Town Sports International Holdings Inc. (TSI), New York, announced that President and Chief Executive Officer Dan Gallagher is leaving the company effective June 19.
Gallagher had been with TSI since 1999. He served as CFO before being promoted to president and COO in January 2014. In February of this year, he was promoted to CEO when Bob Giardina, who had been CEO, was appointed executive chairman of the board. In March, the company reworked its board, and Giardiana became a non-employee member of the board.
No reason was given for Gallagher's departure. Gallagher will receive a payment of $150,000 in consideration of his 2015 target bonus, with an additional severance payment of $550,000 payable in equal installments over the next 12 months, according to an 8-K filing made by the company to the Securities and Exchange Commission Thursday.
Gallagher also will have continued participation in the company’s health, dental and disability insurance programs, as will his eligible dependents, through June 30, 2017, at the company's cost. Gallagher’s vested stock options awarded under TSI's 2006 Stock Incentive Plan will remain outstanding for a post-termination exercise period of 90 days from his date of separation from the company. Gallagher is subject to a non-competition covenant for a period of 12 months.
In February, TSI announced that it was undergoing a review that could lead to a sale of the company. The company recently transitioned most of its clubs to what it calls a high-value, low-price (HVLP) model.
At the time of Gallagher's promotion, Giardina said: "Dan Gallagher, with whom I have had the pleasure of working alongside for the past five years, has been instrumental in the development as well as the implementation of our HVLP strategy, which we have accelerated and expanded following its initial rollout. Dan is a proven leader, with an extensive financial background, including six years as CFO prior to assuming the role of COO at TSI. The board and I have great confidence in Dan's ability to lead our business forward and I am delighted to announce his appointment as CEO."
In May, TSI reported it missed its first quarter revenue estimate by $4.5 million, bringing in $111.4 million. The company blamed the miss on a loss of members in 2014 and lower average dues associated with the company's transition from mid-priced clubs to its HVLP clubs. At that time, the company had converted 124 of its 158 clubs to the HVLP model, and the company said it expected those clubs to continue experiencing near-term revenue pressure.
Patrick Walsh, who was elected to the board in March and serves as chairman of the board of directors, will serve as executive chairman while the board conducts a search for Gallagher's successor.
Walsh stated, "We want to thank Dan for his 16 years of service to Town Sports International. Dan helped the company navigate through periods of significant growth and industry change. His leadership efforts, particularly in finance and operations, are greatly appreciated by the entire board. We wish Dan all the best in his future endeavors.
"I look forward to partnering with the executive team at TSI as we continue to focus on our key initiatives to drive sales, effectuate cost management and increase member satisfaction across all clubs. I am very confident in the team's ability to seamlessly manage through this transition."
TSI owns and operates health clubs located primarily in major cities from Washington, DC, north through New England, operating under the brand names New York Sports Clubs, Boston Sports Clubs, Washington Sports Clubs, Philadelphia Sports Clubs and BFX Studio.