PLANET FITNESS, INC., 10-Q filed on 5/3/2017
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2017
Apr. 26, 2017
Class A Common Stock [Member]
Apr. 26, 2017
Class B Common Stock [Member]
Document Information [Line Items]
 
 
 
Document Type
10-Q 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Mar. 31, 2017 
 
 
Document Fiscal Year Focus
2017 
 
 
Document Fiscal Period Focus
Q1 
 
 
Trading Symbol
PLNT 
 
 
Entity Registrant Name
PLANET FITNESS, INC. 
 
 
Entity Central Index Key
0001637207 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Filer Category
Accelerated Filer 
 
 
Entity Common Stock, Shares Outstanding
 
72,552,901 
25,795,641 
Condensed consolidated balance sheets (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Current assets:
 
 
Cash and cash equivalents
$ 60,236 
$ 40,393 
Accounts receivable, net of allowance for bad debts of $118 and $687 at March 31, 2017 and December 31, 2016, respectively
14,988 
26,873 
Due from related parties
2,914 
2,864 
Inventory
1,331 
1,802 
Restricted assets – national advertising fund
2,502 
3,074 
Other receivables
9,715 
7,935 
Other current assets
7,905 
8,284 
Total current assets
99,591 
91,225 
Property and equipment, net of accumulated depreciation of $33,794 as of March 31, 2017 and $30,987 as of December 31, 2016
61,104 
61,238 
Intangible assets, net
249,148 
253,862 
Goodwill
176,981 
176,981 
Deferred income taxes
561,342 
410,407 
Other assets, net
8,186 
7,729 
Total assets
1,156,352 
1,001,442 
Current liabilities:
 
 
Current maturities of long-term debt
7,185 
7,185 
Accounts payable
13,278 
28,507 
Accrued expenses
10,263 
19,190 
Equipment deposits
10,739 
2,170 
Deferred revenue, current
18,226 
17,780 
Payable to related parties pursuant to tax benefit arrangements, current
11,283 
8,072 
Other current liabilities
536 
369 
Total current liabilities
71,510 
83,273 
Long-term debt, net of current maturities
700,672 
702,003 
Deferred rent, net of current portion
5,213 
5,108 
Deferred revenue, net of current portion
8,445 
8,351 
Deferred tax liabilities
1,052 
1,238 
Payable to related parties pursuant to tax benefit arrangements, net of current portion
552,213 
410,999 
Other liabilities
5,271 
5,225 
Total noncurrent liabilities
1,272,866 
1,132,924 
Commitments and contingencies (note 11)
   
   
Stockholders' equity (deficit):
 
 
Accumulated other comprehensive loss
(1,274)
(1,174)
Additional paid in capital
23,087 
34,467 
Accumulated deficit
(155,288)
(164,062)
Total stockholders' deficit attributable to Planet Fitness Inc.
(133,465)
(130,759)
Non-controlling interests
(54,559)
(83,996)
Total stockholders' deficit
(188,024)
(214,755)
Total liabilities and stockholders' deficit
1,156,352 
1,001,442 
Class A Common Stock [Member]
 
 
Stockholders' equity (deficit):
 
 
Common stock, value
Class B Common Stock [Member]
 
 
Stockholders' equity (deficit):
 
 
Common stock, value
$ 3 
$ 4 
Condensed consolidated balance sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Accounts receivable, allowance for bad debts
$ 118 
$ 687 
Property and equipment, accumulated depreciation
$ 33,794 
$ 30,987 
Class A Common Stock [Member]
 
 
Common stock, par value
$ 0.0001 
$ 0.0001 
Common stock, shares authorized
300,000,000 
300,000,000 
Common stock, shares issued
72,473,000 
61,314,000 
Common stock, shares outstanding
72,473,000 
61,314,000 
Class B Common Stock [Member]
 
 
Common stock, par value
$ 0.0001 
$ 0.0001 
Common stock, shares authorized
100,000,000 
100,000,000 
Common stock, shares issued
26,026,000 
37,185,000 
Common stock, shares outstanding
26,026,000 
37,185,000 
Condensed consolidated statements of operations (USD $)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Revenue:
 
 
Franchise
$ 30,281,000 
$ 21,491,000 
Commission income
6,516,000 
6,186,000 
Corporate-owned stores
27,041,000 
25,697,000 
Equipment
27,264,000 
29,969,000 
Total revenue
91,102,000 
83,343,000 
Operating costs and expenses:
 
 
Cost of revenue
21,124,000 
23,639,000 
Store operations
15,184,000 
14,732,000 
Selling, general and administrative
13,820,000 
11,845,000 
Depreciation and amortization
7,951,000 
7,703,000 
Other gain
(32,000)
(186,000)
Total operating costs and expenses
58,047,000 
57,733,000 
Income from operations
33,055,000 
25,610,000 
Other expense, net:
 
 
Interest expense, net
(8,763,000)
(6,367,000)
Other income
682,000 
393,000 
Total other expense, net
(8,081,000)
(5,974,000)
Income before income taxes
24,974,000 
19,636,000 
Provision for income taxes
7,108,000 
3,291,000 
Net income
17,866,000 
16,345,000 
Less net income attributable to non-controlling interests
9,024,000 
12,977,000 
Net income attributable to Planet Fitness, Inc.
$ 8,842,000 
$ 3,368,000 
Class A Common Stock [Member]
 
 
Net income per share of Class A common stock:
 
 
Basic & diluted
$ 0.14 
$ 0.09 
Weighted-average shares of Class A common stock outstanding:
 
 
Basic
64,120,677 
36,597,985 
Diluted
64,149,941 
36,597,985 
Condensed consolidated statements of comprehensive income (loss) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Statement Of Income And Comprehensive Income [Abstract]
 
 
Net income including non-controlling interests
$ 17,866 
$ 16,345 
Other comprehensive income (loss), net:
 
 
Unrealized gain (loss) on interest rate caps, net of tax
177 
(583)
Foreign currency translation adjustments
(8)
(93)
Total other comprehensive income (loss), net
169 
(676)
Total comprehensive income including non-controlling interests
18,035 
15,669 
Less: total comprehensive income attributable to non-controlling interests
9,114 
12,491 
Total comprehensive income attributable to Planet Fitness, Inc.
$ 8,921 
$ 3,178 
Condensed consolidated statements of cash flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Cash flows from operating activities:
 
 
Net income
$ 17,866 
$ 16,345 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation and amortization
7,951 
7,703 
Amortization of deferred financing costs
465 
371 
Amortization of favorable leases and asset retirement obligations
94 
99 
Amortization of interest rate caps
432 
75 
Deferred tax expense
5,298 
1,354 
Gain on re-measurement of tax benefit arrangement
(541)
 
Provision for bad debts
27 
Gain on disposal of property and equipment
 
(186)
Equity-based compensation
380 
576 
Changes in operating assets and liabilities, excluding effects of acquisitions:
 
 
Accounts receivable
11,859 
8,864 
Notes receivable and due from related parties
(99)
3,544 
Inventory
471 
3,081 
Other assets and other current assets
(2,187)
(4,632)
Accounts payable and accrued expenses
(21,244)
(16,202)
Other liabilities and other current liabilities
188 
30 
Income taxes
310 
(2,314)
Payable to related parties pursuant to tax benefit arrangements
 
(2,113)
Equipment deposits
8,569 
(334)
Deferred revenue
527 
(1,091)
Deferred rent
106 
85 
Net cash provided by operating activities
30,472 
15,262 
Cash flows from investing activities:
 
 
Additions to property and equipment
(5,336)
(865)
Proceeds from sale of property and equipment
 
20 
Net cash used in investing activities
(5,336)
(845)
Cash flows from financing activities:
 
 
Principal payments on capital lease obligations
 
(12)
Repayment of long-term debt
(1,796)
(1,275)
Premiums paid for interest rate caps
(366)
 
Dividend equivalent payments
(20)
 
Distributions to Continuing LLC Members
(3,142)
(6,411)
Net cash used in financing activities
(5,324)
(7,698)
Effects of exchange rate changes on cash and cash equivalents
31 
119 
Net increase in cash and cash equivalents
19,843 
6,838 
Cash and cash equivalents, beginning of period
40,393 
31,430 
Cash and cash equivalents, end of period
60,236 
38,268 
Supplemental cash flow information:
 
 
Net cash paid for income taxes
1,595 
4,336 
Cash paid for interest
7,857 
5,815 
Non-cash investing activities:
 
 
Non-cash additions to property and equipment
$ 38 
$ 170 
Condensed consolidated statement of changes in equity (deficit) (USD $)
In Thousands, except Share data
Total
USD ($)
Accumulated Other Comprehensive (Loss) Income [Member]
USD ($)
Additional Paid-in capital [Member]
USD ($)
Accumulated Deficit [Member]
USD ($)
Non-Controlling Interests [Member]
USD ($)
Class A Common Stock [Member]
Class A Common Stock [Member]
Common Stock [Member]
USD ($)
Class B Common Stock [Member]
Class B Common Stock [Member]
Common Stock [Member]
USD ($)
Beginning balance at Dec. 31, 2016
$ (214,755)
$ (1,174)
$ 34,467 
$ (164,062)
$ (83,996)
 
$ 6 
 
$ 4 
Beginning balance (shares) at Dec. 31, 2016
 
 
 
 
 
61,314,000 
 
37,185,000 
 
Net income
17,866 
 
 
8,842 
9,024 
 
 
 
 
Equity-based compensation expense
380 
 
400 
(20)
 
 
 
 
 
Exchanges of Class B common stock, value issued
 
 
 
 
23,465 
 
 
 
Exchanges of Class B common stock, value exchanged
 
(179)
(23,286)
 
 
 
 
 
(1)
Exchanges of Class B common stock, shares issued
 
 
 
 
 
11,159,000 
 
 
 
Exchanges of Class B common stock, shares exchanged
 
 
 
 
 
 
 
(11,159,000)
 
Tax benefit arrangement liability and deferred taxes arising from secondary offerings and other exchanges
11,506 
 
11,506 
 
 
 
 
 
 
Distributions paid to members of Pla-Fit Holdings
(3,190)
 
 
(48)
(3,142)
 
 
 
 
Other comprehensive income (loss)
169 
79 
 
 
90 
 
 
 
 
Ending balance at Mar. 31, 2017
$ (188,024)
$ (1,274)
$ 23,087 
$ (155,288)
$ (54,559)
 
$ 7 
 
$ 3 
Ending balance (shares) at Mar. 31, 2017
 
 
 
 
 
72,473,000 
 
26,026,000 
 
Business organization
Business organization

(1) Business organization

Planet Fitness, Inc. (the “Company”), through its subsidiaries, is a franchisor and operator of fitness centers, with more than 10.1 million members and 1,367 owned and franchised locations (referred to as stores) in 48 states, the District of Columbia, Puerto Rico, Canada and the Dominican Republic as of March 31, 2017.

The Company serves as the reporting entity for its various subsidiaries that operate three distinct lines of business:

 

Licensing and selling franchises under the Planet Fitness trade name.

 

Owning and operating fitness centers under the Planet Fitness trade name.

 

Selling fitness-related equipment to franchisee-owned stores.

The Company was formed as a Delaware corporation on March 16, 2015 for the purpose of facilitating an initial public offering (the “IPO”) which was completed on August 11, 2015 and related transactions in order to carry on the business of Pla-Fit Holdings, LLC and its subsidiaries (“Pla-Fit Holdings”). As of August 5, 2015, in connection with the recapitalization transactions that occurred prior to the IPO, the Company became the sole managing member and holder of 100% of the voting power of Pla-Fit Holdings. Pla-Fit Holdings owns 100% of Planet Intermediate, LLC which has no operations but is the 100% owner of Planet Fitness Holdings, LLC, a franchisor and operator of fitness centers. 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.

Subsequent to the IPO and the related recapitalization transactions, the Company is a holding company whose principal asset is a controlling equity interest in Pla-Fit Holdings. As the sole managing member of Pla-Fit Holdings, the Company operates and controls all of the business and affairs of Pla-Fit Holdings, and through Pla-Fit Holdings, conducts its business. As a result, the Company consolidates Pla-Fit Holdings’ financial results and reports a non-controlling interest related to the portion of limited liability company units of Pla-Fit Holdings (“Holdings Units”) not owned by the Company. Unless otherwise specified, “the Company” refers to both Planet Fitness, Inc. and Pla-Fit Holdings throughout the remainder of these notes.

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 TSG AIV II-A L.P and TSG PF Co-Investors A L.P. (“Direct TSG Investors”), funds affiliated with TSG Consumer Partners, LLC (“TSG”). 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 addition to the March Secondary Offering, during the three months ended March 31, 2017, certain existing holders of Holdings Units have exercised their exchange rights and exchanged 949,861 Holdings Units for 949,861 newly-issued shares of Class A common stock. Simultaneously, and in connection with these exchanges, 949,861 shares of Class B common stock were surrendered by the holders of Holdings Units that exercised their exchange rights and canceled. Additionally, in connection with these exchanges, Planet Fitness, Inc. received 949,861 Holdings Units, increasing its total ownership interest in Pla-Fit Holdings.

Following the completion of the March Secondary Offering and other exchanges, and as of March 31, 2017, Planet Fitness, Inc. held 100% of the voting interest and 73.6% of the economic interest of Pla-Fit Holdings and the existing equity owners of Pla-Fit Holdings (the “Continuing LLC Owners”) held the remaining 26.4% economic interest in Pla-Fit Holdings. As future exchanges of Holdings Units occur, Planet Fitness, Inc.’s economic interest in Pla-Fit Holdings will increase.

Summary of significant accounting policies
Summary of significant accounting policies

(2) Summary of significant accounting policies

(a) Basis of presentation and consolidation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these interim financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented have been reflected. All significant intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated financial statements as of and for the three months ended March 31, 2017 are unaudited. The condensed consolidated balance sheet as of December 31, 2016 has been derived from the audited financial statements at that date but does not include all of the disclosures required by U.S. GAAP. These interim condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (the “Annual Report”) filed with the SEC on March 6, 2017. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year.

As discussed in Note 1, as a result of the recapitalization transactions, 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”) and PF Melville LLC (“PF Melville”) based on the determination that the Company is the primary beneficiary with respect to these VIEs. These entities 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.

(b) Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results. Significant areas where estimates and judgments are relied upon by management in the preparation of the consolidated financial statements include revenue recognition, valuation of assets and liabilities in connection with acquisitions, valuation of equity-based compensation awards, the evaluation of the recoverability of goodwill and long-lived assets, including intangible assets, income taxes, including deferred tax assets and liabilities and reserves for unrecognized tax benefits, and the liability for the Company’s tax benefit arrangements.

(c) Fair Value

ASC 820, Fair Value Measurements and Disclosures, establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

Level 1—Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The table below presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016:

 

 

 

 

 

 

 

Quoted

 

 

Significant

 

 

 

 

 

 

 

Total fair

 

 

prices

 

 

other

 

 

Significant

 

 

 

value at

 

 

in active

 

 

observable

 

 

unobservable

 

 

 

March 31,

 

 

markets

 

 

inputs

 

 

inputs

 

 

 

2017

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Interest rate caps

 

$

473

 

 

$

 

 

$

473

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quoted

 

 

Significant

 

 

 

 

 

 

 

Total fair

 

 

prices

 

 

other

 

 

Significant

 

 

 

value at

 

 

in active

 

 

observable

 

 

unobservable

 

 

 

December 31,

 

 

markets

 

 

inputs

 

 

inputs

 

 

 

2016

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Interest rate caps

 

$

306

 

 

$

 

 

$

306

 

 

$

 

 

(d) Recent accounting pronouncements

The FASB issued ASU No. 2014-09, 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 expects to adopt this new guidance in fiscal year 2018 and is still evaluating the most appropriate transition method to be utilized. The Company expects the adoption of the new guidance to change the timing of recognition of area development agreement and initial franchise fees. Currently, these fees are generally recognized upfront upon either a store opening or upon execution of the property lease for an area development agreement, and upon execution of a lease and delivery of training for franchise fees. The new guidance will generally require these fees to be recognized over the contractual terms of the geographic exclusivity right and the related franchise license. The Company does not currently expect this new guidance to materially impact the recognition of royalty income. The Company is continuing to evaluate the impact the adoption of this new guidance will have on all revenue transactions, including the impact this guidance may have on the presentation of national advertising fund revenues and expenses.

The FASB issued ASU No. 2016-02, Leases, in February 2016. 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. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public companies. Early application of the amendments in this update is permitted for all entities. The Company anticipates that adoption of this guidance will bring all current operating leases onto the statement of financial position as a right of use asset and related rent liability, and is currently evaluating the effect that implementation of this guidance will have on its consolidated statement of operations.

The FASB issued ASU No. 2016-09, Stock Compensation, in March 2016. This guidance is intended to simplify several aspects of the accounting for share-based payment award transactions. This guidance will be effective for fiscal years beginning after December 15, 2016, including interim periods within that year. The Company has adopted the guidance as of January 1, 2017 on a modified retrospective basis, noting no material impact to the consolidated financial statements.

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 does not expect the adoption of the standard to have a material impact on its consolidated financial statements.

The FASB issued ASU No. 2017-04, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, in January 2017. This guidance eliminates the requirement to calculate the implied fair value, essentially eliminating step two from the goodwill impairment test. The new standard requires goodwill impairment to be based upon the results of step one of the impairment test, which is defined as the excess of the carrying value of a reporting unit over its fair value. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. 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.

Variable interest entities
Variable interest entities

(3) Variable interest entities

The carrying values of VIEs included in the consolidated financial statements as of March 31, 2017 and December 31, 2016 are as follows:

 

 

 

March 31, 2017

 

 

December 31, 2016

 

 

 

Assets

 

 

Liabilities

 

 

Assets

 

 

Liabilities

 

PF Melville

 

$

4,158

 

 

$

 

 

$

4,071

 

 

$

 

MMR

 

 

3,207

 

 

 

 

 

 

3,156

 

 

 

 

Total

 

$

7,365

 

 

$

 

 

$

7,227

 

 

$

 

 

The Company also has variable interests in certain franchisees mainly through the guarantee of certain debt and lease agreements as well as financing provided by the Company and by certain related parties to franchisees. The Company’s maximum obligation, as a result of its guarantees of leases and debt, is approximately $1,241 and $1,350 as of March 31, 2017 and December 31, 2016, 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.

Goodwill and intangible assets
Goodwill and intangible assets

(4) Goodwill and intangible assets

A summary of goodwill and intangible assets at March 31, 2017 and December 31, 2016 is as follows:

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

average

 

Gross

 

 

 

 

 

 

 

 

 

 

 

amortization

 

carrying

 

 

Accumulated

 

 

Net carrying

 

March 31, 2017

 

period (years)

 

amount

 

 

amortization

 

 

Amount

 

Customer relationships

 

11.1

 

$

171,782

 

 

 

(76,163

)

 

$

95,619

 

Noncompete agreements

 

5.0

 

 

14,500

 

 

 

(12,752

)

 

 

1,748

 

Favorable leases

 

7.5

 

 

2,935

 

 

 

(1,735

)

 

 

1,200

 

Order backlog

 

0.4

 

 

3,400

 

 

 

(3,400

)

 

 

 

Reacquired franchise rights

 

5.8

 

 

8,950

 

 

 

(4,669

)

 

 

4,281

 

 

 

 

 

 

201,567

 

 

 

(98,719

)

 

 

102,848

 

Indefinite-lived intangible:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade and brand names

 

N/A

 

 

146,300

 

 

 

 

 

 

146,300

 

Total intangible assets

 

 

 

$

347,867

 

 

$

(98,719

)

 

$

249,148

 

Goodwill

 

 

 

$

176,981

 

 

$

 

 

$

176,981

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

average

 

Gross

 

 

 

 

 

 

 

 

 

 

 

amortization

 

carrying

 

 

Accumulated

 

 

Net carrying

 

December 31, 2016

 

period (years)

 

amount

 

 

amortization

 

 

Amount

 

Customer relationships

 

11.1

 

$

171,782

 

 

$

(72,655

)

 

$

99,127

 

Noncompete agreements

 

5.0

 

 

14,500

 

 

 

(12,027

)

 

 

2,473

 

Favorable leases

 

7.5

 

 

2,935

 

 

 

(1,643

)

 

 

1,292

 

Order backlog

 

0.4

 

 

3,400

 

 

 

(3,400

)

 

 

 

Reacquired franchise rights

 

5.8

 

 

8,950

 

 

 

(4,280

)

 

 

4,670

 

 

 

 

 

 

201,567

 

 

 

(94,005

)

 

 

107,562

 

Indefinite-lived intangible:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade and brand names

 

N/A

 

 

146,300

 

 

 

 

 

 

146,300

 

Total intangible assets

 

 

 

$

347,867

 

 

$

(94,005

)

 

$

253,862

 

Goodwill

 

 

 

$

176,981

 

 

$

 

 

$

176,981

 

 

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

 

Amortization expense related to the intangible assets totaled $4,715 and $4,940 for the three months ended March 31, 2017 and 2016, respectively. Included within these total amortization expense amounts are $94 and $99 related to amortization of favorable and unfavorable leases for the three months ended March 31, 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 March 31, 2017 is as follows:

 

 

Amount

 

Remainder of 2017

 

$

13,500

 

2018

 

 

14,583

 

2019

 

 

14,215

 

2020

 

 

12,517

 

2021

 

 

12,422

 

Thereafter

 

 

35,611

 

Total

 

$

102,848

 

 

Long-term debt
Long-term debt

(5) Long-term debt

Long-term debt as of March 31, 2017 and December 31, 2016 consists of the following:

 

 

 

March 31, 2017

 

 

December 31, 2016

 

Term loan B requires quarterly installments plus interest

   through the term of the loan, maturing March 31, 2021.

   Outstanding borrowings bear interest at LIBOR or base

   rate (as defined) plus a margin at the election of the borrower

 

 

 

 

 

 

 

 

   (4.53% at March 31, 2017 and 4.33% at December 31, 2016)

 

$

714,858

 

 

$

716,654

 

Revolving credit line, requires interest only payments

   through the term of the loan, maturing March 31, 2019.

   Outstanding borrowings bear interest at LIBOR or base rate

   (as defined) plus a margin at the election of the borrower

 

 

 

 

 

 

 

 

   (6.25% at March 31, 2017 and 6.00% December 31, 2016)

 

 

 

 

 

 

Total debt, excluding deferred financing costs

 

$

714,858

 

 

 

716,654

 

Deferred financing costs, net of accumulated amortization

 

 

(7,001

)

 

 

(7,466

)

Total debt

 

 

707,857

 

 

 

709,188

 

Current portion of long-term debt and line of credit

 

 

7,185

 

 

 

7,185

 

Long-term debt, net of current portion

 

$

700,672

 

 

$

702,003

 

 

Future annual principal payments of long-term debt as of March 31, 2017 are as follows:

 

 

 

Amount

 

Remainder of 2017

 

$

5,389

 

2018

 

 

7,185

 

2019

 

 

7,185

 

2020

 

 

7,185

 

2021

 

 

687,914

 

Total

 

$

714,858

 

 

Derivative instruments and hedging activities
Derivative instruments and hedging activities

(6) Derivative instruments and hedging activities

The Company utilizes 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.

By using derivative financial instruments to hedge exposures to changes in interest rates, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is an asset, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative contract is a liability, the Company owes the counterparty and, therefore, the Company is not exposed to the counterparty’s credit risk in those circumstances. The Company minimizes counterparty credit risk in derivative instruments by entering into transactions with high-quality counterparties whose credit rating is higher than A1/A+ at the inception of the derivative transaction. The derivative instruments entered into by the Company do not contain credit-risk-related contingent features.

Market risk is the adverse effect on the value of a derivative instrument that results from a change in interest rates. The market risk associated with interest-rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.

The Company assesses interest rate risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. The Company monitors interest rate risk attributable to both the Company’s outstanding or forecasted debt obligations as well as the Company’s offsetting hedge positions.

In order to manage the market risk arising from the outstanding term loans, the Company has entered into a series of interest rate caps. During the three months ended March 31, 2017, the Company entered into two additional interest rate caps effective on March 31, 2017 and terminating on March 31, 2019 with variable notional amounts in order to hedge one month LIBOR greater than 2.5%. As of March 31, 2017, the Company had interest rate cap agreements with notional amounts of $194,000 outstanding that were entered into in order to hedge three month LIBOR greater than 1.5%, and interest rate cap agreements with notional amounts of $164,327 that were entered into in order to hedge one month LIBOR greater than 2.5%.

The interest rate cap balances of $473 and $306 were recorded within other assets in the condensed consolidated balance sheets as of March 31, 2017 and December 31, 2016, respectively. These amounts have been measured at fair value and are considered to be a Level 2 fair value measurement. The Company recorded an increase to the value of its interest rate caps of $177, net of tax of $57 and a reduction to the value of its interest rate caps of $583, net of tax of $113, within other comprehensive loss during the three months ended March 31, 2017 and 2016, respectively.

As of March 31, 2017, the Company does not expect to reclassify any amounts included in accumulated other comprehensive income (loss) into earnings during the next 12 months. Transactions and events expected to occur over the next 12 months that will necessitate reclassifying these derivatives’ loss to earnings include the re-pricing of variable-rate debt.

Related party transactions
Related party transactions

(7) Related party transactions

 

Amounts due from related parties of $2,914 and $2,864 as of March 31, 2017 and December 31, 2016, respectively, primarily relate to currently due or potential reimbursements for certain taxes accrued or paid by the Company (see Note 10).

 

Activity with entities considered to be related parties is summarized below:  

 

 

For the three months ended

March 31,

 

 

 

2017

 

 

2016

 

Franchise revenue

 

$

448

 

 

$

421

 

Equipment revenue

 

 

19

 

 

 

593

 

Total revenue from related parties

 

$

467

 

 

$

1,014

 

 

Additionally, the Company had deferred area development agreement revenue from related parties of $412 and $422 as of March 31, 2017 and December 31, 2016, respectively.

As of March 31, 2017, the Company had $563,496 payable to related parties pursuant to tax benefit arrangements, see Note 10.

The Company provides administrative services to the Planet Fitness National Advertising Fund, LLC (“NAF”) and charges NAF a fee for providing those services. These services include accounting services, information technology, data processing, product development, legal and administrative support, and other operating expenses, which amounted to $573 and $437 for the three months ended March 31, 2017 and 2016, respectively.

Stockholder's equity
Stockholder's equity

(8) 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 by a Continuing LLC Owner of Holdings Units for shares of Class A common stock, 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 cancelled.

In March 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.

In addition to the March Secondary Offering, during the three months ended March 31, 2017, certain existing holders of Holdings Units exercised their exchange rights and exchanged 949,861 Holdings Units for 949,861 newly-issued shares of Class A common stock. Simultaneously, and in connection with these exchanges, 949,861 shares of Class B common stock were surrendered by the holders of Holdings Units that exercised their exchange rights and canceled. Additionally, in connection with these exchanges, Planet Fitness, Inc. received 949,861 Holdings Units, increasing its total ownership interest in Pla-Fit Holdings.

As a result of these transactions, as of March 31, 2017:

 

Holders of our Class A common stock, excluding the Direct TSG Investors, owned 67,257,210 shares of our Class A common, representing 68.3% of the voting power in the Company and, through the Company, 68.3% of the economic interest in Pla-Fit Holdings;

 

the Direct TSG Investors owned 5,215,691 shares of our Class A common stock, representing 5.3% of the voting power in the Company and, through the Company, 5.3% of the economic interest in Pla-Fit Holdings; and

 

the Continuing LLC Owners collectively owned 26,025,822 Holdings Units, representing 26.4% of the economic interest in Pla-Fit Holdings and 26,025,822 shares of our Class B common stock, representing 26.4% of the voting power in the Company.

Earnings per share
Earnings per share

(9) Earnings per share

Basic earnings per share of Class A common stock is computed by dividing net income attributable to Planet Fitness, Inc. by the weighted-average number of shares of Class A common stock outstanding during the same period. Diluted earnings per share of Class A common stock is computed by dividing net income attributable to Planet Fitness, Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.

Shares of the Company’s Class B common stock do not share in the earnings or losses attributable to Planet Fitness, Inc. and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented. Shares of the Company’s Class B common stock are, however, considered potentially dilutive shares of Class A common stock because shares of Class B common stock, together with the related Holdings Units, are exchangeable into shares of Class A common stock on a one-for-one basis.

The following table sets forth reconciliations used to compute basic and diluted earnings per share of Class A common stock:

 

 

 

Three months ended March 31,

 

 

 

2017

 

 

2016

 

Numerator

 

 

 

 

 

 

 

 

Net income

 

$

17,866

 

 

$

16,345

 

Less: net income attributable to non-controlling interests

 

 

9,024

 

 

 

12,977

 

Net income attributable to Planet Fitness, Inc.

 

$

8,842

 

 

$

3,368

 

 

 

 

 

 

 

 

 

 

Denominator

 

 

 

 

 

 

 

 

Weighted-average shares of Class A common stock outstanding - basic

 

 

64,120,677

 

 

 

36,597,985

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

Stock options

 

 

24,739

 

 

 

-

 

Restricted stock units

 

 

4,525

 

 

 

-

 

Weighted-average shares of Class A common stock outstanding - diluted

 

 

64,149,941

 

 

 

36,597,985

 

 

 

 

 

 

 

 

 

 

Earnings per share of Class A common stock - basic

 

$

0.14

 

 

$

0.09

 

Earnings per share of Class A common stock - diluted

 

$

0.14

 

 

$

0.09

 

 

Weighted average shares of Class B common stock of 34,378,046 and 62,066,702 for the three months ended March 31, 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 111,912 and 134,870 for the three months ended March 31, 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 of 8,160 for the three months ended March 31, 2016 were evaluated under the treasury stock method for potential dilutive effects and were determined to be anti-dilutive.

 

Income taxes
Income taxes

(10) Income taxes

The Company is the sole managing member of Pla-Fit Holdings, which is treated as a partnership for U.S. federal and certain state and local income taxes. As a partnership, Pla-Fit Holdings is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Pla-Fit Holdings is passed through to and included in the taxable income or loss of its members, including the Company, on a pro rata basis. Planet Fitness, Inc. is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to our allocable share of any taxable income of Pla-Fit Holdings. The Company is also subject to taxes in foreign jurisdictions.

The Company incurs U.S. federal and state income taxes on its pro rata share of income flowed through from Pla-Fit Holdings. Our effective tax rate on such income was approximately 39.5% and 39.4% for three months ended March 31, 2017 and 2016, respectively. The provision for income taxes also reflects an effective state tax rate of 2.0% and 2.5% for three months ended March 31, 2017 and 2016, respectively, applied to non-controlling interests, representing the remaining percentage of income before taxes, excluding income from variable interest entities, related to Pla-Fit Holdings. Undistributed earnings of foreign operations were not material for the three months ended March 31, 2017 and 2016.

Net deferred tax assets of $561,342 and $410,407 as of March 31, 2017 and December 31, 2016, respectively, relate primarily to the tax effects of temporary differences in the book basis as compared to the tax basis of our investment in Pla-Fit Holdings as a result of the secondary offerings, other exchanges, recapitalization transactions and IPO. As of March 31, 2017, the Company does not have any material net operating loss carryforwards.

As of March 31, 2017 and December 31, 2016, the total liability related to uncertain tax positions was $2,608. The Company recognizes interest accrued and penalties, if applicable, related to unrecognized tax benefits in income tax expense. As of March 31, 2017, the Company anticipates that the liability for unrecognized tax benefits could decrease by up to $2,608 within the next 12 months due to the expiration of certain statutes of limitation or the settlement of examinations or issues with tax authorities. Interest and penalties for the three months ended March 31, 2017 and 2016 were not material.

Tax benefit arrangements

The Company’s acquisition of Holdings Units in connection with the IPO and future and certain past exchanges of Holdings Units for shares of the Company’s Class A common stock (or cash at the option of the Company) are expected to produce and have produced favorable tax attributes. In connection with the IPO, the Company entered into two tax receivable agreements. Under the first of those agreements, the Company generally is required to pay to certain existing and previous equity owners of Pla-Fit Holdings (the “TRA Holders”) 85% of the applicable tax savings, if any, in U.S. federal and state income tax that the Company is deemed to realize as a result of certain tax attributes of their Holdings Units sold to the Company (or exchanged in a taxable sale) and that are created as a result of (i) the 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.

In connection with the March Secondary Offering and related and other exchanges during the three months ended March 31, 2017, 11,159,103 Holdings Units were redeemed by the TRA Holders for newly issued shares of Class A common stock, resulting in an increase in the tax basis of the net assets of Pla-Fit Holdings subject to the provisions of the tax receivable agreements. As a result of the change in Planet Fitness, Inc.’s ownership percentage of Pla-Fit Holdings that occurred in conjunction with the exchanges, we recorded a decrease to our net deferred tax assets of $10,044 during the three months ended March 31, 2017. As a result of these exchanges, during the three months ended March 31, 2017, we also recognized deferred tax assets in the amount of $166,516, and corresponding tax benefit arrangement liabilities of $144,966, representing 85% of the tax benefits due to the TRA Holders. The offset to the entries recorded in connection with exchanges was to equity.

As of March 31, 2017 and December 31, 2016, the Company had a liability of $563,496 and $419,071, respectively, related to its projected obligations under the tax benefit arrangements. Projected future payments under the tax benefit arrangements are as follows:

 

 

 

Amount

 

Remainder of 2017

 

$

11,283

 

2018

 

 

25,781

 

2019

 

 

26,984

 

2020

 

 

27,575

 

2021

 

 

28,370

 

Thereafter

 

 

443,503

 

Total

 

$

563,496

 

 

Commitments and contingencies
Commitments and contingencies

(11) Commitments and contingencies

From time to time, and in the ordinary course of business, the Company is subject to various claims, charges, and litigation, such as employment-related claims and slip and fall cases. 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.        

Segments
Segments

(12) 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 and the Dominican Republic. 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 three months ended March 31, 2017 and 2016. The “Corporate and other” category, as it relates to Segment EBITDA, primarily includes corporate overhead costs, such as payroll and related benefit costs and professional services which are not directly attributable to any individual segment.

 

 

 

Three months ended March 31,

 

 

 

2017

 

 

2016

 

Revenue

 

 

 

 

 

 

 

 

Franchise segment revenue - U.S.

 

$

36,428

 

 

$

27,230

 

Franchise segment revenue - International

 

 

369

 

 

 

447

 

Franchise segment total

 

 

36,797

 

 

 

27,677

 

Corporate-owned stores - U.S.

 

 

25,973

 

 

 

24,698

 

Corporate-owned stores - International

 

 

1,068

 

 

 

999

 

Corporate-owned stores total

 

 

27,041

 

 

 

25,697

 

Equipment segment - U.S.

 

 

27,264

 

 

 

29,969

 

Equipment segment total

 

 

27,264

 

 

 

29,969

 

Total revenue

 

$

91,102

 

 

$

83,343

 

 

Franchise segment revenue includes franchise revenue and commission income.

Franchise revenue includes revenue generated from placement services of $2,106 and $2,075 for the three months ended March 31, 2017 and 2016, respectively.

 

 

 

Three months ended March 31,

 

 

 

2017

 

 

2016

 

Segment EBITDA

 

 

 

 

 

 

 

 

Franchise

 

$

32,032

 

 

$

23,813

 

Corporate-owned stores

 

 

10,693

 

 

 

10,162

 

Equipment

 

 

6,094

 

 

 

6,318

 

Corporate and other

 

 

(7,131

)

 

 

(6,587

)

Total Segment EBITDA

 

$

41,688

 

 

$

33,706

 

 

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

 

 

 

Three months ended March 31,

 

 

 

2017

 

 

2016

 

Total Segment EBITDA

 

$

41,688

 

 

$

33,706

 

Less:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

7,951

 

 

 

7,703

 

Other expense

 

 

682

 

 

 

393

 

Income from operations

 

 

33,055

 

 

 

25,610

 

Interest expense, net

 

 

(8,763

)

 

 

(6,367

)

Other expense

 

 

682

 

 

 

393

 

Income before income taxes

 

$

24,974

 

 

$

19,636

 

 

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

 

 

 

March 31, 2017

 

 

December 31, 2016

 

Franchise

 

$

206,778

 

 

$

202,580

 

Corporate-owned stores

 

 

157,290

 

 

 

153,761

 

Equipment

 

 

205,815

 

 

 

208,809

 

Unallocated

 

 

586,469

 

 

 

436,292

 

Total consolidated assets

 

$

1,156,352

 

 

$

1,001,442

 

 

The table above includes $2,698 and $2,795 of long-lived assets located in the Company’s corporate-owned stores in Canada as of March 31, 2017 and December 31, 2016, respectively. All other assets are located in the U.S.

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

 

 

 

March 31, 2017

 

 

December 31, 2016

 

Franchise

 

$

16,938

 

 

$

16,938

 

Corporate-owned stores

 

 

67,377

 

 

 

67,377

 

Equipment

 

 

92,666

 

 

 

92,666

 

Consolidated goodwill

 

$

176,981

 

 

$

176,981

 

 

Corporate-owned and franchisee-owned stores
Corporate-owned and franchisee-owned stores

(13) Corporate-owned and franchisee-owned stores

The following table shows changes in our corporate-owned and franchisee-owned stores for the three months ended March 31, 2017 and 2016:

 

 

 

For the three months ended

March 31,

 

 

 

2017

 

 

2016

 

Franchisee-owned stores:

 

 

 

 

 

 

 

 

Stores operated at beginning of period

 

 

1,255

 

 

 

1,066

 

New stores opened

 

 

54

 

 

 

48

 

Stores debranded or consolidated(1)

 

 

 

 

 

(1

)

Stores operated at end of period

 

 

1,309

 

 

 

1,113

 

 

 

 

 

 

 

 

 

 

Corporate-owned stores:

 

 

 

 

 

 

 

 

Stores operated at beginning of period

 

 

58

 

 

 

58

 

New stores opened

 

 

 

 

 

 

Stores operated at end of period

 

 

58

 

 

 

58

 

 

 

 

 

 

 

 

 

 

Total stores:

 

 

 

 

 

 

 

 

Stores operated at beginning of period

 

 

1,313

 

 

 

1,124

 

New stores opened

 

 

54

 

 

 

48

 

Stores debranded or consolidated(1)

 

 

 

 

 

(1

)

Stores operated at end of period

 

 

1,367

 

 

 

1,171

 

 

(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.

Summary of significant accounting policies (Policies)

(a) Basis of presentation and consolidation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these interim financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented have been reflected. All significant intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated financial statements as of and for the three months ended March 31, 2017 are unaudited. The condensed consolidated balance sheet as of December 31, 2016 has been derived from the audited financial statements at that date but does not include all of the disclosures required by U.S. GAAP. These interim condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (the “Annual Report”) filed with the SEC on March 6, 2017. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year.

As discussed in Note 1, as a result of the recapitalization transactions, 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”) and PF Melville LLC (“PF Melville”) based on the determination that the Company is the primary beneficiary with respect to these VIEs. These entities 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.

(b) Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results. Significant areas where estimates and judgments are relied upon by management in the preparation of the consolidated financial statements include revenue recognition, valuation of assets and liabilities in connection with acquisitions, valuation of equity-based compensation awards, the evaluation of the recoverability of goodwill and long-lived assets, including intangible assets, income taxes, including deferred tax assets and liabilities and reserves for unrecognized tax benefits, and the liability for the Company’s tax benefit arrangements.

(c) Fair Value

ASC 820, Fair Value Measurements and Disclosures, establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

Level 1—Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The table below presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016:

 

 

 

 

 

 

 

Quoted

 

 

Significant

 

 

 

 

 

 

 

Total fair

 

 

prices

 

 

other

 

 

Significant

 

 

 

value at

 

 

in active

 

 

observable

 

 

unobservable

 

 

 

March 31,

 

 

markets

 

 

inputs

 

 

inputs

 

 

 

2017

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Interest rate caps

 

$

473

 

 

$

 

 

$

473

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quoted

 

 

Significant

 

 

 

 

 

 

 

Total fair

 

 

prices

 

 

other

 

 

Significant

 

 

 

value at

 

 

in active

 

 

observable

 

 

unobservable

 

 

 

December 31,

 

 

markets

 

 

inputs

 

 

inputs

 

 

 

2016

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Interest rate caps

 

$

306

 

 

$

 

 

$

306

 

 

$

 

 

(d) Recent accounting pronouncements

The FASB issued ASU No. 2014-09, 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 expects to adopt this new guidance in fiscal year 2018 and is still evaluating the most appropriate transition method to be utilized. The Company expects the adoption of the new guidance to change the timing of recognition of area development agreement and initial franchise fees. Currently, these fees are generally recognized upfront upon either a store opening or upon execution of the property lease for an area development agreement, and upon execution of a lease and delivery of training for franchise fees. The new guidance will generally require these fees to be recognized over the contractual terms of the geographic exclusivity right and the related franchise license. The Company does not currently expect this new guidance to materially impact the recognition of royalty income. The Company is continuing to evaluate the impact the adoption of this new guidance will have on all revenue transactions, including the impact this guidance may have on the presentation of national advertising fund revenues and expenses.

The FASB issued ASU No. 2016-02, Leases, in February 2016. 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. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public companies. Early application of the amendments in this update is permitted for all entities. The Company anticipates that adoption of this guidance will bring all current operating leases onto the statement of financial position as a right of use asset and related rent liability, and is currently evaluating the effect that implementation of this guidance will have on its consolidated statement of operations.

The FASB issued ASU No. 2016-09, Stock Compensation, in March 2016. This guidance is intended to simplify several aspects of the accounting for share-based payment award transactions. This guidance will be effective for fiscal years beginning after December 15, 2016, including interim periods within that year. The Company has adopted the guidance as of January 1, 2017 on a modified retrospective basis, noting no material impact to the consolidated financial statements.

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 does not expect the adoption of the standard to have a material impact on its consolidated financial statements.

The FASB issued ASU No. 2017-04, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, in January 2017. This guidance eliminates the requirement to calculate the implied fair value, essentially eliminating step two from the goodwill impairment test. The new standard requires goodwill impairment to be based upon the results of step one of the impairment test, which is defined as the excess of the carrying value of a reporting unit over its fair value. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. 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.

Summary of significant accounting policies (Tables)
Summary of Company's Assets and Liabilities Measured at Fair Value on Recurring Basis

The table below presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016:

 

 

 

 

 

 

 

Quoted

 

 

Significant

 

 

 

 

 

 

 

Total fair

 

 

prices

 

 

other

 

 

Significant

 

 

 

value at

 

 

in active

 

 

observable

 

 

unobservable

 

 

 

March 31,

 

 

markets

 

 

inputs

 

 

inputs

 

 

 

2017

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Interest rate caps

 

$

473

 

 

$

 

 

$

473

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quoted

 

 

Significant

 

 

 

 

 

 

 

Total fair

 

 

prices

 

 

other

 

 

Significant

 

 

 

value at

 

 

in active

 

 

observable

 

 

unobservable

 

 

 

December 31,

 

 

markets

 

 

inputs

 

 

inputs

 

 

 

2016

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Interest rate caps

 

$

306

 

 

$

 

 

$

306

 

 

$

 

 

Variable interest entities (Tables)
Carrying Value of Variable Interest Entities of Consolidated Financial Statements

The carrying values of VIEs included in the consolidated financial statements as of March 31, 2017 and December 31, 2016 are as follows:

 

 

 

March 31, 2017

 

 

December 31, 2016

 

 

 

Assets

 

 

Liabilities

 

 

Assets

 

 

Liabilities

 

PF Melville

 

$

4,158

 

 

$

 

 

$

4,071

 

 

$

 

MMR

 

 

3,207

 

 

 

 

 

 

3,156

 

 

 

 

Total

 

$

7,365

 

 

$

 

 

$

7,227

 

 

$

 

 

Goodwill and intangible assets (Tables)

A summary of goodwill and intangible assets at March 31, 2017 and December 31, 2016 is as follows:

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

average

 

Gross

 

 

 

 

 

 

 

 

 

 

 

amortization

 

carrying

 

 

Accumulated

 

 

Net carrying

 

March 31, 2017

 

period (years)

 

amount

 

 

amortization

 

 

Amount

 

Customer relationships

 

11.1

 

$

171,782

 

 

 

(76,163

)

 

$

95,619

 

Noncompete agreements

 

5.0

 

 

14,500

 

 

 

(12,752

)

 

 

1,748

 

Favorable leases

 

7.5

 

 

2,935

 

 

 

(1,735

)

 

 

1,200

 

Order backlog

 

0.4

 

 

3,400

 

 

 

(3,400

)

 

 

 

Reacquired franchise rights

 

5.8

 

 

8,950

 

 

 

(4,669

)

 

 

4,281

 

 

 

 

 

 

201,567

 

 

 

(98,719

)

 

 

102,848

 

Indefinite-lived intangible:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade and brand names

 

N/A

 

 

146,300

 

 

 

 

 

 

146,300

 

Total intangible assets

 

 

 

$

347,867

 

 

$

(98,719

)

 

$

249,148

 

Goodwill

 

 

 

$

176,981

 

 

$

 

 

$

176,981

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

average

 

Gross

 

 

 

 

 

 

 

 

 

 

 

amortization

 

carrying

 

 

Accumulated

 

 

Net carrying

 

December 31, 2016

 

period (years)

 

amount

 

 

amortization

 

 

Amount

 

Customer relationships

 

11.1

 

$

171,782

 

 

$

(72,655

)

 

$

99,127

 

Noncompete agreements

 

5.0

 

 

14,500

 

 

 

(12,027

)

 

 

2,473

 

Favorable leases

 

7.5

 

 

2,935

 

 

 

(1,643

)

 

 

1,292

 

Order backlog

 

0.4

 

 

3,400

 

 

 

(3,400

)

 

 

 

Reacquired franchise rights

 

5.8

 

 

8,950

 

 

 

(4,280

)

 

 

4,670

 

 

 

 

 

 

201,567

 

 

 

(94,005

)

 

 

107,562

 

Indefinite-lived intangible:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade and brand names

 

N/A

 

 

146,300

 

 

 

 

 

 

146,300

 

Total intangible assets

 

 

 

$

347,867

 

 

$

(94,005

)

 

$

253,862

 

Goodwill

 

 

 

$

176,981

 

 

$

 

 

$

176,981

 

 

The anticipated annual amortization expense to be recognized in future years as of March 31, 2017 is as follows:

 

 

Amount

 

Remainder of 2017

 

$

13,500

 

2018

 

 

14,583

 

2019

 

 

14,215

 

2020

 

 

12,517

 

2021

 

 

12,422

 

Thereafter

 

 

35,611

 

Total

 

$

102,848

 

 

Long-term debt (Tables)

Long-term debt as of March 31, 2017 and December 31, 2016 consists of the following:

 

 

 

March 31, 2017

 

 

December 31, 2016

 

Term loan B requires quarterly installments plus interest

   through the term of the loan, maturing March 31, 2021.

   Outstanding borrowings bear interest at LIBOR or base

   rate (as defined) plus a margin at the election of the borrower

 

 

 

 

 

 

 

 

   (4.53% at March 31, 2017 and 4.33% at December 31, 2016)

 

$

714,858

 

 

$

716,654

 

Revolving credit line, requires interest only payments

   through the term of the loan, maturing March 31, 2019.

   Outstanding borrowings bear interest at LIBOR or base rate

   (as defined) plus a margin at the election of the borrower

 

 

 

 

 

 

 

 

   (6.25% at March 31, 2017 and 6.00% December 31, 2016)

 

 

 

 

 

 

Total debt, excluding deferred financing costs

 

$

714,858

 

 

 

716,654

 

Deferred financing costs, net of accumulated amortization

 

 

(7,001

)

 

 

(7,466

)

Total debt

 

 

707,857

 

 

 

709,188

 

Current portion of long-term debt and line of credit

 

 

7,185

 

 

 

7,185

 

Long-term debt, net of current portion

 

$

700,672

 

 

$

702,003

 

 

Future annual principal payments of long-term debt as of March 31, 2017 are as follows:

 

 

 

Amount

 

Remainder of 2017

 

$

5,389

 

2018

 

 

7,185

 

2019

 

 

7,185

 

2020

 

 

7,185

 

2021

 

 

687,914

 

Total

 

$

714,858

 

 

Related party transactions (Tables)
Schedule of Related Party Transactions

Activity with entities considered to be related parties is summarized below:  

 

 

For the three months ended

March 31,

 

 

 

2017

 

 

2016

 

Franchise revenue

 

$

448

 

 

$

421

 

Equipment revenue

 

 

19

 

 

 

593

 

Total revenue from related parties

 

$

467

 

 

$

1,014

 

 

Earnings per share (Tables) (Class A Common Stock [Member])
Reconciliation of Numerators and Denominators Used to Compute Basic and Diluted Earnings per Share

The following table sets forth reconciliations used to compute basic and diluted earnings per share of Class A common stock:

 

 

 

Three months ended March 31,

 

 

 

2017

 

 

2016

 

Numerator

 

 

 

 

 

 

 

 

Net income

 

$

17,866

 

 

$

16,345

 

Less: net income attributable to non-controlling interests

 

 

9,024

 

 

 

12,977

 

Net income attributable to Planet Fitness, Inc.

 

$

8,842

 

 

$

3,368

 

 

 

 

 

 

 

 

 

 

Denominator

 

 

 

 

 

 

 

 

Weighted-average shares of Class A common stock outstanding - basic

 

 

64,120,677

 

 

 

36,597,985

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

Stock options

 

 

24,739

 

 

 

-

 

Restricted stock units

 

 

4,525

 

 

 

-

 

Weighted-average shares of Class A common stock outstanding - diluted

 

 

64,149,941

 

 

 

36,597,985

 

 

 

 

 

 

 

 

 

 

Earnings per share of Class A common stock - basic

 

$

0.14

 

 

$

0.09

 

Earnings per share of Class A common stock - diluted

 

$

0.14

 

 

$

0.09

 

 

Income taxes (Tables)
Schedule of Future Payments Under Tax Benefit Arrangements

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

 

 

 

Amount

 

Remainder of 2017

 

$

11,283

 

2018

 

 

25,781

 

2019

 

 

26,984

 

2020

 

 

27,575

 

2021

 

 

28,370

 

Thereafter

 

 

443,503

 

Total

 

$

563,496

 

 

Segments (Tables)

The tables below summarize the financial information for the Company’s reportable segments for the three months ended March 31, 2017 and 2016.

 

 

 

Three months ended March 31,

 

 

 

2017

 

 

2016

 

Revenue

 

 

 

 

 

 

 

 

Franchise segment revenue - U.S.

 

$

36,428

 

 

$

27,230

 

Franchise segment revenue - International

 

 

369

 

 

 

447

 

Franchise segment total

 

 

36,797

 

 

 

27,677

 

Corporate-owned stores - U.S.

 

 

25,973

 

 

 

24,698

 

Corporate-owned stores - International

 

 

1,068

 

 

 

999

 

Corporate-owned stores total

 

 

27,041

 

 

 

25,697

 

Equipment segment - U.S.

 

 

27,264

 

 

 

29,969

 

Equipment segment total

 

 

27,264

 

 

 

29,969

 

Total revenue

 

$

91,102

 

 

$

83,343

 

 

 

 

Three months ended March 31,

 

 

 

2017

 

 

2016

 

Segment EBITDA

 

 

 

 

 

 

 

 

Franchise

 

$

32,032

 

 

$

23,813

 

Corporate-owned stores

 

 

10,693

 

 

 

10,162

 

Equipment

 

 

6,094

 

 

 

6,318

 

Corporate and other

 

 

(7,131

)

 

 

(6,587

)

Total Segment EBITDA

 

$

41,688

 

 

$

33,706

 

 

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

 

 

 

Three months ended March 31,

 

 

 

2017

 

 

2016

 

Total Segment EBITDA

 

$

41,688

 

 

$

33,706

 

Less:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

7,951

 

 

 

7,703

 

Other expense

 

 

682

 

 

 

393

 

Income from operations

 

 

33,055

 

 

 

25,610

 

Interest expense, net

 

 

(8,763

)

 

 

(6,367

)

Other expense

 

 

682

 

 

 

393

 

Income before income taxes

 

$

24,974

 

 

$

19,636

 

 

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

 

 

 

March 31, 2017

 

 

December 31, 2016

 

Franchise

 

$

206,778

 

 

$

202,580

 

Corporate-owned stores

 

 

157,290

 

 

 

153,761

 

Equipment

 

 

205,815

 

 

 

208,809

 

Unallocated

 

 

586,469

 

 

 

436,292

 

Total consolidated assets

 

$

1,156,352

 

 

$

1,001,442

 

 

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

 

 

 

March 31, 2017

 

 

December 31, 2016

 

Franchise

 

$

16,938

 

 

$

16,938

 

Corporate-owned stores

 

 

67,377

 

 

 

67,377

 

Equipment

 

 

92,666

 

 

 

92,666

 

Consolidated goodwill

 

$

176,981

 

 

$

176,981

 

 

Corporate-owned and franchisee-owned stores (Tables)
Schedule of Changes in Corporate-owned and Franchisee-owned Stores

The following table shows changes in our corporate-owned and franchisee-owned stores for the three months ended March 31, 2017 and 2016:

 

 

 

For the three months ended

March 31,

 

 

 

2017

 

 

2016

 

Franchisee-owned stores:

 

 

 

 

 

 

 

 

Stores operated at beginning of period

 

 

1,255

 

 

 

1,066

 

New stores opened

 

 

54

 

 

 

48

 

Stores debranded or consolidated(1)

 

 

 

 

 

(1

)

Stores operated at end of period

 

 

1,309

 

 

 

1,113

 

 

 

 

 

 

 

 

 

 

Corporate-owned stores:

 

 

 

 

 

 

 

 

Stores operated at beginning of period

 

 

58

 

 

 

58

 

New stores opened

 

 

 

 

 

 

Stores operated at end of period

 

 

58

 

 

 

58

 

 

 

 

 

 

 

 

 

 

Total stores:

 

 

 

 

 

 

 

 

Stores operated at beginning of period

 

 

1,313

 

 

 

1,124

 

New stores opened

 

 

54

 

 

 

48

 

Stores debranded or consolidated(1)

 

 

 

 

 

(1

)

Stores operated at end of period

 

 

1,367

 

 

 

1,171

 

 

(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.

Business Organization - Additional Information (Detail) (USD $)
3 Months Ended 3 Months Ended 1 Months Ended
Mar. 31, 2017
Member
State
Store
Dec. 31, 2016
Store
Mar. 31, 2016
Store
Dec. 31, 2015
Store
Aug. 5, 2015
Mar. 31, 2017
Holdings Units [Member]
Mar. 31, 2017
Class A Common Stock [Member]
Mar. 31, 2017
Class B Common Stock [Member]
Mar. 31, 2017
Secondary Offering [Member]
Class A Common Stock [Member]
Mar. 31, 2017
Secondary Offering [Member]
Class A Common Stock [Member]
Direct TSG Investors [Member]
Mar. 31, 2017
Secondary Offering [Member]
Class A Common Stock [Member]
Holdings Units [Member]
Mar. 31, 2017
Secondary Offering [Member]
Class B Common Stock [Member]
Holdings Units [Member]
Mar. 31, 2017
Pla-Fit Holdings, LLC [Member]
Aug. 5, 2015
Pla-Fit Holdings, LLC [Member]
Mar. 31, 2017
Pla-Fit Holdings, LLC [Member]
Secondary Offering [Member]
Aug. 5, 2015
Planet Intermediate, LLC [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of members
10,100,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of owned and franchised locations
1,367 
1,313 
1,171 
1,124 
 
 
 
 
 
 
 
 
 
 
 
 
Number of states in which entity operates
48 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Date of formation
Mar. 16, 2015 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of ownership
100.00% 
 
 
 
100.00% 
 
 
 
 
 
 
 
 
100.00% 
 
100.00% 
Number of stock issued during period
 
 
 
 
 
 
949,861 
 
15,000,000 
4,790,758 
10,209,242 
 
 
 
 
 
Share price
 
 
 
 
 
 
 
 
$ 20.44 
 
 
 
 
 
 
 
Number of shares exchanged
 
 
 
 
 
 
 
949,861 
 
 
 
10,209,242 
 
 
 
 
Number of units held by owners
 
 
 
 
 
 
 
 
 
 
 
 
949,861 
 
10,209,242 
 
Stock issued during period, shares, conversion of units
 
 
 
 
 
949,861 
11,159,000 
 
 
 
 
 
 
 
 
 
Percentage of economic interest
 
 
 
 
 
26.40% 
 
 
 
 
 
 
73.60% 
 
 
 
Summary of Significant Accounting Policies - Summary of Company's Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) (Interest Rate Cap [Member], Fair Value Measurements Recurring, USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
 
 
Interest rate caps
$ 473 
$ 306 
Significant Other Observable Inputs (Level 2) [Member]
 
 
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
 
 
Interest rate caps
$ 473 
$ 306 
Variable Interest Entities - Carrying Value of Variable Interest Entities of Consolidated Financial Statements (Detail) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Variable Interest Entity [Line Items]
 
 
Assets
$ 7,365 
$ 7,227 
PF Melville [Member]
 
 
Variable Interest Entity [Line Items]
 
 
Assets
4,158 
4,071 
MMR [Member]
 
 
Variable Interest Entity [Line Items]
 
 
Assets
$ 3,207 
$ 3,156 
Variable Interest Entities - Additional Information (Detail) (USD $)
Mar. 31, 2017
Dec. 31, 2016
Variable Interest Entity Consolidated Carrying Amount Assets And Liabilities [Abstract]
 
 
Maximum obligation of guarantees of leases and debt
$ 1,241,000 
$ 1,350,000 
Maximum loss exposure Involvement of estimated value
$ 0 
 
Goodwill and Intangible Assets - Summary of Goodwill and Intangible Assets (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Goodwill And Intangible Assets [Line Items]
 
 
Total intangible assets, Gross carrying amount
$ 347,867 
$ 347,867 
Gross carrying amount
201,567 
201,567 
Accumulated amortization
(98,719)
(94,005)
Net carrying Amount
102,848 
107,562 
Total intangible assets, Net carrying Amount
249,148 
253,862 
Goodwill, Gross carrying amount
176,981 
176,981 
Goodwill, Net carrying Amount
176,981 
176,981 
Trade and Brand Names [Member]
 
 
Goodwill And Intangible Assets [Line Items]
 
 
Indefinite-lived intangible, Net carrying Amount
146,300 
146,300 
Customer Relationships [Member]
 
 
Goodwill And Intangible Assets [Line Items]
 
 
Weighted average amortization period (years)
11 years 1 month 6 days 
11 years 1 month 6 days 
Gross carrying amount
171,782 
171,782 
Accumulated amortization
(76,163)
(72,655)
Net carrying Amount
95,619 
99,127 
Noncompete Agreements [Member]
 
 
Goodwill And Intangible Assets [Line Items]
 
 
Weighted average amortization period (years)
5 years 
5 years 
Gross carrying amount
14,500 
14,500 
Accumulated amortization
(12,752)
(12,027)
Net carrying Amount
1,748 
2,473 
Favorable Leases [Member]
 
 
Goodwill And Intangible Assets [Line Items]
 
 
Weighted average amortization period (years)
7 years 6 months 
7 years 6 months 
Gross carrying amount
2,935 
2,935 
Accumulated amortization
(1,735)
(1,643)
Net carrying Amount
1,200 
1,292 
Order Backlog [Member]
 
 
Goodwill And Intangible Assets [Line Items]
 
 
Weighted average amortization period (years)
4 months 24 days 
4 months 24 days 
Gross carrying amount
3,400 
3,400 
Accumulated amortization
(3,400)
(3,400)
Reacquired Franchise Rights [Member]
 
 
Goodwill And Intangible Assets [Line Items]
 
 
Weighted average amortization period (years)
5 years 9 months 18 days 
5 years 9 months 18 days 
Gross carrying amount
8,950 
8,950 
Accumulated amortization
(4,669)
(4,280)
Net carrying Amount
$ 4,281 
$ 4,670 
Goodwill and Intangible Assets - Additional Information (Detail) (USD $)
3 Months Ended 12 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Goodwill And Intangible Assets [Line Items]
 
 
 
Impairment charges
$ 0 
 
$ 0 
Amortization of intangible assets
4,715,000 
4,940,000 
 
Favorable And Unfavorable Leases [Member]
 
 
 
Goodwill And Intangible Assets [Line Items]
 
 
 
Amortization of intangible assets
$ 94,000 
$ 99,000 
 
Goodwill and Intangible Assets - Summary of Amortization expenses (Detail) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Goodwill And Intangible Assets Disclosure [Abstract]
 
 
Remainder of 2017
$ 13,500 
 
2018
14,583 
 
2019
14,215 
 
2020
12,517 
 
2021
12,422 
 
Thereafter
35,611 
 
Net carrying Amount
$ 102,848 
$ 107,562 
Long-term Debt - Schedule of Long-term Debt (Detail) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Debt Instrument [Line Items]
 
 
Total debt, excluding deferred financing costs
$ 714,858 
$ 716,654 
Deferred financing costs, net of accumulated amortization
(7,001)
(7,466)
Total debt
707,857 
709,188 
Current portion of long-term debt and line of credit
7,185 
7,185 
Long-term debt, net of current portion
700,672 
702,003 
Term Loan B [Member]
 
 
Debt Instrument [Line Items]
 
 
Total debt, excluding deferred financing costs
$ 714,858 
$ 716,654 
Long-term Debt - Schedule of Long-term Debt (Parenthetical) (Detail)
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Revolving Credit Facility [Member]
 
 
Debt Instrument [Line Items]
 
 
Debt instrument maturity date
Mar. 31, 2019 
Mar. 31, 2019 
Total rate - base plus spread
6.25% 
6.00% 
Term Loan B [Member]
 
 
Debt Instrument [Line Items]
 
 
Debt instrument maturity date
Mar. 31, 2021 
Mar. 31, 2021 
Total rate - base plus spread
4.53% 
4.33% 
Long-term Debt - Schedule of Future Annual Payments of Long-term Debt (Detail) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Debt Disclosure [Abstract]
 
 
Remainder of 2017
$ 5,389 
 
2018
7,185 
 
2019
7,185 
 
2020
7,185 
 
2021
687,914 
 
Total
$ 714,858 
$ 716,654 
Derivative Instruments and Hedging Activities - Additional Information (Detail) (USD $)
3 Months Ended
Mar. 31, 2017
Cap
Mar. 31, 2016
Dec. 31, 2016
Derivative Instruments And Hedging Activities Disclosures [Line Items]
 
 
 
Unrealized loss on interest rate caps, net of tax
$ 177,000 
$ (583,000)
 
LIBOR plus 1.5% [Member]
 
 
 
Derivative Instruments And Hedging Activities Disclosures [Line Items]
 
 
 
Derivative, interest rate cap floor
1.50% 
 
 
LIBOR Plus 2.5% [Member]
 
 
 
Derivative Instruments And Hedging Activities Disclosures [Line Items]
 
 
 
Derivative, interest rate cap floor
2.50% 
 
 
Interest Rate Cap [Member]
 
 
 
Derivative Instruments And Hedging Activities Disclosures [Line Items]
 
 
 
Number of additional caps
 
 
Derivative, inception date
Mar. 31, 2017 
 
 
Derivative, maturity date
Mar. 31, 2019 
 
 
Interest rate caps
473,000 
 
306,000 
Unrealized loss on interest rate caps, net of tax
177,000 
(583,000)
 
Unrealized gain (loss) on interest rate caps, tax
57,000 
(113,000)
 
Interest Rate Cap [Member] |
LIBOR plus 1.5% [Member]
 
 
 
Derivative Instruments And Hedging Activities Disclosures [Line Items]
 
 
 
Derivative, notional amount
194,000,000 
 
 
Interest Rate Cap [Member] |
LIBOR Plus 2.5% [Member]
 
 
 
Derivative Instruments And Hedging Activities Disclosures [Line Items]
 
 
 
Derivative, notional amount
$ 164,327,000 
 
 
Related Party Transactions - Additional Information (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Mar. 31, 2017
Area Development Agreements [Member]
Dec. 31, 2016
Area Development Agreements [Member]
Mar. 31, 2017
Planet Fitness NAF, LLC [Member]
Mar. 31, 2016
Planet Fitness NAF, LLC [Member]
Related Party Transaction [Line Items]
 
 
 
 
 
 
Due from related parties, current portion
$ 2,914 
$ 2,864 
 
 
 
 
Liability payable under tax benefit obligations
563,496 
 
 
 
 
 
Deferred area development revenue from related parties
 
 
412 
422 
 
 
Administrative fees charged
 
 
 
 
$ 573 
$ 437 
Stockholder's Equity - Additional Information (Detail) (USD $)
3 Months Ended 1 Months Ended 3 Months Ended
Mar. 31, 2017
Holdings Units [Member]
Mar. 31, 2017
Class A Common Stock [Member]
Mar. 31, 2017
Class B Common Stock [Member]
Mar. 31, 2017
Pla-Fit Holdings, LLC [Member]
Mar. 31, 2017
Secondary Offering [Member]
Class A Common Stock [Member]
Mar. 31, 2017
Secondary Offering [Member]
Class A Common Stock [Member]
Direct TSG Investors [Member]
Mar. 31, 2017
Secondary Offering [Member]
Class A Common Stock [Member]
Holdings Units [Member]
Mar. 31, 2017
Secondary Offering [Member]
Class B Common Stock [Member]
Holdings Units [Member]
Mar. 31, 2017
Secondary Offering [Member]
Pla-Fit Holdings, LLC [Member]
Mar. 31, 2017
Secondary Offering and Exchange [Member]
Continuing LLC Owners [Member]
Mar. 31, 2017
Secondary Offering and Exchange [Member]
Class A Common Stock [Member]
Direct TSG Investors [Member]
Mar. 31, 2017
Secondary Offering and Exchange [Member]
Class A Common Stock [Member]
Investor [Member]
Mar. 31, 2017
Secondary Offering and Exchange [Member]
Class B Common Stock [Member]
Continuing LLC Owners [Member]
Class Of Stock [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of stock issued during period
 
949,861 
 
 
15,000,000 
4,790,758 
10,209,242 
 
 
 
5,215,691 
67,257,210 
 
Share price
 
 
 
 
$ 20.44 
 
 
 
 
 
 
 
 
Proceeds from sale of shares
 
 
 
 
$ 0 
 
 
 
 
 
 
 
 
Number of shares exchanged
 
 
949,861 
 
 
 
 
10,209,242 
 
 
 
 
 
Number of units held by owners
 
 
 
949,861 
 
 
 
 
10,209,242 
26,025,822 
 
 
26,025,822 
Exchanges of Class B common stock, shares
949,861 
11,159,000 
 
 
 
 
 
 
 
 
 
 
 
Percentage of voting power
 
 
 
 
 
 
 
 
 
 
5.30% 
68.30% 
26.40% 
Percentage of economic interest
 
 
 
 
 
 
 
 
 
26.40% 
5.30% 
68.30% 
 
Earnings per share - Reconciliation of Numerators and Denominators Used to Compute Basic and Diluted Earnings per Share (Detail) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Numerator
 
 
Net income
$ 17,866 
$ 16,345 
Less: net income attributable to non-controlling interests
9,024 
12,977 
Net income attributable to Planet Fitness, Inc.
$ 8,842 
$ 3,368 
Stock Options [Member]
 
 
Effect of dilutive securities:
 
 
Weighted-average shares outstanding adjustment
24,739 
 
Restricted Stock Units [Member]
 
 
Effect of dilutive securities:
 
 
Weighted-average shares outstanding adjustment
4,525 
 
Class A Common Stock [Member]
 
 
Denominator
 
 
Weighted-average shares of Class A common stock outstanding - basic
64,120,677 
36,597,985 
Effect of dilutive securities:
 
 
Weighted-average shares of Class A common stock outstanding - diluted
64,149,941 
36,597,985 
Earnings per share of Class A common stock - basic
$ 0.14 
$ 0.09 
Earnings per share of Class A common stock - diluted
$ 0.14 
$ 0.09 
Earnings per share - Additional Information (Detail)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Stock Options [Member]
 
 
Earnings Per Share Diluted [Line Items]
 
 
Anti-dilutive securities excluded from the calculation of earnings per share
111,912 
134,870 
Restricted Stock Units [Member]
 
 
Earnings Per Share Diluted [Line Items]
 
 
Anti-dilutive securities excluded from the calculation of earnings per share
 
8,160 
Class B Common Stock [Member] |
Continuing LLC Owners Exchange Agreement
 
 
Earnings Per Share Diluted [Line Items]
 
 
Anti-dilutive securities excluded from the calculation of earnings per share
34,378,046 
62,066,702 
Income Taxes - Additional information (Detail) (USD $)
3 Months Ended
Mar. 31, 2017
Agreement
Mar. 31, 2016
Dec. 31, 2016
Tax Credit Carryforward [Line Items]
 
 
 
Effective income tax rate
39.50% 
39.40% 
 
Effective income tax rate reconciliation noncontrolling interest
2.00% 
2.50% 
 
Undistributed earnings of foreign operations
$ 0 
$ 0 
 
Net deferred tax assets
561,342,000 
 
410,407,000 
Total liability related to uncertain tax positions
2,608,000 
 
2,608,000 
Decrease in next twelve months for unrecognized tax benefits
2,608,000 
 
 
Number of tax receivable agreements
 
 
Applicable tax savings
85.00% 
 
 
Percentage of remaining tax savings
15.00% 
 
 
Tax benefit obligation
563,496,000 
 
419,071,000 
TRA Holders [Member]
 
 
 
Tax Credit Carryforward [Line Items]
 
 
 
Decrease in deferred tax assets
(10,044,000)
 
 
Deferred tax asset
166,516,000 
 
 
Deferred tax liability
$ 144,966,000 
 
 
Class A Common Stock [Member] |
TRA Holders [Member]
 
 
 
Tax Credit Carryforward [Line Items]
 
 
 
Number of shares exchanged
11,159,103 
 
 
Income Taxes - Schedule of Future Payments Under Tax Benefit Arrangements (Detail) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Income Tax Disclosure [Abstract]
 
 
Remainder of 2017
$ 11,283 
 
2018
25,781 
 
2019
26,984 
 
2020
27,575 
 
2021
28,370 
 
Thereafter
443,503 
 
Total
$ 563,496 
$ 419,071 
Segments - Additional Information (Detail) (USD $)
3 Months Ended 3 Months Ended
Mar. 31, 2017
Segment
Mar. 31, 2016
Mar. 31, 2017
Franchise [Member]
Mar. 31, 2016
Franchise [Member]
Mar. 31, 2017
Franchise [Member]
Placement Services [Member]
Mar. 31, 2016
Franchise [Member]
Placement Services [Member]
Mar. 31, 2017
Corporate-owned Stores [Member]
Mar. 31, 2016
Corporate-owned Stores [Member]
Mar. 31, 2017
Corporate-owned Stores [Member]
Canada [Member]
Dec. 31, 2016
Corporate-owned Stores [Member]
Canada [Member]
Mar. 31, 2017
Intersegment Eliminations [Member]
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Number of reportable segments
 
 
 
 
 
 
 
 
 
 
Number of operating segments
 
 
 
 
 
 
 
 
 
 
Description of factors used to identify entity's reportable segments
No operating segments aggregated to arrive at the Company's reportable segments. 
 
 
 
 
 
 
 
 
 
 
Revenue
$ 91,102,000 
$ 83,343,000 
$ 36,797,000 
$ 27,677,000 
$ 2,106,000 
$ 2,075,000 
$ 27,041,000 
$ 25,697,000 
 
 
$ 0 
Long-lived assets
 
 
 
 
 
 
 
 
$ 2,698,000 
$ 2,795,000 
 
Segments - Summary of Financial Information for the Company's Reportable Segments (Detail) (USD $)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Segment Reporting Information [Line Items]
 
 
Revenue
$ 91,102,000 
$ 83,343,000 
Total Segment EBITDA
41,688,000 
33,706,000 
Corporate And Other Non Segment [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Total Segment EBITDA
(7,131,000)
(6,587,000)
Franchise [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Revenue
36,797,000 
27,677,000 
Franchise [Member] |
Operating Segments [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Total Segment EBITDA
32,032,000 
23,813,000 
Franchise [Member] |
US [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Revenue
36,428,000 
27,230,000 
Franchise [Member] |
International [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Revenue
369,000 
447,000 
Corporate-owned Stores [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Revenue
27,041,000 
25,697,000 
Corporate-owned Stores [Member] |
Operating Segments [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Total Segment EBITDA
10,693,000 
10,162,000 
Corporate-owned Stores [Member] |
US [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Revenue
25,973,000 
24,698,000 
Corporate-owned Stores [Member] |
International [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Revenue
1,068,000 
999,000 
Equipment [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Revenue
27,264,000 
29,969,000 
Equipment [Member] |
Operating Segments [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Total Segment EBITDA
6,094,000 
6,318,000 
Equipment [Member] |
US [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Revenue
$ 27,264,000 
$ 29,969,000 
Segments - Reconciliation of Total Segment EBITDA to Income Before Taxes (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Segment Reporting [Abstract]
 
 
Total Segment EBITDA
$ 41,688 
$ 33,706 
Depreciation and amortization
7,951 
7,703 
Other expense
682 
393 
Income from operations
33,055 
25,610 
Interest expense, net
(8,763)
(6,367)
Income before income taxes
$ 24,974 
$ 19,636 
Segments - Summary of Company's Assets by Reportable Segment (Detail) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Total consolidated assets
$ 1,156,352 
$ 1,001,442 
Operating Segments [Member] |
Franchise [Member]
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Total consolidated assets
206,778 
202,580 
Operating Segments [Member] |
Corporate-owned Stores [Member]
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Total consolidated assets
157,290 
153,761 
Operating Segments [Member] |
Equipment [Member]
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Total consolidated assets
205,815 
208,809 
Unallocated [Member]
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Total consolidated assets
$ 586,469 
$ 436,292 
Segments - Summary of Company's Goodwill by Reportable Segment (Detail) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Segment Reporting Other Significant Reconciling Item [Line Items]
 
 
Goodwill, Net carrying Amount
$ 176,981 
$ 176,981 
Franchise [Member]
 
 
Segment Reporting Other Significant Reconciling Item [Line Items]
 
 
Goodwill, Net carrying Amount
16,938 
16,938 
Corporate-owned Stores [Member]
 
 
Segment Reporting Other Significant Reconciling Item [Line Items]
 
 
Goodwill, Net carrying Amount
67,377 
67,377 
Equipment [Member]
 
 
Segment Reporting Other Significant Reconciling Item [Line Items]
 
 
Goodwill, Net carrying Amount
$ 92,666 
$ 92,666 
Corporate-owned and Franchisee-owned Stores - Schedule of Changes in Corporate-owned and Franchisee-owned Stores (Detail)
3 Months Ended
Mar. 31, 2017
Store
Mar. 31, 2016
Store
Mar. 31, 2017
Franchisee-Owned Stores [Member]
Store
Mar. 31, 2016
Franchisee-Owned Stores [Member]
Store
Mar. 31, 2017
Corporate-Owned Stores [Member]
Store
Dec. 31, 2016
Corporate-Owned Stores [Member]
Store
Mar. 31, 2016
Corporate-Owned Stores [Member]
Store
Dec. 31, 2015
Corporate-Owned Stores [Member]
Store
Franchisor Disclosure [Line Items]
 
 
 
 
 
 
 
 
Stores operated at beginning of period
1,313 
1,124 
1,255 
1,066 
58 
58 
58 
58 
New stores opened
54 
48 
54 
48 
 
 
 
 
Stores debranded or consolidated
 
(1)1
 
(1)1
 
 
 
 
Stores operated at end of period
1,367 
1,171 
1,309 
1,113 
58 
58 
58 
58