10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on August 10, 2022
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended June 30, 2022
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission File Number: 001-40887
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|||||||
(952 ) 947-0000
(Address of principal executive offices, including zip code; Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | ☒ | |||||||||||||||||||
| Smaller reporting company | Emerging growth company | ||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 8, 2022, the registrant had 193,874,108 shares of common stock outstanding, par value $0.01 per share.
TABLE OF CONTENTS
| Page | |||||
2
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
| June 30, 2022 |
December 31, 2021 |
||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable, net | |||||||||||
| Center operating supplies and inventories | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Income tax receivable | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Intangible assets, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Construction accounts payable | |||||||||||
| Deferred revenue | |||||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Current maturities of debt | |||||||||||
| Current maturities of operating lease liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt, net of current portion | |||||||||||
| Operating lease liabilities, net of current portion | |||||||||||
| Deferred income taxes | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 11) | |||||||||||
| Stockholders’ equity: | |||||||||||
Common stock, $ |
|||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( |
( |
|||||||||
| Accumulated other comprehensive loss | ( |
( |
|||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See notes to unaudited condensed consolidated financial statements.
3
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Center revenue | $ | $ | $ | $ | |||||||||||||||||||
| Other revenue | |||||||||||||||||||||||
| Total revenue | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Center operations | |||||||||||||||||||||||
| Rent | |||||||||||||||||||||||
| General, administrative and marketing | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Other operating (income) expense | ( |
( |
|||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Income (loss) from operations | ( |
( |
|||||||||||||||||||||
| Other (expense) income: | |||||||||||||||||||||||
| Interest expense, net of interest income | ( |
( |
( |
( |
|||||||||||||||||||
| Equity in earnings (loss) of affiliate | ( |
( |
|||||||||||||||||||||
| Total other expense | ( |
( |
( |
( |
|||||||||||||||||||
| Loss before income taxes | ( |
( |
( |
( |
|||||||||||||||||||
| Benefit from income taxes | ( |
( |
( |
( |
|||||||||||||||||||
| Net loss | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
| Loss per common share – basic and diluted | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
| Weighted-average common shares outstanding – basic and diluted | |||||||||||||||||||||||
See notes to unaudited condensed consolidated financial statements.
4
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net loss | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
Foreign currency translation adjustments, net of tax of $ |
( |
( |
|||||||||||||||||||||
| Comprehensive loss | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
See notes to unaudited condensed consolidated financial statements.
5
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
| Common Stock | Additional Paid-In Capital |
Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Equity |
|||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | ( |
$ | ( |
$ | ||||||||||||||||||||||||||||
| Net loss | — | — | — | ( |
— | ( |
|||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( |
( |
|||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Stock option exercises | — | — | |||||||||||||||||||||||||||||||||
| Equity issuance costs | — | — | ( |
— | — | ( |
|||||||||||||||||||||||||||||
| Issuance of common shares in connection with the vesting of restricted stock units | ( |
— | — | ||||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | ( |
$ | ( |
$ | ||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital |
Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Equity |
|||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | ( |
$ | ( |
$ | ||||||||||||||||||||||||||||
| Net loss | — | — | — | ( |
— | ( |
|||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( |
( |
|||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Stock option exercises | — | — | |||||||||||||||||||||||||||||||||
| Equity issuance costs | — | — | ( |
— | — | ( |
|||||||||||||||||||||||||||||
| Issuance of common shares in connection with the vesting of restricted stock units | ( |
— | — | ||||||||||||||||||||||||||||||||
| Settlement of accrued compensation liabilities through the issuance of share-based compensation awards | — | — | — | — | |||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | ( |
$ | ( |
$ | ||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital |
Stockholder Note Receivable |
Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Equity |
||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( |
— | ( |
||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Settlement of accrued compensation liabilities through the issuance of share-based compensation awards | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Dividends on preferred stock | — | — | ( |
— | — | — | ( |
||||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital |
Stockholder Note Receivable |
Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Equity |
||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( |
— | ( |
||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Settlement of accrued compensation liabilities through the issuance of share-based compensation awards | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Dividends on preferred stock | — | — | ( |
— | — | — | ( |
||||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ||||||||||||||||||||||||||||||||
See notes to unaudited condensed consolidated financial statements.
6
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Six Months Ended June 30, |
|||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | ( |
$ | ( |
|||||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Deferred income taxes | ( |
( |
|||||||||
| Share-based compensation | |||||||||||
| Non-cash rent expense | |||||||||||
| (Gain) loss on disposal of property and equipment, net | ( |
||||||||||
| Loss on debt extinguishment | |||||||||||
| Write-off of discounts and debt issuance costs | |||||||||||
| Amortization of debt discounts and issuance costs | |||||||||||
| Changes in operating assets and liabilities | |||||||||||
| Other | ( |
( |
|||||||||
| Net cash provided by (used in) operating activities | ( |
||||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures | ( |
( |
|||||||||
| Proceeds from sale-leaseback transactions | |||||||||||
| Other | ( |
||||||||||
| Net cash used in investing activities | ( |
( |
|||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from borrowings | |||||||||||
| Repayments of debt | ( |
( |
|||||||||
| Proceeds from revolving credit facility | |||||||||||
| Repayments of revolving credit facility | ( |
( |
|||||||||
| Repayments of finance lease liabilities | ( |
( |
|||||||||
| Increase in debt discounts and issuance costs | ( |
||||||||||
| Proceeds from stock option exercises | |||||||||||
| Other | ( |
||||||||||
| Net cash provided by financing activities | |||||||||||
| Effect of exchange rates on cash and cash equivalents | ( |
||||||||||
| Increase in cash and cash equivalents | |||||||||||
| Cash and cash equivalents – beginning of period | |||||||||||
| Cash and cash equivalents – end of period | $ | $ | |||||||||
See notes to unaudited condensed consolidated financial statements.
7
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
454
1. Nature of Business and Basis of Presentation
Nature of Business
Life Time Group Holdings, Inc. (collectively with its direct and indirect subsidiaries, “Life Time,” “we,” “our,” or the “Company”) is a holding company incorporated in the state of Delaware. Life Time Group Holdings, Inc. changed its name from LTF Holdings, Inc. effective on June 21, 2021. As a holding company, Life Time Group Holdings, Inc. does not have its own independent assets or business operations, and all of our assets and business operations are through Life Time, Inc. and its direct and indirect subsidiaries. We are primarily dedicated to providing premium health, fitness and wellness experiences at our athletic country club destinations and via our comprehensive digital platform and portfolio of iconic athletic events – all with the objective of inspiring healthier, happier lives. We design, build and operate our athletic country club destinations that are distinctive and large, multi-use sports and athletic, professional fitness, family recreation and spa centers in a resort-like environment. As of June 30, 2022, we operated 153 centers in 29 states and one Canadian province.
COVID-19 Impact
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic, the United States declared a National Public Health Emergency and we closed all of our centers based on orders and advisories from federal, state and local governmental authorities regarding COVID-19. We re-opened our first center on May 8, 2020 and continued to re-open our centers as state and local governmental authorities permitted. With the exception of our three Canadian centers, which were temporarily closed during a portion of January 2022, all of our centers were open during the three and six months ended June 30, 2022.
Initial Public Offering
On October 12, 2021, Life Time Group Holdings, Inc. consummated its initial public offering (“IPO”) of 39.0 million shares of its common stock at a public offering price of $18.00 per share, resulting in total gross proceeds of $702.0 million, which was reduced by underwriting discounts and other offering and issuance expenses of $28.0 million, of which approximately $0.3 674.0 million. The shares of the Company’s common stock began trading on The New York Stock Exchange (the “NYSE”) under the symbol “LTH” on October 7, 2021. A registration statement on Form S-1 relating to the offering of these securities was declared effective by the Securities and Exchange Commission (the “SEC”) on October 6, 2021.
On November 1, 2021, Life Time Group Holdings, Inc. consummated the sale of nearly 1.6 million additional shares of its common stock at the IPO price of $18.00 per share pursuant to the partial exercise by the underwriters of their over-allotment option, resulting in total gross proceeds of approximately $28.4 million, which was reduced by underwriting discounts and other offering expenses of $1.3 million, for net proceeds of $27.1 million. We used these net proceeds, as well as the remaining portion of the net proceeds we received in connection with the IPO after the $575.7 million (including a $5.7 million prepayment penalty) partial pay down of our Term Loan Facility (as defined in Note 6, Debt), for general corporate purposes.
Basis of Presentation
8
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
2. Summary of Significant Accounting Policies
Recently Adopted Accounting Pronouncements
In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance,” to increase the transparency of government assistance, including with respect to the disclosure of the types of assistance an entity receives, an entity’s method of accounting for government assistance and the effect of the assistance on an entity’s financial statements. The amendments are to be applied either (1) prospectively to all applicable transactions that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application or (2) retrospectively to those transactions. We adopted this ASU as of January 1, 2022 and applied it prospectively. The adoption of this ASU did not have any impact on our financial position, results of operations or cash flows.
New Accounting Pronouncements Not Yet Adopted
Fair Value Measurements
The accounting guidance establishes a framework for measuring fair value and expanded disclosures about fair value measurements. The guidance applies to all assets and liabilities that are measured and reported on a fair value basis. This enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The guidance requires that each asset and liability carried at fair value be classified into one of the following categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
The carrying amounts related to cash and cash equivalents, accounts receivable, income tax receivable, accounts payable and accrued liabilities approximate fair value.
Fair Value Measurements on a Recurring Basis. We had no material remeasurements of such assets or liabilities to fair value during the three and six months ended June 30, 2022 and 2021.
Financial Assets and Liabilities. At June 30, 2022, the fair value of our outstanding Term Loan Facility, Secured Notes and Unsecured Notes (each of which is defined in Note 6, Debt) was approximately $268.2 million, $846.4 million and $429.9 million, respectively. At December 31, 2021, the fair value of our outstanding Term Loan Facility, Secured Notes and Unsecured Notes was approximately $277.0 million, $957.4 million and $494.0 million, respectively. The carrying amount of our outstanding Mortgage Notes and Construction Loan (each of which is defined in Note 6, Debt) at June 30, 2022 and December 31, 2021 approximates fair value. The fair value of our debt is based on the amount of future cash flows discounted using rates we would currently be able to realize for similar instruments of comparable maturity. If our long-term debt were recorded at fair value, it would be classified as Level 2 in the fair value hierarchy. For more information regarding our debt, see Note 6, Debt.
9
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
3. Supplemental Balance Sheet and Cash Flow Information
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
| June 30, 2022 |
December 31, 2021 |
||||||||||
| Property held for sale | $ | $ | |||||||||
| Construction contract receivables | |||||||||||
| Deferred membership origination costs | |||||||||||
| Prepaid expenses | |||||||||||
| Prepaid expenses and other current assets | $ | $ | |||||||||
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
| June 30, 2022 |
December 31, 2021 |
||||||||||
| Real estate taxes | $ | $ | |||||||||
| Accrued interest | |||||||||||
| Payroll liabilities | |||||||||||
| Utilities | |||||||||||
| Self-insurance accruals | |||||||||||
| Corporate accruals | |||||||||||
| Current maturities of finance lease liabilities | |||||||||||
| Other | |||||||||||
| Accrued expenses and other current liabilities | $ | $ | |||||||||
Supplemental Cash Flow Information
Decreases (increases) in operating assets and increases (decreases) in operating liabilities are as follows:
| Six Months Ended June 30, |
|||||||||||
| 2022 | 2021 | ||||||||||
| Accounts receivable | $ | ( |
$ | ( |
|||||||
| Center operating supplies and inventories | ( |
( |
|||||||||
| Prepaid expenses and other current assets | ( |
( |
|||||||||
| Income tax receivable | ( |
||||||||||
| Other assets | |||||||||||
| Accounts payable | |||||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Deferred revenue | ( |
||||||||||
| Other liabilities | ( |
||||||||||
| Changes in operating assets and liabilities | $ | $ | |||||||||
10
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
Additional supplemental cash flow information is as follows:
| Six Months Ended June 30, |
|||||||||||
| 2022 | 2021 | ||||||||||
| Net cash paid for income taxes, net of refunds received | $ | $ | |||||||||
| Cash payments for interest, net of capitalized interest | |||||||||||
| Capitalized interest | |||||||||||
| Non-cash activity: | |||||||||||
| Issuance of Series A Preferred Stock (as defined in Note 10, Loss Per Share) in connection with the extinguishment of a related party secured loan | |||||||||||
4. Goodwill and Intangibles
The goodwill balance was $1,233.2
Intangible assets consisted of the following:
| June 30, 2022 | |||||||||||||||||
| Gross | Accumulated Amortization | Net | |||||||||||||||
| Trade name | $ | $ | — | $ | |||||||||||||
| Other | ( |
||||||||||||||||
| Total intangible assets | $ | $ | ( |
$ | |||||||||||||
| December 31, 2021 | |||||||||||||||||
| Gross | Accumulated Amortization | Net | |||||||||||||||
| Trade name | $ | $ | — | $ | |||||||||||||
| Other | ( |
||||||||||||||||
| Total intangible assets | $ | $ | ( |
$ | |||||||||||||
Other intangible assets at June 30, 2022 and December 31, 2021 include a facility license as well as trade names and customer relationships associated with our race registration and timing businesses.
Amortization expense associated with intangible assets for the three months ended June 30, 2022 and 2021 was $0.3 million and $0.2 million, respectively, and was $0.8 million and $0.4 million for the six months ended June 30, 2022 and 2021, respectively. Amortization expense associated with intangible assets is included in Depreciation and amortization in our condensed consolidated statements of operations.
There were no
11
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
5. Revenue
Revenue associated with our membership dues, enrollment fees, and certain services from our in-center businesses is recognized over time as earned. Revenue associated with products and services offered in our cafes and spas, as well as through e-commerce, is recognized at a point in time. The following is a summary of revenue, by major revenue stream, that we recognized during the three and six months ended June 30, 2022 and 2021:
| Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Membership dues and enrollment fees | $ | $ | $ | $ | |||||||||||||||||||
| In-center revenue | |||||||||||||||||||||||
| Total center revenue | |||||||||||||||||||||||
| Other revenue | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | |||||||||||||||||||
The timing associated with the revenue we recognized during the three months ended June 30, 2022 and 2021 is as follows:
| Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | ||||||||||||||||||||||||||||||||||
| Center Revenue |
Other Revenue |
Total Revenue |
Center Revenue |
Other Revenue |
Total Revenue |
||||||||||||||||||||||||||||||
| Goods and services transferred over time | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Goods and services transferred at a point in time | |||||||||||||||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
The timing associated with the revenue we recognized during the six months ended June 30, 2022 and 2021 is as follows:
| Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | ||||||||||||||||||||||||||||||||||
| Center Revenue |
Other Revenue |
Total Revenue |
Center Revenue |
Other Revenue |
Total Revenue |
||||||||||||||||||||||||||||||
| Goods and services transferred over time | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Goods and services transferred at a point in time | |||||||||||||||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Contract liabilities represent payments or consideration received in advance for goods or services that the Company has not yet transferred to the customer. Contract liabilities consist primarily of deferred revenue for fees collected in advance for membership dues, enrollment fees, personal training and other center services offerings, as well as our media and athletic events. Contract liabilities at June 30, 2022 and December 31, 2021 were $43.2 million and $35.9 million, respectively.
Contract liabilities that will be recognized within one year are classified as deferred revenue in our condensed consolidated balance sheets. Deferred revenue at June 30, 2022 and December 31, 2021 was $41.2 million and $33.9 million, respectively, and consists primarily of prepaid membership dues, personal training and other in-center services, and enrollment fees. The $7.3 million increase was primarily driven by registrations received for future personal training sessions, kids summer camps and beach club access.
12
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
6. Debt
Debt consisted of the following:
| June 30, 2022 |
December 31, 2021 | ||||||||||
| Term Loan Facility, maturing December 2024 | $ | $ | |||||||||
| Revolving Credit Facility, maturing December 2026 | |||||||||||
| Secured Notes, maturing January 2026 | |||||||||||
| Unsecured Notes, maturing April 2026 | |||||||||||
| Mortgage Notes, various maturities | |||||||||||
| Construction Loan, maturing February 2026 | |||||||||||
| Other debt | |||||||||||
| Fair value adjustment | |||||||||||
| Total debt | |||||||||||
| Less unamortized debt discounts and issuance costs | ( |
( |
|||||||||
| Total debt less unamortized debt discount and issuance costs | |||||||||||
| Less current maturities | ( |
( |
|||||||||
| Long-term debt, less current maturities | $ | $ | |||||||||
Senior Secured Credit Facility
In June 2015, Life Time, Inc. and certain of our other wholly-owned subsidiaries entered into a senior secured credit facility with a group of lenders led by Deutsche Bank AG as the administrative agent. On January 22, 2021, Life Time, Inc. and certain of our other wholly-owned subsidiaries entered into an eighth amendment to the credit agreement governing our senior secured credit agreement (the “Credit Agreement”). Pursuant to such eighth amendment to the Credit Agreement, Life Time, Inc. and such other subsidiaries, among other things, (i) entered into a new term loan facility (the “Term Loan Facility”) and incurred new term loans in an aggregate principal amount of $850.0 million and (ii) extended the maturity on the vast majority of commitments under the revolving portion of our senior secured credit facility (the “Revolving Credit Facility” and together with the Term Loan Facility, the “Credit Facilities”). On December 2, 2021, Life Time, Inc. and certain of our other wholly-owned subsidiaries entered into a ninth amendment to the Credit Agreement. Pursuant to such ninth amendment, Life Time, Inc. and such other subsidiaries increased the commitments under the Revolving Credit Facility to $475.0 million and extended the maturity of the Revolving Credit Facility to December 2, 2026, except that the maturity will be: (a) September 22, 2024 if we have not refinanced or amended the Term Loan Facility in a manner set forth in such amendment by such date; (b) October 16, 2025 if we have at least $100.0 million remaining outstanding on the senior secured notes (the “Secured Notes”) that mature in January 2026 on such date; and (c) January 14, 2026 if we have at least $100.0 million remaining outstanding on the senior unsecured notes (the “Unsecured Notes”) that mature in April 2026 on such date.
Upon the exercise of an accordion feature and subject to certain conditions, borrowings under the Credit Facilities may be increased subject, in certain cases, to meeting a first lien net leverage ratio. The Credit Facilities are secured by a first priority lien (on a pari-passu basis with the Secured Notes described below) on substantially all of our assets.
Term Loan Facility
The $850.0 million Term Loan Facility, which matures in December 2024, initially amortized at 0.25 % quarterly, which required us to make three mandatory quarterly principal repayments of approximately $2.1 million during the year ended December 31, 2021. On October 13, 2021, we used a portion of net proceeds we received in connection with the IPO to pay down $575.7 million (including a $5.7 million prepayment penalty) of our Term Loan Facility. As a result of the pay down, we are no longer required to make quarterly principal payments on the Term Loan Facility prior to its maturity. At June 30, 2022, the Term Loan Facility loan balance was $273.6 million, with interest due at intervals ranging from 30 to 180 days at interest rates ranging from LIBOR plus 4.75 % or base rate plus 3.75 %, in either case subject to a 1.00 % rate floor.
13
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
Revolving Credit Facility
Our Revolving Credit Facility provides for a $475.0 million revolver and matures in December 2026, or earlier as detailed above under “—Senior Secured Credit Facility.” At June 30, 2022, there were $30.0 million of outstanding borrowings on the Revolving Credit Facility and there were $31.5 million of outstanding letters of credit, resulting in total revolver availability of $413.5 million, which was available at intervals ranging from 30 to 180 days at interest rates ranging from LIBOR plus 4.25 % or base rate plus 3.25 %.
The weighted average interest rate and debt outstanding under the Revolving Credit Facility for the six months ended June 30, 2022 was 4.26 % and $41.0 million, respectively. The highest month-end balance during that same period was $90.0 million.
Secured Notes
On January 22, 2021, Life Time, Inc. issued the Secured Notes in an aggregate principal amount of $925.0 million. These notes mature in January 2026 and interest only payments are due semi-annually in arrears at 5.75 %. Life Time, Inc. has the option to call the Secured Notes, in whole or in part, on one or more occasions, beginning on January 15, 2023, subject to the payment of a redemption price that includes a call premium that varies depending on the year of redemption. In addition, at any time prior to January 15, 2023, Life Time, Inc. may redeem up to 40.00 % of the aggregate principal amount of the Secured Notes outstanding with the net proceeds of certain equity offerings by us at a redemption price equal to 105.75 % of the principal amount of the Secured Notes, plus accrued and unpaid interest, if any, to, but not including, the redemption date. The Secured Notes and the related guarantees are our senior secured obligations and are secured on a first-priority basis by security interests in substantially all of our assets.
Unsecured Notes
On February 5, 2021, Life Time, Inc. issued the Unsecured Notes in the original principal amount of $475.0 million. The Unsecured Notes mature in April 2026 and interest only payments are due semi-annually in arrears at 8.00 %. Life Time, Inc. has the option to redeem the Unsecured Notes, in whole or in part, on one or more occasions, beginning on February 1, 2023, subject to the payment of a redemption price that includes a call premium that varies depending on the year of redemption. In addition, at any time prior to February 1, 2023, Life Time, Inc. may redeem up to 40.00 % of the aggregate principal amount of the Unsecured Notes outstanding with the net proceeds of certain equity offerings by us at a redemption price equal to 108.00 % of the principal amount of the Unsecured Notes, plus accrued and unpaid interest, if any, to, but not including, the redemption date. The Unsecured Notes and the related guarantees are our general senior unsecured obligations and will rank equally in right of payment with all of our existing and future senior indebtedness without giving effect to collateral arrangements.
Mortgage Notes
Certain of our subsidiaries have entered into mortgage facilities with various financial institutions (collectively, the “Mortgage Notes”), which are collateralized by certain of our related real estate and buildings, including one of our corporate headquarters properties. The Mortgage Notes have varying maturity dates from March 2023 through August 2027 and carried a weighted average interest rate of 4.71 % and 4.70 % at June 30, 2022 and December 31, 2021, respectively. Payments of principal and interest on each of the Mortgage Notes are payable monthly on the first business day of each month. The Mortgage Notes contain customary affirmative covenants, including but not limited to, payment of property taxes, granting of lender access to inspect the properties, maintenance of the properties, providing financial statements, providing estoppel certificates and lender consent to leases. The Mortgage Notes also contain various customary negative covenants, including, but not limited to, restrictions on transferring the property, change in control of the borrower and changing the borrower’s business or principal place of business. As of June 30, 2022, we were either in compliance in all material respects with the covenants associated with the Mortgage Notes or the covenants were not applicable.
Construction Loan
On January 22, 2021, we closed on a construction loan (the “Construction Loan”) providing up to $28.0 million to partially finance the construction of a Life Time Living location that remains under construction as of June 30, 2022. The Construction Loan has a maturity date of February 15, 2026 and is collateralized by the property. Borrowings under the Construction Loan bear interest at a variable annual rate of no less than 4.80 %. Interest only payments are due monthly beginning April 15, 2022 and continuing through February 15, 2024. Beginning March 15, 2024, based on the principal balance due as of February 15, 2024, monthly principal and interest installment payments will be due in an amount sufficient to fully amortize the principal balance at maturity. At June 30, 2022, there were $8.7 million of outstanding borrowings on the Construction Loan. There were no outstanding borrowings as of December 31, 2021.
14
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
Debt Discounts and Issuance Costs
Unamortized debt discounts and issuance costs associated with the Term Loan Facility, Secured Notes, Unsecured Notes and Construction Loan of $22.8 million and $25.9 million are included in Long-term debt, net of current portion on our condensed consolidated balance sheets at June 30, 2022 and December 31, 2021, respectively.
Unamortized revolver-related debt issuance costs of $3.5 million and $4.0 million are included in Other assets on our condensed consolidated balance sheets at June 30, 2022 and December 31, 2021, respectively.
Debt Covenants
We are required to comply with certain affirmative and restrictive covenants under our Credit Facilities, Secured Notes and Unsecured Notes. We are also required to comply with a first lien net leverage ratio covenant under the Revolving Credit Facility, which requires us to maintain a first lien net leverage ratio, if 30.00 % or more of the Revolving Credit Facility commitments are outstanding shortly after the end of any fiscal quarter (excluding all cash collateralized undrawn letters of credit and other undrawn letters of credit up to $20.0 million). During the first three quarterly test periods of 2022, certain financial measures used in the calculation of the first lien net leverage ratio will be calculated on a pro forma basis by annualizing the respective financial measures recognized during those test periods.
As of June 30, 2022, we were either in compliance in all material respects with the covenants under the Credit Facilities, or the covenants were not applicable.
Future Maturities of Long-Term Debt
Aggregate annual future maturities of long-term debt, excluding unamortized discounts, issuance costs and fair value adjustments, at June 30, 2022 were as follows:
| July 2022 through June 2023 | $ | ||||
| July 2023 through June 2024 | |||||
| July 2024 through June 2025 | |||||
| July 2025 through June 2026 | |||||
| July 2026 through June 2027 | |||||
| Thereafter | |||||
| Total future maturities of long-term debt | $ | ||||
7. Leases
Lease Cost
Lease cost included in our condensed consolidated statements of operations for the three months ended June 30, 2022 and 2021 consisted of the following:
| Three Months Ended June 30, |
Classification in Condensed Consolidated Statements of Operations |
||||||||||||||||
| 2022 | 2021 | ||||||||||||||||
| Lease cost: | |||||||||||||||||
| Operating lease cost | $ | $ | Rent | ||||||||||||||
| Short-term lease cost | Rent | ||||||||||||||||
| Variable lease cost | Rent | ||||||||||||||||
| Finance lease cost: | |||||||||||||||||
| Amortization of right-of-use assets | Depreciation and amortization | ||||||||||||||||
| Interest on lease liabilities | Interest expense, net of interest income | ||||||||||||||||
| Total lease cost | $ | $ | |||||||||||||||
15
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
Lease cost included in our condensed consolidated statements of operations for the six months ended June 30, 2022 and 2021 consisted of the following:
| Six Months Ended June 30, |
Classification in Condensed Consolidated Statements of Operations |
||||||||||||||||
| 2022 | 2021 | ||||||||||||||||
| Lease cost: | |||||||||||||||||
| Operating lease cost | $ | $ | Rent | ||||||||||||||
| Short-term lease cost | Rent | ||||||||||||||||
| Variable lease cost | Rent | ||||||||||||||||
| Finance lease cost: | |||||||||||||||||
| Amortization of right-of-use assets | Depreciation and amortization | ||||||||||||||||
| Interest on lease liabilities | Interest expense, net of interest income | ||||||||||||||||
| Total lease cost | $ | $ | |||||||||||||||
Operating and Finance Lease Right-of-Use Assets and Lease Liabilities
Operating and finance lease right-of-use assets and lease liabilities were as follows:
| June 30, 2022 | December 31, 2021 | Classification on Condensed Consolidated Balance Sheets |
|||||||||||||||
| Lease right-of-use assets: | |||||||||||||||||
| Operating leases | $ | $ | Operating lease right-of-use assets | ||||||||||||||
Finance leases (1)
|
|||||||||||||||||
| Total lease right-of-use assets | $ | $ | |||||||||||||||
| Lease liabilities: | |||||||||||||||||
| Current | |||||||||||||||||
| Operating leases | $ | $ | Current maturities of operating lease liabilities | ||||||||||||||
| Finance leases | |||||||||||||||||
| Non-Current | |||||||||||||||||
| Operating leases | Operating lease liabilities, net of current portion | ||||||||||||||||
| Finance leases | |||||||||||||||||
| Total lease liabilities | $ | $ | |||||||||||||||
Remaining Lease Terms and Discount Rates
The weighted-average remaining lease terms and discount rates associated with our operating and finance lease liabilities at June 30, 2022 were as follows:
| June 30, 2022 | |||||
Weighted-average remaining lease term (1)
|
|||||
| Operating leases | |||||
| Finance leases | |||||
| Weighted-average discount rate | |||||
| Operating leases | |||||
| Finance leases | |||||
(1) The weighted-average remaining lease term associated with our operating and finance lease liabilities does not include all of the optional renewal periods available to us under our current lease arrangements. Rather, the weighted-average remaining lease term only includes periods covered by an option to extend a lease if we are reasonably certain to exercise that option.
16
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
Sale-Leaseback Transactions
During the six months ended June 30, 2022, we entered into and consummated sale-leaseback transactions involving four properties with an unrelated third party. Under these transactions, we sold four properties with a combined net book value of $150.8 million for $175.0 million, which was reduced by transaction costs of $0.8 million, for net cash proceeds of $174.2 million. The estimated fair value of the properties sold was $201.2 million. Accordingly, the aggregate sales price associated with this arrangement was increased by $26.2 million, which resulted in the recognition of a gain of $49.6 million on this transaction. This gain is included in Other operating (income) expense in our condensed consolidated statements of operations.
Supplemental Cash Flow Information
Supplemental cash flow information associated with our operating and finance leases is as follows:
| Six Months Ended June 30, |
|||||||||||
| 2022 | 2021 | ||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
| Operating cash flows from operating leases | $ | $ | |||||||||
| Operating cash flows from finance leases | |||||||||||
| Financing cash flows from finance leases | |||||||||||
| Non-cash information: | |||||||||||
| Right-of-use assets obtained in exchange for initial lease liabilities: | |||||||||||
| Operating leases | |||||||||||
| Finance leases | |||||||||||
| Right-of-use asset adjustments recognized as a result of the remeasurement of existing lease liabilities: | |||||||||||
| Operating leases | ( |
||||||||||
| Non-cash increase in operating lease right-of-use assets associated with below-market sale-leaseback transactions | |||||||||||
Maturities of Operating and Finance Lease Liabilities
The maturities associated with our operating and finance lease liabilities at June 30, 2022 are as follows:
| Operating Leases | Finance Leases | Total | |||||||||||||||
| July 2022 through June 2023 | $ | $ | $ | ||||||||||||||
| July 2023 through June 2024 | |||||||||||||||||
| July 2024 through June 2025 | |||||||||||||||||
| July 2025 through June 2026 | |||||||||||||||||
| July 2026 through June 2027 | |||||||||||||||||
| Thereafter | |||||||||||||||||
| Total lease payments | |||||||||||||||||
| Less: Imputed interest | |||||||||||||||||
| Present value of lease liabilities | $ | $ | $ | ||||||||||||||
17
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
8. Stockholders’ Equity
2021 Equity Incentive Plan
In connection with the IPO and effective October 6, 2021, we adopted the 2021 Incentive Award Plan (the “2021 Equity Plan”), under which we may grant cash and equity-based incentive awards to our employees, consultants and directors. The maximum number of shares of our common stock available for issuance under the 2021 Equity Plan is equal to the sum of (i) approximately 14.5 million shares of our common stock, (ii) an annual increase on the first day of each year beginning in 2022 and ending in and including 2031, equal to the lesser of (A) 4 % of the outstanding shares of our common stock on the last day of the immediately preceding fiscal year and (B) such lesser amount as determined by our board of directors, and (iii) the approximately 1.0 million shares of our common stock that were available for issuance under the 2015 Equity Plan as of October 6, 2021. Effective January 1, 2022, the number of shares of our common stock available for issuance under the 2021 Equity Plan increased by approximately 7.7 million shares pursuant to the evergreen feature described in part (ii) of the immediately preceding sentence. Additionally, the number of shares of our common stock available for issuance under the 2021 Equity Plan may increase with respect to awards under the 2015 Equity Plan and any other prior equity incentive plans of the Company or its predecessor which are forfeited or lapse unexercised and which following the effective date of the 2021 Equity Plan are not issued under such prior plan; provided, however, no more than 14.5 million shares may be issued upon the exercise of incentive stock options. The share reserve formula under the 2021 Equity Plan is intended to provide us with the continuing ability to grant equity awards to eligible employees, directors and consultants for the ten-year term of the 2021 Equity Plan.
As of June 30, 2022, approximately 19.1 million shares were available for future awards to employees and other eligible participants under the 2021 Equity Plan.
2021 Employee Stock Purchase Plan
In connection with the IPO and effective October 6, 2021, we adopted the 2021 Employee Stock Purchase Plan (the “ESPP”). The ESPP is designed to allow our eligible employees to purchase shares of our common stock, at periodic intervals, with their accumulated payroll deductions. The ESPP consists of two components: an Internal Revenue Service (“IRS”) Code section 423 (“Section 423”) component, which is intended to qualify under Section 423 of the IRS Code and a non-Section 423 component, which need not qualify under Section 423 of the IRS Code. The aggregate number of shares of our common stock that has initially been reserved for issuance under the ESPP is equal to (i) approximately 2.9 million shares of our common stock, and (ii) an annual increase on the first day of each year beginning in 2022 and ending in and including 2031, equal to the lesser of (A) 1 % of the aggregate number of shares of our common stock outstanding on the final day of the immediately preceding calendar year and (B) such smaller number of our shares of common stock as determined by our board of directors; provided that in no event will more than 29.0 million shares of our common stock be available for issuance under the Section 423 component of the ESPP. Our board of directors determined that no additional shares would become available under the ESPP as of January 1, 2022 pursuant to the evergreen feature described in part (ii) of the immediately preceding sentence. Our board of directors or the compensation committee will have authority to interpret the terms of the ESPP and determine eligibility of participants.
The ESPP will permit participants to purchase common stock through payroll deductions of up to a percentage of their eligible compensation, which includes a participant’s gross base compensation for services to us. On the first trading day of each offering period, each participant will automatically be granted an option to purchase shares of our common stock. The option will expire at the end of the applicable offering period and will be exercised on each purchase date during such offering period to the extent of the payroll deductions accumulated during the offering period. The purchase price will be at such discount as determined by our board of directors or compensation committee, but no greater than 85 % of the fair market value of a share of our common stock on the date determined by our board of directors or compensation committee. Participants may voluntarily end their participation in the ESPP prior to the end of the applicable offering period and will be paid their accrued payroll deductions that have not yet been used to purchase shares of common stock. Upon exercise, the participant will purchase the number of whole shares that his or her accumulated payroll deductions will buy at the option purchase price, subject to the certain participation limitations. Participation will end automatically upon a participant’s termination of employment. No offering periods commenced under the ESPP during the three and six months ended June 30, 2022.
18
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
Stock Options
During the six months ended June 30, 2022, the Company granted approximately 0.9 million stock option awards under the 2021 Equity Plan. These options have a 10-year contractual term from the date of grant and vest in ratable annual installments on each of the first anniversaries of the grant date, subject to continuous employment or service from the grant date through the applicable vesting date. The exercise price associated with each of these awards is not less than the fair market value per share of our common stock at the time of grant. The fair value of the options granted during the six months ended June 30, 2022 was calculated using the Black-Scholes option pricing model. During each of the three and six months ended June 30, 2022, approximately 0.1 25.3 million shares of our common stock were outstanding, of which approximately 22.0 million were exercisable.
Share-based compensation expense associated with stock options for the three months ended June 30, 2022 was $3.3 million, of which $0.3 million, $2.9 million and $0.1 million is included in Center operations, General, administrative and marketing and Other operating (income) expense, respectively, in our condensed consolidated statements of operations. Share-based compensation expense associated with stock options for the six months ended June 30, 2022 was $14.7 million, of which $1.3 million, $13.0 million and $0.4 million is included in Center operations, General, administrative and marketing and Other operating (income) expense, respectively, in our condensed consolidated statements of operations. No 22.5 million, which is expected to be recognized over a weighted average remaining period of 3.1 years.
Restricted Stock Units
During the six months ended June 30, 2022, the Company granted approximately 1.6 million restricted stock unit awards under the 2021 Equity Plan, of which approximately 1.3 million are time vesting awards and approximately 0.3 million are time vesting awards with a performance qualifier. Of the 1.6 million restricted stock unit awards that were granted during the six months ended June 30, 2022, approximately 1.5 million vest in ratable annual installments, approximately 0.1 million vest in ratable annual installments and less than 0.1 million vest in approximately