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(1) Business organization
Planet Fitness, Inc. (the “Company”), through its subsidiaries, is a franchisor and operator of fitness centers, with more than 8.7 million members and 1,242 owned and franchised locations (referred to as stores) in 47 states, the District of Columbia, Puerto Rico, Canada and the Dominican Republic as of September 30, 2016.
The Company serves as the reporting entity for its various subsidiaries that operate three distinct lines of business:
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• |
Licensing and selling franchises under the Planet Fitness trade name. |
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• |
Owning and operating fitness centers under the Planet Fitness trade name. |
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• |
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, LLC (“Holdings Units”) not owned by the Company.
The recapitalization transactions are considered transactions between entities under common control. As a result, the financial statements for periods prior to the IPO and the recapitalization transactions are the financial statements of Pla-Fit Holdings as the predecessor to the Company for accounting and reporting purposes. Unless otherwise specified, “the Company” refers to both Planet Fitness, Inc. and Pla-Fit Holdings throughout the remainder of these notes.
In June 2016, the Company completed a secondary offering (“June Secondary Offering”) of 11,500,000 shares of its Class A common stock at a price of $16.50 per share. All of the shares sold in the offering were offered by certain existing holders of Holdings Units (“Continuing LLC Owners”) and certain holders of Class A common stock (“Direct TSG Investors”). The Company did not receive any proceeds from the sale of shares of Class A common stock offered by the Direct TSG Investors and the participating Continuing LLC Owners. The shares sold in the June Secondary Offering consisted of (i) 3,608,840 existing shares of Class A common stock held by the Direct TSG Investors and (ii) 7,891,160 newly-issued shares of Class A common stock issued in connection with the exercise of the exchange right by the Continuing LLC Owners that participated in the June Secondary Offering. Simultaneously, and in connection with the exchange, 7,891,160 shares of Class B common stock were surrendered by the Continuing LLC Owners that participated in the June Secondary Offering and canceled. Additionally, in connection with the exchange, Planet Fitness, Inc. received 7,891,160 Holdings Units, increasing its total ownership interest in Pla-Fit Holdings. Immediately preceding the June Secondary Offering, Planet Fitness, Inc. held 100% of the voting interest and 37.1% of the economic interest of Pla-Fit Holdings and the Continuing LLC Owners held the remaining 62.9% economic interest in Pla-Fit Holdings.
In September 2016, the Company completed a secondary offering (“September Secondary Offering”) of 8,000,000 shares of its Class A common stock at a price of $19.62 per share. All of the shares sold in the offering were offered by the Direct TSG Investors and participating Continuing LLC Owners. The Company did not receive any proceeds from the sale of shares of Class A common stock offered by the Direct TSG Investors and the Continuing LLC Owners that participating in the September Secondary Offering. The shares sold in the September Secondary Offering consisted of (i) 2,593,981 existing shares of Class A common stock held by the Direct TSG Investors and (ii) 5,406,019 newly-issued shares of Class A common stock issued in connection with the exercise of the exchange right by the Continuing LLC Owners that participated in the September Secondary offering. Simultaneously, and in connection with the exchange, 5,406,019 shares of Class B common stock were surrendered by the Continuing LLC Owners that participated in the September Secondary Offering and canceled. Additionally, in connection with the exchange, Planet Fitness, Inc received 5,406,019 Holdings Units, increasing its total ownership interest in Pla-Fit Holdings. Immediately preceding the September Secondary Offering, Planet Fitness, Inc. held 100% of the voting interest and 45.1% of the economic interest of Pla-Fit Holdings and the Continuing LLC Owners held the remaining 54.9% economic interest in Pla-Fit Holdings. Immediately following the completion of the September Secondary Offering and as of September 30, 2016, Planet Fitness, Inc. held 100% of the voting interest and 50.6% of the economic interest of Pla-Fit Holdings and the Continuing LLC Owners held the remaining 49.4% 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.
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(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 and nine months ended September 30, 2016 and 2015 are unaudited. The condensed consolidated balance sheet as of December 31, 2015 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, 2015 (the “Annual Report”) filed with the SEC on March 4, 2016. 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 and Pla-Fit Holdings is considered to be the predecessor to Planet Fitness, Inc. for accounting and reporting purposes. 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 September 30, 2016 and December 31, 2015:
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Quoted |
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Significant |
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Total fair |
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prices |
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other |
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Significant |
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value at |
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in active |
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observable |
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unobservable |
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September 30, |
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markets |
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inputs |
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inputs |
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2016 |
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(Level 1) |
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(Level 2) |
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(Level 3) |
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Interest rate caps |
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$ |
134 |
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$ |
— |
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$ |
134 |
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$ |
— |
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Quoted |
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Significant |
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Total fair |
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prices |
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other |
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Significant |
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value at |
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in active |
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observable |
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unobservable |
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December 31, |
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markets |
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inputs |
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inputs |
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2015 |
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(Level 1) |
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(Level 2) |
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(Level 3) |
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Interest rate caps |
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$ |
1,147 |
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$ |
— |
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$ |
1,147 |
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$ |
— |
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(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 fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 for public companies. In March 2016, the FASB issued ASU 2016-08, which further clarifies the implementation guidance on principal versus agent considerations contained in ASU 2014-09. This guidance is to be applied either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact the adoption of this guidance will have on its consolidated financial statements.
The FASB issued ASU No. 2015-02, Income Statement—Consolidation, in February 2015. This guidance affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, the guidance 1) modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities, 2) eliminates the presumption that a general partner should consolidate a limited partnership, 3) affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships, and 4) provides a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The guidance is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. The Company adopted ASU No. 2015-02 as of January 1, 2016, noting no material impact to the consolidated financial statements.
The FASB issued ASU No. 2015-05: Intangibles - Goodwill and Other - Internal-Use Software: Customer's Accounting for Fees Paid in a Cloud Computing Arrangement, in April 2015. The amendments in this update provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the update specifies that the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. The update further specifies that the customer should account for a cloud computing arrangement as a service contract if the arrangement does not include a software license. The guidance is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. The Company adopted ASU No. 2015-05 as of January 1, 2016 on a prospective basis, noting no material impact to the consolidated financial statements.
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 is currently evaluating the effect that implementation of this guidance will have on its consolidated financial statements.
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 is currently evaluating the effect of the standard on its 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 is currently evaluating the effect of the standard on its consolidated financial statements.
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(3) Variable interest entities
The carrying values of VIEs included in the consolidated financial statements as of September 30, 2016 and December 31, 2015 are as follows:
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September 30, 2016 |
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December 31, 2015 |
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Assets |
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Liabilities |
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Assets |
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Liabilities |
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PF Melville |
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$ |
3,984 |
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$ |
— |
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$ |
3,728 |
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$ |
— |
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MMR |
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3,105 |
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— |
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2,953 |
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|
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— |
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Total |
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$ |
7,089 |
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$ |
— |
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$ |
6,681 |
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$ |
— |
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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 $1,459 and $1,871 as of September 30, 2016 and December 31, 2015, 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 $0.
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(4) Goodwill and intangible assets
A summary of goodwill and intangible assets at September 30, 2016 and December 31, 2015 is as follows:
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Weighted |
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average |
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Gross |
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amortization |
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carrying |
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Accumulated |
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Net carrying |
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September 30, 2016 |
|
period (years) |
|
amount |
|
|
amortization |
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Amount |
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Customer relationships |
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11.1 |
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$ |
171,782 |
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|
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(68,926 |
) |
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$ |
102,856 |
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Noncompete agreements |
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5.0 |
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|
14,500 |
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|
|
(11,302 |
) |
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|
3,198 |
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Favorable leases |
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7.5 |
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|
2,935 |
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|
|
(1,549 |
) |
|
|
1,386 |
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Order backlog |
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0.4 |
|
|
3,400 |
|
|
|
(3,400 |
) |
|
|
— |
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Reacquired franchise rights |
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5.8 |
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|
8,950 |
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|
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(3,891 |
) |
|
|
5,059 |
|
|
|
|
|
|
201,567 |
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|
|
(89,068 |
) |
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|
112,499 |
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Indefinite-lived intangible: |
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|
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Trade and brand names |
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N/A |
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|
146,300 |
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|
|
— |
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|
|
146,300 |
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Total intangible assets |
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|
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$ |
347,867 |
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$ |
(89,068 |
) |
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$ |
258,799 |
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Goodwill |
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|
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$ |
176,981 |
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|
$ |
— |
|
|
$ |
176,981 |
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|
|
Weighted |
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|
|
|
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|
|
|
|
|
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average |
|
Gross |
|
|
|
|
|
|
|
|
|
|
|
|
amortization |
|
carrying |
|
|
Accumulated |
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Net carrying |
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December 31, 2015 |
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period (years) |
|
amount |
|
|
amortization |
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|
Amount |
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Customer relationships |
|
11.1 |
|
$ |
171,782 |
|
|
$ |
(57,741 |
) |
|
$ |
114,041 |
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Noncompete agreements |
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5.0 |
|
|
14,500 |
|
|
|
(9,127 |
) |
|
|
5,373 |
|
Favorable leases |
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7.5 |
|
|
2,935 |
|
|
|
(1,256 |
) |
|
|
1,679 |
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Order backlog |
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0.4 |
|
|
3,400 |
|
|
|
(3,400 |
) |
|
|
— |
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Reacquired franchise rights |
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5.8 |
|
|
8,950 |
|
|
|
(2,724 |
) |
|
|
6,226 |
|
|
|
|
|
|
201,567 |
|
|
|
(74,248 |
) |
|
|
127,319 |
|
Indefinite-lived intangible: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and brand names |
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N/A |
|
|
146,300 |
|
|
|
— |
|
|
|
146,300 |
|
Total intangible assets |
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|
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$ |
347,867 |
|
|
$ |
(74,248 |
) |
|
$ |
273,619 |
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Goodwill |
|
|
|
$ |
176,981 |
|
|
$ |
— |
|
|
$ |
176,981 |
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The Company determined that no impairment charges were required during any periods presented.
Amortization expense related to the intangible assets totaled $4,940 and $5,404 for the three months ended September 30, 2016 and 2015, respectively and $14,820 and $16,181 for the nine months ended September 30, 2016 and 2015, respectively. Included within these total amortization expense amounts are $97 and $143 related to amortization of favorable and unfavorable leases for the three months ended September 30, 2016 and 2015, respectively and $292 and $380 for the nine months ended September 30, 2016 and 2015. 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 September 30, 2016 is as follows:
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Amount |
|
|
Remainder of 2016 |
|
$ |
4,936 |
|
2017 |
|
|
18,215 |
|
2018 |
|
|
14,583 |
|
2019 |
|
|
14,215 |
|
2020 |
|
|
12,517 |
|
Thereafter |
|
|
48,033 |
|
Total |
|
$ |
112,499 |
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(5) Long-term debt
Long-term debt as of September 30, 2016 and December 31, 2015 consists of the following:
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September 30, 2016 |
|
|
December 31, 2015 |
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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 |
|
|
|
|
|
|
|
|
(4.50% at September 30, 2016 and 4.75% at December 31, 2015) |
|
$ |
488,450 |
|
|
$ |
492,275 |
|
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 |
|
|
|
|
|
|
|
|
(4.25% at September 30, 2016 and December 31, 2015) |
|
|
— |
|
|
|
— |
|
Total debt, excluding deferred financing costs |
|
$ |
488,450 |
|
|
|
492,275 |
|
Deferred financing costs, net of accumulated amortization |
|
|
(6,283 |
) |
|
|
(7,396 |
) |
Total debt |
|
|
482,167 |
|
|
|
484,879 |
|
Current portion of long-term debt and line of credit |
|
|
5,100 |
|
|
|
5,100 |
|
Long-term debt, net of current portion |
|
$ |
477,067 |
|
|
$ |
479,779 |
|
Future annual principal payments of long-term debt as of September 30, 2016 are as follows:
|
|
Amount |
|
|
Remainder of 2016 |
|
$ |
1,275 |
|
2017 |
|
|
5,100 |
|
2018 |
|
|
5,100 |
|
2019 |
|
|
5,100 |
|
2020 |
|
|
5,100 |
|
Thereafter |
|
|
466,775 |
|
Total |
|
$ |
488,450 |
|
|
(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 September 2014 and September 2015, the Company entered into a series of interest rate caps. As of September 30, 2016, the Company had interest rate cap agreements with notional amounts of $209,000 outstanding that were entered into in order to hedge LIBOR greater than 1.5%.
The interest rate cap balances of $134 and $1,147 were recorded within other assets in the condensed consolidated balance sheets as of September 30, 2016 and December 31, 2015, respectively. These amounts have been measured at fair value and are considered to be a Level 2 fair value measurement. The Company recorded a reduction to the value of its interest rate caps of $469, net of tax of $83, within other comprehensive loss during the nine months ended September 30, 2016.
As of September 30, 2016, 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.
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(7) Related party transactions
Amounts due from related parties consist of:
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
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Accounts receivable – related entities |
|
$ |
31 |
|
|
$ |
39 |
|
Accounts receivable – stockholders/members |
|
|
66 |
|
|
|
4,901 |
|
Due from related parties |
|
$ |
97 |
|
|
$ |
4,940 |
|
|
|
|
|
|
|
|
|
|
Accounts payable – related entities |
|
|
3,966 |
|
|
|
— |
|
Due to related parties |
|
$ |
3,966 |
|
|
$ |
— |
|
Amounts due from stockholders/members as of September 30, 2016 and December 31, 2015 relate to reimbursements for certain taxes owed or paid by the Company.
Activity with entities considered to be related parties is summarized below:
|
|
For the three months ended September 30, |
|
|
|
For the nine months ended September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
|
2016 |
|
|
2015 |
|
||||
Franchise revenue |
|
$ |
359 |
|
|
$ |
298 |
|
|
|
$ |
1,174 |
|
|
$ |
868 |
|
Equipment revenue |
|
|
3 |
|
|
|
425 |
|
|
|
|
770 |
|
|
|
1,108 |
|
Total revenue from related parties |
|
$ |
362 |
|
|
$ |
723 |
|
|
|
$ |
1,944 |
|
|
$ |
1,976 |
|
The Company paid management fees to TSG Consumer Partners, LLC (“TSG”) totaling $0 and $1,384 during the three months ended September 30, 2016 and 2015, respectively and $0 and $1,899 during the nine months ended September 30, 2016 and 2015. In connection with the IPO, the management agreement with TSG was terminated, and the Company paid TSG a $1,000 termination fee, which is included in the fees paid for the three and nine months ended September 30, 2015.
|
(8) Stockholder’s equity
The recapitalization transactions
We refer to the Merger, Reclassification and entry into the exchange agreement, each as described below, as the “recapitalization transactions.” The Merger was effected pursuant to a merger agreement by and among the Company and Planet Fitness Holdings, L.P. (a predecessor entity to the Company that held indirect interests in Pla-Fit Holdings, LLC) and the recapitalization transactions were effected pursuant to a recapitalization agreement by and among the Company, Pla-Fit Holdings, Continuing LLC Owners, and Direct TSG Investors.
Merger
Prior to the Merger, the Direct TSG Investors held interests in Planet Fitness Holdings, L.P., which was formed in October 2014 and had no material assets, liabilities or operations, other than as a holding company owning indirect interests in Pla-Fit Holdings. The Direct TSG Investors consist of investment funds affiliated with TSG. Pursuant to a merger agreement dated June 22, 2015, Planet Fitness Holdings, L.P. merged with and into the Company, and the interests in Planet Fitness Holdings, L.P. held by the Direct TSG Investors were converted into 26,106,930 shares of Class A common stock of the Company. We refer to this as the “Merger.” All shares of Class A common stock have both voting and economic rights in Planet Fitness, Inc.
The Merger was effected on August 5, 2015, prior to the time our Class A common stock was registered under the Exchange Act and prior to the completion of the IPO.
Reclassification
The equity interests of Pla-Fit Holdings, LLC previously consisted of three different classes of limited liability company units (Class M, Class T and Class O). Prior to the completion of the IPO, the limited liability company agreement of Pla-Fit Holdings was amended and restated to, among other things, modify its capital structure to create a single new class of units, the Holdings Units. We refer to this capital structure modification as the “Reclassification.”
The Direct TSG Investors’ indirect interest in Pla-Fit Holdings was held through Planet Fitness Holdings, L.P. As a result, following the Merger, the Direct TSG Investors’ indirect interests in Pla-Fit Holdings are held through the Company. Therefore, the Holdings Units received in the Reclassification were allocated to: (1) the Continuing LLC Owners based on their existing interests in Pla-Fit Holdings; and (2) the Company to the extent of the Direct TSG Investors’ indirect interest in Pla-Fit Holdings. The number of Holdings Units allocated to the Company in the Reclassification was equal to the number of shares of Class A common stock that the Direct TSG Investors received in the Merger (on a one-for-one basis).
The Reclassification was effected on August 5, 2015, prior to the time our Class A common stock was registered under the Exchange Act and prior to the completion of the IPO.
Following the Merger and the Reclassification, the Company issued to Continuing LLC Owners 72,602,810 shares of Class B common stock in addition to their Holdings Units, with each Continuing LLC Owner receiving one share of Class B common stock for each Holdings Unit held. The shares of Class B common stock have no rights to dividends or distributions, whether in cash or stock, but entitle the holder to one vote per share on matters presented to stockholders of the Company. The Holdings Units entitle the Continuing LLC Owners to participate pro rata in distributions made by Pla-Fit Holdings to its members, including the Continuing LLC Owners and the Company, but do not entitle the Continuing LLC Owners to any voting rights. The Continuing LLC Owners consist of investment funds affiliated with TSG and certain current and former employees and directors.
Pursuant to the LLC agreement that went into effect at the time of the Reclassification (“New LLC Agreement”), the Company was designated as the sole managing member of Pla-Fit Holdings. Accordingly, the Company has the right to determine when distributions will be made by Pla-Fit Holdings to its members, including the Company, and the amount of any such distributions (subject to the requirements with respect to the tax distributions described below). If the Company authorizes a distribution by Pla-Fit Holdings, the distribution will be made to the members of Pla-Fit Holdings, including the Company, pro rata in accordance with the percentages of their respective Holdings Units.
The holders of Holdings Units will incur U.S. federal, state and local income taxes on their allocable share of any taxable income of Pla-Fit Holdings (as calculated pursuant to the New LLC Agreement). Net profits and net losses of Pla-Fit Holdings will generally be allocated to its members pursuant to the New LLC Agreement pro rata in accordance with the percentages of their respective Holdings Units. The New LLC Agreement provides for cash distributions to the holders of Holdings Units for purposes of funding their tax obligations in respect of the income of Pla-Fit Holdings that is allocated to them, to the extent other distributions from Pla-Fit Holdings for the relevant year have been insufficient to cover such liability. Generally, these tax distributions are computed based on the estimated taxable income of Pla-Fit Holdings allocable to the holders of Holdings Units multiplied by an assumed, combined tax rate equal to the maximum rate applicable to an individual or corporation resident in San Francisco, California (taking into account the non-deductibility of certain expenses and the character of the Company’s income).
Exchange agreement
Following the Merger and the Reclassification, the Company and the Continuing LLC Owners entered into an exchange agreement under which 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. As a Continuing LLC Owner exchanges Holdings Units, along with a corresponding number of shares of Class B common stock, for shares of Class A common stock, the number of Holdings Units held by the Company will be correspondingly increased as it acquires the exchanged Holdings Units and cancels a corresponding number of shares of Class B common stock.
IPO transactions
In connection with the completion of the IPO on August 11, 2015, in order to facilitate the disposition of equity interests in Pla-Fit Holdings held by Continuing LLC Owners affiliated with TSG, the Company used the net proceeds received to purchase issued and outstanding Holdings Units from these Continuing LLC Owners that they received in the Reclassification. In connection with the IPO, the Company purchased 10,491,055 issued and outstanding Holdings Units from these Continuing LLC Owners for an aggregate of $156,946. This is in addition to the 26,106,930 Holdings Units that the Company acquired in the Reclassification on a one-for-one basis in relation to the number of shares of Class A common stock issued to the Direct TSG Investors in the Merger. Accordingly, following the IPO, the Company held 36,597,985 Holdings Units, which was equal to the number of shares of Class A common stock that were issued to the Direct TSG Investors and investors in the IPO. The Direct TSG Investors, who did not receive Holdings Units in the Reclassification but received shares of Class A common stock in the Merger, sold 5,033,945 shares of Class A common stock in the IPO.
June Secondary Offering
As described in Note 1, on June 28, 2016 the Company completed the June Secondary Offering of 11,500,000 shares of our Class A common stock at a price of $16.50 per share. All of the shares sold in the offering were offered by Direct TSG Investors and the participating Continuing LLC Owners. The Company did not receive any proceeds from the sale of shares of Class A common stock offered by the Direct TSG Investors and the participating Continuing LLC Owners. The shares sold in the offering consisted of (i) 3,608,840 existing shares of Class A common stock held by the Direct TSG Investors and (ii) 7,891,160 newly-issued shares of Class A common stock issued in connection with the exercise of the exchange right by the Continuing LLC Owners that participated in the June Secondary Offering. Simultaneously, and in connection with the exchange, 7,891,160 shares of Class B common stock were surrendered by the Continuing LLC Owners that participated in the June Secondary Offering and canceled. Additionally, in connection with the exchange, we received 7,891,160 Holdings Units, increasing Planet Fitness Inc.’s total ownership interest in Pla-Fit Holdings.
September Secondary Offering
As described in Note 1, on September 28, 2016, the Company completed the September Secondary Offering of 8,000,000 shares of our Class A common stock at a price of 19.62 per share. All of the shares sold in the offering were offered by the Direct TSG Investors and participating Continuing LLC Owners. The Company did not receive any proceeds from the sale of shares of Class A common stock offered by the Direct TSG Investors and the participating Continuing LLC Owners. The shares sold in the offering consisted of (i) 2,593,981 existing shares of Class A common stock held by the Direct TSG Investors and (ii) 5,406,019 newly-issued shares of Class A common stock issued in connection with the exercise of the exchange right by the Continuing LLC Owners that participated in the September Secondary Offering. Simultaneously, and in connection with the exchange, 5,406,019 shares of Class B common stock were surrendered by the Continuing LLC Owners that participated in the September Secondary Offering and canceled. Additionally, in connection with the exchange, Planet Fitness, Inc received 5,406,019 Holdings Units, increasing its total ownership interest in Pla-Fit Holdings. Future exchanges of Holdings Units by the Continuing LLC Owners will result in a change in ownership and reduce the amount recorded as non-controlling interest and increase additional paid-in capital on our consolidated balance sheets.
As a result of the recapitalization transactions, the offering transactions, the IPO, completion of our secondary offerings, and other exchanges and equity activity during the quarter:
|
• |
the investors in the IPO and the Company’s secondary offerings collectively own 35,043,641 shares of Planet Fitness, Inc. Class A common stock, representing 35.5% of the voting power in the Company and, through the Company, 35.5% of the economic interest in Pla-Fit Holdings; |
|
• |
the Direct TSG Investors own 14,870,164 shares of Planet Fitness, Inc. Class A common stock, representing 15.1% of the voting power in the Company and, through the Company, 15.1% of the economic interest in Pla-Fit Holdings; and |
|
• |
the Continuing LLC Owners collectively hold 48,665,585 Holdings Units, representing 49.4% of the economic interest in Pla-Fit Holdings and 48,665,585 shares of Planet Fitness, Inc. Class B common stock, representing 49.4% of the voting power in the Company. |
|
(10) Income taxes
As a result of the recapitalization transactions, the Company became the sole managing member of Pla-Fit Holdings, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Pla-Fit Holdings is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Pla-Fit Holdings is passed through to and included in the taxable income or loss of its members, including the Company following the recapitalization transactions, on a pro rata basis. Planet Fitness, Inc. is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to our allocable share of any taxable income of Pla-Fit Holdings following the recapitalization transactions. 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. The effective tax rate on such income was approximately 39.5%. The provision for income taxes also reflects an effective state tax rate of 2.1% applied to non-controlling interests, excluding income from variable interest entities, related to Pla-Fit Holdings.
Net deferred tax assets of $255,729 and $117,358 as of September 30, 2016 and December 31, 2015, respectively, relate primarily to the tax effects of temporary differences in the book basis as compared to the tax basis of Planet Fitness, Inc.’s investment in Pla-Fit Holdings as a result of the recapitalization transactions, IPO, and secondary offerings. The Company has net operating loss carryforwards related to its Canada operations of approximately $1,911, which begin to expire in 2034. It is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets. The net deferred tax liabilities of $1,275 as of September 30, 2016 and $0 as of December 31, 2015 relate primarily to the tax effects of temporary differences in the book basis as compared to the tax basis of certain assets of Pla-Fit Holdings.
As of September 30, 2016, the total liability related to uncertain tax positions is $300. The Company recognizes interest accrued and penalties, if applicable, related to unrecognized tax benefits in income tax expense. Interest and penalties for the nine months ended September 30, 2016 were not material.
Tax benefit arrangements
The Company’s acquisition of Holdings Units in connection with the IPO, secondary offerings and future and certain past exchanges of Holdings Units for shares of the Company’s Class A common stock (or cash at the option of the Company) are expected to produce and have produced favorable tax attributes. In connection with the IPO, the Company entered into two tax receivable agreements. Under the first of those agreements, the Company generally is required to pay to the Continuing LLC Owners 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 or exchanges of their Holdings Units for shares of Class A common stock and (ii) tax benefits attributable to payments made under the tax receivable agreement (including imputed interest). Under the second tax receivable agreement, the Company generally is required to pay to the Direct TSG Investors 85% of the amount of tax savings, if any, that the Company is deemed to realize as a result of the tax attributes of the Holdings Units held in respect of the Direct TSG Investors’ interest in the Company, which resulted from the Direct TSG Investors’ purchase of interests in Pla-Fit Holdings in 2012, and certain other tax benefits. Under both agreements, the Company generally retains the benefit of the remaining 15% of the applicable tax savings. Also, pursuant to the exchange agreement (see Note 8), to the extent an exchange results in Pla-Fit Holdings, LLC incurring a current tax liability relating to the New Hampshire business profits tax, the Continuing LLC Owners have agreed that they will contribute to Pla-Fit Holdings, LLC an amount sufficient to pay such tax liability (up to 3.5% of the value received upon exchange). If and when the Company subsequently realizes a related tax benefit, Pla-Fit Holdings, LLC will distribute the amount of any such tax benefit to the relevant Continuing LLC Owner in respect of its contribution. Due to changes in New Hampshire tax law, the Company no longer expects to incur any such liability under the New Hampshire business profits tax.
In June 2016, in connection with the June Secondary Offering, 7,891,160 Holdings Units were redeemed by the participating Continuing LLC Owners for newly-issued shares of Class A common stock, resulting in an increase in the tax basis of the net assets of Pla-Fit Holdings subject to the provisions of the tax receivable agreements. As a result of the change in Planet Fitness, Inc.’s ownership percentage of Pla-Fit Holdings that occurred in conjunction with the exchange, we recorded a decrease to our net deferred tax assets of $7,638 during the three months ended June 30, 2016. As a result of the exchange, we also recognized a deferred tax asset in the amount of $89,876 and a corresponding tax benefit arrangement liability of $78,152, representing 85% of the tax benefits due to the participating Continuing LLC Owners.
In September 2016, in connection with the September Secondary Offering, 5,406,019 Holdings Units were redeemed by the participating Continuing LLC Owners for newly-issued shares of Class A common stock, resulting in an increase in the tax basis of the net assets of Pla-Fit Holdings subject to the provisions of the tax receivable agreements. As a result of the change in Planet Fitness, Inc.’s ownership percentage of Pla-Fit Holdings that occurred in conjunction with the exchange, we recorded a decrease to our net deferred tax assets of $5,378 during the three months ended September 30, 2016. As a result of the exchange, we also recognized a deferred tax asset in the amount of $71,174 and a corresponding tax benefit arrangement liability of $61,735, representing 85% of the tax benefits due to the participating Continuing LLC Owners.
As of September 30, 2016, the Company has a liability of $274,072 related to its projected obligations under the tax benefit arrangements. Projected future payments under the tax benefit arrangements are as follows:
|
|
Amount |
|
|
Remainder of 2016 |
|
$ |
922 |
|
2017 |
|
|
10,658 |
|
2018 |
|
|
13,438 |
|
2019 |
|
|
13,569 |
|
2020 |
|
|
13,910 |
|
Thereafter |
|
|
221,575 |
|
Total |
|
$ |
274,072 |
|
|
(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.
|
(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 and nine months ended September 30, 2016 and 2015. The “Corporate and other” category, as it relates to Segment EBITDA, primarily includes corporate overhead costs, such as payroll and related benefit costs and professional services which are not directly attributable to any individual segment.
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise segment revenue - U.S. |
|
$ |
26,940 |
|
|
$ |
19,785 |
|
|
$ |
83,312 |
|
|
$ |
63,371 |
|
Franchise segment revenue - International |
|
|
285 |
|
|
|
9 |
|
|
|
1,068 |
|
|
|
59 |
|
Franchise segment total |
|
|
27,225 |
|
|
|
19,794 |
|
|
|
84,380 |
|
|
|
63,430 |
|
Corporate-owned stores - U.S. |
|
|
25,591 |
|
|
|
24,203 |
|
|
|
75,595 |
|
|
|
71,716 |
|
Corporate-owned stores - International |
|
|
1,084 |
|
|
|
950 |
|
|
|
3,161 |
|
|
|
1,958 |
|
Corporate-owned stores total |
|
|
26,675 |
|
|
|
25,153 |
|
|
|
78,756 |
|
|
|
73,674 |
|
Equipment segment - U.S. |
|
|
33,107 |
|
|
|
23,870 |
|
|
|
98,686 |
|
|
|
87,588 |
|
Equipment segment total |
|
|
33,107 |
|
|
|
23,870 |
|
|
|
98,686 |
|
|
|
87,588 |
|
Total revenue |
|
$ |
87,007 |
|
|
$ |
68,817 |
|
|
$ |
261,822 |
|
|
$ |
224,692 |
|
Franchise segment revenue includes franchise revenue and commission income.
Franchise revenue includes revenue generated from placement services of $2,224 and $1,623 for the three months ended September 30, 2016 and 2015, respectively and $6,952 and $5,895 for the nine months ended September 30, 2016 and 2015, respectively.
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Segment EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise |
|
$ |
22,814 |
|
|
$ |
15,496 |
|
|
$ |
71,308 |
|
|
$ |
46,778 |
|
Corporate-owned stores |
|
|
10,550 |
|
|
|
9,256 |
|
|
|
30,259 |
|
|
|
26,342 |
|
Equipment |
|
|
7,153 |
|
|
|
4,910 |
|
|
|
21,330 |
|
|
|
18,914 |
|
Corporate and other |
|
|
(6,823 |
) |
|
|
(13,162 |
) |
|
|
(20,147 |
) |
|
|
(27,191 |
) |
Total Segment EBITDA |
|
$ |
33,694 |
|
|
$ |
16,500 |
|
|
$ |
102,750 |
|
|
$ |
64,843 |
|
The following table reconciles total Segment EBITDA to income before income taxes:
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Total Segment EBITDA |
|
$ |
33,694 |
|
|
$ |
16,500 |
|
|
$ |
102,750 |
|
|
$ |
64,843 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
7,745 |
|
|
|
7,976 |
|
|
|
23,127 |
|
|
|
24,160 |
|
Other (expense) income |
|
|
(204 |
) |
|
|
(1,815 |
) |
|
|
30 |
|
|
|
(2,627 |
) |
Income from operations |
|
|
26,153 |
|
|
|
10,339 |
|
|
|
79,593 |
|
|
|
43,310 |
|
Interest expense, net |
|
|
(6,291 |
) |
|
|
(6,556 |
) |
|
|
(18,819 |
) |
|
|
(17,872 |
) |
Other (expense) income |
|
|
(204 |
) |
|
|
(1,815 |
) |
|
|
30 |
|
|
|
(2,627 |
) |
Income before income taxes |
|
$ |
19,658 |
|
|
$ |
1,968 |
|
|
$ |
60,804 |
|
|
$ |
22,811 |
|
The following table summarizes the Company’s assets by reportable segment:
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||
Franchise |
|
$ |
204,137 |
|
|
$ |
206,997 |
|
Corporate-owned stores |
|
|
157,509 |
|
|
|
151,620 |
|
Equipment |
|
|
210,997 |
|
|
|
208,168 |
|
Unallocated |
|
|
279,695 |
|
|
|
132,392 |
|
Total consolidated assets |
|
$ |
852,338 |
|
|
$ |
699,177 |
|
The table above includes $2,940 and $3,149 of long-lived assets located in the Company’s corporate-owned stores in Canada as of September 30, 2016 and December 31, 2015, respectively. All other assets are located in the U.S.
The following table summarizes the Company’s goodwill by reportable segment:
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||
Franchise |
|
$ |
16,938 |
|
|
$ |
16,938 |
|
Corporate-owned stores |
|
|
67,377 |
|
|
|
67,377 |
|
Equipment |
|
|
92,666 |
|
|
|
92,666 |
|
Consolidated goodwill |
|
$ |
176,981 |
|
|
$ |
176,981 |
|
|
(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 September 30, 2016 and 2015:
|
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Franchisee-owned stores: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores operated at beginning of period |
|
|
1,148 |
|
|
|
956 |
|
|
|
1,066 |
|
|
|
863 |
|
New stores opened |
|
|
37 |
|
|
|
26 |
|
|
|
121 |
|
|
|
122 |
|
Stores debranded or consolidated(1) |
|
|
(1 |
) |
|
|
- |
|
|
|
(3 |
) |
|
|
(3 |
) |
Stores operated at end of period |
|
|
1,184 |
|
|
|
982 |
|
|
|
1,184 |
|
|
|
982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate-owned stores: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores operated at beginning of period |
|
|
58 |
|
|
|
58 |
|
|
|
58 |
|
|
|
55 |
|
New stores opened |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3 |
|
Stores operated at end of period |
|
|
58 |
|
|
|
58 |
|
|
|
58 |
|
|
|
58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stores: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores operated at beginning of period |
|
|
1,206 |
|
|
|
1,014 |
|
|
|
1,124 |
|
|
|
918 |
|
New stores opened |
|
|
37 |
|
|
|
26 |
|
|
|
121 |
|
|
|
125 |
|
Stores debranded or consolidated(1) |
|
|
(1 |
) |
|
|
- |
|
|
|
(3 |
) |
|
|
(3 |
) |
Stores operated at end of period |
|
|
1,242 |
|
|
|
1,040 |
|
|
|
1,242 |
|
|
|
1,040 |
|
(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. |
|
(a) Basis of presentation and consolidation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these interim financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented have been reflected. All significant intercompany balances and transactions have been eliminated in consolidation.
The condensed consolidated financial statements as of and for the three and nine months ended September 30, 2016 and 2015 are unaudited. The condensed consolidated balance sheet as of December 31, 2015 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, 2015 (the “Annual Report”) filed with the SEC on March 4, 2016. 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 and Pla-Fit Holdings is considered to be the predecessor to Planet Fitness, Inc. for accounting and reporting purposes. 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 September 30, 2016 and December 31, 2015:
|
|
|
|
|
|
Quoted |
|
|
Significant |
|
|
|
|
|
||
|
|
Total fair |
|
|
prices |
|
|
other |
|
|
Significant |
|
||||
|
|
value at |
|
|
in active |
|
|
observable |
|
|
unobservable |
|
||||
|
|
September 30, |
|
|
markets |
|
|
inputs |
|
|
inputs |
|
||||
|
|
2016 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
||||
Interest rate caps |
|
$ |
134 |
|
|
$ |
— |
|
|
$ |
134 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted |
|
|
Significant |
|
|
|
|
|
||
|
|
Total fair |
|
|
prices |
|
|
other |
|
|
Significant |
|
||||
|
|
value at |
|
|
in active |
|
|
observable |
|
|
unobservable |
|
||||
|
|
December 31, |
|
|
markets |
|
|
inputs |
|
|
inputs |
|
||||
|
|
2015 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
||||
Interest rate caps |
|
$ |
1,147 |
|
|
$ |
— |
|
|
$ |
1,147 |
|
|
$ |
— |
|
(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 fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 for public companies. In March 2016, the FASB issued ASU 2016-08, which further clarifies the implementation guidance on principal versus agent considerations contained in ASU 2014-09. This guidance is to be applied either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact the adoption of this guidance will have on its consolidated financial statements.
The FASB issued ASU No. 2015-02, Income Statement—Consolidation, in February 2015. This guidance affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, the guidance 1) modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities, 2) eliminates the presumption that a general partner should consolidate a limited partnership, 3) affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships, and 4) provides a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The guidance is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. The Company adopted ASU No. 2015-02 as of January 1, 2016, noting no material impact to the consolidated financial statements.
The FASB issued ASU No. 2015-05: Intangibles - Goodwill and Other - Internal-Use Software: Customer's Accounting for Fees Paid in a Cloud Computing Arrangement, in April 2015. The amendments in this update provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the update specifies that the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. The update further specifies that the customer should account for a cloud computing arrangement as a service contract if the arrangement does not include a software license. The guidance is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. The Company adopted ASU No. 2015-05 as of January 1, 2016 on a prospective basis, noting no material impact to the consolidated financial statements.
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 is currently evaluating the effect that implementation of this guidance will have on its consolidated financial statements.
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 is currently evaluating the effect of the standard on its 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 is currently evaluating the effect of the standard on its consolidated financial statements.
|
The table below presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2016 and December 31, 2015:
|
|
|
|
|
|
Quoted |
|
|
Significant |
|
|
|
|
|
||
|
|
Total fair |
|
|
prices |
|
|
other |
|
|
Significant |
|
||||
|
|
value at |
|
|
in active |
|
|
observable |
|
|
unobservable |
|
||||
|
|
September 30, |
|
|
markets |
|
|
inputs |
|
|
inputs |
|
||||
|
|
2016 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
||||
Interest rate caps |
|
$ |
134 |
|
|
$ |
— |
|
|
$ |
134 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted |
|
|
Significant |
|
|
|
|
|
||
|
|
Total fair |
|
|
prices |
|
|
other |
|
|
Significant |
|
||||
|
|
value at |
|
|
in active |
|
|
observable |
|
|
unobservable |
|
||||
|
|
December 31, |
|
|
markets |
|
|
inputs |
|
|
inputs |
|
||||
|
|
2015 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
||||
Interest rate caps |
|
$ |
1,147 |
|
|
$ |
— |
|
|
$ |
1,147 |
|
|
$ |
— |
|
|
The carrying values of VIEs included in the consolidated financial statements as of September 30, 2016 and December 31, 2015 are as follows:
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||||||||||
|
|
Assets |
|
|
Liabilities |
|
|
Assets |
|
|
Liabilities |
|
||||
PF Melville |
|
$ |
3,984 |
|
|
$ |
— |
|
|
$ |
3,728 |
|
|
$ |
— |
|
MMR |
|
|
3,105 |
|
|
|
— |
|
|
|
2,953 |
|
|
|
— |
|
Total |
|
$ |
7,089 |
|
|
$ |
— |
|
|
$ |
6,681 |
|
|
$ |
— |
|
|
A summary of goodwill and intangible assets at September 30, 2016 and December 31, 2015 is as follows:
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
average |
|
Gross |
|
|
|
|
|
|
|
|
|
|
|
|
amortization |
|
carrying |
|
|
Accumulated |
|
|
Net carrying |
|
|||
September 30, 2016 |
|
period (years) |
|
amount |
|
|
amortization |
|
|
Amount |
|
|||
Customer relationships |
|
11.1 |
|
$ |
171,782 |
|
|
|
(68,926 |
) |
|
$ |
102,856 |
|
Noncompete agreements |
|
5.0 |
|
|
14,500 |
|
|
|
(11,302 |
) |
|
|
3,198 |
|
Favorable leases |
|
7.5 |
|
|
2,935 |
|
|
|
(1,549 |
) |
|
|
1,386 |
|
Order backlog |
|
0.4 |
|
|
3,400 |
|
|
|
(3,400 |
) |
|
|
— |
|
Reacquired franchise rights |
|
5.8 |
|
|
8,950 |
|
|
|
(3,891 |
) |
|
|
5,059 |
|
|
|
|
|
|
201,567 |
|
|
|
(89,068 |
) |
|
|
112,499 |
|
Indefinite-lived intangible: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and brand names |
|
N/A |
|
|
146,300 |
|
|
|
— |
|
|
|
146,300 |
|
Total intangible assets |
|
|
|
$ |
347,867 |
|
|
$ |
(89,068 |
) |
|
$ |
258,799 |
|
Goodwill |
|
|
|
$ |
176,981 |
|
|
$ |
— |
|
|
$ |
176,981 |
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
average |
|
Gross |
|
|
|
|
|
|
|
|
|
|
|
|
amortization |
|
carrying |
|
|
Accumulated |
|
|
Net carrying |
|
|||
December 31, 2015 |
|
period (years) |
|
amount |
|
|
amortization |
|
|
Amount |
|
|||
Customer relationships |
|
11.1 |
|
$ |
171,782 |
|
|
$ |
(57,741 |
) |
|
$ |
114,041 |
|
Noncompete agreements |
|
5.0 |
|
|
14,500 |
|
|
|
(9,127 |
) |
|
|
5,373 |
|
Favorable leases |
|
7.5 |
|
|
2,935 |
|
|
|
(1,256 |
) |
|
|
1,679 |
|
Order backlog |
|
0.4 |
|
|
3,400 |
|
|
|
(3,400 |
) |
|
|
— |
|
Reacquired franchise rights |
|
5.8 |
|
|
8,950 |
|
|
|
(2,724 |
) |
|
|
6,226 |
|
|
|
|
|
|
201,567 |
|
|
|
(74,248 |
) |
|
|
127,319 |
|
Indefinite-lived intangible: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and brand names |
|
N/A |
|
|
146,300 |
|
|
|
— |
|
|
|
146,300 |
|
Total intangible assets |
|
|
|
$ |
347,867 |
|
|
$ |
(74,248 |
) |
|
$ |
273,619 |
|
Goodwill |
|
|
|
$ |
176,981 |
|
|
$ |
— |
|
|
$ |
176,981 |
|
The anticipated annual amortization expense to be recognized in future years as of September 30, 2016 is as follows:
|
|
Amount |
|
|
Remainder of 2016 |
|
$ |
4,936 |
|
2017 |
|
|
18,215 |
|
2018 |
|
|
14,583 |
|
2019 |
|
|
14,215 |
|
2020 |
|
|
12,517 |
|
Thereafter |
|
|
48,033 |
|
Total |
|
$ |
112,499 |
|
|
Long-term debt as of September 30, 2016 and December 31, 2015 consists of the following:
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||
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 |
|
|
|
|
|
|
|
|
(4.50% at September 30, 2016 and 4.75% at December 31, 2015) |
|
$ |
488,450 |
|
|
$ |
492,275 |
|
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 |
|
|
|
|
|
|
|
|
(4.25% at September 30, 2016 and December 31, 2015) |
|
|
— |
|
|
|
— |
|
Total debt, excluding deferred financing costs |
|
$ |
488,450 |
|
|
|
492,275 |
|
Deferred financing costs, net of accumulated amortization |
|
|
(6,283 |
) |
|
|
(7,396 |
) |
Total debt |
|
|
482,167 |
|
|
|
484,879 |
|
Current portion of long-term debt and line of credit |
|
|
5,100 |
|
|
|
5,100 |
|
Long-term debt, net of current portion |
|
$ |
477,067 |
|
|
$ |
479,779 |
|
Future annual principal payments of long-term debt as of September 30, 2016 are as follows:
|
|
Amount |
|
|
Remainder of 2016 |
|
$ |
1,275 |
|
2017 |
|
|
5,100 |
|
2018 |
|
|
5,100 |
|
2019 |
|
|
5,100 |
|
2020 |
|
|
5,100 |
|
Thereafter |
|
|
466,775 |
|
Total |
|
$ |
488,450 |
|
|
Amounts due from related parties consist of:
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||
Accounts receivable – related entities |
|
$ |
31 |
|
|
$ |
39 |
|
Accounts receivable – stockholders/members |
|
|
66 |
|
|
|
4,901 |
|
Due from related parties |
|
$ |
97 |
|
|
$ |
4,940 |
|
|
|
|
|
|
|
|
|
|
Accounts payable – related entities |
|
|
3,966 |
|
|
|
— |
|
Due to related parties |
|
$ |
3,966 |
|
|
$ |
— |
|
Activity with entities considered to be related parties is summarized below:
|
|
For the three months ended September 30, |
|
|
|
For the nine months ended September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
|
2016 |
|
|
2015 |
|
||||
Franchise revenue |
|
$ |
359 |
|
|
$ |
298 |
|
|
|
$ |
1,174 |
|
|
$ |
868 |
|
Equipment revenue |
|
|
3 |
|
|
|
425 |
|
|
|
|
770 |
|
|
|
1,108 |
|
Total revenue from related parties |
|
$ |
362 |
|
|
$ |
723 |
|
|
|
$ |
1,944 |
|
|
$ |
1,976 |
|
|
Projected future payments under the tax benefit arrangements are as follows:
|
|
Amount |
|
|
Remainder of 2016 |
|
$ |
922 |
|
2017 |
|
|
10,658 |
|
2018 |
|
|
13,438 |
|
2019 |
|
|
13,569 |
|
2020 |
|
|
13,910 |
|
Thereafter |
|
|
221,575 |
|
Total |
|
$ |
274,072 |
|
|
The tables below summarize the financial information for the Company’s reportable segments for the three and nine months ended September 30, 2016 and 2015.
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise segment revenue - U.S. |
|
$ |
26,940 |
|
|
$ |
19,785 |
|
|
$ |
83,312 |
|
|
$ |
63,371 |
|
Franchise segment revenue - International |
|
|
285 |
|
|
|
9 |
|
|
|
1,068 |
|
|
|
59 |
|
Franchise segment total |
|
|
27,225 |
|
|
|
19,794 |
|
|
|
84,380 |
|
|
|
63,430 |
|
Corporate-owned stores - U.S. |
|
|
25,591 |
|
|
|
24,203 |
|
|
|
75,595 |
|
|
|
71,716 |
|
Corporate-owned stores - International |
|
|
1,084 |
|
|
|
950 |
|
|
|
3,161 |
|
|
|
1,958 |
|
Corporate-owned stores total |
|
|
26,675 |
|
|
|
25,153 |
|
|
|
78,756 |
|
|
|
73,674 |
|
Equipment segment - U.S. |
|
|
33,107 |
|
|
|
23,870 |
|
|
|
98,686 |
|
|
|
87,588 |
|
Equipment segment total |
|
|
33,107 |
|
|
|
23,870 |
|
|
|
98,686 |
|
|
|
87,588 |
|
Total revenue |
|
$ |
87,007 |
|
|
$ |
68,817 |
|
|
$ |
261,822 |
|
|
$ |
224,692 |
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Segment EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise |
|
$ |
22,814 |
|
|
$ |
15,496 |
|
|
$ |
71,308 |
|
|
$ |
46,778 |
|
Corporate-owned stores |
|
|
10,550 |
|
|
|
9,256 |
|
|
|
30,259 |
|
|
|
26,342 |
|
Equipment |
|
|
7,153 |
|
|
|
4,910 |
|
|
|
21,330 |
|
|
|
18,914 |
|
Corporate and other |
|
|
(6,823 |
) |
|
|
(13,162 |
) |
|
|
(20,147 |
) |
|
|
(27,191 |
) |
Total Segment EBITDA |
|
$ |
33,694 |
|
|
$ |
16,500 |
|
|
$ |
102,750 |
|
|
$ |
64,843 |
|
The following table reconciles total Segment EBITDA to income before income taxes:
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Total Segment EBITDA |
|
$ |
33,694 |
|
|
$ |
16,500 |
|
|
$ |
102,750 |
|
|
$ |
64,843 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
7,745 |
|
|
|
7,976 |
|
|
|
23,127 |
|
|
|
24,160 |
|
Other (expense) income |
|
|
(204 |
) |
|
|
(1,815 |
) |
|
|
30 |
|
|
|
(2,627 |
) |
Income from operations |
|
|
26,153 |
|
|
|
10,339 |
|
|
|
79,593 |
|
|
|
43,310 |
|
Interest expense, net |
|
|
(6,291 |
) |
|
|
(6,556 |
) |
|
|
(18,819 |
) |
|
|
(17,872 |
) |
Other (expense) income |
|
|
(204 |
) |
|
|
(1,815 |
) |
|
|
30 |
|
|
|
(2,627 |
) |
Income before income taxes |
|
$ |
19,658 |
|
|
$ |
1,968 |
|
|
$ |
60,804 |
|
|
$ |
22,811 |
|
The following table summarizes the Company’s assets by reportable segment:
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||
Franchise |
|
$ |
204,137 |
|
|
$ |
206,997 |
|
Corporate-owned stores |
|
|
157,509 |
|
|
|
151,620 |
|
Equipment |
|
|
210,997 |
|
|
|
208,168 |
|
Unallocated |
|
|
279,695 |
|
|
|
132,392 |
|
Total consolidated assets |
|
$ |
852,338 |
|
|
$ |
699,177 |
|
The following table summarizes the Company’s goodwill by reportable segment:
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||
Franchise |
|
$ |
16,938 |
|
|
$ |
16,938 |
|
Corporate-owned stores |
|
|
67,377 |
|
|
|
67,377 |
|
Equipment |
|
|
92,666 |
|
|
|
92,666 |
|
Consolidated goodwill |
|
$ |
176,981 |
|
|
$ |
176,981 |
|
|
The following table shows changes in our corporate-owned and franchisee-owned stores for the three months ended September 30, 2016 and 2015:
|
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Franchisee-owned stores: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores operated at beginning of period |
|
|
1,148 |
|
|
|
956 |
|
|
|
1,066 |
|
|
|
863 |
|
New stores opened |
|
|
37 |
|
|
|
26 |
|
|
|
121 |
|
|
|
122 |
|
Stores debranded or consolidated(1) |
|
|
(1 |
) |
|
|
- |
|
|
|
(3 |
) |
|
|
(3 |
) |
Stores operated at end of period |
|
|
1,184 |
|
|
|
982 |
|
|
|
1,184 |
|
|
|
982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate-owned stores: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores operated at beginning of period |
|
|
58 |
|
|
|
58 |
|
|
|
58 |
|
|
|
55 |
|
New stores opened |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3 |
|
Stores operated at end of period |
|
|
58 |
|
|
|
58 |
|
|
|
58 |
|
|
|
58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stores: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores operated at beginning of period |
|
|
1,206 |
|
|
|
1,014 |
|
|
|
1,124 |
|
|
|
918 |
|
New stores opened |
|
|
37 |
|
|
|
26 |
|
|
|
121 |
|
|
|
125 |
|
Stores debranded or consolidated(1) |
|
|
(1 |
) |
|
|
- |
|
|
|
(3 |
) |
|
|
(3 |
) |
Stores operated at end of period |
|
|
1,242 |
|
|
|
1,040 |
|
|
|
1,242 |
|
|
|
1,040 |
|
(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. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|