The impact of the COVID-19 pandemic has caused Town Sports International Holdings Inc. to take a material impairment charge of $135 million to $155 million and to be in non-compliance with rules of Nasdaq, where it trades publicly. It also has permanently closed some clubs.
Town Sports owns brands such as New York Sports Clubs, Boston Sports Clubs, Philadelphia Sports Clubs, Washington Sports Clubs, Lucille Roberts and Total Woman Gym + Spa.
In mid-June, a report surfaced that Town Sports had notified members at one of its Boston Sports Club locations (the Wells Avenue location in Newton, Massachusetts) that the location had permanently closed. The company also closed its downtown Bethesda, Maryland, location of Washington Sports Club, according to Bethesda Magazine.
Disruptions caused by the COVID-19 pandemic had caused Town Sports to be unable to file its first quarter 2020 financial report, but it had received an extension to June 29 and then an extension to July 6, the company announced. It was unable to meet either deadline.
On July 6 Town Sports announced it will be required to recognize a material impairment of the carrying values of the company’s right of use assets, fixed assets and other long-term assets including goodwill, which the company expects to be in the range of $135 million to $155 million in the aggregate.
Town Sports then received a notice on July 7, 2020, from the Listing Qualifications Department of NASDAQ indicating that as a result of the company’s failure to timely file its first quarter 2020 financial report, Town Sports no longer complies with the continued listing requirements as set forth in NASDAQ Listing Rule 5250(c)(1).
The company has until Sept. 8, 2020, to submit a plan to regain compliance or risk being delisted from the Nasdaq Global Market.
If Nasdaq accepts the plan, Nasdaq can grant an exception of up to 180 calendar days from the filing due date, until Dec. 28, 2020, to regain compliance. If Nasdaq does not accept the plan, Town Sports will have the opportunity to appeal that decision to a Nasdaq Hearings Panel.
The company’s management is working to complete the report and intends to file it as soon as practicable, according to an announcement from Town Sports.
Town Sports is reportedly working on a plan to move forward that might include a Chapter 11 filing, according to reporting in an April 14 story by Bloomberg Law.
The company reported 2019 revenue of $466.76 million, a 5.3 percent increase from 2018. However, its 2019 gains were accompanied by $6.45 million in operating losses and an adjusted EBITDA decrease of 23.3 percent.