acquire any particular amount of stock and can suspend or terminate the program at any time.

Dividends

The Company did not declare or pay any dividends during the years ended December 31, 2018 or 2017. Dividends declared and paid to holders of the Company’s Class A common stock during the year ended December 31, 2016 were $169,282, or $2.78 per share of Class A common stock. The dividend was declared on November 10, 2016 and paid on December 5, 2016 to Class A common stock holders of record as of November 22, 2016. The Company also paid cash dividend equivalents of $101,729, or $2.78 per share, to holders of Holdings Units on December 5, 2016 and accrued $3,899 of dividend equivalents for future payment to holders of unvested share awards to be paid upon vesting of the related awards.

Equity-based compensation

12 Months Ended

Dec. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Equity-based Compensation

Equity-based compensation

2013 Equity Incentive Plan

In 2013, the Company’s Board of Directors adopted the 2013 Equity Incentive Plan (the “2013 Plan”). Under the 2013 Plan, the Company granted awards in the form of Class M Units to certain employees and directors of the Company and its subsidiaries. The Class M Units received distributions (other than tax distributions) only upon a liquidity event, as defined, that exceeded a threshold equivalent to the fair value of the Company, as determined by the Company’s Board of Directors, at the grant date. Eighty percent of the awards vest over five years of continuous employment or service while the other twenty percent only vest in the event of an initial public offering of the Company’s common stock or that of its parent or one of its subsidiaries, subject to the holder of the Class M Units remaining employed or providing services on the date of such initial public offering. All awards include a repurchase option at the election of the Company for the vested portion upon termination of employment or service, and have a ten year contractual term. These awards are accounted for as equity at their fair value as of the grant date. In connection with the IPO and related recapitalization transactions, all of the outstanding Class M Units were converted into Holdings Units and shares of Class B common stock of Planet Fitness, Inc. in accordance with the terms of the awards. The Company’s IPO constituted a qualifying event under the terms of the awards and as a result 4,238,338 Holdings Units and corresponding shares of Class B common stock were issued to the existing Class M Unit holders with a weighted-average grant date fair value of $1.52 per share. The Company recorded $21, $152 and $784 of compensation expense in the years ended December 31, 2018, 2017 and 2016, respectively, related to these awards.

The fair value of each award was estimated on the date of grant using a Monte Carlo simulation model.

During the year ended December 31, 2016, the Company modified the vesting terms of 22,527 outstanding Holdings Units such that those units were fully vested immediately. In connection with the modification, the Company recorded $337 of compensation expense in the year ended December 31, 2016.

A summary of unvested Holdings Unit activity is presented below:



	Holdings Units		Weighted average grant date fair value		Weighted average remaining contractual term (years)	Aggregate intrinsic value
Unvested outstanding at January 1, 2018	270,221		$	1.52
Units granted	—		—
Units forfeited	(8,990	)	$	1.52
Units vested	(247,746	)	$	1.52
Unvested outstanding at December 31, 2018	13,485		$	1.52	0.9	$	723

The amount of total unrecognized compensation cost related to all awards under this plan was $3 as of December 31, 2018, which is expected to be recognized over a weighted-average period of 0.9 years.

2015 Omnibus Incentive Plan

Stock Options

In August 2015, the Company adopted the 2015 Omnibus Incentive Plan (the "2015 Plan") under which the Company may grant options and other equity-based awards to purchase up to 7,896,800 shares to employees, directors and officers. Generally, stock options awarded vest annually, on a tranche by tranche basis, over a period of four years with a maximum contractual term of 10 years.

The fair value of stock option awards granted were determined on the grant date using the Black-Scholes valuation model based on the following assumptions:



	Year ended December 31,
	2018		2017
Expected term (years) (1)	6.25 -6.5		6.25
Expected volatility (2)	29.1% - 29.3%		28.6% - 32.9%
Risk-free interest rate (3)	2.61% - 2.88%		1.86% - 2.10%
Dividend yield (4)	—	%	—	%


(1)	Expected term represents the estimated period of time until an award is exercised and was determined using the simplified method.


(2)	Expected volatility is based on the historical volatility of a selected peer group over a period equivalent to the expected term.


(3)	The risk-free rate is an interpolation of yields on U.S. Treasury securities with maturities equivalent to the expected term.


(4)	Based on an assumed a dividend yield of zero at the time of grant.

A summary of stock option activity for the year ended December 31, 2018:



	Stock Options		Weighted average exercise price		Weighted average remaining contractual term (years)	Aggregate intrinsic value
Outstanding at January 1, 2018	918,206		$	19.59
Granted	224,141		$	38.83
Exercised	(67,349	)	$	18.04
Forfeited	(60,793	)	$	25.02
Outstanding at December 31, 2018	1,014,205		$	23.62	8.0	$	30,427
Vested or expected to vest at December 31, 2018	1,014,205		$	23.62	8.0	$	30,427
Exercisable at December 31, 2018	256,970		$	19.04	7.3	$	8,887

The weighted-average grant date fair value of stock options granted during the year ended December 31, 2018 was $13.49. During the years ended December 31, 2018 and 2017, $3,316 and $2,195, respectively, was recorded to selling, general and administrative expense related to these stock options. As of December 31, 2018, total unrecognized compensation expense related to unvested stock options, was $3,228, which is expected to be recognized over a weighted-average period of 2.0 years.

Restricted stock units

During the year ended December 31, 2018, the Company granted 94,177 restricted Class A stock units (“RSUs”) under the 2015 Plan. RSUs granted to members of the Board of Directors vest on the first anniversary of the grant date, provided that the recipient continues to serve on the Board of Directors through the vesting dates. RSUs are also granted to certain employees of the Company and generally vest annually, on a tranche by tranche basis, over a period of four years. RSU awards are valued using the intrinsic value method.



	Restricted stock units		Weighted average fair value		Weighted average remaining contractual term (years)	Aggregate intrinsic value
Unvested outstanding at January 1, 2018	16,218		$	23.26
Granted	94,177		$	39.71
Vested	(24,053	)	$	28.85
Forfeited	(4,546	)	$	36.42
Unvested outstanding at December 31, 2018	81,796		$	39.82	2.1	$	4,386

The weighted-average grant date fair value of RSUs granted during the year ended December 31, 2018 was $39.71. During the years ended December 31, 2018 and 2017, $1,637 and $184, respectively, was recorded to selling, general and administrative expense related to these RSUs. As of December 31, 2018, total unrecognized compensation expense related to unvested RSUs was $2,155, which is expected to be recognized over a weighted-average period of 2.1 years.

Employee stock purchase plan

The 2018 Employee Stock Purchase Plan (the "ESPP"), as adopted by the Board of Directors in March 2018, allows eligible employees to purchase shares of the Company’s Class A common stock at a discount through payroll deductions of up to 10% of their eligible compensation, subject to any plan limitations. The ESPP provides for six-month offering periods, and at the end of each offering period, employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s Class A common stock on the first trading day of the offering period or on the last day of the offering period. As of December 31, 2018, a total of 1,000,000 shares of common stock were authorized and available for the issuance of equity awards under the ESPP. The first purchase of Class A common stock under the plan will occur in January, 2019. During the year ended December 31, 2018, $129 was recorded to expense related to the ESPP.

Earnings per share

12 Months Ended

Dec. 31, 2018

Earnings Per Share [Abstract]

Earnings per share

Basic earnings per share of Class A common stock is computed by dividing net income attributable to Planet Fitness, Inc. for the years ended December 31, 2018, 2017, and 2016, by the weighted-average number of shares of Class A common stock outstanding during the same periods. 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 of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock:



Basic net income per share:	Year Ended December 31, 2018		Year Ended December 31, 2017		Year Ended December 31, 2016
Numerator
Net income	$	103,162	$	55,601	$	71,247
Less: net income attributable to non-controlling interests	15,141		22,455		49,747
Net income attributable to Planet Fitness, Inc. - basic & diluted	$	88,021	$	33,146	$	21,500
Denominator
Weighted-average shares of Class A common stock outstanding - basic	87,235,021		78,910,390		43,300,288
Effect of dilutive securities:
Stock options	417,264		56,198		1,489
Restricted stock units	22,618		4,962		2,908
Weighted-average shares of Class A common stock outstanding - diluted	87,674,903		78,971,550		43,304,685
Earnings per share of Class A common stock - basic	$	1.01	$	0.42	$	0.50
Earnings per share of Class A common stock - diluted	$	1.00	$	0.42	$	0.50

Weighted average shares of Class B common stock of 10,275,077, 19,483,737 and 55,305,992 for the years ended December 31, 2018, 2017 and 2016, 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 143,006, 489,133 and 208,452 for the years ended December 31, 2018, 2017 and 2016, 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 131, 1,829 and 0, for the year ended December 31, 2018, 2017 and 2016, respectively, were evaluated under the treasury stock method for potential dilutive effects and were determined to be anti-dilutive.

Income taxes

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Income taxes

Income before the provision for income taxes as shown in the accompanying consolidated statements of operations is as follows:



	Year Ended December 31,
	2018		2017		2016
Domestic	$	128,861	$	426,873	$	88,016
Foreign	2,943		2,308		1,892
Total income before the provision for income taxes	131,804		429,181		89,908

The provision (benefit) for income taxes consists of the following:



	Year Ended December 31,
	2018		2017			2016
Current:
Federal	$	178	$	(2,600	)	$	1,206
State	3,586		2,941			1,428
Foreign	945		817			421
Total current tax expense	4,709		1,158			3,055
Deferred:
Federal	22,757		365,470			11,633
State	946		6,857			3,755
Foreign	230		95			218
Total deferred tax expense	23,933		372,422			15,606
Provision for income taxes	$	28,642	$	373,580		$	18,661

The Company is the sole managing member of Pla-Fit Holdings, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. 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 is also subject to taxes in certain foreign jurisdictions.

On December 22, 2017, the 2017 Tax Act was enacted, making significant changes to the Internal Revenue Code. Changes included, but were not limited to, a corporate tax rate decrease from 35% to 21% beginning on January 1, 2018, the transition of U.S international taxation from a worldwide tax system to a modified territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. The Company recognized $334,619 of income tax expense in our income tax provision in the fourth quarter of 2017 as a result of the enactment of the 2017 Tax Act, of which $334,022 related to the remeasurement of certain deferred tax assets and liabilities, and $597 related to mandatory repatriation. The 2017 Tax Act also caused a remeasurement of our tax benefit arrangements, as discussed in more detail below.

A reconciliation of the U.S. statutory income tax rate to the Company’s effective tax rate is as follows:



	Year Ended December 31,
	2018		2017		2016
U.S. statutory tax rate	21.0	%	35.0	%	35.0	%
State and local taxes, net of federal benefit	5.9	%	1.0	%	4.9	%
State rate change impact on deferred taxes	(3.4	)%	0.8	%	(1.4	)%
Federal rate change impact on deferred taxes	—	%	77.8	%	—	%
Tax benefit arrangement liability adjustment	0.8	%	(25.8	)%	—	%
Foreign tax rate differential	0.2	%	—	%	(0.3	)%
Withholding taxes and other	(0.3	)%	0.1	%	—	%
Reserve for uncertain tax position	(0.2	)%	0.1	%	3.1	%
Income attributable to non-controlling interests	(2.3	)%	(1.9	)%	(20.5	)%
Effective tax rate	21.7	%	87.1	%	20.8	%

The Company’s effective tax rate was 21.7% in 2018, in comparison to the U.S. statutory tax rate in 2018 of 21%. The comparison of our effective tax rate to U.S. statutory tax rate is influenced by the fact that we are subject to taxation in various state and local jurisdictions resulting in an increase in our effective tax rate, offset mainly by income tax benefit recorded in 2018 to remeasure deferred tax assets. This remeasurement was a result of various state tax legislation enacted in the year as well as acquisitions which resulted in an increase in the amount of income apportioned to various states in future periods and accordingly resulted in recognition of a deferred tax benefit in 2018, and a decrease to our effective income tax rate in 2018.

The Company’s effective tax rate is 21.7% for the year ended December 31, 2018, compared to 87.1% in the prior year. The decrease in our effective income tax rate is primarily due to the recognition of an income tax expense in connection with remeasurement of our deferred taxes in 2017 as a result of the Tax Act, as well as a decrease in the U.S. statutory tax rate in 2018. These factors are partially offset by the income tax benefit recognized in 2017 in connection with the remeasurement of our TRA liability as a result of the Tax Act.

Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the accompanying consolidated balance sheets. These temporary differences result in taxable or deductible amounts in future years. Details of the Company’s deferred tax assets and liabilities are summarized as follows:



	Year Ended December 31,
	2018			2017
Deferred tax assets:
Accrued expense and reserves	$	37		$	1,422
Deferred revenue	4,619			1,900
Goodwill and intangible assets	409,740			404,547
Net operating loss	—			603
Other	4,901			3,619
Deferred tax assets	$	419,297		$	412,091
Deferred tax liabilities:
Prepaid expenses	(922		)	(773		)
Property and equipment	(5,837		)	(5,165		)
Total deferred tax liabilities	$	(6,759	)	$	(5,938	)
Total deferred tax assets and liabilities	$	412,538		$	406,153
Reported as:
Deferred income taxes - non-current assets	$	414,841		$	407,782
Deferred income taxes - non-current liabilities	(2,303		)	(1,629		)
Total deferred tax assets and liabilities	$	412,538		$	406,153

As of December 31, 2018, the Company does not have any material net operating loss carryforwards.

A summary of the changes in the Company’s unrecognized tax positions is as follows:



	Year Ended December 31,
	2018			2017
Balance at beginning of year	$	2,608		$	2,608
Decrease related to prior year tax positions	(2,308		)	—
Balance at end of year	$	300		$	2,608

As of December 31, 2018 and 2017, the total liability related to uncertain tax positions was $300 and 2,608, respectively, and is included within other liabilities on our consolidated balance sheets. The table above presents a reconciliation of the beginning and ending balances of the liability for unrecognized tax benefits, excluding interest and penalties, for the years ended December 31, 2018 and 2017. The decrease in the liability for uncertain tax position is due to a settlement of a tax examination during 2018. During 2018, the Company settled a tax examination for $2,625 which was fully indemnified. At the date of settlement the Company had recorded on its balance sheet an unrecognized tax benefit and related indemnification asset of $2,967, reflecting principal and interest, and released $342 as an offset to provision for income taxes and also released an indemnification asset of $342 through other expense. The Company recognized interest and penalties related to uncertain tax positions as a component of income tax expense.

The Company and its subsidiaries file U.S. federal income tax returns, as well as tax returns in various state and foreign jurisdictions. Generally, the tax years 2015 through 2018 remain open to examination by the tax authorities in these jurisdictions.

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 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 sales 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 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. Also, pursuant to the exchange agreement (see Note 11), to the extent an exchange results in Pla-Fit Holdings, LLC incurring a current tax liability relating to the New Hampshire business profits tax, the TRA Holders have agreed that they will contribute to Pla-Fit Holdings, LLC an amount sufficient to pay such liability (up to 3.5% of the value receive upon exchange). If and when the Company subsequently realizes a related tax benefit, Pla-Fit Holdings, LLC will distribute the amount of any such tax benefit to the relevant TRA LLC Owner in respect of its contribution. Due to changes in New Hampshire tax law during 2016, the Company no longer expects to incur any such liability under the New Hampshire business profits tax. The Company recorded other expense of $4,765, other income of $317,350 and other expense of $72 and in the years ended December 31, 2018, 2017 and 2016, respectively, reflecting a change in the tax benefit obligation attributable to a change in the expected tax benefits. In 2018, the remeasurement was primarily due to various state tax legislation changes enacted in the year as well as acquisitions which resulted in an increase in the amount of income apportioned to various states in future periods and accordingly resulted in a decrease to the tax benefit arrangement liability. Included in this amount in 2017, was a gain of $316,813 related to the remeasurement of our tax benefit arrangements in connection with changes in the tax rate due to the 2017 Tax Act. This remeasurement gain, which is not subject to federal or state income tax, favorably impacted our effective federal and state income tax rates in 2017.

In connection with the exchanges that occurred in the secondary offerings and other exchanges during 2018 and 2017, 1,736,020 and 25,842,004 Holdings Units, respectively, were redeemed by the Continuing LLC Owners 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 that occurred in conjunction with the exchanges, we recorded a decrease to our net deferred tax assets of $721 and $24,371, during the years ended December 31, 2018 and 2017, respectively. As a result of these exchanges, during the years ended December 31, 2018 and 2017 we also recognized deferred tax assets in the amount of $27,565 and $394,108, respectively, and corresponding tax benefit arrangement liabilities of $23,526 and $341,089, respectively, representing approximately 85% of the tax benefits due to the TRA Holders. The offset to the entries recorded in connection with exchanges in each year was to stockholders’ equity.

The tax benefit obligation was $429,233 and $431,360 as of December 31, 2018 and 2017, respectively.

Projected future payments under the tax benefit arrangements are as follows:



	Amount
2019	$	24,765
2020	24,996
2021	25,450
2022	25,975
2023	26,482
Thereafter	301,565
Total	$	429,233

Commitments and contingencies

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and contingencies

(a) Operating lease commitments

The Company rents equipment, office, and warehouse space at various locations in the United States and Canada under noncancelable operating leases. Rental expense was $24,900, $20,296, and $19,203 for the years ended December 31, 2018, 2017 and 2016, respectively. Approximate annual future commitments under noncancelable operating leases as of December 31, 2018 are as follows:



	Amount
2019	$	15,911
2020	15,219
2021	13,454
2022	12,561
2023	11,133
Thereafter	45,324
Total	$	113,602

(b) Legal matters

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. The Company is not currently aware of any 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.

(c) Purchase commitments

As of December 31, 2018, the Company had advertising purchase commitments of approximately $17,848, including commitments made by the NAF. In addition, the Company had open purchase orders of approximately $18,189 primarily related to equipment to be sold to franchisees.

(d) Guarantees

The Company has guaranteed certain leases of entities that were previously related through common ownership. These guarantees relate to leases for operating space of franchises operated by the related entities. The Company’s maximum obligation, as a result of its guarantees of leases, is approximately $732 and $979 as of December 31, 2018 and 2017, respectively, and would only require payment upon default by the primary obligor. The Company has determined the fair value of these guarantees at inception is not material, and as of December 31, 2018 and 2017, no accrual has been recorded for the Company’s potential obligation under its guaranty arrangement.

Retirement Plan	12 Months Ended
Retirement Plan	Dec. 31, 2018
Retirement Benefits [Abstract]
Retirement Plan	Retirement Plan The Company maintains a 401(k) deferred tax savings plan (the Plan) for eligible employees. The Plan provides for the Company to make an employer matching contribution currently equal to 100% of employee deferrals up to a maximum of 4% of each eligible participating employees’ wages. Total employer matching contributions expensed in the consolidated statements of operations were approximately $832, $623, and $484 for the years ended December 31, 2018, 2017 and 2016, respectively.

Segments

12 Months Ended

Dec. 31, 2018

Segment Reporting [Abstract]

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 and Mexico. The Corporate-owned stores segment includes operations with respect to all Corporate-owned stores throughout the United States and Canada. The Equipment segment includes the sale of equipment to 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 years ended December 31, 2018, 2017 and 2016. The “Corporate and other” column, 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.



	Year Ended December 31,
	2018		2017		2016
Revenue
Franchise segment revenue - U.S.	$	219,506	$	147,787	$	114,717
Franchise segment revenue - International	4,634		2,368		1,771
Franchise segment total	224,140		150,155		116,488
Corporate-owned stores segment - U.S.	134,174		107,712		100,541
Corporate-owned stores segment - International	4,425		4,402		4,180
Corporate-owned stores segment total	138,599		112,114		104,721
Equipment segment - U.S.	210,159		167,673		157,032
Equipment segment total	210,159		167,673		157,032
Total revenue	$	572,898	$	429,942	$	378,241

Franchise segment revenue includes franchise revenue, commission income and in 2018 includes NAF revenue, see Note 2 and Note 10.

Franchise revenue includes revenue generated from placement services of $11,502, $11,371, and $10,513 for the years ended December 31, 2018, 2017 and 2016, respectively.



	Year Ended December 31,
	2018			2017		2016
Segment EBITDA
Franchise	$	152,571		$	126,459	$	97,256
Corporate-owned stores	56,704			46,855		40,847
Equipment	47,607			38,539		36,439
Corporate and other	(43,753		)	284,372		(26,007		)
Total Segment EBITDA	$	213,129		$	496,225	$	148,535

The following table reconciles total Segment EBITDA to income before taxes:



	Year Ended December 31,
	2018			2017			2016
Total Segment EBITDA	$	213,129		$	496,225		$	148,535
Less:
Depreciation and amortization	35,260			31,761			31,502
Other income (expense)	(6,175		)	316,928			1,371
Income from operations	184,044			147,536			115,662
Interest expense, net	(46,065		)	(35,283		)	(27,125		)
Other income (expense)	(6,175		)	316,928			1,371
Income before income taxes	$	131,804		$	429,181		$	89,908

The following table summarizes the Company’s assets by reportable segment:



	December 31, 2018		December 31, 2017
Franchise	$	319,422	$	243,348
Corporate-owned stores	243,221		167,367
Equipment	210,462		206,632
Unallocated	580,311		475,118
Total consolidated assets	$	1,353,416	$	1,092,465

The table above includes $1,892 and $2,558 of long-lived assets located in the Company’s international corporate-owned stores as of December 31, 2018 and 2017, respectively.

The following table summarizes the Company’s goodwill by reportable segment:



	December 31, 2018		December 31, 2017
Franchise	$	16,938	$	16,938
Corporate-owned stores	89,909		67,377
Equipment	92,666		92,666
Total consolidated goodwill	$	199,513	$	176,981

Corporate-owned and franchisee-owned stores

12 Months Ended

Dec. 31, 2018

Franchisors [Abstract]

Corporate-owned and franchisee-owned stores

The following table shows changes in our corporate-owned and franchisee-owned stores for the years ended December 31, 2018, 2017 and 2016:



	Year Ended December 31,
	2018		2017		2016
Franchisee-owned stores:
Stores operated at beginning of period	1,456		1,255		1,066
New stores opened	226		206		195
Stores debranded, sold or consolidated⁽¹⁾	(16	)	(5	)	(6	)
Stores operated at end of period	1,666		1,456		1,255
Corporate-owned stores:
Stores operated at beginning of period	62		58		58
New stores opened	4		4		—
Stores acquired from franchisees	10		—		—
Stores operated at end of period	76		62		58
Total stores:
Stores operated at beginning of period	1,518		1,313		1,124
New stores opened	230		210		195
Stores debranded, sold or consolidated⁽¹⁾	(6	)	(5	)	(6	)
Stores operated at end of period	1,742		1,518		1,313

(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. We retain 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.

Quarterly financial data (unaudited)

12 Months Ended

Dec. 31, 2018

Quarterly Financial Information Disclosure [Abstract]

Quarterly financial data (unaudited)



	For the quarter ended
	March 31, 2018		June 30, 2018		September 30, 2018		December 31, 2018
Total revenue	$	121,333	$	140,550	$	136,656	$	174,359
Income from operations	38,918		48,811		43,573		52,742
Net income	23,493		30,418		20,472		28,779
Net income attributable to Planet Fitness, Inc.	19,880		25,874		17,471		24,796
Earnings per share:
Class A - Basic	$	0.23	$	0.30	$	0.20	$	0.29
Class A - Diluted	$	0.23	$	0.29	$	0.20	$	0.29
	For the quarter ended
	March 31, 2017		June 30, 2017		September 30, 2017		December 31, 2017
Total revenue	$	91,102	$	107,316	$	97,496	$	134,028
Income from operations	33,055		38,250		33,954		42,277
Net income	17,866		18,004		18,902		829
Net income (loss) attributable to Planet Fitness, Inc.	8,842		12,412		15,345		(3,453		)
Earnings (loss) per share:
Class A - Basic	$	0.14	$	0.16	$	0.18	$	(0.04	)
Class A - Diluted	$	0.14	$	0.16	$	0.18	$	(0.04	)

Valuation and Qualifying Accounts

12 Months Ended

Dec. 31, 2018

Valuation and Qualifying Accounts [Abstract]

Valuation and Qualifying Accounts

Schedule II – Valuation and Qualifying Accounts



(in thousands)	Balance at Beginning of Period		Provision for (recovery of) doubtful accounts, net			Write-offs and other			Balance at End of Period
Allowance for doubtful accounts:
December 31, 2018	$	32	$	19		$	33		$	84
December 31, 2017	687		$	(19	)	$	(636	)	32
December 31, 2016	629		58			—			687

Summary of significant accounting policies (Policies)

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Basis of presentation and consolidation

(a) Basis of presentation and consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). All significant intercompany balances and transactions have been eliminated in consolidation.

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 collects 2% of gross monthly membership fees from franchisees, in accordance with the provisions of the franchise agreements, and uses the amounts received to increase sales and further enhance the public reputation of the Planet Fitness brand. See Note 4 for further information related to the NAF.

Use of estimates

(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 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, and the liability for the Company’s tax benefit arrangements.

Concentrations

(c) Concentrations

Cash and cash equivalents are financial instruments, which potentially subject the Company to a concentration of credit risk. The Company invests its excess cash in several major financial institutions, which are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The Company maintains balances in excess of these limits, but does not believe that such deposits with its banks are subject to any unusual risk.

The credit risk associated with trade receivables is mitigated due to the large number of customers, generally our franchisees, and their broad dispersion over many different geographic areas. We do not have any concentrations with respect to our revenues.

The Company purchases equipment, both for corporate-owned stores and for sales to franchisee-owned stores from various equipment vendors. For the year ended December 31, 2018 purchases from two equipment vendors comprised 76% and 13%, respectively, of total equipment purchases. For the year ended December 31, 2017 purchases from one equipment vendor comprised 91% of total equipment purchases and for the year ended December 31, 2016 purchases from two equipment vendors comprised 83% and 13%, respectively, of total equipment purchases.

The Company, including the NAF, uses one primary vendor for advertising services. For the year ended December 31, 2018, purchases from this vendor comprised 65% of total advertising purchases. For the year ended December 31, 2017 purchases from one vendor comprised 63% of total advertising purchases and for the year ended December 31, 2016 purchases from two vendors comprised 25% and 16% of total advertising purchases, respectively. (see Note 4 for further discussion of the NAF).

Cash, cash equivalents and restricted cash

(d) Cash, cash equivalents and restricted cash

The Company considers all highly liquid investments purchased with an original maturity of 90 days or less to be cash equivalents. Cash held within the NAF is recorded as a restricted asset (see Note 4).

In accordance with the Company’s securitized financing facility, certain cash accounts have been established in the name of Citibank, N.A. (the “Trustee”). The Company holds restricted cash which primarily represents cash collections held by the Trustee, which includes interest, principal, and commitment fee reserves. As of December 31, 2018, the Company had restricted cash held by the Trustee of $30,708. 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.

Revenue recognition and Deferred Revenue