Acquisitions

Acquisitions of businesses are accounted for in accordance with ASC 805, Business Combinations and ASU 2017-01. According to ASC 805, transactions that represent business combinations should be accounted for under the acquisition method. In addition, the ASC 805 includes a subtopic which provides guidance on transactions sometimes associated with business combinations but that do not meet the requirements to be accounted for as business combinations under the acquisition method. Under the acquisition method, the purchase price is allocated to the assets acquired and the liabilities assumed based on their respective estimated fair values as of the acquisition date. Any excess of the purchase price over the fair values of the assets acquired and liabilities assumed was allocated to goodwill. These acquisitions were not material to the financial position, results of operations or cash flows of the Company; therefore, the respective pro forma financial information has not been presented. The results of operations of the clubs acquired have been included in the Company’s consolidated financial statements pro rata from the date of acquisition.

Acquisition of Lucille Roberts Health Club Business

In September 2017, the Company acquired Lucille Roberts for a net cash purchase price of $9,450. The acquisition added 16 clubs to the Company's portfolio in the New York metropolitan region and was accounted for as a business combination. These 16 clubs continue to operate under the Lucille Roberts trade name. Acquisition costs incurred in connection with this transaction during the year ended December 31, 2017, were approximately $285 and are included in general and administrative expenses in the accompanying condensed consolidated statements of income. The following table summarizes the allocation of the purchase price to the fair value of the assets and liabilities acquired.



	September 2017
Allocation of purchase price:
Fixed assets	$	1,024
Goodwill	4,793
Definite lived intangible assets:
Membership lists	1,400
Trade names	700
Favorable lease commitments	2,350
Deferred revenue	(817		)
Total allocation of purchase price	$	9,450

The goodwill recognized represents the excess of the purchase price over the fair value of the assets acquired and liabilities assumed. The goodwill associated with this acquisition is partially attributable to the avoided costs of acquiring the assembled workforce and is deductible for tax purposes in its entirety. The definite lived intangible assets acquired are being amortized over their estimated useful lives with the membership lists amortized over the estimated average membership life of 26 months, the trade name amortized over its estimated useful life of five years and the favorable lease commitments amortized over the remaining life of each respective lease, or a weighted average life of 6.3 years.

From the acquisition on September 11, 2017 through December 31, 2017, the Lucille Roberts clubs generated revenue of $3,937 and net loss of ($778). It is impractical to disclose proforma information due to the unavailability of historical audited financial statements for Lucille Roberts.

Acquisition of Assets

In November 2017, the Company acquired a building and the land it occupies in the New York metropolitan region, as well as a single health club located on the premises for a purchase price of $12,600. Of the total purchase price, $2,675 was attributed to land, $9,675 was attributed to building, and the remainder of the purchase price was primarily equipment and deferred revenue. This transaction was accounted for as an asset acquisition.

Acquisition of TMPL Gym

In December 2017, the Company acquired an existing club in the New York metropolitan region under the TMPL trade name for a net cash purchase price of $5,925. TMPL is a luxury gym that features a wide variety of fitness programs and group exercises. The club continues to operate under the TMPL trade name and was accounted for as a business combination.

Acquisition costs incurred in connection with this transaction during the year ended December 31, 2017, were approximately $61 and are included in general and administrative expenses in the accompanying condensed consolidated statements of income. The following table summarizes the allocation of the purchase price to the fair value of the assets and liabilities acquired. The purchase price allocation presented below has been prepared on a preliminary basis and changes to the preliminary purchase price allocations may occur as additional information concerning asset and liability valuations are finalized.



	December 2017
Allocation of purchase price:
Fixed assets	$	5,195
Goodwill	365
Definite lived intangible assets:
Non-compete agreement	900
Trade name	200
Deferred revenue	(500		)
Capital lease liability	(160		)
Other liabilities	(75		)
Total allocation of purchase price	$	5,925

The goodwill recognized represents the excess of the purchase price over the fair value of the assets acquired and liabilities assumed. The goodwill associated with this acquisition is partially attributable to the avoided costs of acquiring the assembled workforce and is deductible for tax purposes in its entirety. The definite lived intangible assets acquired are being amortized over their estimated useful lives with the non-compete amortized over five years and the trade name amortized over 15 years. It is impractical to disclose proforma information due to the unavailability of historical audited financial statements for TMPL.

Subsequent Acquisitions

In December 2017, the Company entered into an agreement to acquire an existing club in the Boston metropolitan region. In connection with this agreement, the Company deposited $250 and into an escrow account in November 2017. The remaining purchase price of $2,500 was deposited into an escrow account in December 2017. These amounts were recorded in prepaid expenses and other current assets on the balance sheet as of December 31, 2017. The fair value of the net assets acquired on the acquisition date primarily comprises property, plant and equipment, and intangible assets. This acquisition was effective in January 2018. The acquisition will be accounted for as a business combination and the purchase price allocation is pending.

In December 2017, the Company entered into an agreement to acquire an existing club in the Florida region, as well as the land and building the club occupied. In connection with this agreement, the Company deposited $50 into an escrow account in November 2017. The remaining purchase price of $3,969 was made in January 2018 and the acquisition was effective at that time. The fair value of the net assets acquired on the acquisition date primarily comprises land, building, and equipment. This transaction will be accounted for as an asset acquisition in the first quarter of 2018.

The above transactions were completed in January 2018 with no material impact on the Company's financial statements. The purchase price allocations are in the process of being finalized.