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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
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Delaware
|
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20-0640002
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(State or other Jurisdiction of
Incorporation or Organization)
|
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(I.R.S. Employer
Identification Number)
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Large accelerated filer
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¨
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Accelerated filer
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ý
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Non-accelerated filer
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¨
(Do not check if smaller reporting company)
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Smaller reporting company
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¨
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Page
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PART I. FINANCIAL INFORMATION
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||
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|
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Item 1.
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Financial Statements (Unaudited)
|
|
|
||
|
||
|
||
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|
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Item 2.
|
||
Item 3.
|
||
Item 4.
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||
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||
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Item 1.
|
||
Item 1A.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 5.
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||
Item 6.
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||
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September 30, 2015
|
|
December 31, 2014
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
88,286
|
|
|
$
|
93,452
|
|
Accounts receivable (less allowance for doubtful accounts of $2,814 and $2,511 as of September 30, 2015 and December 31, 2014, respectively)
|
2,428
|
|
|
3,656
|
|
||
Inventory
|
456
|
|
|
573
|
|
||
Deferred tax assets
|
533
|
|
|
724
|
|
||
Prepaid corporate income taxes
|
9,843
|
|
|
11,588
|
|
||
Prepaid expenses and other current assets
|
15,809
|
|
|
12,893
|
|
||
Total current assets
|
117,355
|
|
|
122,886
|
|
||
Fixed assets, net
|
206,255
|
|
|
233,644
|
|
||
Goodwill
|
1,055
|
|
|
32,593
|
|
||
Intangible assets, net
|
182
|
|
|
394
|
|
||
Deferred tax assets
|
217
|
|
|
—
|
|
||
Deferred membership costs
|
4,443
|
|
|
7,396
|
|
||
Other assets
|
12,454
|
|
|
12,920
|
|
||
Total assets
|
$
|
341,961
|
|
|
$
|
409,833
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Current portion of long-term debt
|
$
|
3,114
|
|
|
$
|
3,114
|
|
Accounts payable
|
5,422
|
|
|
2,873
|
|
||
Accrued expenses
|
28,927
|
|
|
26,702
|
|
||
Accrued interest
|
129
|
|
|
376
|
|
||
Dividends payable
|
173
|
|
|
291
|
|
||
Deferred revenue
|
43,657
|
|
|
36,950
|
|
||
Deferred tax liabilities
|
229
|
|
|
300
|
|
||
Total current liabilities
|
81,651
|
|
|
70,606
|
|
||
Long-term debt
|
295,394
|
|
|
296,757
|
|
||
Building financing arrangement
|
83,900
|
|
|
83,400
|
|
||
Dividends payable
|
123
|
|
|
211
|
|
||
Deferred lease liabilities
|
52,292
|
|
|
53,847
|
|
||
Deferred tax liabilities
|
577
|
|
|
11,999
|
|
||
Deferred revenue
|
1,571
|
|
|
2,455
|
|
||
Other liabilities
|
10,343
|
|
|
8,642
|
|
||
Total liabilities
|
525,851
|
|
|
527,917
|
|
||
Commitments and Contingencies (Note 12)
|
|
|
|
|
|
||
Stockholders’ deficit:
|
|
|
|
||||
Preferred stock, $0.001 par value; no shares issued and outstanding at both September 30, 2015 and December 31, 2014
|
|
|
|
|
|
||
Common stock, $0.001 par value; issued and outstanding 24,879,897 and 24,322,249 shares at September 30, 2015 and December 31, 2014, respectively
|
24
|
|
|
24
|
|
||
Additional paid-in capital
|
(8,586
|
)
|
|
(10,055
|
)
|
||
Accumulated other comprehensive (loss) income
|
(923
|
)
|
|
395
|
|
||
Accumulated deficit
|
(174,405
|
)
|
|
(108,448
|
)
|
||
Total stockholders’ deficit
|
(183,890
|
)
|
|
(118,084
|
)
|
||
Total liabilities and stockholders’ deficit
|
$
|
341,961
|
|
|
$
|
409,833
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
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2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Club operations
|
$
|
102,119
|
|
|
$
|
110,956
|
|
|
$
|
318,748
|
|
|
$
|
339,600
|
|
Fees and other
|
1,645
|
|
|
1,565
|
|
|
4,736
|
|
|
4,521
|
|
||||
|
103,764
|
|
|
112,521
|
|
|
323,484
|
|
|
344,121
|
|
||||
Operating Expenses:
|
|
|
|
|
|
|
|
||||||||
Payroll and related
|
42,889
|
|
|
43,994
|
|
|
135,886
|
|
|
133,329
|
|
||||
Club operating
|
49,280
|
|
|
46,664
|
|
|
151,386
|
|
|
144,877
|
|
||||
General and administrative
|
6,696
|
|
|
7,813
|
|
|
23,144
|
|
|
23,600
|
|
||||
Depreciation and amortization
|
12,190
|
|
|
11,638
|
|
|
36,042
|
|
|
35,289
|
|
||||
Impairment of fixed assets
|
12,420
|
|
|
—
|
|
|
14,571
|
|
|
4,513
|
|
||||
Impairment of goodwill
|
—
|
|
|
—
|
|
|
31,558
|
|
|
137
|
|
||||
|
123,475
|
|
|
110,109
|
|
|
392,587
|
|
|
341,745
|
|
||||
Operating (loss) income
|
(19,711
|
)
|
|
2,412
|
|
|
(69,103
|
)
|
|
2,376
|
|
||||
Interest expense
|
5,204
|
|
|
4,519
|
|
|
15,562
|
|
|
13,927
|
|
||||
Equity in the earnings of investees and rental income
|
(571
|
)
|
|
(580
|
)
|
|
(1,761
|
)
|
|
(1,820
|
)
|
||||
Loss before benefit for corporate income taxes
|
(24,344
|
)
|
|
(1,527
|
)
|
|
(82,904
|
)
|
|
(9,731
|
)
|
||||
Benefit for corporate income taxes
|
(2,338
|
)
|
|
(660
|
)
|
|
(17,066
|
)
|
|
(4,430
|
)
|
||||
Net loss
|
$
|
(22,006
|
)
|
|
$
|
(867
|
)
|
|
$
|
(65,838
|
)
|
|
$
|
(5,301
|
)
|
|
|
|
|
|
|
|
|
||||||||
Basic and diluted loss per share
|
$
|
(0.89
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(2.68
|
)
|
|
$
|
(0.22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average number of shares used in calculating loss per share
|
24,654,267
|
|
|
24,301,677
|
|
|
24,554,390
|
|
|
24,251,682
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dividends declared per common share
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.32
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Statements of Comprehensive Loss:
|
|
|
|
|
|
|
|
||||||||
Net loss
|
$
|
(22,006
|
)
|
|
$
|
(867
|
)
|
|
$
|
(65,838
|
)
|
|
$
|
(5,301
|
)
|
Other comprehensive (loss) income, net of tax:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments, net of tax of $0 for each of the three and nine months ended September 30, 2015 and 2014
|
(238
|
)
|
|
(364
|
)
|
|
(44
|
)
|
|
(253
|
)
|
||||
Interest rate swap, net of tax of $0 for each of the three and nine months ended September 30, 2015 and 2014, respectively, and ($333) and $193 for the comparable prior-year periods
|
(558
|
)
|
|
433
|
|
|
(1,274
|
)
|
|
(250
|
)
|
||||
Total other comprehensive (loss) income, net of tax
|
(796
|
)
|
|
69
|
|
|
(1,318
|
)
|
|
(503
|
)
|
||||
Total comprehensive loss
|
$
|
(22,802
|
)
|
|
$
|
(798
|
)
|
|
$
|
(67,156
|
)
|
|
$
|
(5,804
|
)
|
|
Nine Months Ended September 30,
|
||||||
|
2015
|
|
2014
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(65,838
|
)
|
|
$
|
(5,301
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
36,042
|
|
|
35,289
|
|
||
Impairment of fixed assets
|
14,571
|
|
|
4,513
|
|
||
Impairment of goodwill
|
31,558
|
|
|
137
|
|
||
Amortization of debt discount
|
972
|
|
|
978
|
|
||
Amortization of debt issuance costs
|
588
|
|
|
443
|
|
||
Amortization of building financing costs
|
95
|
|
|
—
|
|
||
Non-cash rental income, net of non-cash rental expense
|
(2,694
|
)
|
|
(4,913
|
)
|
||
Share-based compensation expense
|
1,187
|
|
|
1,563
|
|
||
Net change in deferred taxes
|
(11,519
|
)
|
|
(23,567
|
)
|
||
Net change in certain operating assets and liabilities
|
12,961
|
|
|
(10,172
|
)
|
||
Decrease in deferred membership costs
|
2,953
|
|
|
930
|
|
||
Landlord contributions to tenant improvements
|
296
|
|
|
1,302
|
|
||
Increase in insurance reserves
|
689
|
|
|
760
|
|
||
Other
|
340
|
|
|
(60
|
)
|
||
Total adjustments
|
88,039
|
|
|
7,203
|
|
||
Net cash provided by operating activities
|
22,201
|
|
|
1,902
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Capital expenditures
|
(24,073
|
)
|
|
(29,196
|
)
|
||
Change in restricted cash
|
(1,100
|
)
|
|
—
|
|
||
Net cash used in investing activities
|
(25,173
|
)
|
|
(29,196
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from building financing arrangement
|
500
|
|
|
83,400
|
|
||
Principal payments on 2013 Term Loan Facility
|
(2,335
|
)
|
|
(3,160
|
)
|
||
Debt issuance costs
|
(350
|
)
|
|
(2,437
|
)
|
||
Cash dividends paid
|
(82
|
)
|
|
(7,666
|
)
|
||
Redemption paid pursuant to the Rights Plan
|
(246
|
)
|
|
—
|
|
||
Proceeds from stock option exercises
|
282
|
|
|
47
|
|
||
Tax benefit from restricted stock vesting
|
—
|
|
|
1,692
|
|
||
Net cash (used in) provided by financing activities
|
(2,231
|
)
|
|
71,876
|
|
||
Effect of exchange rate changes on cash
|
37
|
|
|
(229
|
)
|
||
Net (decrease) increase in cash and cash equivalents
|
(5,166
|
)
|
|
44,353
|
|
||
Cash and cash equivalents beginning of period
|
93,452
|
|
|
73,598
|
|
||
Cash and cash equivalents end of period
|
$
|
88,286
|
|
|
$
|
117,951
|
|
Summary of the change in certain operating assets and liabilities:
|
|
|
|
||||
Decrease (increase) in accounts receivable
|
$
|
943
|
|
|
$
|
(44
|
)
|
Decrease (increase) in inventory
|
118
|
|
|
(90
|
)
|
||
Increase in prepaid expenses and other current assets
|
(781
|
)
|
|
(1,496
|
)
|
||
Increase (decrease) in accounts payable, accrued expenses and accrued interest
|
5,052
|
|
|
(4,612
|
)
|
||
Change in prepaid corporate income taxes and corporate income taxes payable
|
1,806
|
|
|
(6,166
|
)
|
||
Increase in deferred revenue
|
5,823
|
|
|
2,236
|
|
||
Net change in certain working capital components
|
$
|
12,961
|
|
|
$
|
(10,172
|
)
|
Supplemental disclosures of cash flow information:
|
|
|
|
||||
Cash payments for interest, net of capitalized interest
|
$
|
12,981
|
|
|
$
|
12,741
|
|
Cash payments for income taxes
|
$
|
88
|
|
|
$
|
23,552
|
|
|
September 30, 2015
|
|
December 31, 2014
|
||||
2013 Term Loan Facility outstanding principal balance
|
$
|
305,949
|
|
|
$
|
308,284
|
|
Less: Unamortized discount
|
(7,441
|
)
|
|
(8,413
|
)
|
||
Less: Current portion due within one year
|
(3,114
|
)
|
|
(3,114
|
)
|
||
Long-term portion
|
$
|
295,394
|
|
|
$
|
296,757
|
|
•
|
Level 1—Quoted prices for
identical
instruments in active markets.
|
•
|
Level 2—Quoted prices for
similar
instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
|
•
|
Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable
.
|
|
|
|
Fair Value Measurements Using:
|
||||||||||||
|
Total
Fair Value |
|
Quoted Prices in
Active Markets for Identical Assets (Level 1) |
|
Significant Other
Observable Inputs (Level 2) |
|
Significant
Unobservable Inputs (Level 3) |
||||||||
Interest rate swap liability as of September 30, 2015
|
$
|
2,568
|
|
|
$
|
—
|
|
|
$
|
2,568
|
|
|
$
|
—
|
|
Interest rate swap liability as of December 31, 2014
|
$
|
1,294
|
|
|
$
|
—
|
|
|
$
|
1,294
|
|
|
$
|
—
|
|
Grant Date
|
|
Risk-free Interest Rate
|
|
Expected Dividend Yield
|
|
Expected Term (Years)
|
|
Expected Volatility
|
|||
August 19, 2015
|
|
1.05
|
%
|
|
—
|
%
|
|
3.50
|
|
50.70
|
%
|
Grant Date
|
|
Number of Shares
|
|
Price Per Share
|
|
Aggregate Grant
Date Fair Value |
|||||
February 2, 2015
|
|
35,764
|
|
|
$
|
6.85
|
|
|
$
|
245
|
|
March 24, 2015
|
|
31,845
|
|
|
$
|
6.28
|
|
|
$
|
200
|
|
|
NYSC
|
|
BSC
|
|
SSC
|
|
Outlier
Clubs |
|
Total
|
||||||||||
Goodwill, net of accumulated amortization
|
$
|
31,549
|
|
|
$
|
9
|
|
|
$
|
1,035
|
|
|
$
|
137
|
|
|
$
|
32,730
|
|
Less: accumulated impairment of goodwill
|
—
|
|
|
—
|
|
|
—
|
|
|
(137
|
)
|
|
(137
|
)
|
|||||
Balance as of December 31, 2014
|
31,549
|
|
|
9
|
|
|
1,035
|
|
|
—
|
|
|
32,593
|
|
|||||
Changes due to foreign currency exchange rate fluctuations
|
—
|
|
|
—
|
|
|
20
|
|
|
—
|
|
|
20
|
|
|||||
Less: impairment of goodwill
|
(31,549
|
)
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
(31,558
|
)
|
|||||
Balance as of September 30, 2015
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,055
|
|
|
$
|
—
|
|
|
$
|
1,055
|
|
|
As of September 30, 2015
|
||||||||||
|
Gross Carrying
Amount |
|
Accumulated
Amortization |
|
Net Intangible
Assets |
||||||
Membership lists
|
$
|
11,344
|
|
|
$
|
(11,344
|
)
|
|
$
|
—
|
|
Management contracts
|
250
|
|
|
(102
|
)
|
|
148
|
|
|||
Trade names
|
40
|
|
|
(6
|
)
|
|
34
|
|
|||
|
$
|
11,634
|
|
|
$
|
(11,452
|
)
|
|
$
|
182
|
|
|
As of December 31, 2014
|
||||||||||
|
Gross Carrying Amount
|
|
Accumulated
Amortization |
|
Net Intangible
Assets |
||||||
Membership lists
|
$
|
11,344
|
|
|
$
|
(11,163
|
)
|
|
$
|
181
|
|
Management contracts
|
250
|
|
|
(73
|
)
|
|
177
|
|
|||
Trade names
|
40
|
|
|
(4
|
)
|
|
36
|
|
|||
|
$
|
11,634
|
|
|
$
|
(11,240
|
)
|
|
$
|
394
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Clubs
|
$
|
103,075
|
|
|
$
|
112,419
|
|
|
$
|
321,875
|
|
|
$
|
344,019
|
|
BFX Studio
|
689
|
|
|
102
|
|
|
1,609
|
|
|
102
|
|
||||
Total Revenues
|
$
|
103,764
|
|
|
$
|
112,521
|
|
|
$
|
323,484
|
|
|
$
|
344,121
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
EBITDA:
|
|
|
|
|
|
|
|
||||||||
Clubs
|
$
|
(6,094
|
)
|
|
$
|
15,690
|
|
|
$
|
(28,404
|
)
|
|
$
|
42,109
|
|
BFX Studio
|
(856
|
)
|
|
(1,060
|
)
|
|
(2,896
|
)
|
|
(2,624
|
)
|
||||
Total reportable segments
|
(6,950
|
)
|
|
14,630
|
|
|
(31,300
|
)
|
|
39,485
|
|
||||
Depreciation and amortization
|
12,190
|
|
|
11,638
|
|
|
36,042
|
|
|
35,289
|
|
||||
Interest expense
|
5,204
|
|
|
4,519
|
|
|
15,562
|
|
|
13,927
|
|
||||
Loss before benefit for corporate income taxes
|
$
|
(24,344
|
)
|
|
$
|
(1,527
|
)
|
|
$
|
(82,904
|
)
|
|
$
|
(9,731
|
)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Capital Expenditures:
|
|
|
|
|
|
|
|
||||||||
Clubs
|
$
|
5,468
|
|
|
$
|
11,594
|
|
|
$
|
17,267
|
|
|
$
|
25,536
|
|
BFX Studio
|
1,812
|
|
|
1,414
|
|
|
6,806
|
|
|
3,660
|
|
||||
Total Capital Expenditures
|
$
|
7,280
|
|
|
$
|
13,008
|
|
|
$
|
24,073
|
|
|
$
|
29,196
|
|
•
|
Membership revenue:
Our largest sources of revenue are dues inclusive of monthly membership fees, annual maintenance fees, initiation and processing fees paid by our members. In addition, we collect usage fees on a per visit basis for non-passport members using non-home clubs. These dues and fees comprised
76.0%
of our total revenue for the
nine months ended September 30, 2015
. We recognize revenue from membership dues in the month when the services are rendered. Approximately 98% of our members pay their monthly dues by Electronic Funds Transfer, or EFT, while the balance is paid annually in advance. We recognize revenue from initiation and processing fees over the estimated average membership life and annual fees over a twelve month period.
|
•
|
Ancillary club revenue:
For the
nine months ended September 30, 2015
, we generated
17.1%
of our revenue from personal training and
5.4%
of our revenue from other ancillary programs and services consisting of BFX Studio classes, programming for children, Small Group Training and other member activities, as well as sales of miscellaneous sports products. We continue to grow ancillary club revenue by building on ancillary programs such as our personal training membership product and our fee-based Small Group Training programs.
|
|
|
2014
|
|
2015
|
||||||||||||||||||||
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Full Year
|
|
Q1
|
|
Q2
|
|
Q3
|
|||||||||
Wholly owned clubs operated at beginning of period
|
|
160
|
|
|
160
|
|
|
161
|
|
|
156
|
|
|
160
|
|
|
156
|
|
|
156
|
|
|
152
|
|
New clubs opened
|
|
—
|
|
|
1
|
|
|
—
|
|
|
3
|
|
|
4
|
|
|
1
|
|
|
—
|
|
|
—
|
|
Clubs closed, relocated or merged
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
(3
|
)
|
|
(8
|
)
|
|
(1
|
)
|
|
(4
|
)
|
|
(1
|
)
|
Wholly owned clubs at end of period
|
|
160
|
|
|
161
|
|
|
156
|
|
|
156
|
|
|
156
|
|
|
156
|
|
|
152
|
|
|
151
|
|
Total clubs operated at end of period (1) (2)
|
|
162
|
|
|
163
|
|
|
158
|
|
|
158
|
|
|
158
|
|
|
158
|
|
|
154
|
|
|
153
|
|
(1)
|
Includes wholly-owned and partly-owned clubs. Not included in the total club count are locations that are managed by us in which we do not have an equity interest. These managed sites include three fitness clubs located in colleges and universities and eight managed sites.
|
(2)
|
Excludes
three
BFX Studio locations.
|
|
2014
|
|
2015
|
|||||||||||||||||
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Q1
|
|
Q2
|
|
Q3
|
||||||||
Comparable club revenue
|
(4.7
|
)%
|
|
(4.5
|
)%
|
|
(4.5
|
)%
|
|
(3.9
|
)%
|
|
(3.5
|
)%
|
|
(5.4
|
)%
|
|
(7.1
|
)%
|
|
Three Months Ended September 30,
|
|
|
|||||||||||||
|
2015
|
|
2014
|
|
|
|||||||||||
|
Revenue
|
|
% Revenue
|
|
Revenue
|
|
% Revenue
|
|
% Variance
|
|||||||
Membership dues
|
$
|
74,806
|
|
|
72.1
|
%
|
|
$
|
84,377
|
|
|
75.0
|
%
|
|
(11.3
|
)%
|
Initiation and processing fees
|
3,373
|
|
|
3.2
|
|
|
2,886
|
|
|
2.6
|
|
|
16.9
|
|
||
Membership revenue
|
78,179
|
|
|
75.3
|
|
|
87,263
|
|
|
77.6
|
|
|
(10.4
|
)
|
||
Personal training revenue
|
17,868
|
|
|
17.2
|
|
|
17,703
|
|
|
15.7
|
|
|
0.9
|
|
||
Other ancillary club revenue (1)
|
6,072
|
|
|
5.9
|
|
|
5,990
|
|
|
5.3
|
|
|
1.4
|
|
||
Ancillary club revenue
|
23,940
|
|
|
23.1
|
|
|
23,693
|
|
|
21.0
|
|
|
1.0
|
|
||
Fees and other revenue (2)
|
1,645
|
|
|
1.6
|
|
|
1,565
|
|
|
1.4
|
|
|
5.1
|
|
||
Total revenue
|
$
|
103,764
|
|
|
100.0
|
%
|
|
$
|
112,521
|
|
|
100.0
|
%
|
|
(7.8
|
)%
|
(1)
|
Other ancillary club revenue primarily consists of BFX Studio classes, Small Group Training, Sports Clubs for Kids, and racquet sports.
|
(2)
|
Fees and other revenue primarily consist of rental income, marketing revenue and management fees.
|
|
Three Months Ended September 30,
|
|
|
|||||||
|
2015
|
|
2014
|
|
% Variance
|
|||||
Payroll and related
|
$
|
42,889
|
|
|
$
|
43,994
|
|
|
(2.5
|
)%
|
Club operating
|
49,280
|
|
|
46,664
|
|
|
5.6
|
|
||
General and administrative
|
6,696
|
|
|
7,813
|
|
|
(14.3
|
)
|
||
Depreciation and amortization
|
12,190
|
|
|
11,638
|
|
|
4.7
|
|
||
Impairment of fixed assets
|
12,420
|
|
|
—
|
|
|
N/A
|
|
||
Total operating expenses
|
$
|
123,475
|
|
|
$
|
110,109
|
|
|
12.1
|
%
|
•
|
Rent and occupancy expenses increased $1.8 million in the three months ended September 30, 2015 compared to the same period last year principally due to the following:
|
◦
|
Mature clubs expenses increased $860,000 resulting from rent escalations.
|
◦
|
Expenses associated with newly opened and future clubs and BFX Studio locations increased $221,000.
|
◦
|
In the three months ended September 30, 2014, we recognized $2.9 million of gains related to the reversal of deferred rent in connection with leases terminated early which decreased rent and occupancy expenses in that period.
|
◦
|
Offsetting the above increases were savings of $1.5 million for closed clubs.
|
◦
|
Lease termination penalties decreased $641,000.
|
•
|
Electric utilities expense increased
$694,000
in the
three months ended September 30, 2015
compared to the same prior-year period primarily as a result of rate increases, as well as the warmer weather and therefore higher electricity consumption.
|
|
Nine Months Ended September 30,
|
|
|
|||||||||||||
|
2015
|
|
2014
|
|
|
|||||||||||
|
Revenue
|
|
% Revenue
|
|
Revenue
|
|
% Revenue
|
|
% Variance
|
|||||||
Membership dues
|
$
|
235,185
|
|
|
72.7
|
%
|
|
$
|
260,571
|
|
|
75.7
|
%
|
|
(9.7
|
)%
|
Initiation and processing fees
|
10,650
|
|
|
3.3
|
|
|
9,080
|
|
|
2.7
|
|
|
17.3
|
|
||
Membership revenue
|
245,835
|
|
|
76.0
|
|
|
269,651
|
|
|
78.4
|
|
|
(8.8
|
)
|
||
Personal training revenue
|
55,527
|
|
|
17.1
|
|
|
52,857
|
|
|
15.3
|
|
|
5.1
|
|
||
Other ancillary club revenue (1)
|
17,386
|
|
|
5.4
|
|
|
17,092
|
|
|
5.0
|
|
|
1.7
|
|
||
Ancillary club revenue
|
72,913
|
|
|
22.5
|
|
|
69,949
|
|
|
20.3
|
|
|
4.2
|
|
||
Fees and other revenue (2)
|
4,736
|
|
|
1.5
|
|
|
4,521
|
|
|
1.3
|
|
|
4.8
|
|
||
Total revenue
|
$
|
323,484
|
|
|
100.0
|
%
|
|
$
|
344,121
|
|
|
100.0
|
%
|
|
(6.0
|
)%
|
(1)
|
Other ancillary club revenue primarily consists of BFX Studio classes, Small Group Training, Sports Clubs for Kids, and racquet sports.
|
(2)
|
Fees and other revenue primarily consist of rental income, marketing revenue and management fees.
|
|
Nine Months Ended September 30,
|
|
|
|||||||
|
2015
|
|
2014
|
|
% Variance
|
|||||
Payroll and related
|
$
|
135,886
|
|
|
$
|
133,329
|
|
|
1.9
|
%
|
Club operating
|
151,386
|
|
|
144,877
|
|
|
4.5
|
|
||
General and administrative
|
23,144
|
|
|
23,600
|
|
|
(1.9
|
)
|
||
Depreciation and amortization
|
36,042
|
|
|
35,289
|
|
|
2.1
|
|
||
Impairment of fixed assets
|
14,571
|
|
|
4,513
|
|
|
>100%
|
|
||
Impairment of goodwill
|
31,558
|
|
|
137
|
|
|
>100%
|
|
||
Total operating expenses
|
$
|
392,587
|
|
|
$
|
341,745
|
|
|
14.9
|
%
|
•
|
Marketing expenses increased $5.0 million in the nine months ended September 30, 2015 compared to the same period in the prior year principally due to increased advertising spend associated with the new pricing model.
|
•
|
Rent and occupancy expenses increased $2.6 million in the nine months ended September 30, 2015 compared to the same period last year principally due to the following:
|
◦
|
Mature clubs expenses increased $2.5 million resulting from rent escalations.
|
◦
|
Expenses associated with newly opened and future clubs and BFX Studio locations had increased $868,000.
|
◦
|
In the nine months ended September 30, 2014, we recognized $2.9 million of gains related to the reversal of deferred rent in connection with leases terminated early which decreased rent and occupancy expenses in that period.
|
◦
|
Lease termination penalties increased $230,000.
|
◦
|
Offsetting the above increases were savings of $3.6 million for closed clubs.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Revenues
|
$
|
103,075
|
|
|
$
|
112,419
|
|
|
$
|
321,875
|
|
|
$
|
344,019
|
|
EBITDA
|
$
|
(6,094
|
)
|
|
$
|
15,690
|
|
|
$
|
(28,404
|
)
|
|
$
|
42,109
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Revenues
|
$
|
689
|
|
|
$
|
102
|
|
|
$
|
1,609
|
|
|
$
|
102
|
|
EBITDA
|
$
|
(856
|
)
|
|
$
|
(1,060
|
)
|
|
$
|
(2,896
|
)
|
|
$
|
(2,624
|
)
|
•
|
making it more difficult to satisfy our obligations, including with respect to our outstanding indebtedness;
|
•
|
increasing our vulnerability to general adverse economic and industry conditions;
|
•
|
limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions of new clubs and other general corporate requirements;
|
•
|
requiring a substantial portion of our cash flow from operations for the payment of interest on our debt, which is variable on our 2013 Revolving Loan Facility and partially variable on our 2013 Term Loan Facility, and/or principal pursuant to excess cash flow requirements and reducing our ability to use our cash flow to fund working capital, capital expenditures and acquisitions of new clubs and general corporate requirements;
|
•
|
increasing our vulnerability to interest rate fluctuations in connection with borrowings under our 2013 Senior Credit Facility, some of which are at variable interest rates;
|
•
|
limiting our ability to refinance our existing indebtedness on favorable terms, or at all; and
|
•
|
limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate.
|
|
Payments Due by Period (in thousands)
|
||||||||||||||||||
|
|
|
Less than
|
|
|
|
|
|
More than
|
||||||||||
Contractual Obligations (4)
|
Total
|
|
1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
5 Years
|
||||||||||
Long-term debt (1)
|
$
|
305,949
|
|
|
$
|
3,114
|
|
|
$
|
6,228
|
|
|
$
|
6,228
|
|
|
$
|
290,379
|
|
Interest payments on long-term debt (2)
|
73,281
|
|
|
15,333
|
|
|
29,462
|
|
|
26,816
|
|
|
1,670
|
|
|||||
Operating lease obligations (3)
|
602,754
|
|
|
90,057
|
|
|
161,824
|
|
|
133,365
|
|
|
217,508
|
|
|||||
Total contractual obligations
|
$
|
981,984
|
|
|
$
|
108,504
|
|
|
$
|
197,514
|
|
|
$
|
166,409
|
|
|
$
|
509,557
|
|
(1)
|
Principal amounts paid each year may increase if annual excess cash flow amounts are required (as described above). Excess cash flow was calculated as of December 31, 2014 and no payments are currently required in 2015 or any future period.
|
(2)
|
Based on interest rates pursuant to the 2013 Term Loan Facility and the interest swap agreement as of
September 30, 2015
.
|
(3)
|
Operating lease obligations include base rent only. Certain leases provide for additional rent based on real estate taxes, common area maintenance and defined amounts based on our operating results. Amounts include obligations under the Initial Lease related to the Building financing arrangement and does not include any amounts relating to the New Club Lease. See “Building Financing Arrangement.”
|
(4)
|
The table above does not reflect payments related to planned club closures and executive separation obligations to our former Executive Chairman, our former Chief Executive Officer and our former Chief Information Officer. Refer to Note
14
- Separation Obligation to our condensed consolidated financial statements.
|
|
|
|
|
TOWN SPORTS INTERNATIONAL
HOLDINGS, INC.
|
|
|
|
|
|
DATE:
|
November 2, 2015
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Carolyn Spatafora
|
|
|
|
|
Carolyn Spatafora
|
|
|
|
|
Chief Financial Officer
|
Exhibit
No.
|
|
Description of Exhibit
|
|
|
|
3.1
|
|
Amended and Restated Certificate of Incorporation of Town Sports International Holdings, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006).
|
|
|
|
3.2
|
|
Third Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K, filed on September 17, 2014).
|
|
|
|
3.3
|
|
Certificate of Designations of Series A Junior Participating Preferred Stock of Town Sports International Holdings, Inc. filed with the Secretary of State of the State of Delaware on January 2, 2015 (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K, dated January 2, 2015).
|
|
|
|
4.1
|
|
Rights Agreement, dated as of December 31, 2014, between Registrant and Computershare Trust Company N.A., as Rights Agent (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K, dated January 2, 2015).
|
|
|
|
10.1
|
|
Letter Agreement with Gregory Bartoli, dated August 17, 2015 (incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed August 18, 2015).
|
|
|
|
10.2
|
|
Form of Indemnification Agreement for Directors.
|
|
|
|
10.3
|
|
Form of Non-Qualified Stock Option Agreement for Gregory Bartoli pursuant to the 2006 Incentive Plan, as amended.
|
|
|
|
10.4
|
|
Form of Restricted Stock Agreement for Gregory Bartoli.
|
|
|
|
10.5
|
|
Form of Non-Qualified Stock Option Agreement for Gregory Bartoli.
|
|
|
|
31.1
|
|
Certification of Executive Chairman pursuant to Rule 13a – 14(a) and Rule 15d – 14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a – 14(a) and Rule 15d – 14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1
|
|
Certification of Executive Chairman pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
Vesting Date
|
Percentage of Option Shares Vested
|
First Anniversary of Grant Date
|
33-1/3%
|
Second Anniversary of Grant Date
|
66-2/3%
|
Third Anniversary of Grant Date
|
100%
|
1.
|
Grant of Shares
. Subject to the restrictions, terms and conditions of this Agreement, the Company awarded the Holder 300,000 shares of validly issued Common Stock (the “
Shares
”) on August 19, 2015 (the “
Grant Date
”). Pursuant to
Section 2
hereof, the Shares are subject to certain restrictions, which restrictions relate to the passage of time as an employee of the Company or its Affiliates. While such restrictions are in effect (such period, being the “
Restriction Period
”), the Shares subject to such restrictions shall be referred to herein as “
Restricted Stock
.”
|
2.
|
Restrictions on Transfer
. The Holder shall not sell, transfer, pledge, hypothecate, assign or otherwise dispose of the Shares, except as set forth in this Agreement. Any attempted sale, transfer, pledge, hypothecation, assignment or other disposition of the Shares in violation of this Agreement shall be void and of no effect and the Company shall have the right to disregard the same on its books and records and to issue “stop transfer” instructions to its transfer agent.
|
3.
|
Restricted Stock
.
|
(a)
|
Retention of Certificates
. Promptly after the date of this Agreement, the Company shall issue stock certificates representing the Restricted Stock unless, to the extent permitted under applicable law, it elects to issue the Shares in the form of uncertificated shares and recognize such ownership through an uncertificated book entry account maintained by the Company (or its designee) on behalf of the Holder or through another similar method. The stock certificates shall be registered in the Holder’s name and shall bear any legend required under
Section 4(a)
hereof Unless held in uncertificated book entry form, such stock certificates shall be held in custody by the Company (or its designated agent) until the restrictions thereon shall have lapsed. Upon the Company’s request, the Holder shall deliver to the Company a duly signed stock power, endorsed in blank, relating to the Restricted Stock. If the Holder receives a stock dividend on the Restricted Stock or the shares of Restricted Stock are split or the Holder receives any other shares, securities, moneys or property representing a dividend on the Restricted Stock (other than cash dividends on or after the date of this Agreement) or representing a distribution or return of capital upon or in respect of the Restricted Stock or any part thereof, or resulting from a split-up, reclassification or other like changes of the Restricted Stock, or otherwise received in exchange therefor, or any warrants, rights or options issued to the Holder in respect of the Restricted Stock (collectively “
RS Property
”), the Holder will also immediately deposit with and deliver to the Company any of such RS Property, including, without limitation, any certificates representing shares duly endorsed in blank or accompanied by stock powers duly executed in blank, and such RS Property shall be subject to the same restrictions, including, without limitation, the restrictions in Section 2 and this
Section 3(a)
hereof, as the Restricted Stock with regard to which they are issued and shall herein be encompassed within the term “
Restricted Stock
.”
|
(b)
|
Rights with Regard to Restricted Stock
. Subject to
Section 8
, the Holder will have the right to vote the Restricted Stock, and to receive, subject to the Committee’s determination (in its sole discretion), any dividends payable to holders of record of Restricted Stock on and after the transfer of the Restricted Stock (although such dividends shall be treated, to the extent required by applicable law, as additional compensation for tax purposes if paid on Restricted Stock and stock dividends will be subject to the restrictions provided in Section 2 and
Section 3(a)
), and to exercise all other rights, powers and privileges of a holder of Common Stock with respect to the Restricted Stock set forth in herein, except that: (i) the Holder shall not be entitled to delivery of the stock certificate or certificates representing the Restricted Stock until the Restriction Period shall have expired; (ii) the Company (or its designated agent) shall retain custody of the stock certificate or certificates representing the Restricted Stock and the other RS Property during the Restriction Period; (iii) no RS Property shall bear interest or be segregated in separate accounts during the Restriction Period; and (iv) the Holder shall not sell, assign, transfer, pledge, exchange, encumber or dispose of the Restricted Stock during the Restriction Period.
|
(c)
|
Vesting
. The Restricted Stock shall become vested and cease to be Restricted Stock (but shall remain subject to
Section 5
) pursuant to the following schedule; provided that, except to the extent provided in Sections 6(c) and 7 of the Letter Agreement in the event of a Termination of Employment without Cause by the Company or by the Holder for Good Reason (as defined in the Letter Agreement), the Holder has not had a Termination any time prior to the applicable vesting date:
|
Vesting Date
|
Number of Shares
|
First Anniversary of Grant Date
|
100,000
|
Second Anniversary of Grant Date
|
100,000
|
Third Anniversary of Grant Date
|
100,000
|
(d)
|
Forfeiture
. The Holder shall forfeit to the Company, without compensation, other than repayment of any par value paid by the Holder for the Shares (if any), any and all Restricted Stock (but no vested Shares) and RS Property upon the Holder’s Termination of Employment for any reason, provided that such forfeiture shall not apply to that portion of the Shares that vest in accordance with Section 7(c) of the Letter Agreement in the event of a Termination of Employment by the Company without Cause or by the Holder for Good Reason.
|
(e)
|
Withholding
. Holder shall pay, or make arrangements to pay, in a manner satisfactory to the Company, an amount equal to the amount of all applicable federal, state and local or foreign taxes that the Company is required to withhold at any time. In the absence of such arrangements, the Company or one of its Affiliates shall have the right to withhold such taxes from the Holder’s normal pay or other amounts payable to the Holder, including, but not limited to, the right to withhold any of the Shares otherwise deliverable to the Holder hereunder. In addition, any statutorily required withholding obligation may be satisfied, in whole or in part, at the Holder’s election, in the form and manner prescribed by the Committee, by delivery of shares of Common Stock (including, without limitation, the Shares issued under this Agreement).
|
(f)
|
Section 83(b)
. If the Holder properly elects (as required by Section 83(b) of the Code) within 30 days after the issuance of the Restricted Stock to include in gross income for federal income tax purposes in the year of issuance the fair market value of such shares of Restricted Stock, the Holder shall pay to the Company or make arrangements satisfactory to the Company to pay to the Company upon such election, any federal, state or local taxes required to be withheld with respect to the Restricted Stock. If the Holder shall fail to make such payment, the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to the Holder any federal, state or local taxes of any kind required by law to be withheld with respect to the Restricted Stock, as well as the rights set forth in
Section 3(e)
. The Holder acknowledges that it is the Holder’s sole responsibility, and not the Company’s, to file timely and properly the election under Section 83(b) of the Code and any corresponding provisions of state tax laws if the Holder elects to utilize such election.
|
(g)
|
Delivery Delay
. The delivery of any certificate representing the Restricted Stock or other RS Property may be postponed by the Company for such period as may be required for it to comply with any applicable federal or state securities law, or any national securities exchange listing requirements and the Company is not obligated to issue or deliver any securities if, in the opinion of counsel for the Company, the issuance of the Shares shall constitute a violation by the Holder or the Company of any provisions of any applicable federal or state law or of any regulations of any governmental authority or any national securities exchange.
|
4.
|
Legend
.
|
(b)
|
Notwithstanding the foregoing, in no event shall the Company be obligated to deliver to the Holder a certificate representing the Restricted Stock prior to the vesting dates set forth above.
|
5.
|
Securities Representations
. The Holder acknowledges that the Shares are not being registered under the Securities Act, based, in part in reliance upon an exemption from registration under the Securities Act, and a comparable exemption from qualification or registration under applicable state securities laws, as each may be amended from time to time. Holder, and by executing this Agreement, hereby makes the following representations to the Company and acknowledges that the Company’s reliance on federal and state securities law exemptions from registration and qualification is predicated, in substantial part upon the accuracy of these representations:
|
(a)
|
The Holder is acquiring the Shares solely for Holder’s own account, for investment purposes only, and not with a view to or an intent to sell, or to offer for resale in connection with any unregistered distribution, all or any portion of the units within the meaning of the Securities Act and/or any applicable state securities laws.
|
(b)
|
In evaluating the merits and risks of an investment in the Shares, the Holder has and will rely upon the advice of the Holder’s own legal counsel, tax advisors, and/or investment advisors.
|
(c)
|
The Holder understands that the Shares will be characterized as “restricted securities” under the federal securities laws, and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances, including in accordance with the conditions of Rule 144 promulgated under the Securities Act, as presently in effect, with which the Holder is familiar. The Company will use commercially reasonable efforts to file are-offer prospectus.
|
(d)
|
The Holder has read and understands the restrictions and limitations set forth in this Agreement.
|
(e)
|
The Holder is an “accredited investor” as defined in the Securities Act.
|
(f)
|
The Holder acknowledges that he will be subject to the Company’s employee trading policy.
|
6.
|
No Obligation to Continue Employment
. This Agreement is not an agreement of employment. This Agreement does not guarantee that the Company or its Affiliates will employ or retain, or continue to employ or retain, the Holder during the entire, or any portion of the, term of this Agreement, including, but not limited to, any period during which the Restricted Stock is outstanding, nor does it modify in any respect the Company’s or its Affiliate’s right to terminate or modify the Holder’s employment or compensation.
|
7.
|
Power of Attorney
. The Company, its successors and assigns are hereby appointed the attorneys-in-fact, with full power of substitution, of the Holder for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instruments which such attorneys-in-fact may deem necessary or advisable to accomplish the purposes of this Agreement, which appointment as attorneys-in-fact is irrevocable and coupled with an interest. The Company, as attorney-in-fact for the Holder, may in the name and stead of the Holder, make and execute all conveyances, assignments and transfers of the Shares and property provided for in this Agreement, and the Holder hereby ratifies and confirms all that the Company, as said attorney-in-fact, shall do by virtue hereof. Nevertheless, the Holder shall, if so requested by the Company, execute and deliver to the Company all such instruments as may, in the judgment of the Company, be advisable for such purpose.
|
8.
|
Rights as a Stockholder
. The Holder shall have no rights as a stockholder with respect to any Restricted Stock unless and until the Holder has become the holder of record of the Shares, whether the Shares are represented by a certificate or through book entry or another similar method, and no adjustments shall be made for dividends in cash or other property, distributions or other rights in respect of any Shares, except as otherwise specifically provided for in Section 8.3(b) of the Plan (which is incorporated herein by reference) or this Agreement.
|
9.
|
Entire Agreement
. This Agreement (together with the provisions of the Letter Agreement and the Plan incorporated herein by reference) contains the entire understanding of the parties with respect to the subject matter hereof and supersedes any prior agreements between the Company and the Holder with respect to the subject matter hereof. Notwithstanding the foregoing, to the extent the Plan is not inconsistent with the terms of this Agreement, the terms of the Plan shall equally apply to the Restricted Stock and are incorporated herein.
|
10.
|
Section 409A
. To the extent applicable, the Board or the Committee may at any time and from time to time amend, in whole or in part, any or all of the provisions of this Agreement to comply with Section 409A of the Code and the regulations thereunder or any other applicable law and may also amend, suspend or terminate this Agreement subject to the terms of the Plan. The award of Restricted Stock pursuant to this Agreement is not intended to be considered “deferred compensation” for the purposes of Section 409A of the Code.
|
11.
|
Changes in Capital Structure; Restrictions On New Shares
. In the event of the occurrence of any transaction or event described in Section 4 of the Plan, this award of Restricted Stock shall be treated in the same manner as the outstanding awards made under the Plan. For the avoidance of doubt, in the event that the Holder receives any new or additional or different shares or securities by reason of any transaction or event described in Section 4.2 of the Plan, such new or additional or different shares or securities which are attributable to the Holder in his capacity as the registered owner of the Restricted Stock then subject to restrictions, shall be considered to be Restricted Stock and shall be subject to all of the restrictions, unless the Committee provides for the removal or lapse of the restrictions on the shares of Restricted Stock underlying the distribution of the new or additional shares or securities. In addition, the Committee may, in its discretion, take the actions that are described in Section 12.1 of the Plan (which is incorporated by reference herein).
|
12.
|
No Restriction on Right of Company to Effect Corporate Changes
. This Agreement shall not affect in any way the right or power of the Company, the Board or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the capital structure or business of the Company, any merger or consolidation of the Company or any Affiliate, or any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Stock or the rights thereof or which are convertible into or exchangeable for Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of the assets or business of the Company, or any other corporate act or proceeding, whether of a similar character or otherwise as provided in Section 4.2(a) of the Plan.
|
13.
|
Restricted Stock Not Transferable
. No Restricted Stock or any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Holder or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect.
|
14.
|
Notices
. Any notice or communication given hereunder (each, a “
Notice
”) shall be in writing and shall be sent by personal delivery, by courier or by regular United States mail, first class and prepaid, to the appropriate party at the address set forth below:
|
15.
|
Acceptance
. The Holder shall forfeit the Restricted Stock if the Holder does not execute this Agreement within a period of 60 days from the date the Holder receives this Agreement (or such other period as the Committee shall provide).
|
16.
|
Restrictive Covenants
. The Company’s grant of the Restricted Stock is additional consideration for the restrictive covenants that the Holder has agreed to in the Letter Agreement and the Confidentiality and Non-Solicitation Agreement referred to therein.
|
17.
|
Waiver of Jury Trial
. Each of the parties hereto waives any right it may have to trial by jury in respect of any litigation based on, arising out of, under or in connection with this agreement or any course of conduct, course of dealing, verbal or written statement or action of any party hereto.
|
18.
|
Amendment
. This Agreement may be amended without Holder’s consent provided that such amendment would not impair any of his rights under this Agreement. No amendment of this Agreement shall, without Holder’s consent, impair any of his rights under this Agreement. The Committee’s interpretation of this Agreement and all decisions and determinations by the Committee with respect to this Agreement are final, binding and conclusive on all parties,
provided
,
that
, to the extent that any such interpretation, decision or determination applies equally to the participants in the Plan, the interpretation, decision or determination with respect to this grant of Restricted Stock will be consistent with that made for the Plan participants.
|
19.
|
Miscellaneous
.
|
(a)
|
This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, legal representatives, successors and assigns.
|
(b)
|
All questions concerning the construction, validity and interpretation of this Agreement will be governed by, and construed in accordance with, the domestic laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.
|
(c)
|
In the event of any dispute, controversy or claim between the Company or any Affiliate and the Holder in any way concerning, arising out of or relating to the Plan or this Agreement (a “
Dispute
”), including without limitation any Dispute concerning, arising out of or relating to the interpretation, application or enforcement of the Plan or this Agreement, the parties hereby (i) agree and consent to the personal jurisdiction of the courts of the State of New York located in New York County and/or the Federal courts of the United States of America located in the Southern District of New York (collectively, the “
Agreed Venue
”) for resolution of any such Dispute, (ii) agree that those courts in the Agreed Venue, and only those courts, shall have exclusive jurisdiction to determine any Dispute, including, without limitation, any appeal, and (iii) agree that any cause of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of New York. The parties also hereby irrevocably (A) submit to the jurisdiction of any competent court in the Agreed Venue (and of the appropriate appellate courts therefrom), (B) to the fullest extent permitted by law, waive any and all defenses the parties may have on the grounds of lack of jurisdiction of any such court and any other objection that such parties may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court (including without limitation any defense that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum), and (C) consent to service of process in any such suit, action or proceeding, anywhere in the world, whether within or without the jurisdiction of any such court, in any manner provided by applicable law. Without limiting the foregoing, each party agrees that service of process on such party pursuant to a notice as provided in
Section 14
shall be deemed effective service of process on such party. Any action for enforcement or recognition of any judgment obtained in connection with a Dispute may be enforced in any competent court in the Agreed Venue or in any other court of competent jurisdiction.
|
(d)
|
This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one contract.
|
(e)
|
The failure of any party hereto at any time to require performance by another party of any provision of this Agreement shall not affect the right of such party to require performance of that provision, and any waiver by any party of any breach of any provision of this Agreement shall not be construed as a waiver of any continuing or succeeding breach of such provision, a waiver of the provision itself, or a waiver of any right under this Agreement.
|
Vesting Date
|
Percentage of Option Shares Vested
|
First Anniversary of Grant Date
|
33-1/3%
|
Second Anniversary of Grant Date
|
66-2/3%
|
Third Anniversary of Grant Date
|
100%
|
19.
|
Amendment
:
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q for the quarter ended
September 30, 2015
of Town Sports International Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
|
By:
|
|
/s/ Patrick Walsh
|
|
|
Patrick Walsh
|
|
|
Executive Chairman
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q for the quarter ended
September 30, 2015
of Town Sports International Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
|
By:
|
|
/s/ Carolyn Spatafora
|
|
|
Carolyn Spatafora
|
|
|
Chief Financial Officer
|
(1)
|
The Quarterly Report on Form 10-Q of Town Sports International Holdings, Inc. (the “Company”) for the quarterly period ended
September 30, 2015
(the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78m); and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/s/ Patrick Walsh
|
Patrick Walsh
|
Town Sports International Holdings, Inc.
|
Executive Chairman
|
(1)
|
The Quarterly Report on Form 10-Q of Town Sports International Holdings, Inc. (the “Company”) for the quarterly period ended
September 30, 2015
(the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78m); and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/s/ Carolyn Spatafora
|
Carolyn Spatafora
|
Town Sports International Holdings, Inc.
|
Chief Financial Officer
|