☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

(Former name, former address and former fiscal year, if changed since last report)

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.

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).

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.

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).

As of ~~August 4, 2020,~~May 5, 2021, there were outstanding ~~48,560,369~~49,260,746 shares of the registrant’s common stock, par value $.001 per share (“Common Stock”).

	June 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
Current assets:
Cash and cash equivalents	$	60,274		$	2,486		$	52,428		$	100,385
Accounts receivable, net		36,339			97,596			44,959			25,981
Inventories		22,088			36,407
Prepaid expenses		15,058			18,255			4,154			5,556
Income taxes receivable								779			10,996
Other current assets		8,110			6,993			19,586			11,336
Total current assets		141,869			161,737			121,906			154,254

Property and equipment, net of accumulated depreciation of $53,525 and $42,510 respectively		52,436			52,909
Right-of-use assets, operating leases		35,300			41,518
Right-of-use assets, finance leases		1,356			1,680
Property and equipment, net of accumulated depreciation of $40,713 and $38,188 respectively								19,981			20,959
Right-of-use assets								16,288			18,139
Long-term deferred tax asset								1,186			3,601
Intangible assets, net		593,520			689,686			29,049			29,049
Goodwill, net		535,135			654,635			334,680			334,680
Other assets		21,554			23,740			16,808			18,301
Total assets	$	1,381,170		$	1,625,905		$	539,898		$	578,983

Current liabilities:
Accounts payable	$	35,492		$	46,480		$	18,400		$	19,741
Accrued salaries and benefits		10,539			13,071			5,264			8,949
Accrued liabilities		42,020			55,663			31,395			18,424
Deferred revenue		12,440			12,037			4,351			4,460
Income taxes payable		7,835			405
Current portion of operating lease liabilities		13,157			13,131
Current portion of finance lease liabilities		644			624
Current portion of long-term debt		9,775			—			7,456			7,456
Current portion of lease liabilities								8,064			8,052
Current portion of other long-term liabilities		15,664			4,947			14,195			14,753
Total current liabilities		147,566			146,358			89,125			81,835

Long-term debt		1,002,547			1,048,127			397,750			459,250
Long-term operating lease liabilities		23,515			30,321
Long-term finance lease liabilities		753			1,080
Long-term deferred tax liability		137,205			160,846
Long-term lease liabilities								9,460			11,494
Other long-term liabilities		31,863			12,263			17,309			22,748

Commitments and contingent liabilities

Stockholders' equity:
Preferred stock $.001 par value, 5,000,000 shares authorized, NaN outstanding		—			—			—			—
Common Stock $.001 par value, 120,000,000 shares authorized, 48,548,741 and 48,156,786 shares outstanding, respectively		48			48
Common Stock $.001 par value, 120,000,000 shares authorized, 49,246,281 and 48,983,735 shares outstanding, respectively								49			49
Additional paid-in capital		505,760			504,419			513,923			513,263
Accumulated deficit		(406,840	)		(237,284	)		(444,949	)		(464,085	)
Treasury stock, at cost, 2,254,953 shares in treasury		(28,182	)		(28,182	)		(28,182	)		(28,182	)
Accumulated other comprehensive loss		(33,065	)		(12,091	)		(14,587	)		(17,389	)
Total stockholders' equity		37,721			226,910			26,254			3,656
Total liabilities and stockholders' equity	$	1,381,170		$	1,625,905		$	539,898		$	578,983

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Revenues:

Services

$
79,856

$
157,481

$
239,548

$
314,008

Products

182,742

182,896

360,705

240,463

Total revenues

262,598

340,377

600,253

554,471

Cost of revenue:

Services (exclusive of depreciation of
   $2,240, $1,503, $4,071, and $2,859,
   respectively, included below)

31,886

111,073

147,034

224,916

Products (exclusive of depreciation and
   amortization of $8,587, $5,861, $19,280,
   and $7,488, respectively, included below)

86,355

83,685

170,363

110,181

Total cost of revenue

118,241

194,758

317,397

335,097

Marketing expenses

51,105

54,603

138,177

78,751

Selling, general and administrative
   expenses

23,471

29,667

51,480

56,852

Depreciation and amortization

12,919

9,084

27,682

12,666

Impairment loss

—

—

199,500

—

Restructuring and related charges

1,009

2,352

1,752

3,943

Operating income (loss)

55,853

49,913

(135,735
)

67,162

Interest expense

21,235

23,661

42,898

31,328

Income (loss) before income taxes

34,618

26,252

(178,633
)

35,834

Income tax expense (benefit)

6,107

8,115

(9,038
)

13,483

Net income (loss)

28,511

18,137

(169,595
)

22,351

Earnings (loss) per share:

Basic

$
0.59

$
0.38

$
(3.49
)

$
0.49

Diluted ⁽¹⁾

$
0.58

$
0.37

$
(3.49
)

$
0.49

Comprehensive income (loss)

$
27,366

$
5,901

$
(190,569
)

$
10,115

Weighted average common shares and
   equivalents:

Basic

48,711

47,790

48,662

45,165

Diluted ⁽¹⁾

48,794

48,461

48,662

45,719

	Three Months Ended March 31,
	2021			2020
Revenues	$	108,085		$	159,692
Cost of revenue (exclusive of depreciation of $2,531 and $1,831, respectively included below)		57,285			115,148
Marketing expense		1,231			7,299
Selling, general and administrative expenses		9,696			12,052
Depreciation expense		2,683			2,030
Restructuring and related charges		—			482
Operating income		37,190			22,681

Interest expense		10,756			11,270
Other (income) expense, net		(1,130	)		—
Total non-operating expense, net		9,626			11,270
Income before income taxes		27,564			11,411

Income tax expense		7,620			3,136
Income from continuing operations	$	19,944		$	8,275

Loss from discontinued operations, net of income tax benefit of $277 and $18,282, respectively		(808	)		(206,381	)
Net income (loss)	$	19,136		$	(198,106	)

Earnings (loss) per share - basic:
Continuing operations	$	0.41		$	0.17
Discontinued operations	$	(0.02	)	$	(4.25	)
Net income (loss)	$	0.39		$	(4.08	)

Earnings (loss) per share - diluted:
Continuing operations	$	0.40		$	0.17
Discontinued operations	$	(0.02	)	$	(4.22	)
Net income (loss)	$	0.38		$	(4.05	)

Comprehensive income (loss)	$	21,938		$	(217,935	)

Weighted average common shares and equivalents:
Basic		49,222			48,613
Diluted		50,340			48,855

~~See acco~~mpa~~nying not~~e~~s to the co~~n~~sol~~i~~dated fina~~nci~~al statemen~~ts.

For the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~

	Preferred Stock		Common Stock		Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Treasury Stock			Accumulated Other Comprehensive Loss			Total			Preferred Stock		Common Stock		Additional Paid-in Capital			Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Loss			Total
Balance, March 31, 2019	$	—	$	47	$	491,548		$	53,751		$	(28,182	)	$	—		$	517,164
Balance, January 1, 2020																				$	—	$	48	$	504,419		$	(240,494	)	$	(28,182	)	$	(12,091	)	$	223,700
Comprehensive income (loss)		—		—		—			18,137			—			(12,236	)		5,901			—		—		—			(198,106	)		—			(19,829	)		(217,935	)
Exercise of stock options		—		—		137			—			—			—			137
Tax withholding for share-based compensation		—		—		(794	)		—			—			—			(794	)
Share-based employee compensation expense		—		—		6,898			—			—			—			6,898
Balance, June 30, 2019	$	—	$	47	$	497,789		$	71,888		$	(28,182	)	$	(12,236	)	$	529,306

Balance, December 31, 2018	$	—	$	41	$	347,487		$	49,655		$	(28,182	)	$	—		$	369,001
Comprehensive income (loss)		—		—		—			22,351			—			(12,236	)		10,115
Issuance of Common Stock in connection with Merger		—		6		132,832			—			—			—			132,838
Share-based compensation replacement awards related to Merger and attributable to pre- combination services		—		—		9,107			—			—			—			9,107
Exercise of stock options		—		—		370			—			—			—			370
Exercise and vesting of share-based compensation awards																					—		—		601			—			—			—			601
Tax withholding for share-based compensation		—		—		(1,135	)		—			—			—			(1,135	)		—		—		(2,795	)		—			—			—			(2,795	)
Share-based employee compensation expense		—		—		9,257			—			—			—			9,257			—		—		824			—			—			—			824
Other		—		—		(129	)		(118	)		—			—			(247	)		—		—		—			19			—			—			19
Balance, June 30, 2019	$	—	$	47	$	497,789		$	71,888		$	(28,182	)	$	(12,236	)	$	529,306
Balance, March 31, 2020																				$	—	$	48	$	503,049		$	(438,581	)	$	(28,182	)	$	(31,920	)	$	4,414

Balance, March 31, 2020	$	—	$	48	$	503,049		$	(435,371	)	$	(28,182	)	$	(31,920	)	$	7,624
Comprehensive income (loss)		—		—		—			28,511			—			(1,145	)		27,366
Balance, January 1, 2021																				$	—	$	49	$	513,263		$	(464,085	)	$	(28,182	)	$	(17,389	)	$	3,656
Comprehensive income																					—		—		—			19,136			—			2,802			21,938
Exercise and vesting of share-based compensation awards																					—		—		164			—			—			—			164
Tax withholding for share-based compensation		—		—		(154	)		—			—			—			(154	)		—		—		(2,502	)		—			—			—			(2,502	)
Share-based employee compensation expense		—		—		2,865			—			—			—			2,865			—		—		2,998			—			—			—			2,998
Other		—		—		—			20			—			—			20
Balance, June 30, 2020	$	—	$	48	$	505,760		$	(406,840	)	$	(28,182	)	$	(33,065	)	$	37,721

Balance, December 31, 2019	$	—	$	48	$	504,419		$	(237,284	)	$	(28,182	)	$	(12,091	)	$	226,910
Comprehensive income (loss)		—		—		—			(169,595	)		—			(20,974	)		(190,569	)
Exercise of stock options		—		—		601			—			—			—			601
Tax withholding for share-based compensation		—		—		(2,949	)		—			—			—			(2,949	)
Share-based employee compensation expense		—		—		3,689			—			—			—			3,689
Other		—		—		—			39			—			—			39
Balance, June 30, 2020	$	—	$	48	$	505,760		$	(406,840	)	$	(28,182	)	$	(33,065	)	$	37,721
Balance, March 31, 2021																				$	—	$	49	$	513,923		$	(444,949	)	$	(28,182	)	$	(14,587	)	$	26,254

	Six Months Ended June 30,						Three Months Ended March 31,
	2020			2019			2021			2020
Cash flows from operating activities:
Net income (loss)	$	(169,595	)	$	22,351
Income from continuing operations							$	19,944		$	8,275
Loss from discontinued operations								(808	)		(206,381	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		27,682			12,666			2,683			14,763
Amortization and write-off of deferred loan costs		2,315			3,073			1,183			1,212
Amortization of debt discount		2,049			389
Amortization and write-off of debt discount								1,077			1,095
Share-based employee compensation expense		3,689			9,257			2,998			824
Impairment of goodwill and intangible assets		199,500			—
Gain on derivatives								(1,130	)		—
Impairment of goodwill and intangible assets of discontinued operation								—			199,500
Deferred income taxes		(16,447	)		10,789			1,454			(16,031	)
Decrease (increase) in accounts receivable, net		61,257			(3,754	)
(Increase) decrease in accounts receivable, net								(18,978	)		16,665
Decrease in income taxes receivable								10,217			—
Decrease in inventory		14,319			8,719			—			4,057
Decrease in other current assets		1,363			1,057			529			4,746
Increase (decrease) in accounts payable		9,411			(5,872	)
(Decrease) increase in accrued salaries and benefits		(2,532	)		570
Decrease in other current liabilities		(5,925	)		(8,266	)
Increase (decrease) in deferred revenue		403			(2,725	)
(Decrease) increase in accounts payable								(42	)		12,612
Decrease in accrued salaries and benefits								(3,685	)		(4,852	)
Increase in other current liabilities								5,594			5,501
(Decrease) increase in deferred revenue								(109	)		3,247
Other		3,454			1,345			1,691			1,790
Net cash flows provided by operating activities	$	130,943		$	49,599		$	22,618		$	47,023

Cash flows from investing activities:
Acquisition of property and equipment	$	(10,362	)	$	(8,918	)	$	(1,561	)	$	(4,875	)
Business acquisitions, net of cash acquired		—			(1,062,818	)
Settlement on derivatives not designated as hedges								(1,633	)		—
Net cash flows used in investing activities	$	(10,362	)	$	(1,071,736	)	$	(3,194	)	$	(4,875	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt	$	196,525		$	1,399,945		$	—		$	160,325
Payments of long-term debt		(236,375	)		(347,879	)		(63,600	)		(123,000	)
Payments related to tax withholding for share-based compensation		(2,949	)		(1,135	)		(2,502	)		(2,795	)
Exercise of stock options		601			370			164			601
Deferred loan costs		—			(30,189	)
Principal payments related to financing leases		(306	)		(22	)
Change in cash overdraft and other		(20,289	)		3,530			(1,443	)		3,269
Net cash flows (used in) provided by financing activities	$	(62,793	)	$	1,024,620		$	(67,381	)	$	38,400

Effect of exchange rate changes on cash	$	—		$	(12	)

Net increase in cash and cash equivalents	$	57,788		$	2,471
Net (decrease) increase in cash and cash equivalents							$	(47,957	)	$	80,548

Cash and cash equivalents, beginning of period	$	2,486		$	1,933		$	100,385		$	2,486

Cash and cash equivalents, end of period	$	60,274		$	4,404		$	52,428		$	83,034

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). In our opinion, the accompanying consolidated financial statements of Tivity Health,^®, Inc. and its ~~wholly-owned~~wholly owned subsidiaries ~~including the results of Nutrisystem~~^®~~, Inc. (“Nutrisystem”) acquired on March 8, 2019~~ (collectively, “Tivity Health,” the “Company,” or such terms as “we,” “us,” or “our”) reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement. In preparing our consolidated financial statements in conformity with U.S. GAAP, management must make estimates and assumptions that affect: (1) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements; and (2) the reported amounts of revenues and expenses during the reporting period. ~~By their nature, estimates are subject to an inherent degree of uncertainty. Due~~ to the significant uncertainty relating to the potential future impacts of the coronavirus pandemic on our business and the overall market, actual results could differ from those estimates, including, but not limited to, estimates of fair value of goodwill and indefinite-lived intangible assets, allowances for doubtful accounts, and valuation allowances on deferred tax assets. Our consolidated statements of operations include results of Nutrisystem from March 8, 2019 forward. We have reclassified certain items in prior periods to conform to current classifications.

~~Following~~Our results from continuing operations do not include the ~~acquisition~~results of Nutrisystem, ~~(the “Merger”~~Inc. (“Nutrisystem”), which we ~~organize and manage our~~sold effective December 9, 2020. Results of operations ~~within 2 reportable segments, based on~~for Nutrisystem have been classified as discontinued operations for all periods presented in the ~~types of products and services they offer: Healthcare and Nutrition. The Healthcare segment is comprised~~ of ~~our legacy business and includes SilverSneakers~~^®accompanying consolidated financial statements. ~~senior fitness, Prime~~^® ~~Fitness, WholeHealth Living~~^®~~and Wisely Well~~^TM~~. The Nutrition segment is comprised of Nutrisystem’s legacy business and includes the Nutrisystem~~^® ~~and the South Beach Diet~~^®~~programs.~~

We have omitted certain financial information that is normally included in financial statements prepared in accordance with U.S. GAAP but that is not required for interim reporting purposes. You should read the accompanying consolidated financial statements in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~

In January 2020, the Secretary of the U.S. Department of Health and Human Services (“HHS”) declared a national public health emergency due to a novel strain of coronavirus, which causes the disease known as “COVID-19”. In March 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic, and COVID-19 continues to spread throughout the United States and other countries. Many state and local governments, together with public health officials, have recommended and mandated precautions to mitigate the spread of COVID-19, including ordering closure of certain businesses and imposing stay-at-home orders and social distancing guidelines for individuals. Such measures have resulted in significantly reduced demand for many businesses that have continued in operation.

By March 31, 2020, substantially all of the fitness centers in our national network were temporarily closed, which had an adverse impact on the results of operations in our Healthcare segment for the first quarter of 2020 ~~because a significant~~ ~~portion of our Healthcare segment revenues from our SilverSneakers program is based on~~ ~~member visits to a fitness partner location. A substantial number of o~~ur fitness partner locations remained closed through April, with some locations reopening in May and additional locations reopening in June. For the month of June 2020, approximately 66% of our fitness partner locations reported at least one visit from our SilverSneakers program. For the second quarter of 2020, the average monthly total participation levels of our SilverSneakers members were significantly below historical levels, and we also experienced a decline in paid subscribers for Prime Fitness, each of which adversely impacted revenues in our Healthcare segment.2020.

We do not believe that COVID-19-related developments had a material impact on the results of operations or cash flows of our Nutrition segment for the first or second quarters of 2020. While overall we did not experience any significant disruptions, interruptions, or increased costs related to our supply chain, inventory, or distribution channels as a result of COVID-19, we experienced delays in fulfilling orders for our Nutrition segment’s products at certain of our warehouses ~~due to some employees of our fulfillment provider testing positive for COVID-19. As a result, we incurred incremental expense of $1.3 million in the second quarter related to increased labor rates and~~

overtime for employees of our fulfillment provider as well as additional shipping and related charges as we transferred the fulfillment of certain orders to other warehouses that were farther from the customer’s delivery destination.

~~We have taken a number of actions in response to the pandemic, including the following:~~

As a result of the COVID-19 pandemic, in March 2020, we experienced a significant decline in the Company’s market capitalization and in the actual and forecasted operating results of our Healthcare segment, ~~in addition to the unfavorable change in market conditions~~. As a result, management concluded that there were triggering events during the first quarter of 2020 necessitating an impairment evaluation of our goodwill (for each of our reporting units) and indefinite-lived intangible assets (~~which consist of the Nutrisystem tradename and the SilverSneakers tradename). Through this evaluation, management concluded that the fair value of goodwill allocated to the~~

~~Nutrition business unit as well as the fair value of the Nutrisystem tradename were below their carrying amounts, and we recorded an impairment loss of $199.5 million,~~ including $80.0 million related to the Nutrisystem tradename and $119.5 million related to goodwill allocated to the Nutrition segment. There were 0 impairment triggers during the second quarter of 2020 related to our goodwill or indefinite-lived intangible assets.

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (“ASC 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. ASC 848 contains temporary optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform, such as a transition away from the use of LIBOR. ASC 848 was effective for the Company as of January 1, 2020. The provisions of ASC 848 are available through December 31, 2022, at which time the reference rate replacement activity is expected to have been completed. The provisions of ASC 848 must be applied at a Topic, Subtopic or Industry Subtopic level for all transactions other than derivatives, which may be applied at a hedging relationship level. The accounting relief provided by ASC 848 is applicable only to legacy contracts if the amendments made to the agreements are solely for reference rate reform activities. Modifications that are unrelated to reference rate reform will scope out a given contract. ASC 848 allows for different elections to be made at different points in time, and the timing of those elections will be documented as applicable. For the avoidance of doubt, we intend to reassess the elections of optional expedients and exceptions included within ASC 848 related to our hedging activities and will document the election of these items on a quarterly basis. In March 2020, we elected the expedient that allows us to assume that our hedged interest payments are probable of occurring regardless of any expected modification in their terms related to reference rate reform. In addition, we have the option to change the method of assessing effectiveness upon a change in the critical terms of the derivative or the hedged transactions and upon the end of relief under ASC 848. In June 2020, we elected to (i) continue the method of assessing effectiveness as documented in the original hedge documentation and (ii) apply the expedient wherein the reference rate on the hypothetical derivative matches the reference rate on the hedging instrument. We will also apply the aforementioned elections to any future designated cash flow hedging relationship.

In October 2018, the FASB issued ASU 2018-16, "Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes" (“ASU 2018-16”), which adds the OIS rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition and provide lead time for entities to prepare for changes to interest rate risk hedging strategies. ASU 2018-16 is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. As of March 31, ~~2020,~~2021, the benchmark interest rate in our existing interest rate swap agreements is LIBOR. The adoption of this standard did not have an impact on our financial position, results of operations, or cash flows.

~~In January 2017,~~On October 18, 2020, we entered into a Stock Purchase Agreement (“Purchase Agreement”) with Kainos NS Holdings LP, a Delaware limited partnership (“Parent”), and KNS Acquisition Corp., a Delaware corporation and indirect wholly owned subsidiary of Parent (“Purchaser,” and collectively with Parent, “Kainos”) to sell to Kainos all of the ~~FASB~~ issued ~~ASU No. 2017-04, “Intangibles - Goodwill~~ and ~~Other” (“ASU 2017-04”),~~outstanding capital stock of Nutrisystem, a wholly owned subsidiary of the Company that included the Nutrisystem® and South Beach Diet® programs, which ~~simplifies~~would result in the ~~subsequent measurement~~disposition of ~~goodwill by eliminating step two from~~our Nutrition business.

Effective as of December 9, 2020, we completed the ~~goodwill impairment test. ASU 2017-04~~sale of Nutrisystem to Kainos for an aggregate purchase price, after giving effect to customary indebtedness and cash adjustments, of approximately $558.9 million, which amount is ~~effective for annual and interim impairment tests~~subject to a customary working capital adjustment post-closing. We estimate such working capital adjustment will result in ~~fiscal years beginning after December 15, 2019 and is required~~additional proceeds to be ~~applied prospectively. Early adoption is allowed for annual goodwill impairment tests performed on testing dates after January 1, 2017. We adopted ASU 2017-04 on October 1, 2019.~~received in 2021 of $2.8 million, which we have recorded in other current assets at March 31, 2021 and December 31, 2020. ~~As further discussed~~Additionally, we incurred $11.2 million of transaction costs in ~~Note 12, we recorded impairment losses~~2020 directly related to ~~goodwill during~~ the ~~fourth quarter~~disposition of ~~2019~~Nutrisystem, resulting in estimated net proceeds, after post-closing adjustment, of $550.5 million.

In accordance with ASC Topic 205, “Presentation of Financial Statements”, the Nutrition business met the criteria for discontinued operations, as it was a component of the Company and the ~~first quarter~~sale represented a strategic shift in the Company’s operations and financial results. Accordingly, the results of ~~2020~~.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”), which changes the fair value measurement disclosure requirements of ASC 820. ASU 2018-13 is effective for fiscal years beginning on or after December 15, 2019, including interim periods therein, and is generally required to be applied retrospectively, except for certain components that are to be applied prospectively. ~~The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures~~.

In August 2018, the FASB issued ASU No. 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” which requires implementation costs incurred by customers in cloud computing arrangements to be deferred and recognized over the termoperations of the ~~arrangement, if those costs would be capitalized by~~Nutrition business have been classified as discontinued operations for 2020 and 2021.

The following table presents financial results of the ~~customer~~Nutrition business included in ~~a software licensing arrangement. This standard is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal~~

~~years. The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.~~

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which requires companies to measure credit losses for financial assets held at the reporting date utilizing a methodology that reflects current expected credit losses over the lifetime of such assets. ASU 2016-13 was effective“loss from discontinued operations" for the ~~Company on January 1, 2020~~three months ended March 31, 2021 and ~~is generally required to be applied~~2020.

The depreciation, amortization and significant operating and investing non-cash items of the modified retrospective approach, with limited exceptions for specific instruments. The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.discontinued operations were as follows:

We account for revenue from contracts with customers in accordance with Accounting Standards Codification (“ASC”) Topic 606. The unit of account in ASC Topic 606 is a performance obligation, which is a promise in a contract to transfer to a customer either a distinct good or service (or bundle of goods or services) or a series of distinct goods or services provided over a period of time. ASC Topic 606 requires that a contract's transaction price, which is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, is to be allocated to each performance obligation in the contract based on relative standalone selling prices and recognized as revenue when or as the performance obligation is satisfied.

~~Our~~ We earn~~Healthcare segment earns~~ revenue from continuing operations primarily from 3 ~~programs,~~programs: SilverSneakers^® senior fitness, Prime Fitness^®, and WholeHealth ~~Living.~~Living^TM. We provide the SilverSneakers senior fitness program to members of Medicare Advantage, ~~and~~ Medicare Supplement, and group retiree plans through our contracts with such plans. We offer Prime Fitness, a fitness facility access program, through contracts with commercial health plans, employers, and other sponsoring organizations that allow their members to individually purchase the program. We sell our WholeHealth Living program primarily to health plans.

Except for Prime Fitness, our ~~Healthcare segment’s~~ customer contracts generally have initial terms of approximately three years. Some contracts allow the customer to terminate early and/or determine on an annual basis to which of their members they will offer our programs.For Prime Fitness, our contracts with commercial health plans, employers, and other sponsoring organizations generally have initial terms of approximately three years, while i~~ndividuals~~individuals who purchase the Prime Fitness program through these organizations may cancel at any time (on a monthly basis) after an initial period of one to three ~~months~~. months. The significant majority of our~~Healthcare segment’s~~ customer contracts contain 1 performance obligation - to stand ready to provide access to our network of fitness locations and fitness programming - which is satisfied over time as services are rendered each month over the contract term. ~~There are generally 0~~Unsatisfied performance obligations ~~that are unsatisfied~~ at the end of a particular ~~month. There was 0 material~~month primarily relate to certain monthly memberships for our Prime Fitness program, which are recorded as deferred revenue on the consolidated balance sheet and recognized as revenue during the ~~three~~immediately subsequent month. Deferred revenue was $4.4 million and ~~six~~$4.5 million at March 31, 2021 and December 31, 2020, respectively. During the three months ended ~~June 30,~~March 31, 2021, we recognized $3.8 million of revenue that was included in deferred revenue at December 31, 2020 ~~from performance obligations satisfied in a prior period.~~and increased deferred revenue by $3.7 million, excluding amounts recognized as revenue during 2021.

Our fees ~~within~~ ~~the~~ ~~Healthcare segment~~ are variable month to month and are generally billed per member per month (“PMPM”) or billed based on a combination of PMPM and member visits to a network location. We bill PMPM fees by multiplying the contractually negotiated PMPM rate by the number of members eligible for or receiving our services during the month. The average monthly total participation levels of our members were significantly lower for the three months ended March 31, 2021 than for the three months ended March 31, 2020 due to the COVID-19 pandemic. As a result, revenues from PMPM fees represented 53% of SilverSneakers revenue for the three months ended March 31, 2021, compared to 36% for the three months ended March 31, 2020. We bill for member visits approximately one month in arrears once actual member visits are known. Payments from customers are typically due within 30 days of invoice date. When material, we capitalize costs to obtain contracts with customers and amortize them over the expected recovery period. At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019, $0.7~~2020, $0.8 million ~~and $0.5 million, respectively,~~ of such costs were

capitalized. During the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, the~~ amortization ofexpense related to such capitalized costs was ~~immaterial.~~$0.2 million and $0.1 million, respectively.

Our ~~Healthcare segment’s~~ customer contracts include variable consideration, which is allocated to each distinct month over the contract term based on eligible members and/or member visits each month. The allocated consideration corresponds directly with the value to our customers of our services completed for the month. Under the majority of our ~~Healthcare segment’s~~ contracts, we recognize revenue each month using the practical expedient available under ASC 606-10-55-18, which provides that revenue is recognized in the amount for which we have the right to invoice. ASC 606-10-50-14(b) provides an optional exemption, which we have elected to apply, from disclosing remaining performance obligations when revenue is recognized from the satisfaction of the performance obligation in accordance with the “right to invoice” practical expedient.

Although we evaluate our financial performance and make resource allocation decisions based upon the results of our 2single operating and reportable ~~segments,~~segment, we believe the following information depicts how our ~~Healthcare segment~~ revenues and cash flows from continuing operations are affected by economic factors.

The following table sets forth ~~Healthcare~~ revenue from continuing operations disaggregated by program. Revenue from our SilverSneakers program is predominantly contracted with Medicare Advantage and Medicare Supplement plans.

Our Nutrition segment earns revenue from 4 sources: direct to consumer, retail, QVC and other. Revenue is measured based on the consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third parties. As explained in more detail below, revenue is recognized upon satisfaction of the performance obligation by transferring control over a product to a Nutrition segment customer. Direct-mail advertising costs are expensed as incurred. We recognize an asset for the carrying amount of product to be returned and for costs to obtain a contract if the amortization is more than one year in duration. We expense costs to obtain a contract as incurred if the amortization period is less than one year.

We sell pre-packaged foods directly to weight loss program participants primarily through the Internet and telephone (referred to as the direct to consumer channel), through QVC (a television shopping network), and select retailers. Pre-packaged foods include both frozen and non-frozen (ready-to-go), shelf-stable products.

~~Products sold through the direct to consumer channel, both frozen and non-frozen, may be sold separately (a la carte) or as part of a packaged monthly meal plan for which~~ ~~Nutrition segment~~ customers pay at the point of sale. Products sold through QVC are payable by QVC upon our shipment of the product to the end consumer. For both the direct to consumer channel and QVC, we recognize revenue at a point in time, i.e., at the shipping point. Direct to consumer customers may return unopened ready-to-go Nutrisystem products within 30 days after purchase in order to receive a refund or credit. Frozen Nutrisystem products are refundable only if the order is canceled within 14 days after delivery. South Beach Diet products are not refundable.

Products sold to retailers include both frozen and non-frozen products and are payable by the retailer upon receipt. We recognize revenue at a point in time, i.e., when the retailers take possession of the product. Certain retailers have the right to return unsold products.

We account for the shipment of frozen and non-frozen, ready-to-go products as separate performance obligations. The consideration, including variable consideration for product returns, is allocated between frozen and non-frozen products based on their standalone selling prices. The amount of revenue recognized is adjusted for expected returns, which are estimated based on historical data.

In addition to our pre-packaged foods, we sell prepaid gift cards through a wholesaler that are redeemable through the Internet or telephone. Prepaid gift cards represent grants of rights to goods to be provided in the future to gift card buyers. The wholesaler has the right to return all unsold prepaid gift cards. The wholesaler’s retail selling price of the gift cards is deferred in the balance sheet and recognized as revenue when we have satisfied our performance obligation, i.e., when a gift card holder redeems the gift card with us. We recognize breakage amounts (the estimated amount of unused gift cards) as revenue, in proportion to the actual gift card redemptions exercised by gift card holders in relation to the total expected redemptions of gift cards. We utilize historical experience in estimating the total expected breakage and period over which the gift cards will be redeemed.

Sales and other taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a Nutrition segment customer are excluded from revenue and presented on a net basis. After control over a product has transferred to a Nutrition segment customer, shipping and handling costs associated with outbound freight are accounted for as a fulfillment cost and are included in revenue and cost of revenue in the accompanying consolidated statements of operations. Revenue from shipping and handling charges was $6.5 million and $13.0 million for the three and six months ended June 30, 2020, respectively, and $6.3 million and $8.1 million for the three and six months ended June 30, 2019 (from March 8, 2019 forward), respectively.

~~The following table sets forth Nutrition segment revenue, from March 8, 2019 forward, disaggregated by the source of revenue:~~

~~The following table provides information about receivables, contract assets and contract liabilities from contracts with customers:~~

The contract assets primarily relate to unbilled accounts receivable and are included as other current assets in the accompanying consolidated balance sheet. The contract liabilities (deferred revenue) primarily relate to sale of prepaid gift cards and unshipped foods, which are deferred until such time as the Company has satisfied its performance obligations.

~~Significant changes in the contract liabilities (deferred revenue) balance during the period are as follows:~~

The following table includes estimated revenue from the prepaid gift cards expected to be recognized in the future related to performance obligations that are unsatisfied (or partially satisfied) at the end of the reporting period:

~~We apply the practical expedient in subtopic ASC 606-10-50-14 and do not disclose information about remaining performance obligations that have original expected durations of one year or less.~~

~~We review the reserves for our~~ ~~Nutrition segment~~ customer returns at each reporting period and adjust them to reflect data available at that time. To estimate reserves for returns, we consider actual return rates in preceding periods and changes in product offerings or marketing methods that might impact returns going forward. To the extent the estimate of returns changes, we will adjust the reserve, which will impact the amount of revenue recognized in the period of the adjustment. The provision for estimated returns for the three and six months ended June 30, 2020 was $4.1 million and $9.3 million, respectively, and ~~$5.6 million and $7.0 million~~ ~~for the three and six months ended June 30, 2019 (from March 8, 2019 forward), respectively. At June 30, 2020 and December 31, 2019, the reserve for estimated returns incurred but not received and processed was~~ ~~$1.4 million and $0.8 million, respectively, and has been included in accrued liabilities in the accompanying consolidated balance sheet.~~

~~Inventories consist principally of packaged food held in external fulfillment locations. We value inventories at the~~ ~~lower~~ of cost or net realizable value, with cost determined using the first-in, first-out method. We continually assess quantities of inventory on hand to identify excess or obsolete inventory and record a provision for any estimated loss. We estimate the reserve for excess and obsolete inventory primarily on forecasted demand and/or our ability to sell the products, our ability to introduce new products, future production requirements, and changes in consumer behavior. The reserve for excess and obsolete inventory was $2.0 million and $1.8 million at~~June 30, 2020and~~ ~~December~~ ~~31, 2019, respectively.~~

The COVID-19 pandemic has had and is having an adverse impact on the overall economy, resulting in rapidly changing market and economic conditions that have impacted the Company. In March 2020, we experienced a significant decline in the Company’s market capitalization and in the actual and forecasted operating results of our Healthcare segment, in addition to the unfavorable change in market conditions. As a result, management concluded that there were triggering events during the first quarter of 2020 necessitating an impairment evaluation of our goodwill and indefinite-lived intangible assets. Through this evaluation, management concluded that the fair value of goodwill allocated to the Nutrition business unit as well as the fair value of the Nutrisystem tradename were below their carrying amounts, and i~~n the first quarter of 2020, we recorded impairment losses of $80.0 million and $119.5~~ ~~million related to the~~ ~~Nutrisystem~~ ~~tradename and goodwill, respectively (see Note 12). A reconciliation of our goodwill balance is as follows:~~

~~At June 30, 2020 and December 31, 2019, intangible assets not subject to amortization consist of tradenames of $509.0 million and $589.0~~ ~~million, respectively.~~

Marketing expense includes media, advertising production, marketing and promotional expenses and payroll-related expenses, including share-based payment arrangements, for personnel engaged in these activities. Media expense was $45.1 million and $122.4 million for the three and six months ended June 30, 2020, respectively, and $47.3 million and $67.5 million for the three and six months ended June 30, 2019 (~~from March 8, 2019 forward)~~, respectively. Internet advertising expense is recorded based on either the rate of delivery of a guaranteed number of impressions over the advertising contract term or on the cost per customer acquired, depending upon the terms. All other advertising costs are charged to expense as incurred or the first time the advertising takes place. At ~~June 30, 2020 and December 31, 2019, $0.3 million and $5.0 million, respectively, of costs have been prepaid for future advertisements and promotions.~~

We currently have 54 types of share-based awards outstanding to our employees and directors: stock options, ~~restricted stock awards,~~ restricted stock units,performance-based stock units, and market stock units. We believe that our share-based awards align the interests of our employees and directors with those of our stockholders. Vesting terms for each of these award types generally range from one to ~~four~~three years.

~~We recognize share-based compensation expense for the market stock units if the requisite service period is rendered, even if the market condition is never satisfied.~~ For the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, we recognized total share-based compensation costs of ~~$2.9~~$3.0 million and ~~$3.7~~$0.9 million, respectively.For the three and six months ended June 30, 2019, we recognized total share-based compensation costs of $6.9 million and $9.3 million, respectively, including $0.5 million and $0.6 million, respectively, recorded to restructuring and related charges. We account for forfeitures as they occur.

In March 2021, we granted annual long-term incentive awards consisting of (i) approximately 150,000 stock options with a weighted average exercise price of $26.29 per share and a weighted average grant date fair value of $13.21 per share, and (ii) approximately 83,000 restricted stock units with a weighted average grant date fair value of $23.90 per share. These awards vest over or at the end of three years.

For the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ we had an effective income tax rate from continuing operations of ~~17.6%~~27.6% and ~~30.9%~~27.5%, respectively. During the second quarter of 2020, our effective income tax rate was lower than our statutory rate, primarily due to a change in the estimated annual effective income tax rate. During the second quarter of 2019, we had nondeductible expenses related to the acquisition of Nutrisystem that caused an increase in our effective income tax rate.

For the six months ended June 30, 2020 and 2019, we had an effective tax benefit rate of 5.1% and an effective income tax rate of 37.6%, respectively. For the six months ended June 30, 2020, our effective tax benefit rate was lower than our statutory benefit rate primarily due to the nondeductible goodwill impairment loss of $119.5 million recorded during the first quarter. For the six months ended June 30, 2019, our effective income tax rate increased due to nondeductible expenses related to the acquisition of Nutrisystem as well as two adjustments related to the acquisition that collectively increased our income tax expense for such period by approximately $2.7 million: (i)we evaluated the realizability of beginning-of-the-year deferred tax assets and increased the valuation allowance on deferred tax assets related to state net operating loss carryforwards by $1.8 million, and (ii) we recorded a $0.9 million reduction in deferred tax assets related to state income tax credits.

We file income tax returns in the U.S. Federal jurisdiction and in various state and foreign jurisdictions. Tax years remaining subject to examination in the U.S. Federal jurisdiction include ~~2016~~2017 to present.

We maintain lease agreements principally for our office spaces and certain equipment. ~~In addition, certain of our contracts, such as those with our fulfillment vendor related to our warehouse space or contracts with certain equipment vendors, contain embedded leases.~~ We maintain 32 sublease agreements with respect to ~~two~~one of our office locations, each of which continues through the initial term of

our master lease agreement. Such sublease income and payments, while they reduce our rent expense, are not considered in the value of the right-of-use asset or lease liability. With the exception of two finance leases related to a network server and office equipment, all of our leases are classified as operating leases. In the aggregate, our leases generally have remaining lease terms of one to ~~five years,~~42 months, some of which include options to extend the lease for additional periods. Such extension options were not considered in the value of the right-of-use asset or lease liability because it is not probable that we will exercise the options to extend. If applicable, allocations among lease and non-lease components would be achieved using relative standalone selling prices.

The following table shows the components of lease expense for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,			Three Months Ended March 31,
(In thousands)	2020			2019			2020			2019			2021			2020
Finance lease cost:
Amortization of leased assets	$	162		$	12		$	324		$	24		$	158		$	162
Interest of lease liabilities		22			2			47			4			14			25
Operating lease cost		3,675			3,804			7,350			6,520			1,915			1,960
Short-term lease cost		137			116			266			149
Total lease cost before subleases	$	3,996		$	3,934		$	7,987		$	6,697		$	2,087		$	2,147
Sublease income		(1,363	)		(1,356	)		(2,764	)		(2,700	)		(1,344	)		(1,401	)
Total lease cost, net	$	2,633		$	2,578		$	5,223		$	3,997		$	743		$	746

The Company's debt, net of unamortized deferred loan costs and original issue discount, consisted of the following at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:

(In thousands)	June 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
Term Loan A	$	280,000		$	288,750		$	97,785		$	124,035
Term Loan B		775,000			786,250			334,890			372,240
Revolving Credit Facility		—			19,850
		1,055,000			1,094,850			432,675			496,275
Less: deferred loan costs and original issue discount		(42,678	)		(46,723	)		(27,469	)		(29,569	)
Total debt		1,012,322			1,048,127			405,206			466,706
Less: current portion		(9,775	)		—
Total non-current portion of debt	$	1,002,547		$	1,048,127
Less: current portion ⁽¹⁾								(7,456	)		(7,456	)
Total long-term debt							$	397,750		$	459,250

In connection with the consummation of ~~the Merger,~~our merger with Nutrisystem, on March 8, 2019, we entered into a new Credit and Guaranty Agreement (the “Credit Agreement”) with a group of lenders, Credit Suisse AG, Cayman Islands Branch, as general administrative agent, term facility agent and collateral agent, and SunTrust Bank, as revolving facility agent and ~~swingline~~swing line lender. The Credit Agreement provides us with (i) a $350.0 million term loan A facility (“Term Loan A”), (ii) an $830.0 million term loan B facility (“Term Loan B” and, together with Term Loan A, the “Term Loans”), (iii) a $125.0 million revolving credit facility that includes a $35.0 million sublimit for swingline loans and a $50.0 million sublimit for letters of credit (the “Revolving Credit Facility”; Term Loan A, Term Loan B and the Revolving Credit Facility are sometimes herein referred to collectively as the “Credit Facilities”), and (iv) uncommitted incremental accordion facilities in an aggregate amount at any date equal to the greater of $125.0 million or 50% of our consolidated EBITDA for the then-preceding four fiscal quarters, plus additional amounts based on, among other things, satisfaction of certain financial ratio requirements. As of ~~June 30, 2020,~~March 31, 2021, outstanding debt under the Credit Agreement was ~~$1,012~~$405.2 million, and availability under the ~~Revolving Credit Facility~~revolving credit facility totaled $124.5 million as calculated under the most restrictive covenant.

We are required to repay Term Loan A loans in consecutive quarterly installments, each in the amount of 2.50% of the aggregate initial amount of such loans, payable beginning on June 30, 2019 and on the last day of each succeeding quarter thereafter until maturity on March 8, 2024, at which time the entire outstanding principal balance of such loans is due and payable in full.

We are required to repay Term Loan B loans in consecutive quarterly installments, each in the amount of 0.75% of the aggregate initial amount of such loans, payable beginning on June 30, 2019 and on the last day of each succeeding quarter thereafter until maturity on March 8, 2026, at which time the entire outstanding principal balance of such loans is due and payable in full.

We are permitted to make voluntary prepayments of borrowings under the Term Loans at any time without penalty. From March 8, 2019 through ~~June 30, 2020~~March 31, 2021, we made ~~payments~~voluntary prepayments of ~~$125.0~~$228.3 million on the Term Loans, which ~~included prepayments of~~prepaid all ~~amounts~~scheduled quarterly installments due on Term Loan A and Term Loan B through ~~March 31, 2021,~~September 30, 2022 and June 30, 2023, respectively, excluding any Excess Cash Flow Payments that may be required, as described below. In addition, in December 2020 we used the significant majority of net proceeds from the divestiture of Nutrisystem to pay $519.0 million of principal on the Term Loans, which was applied to the amount due and payable at maturity.

We are required to repay in full any outstanding swingline loans and revolving loans under the Revolving Credit Facility on March 8, 2024. In addition, the Credit Agreement contains provisions that, beginning with fiscal 2019, may require annual excess cash flow (as defined in the Credit Agreement and generally designed to equal cash generated by our business in excess of cash used in the business) to be applied towards the Term Loans. We are required to make prepayments on the Term Loans equal to our excess cash flow for a given fiscal year multiplied by the following excess cash flow percentages (such resulting payment an “Excess Cash Flow Payment”) based on our Net Leverage Ratio (as defined ~~below)~~in the Credit Agreement) on the last day of such fiscal year: (a) 75% if the Net Leverage Ratio is greater than 3.75:1, (b) 50% if the Net Leverage Ratio is equal to or less than 3.75:1 but greater than 3.25:1 (c) 25% if the Net Leverage Ratio is equal to or less than 3.25:1 but greater than 2.75:1, and (d) 0% if the Net Leverage Ratio is equal to or less than 2.75:1. Any such potential mandatory prepayments are reduced by voluntary prepayments. We were not required to make an Excess Cash Flow Payment for fiscal 2020 or 2019.

The Credit Agreement contains a financial covenant that requires us to maintain maximum ratios or levels of consolidated total net debt to consolidated adjusted EBITDA, calculated as provided in the Credit Agreement (the “Net Leverage Ratio”), of 5.75:1.00 for all test dates occurring on or after December 31, 2019 but prior to December 31, 2020, 5.25:1.00 for all test dates occurring on or after December 31, 2020 but prior to December 31, 2021, and 4.75:1.00 for all test dates occurring on or after December 31, 2021. As of ~~June 30, 2020,~~March 31, 2021, we were in compliance with all of the covenant requirements of the Credit Agreement, and our Net Leverage Ratio was equal to ~~4.08~~.2.11.

Based on our current assumptions with respect to the COVID-19 pandemic, including, among other things, the ~~duration of~~outstanding principal on the ~~temporary closures of~~term loans under our ~~fitness partner locations~~Credit Agreement and the average monthly total participation levels of our members ~~after such~~at our fitness partner locations, ~~reopen,~~ we currently believe we will be in compliance with the Net Leverage Ratio covenant over the next 12 months; however, given the significant uncertainty relating to the potential impacts of the COVID-19 pandemic on our business going forward, there are potential scenarios under which we could fail to comply with the Net Leverage Ratio covenant. Our failure to comply with the Net Leverage Ratio covenant would result in an event of default that, if not waived, could have a material adverse effect on our financial condition, results of operations or debt service capability.months. We will continue to monitor our projected ability to comply with all covenants under the Credit Agreement, including the Net Leverage ~~Ratio, which could include seeking an amendment to or waiver of the Net Leverage Ratio covenant if necessary.~~Ratio.

Borrowings under the Credit Agreement bear interest at variable rates based on a margin or spread in excess of either (1) one-month, two-month, three-month or six-month LIBOR (or, with the approval of all lenders holding the particular class of loans, 12-month LIBOR), which may not be less than 0, or (2) the greatest of (a) the prime lending rate of the agent bank for the particular facility, (b) the federal funds rate plus 0.50%, and (c) one-month LIBOR plus 1.00% (the “Base Rate”), as selected by the Company. The LIBOR margin for Term Loan A loans is 4.25%, the LIBOR margin for Term Loan B loans is 5.25% and the LIBOR margin for revolving loans varies between 3.75% and 4.25%, depending on our total Net Leverage Ratio. The Base Rate margin for Term Loan A loans is 3.25%, the Base Rate margin for Term Loan B loans is 4.25% and the Base Rate margin for revolving loans varies between 2.75% and 3.25%, depending on our total Net Leverage Ratio. In May 2019, we entered into 8 amortizing interest rate swap agreements, each of which matures in May 2024. Under these agreements, we receive a variable rate of interest based on LIBOR, and we pay a fixed rate of interest equal to approximately 2.2% plus a spread, as described in the preceding sentences. As further explained in Note 11, during the fourth quarter of ~~June 30,~~ 2020 we concluded that five of the eight interest rate swaps no longer qualified for hedge accounting treatment, and we de-designated these derivatives. As of March 31, 2021, the eight interest rate swap agreements had current notional amounts totaling ~~$800.0 million.~~$700.0 million, of which $388.9 million related to effective hedges.

The Credit Agreement also provides for annual commitment fees ranging between 0.250% and 0.500% of the unused commitments under the Revolving Credit Facility, depending on our total Net Leverage Ratio, and annual letter of credit fees on the daily outstanding availability under outstanding letters of credit at the applicable LIBOR margin for the Revolving Credit Facility, depending on our total Net Leverage Ratio.

Extensions of credit under the Credit Agreement are secured by guarantees from substantially all of the Company’s active material domestic subsidiaries and by security interests in substantially all of Company’s and such subsidiaries’ assets.

The Credit Agreement contains a financial covenant that requires us to maintain specified maximum ratios or levels of consolidated total net debt to EBITDA, calculated as provided in the Credit Agreement. The Credit Agreement also contains various other affirmative and negative covenants customary for financings of this type that, subject to certain exceptions, impose restrictions and limitations on the Company and certain of the Company’s subsidiaries with respect to, among other things, indebtedness; liens; negative pledges; restricted payments (including dividends, distributions, buybacks, redemptions, repurchases with respect to equity interests, and payments, redemptions, retirements, purchases, acquisitions, defeasance, exchange, conversion, cancellation or termination with respect to junior lien, subordinated or unsecured debt); restrictions on subsidiary distributions; loans, advances, guarantees, acquisitions and other investments; mergers and other fundamental changes; sales and other dispositions of assets (including equity interests in subsidiaries); sale/leaseback transactions; transactions with affiliates; conduct of business; amendments and waivers of organizational documents and material junior debt agreements; and changes to fiscal year.

Shareholder Lawsuits: Weiner Lawsuit and Consolidated Derivative ~~Lawsuit, and Witmer~~ Lawsuit

On November 6, 2017, United Healthcare issued a press release announcing expansion of its fitness benefits (“United Press Release”), and the market price of the Company's shares of common stock, par value ~~$.001~~$0.001 per

share (“Common Stock”) dropped on that same day. InThe lawsuits filed in connection with the United Press Release ~~4 lawsuits were filed against the Company. As further~~are described below 3 of the four lawsuits have been dismissed. We are currently not able to predict the probable outcome of the remaining matter or to reasonably estimate a range of potential loss, if any. We intend to vigorously defend ourselves against the remaining complaint..

On November 20, 2017, Eric Weiner, claiming to be a stockholder of the Company, filed a complaint ~~on behalf of stockholders who purchased Common Stock between February 24, 2017 and November 3, 2017 (“Weiner Lawsuit”). The Weiner Lawsuit was filed as a class action~~ in the ~~U.S.~~United States District Court for the Middle District of Tennessee ~~naming~~ (“Weiner Lawsuit”). The Weiner Lawsuit names as defendants the Company, the Company's former chief executive officer, chief financial officer, and a former executive who served as both chief accounting officer and interim chief financial officer. The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated under the Exchange Act in making false and misleading statements

and omissions related to the United Press Release. ~~The complaint seeks monetary damages on behalf of the purported class.~~ On April 3, 2018, the Court ~~entered an order appointing~~appointed the Oklahoma Firefighters Pension and Retirement System as lead plaintiff, ~~designated counsel for the lead plaintiff,~~ and ~~established certain deadlines for the case. On June 4, 2018, plaintiff filed a first amended complaint.~~ ~~The Court denied the Company’s Motion to Dismiss~~ on ~~March 18, 2019 and the Company’s Motion to Reconsider on May 22, 2019. On~~ January 29, 2020, the Court ~~granted lead plaintiff’s motion to certify the class. On July 23, 2020, the United States Court of Appeals for the Sixth Circuit denied the Company’s application for permission to appeal~~entered an order certifying the class ~~certification ruling.~~ of stockholders who purchased Company Common Stock between March 6, 2017 and November 6, 2017. On April 23, 2021, the parties reached a settlement in principle of the Weiner Lawsuit pursuant to which defendants’ insurers will pay the entire settlement amount in exchange for a release of claims.The ~~case~~settlement is ~~currently set for trial on May 18, 2021~~.subject to the execution of a definitive settlement agreement and court approval, neither of which can be assured.

On January 26, 2018 and August 24, 2018, individuals claiming to be stockholders of the Company filed shareholder derivative actions, on behalf of the Company, in the ~~U.S.~~United States District Court for the Middle District of Tennessee, naming the Company as a nominal defendant and certain current and former executives and directors as defendants. On October 15, 2018, the two complaints were consolidated (the “Consolidated Derivative Lawsuit”). On May 15, 2019, a consolidated amended complaint was filed. The consolidated amended complaint asserts claims for violation of Section 10(b), 14(a), and 29(b) of the Exchange Act, breach of fiduciary duty, waste of corporate assets, and unjust enrichment. Plaintiffs seek to recover damages on behalf of the Company, certain corporate governance and internal procedural reforms, and other equitable relief. On June 14, 2019, the defendants filed a Motion to Dismiss all claims and the plaintiffs filed their opposition to the Motion to Dismiss on July 17, 2019. On October 22, 2019, the Consolidated Derivative Lawsuit was dismissed with prejudice. On November 20, 2019, plaintiffs filed a notice of appeal with the United States Circuit Court for the Sixth Circuit. ~~The~~After the parties ~~have~~ entered into a Memorandum of Understanding (“MOU”) to resolve the Consolidated Derivative Lawsuit, ~~and on May 19, 2020,~~ the case was remanded to the District ~~Court to review for approval~~Court. The parties filed a ~~forthcoming~~joint stipulation of settlement based on the terms set forth in the MOU and plaintiffs filed a motion to approve settlement on October 12, 2020.. The Court granted final approval to the settlement on February 19, 2021.

On February 25, 2020, Robert Strougo, claiming to be a stockholder of the Company, filed a complaint in the United States District Court for the Middle District of Tennessee (the "Strougo Lawsuit"). On August 18, 2020, the Court appointed Sheet Metal Workers Local No. 33, Cleveland District, Pension Fund as lead plaintiff. Plaintiff filed its amended complaint on November 13, 2020. The amended complaint is on behalf of a putative class of stockholders who purchased Company Common Stock between March 8, 2019 and February 19, 2020 ~~(the "Strougo Lawsuit"). The Strougo Lawsuit was filed~~and names as ~~a class action in the U.S. District Court for the Middle District of Tennessee, naming~~defendants the Company, the Company's chief financial officer, and former chief ~~executive officer as defendants.~~operating officer. The amended complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated under the Exchange Act in making false and misleading statements and omissions related to the performance of and accounting for the Nutrisystem business that the Company acquired on March 8, 2019. The ~~complaint seeks monetary damages on behalf of the purported class. Three parties have~~Company filed a motion ~~seeking~~ to ~~be appointed lead plaintiff and counsel, but~~dismiss the ~~Court has not ruled~~amended complaint on those motions. Given the uncertainty of litigation and the preliminary stage of the case, we are currently not able to predict the probable outcome of the matter or to reasonably estimate a range of potential loss, if any.December 4, 2020, which motion remains pending.

On April 9, 2020, John Cobb, claiming to be a stockholder of the Company, filed a derivative complaint in the United States District Court for the Middle District of Tennessee naming the Company as a nominal defendant and certain current and former directors and ~~the Company’s former chief executive officer and current chief financial officer~~officers as defendants (the “Cobb Lawsuit”). The complaint ~~asserted~~asserts claims for breach of Section 14(a) of the Exchange Act, breach of fiduciary duty, unjust enrichment, and waste of corporate assets, ~~failure of internal controls, and unjust enrichment,~~ largely tracking the factual allegations in the Strougo Lawsuit. The plaintiff seeks monetary damages on behalf of the Company, restitution, and certain corporate governance and internal procedural reforms. On June 9, 2020, the United States Magistrate Judge approved the parties’ stipulation to a stay the case pending the resolution of defendants’ ~~anticipated~~ motion to dismiss in the Strougo case. Given the uncertainty of litigation and the preliminary stage of the case, we are currently not able to predict the probable outcome of the matter or to reasonably estimate a range of potential loss, if any. Lawsuit.

In July 2020, three putative derivative complaints were filed in the United States District Court for the District of Delaware by the following individuals claiming to be stockholders of the Company: Patrick Yerby, Thomas R. Conte, Melvyn Klein, and Mark Ridendour (the “Delaware Derivative Lawsuits”). The complaints largely track the allegations, named defendants, asserted claims, and requested relief of the Cobb Lawsuit. ~~Once the~~The three Delaware Derivative Lawsuits ~~are~~have been consolidated ~~by the District Court, the Company intends to seek a stay~~ and stayed on terms similar to ~~that~~those entered in the Cobb Lawsuit.

Given the uncertainty of litigation and the preliminary stage of the ~~case,~~Strougo Lawsuit, Cobb Lawsuit, and Delaware Derivative Lawsuits, we are not currently able to predict the probable outcome of the matter or to reasonably estimate a range of potential loss, if any. We intend to vigorously defend ourselves against ~~the Strougo Lawsuit, Cobb Lawsuit, and Delaware Derivative Lawsuit.~~these lawsuits.

On May 31, 2019, Pacific Packaging Concepts, Inc. (“Pacific Packaging”) filed a complaint in the U.S. District Court for the Central District of California, Western Division, naming as defendants two subsidiaries of the ~~Company;~~Company: Nutrisystem, Inc. and Nutri/System IPHC, Inc. In its complaint, Pacific Packaging alleged that the defendants’ use of Pacific Packaging’s federally registered trademark, Fresh Start, in advertisements for its weight management program and shakes constitutes federal trademark infringement, counterfeit trademark infringement, false designation of origin, federal trademark dilution, unfair competition, false advertising, common law unfair competition, and common law trademark infringement. The complaint seeks injunctive relief and monetary damages in an unspecified amount. On August 29, 2019, the defendants filed their Answer to Complaint. The case is currently set for trial on October 29, 2021. In connection with the sale of Nutrisystem, the Company agreed to indemnify Kainos for losses arising out of this matter and retained the right to control the defense thereof. Given the uncertainty of litigation and the preliminary stage of the case, we are currently not able to predict the probable outcome of the matter or to reasonably estimate a range of potential loss, if any. We intend to vigorously defend ourselves against this complaint.

Additionally, from time to time, we are subject to contractual disputes, claims and legal proceedings that arise in the ordinary course of our business. Some of the legal proceedings pending against us as of the date of this report are expected to be covered by insurance policies. As these matters are subject to inherent uncertainties, our view of these matters may change in the future. We expense legal costs as ~~incurred~~incurred..

We account for certain assets and liabilities at fair value. Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date, assuming the transaction occurs in the principal or most advantageous market for that asset or liability.

The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

The following table presents our assets and liabilities measured at fair value on a recurring basis at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

The fair values of interest rate swap agreements are primarily determined based on the present value of future cash flows using internal models and third-party pricing services with observable inputs, including interest rates, yield curves and applicable credit spreads.

We measure certain assets at fair value on a nonrecurring basis in the fourth quarter of each year, including the following:

Each of these assets above is classified as Level 3 within the fair value hierarchy.The COVID-19 pandemic has had and is having an adverse impact on the overall economy, resulting in rapidly changing market and economic conditions that have impacted the Company. In March 2020, we experienced a significant decline in the Company’s market capitalization and in the actual and forecasted operating results of our Healthcare segment, in addition to the unfavorable change in market conditions. As a result, management concluded that there were triggering events during the first quarter of 2020 necessitating an impairment evaluation of our goodwill (for each of our reporting units) and indefinite-lived intangible assets (which consist of the Nutrisystem tradename and the SilverSneakers tradename).

~~We estimated the~~The fair value of ~~each~~a reporting unit ~~using~~is the price that would be received upon a ~~combination~~sale of the unit as a ~~discounted cash flow model and~~whole in an orderly transaction between market participants at the measurement date. Following the sale of Nutrisystem effective December 9, 2020, we have a ~~market-based approach, and we reconciled~~single reporting unit.

We also measure on a non-recurring basis our cost method investments that do not have readily determinable fair values. We have elected the ~~aggregate~~measurement alternative to measure such investments at cost less impairment, adjusted by observable price changes, with any fair value changes recognized in earnings. We own 159,309 shares of common stock of Sharecare, Inc. (“Sharecare”) that we acquired in connection with the sale of our ~~reporting units~~total population health services business to our consolidated market capitalization. Estimating fair value requires significant judgments, including management’s estimate of future cash flows of each reporting unit (which is dependent on internal forecasts of projected income), estimation of the long-term growth rates of future revenues for our reporting units, the terminal growth rate of revenue, the tax rate,Sharecare in July 2016 and determination of the weighted average cost of capital, as well as relevant comparable company revenue and earnings multiples and market participant acquisition premium for the market-based approaches. Changes in these estimates and assumptions could materially affect the estimate of fair value and goodwill impairment for each reporting unit. There is significant uncertainty relating to the potential future impacts of the COVID-19 pandemic on our business and the overall market.

Certain significant inputs used in the estimation of fair value were adversely impacted by the changing market and economic conditions discussed above, most notably the weighted average cost of capital, resulting in a lower estimated fair value for each of our reporting units. Before we performed the impairment analysis during the first quarter, the estimated fair value of the Nutrition reporting unit was equal to its carrying value due to an impairment loss we recorded in the fourth quarter of 2019. Because there was no excess of estimated fair value over carrying value (“headroom”) for the Nutrition reporting unitreport at ~~the beginning of 2020, the decrease in the estimated fair value of the Nutrition reporting unit during the first quarter of 2020 resulted in an impairment of the carrying value of~~

goodwill for the Nutrition reporting unit, and we recorded a $119.5 million goodwill impairment loss. None of the impaired goodwill is deductible for tax purposes, and there is no cash tax benefit related to the impairment. For the Healthcare reporting unit, the fair value of the reporting unit exceeded its carrying amount, and we determined that thetheir carrying value of ~~goodwill was~~$10.8 million in “Other assets” on the consolidated balance sheets. On February 12, 2021, Sharecare announced that it had entered into a merger agreement with Falcon Capital Acquisition Corp. (“FCAC”) and FCAC Merger Sub, Inc. (“Merger Sub”) pursuant to which Sharecare would merge with and into Merger Sub with Sharecare surviving as a wholly owned subsidiary of FCAC (the “Sharecare Transaction”), as further described in the Current Report on Form 8-K filed by FCAC on February 12, 2021 and other filings made by FCAC with the Securities and Exchange Commission, including the Registration Statement on Form S-4 filed on February 16, 2021, as amended by Amendment No. 1 to the Registration Statement on Form S-4 filed on April 8, 2021, none of which shall constitute a part of this report or be incorporated by reference into this report. The Sharecare Transaction is subject to customary closing conditions, including the approval of Sharecare’s and FCAC’s shareholders, and may or may not ~~impaired.~~

~~Also during the first quarter of 2020, we estimated the fair~~be consummated. The value of ~~indefinite-lived intangible assets, which consisted~~any consideration that we may receive as a shareholder of ~~2 tradenames (the Nutrisystem tradename~~Sharecare in connection with the Sharecare Transaction is speculative, and any equity consideration we may receive in connection with the SilverSneakers tradename), using the relief-from-royalty method, which required significant assumptions such as the long-term growth rate of future revenues, the royalty rate for such revenue, and a discount rate. Changes in these estimates and assumptions could materially affect the estimate of fair value for the tradenames. SimilarSharecare Transaction will be subject to the goodwill impairment analysis described above, the discount rate used in the estimation of fair value of the tradenames was adversely impacted by the changing market and economic conditions discussed above, resulting in a lower estimated fair value for each tradename.restrictions on resale.

Due to an impairment loss recorded in the fourth quarter of 2019 related to the Nutrisystem tradename and goodwill, the estimated fair value of the Nutrisystem tradename was equal to its carrying value at the beginning of 2020. The decrease in the estimated fair value of the Nutrisystem tradename during the first quarter of 2020 resulted in an impairment of tradename, and we recorded an $80.0 million impairment loss related to the Nutrisystem tradename. None of this impairment loss is deductible for tax purposes, and there is no cash tax benefit related to the impairment. Based on our impairment assessment of the SilverSneakers tradename, we determined that the carrying value of the tradename was not impaired as of the measurement date.

~~There were 0~~ ~~impairment triggers during the second quarter of 2020 related to our goodwill or indefinite-lived intangible assets.~~

The e~~stimated~~stimated fair valueof each classof financialinstruments at ~~June 30, 2020~~March 31, 2021 was asfollows:

Cash and cash equivalents – The carrying amount of $~~60.3~~52.4 million approximates fair value due to the short maturity of those instruments (less than three months).

Debt – The estimated fair value of outstanding borrowings under the Credit Agreement, which includes term loan facilities and a revolving credit facility (see Note ~~10)~~8), is determined based on the fair value hierarchy as discussed above.

The Term Loans are actively traded and therefore are classified as Level 1 valuations. The estimated fair value is based on an average of quotes as of March 31, 2021 ~~June 30, 2020~~ from dealers who stand ready and willing to transact at those ~~prices~~.prices. We use a mid-market pricing convention (i.e., the mid-point of average bid and ask prices) to individually value Term Loan A and Term Loan B. The Revolving Credit Facility is not actively traded and therefore is classified as a Level 2 valuation based on the market for similar instruments. The estimated fair value and carrying amount of outstanding borrowings under the Term Loans (excluding original issue discount and deferred loan costs) at ~~June 30, 2020~~March 31, 2021 were ~~$921.2~~$432.6 million and ~~$1,012.3~~$432.7 million, respectively. There were 0 outstanding borrowings under the Revolving Credit Facility at ~~June 30, 2020.~~March 31, 2021.

We use derivative instruments to manage differences in the amount, timing, and duration of our known or expected cash payments related to our outstanding debt (i.e., interest rate risk). ~~These derivatives~~Some of these derivatives are designated and qualify as a hedge of the exposure to variability in expected future cash flows and are therefore considered cash flow hedges. We account for derivatives in accordance with FASB ASC Topic 815, which establishes accounting and reporting standards requiring that derivative instruments be recorded on the balance sheet at fair value as either an asset or liability. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Changes in the derivative’s fair value will be recognized currently in earnings unless specific hedge accounting criteria are met. We classify cash flows from settlement of our effective cash flow hedges in the same category as the cash flows from the related hedged items, generally within the operating activities in the consolidated statements of cash flows. We ~~do not use~~classify cash flows from settlement of our non-designated derivatives ~~for trading or speculative purposes and currently do not have any derivatives that are not designated as hedges.~~within the investing section of the consolidated statements of cash flows.

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. The counterparties to the interest rate swap agreements expose us to credit risk in the event of nonperformance by such counterparties. However, at ~~June 30, 2020~~March 31, 2021, we do not anticipate nonperformance by these counterparties. Our interest rate swap agreements with each of the counterparties contain a provision whereby if we either default or are capable of being declared in default on any of our indebtedness, whether or not such default results in repayment of the indebtedness being accelerated by the lender, then we could also be declared in default on our derivative obligations.

Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction will not occur in the initially identified time period or within a subsequent two-month time period. Deferred gains and losses in accumulated other comprehensive income or loss ("accumulated OCI") associated with such derivative instruments are reclassified into earnings in the period of de-designation.

Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for our making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. In May 2019, we entered into 8 amortizing interest rate swap agreements, each of which matures in May 2024. Under these agreements, we receive a variable rate of interest based on LIBOR, and we pay a fixed rate of interest equal to approximately 2.2% plus a spread (see Note ~~10)~~8). Upon entering into the Purchase Agreement with Kainos on October 18, 2020, we determined that some of our hedged transactions would not materially occur in the initially identified time period since we expected to use the majority of the net proceeds from the sale to pay down a significant portion of outstanding debt. As a result, we concluded that 5 of ~~June 30,~~our 8

interest rate swaps no longer qualified for hedge accounting treatment. Accordingly, in the fourth quarter of 2020 we de-designated these 5 derivatives (“de-designated swaps”) and accelerated the reclassification of deferred gains and losses in accumulated OCI to earnings from discontinued operations as a result of the hedged forecasted transactions becoming probable not to occur.

Additionally, upon de-designation in October 2020, we froze $3.2 million of previously deferred losses in accumulated OCI related to forecasted payments that are probable of occurring. We reclassify such deferred losses from accumulated OCI into earnings as an adjustment to interest expense during periods in which the forecasted transactions impact earnings, consistent with hedge accounting treatment. In the event that the related forecasted payments are no longer probable of occurring, the related loss in accumulated OCI will be recognized in earnings immediately.

We continue to maintain the effective hedging relationship between 3 interest rate swap agreements and the portion of our forecasted payments that is expected to remain highly probable of occurring. During the fourth quarter of 2020 we evaluated the likelihood and extent of potential future losses from the de-designated swaps. Such potential future losses are capped since the variable interest rate of our swaps is subject to a floor of 0%. Based on the LIBOR rates in effect at the time of de-designation, we decided to hold the de-designated swaps as derivative instruments requiring mark-to-market accounting treatment, with any change in fair value recognized each period in current earnings.

At March 31, 2021, our interest rate swap agreements designated as effective cash flow hedges had current notional amounts totaling $388.9 million, and our de-designated interest rate swap agreements had current notional amounts totaling ~~$800.0~~$311.1 million.

We record all derivatives ~~that are designated and qualify as cash flow hedges~~ at estimated fair value in the consolidated balance ~~sheet, with the related gains~~sheet. Gains and losses on derivatives designated as effective cash flow hedges are recorded in accumulated ~~other comprehensive income or loss ("accumulated OCI")~~OCI and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects ~~earnings~~. earnings. Amounts reported in accumulated OCI related to cash flow hedge derivatives will be reclassified to interest expense as we make interest payments on our variable-rate debt. As of ~~June 30, 2020,~~March 31, 2021, we expect to reclassify ~~$15.8~~$8.5 million from accumulated OCI as an increase to interest expense within the next 12 months due to the scheduled payment of interest associated with our debt.Gains and losses on derivatives de-designated as effective cash flow hedges are recorded in the consolidated statement of operations as other (income) expense, net.

The estimated gross fair values of derivative instruments and their classification on the consolidated balance sheet at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were as follows:

(In thousands)	June 30, 2020		December 31, 2019		March 31, 2021		December 31, 2020
Liabilities:
Derivatives designated as hedging instruments:
Derivatives designated as effective hedging instruments:
Current portion of long-term liabilities	$	15,664	$	4,947	$	7,895	$	8,205
Other long-term liabilities		28,743		11,291		9,024		12,172
	$	44,407	$	16,238	$	16,919	$	20,377

Non-designated derivatives:
Current portion of long-term liabilities					$	6,300	$	6,548
Other long-term liabilities						7,197		9,712
					$	13,497	$	16,260

The following table presents the effect of cash flow hedge accounting on accumulated OCI as of ~~June 30~~March 31, ~~2020~~2021 and ~~2019:~~2020:

The following table presents the impact that non-designated derivatives had on our consolidated statement of operations for the three months ended March 31, 2021:

We use the two-class method to calculate earnings per share as the unvested restricted stock awards outstanding under our equity incentive plan are participating shares with nonforfeitable rights to dividends. Under the two-class method, we compute earnings per share of Common Stock by dividing the sum of distributed earnings to common stockholders (currently not applicable as we do not pay dividends) and undistributed earnings allocated to common stockholders by the weighted average number of outstanding shares of Common Stock for the period. In applying the two-class method, we allocate undistributed earnings to both shares of Common Stock and participating securities based on the number of weighted average shares outstanding during the period. Any undistributed losses are not allocated to unvested restricted stock as the restricted stockholders are not obligated to share in the losses. Following is areconciliation ofrtheencumerato~~ncili~~a~~tion~~r aofnd denom~~the~~inator nu~~merat~~orof basaindc ~~denom~~i~~nat~~orof~~bas~~icand diluted earnings (loss) per share for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:

(In thousands except per share data)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Numerator:

Net income (loss)

$
28,511

$
18,137

$
(169,595
)

$
22,351

Net income allocated to unvested restricted stock

(20
)

(93
)

—

(77
)
Net income (loss) allocated to shares of Common Stock

$
28,491

$
18,044

$
(169,595
)

$
22,274

Denominator:

Shares used for basic income (loss) per share

48,711

47,790

48,662

45,165

Effect of dilutive stock options and
   restricted stock units outstanding:

Non-qualified stock options

8

93

—

110

Restricted stock units

75

578

—

444

Shares used for diluted income (loss) per share ⁽¹⁾

48,794

48,461

48,662

45,719

Earnings (loss) per share:

Basic

$
0.59

$
0.38

$
(3.49
)

$
0.49

Diluted ⁽¹⁾

$
0.58

$
0.37

$
(3.49
)

$
0.49

Dilutive securities outstanding not included in the
   computation of earnings per share
   because their effect is anti-dilutive:

Non-qualified stock options

235

71

202

76

Restricted stock units

750

288

544

172

Restricted stock awards

32

128

35

64

Performance-based stock units

95

—

64

—

Market-based stock units

49

—

25

—

~~(1)~~

~~The impact of potentially dilutive securities for the six months ended June 30, 2020 was not considered because the impact would be anti-dilutive.~~

(In thousands except per share data)	Three Months Ended March 31,
	2021			2020
Numerator:
Income from continuing operations - numerator for earnings (loss) per share	$	19,944		$	8,275
Net income (loss) from discontinued operations - numerator for earnings (loss) per share		(808	)		(206,381	)
Net income (loss)	$	19,136		$	(198,106	)

Denominator:
Shares used for basic income (loss) per share		49,222			48,613
Effect of dilutive stock options and stock units outstanding:
Non-qualified stock options		62			44
Restricted stock units		844			165
Performance-based stock units		61			33
Market stock units		151			—
Shares used for diluted income (loss) per share		50,340			48,855

Earnings (loss) per share - basic:
Continuing operations	$	0.41		$	0.17
Discontinued operations	$	(0.02	)	$	(4.25	)
Net income (loss)	$	0.39		$	(4.08	)

Earnings (loss) per share - diluted:
Continuing operations	$	0.40		$	0.17
Discontinued operations	$	(0.02	)	$	(4.22	)
Net income (loss)	$	0.38		$	(4.05	)

Dilutive securities outstanding not included in the computation of earnings per share because their effect is anti-dilutive:
Non-qualified stock options		268			118
Restricted stock units		9			98
Restricted stock awards		—			38

Market stock units and ~~performance~~performance-based stock units outstanding are considered contingently issuable shares, and certain of these stock units were excluded from the calculations of diluted earnings per share ~~for all periods presented~~ as the performance criteria had not been met as of the end of the applicable reporting ~~periods.~~period.

The following tables summarize the changes in accumulated OCI, net of tax, for the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020:

The following table presents details about reclassifications out of accumulated OCI for the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020:

					Three Months Ended
(In thousands)	Six Months Ended June, 2020			Statement of Operations Classification	March 31, 2021			March 31, 2020			Statement of Operations Classification
Interest rate swaps	$	4,603		Interest expense	$	2,350		$	1,121		Interest expense
		(1,175	)	Income tax expense		(600	)		(286	)	Income tax expense
	$	3,428		Net of tax
Total amounts reclassified from accumulated OCI					$	1,750		$	835		Net of tax

As discussed in Note 9, on April 23, 2021, we reached a settlement in principle related to the Weiner Lawsuit pursuant to which our insurers will pay the entire settlement amount in exchange for a release of claims. Accordingly, we have recorded a current liability (in “Accrued liabilities”) and ~~Concentrations~~corresponding current asset (in “Other current assets”) at March 31, 2021 equal to the amount of ~~Risk~~ the settlement.

Following the acquisition of Nutrisystem in March 2019, we organize and manage our operations within 2 reportable segments, based on the types of products and services they offer: Healthcare and Nutrition. The Healthcare segment derives its revenues from ~~SilverSneakers~~senior fitness, Prime Fitness and WholeHealth Living. The Nutrition segment provides weight management products and services and derives its revenues from Nutrisystem and South Beach Diet products. Prior to the acquisition of Nutrisystem, we had 1 ~~reportable segment.~~

~~Our chief operating decision maker evaluates performance and allocates resources based on~~ each segment’s EBITDA excluding acquisition and integration costs, impairment loss, restructuring and related charges, CEO transition costs, and direct, incremental costs related to COVID-19. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Transactions between the segments primarily consist of payments made by one segment on behalf of the other segment, which are recorded as current assets and eliminated in consolidation. Intersegment revenues and costs related to Wisely Well totaled$1.9 million for the three and six months ended June 30, 2020. The following tables present information about reported segment revenues and profit or loss, net of intersegment eliminations, as well as reconciliations of each such amount to consolidated totals:

(In thousands)

Three Months Ended June 30,

2020

2019

Healthcare

Nutrition

Total
Segments

Healthcare

Nutrition

Total
Segments

Revenues

$
81,923

$
180,675

$
262,598

$
157,481

$
182,896

$
340,377

(1)

Consolidated income before income taxes

$
34,618

$
26,252

Acquisition and integration costs

2,049

8,999

Impairment loss

—

—

CEO transition costs

1,745

—

COVID-19 costs

1,260

—

Restructuring and related charges

1,009

2,352

Interest expense

21,235

23,661

Depreciation and amortization

12,919

9,084

Adjusted EBITDA

$
41,472

$
33,363

$
74,835

$
35,681

$
34,667

$
70,348

(In thousands)

Six Months Ended June 30,

2020

2019

Healthcare

Nutrition

Total
Segments

Healthcare

Nutrition

Total
Segments

Revenues

$
241,615

$
358,638

$
600,253

$
314,008

$
240,463

$
554,471

(1)

Consolidated income (loss) before income taxes

$
(178,633
)

$
35,834

Acquisition and integration costs

4,844

26,049

Impairment loss

199,500

—

CEO transition costs

4,332

—

COVID-19 costs

1,260

—

Restructuring and related charges

1,752

3,943

Interest expense

42,898

31,328

Depreciation and amortization

27,682

12,666

Adjusted EBITDA

$
71,719

$
31,916

$
103,635

$
61,810

$
48,010

$
109,820

As of June 30, 2020, we were subject to concentration of revenue risk related to the services that we provide. For the three and six months ended June 30, 2020, a significant portion (19% and 28%, respectively) of our consolidated revenues was derived from our SilverSneakerssenior fitness offering, in which a meaningful amount of our fees is earned based on member visits to fitness partner locations. Due to widespread closures of our partner locations beginning in March 2020 related to the COVID-19 pandemic, there was a significant decrease in member participation and the related revenues during March 2020, with visits decreasing sharply by the end of March. A substantial number of our fitness partner locations remained closed for at least a portion of the second quarter. During the second quarter of 2020, the average monthly total participation levels of our SilverSneakers members were significantly below historical levels, and we also experienced a decline in paid subscribers for Prime Fitness, each of which adversely impacted revenues in our Healthcare segment. ~~These adverse impacts to revenue were somewhat mitigated by a reduction in cost of services as our visit costs decreased in a corresponding manner.~~

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

As used throughout this Quarterly Report on Form 10-Q, unless the context otherwise indicates, the terms “we,” “us,” “our,” “Tivity Health,” or the “Company” refer collectively to Tivity Health, Inc. and its wholly-owned subsidiaries. Please read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included under Item 1. “Financial Statements” of this report.

In January 2020, the Secretary of ~~HHS~~the U.S. Department of Health and Human Services declared a national public health emergency due to a novel strain of coronavirus, which causes the disease known as ~~“COVID-19”.~~ “COVID-19.” In March 2020, the World Health Organization characterized the outbreak of COVID-19 as a global ~~pandemic, and COVID-19 continues to spread throughout the United States and other countries. Many state and local governments,~~ ~~together with public health officials, have recommended and mandated precautions to mitigate the spread of COVID-19, including~~ ordering closure of certain businesses and imposing stay-at-home orders and social distancing guidelines for individuals. Such measures have resulted in significantly reduced demand for many businesses that have continued in operation.

pandemic. By March 31, 2020, substantially all of the fitness centers in our national network were temporarily closed, which had an adverse impact on ~~the~~our results of operations ~~in our Healthcare segment~~ for the first quarter of 2020 and beyond because a significant portion of ~~our Healthcare segment~~ revenues from our SilverSneakers program is based on member visits to a fitness partner location. ~~A substantial number~~ Some locations beganreopening in May 2020 and additional locations reopened in June and throughout the remainder of 2020. As of March 31, 2021, a significant majority of our fitness partner locations ~~remained closed through April, with some locations reopening in May and additional locations reopening in June. For~~were open. SilverSneakers in-person visits totaled 11.2 million for the ~~month of June 2020, approximately 66% of our fitness partner locations reported at least one visit from our SilverSneakers program. For the second~~first quarter of 2021, compared to 25.3 million and 9.3 million for the first and fourth quarters of 2020, respectively. In addition, while the ~~average monthly total participation levels~~number of ~~our SilverSneakers members were significantly below historical levels, and we also experienced a decline in paid~~active subscribers for Prime Fitness ~~each of which adversely impacted revenues in our Healthcare segment.~~ We are unable to predict with certainty how many of our fitness partner locations will be open in the future and for what duration, or the level of member participation at our fitness partner locations.

We do not believe that COVID-19-related developments had a material impact on the results of operations or cash flows of our Nutrition segment for the first or second quarters of 2020. While overall we did not experience any significant disruptions, interruptions, ordeclined from April through December 2020, it increased costs related to our supply chain, inventory, or distribution channels as a result of COVID-19, we experienced delays in fulfilling orders for our Nutrition segment’s products at certain of our warehouses ~~due to some employees of our fulfillment provider testing positive for COVID-19~~. As a result, we incurred incremental expense of $1.3 million in the second quarter related to increased labor rates and overtime for employees of our fulfillment provider as well as additional shipping and related charges as we transferred the fulfillment of certain orders to other warehouses that were farther from the customer’s delivery destination.

~~We have taken a number of actions in response to the pandemic, including the following:~~

As a result of the COVID-19 pandemic, in March 2020, we experienced a significant decline in the Company’s market capitalization and in the actual and forecasted operating results of our Healthcare segment, ~~in addition to the unfavorable change in market conditions. As a result, management concluded that there were triggering events~~slightly during the first quarter of ~~2020 necessitating an impairment evaluation~~2021 and we expect it to stabilize for the rest of 2021.

As fitness locations closed as a result of the pandemic, we quickly adapted to the changing needs of our ~~goodwill~~members and ~~indefinite-lived intangible assets. Through this evaluation, management concluded that~~clients by launching a new and dynamic suite of virtual offerings, which we will continue to offer. Virtual visits grew significantly, from 12,000 for the fair value of goodwill allocated to the Nutrition business unit as well as the fair value of the Nutrisystem tradename were below their carrying amounts, and we recorded an impairment loss of $199.5 million, ~~including $80.0 million related to the Nutrisystem tradename and $119.5 million related to goodwill allocated to the Nutrition segment. There were no impairment triggers during the second~~first quarter of 2020 ~~related~~to 1.2 million for the first quarter of 2021. We believe these digital offerings not only allow our currently homebound members to stay active and connected with the help of SilverSneakers but that they will also be a critical contributor to our ~~goodwill or indefinite-lived intangible assets.~~new digitally-enabled member engagement platform going forward.

Tivity Health, Inc., was founded and incorporated in Delaware in 1981, is a leading provider of healthy life-changing solutions, including SilverSneakers, Nutrisystem, Prime Fitness, Wisely Well, South Beach Diet, and WholeHealth Living. On March 8, 2019, we completed1981. Through our ~~acquisition of Nutrisystem, Inc. (“Nutrisystem”), a provider of weight management products and services, including nutritionally balanced weight loss~~four programs, ~~sold primarily through the Internet and telephone and multi-day kits and single items (a la carte) available at select retail locations.~~

Following the acquisition of Nutrisystem, we organize and manage our operations within two reportable segments, based on the types of products and services they offer: Healthcare and Nutrition. The Healthcare segment is comprised of our legacy business and includes SilverSneakers, Prime Fitness, WholeHealth Living, and Wisely ~~Well. The Nutrition segment is comprised of Nutrisystem’s legacy business~~Well^TM, we are focused on becoming the modern destination for healthy living, especially for seniors and ~~includes Nutrisystem and the South Beach Diet.~~

~~On May 6, 2020, we announced that the Board has decided to explore strategic alternatives with respect to our Nutrition business unit, including a possible transaction. We can give no assurance~~ ~~as to whether we will be able to identify any strategic alternatives that are likely to increase value to our stockholders~~older adults.

~~As part of our Healthcare segment,~~We offer SilverSneakers ~~is offered~~ to members of Medicare Advantage, ~~and~~ Medicare Supplement, and group retiree plans. We also offer Prime Fitness, a fitness facility access program, through commercial health plans, employers, and other sponsoring organizations. Our national network of fitness centers delivers both SilverSneakers and Prime Fitness. Our fitness networks encompass ~~more than~~approximately 16,000 partner locations and ~~approximately~~nearly 1,000 alternative ~~virtual and physical~~ locations that provide classes outside of traditional fitness centers. We also offer virtual fitness experiences, including live instructor-led classes. Through our WholeHealth Living program, which we sell primarily to health plans, we offer a continuum of services related to complementary, alternative, and physical medicine. Our WholeHealth Living network includes relationships with ~~approximately 24,000~~over 17,000 complementary, alternative, and physical medicine ~~practitioners~~practitioner locations to serve individuals through health plans and employers who seek health services such as chiropractic care, acupuncture, physical therapy, occupational therapy, massage therapy, and more.Finally, through our Wisely Well brand, we offer meals designed to support individuals and caregivers who are seeking meal convenience as well as those recovering after a hospitalization or living with chronic conditions.

~~Our Nutrition segment includes~~Effective as of December 9, 2020, we completed the sale of Nutrisystem to Kainos pursuant to terms of the Purchase Agreement. At the closing (the “Closing”) of the transactions contemplated by the Purchase Agreement, Nutrisystem, Inc. and its subsidiaries were acquired by, and became wholly owned subsidiaries of, Kainos. Pursuant to the ~~South Beach Diet. Typically, our Nutrition segment customers~~terms of the Purchase Agreement, Kainos paid to the Company an aggregate purchase ~~monthly food packages containing~~price, after giving effect to customary indebtedness and cash adjustments, of approximately $559 million, which amount is subject to a ~~four-week meal plan consisting~~customary working capital adjustment post-Closing. We used the significant majority of ~~breakfasts, lunches, dinners, snacks and flex meals, which they supplement, depending~~the net proceeds from the divestiture to pay down $519 million of principal on the ~~program they are following, with items such~~term loans under our Credit

Agreement. Results of operations for Nutrisystem have been classified as fresh fruits, fresh vegetables, lean protein and dairy. Most Nutrition segment customers order on auto-delivery, which means we send a four-week meal plan on an ongoing basis until notified of a customer’s cancellation. Auto-delivery customers are offered savings off of our regular one-time rate with each order. Monthly notifications are also sent to remind customers to update order preferences. We offer pre-selected favorites or customers may personalize their meal plan by selecting their entire menu or by customizing plans to their specific tastes or dietary preference. In total, our plans feature approximately 250 food options including frozen and unfrozen ready-to-go entrees, snacks, and shakes, at different price points. Additionally, we offer unlimited counseling from our trained weight loss counselors, registered dietitians and certified diabetes educators at no cost. Counselors are available as needed, seven days a week throughout an extended day, with further support provided through our digital tools. The Nutrition segment also offers its products through select retailers and QVC, a television shopping network.discontinued operations for all periods presented in the consolidated financial statements.

This report contains forward-looking statements, which are based upon current expectations, involve a number of risks and uncertainties, and are subject to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not historical statements of fact and those regarding the intent, belief, or expectations of the Company, including, without limitation, all statements regarding the Company's future earnings, revenues, and results of operations. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may vary from those in the forward-looking statements as a result of various factors, including, but not limited to:

We undertake no obligation to update or revise any such forward-looking statements.

~~Tivity Health’s integrated portfolio~~Our strategy is to become the modern destination for healthy living. We will expand beyond fitness by establishing an engagement platform that enables personalized member interaction with all of ~~healthy life-changing solutions supports overall health~~our offerings, and wellness programs, which we believe are critical to our health plan and employer-based customers. On May 6, 2020, we announced that the Board has decided to explore strategic alternatives with regard to our Nutrition business unit, including a possible transaction. We can give no assurance as to whether we will ~~be able~~partner with other payors and service providers to ~~identify any strategic alternatives that are likely~~aggregate services to ~~increase value~~members under the SilverSneakers umbrella. We plan to accelerate growth in our ~~stockholders. In the event that we determine~~core SilverSneakers and Prime Fitness businesses by expanding and strengthening our fitness partner network, continuing to pursue a sale of the Nutrition business unit, we may be unable to secure a buyer or, if we do so, such sale transaction may not be at a price that is favorable to us. Speculation regarding any developments related to the review of strategic alternatives forgrow and scale our ~~Nutrition business unit~~new virtual offerings, and ~~perceived uncertainties related to the future of the Company could cause~~expanding our ~~stock price to fluctuate significantly.~~ We have not set a specific timetable for the conclusion of this process. Notwithstanding the exploration of strategic alternatives, our near-term strategy for the Nutrition business unit is to maximize opportunities to better serve our customers and grow our business as well as prepare for a successful 2021 diet season. For the Healthcare business unit, we will continue to focus on adding new members, building engagement and participation among current eligible members (including expansion and enhancementpopular community-based offerings. The continued development of our suite of digital offerings will enable a more tailored, interactive, and ~~virtual exercise classes during~~impactful experience across a variety of areas, including fitness, social connection, community involvement, volunteering, and ~~beyond the duration of the COVID-19 pandemic), and collaborating with health plans and other partners to introduce new products~~ ~~and services.~~enrichment. In addition, we ~~expect that the Healthcare business unit will continue~~plan to ~~use the Wisely Well brand~~accelerate growth in our WholeHealth Living offering through market share expansion and to support our health plan partners with nutrition offerings such as home meal delivery to seniors or members recently discharged from the hospital as well as nutritional support for members with chronic conditions.improved technology.

We describe our significant accounting policies in Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020 (“~~2019~~2020 Form 10-K”). We prepare the consolidated financial statements in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”), which requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and related disclosures at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

We believe the following accounting policies are the most critical in understanding the estimates and judgments that are involved in preparing our financial statements and the uncertainties that could impact our results of operations, financial condition, and cash flows.

We continually assess the quantities of inventory on hand to identify excess or obsolete inventory and record a provision for any estimated loss. We estimate the reserve for excess and obsolete inventory based primarily on our forecasted demand and/or our ability to sell the products, introduction of new products, future production requirements and changes in our customers’ behavior. The reserve for excess and obsolete inventory was $2.0 million and $1.8 million at June 30, 2020 and December 31, 2019, respectively.

In connection with any acquisitions, we allocate the purchase price to the assets and liabilities we acquire, such as net tangible assets, deferred revenue, identifiable intangible assets such as trade names, customer lists, and customer relationships, and goodwill. We apply significant judgments and estimates in determining the fair market value of the assets acquired and their useful lives. For example, we estimated the fair value of existing definite-lived customer lists based on the multi-period excess earnings method under the income approach, which involved applying an attrition rate to the estimated net future cash flows from the customers that existed as of the acquisition date. We estimated the fair values of the tradenames using the relief-from-royalty method, which required significant assumptions such as the long-term growth rates of future revenues, the royalty rate for such revenue, the terminal growth rate of revenue, the tax rate, and a discount rate. Different estimates and assumptions in valuing acquired assets could yield materially different results.

~~We review~~go~~odwillfor i~~mp~~airm~~e~~nt at therep~~o~~rtingunitlev~~e~~l (op~~e~~rat~~ingse~~gment~~o~~r onelevel~~be~~low~~ano~~perating~~segment) on an annual basis (during the fourth quarter of our fiscal year) or more frequently whenever events or circumstances indicate that the carrying value may not be recoverable. Following the acquisition of Nutrisystem in March 2019, we have two reporting units: Healthcare and Nutrition. Prior to such acquisition, we had one reporting unit. As further described below under “Impairment Loss,” in March 2020, we experienced a significant decline in the Company’s market capitalization and in the actual and forecasted operating results of our Healthcare segment, in addition to the unfavorable change in market conditions. As a result, management concluded that there were triggering events during the first quarter of 2020 necessitating an impairment evaluation of our goodwill and indefinite-lived intangible assets. Through this evaluation, management concluded that the fair value of goodwill allocated to the Nutrition business unit as well as the fair value of the Nutrisystem tradename were below their carrying amounts, ~~and during the first quarter of 2020, we recorded an impairment loss of $199.5 million,~~including $80.0 million related to the Nutrisystem tradename and $119.5 million related to goodwill allocated to the Nutrition segment. See Note 12 of the notes to consolidated financial statements included in this report.

~~As part of the annual impairment test, we may elect to perf~~o~~rm a qualitative ass~~essmen~~t to determinewhether it is more l~~i~~kely than not that the fair valueof a rep~~o~~rtingunit is less thanits c~~a~~rryi~~n~~g value.~~If w~~e elect not to perform a qualitat~~ive~~assessment or we determine that it is more l~~i~~kely than not that the fair valueof a rep~~o~~rtingunit is less thanits c~~a~~rryi~~n~~g value, we perform a quantitative review as descr~~i~~bed be~~l~~ow.~~

During a quantitative review of goodwill, we estimate the fair value of each reporting unit based on a discounted cash flow model or a combination of a discounted cash flow model and market-based approaches, and we reconcile the aggregate fair value of our reporting units to our consolidated market capitalization. If the fair value of the reporting unit exceeds its carrying amount, no impairment is indicated. If the fair value of the reporting unit is less than its carrying amount, impairment of goodwill is measured as the excess of the carrying amount over fair value. Estimating fair value requires significant judgments, including management's estimate of future cash flows of each reporting unit (which is dependent on internal forecasts of projected income), estimation of the long-term growth rates of future revenues for our reporting units, the terminal growth rate of revenue, the tax rate, and determination of the weighted average cost of capital, as well as relevant comparable company revenue and earnings multiples and market participant acquisition premium for the market-based approaches. Changes in these estimates and assumptions could materially affect the estimate of fair value and potential goodwill impairment for each reporting unit.

~~Except for two tradenames that have an indef~~init~~e life and are not subject to amort~~i~~zation, we amortize identifiable~~ i~~ntangib~~l~~e asset~~s ~~over their estimated usef~~u~~l lives on a stra~~i~~ght-l~~in~~e or accelerated basis based on the period for which the economic benefits of the asset are expected to be realized.We as~~se~~ss the potential~~ i~~mpair~~m~~ent of intangible assets subject to amortiz~~a~~tionwhenever e~~v~~ents orchanges in c~~i~~rcu~~m~~stances indicate that~~

~~the carryin~~g ~~value~~s may not be ~~recoverable~~. If we ~~determin~~e ~~tha~~tthe ~~carryin~~g ~~valu~~e of ~~othe~~r ~~identifiabl~~e ~~intangibl~~e ~~asset~~smay not ~~be recoverable~~,we ~~calculat~~eany ~~impair~~ment ~~usin~~g an ~~estimat~~e of thea~~sset'~~s ~~fai~~rvalue ~~base~~d on the ~~estima~~ted price ~~tha~~t ~~wou~~ld be ~~receivedto sellthe asset in~~anord~~erlytra~~nsa~~ction~~be~~tween~~ma~~rketpartici~~p~~ants.~~

We review indefinite-lived intangible assets for impairment on an annual basis (during the fourth quarter of our fiscal year) or more frequently whenever events or circumstances indicate that the carrying value may not be recoverable. We estimate the fair value of our indefinite-lived tradenames using the relief-from-royalty method, which requires us to estimate significant assumptions such as the long-term growth rates of future revenues associated with the tradename, the royalty rate for such revenue, the terminal growth rate of revenue, the tax rate, and a discount rate. Changes in these estimates and assumptions could materially affect the estimates of fair values for the tradenames.

We account for revenue from contracts with customers in accordance with Accounting Standards Codification (“ASC”) Topic 606 “Revenue from Contracts with Customers” (“ASC Topic 606”). The unit of account in ASC Topic 606 is a performance obligation, which is a promise in a contract to transfer to a customer either a distinct good or service (or bundle of goods or services) or a series of distinct goods or services provided over a period of time. ASC Topic 606 requires that a contract’s transaction price, which is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, is to be allocated to each performance obligation in the contract based on relative standalone selling prices and recognized as revenue when or as the performance obligation is satisfied.

~~Our~~We earn ~~Healthcare segment~~ ~~earns~~ revenue from ~~our~~continuing operations primarily from three programs,s: SilverSneakers senior fitness, Prime Fitness and WholeHealth Living. We provide the SilverSneakers senior fitness program to members of Medicare Advantage, ~~and~~ Medicare Supplement, and group retiree plans through our contracts with those plans. We offer Prime Fitness, a fitness facility access program, through contracts with commercial health plans, employers, and other sponsoring organizations that allow their members to individually purchase the program. We sell our WholeHealth Living program primarily to health plans.

The significant majority of our ~~Healthcare segment’s~~ customer contracts contain one performance obligation - to stand ready to provide access to our network of fitness locations and fitness programming - which is satisfied over time as services are rendered each month over the contract term. ~~There are generally no~~Unsatisfied performance obligations ~~that are unsatisfied~~ at the end of a particular month primarily relate to certain monthly memberships for our Prime Fitness program, which are recorded as deferred revenue on the consolidated balance sheet and recognized as revenue during the immediately subsequent month. There was no material revenue recognized during the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 from performance obligations satisfied in a prior period.

Our fees ~~within our Healthcare segment~~ are variable month to month and are generally billed per member per month (“PMPM”) or billed based on a combination of PMPM and member visits to a network location. We bill PMPM fees by multiplying the contractually negotiated PMPM rate by the number of members eligible for or receiving our services during the month. We bill for member visits approximately one month in arrears once actual member visits are known. Payments from customers are typically due within 30 days of invoice date. When material, we capitalize costs to obtain contracts with customers and amortize them over the expected recovery period.

Although we evaluate our financial performance and make resource allocation decisions based upon the results of our ~~two~~single operating and reportable ~~segments,~~segment, we believe the following information depicts how our ~~Healthcare segment~~ revenues and cash flows are affected by economic factors. For the three ~~and six~~ months ended ~~June 30, 2020,~~March 31, 2021, revenue from our SilverSneakers program, which is predominantly contracted with Medicare Advantage and Medicare

Supplement plans, comprised approximately ~~60% and 71%, respectively,~~74% of revenues ~~in the Healthcare segment,~~from continuing operations, while revenue from our Prime Fitness ~~program~~and WholeHealth Living programs comprised approximately ~~23%~~21% and ~~21%~~5%, respectively, of revenues ~~in the Healthcare segment, and our WholeHealth Living program comprised approximately 6% and 4%, respectively, of revenues in the Healthcare segment. Other revenues, which were earned~~ from ~~health plans and a large employer, comprised 11% and 4% of our revenues for the three and six months ended June 30, 2020, respectively.~~continuing operations.

~~Our Nutrition segment earns revenue from four sources: direct~~We reviewgoodwillfor impairment at thereportingunitlevel (operatingsegmentor one level below an operating segment) on an annualbasis (duringthe fourth quarter of our fiscal year) ormore frequently whenever events orcircumstances indicatethat the carryingvalue may not be recoverable. Following the sale of Nutrisystem in December 2020, we have a single reporting unit.

As part of the annual impairment test, we may elect to ~~consumer, retail, QVC~~perform a qualitative assessment to determinewhether it is more likely than not that the fair valueof the reportingunit is less thanits carrying value.If we elect not to perform a qualitativeassessment or we determine that it is more likely than not that the fair valueof the reporting unit is less thanits carrying value, we perform a quantitative review as described below.

During a quantitative review of goodwill, we estimate the fair value of the reporting unit based on our market capitalization and ~~other. Revenue~~compare such fair value to the carrying value of the reporting unit. If the fair value of the reporting unit exceeds its carrying amount, no impairment is indicated. If the fair value of the reporting unit is less than its carrying amount, impairment of goodwill is measured as the excess of the carrying amount over fair value.

Except for a tradename that has an indefinite life and is not subject to amortization, we amortize identifiable intangible assets over their estimated useful lives on a straight-line or accelerated basis based on the consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third parties. As explained in more detail below, revenue is recognized upon satisfactionperiod for which the economic benefits of the ~~performance obligation by transferring control over a product~~asset are expected to ~~a Nutrition segment customer. The estimated breakage~~be realized.We assess the potential impairment of gift cards (estimated amount of unused gift cards) is recognized over the pattern of redemption of the gift cards, and direct-mail advertising costs are expensed as incurred. We recognize an asset for intangible assets subject to amortizationwhenever events orchanges in circumstances indicate thatthe carrying ~~amount~~values may not be recoverable. If we determine thatthe carrying value of ~~product~~other identifiable intangible assetsmay not be recoverable,we calculateany impairment using an estimate of the asset's fair value based on the estimated price that would be received to ~~be returned and for costs to obtain a contract if~~sell the ~~amortization is more than one year~~asset in ~~duration. We expense costs to obtain~~ an orderly transa ~~contract as incurred if the amortization period is less than one year.~~ction between marketparticipants.

We ~~sell pre-packaged foods directly~~review indefinite-lived intangible assets for impairment on an annual basis (during the fourth quarter of our fiscal year) or more frequently whenever events or circumstances indicate that the carrying value may not be recoverable. We estimate the fair value of our indefinite-lived tradename using the relief-from-royalty method, which requires us to ~~weight loss program participants primarily through the Internet and telephone (referred to~~estimate significant assumptions such as the ~~direct to consumer channel), through QVC (a television shopping network),~~long-term growth rates of future revenues associated with the tradename, the royalty rate for such revenue, the terminal growth rate of revenue, the tax rate, and ~~select retailers. Pre-packaged foods are comprised~~a discount rate. Changes in these estimates and assumptions could materially affect the estimates of ~~both frozen and non-frozen (ready-to-go), shelf-stable products.~~

Products sold through the direct to consumer channel, both frozen and non-frozen, may be sold separately (a la carte) or as part of a packaged monthly meal plan for which Nutrition segment customers pay at the point of sale. Products sold through QVC are payable by QVC upon our shipment of the product to the end consumer. For both the direct to consumer channel and QVC, we recognize revenue at a point in time, i.e., at the shipping point. Direct to consumer customers may return unopened ready-to-go Nutrisystem products within 30 days after purchase in order to receive a refund or credit. Frozen Nutrisystem products are non-returnable and non-refundable unless the order is canceled within 14 days after delivery~~. South Beach Diet products are not refundable.~~

~~We account~~fair value for the shipment of frozen and non-frozen, ready-to-go products as separate performance obligations. The consideration, including variable consideration for product returns, is allocated between frozen and non-frozen products based on their standalone selling prices. The amount of revenue recognized is adjusted for expected returns, which are estimated based on historical data.

~~We review the reserves for our~~ ~~Nutrition segment~~ customer returns at each reporting period and adjust them to reflect data available at that time. To estimate reserves for returns, we consider actual return rates in preceding periods and changes in product offerings or marketing methods that might impact returns going forward. To the extent the estimate of returns changes, we will adjust the reserve, which will impact the amount of revenue recognized in the period of the adjustment. The provision for estimated returns for the three and six months ended June 30, 2020 was $4.1 million and $9.3 million, respectively. The provision for estimated returns for the three and six months ended June 30, 2019 was $5.6 million and $7.0 million, respectively. The reserve for estimated returns incurred but not received and processed was $1.4 million and $0.8 million at June 30, 2020 and December 31, 2019, respectively, and has been included in accrued liabilities in the accompanying consolidated balance sheet.tradename.

In managing our business, we regularly review and analyze a number of key performance indicators (“KPIs”), including revenues, ~~by segment,~~ adjusted EBITDA ~~by segment~~ (both in dollars and as a percentage of revenues), and free cash flow. ~~Free~~

Adjusted EBITDA and free cash flow isare not calculated in accordance with U.S. GAAP (“non-GAAP”). These KPIs help us monitor our performance, identify trends affecting our business, determine the allocation of resources, and assess the quality and potential variability of our cash flows and earnings. We believe they are useful to investors in evaluating and understanding our business.

Following the divestiture of Nutrisystem, we have only one reportable segment and therefore no longer review and analyze revenues on a segment-level basis or adjusted EBITDA on a segment-level basis as KPIs. Instead, we review and analyze revenues from continuing operations and adjusted EBITDA from continuing operations. We updated our definition of adjusted EBITDA during the first quarter of 2021 to exclude other (income)/expense related to de-designated swaps. We consider such (income)/expense to be outside the performance of our ongoing core business operations and believe that presenting Adjusted EBITDA excluding other (income)/expense provides increased transparency as to the operating costs of our current business performance. We did not revise the prior period’s Adjusted EBITDA amounts because there were no costs similar in nature to these items.

Additionally, beginning in the fourth quarter of 2020, we revised the definition of free cash flow such that it is reduced by settlement on derivatives not designated as hedges, a new item for 2020 that did not exist in prior periods. Settlement on derivatives not designated as hedges arose in 2020 due to the de-designation of certain interest rate swaps in the fourth quarter of 2020 in connection with the repayment of a portion of the principal on the term loans under our Credit Agreement, as further described in Note 11 of the notes to consolidated financial statements included in this report. We believe it is appropriate to exclude settlement on derivatives not designated as hedges from free cash flow because these payments are similar to interest payments (which are reflected in cash flow from operating activities) and they reduce our cash available to repay debt or make other investments.

(In thousands)							Three Months Ended March 31,
	Six Months Ended June 30,						2021			2020
(In thousands)	2020			2019
Net cash flows provided by operating activities	$	130,943		$	49,599		$	22,618		$	47,023
Acquisition of property and equipment		(10,362	)		(8,918	)		(1,561	)		(4,875	)
Settlement on derivatives not designated as hedges								(1,633	)		—
Free cash flow	$	120,581		$	40,681		$	19,424		$	42,148

Although there is significant uncertainty relating to the potential impacts of the COVID-19 pandemic on our business going forward, including the duration of the outbreak, the timing and duration of any operational restrictions applicable to our fitness partner locations, ~~being open,~~ the impact on member participation in our SilverSneakers programs,our ability to continue to attract subscribers for our Prime Fitness program, and the ultimate medium- and long-term impact of the pandemic on the global economy, we expect our results offrom continuing operations for the short term to continue to be adversely impacted by COVID-19, primarily in our Healthcare segment, when compared to the same periods in the prior year and to our expectations at the beginning of 2020. For the Nutrition segment, we expect revenues for the third quarter of 2020 to decrease compared to the second quarter of 2020 due to normal seasonality in this business.COVID-19.

The key financial results for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 are:

The following table sets forth the components of the consolidated statements of operations for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ expressed as a percentage of revenues from continuing operations.

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
Revenues		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenue (exclusive of depreciation and amortization included below)		45.0	%		57.2	%		52.9	%		60.4	%
Cost of revenue (exclusive of depreciation included below)														53.0	%		72.1	%
Marketing expenses		19.5	%		16.0	%		23.0	%		14.2	%		1.1	%		4.6	%
Selling, general and administrative expenses		8.9	%		8.7	%		8.6	%		10.3	%		9.0	%		7.5	%
Depreciation and amortization		4.9	%		2.7	%		4.6	%		2.3	%
Impairment loss		—			—			33.2	%		—
Depreciation expense														2.5	%		1.3	%
Restructuring and related charges		0.4	%		0.7	%		0.3	%		0.7	%		0.0	%		0.3	%
Operating income (loss) ⁽¹⁾		21.3	%		14.7	%		(22.6	)%		12.1	%
Operating income ⁽¹⁾														34.4	%		14.2	%

Interest expense		8.1	%		7.0	%		7.1	%		5.7	%		10.0	%		7.1	%
Income (loss) before income taxes ⁽¹⁾		13.2	%		7.7	%		(29.8	)%		6.5	%
Other (income) expense, net														(1.0	)%		0.0	%
Total non-operating expense, net ⁽¹⁾														8.9	%		7.1	%
Income before income taxes ⁽¹⁾														25.5	%		7.1	%

Income tax expense		2.3	%		2.4	%		(1.5	)%		2.4	%		7.1	%		2.0	%
Net income (loss) ⁽¹⁾		10.9	%		5.3	%		(28.3	)%		4.0	%
Income from continuing operations ⁽¹⁾														18.5	%		5.2	%

Revenues from continuing operationswere ~~$262.6~~$108.1 million for the three months ended March 31, 2021compared to $159.7 million for the ~~second quarter~~same period in 2020, a decrease of ~~2020 compared to $340.4~~$51.6 million, ~~for the second quarter~~primarily as a result of ~~2019, including the following revenues~~a net decrease in SilverSneakers revenue of $41.8 million driven by ~~segment:~~

~~Revenues were $600.3 million for the~~ ~~six months ended June 30, 2020compared to $554.5 million for the~~ ~~six months ended June 30, 2019, including the following revenues by segment:~~

~~Cos~~in March 2020 due to the COVID-19 pandemic. As a result, revenues from PMPM fees represented 53% of SilverSneakers revenue for tthe three months ended March 31, 2021, compared to 36% for the same period in 2020. In addition, revenue from Prime Fitness ofdecreased by $10.2 million due to a decrease in active subscribers ~~Revenue~~for the three months ended March 31, 2021compared to the same period in 2020.

Cost of ~~revenue~~ ~~(excluding depreciation and amortization) (“Cost of Revenue”) was $118.2 million, or 45.0%~~ ~~of revenues, for the second quarter of 2020 compared to $194.8 million, or 57.2% of revenues, for the second quarter of~~ ~~2019, including the following Cost of~~ Revenue ~~by segment:~~

Cost of ~~Revenue was $317.4 million, or 52.9%~~revenue from continuing operations (excluding depreciation) as a percentage of revenues ~~for~~ decreased from the ~~six~~three months ended ~~June 30~~March 31, 2020 (72.1%) to the three months ended March 31, 2021 (53.0%), ~~2020compared~~primarily due to ~~$335.1 million, or 60.4%~~a higher mix of revenues ~~for~~ from PMPM fees in the ~~six months ended June 30, 2019, including~~first quarter of 2021, as noted above, coupled with a decrease in visit costs due to a decline in participation levels (compared to such levels prior to the ~~following Cost of Revenue by segment:~~ COVID-19 pandemic).

Marketing expenses ~~were~~ ~~$51.1 million, or 19.4%~~from continuing operations as a percentage of revenues ~~for~~decreased from the ~~second~~three months ended March 31, 2020 (4.6%), to the three months ended March 31, 2021 (1.1%), primarily due to decreased spending in the first quarter of ~~2020 compared~~2021 on SilverSneakers television advertising, due in part to ~~$54.6 million, or 16.0% of revenues, for~~ the ~~second quarter of 2019, including the following marketing expenses by segment:~~COVID-19 pandemic as well as a shift in our media mix towards more targeted digital marketing.

~~Marketing expenses were~~ ~~$138.2 million, or 23.0%~~ ~~of revenues, for the~~ ~~six months ended June 30, 2020 compared to $78.8 million, or 14.2% of revenues, for the~~ ~~six months ended June 30~~, ~~2019, including the following marketing expenses by segment:~~

Selling, general and administrative ~~(“SG&A”)~~ expenses ~~were~~from continuing operations ~~$23.5 million, or 8.9%~~as a percentage of revenues increased from the three months ended March 31, 2020 (7.5%) to the three months ended March 31, 2021 (9.0%) primarily due to (i) the fixed nature of ~~revenues~~,certain costs that cannot be reduced proportionately with reductions in revenue, and (ii) an increase in share-based compensation expense due to (a) the timing and design of annual long-term incentive awards, and (b) grants of long-term incentive awards in May 2020 and August 2020 to the Company’s Board of Directors, executive officers, and certain other employees, all of whose cash compensation was reduced for ~~the second quarter~~a significant portion of 2020 ~~compared~~in order to ~~$29.7 million, or 8.7% of revenues, for the second quarter of 2019, including the following SG&A expenses by segment:~~

~~SG&A~~ ~~exp~~enses ~~were~~ ~~$51.5 million, or 8.6%~~ ~~of revenues~~, ~~for the~~ ~~six months ended June 30, 2020 compared to $56.9 million, or 10.3% of revenues, for the~~ ~~six months ended June 30~~, ~~2019, including the following SG&A expenses by segment:~~

~~During the first quarter of 2020,~~ ~~we recorded an impairment loss of $199.5 million, including $80.0 million related~~preserve liquidity and manage cash flow in response to the ~~Nutrisystem tradename and $119.5 million related to goodwill allocated~~COVID-19 pandemic, with the value of such grants being equal as closely as reasonably possible to the ~~Nutrition segment. These impairment losses were primarily attributable to~~ ~~rapidly changing market and economic conditions resulting from the COVID-19 pandemic. See Note 12~~amount of the ~~notes to consolidated financial statements included~~cash compensation reduction. These increases were partially offset by decreases in ~~this report.~~(i) transition, acquisition, and integration costs, and (ii) CEO transition-related expenses associated with the termination of our former CEO in February 2020 and the hiring of a new CEO in June 2020.

During the first quarter of 2019, we began a reorganization primarily related to integrating the ~~Healthcare and Nutrition segments~~Nutrisystem business and streamlining our corporate and operations support ~~("2019~~(the "2019 Restructuring Plan"). The 2019 Restructuring Plan concluded during the first quarter of 2020. For the three ~~and six~~ months ended ~~June 30, 2019~~,March 31, 2020, we incurred restructuring charges from continuing operations of $2.4 million and $3.9 million, respectively, related to the 2019 Restructuring Plan, of which $0.8 million and $1.8 million, respectively, related to the Healthcare segment and $1.6 million and $2.1 million, respectively, related to the Nutrition segment. For the ~~six months ended June 30, 2020, we incurred restructuring charges of $0.7~~$0.5 million related to the 2019 Restructuring ~~Plan, of which $0.5 million related to the Healthcare segment and $0.2 million related to the Nutrition segment.~~Plan. To date, we have incurred restructuring charges from continuing operations of ~~$7.8~~$2.4 million related to the 2019 Restructuring ~~Plan, of which $2.4 million related to the Healthcare segment and $5.4 million related to the Nutrition segment.~~Plan. These expenses consist entirely of severance and other employee-related costs. The 2019 Restructuring Plan is expected to result in total annualized savings in 2020 of approximately $19.5 million, with $6.7 million relating to the Healthcare segment and $12.8 million relating to the Nutrition segment.

~~During the second quarter of 2020,~~ we began a reorganization plan primarily related to eliminating certain compensation costs in response to the COVID-19 pandemic in order to preserve our liquidity and manage our cash flows (“2020 COVID Restructuring Plan”). To date, and for the ~~three and six months ended June 30, 2020~~, we incurred restructuring charges of $1.0 million related to the 2020 COVID Restructuring Plan, of which $0.8 million related to the Healthcare segment and $0.2 million related to the Nutrition segment. These expenses consist entirely of severance and other employee-related costs. The 2020 COVID Restructuring Plan is expected to result in total annualized savings at target performance of approximately $7.5 million, with $6.0 million relating to the Healthcare segment and $1.5 million relating to the Nutrition segment.

Depreciation ~~and am~~o~~rtization~~ expense from continuing operations increased ~~by $3.8~~$0.7 million for the ~~second quarter of 2020~~three months ended March 31, 2021 compared to the ~~second quarter of 2019,~~same period in 2020, primarily due to ~~increased amortization expense on intangible assets~~an increase in the ~~Nutrition segment due to an adjustment to the customer list intangible asset to finalize the preliminary purchase price allocation during the fourth quarter~~amount of ~~2019 based on information obtained regarding facts and circumstances that existed as of the acquisition date.~~

Depdepreciable computer softwarere~~ciationand am~~o~~rtization expe~~nseincreased by $15.0 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to the acquisition of Nutrisystem on March 8, 2019, which resulted in additional depreciation and amortization expense in 2020 attributable to the acquisition of Nutrisystem’s property and equipment as well as intangible assets recorded in connection with the acquisition..

Interest expense ~~decreased by $2.4 million for~~from continuing operations did not change materially from the ~~second quarter of~~three months ended March 31, 2020 ~~compared~~ to the ~~second quarter of 2019, primarily due to a lower level of outstanding borrowings in 2020 under the Credit Agreement (as defined below).~~

~~Interest expense increased by $11.6 million for the six~~three months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to our entering into a new Credit and Guaranty Agreement (the “Credit Agreement”) with a group of lenders, Credit Suisse AG, Cayman Islands Branch, as general administrative agent, term facility agent and collateral agent, and SunTrust Bank, as revolving facility agent and swingline lender, on March ~~8, 2019, including term loans with an initial borrowing of $1,180 million, in connection with the acquisition of Nutrisystem.~~31, 2021.

Other (income) expense, net increased $1.1 million for the three months ended March 31, 2021 compared to the same period in 2020 due to mark-to-market adjustments on ~~Incom~~certain interest rate swap agreements that, effective in the fourth quarter of 2020, no longer qualify for hedge accounting treatment (“de-designated swaps”). Changes in fair value of the de-designated swaps are required to be recognized each period in current earnings.e Tax

See Note 86 of the notes to consolidated financial statements in this report for a discussion of income tax ~~expense.~~expense from continuing operations.

As of ~~June 30, 2020,~~March 31, 2021, outstanding debt under the Credit Agreement was ~~$1.0 billion,~~$405.2 million, which represented $432.7 million of principal on the Term Loans less deferred loan costs and original issue discount, and we had ~~$60.3~~$52.4 million of cash and cash equivalents.

As of ~~June 30, 2020,~~March 31, 2021, we had a working capital ~~deficit~~ of ~~$5.7~~$32.8 million. While the COVID-19 pandemic has created significant uncertainty as to general economic and market conditions for the remainder of ~~2020~~2021 and beyond, as of the date of this report, we believe our cash on hand, expected cash flows from operations, and anticipated available credit under the Credit Agreement will be sufficient to fund our operations, principal and interest payments, and capital expenditures ~~(which we currently plan to curtail for the remainder of 2020)~~ for the next 12 months. We cannot assure you that we will be able to secure additional financing if needed and, if such funds are available, whether the terms or conditions will be favorable to us. With the uncertainty surrounding COVID-19, our ability to engage in financing transactions may be constrained by (i) volatile or tight economic, capital, credit and/or financial market conditions, (ii) moderated investor and/or lender interest or capacity, (iii) restrictions under our Credit Agreement, and/or (iv) our liquidity, leverage and net worth, and we can provide no assurance as to successfully completing, the costs of, or the operational limitations arising from, any one or series of such transactions. As of ~~June 30, 2020,~~March 31, 2021, availability under the Revolving Credit Facility totaled $124.5 million as calculated under the most restrictive ~~covenant~~covenant..

In connection with the consummation of the acquisition of Nutrisystem, on March 8, 2019, we entered into the Credit Agreement. The Credit Agreement provides us with (i) a $350.0 million Term Loan A, (ii) an $830.0 million Term Loan B, (iii) a $125.0 million revolving credit facility that includes a $35.0 million sublimit for swingline loans and a $50.0 million sublimit for letters of credit, and (iv) uncommitted incremental accordion facilities in an aggregate amount at any date equal to the greater of $125.0 million or 50% of our consolidated EBITDA for the then-preceding four fiscal quarters, plus additional amounts based on, among other things, satisfaction of certain financial ratio requirements.

We are permitted to make voluntary prepayments of borrowings under the Term Loans at any time without penalty. From March 8, 2019 through ~~June 30, 2020,~~March 31, 2021, we made ~~payments~~voluntary prepayments of ~~$125.0~~$228.3 million on the Term Loans, which ~~included prepayments of~~prepaid all ~~amounts~~scheduled quarterly Term Loan A installments due through ~~March 31, 2021,~~September 30, 2022 and all scheduled quarterly Term Loan B installments due through June 30, 2023, excluding any Excess Cash Flow

Payments that may be required, as described below. In addition, in December 2020 we used the significant majority of the net proceeds from the divestiture of Nutrisystem to pay $519.0 million of principal on the Term Loans, which was applied to the amount due and payable at maturity.

We are required to repay in full any outstanding swingline loans and revolving loans under the Revolving Credit Facility on March 8, 2024. In addition, the Credit Agreement contains provisions that, beginning with fiscal 2019, may require annual excess cash flow (as defined in the Credit Agreement and generally designed to equal cash generated by our business in excess of cash used in the business) to be applied towards the Term Loans. We are required to make prepayments on the Term Loans equal to our excess cash flow for a given fiscal year multiplied by the following excess cash flow percentages (such resulting payment an “Excess Cash Flow Payment”) based on our Net Leverage Ratio (as defined in the Credit Agreement) on the last day of such fiscal year: (a) 75% if the Net Leverage Ratio is greater than 3.75:1, (b) 50% if the Net Leverage Ratio is equal to or less than 3.75:1 but greater than 3.25:1 (c) 25% if the Net Leverage Ratio is equal to or less than 3.25:1 but greater than 2.75:1, and (d) 0% if the Net Leverage Ratio is equal to or less than 2.75:1. Any such potential mandatory prepayments are reduced by voluntary prepayments. We were not required to make an Excess Cash Flow Payment for fiscal ~~2019.~~2020.

The Credit Agreement contains a financial covenant that requires us to maintain maximum ratios or levels of consolidated total net debt to consolidated adjusted EBITDA, calculated as provided in the Credit Agreement (the “Net Leverage Ratio”), of ~~5.75:1.00 for all test dates occurring on or after December 31, 2019 but prior to December 31, 2020,~~ 5.25:1.00 for all test dates occurring on or after December 31, 2020 but prior to December 31, 2021 and 4.75:1.00 for all test dates occurring on or after December 31, 2021. As of ~~June 30, 2020,~~March 31, 2021, we were in compliance with all of the covenant requirements of the Credit Agreement, and our Net Leverage Ratio was equal to ~~4.08.~~2.11.

~~In July 2020, we repaid $24.8 million of principal on the term loans under our credit agreement, resulting in our next required quarterly installment being due in December 2021.~~ Based on our current assumptions with respect to the COVID-19 pandemic, including, among other things, the outstanding principal on the term loans under our ~~fitness partner locations reopening and/or remaining open~~Credit Agreement and the average monthly total participation levels of our members at ~~such~~our fitness partner locations, we currently believe we will be in compliance with the Net Leverage Ratio covenant over the next 12 months; however, given the significant uncertainty relating to the potential impacts of the COVID-19 pandemic on our business going forward, there are potential scenarios under which we could fail to comply with the Net Leverage Ratio covenant. Our failure to comply with the Net Leverage Ratio covenant would result in an event of default that, if not waived, could have a material adverse effect on our financial condition, results of operations or debt service capability. months. We will continue to monitor our projected ability to comply with all covenants under the Credit Agreement, including the Net Leverage Ratio ~~which could include seeking an amendment to or waiver of the Net Leverage Ratio covenant if necessary~~.

Operating activities during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 provided cash of ~~$130.9~~$22.6 million compared to ~~$49.6~~$47.0 million during the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. The ~~incre~~decrease ~~in operating cash flow~~ is primarily due to (i) ~~increased~~reduced cash flows from operating activities from Nutrisystem, which we sold in December 2020, and (ii) reduced cash collections on accounts ~~receivable, (ii) decreased payments related to acquisition and integration costs, and (iii) decreased payments related to visit costs.~~receivable. These ~~changes~~decreases were partially offset by ~~higher~~lower interest payments ~~related to borrowings under~~and the ~~Credit Agreement~~.receipt of tax refunds in the first quarter of 2021.

Investing activities during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 used ~~$10.4~~$3.2 million in cash, compared to ~~$1,072~~$4.9 million during the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. This change is primarily due to ~~the acquisition of Nutrisystem~~a decrease in ~~March 2019.~~capital expenditures, partially offset by settlement payments on non-designated derivatives.

Financing activities during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 used ~~$62.8~~$67.4 million inof cash, compared to cash provided of ~~$1,025~~$38.4 million during the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. This decrease is primarily due to ~~a higher amount of~~ ~~net borrowings~~voluntary prepayments under the Credit Agreement ~~in 2019 (compared~~of $63.6 million during the first quarter of 2021, compared to net ~~payments under~~borrowings of $37.3 million for the ~~Credit Agreement~~same period in ~~2020) and the payment of deferred loan costs in 2019, each related to the acquisition of Nutrisystem in March 2019.~~2020.

See Note 2 of the notes to consolidated financial statements included in this report for discussion of recent relevant accounting standards.

We are subject to market risk related to interest rate changes, primarily as a result of the Credit ~~Agreement. B~~Agreement and certain interest rate swap agreements that, effective October 2020, no longer qualify for hedge accounting treatment (see further discussion below).

~~orrowings~~Borrowings under the Credit Agreement bear interest at variable rates based on a margin or spread in excess of either (1) one-month, two-month, three-month or six-month LIBOR (or, with the approval of all lenders holding the particular class of loans, 12-month LIBOR), which may not be less than zero, or (2) the greatest of (a) the prime lending rate of the agent bank for the particular facility, (b) the federal funds rate plus 0.50%, and (c) one-month LIBOR plus 1.00% ~~(“Base~~(the “Base Rate”), as selected by the Company. The LIBOR margin for Term Loan A loans is 4.25%, the LIBOR margin for Term Loan B loans is 5.25%, and the LIBOR margin for revolving loans varies between 3.75% and 4.25%, depending on our total Net Leverage Ratio. The Base Rate margin for Term Loan A loans is 3.25%, the Base Rate margin for Term Loan B loans is 4.25%, and the Base Rate margin for revolving

loans varies between 2.75% and 3.25%, depending on our total Net Leverage Ratio. Effective May 31, 2019, we maintain eight amortizing interest rate swap agreements with current notional amounts totaling ~~$800.0~~$700.0 million, through which we receive a variable rate of interest based on LIBOR, and we pay a fixed rate of interest equal to approximately 2.2% plus a spread. All of these interest rate swap agreements were designated as cash flow hedges from their inception through October 18, 2020. Upon entering into the Purchase Agreement with Kainos on October 18, 2020, we determined that some of our hedged transactions would not materially occur in the initially identified time period since we expected to use the majority of the net proceeds from the sale to pay down a significant portion of outstanding debt. As a result, we concluded that five of the eight interest rate swaps no longer qualified for hedge accounting treatment, and we discontinued the related hedging designation (“de-designated swaps”).

For the three months ended March 31, 2021, we estimate that a 100-basis point increase in LIBOR would have increased our net cash flows by $0.6 million, which reflects decreased payments on our interest rate swaps (for which we pay a fixed interest rate of approximately 2.2% and receive a variable interest rate based on LIBOR), partially offset by higher payments on variable rate debt outstanding under the Credit Agreement. The Credit Agreement and each of the interest rate swap agreements contain a zero percent “floor” with respect to LIBOR (i.e., if the LIBOR rate is negative it will be deemed to be zero). Therefore, a 100-basis point decrease in LIBOR would not have had a material impact on our net cash flows for the first quarter of 2021 since the actual LIBOR rate under these agreements during the quarter ranged between 0.10% and 0.15%. We estimate that a ~~one-po~~int ~~interes~~t ~~rat~~e change inour fl~~oatin~~g ~~rat~~e ~~deb~~t would~~hav~~e re~~sulte~~din~~a change~~ 100-basis point decrease in ~~interest expense of approximately $1.6~~LIBOR would have decreased our net cash flows by $0.1 million for the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021.

The Company's principal executive officer and principal financial officer have reviewed and evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of ~~June 30, 2020.~~March 31, 2021. Based on that evaluation, the principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures are effective as of ~~June 30, 2020.~~March 31, 2021. They are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms and to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

There were no changes in the Company's internal controls over financial reporting during the three months ended ~~June 30, 2020~~March 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

See Note 119 of the notes to consolidated financial statements included in this report for discussion of recent legal proceedings.

In addition to the risks and uncertainties described below and other information set forth in this report, you should carefully consider the risks and uncertainties previously reported under the caption Part I, Item 1A. “Risk Factors” in the ~~2019~~2020 Form 10-K, ~~as amended~~the occurrence of which could materially and ~~restated in its entirety in Part II, Item 1A. “Risk Factors”~~adversely affect our business, prospects, financial condition and operating results. The risks previously reported and described in the ~~Quarterly Report on~~2020 Form ~~10-Q for the quarter ended March 31, 2020, is amended~~10-K and ~~restated~~ in ~~its entirety as follows:~~

In the execution of our business strategy, our operations and financial condition are subject to certain risks. A summary of certain material risks is provided below, and you should take such risks into account in evaluating any investment decision involving the Company. This section doesthis report do not describe all risks applicable to us and isare intended only as a summary of certain material factors that could impact our operations in the industry in which we ~~operate. Other sections of this report contain additional information concerning these and other risks.~~

~~The COVID-19 pandemic has had, and is expected to continue to have, a material adverse effect on our business and results of operations.~~

In late 2019, COVID-19 was reported to have surfaced in Wuhan, China and has spread to other countries, including the United States. In January 2020, the Secretary of HHS declared a national public health emergency due to COVID-19, and in March 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic. Many state and local governments, together with public health officials, have recommended and mandated precautions to mitigate the spread of COVID-19, including ordering closure of certain businesses and imposing stay-at-home orders and social distancing guidelines for individuals. As a result, by March 31, 2020, substantially all of the fitness centers in our national network were temporarily closed. Aoperate ~~substantial number of o~~ur fitness partner locations remained closed through April 2020. Although some locations reopened in May 2020 and additional locations reopened in June 2020, the average monthly total participation levels of our members after such locations reopened were significantly below historical levels, thus adversely impacting revenues in our Healthcare segment during the second quarter of 2020. We may face reclosures and/or long-term closures and other operational restrictions with respect to some or all of our Healthcare segment’s fitness partner locations for prolonged periods of time due to, among other factors, evolving governmental restrictions including public health directives, quarantine policies, or social distancing measures. Additionally, even if fitness partner locations are open, members may avoid public gathering places because of a perceived risk of infection or risk to health, which could reduce overall demand and adversely impact their use of our services. Because a significant~~portion of our Healthcare segment revenues from our SilverSneakers program is based on~~ ~~member visits to a fitness partner location, this decrease in member participation has affected and could further adversely affect our business and results of operations.~~

Consumer spending generally may also be negatively impacted by adverse general macroeconomic conditions and reduced consumer confidence, including the impacts of any recession resulting from the COVID-19 pandemic. This may further negatively impact the number of paid subscribers in our Prime Fitness program. In addition, it may negatively impact sales in our Nutrition segment and may cause our Nutrition segment’s direct to consumer and retail customers to purchase fewer products from us. Any significant reduction in consumer spending caused by COVID-19 and decreased consumer confidence and spending following the pandemic would likely result in a loss of sales and profits in our Nutrition segment and other material adverse effects.

The COVID-19 pandemic also has the potential to significantly impact our Nutrition segment’s supply chain, food manufacturers, distribution centers, or logistics and other service providers. We have experienced delays and some additional costs in fulfilling orders for our Nutrition segment’s products at certain of our warehouses due to some employees ~~of our fulfillment provider testing positive for COVID-19 and could experience similar events or delays at our other warehouses~~. Additionally, our service providers and their operations may be disrupted, temporarily closed or experience worker shortages, which could result in additional disruptions or delays in shipments of our Nutrition segment’s products.

As a result of the COVID-19 pandemic, including related governmental guidance or requirements, we have implemented a work-from-home policy for our employees, which may negatively impact productivity and cause other disruptions to our business. We closed our corporate offices and/or call centers in Franklin, Tennessee, Fort Washington, Pennsylvania and Chandler, Arizona from mid-March through May and began reopening our corporate offices on a limited basis in June as we continue to prioritize the safety and well-being of our employees. We have incurred, and may incur in the future, costs related to implementing our work-from-home policy as well as additional cleaning fees and supplies related to the COVID-19 pandemic.

The full extent of the impact of the COVID-19 pandemic on our business is highly uncertain and difficult to predict, as information is rapidly evolving with respect to the duration and severity of the pandemic. At this point, we cannot predict with certainty the duration and severity of the COVID-19 pandemic or its future impact on our business, and our estimates could change in the future.

The performance of our business (as it could further be affected by the COVID-19 pandemic) and the level of our indebtedness could prevent us from meeting the obligations under our Credit Agreement or have an adverse effect on our future financial condition, our ability to raise additional capital, or our ability to react to changes in the economy or our industry.

In connection with the consummation of the acquisition of Nutrisystem, on March 8, 2019, we entered the Credit Agreement. As of June 30, 2020, outstanding debt under the Credit Agreement was $1,012.3 million.

Our ability to service our indebtedness will depend on our ability to generate cash in the future. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available in an amount sufficient to enable us to service our indebtedness or to fund other liquidity needs. If there are prolonged or worsening effects of the COVID-19 pandemic, such as long-term closures of our fitness partner locations, we could be unable to generate revenues and cash flows sufficient to conduct our business, service our outstanding debt and comply with the covenants under the Credit Agreement. This could, among other things, exhaust our available liquidity (and ability to access liquidity sources) and/or result in an acceleration of the maturity of a significant portion or all of our then-outstanding debt obligations, which we may be unable to repay or refinance.

The Credit Agreement contains a Net Leverage Ratio covenant. Given the significant uncertainty relating to the potential impacts of the COVID-19 pandemic on our business going forward, there are potential scenarios under which we could fail to comply with the Net Leverage Ratio covenant contained in our Credit Agreement. Our failure to comply with such covenant would result in an event of default that, if not waived, could have a material adverse effect on our financial condition, results of operations or debt service capability. The Credit Agreement also contains various other affirmative and negative covenants customary for financings of this type that, subject to certain exceptions, impose restrictions and limitations on us and certain of our subsidiaries with respect to, among other things, indebtedness; liens; negative pledges; restricted payments (including dividends, distributions, buybacks, redemptions, repurchases with respect to equity interests, and payments, redemptions, retirements, purchases, acquisitions, defeasance, exchange, conversion, cancellation or termination with respect to junior lien, subordinated or unsecured debt); restrictions on subsidiary distributions; loans, advances, guarantees, acquisitions and other investments; mergers and other fundamental changes; sales and other dispositions of assets (including equity interests in subsidiaries); sale/leaseback transactions; transactions with affiliates; conduct of business; amendments and waivers of organizational documents and material junior debt agreements; and changes to fiscal year.

~~Our indebtedness could adversely affect our future financial condition or our ability to react to changes in the economy or industry by, among other things:~~

~~If our customers experience financial distress, or seek to change or delay payment terms, it could negatively affect our financial position and results.~~

At any given time, one or more of our customers may experience financial difficulty, file for bankruptcy protection or go out of business. Unfavorable economic and financial conditions, such as the current events surrounding the COVID-19 pandemic, could result in an increase in our customers’ financial difficulties that then affect us. The direct impact on us could include reduced revenues and write-offs of accounts receivable and negatively impact our operating cash flow. While we currently cannot estimate what those effects will be, if they are severe, the indirect impact could include impairments of intangible assets and reduced liquidity, among others.

We are reviewing strategic alternatives for our Nutrition business unit, but there can be no assurance that we will be successful in identifying or consummating any strategic alternatives, that strategic alternatives will yield additional value for stockholders, or that exploration of strategic alternatives for our Nutrition business unit will not adversely impact the Company.

On May 6, 2020, we announced we are exploring strategic alternatives relating to our Nutrition business unit, including a potential transaction. If we determine to divest of the Nutrition business unit, we can give no assurance as to whether we will be able to secure a buyer for our Nutrition business unit or, if we do so, whether such divestiture will be at a price or on terms that are favorable to us, and we may incur a loss on disposal. Speculation regarding any developments related to the review of strategic alternatives for our Nutrition business unit and perceived uncertainties related to the future of the Company could cause our stock price to fluctuate significantly.

Our exploration of strategic alternatives for our Nutrition business unit could result in management distraction, incurrence of significant transaction expenses, failure to retain or attract key personnel, vendors or customers, or exposure to potential litigation. If we are unable to mitigate these or other potential risks related to the uncertainty caused by our exploration of strategic alternatives for our Nutrition business unit, it may disrupt our business and could have a material adverse effect on our business, financial condition, results of operations or cash flows.

We may not be able to realize the anticipated benefits from a divestiture of our Nutrition business unit. There can be no assurance that any potential transaction or other strategic alternative, if identified, evaluated and consummated, will provide greater value to our stockholders than that reflected in our current stock price. Further, the Board may determine to suspend or terminate the exploration of strategic alternatives for our Nutrition business unit at any time due to various factors. Any potential transaction or other outcome of this process is also dependent upon a number of factors that may be beyond our control, including among other factors, market conditions (including the impact of the COVID-19 pandemic), industry trends, regulatory limitations and the interest of third parties in our business.

Our business strategy relating to the development and introduction of new products and services exposes us to risks such as limited customer and/or market acceptance and additional expenditures that may not result in additional net revenue.

An important component of our business strategy is to focus on new products and services that enable us to provide immediate value to our customers. We cannot predict whether customers and/or the market will accept these new products and services, and if we fail to execute successfully on this strategy or to adapt this strategy as market conditions evolve, our ability to grow revenue and our results of operations may be adversely affected.

~~If we fail to successfully implement our business strategy, our financial performance and our growth could be materially and adversely affected.~~

Our future financial performance and success are dependent in large part upon our ability to implement our business strategy successfully. Implementation of our strategy will require effective management of our operational, financial and human resources and will place significant demands on those resources. See Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations – Business Strategy" in this report for more information regarding our business strategy. There are risks involved in pursuing our strategy, including the ability to hire or retain the personnel necessary to manage our strategy effectively.

In addition to our risk factors previously disclosed in our 2020 Form 10-K, our risk factors also include the ~~risks set forth above, implementation of our business strategy could be affected by a number of factors beyond our control, such as epidemics~~following additional risk factor.

Legislative, regulatory, and ~~pandemics (including the responses of governmental authorities to contain such epidemics and pandemics), increased competition,~~ legal developments government regulation, general economic conditions, increased operating costs or expenses, and changes in industry trends. We may decide to alter or discontinue certain aspects of our business strategy at any time. If we are not able to implement our business strategy successfully, our long-term growth and profitability may be adversely affected. Even if we are able to implement some or all of the initiatives of our business strategy successfully, our operating results may not improve to the extent we anticipate, or at all.

~~We may experience difficulties associated with the implementation and/or integration of new businesses, services (including outsourced services), technologies, solutions, or products.~~

We may face difficulties, costs, and delays in effectively implementing and/or integrating acquired businesses, services (including outsourced services), technologies, solutions, or products into our business. Implementing internally-developed solutions and products, and/or integrating newly acquired businesses, services (including outsourced services), and technologies could be time-consuming and may strain our resources. Consequently, we may not be successful in implementing and/or integrating these new businesses, services, technologies, solutions, or products and may not achieve anticipated revenue and cost benefits.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly, and changes in LIBOR reporting practices could lead to an increase in the cost of our indebtedness and adversely affect our results of operations.

Borrowings under our Credit Agreement are at variable rates of interest and expose us to interest rate risk. Interest rates are currently at historically low levels, but if interest rates increase, our debt service obligations with respect to our variable rate indebtedness would increase even if the amount borrowed remained the same, and our net income and cash flows would correspondingly decrease.

To mitigate our exposure to future interest rate volatility with respect to our variable rate indebtedness, we have entered into interest rate swaps and may in the future enter into additional interest rate swaps, which involve the exchange of floating for fixed rate interest payments. Considering hedging gains and losses and cash settlement costs, we may not elect to maintain such interest rate swaps, and any swaps may not fully mitigate our interest rate risk.

In addition, a transition away from LIBOR as a benchmark for establishing the applicable interest rate may adversely affect our variable rate debt and interest rate swaps. The Financial Conduct Authority of the United Kingdom has announced that by the end of calendar year 2021 it will no longer require LIBOR submissions, resulting in the possible unavailability or lack of suitability of LIBOR as a benchmark rate. While our borrowing arrangements provide for alternative base rates as well as a method for selecting a benchmark replacement for LIBOR, the consequences of the possibility of LIBOR becoming unavailable or not suitable cannot be entirely predicted at this time. Use of an alternative base rate or a benchmark replacement for LIBOR as a basis for calculating interest with respect to our outstanding variable rate indebtedness or interest rate swap agreements could lead to an increase in the interest we pay and a corresponding increase in the cost of such indebtedness, and could affect our ability to refinance some or all of our existing indebtedness or otherwise have a material adverse impact on our business, financial condition and results of operations.

~~Changes in macroeconomic conditions and certain market risks may adversely affect our business.~~

Economic difficulties and other macroeconomic conditions (including any downturn or recession caused by the COVID-19 pandemic) could reduce the demand and/or the timing of purchases for certain of our services from customers and potential customers. In addition, changes in economic conditions could create liquidity and credit constraints. We cannot assure you that we would be able to secure additional financing if needed and, if such funds were available, that the terms and conditions would be acceptable to us.

~~We have a significant amount of goodwill and intangible assets, the value of which could become further impaired.~~

We have recorded significant portions of the purchase price of certain acquisitions as goodwill and/or intangible assets. We review goodwill and intangible assets not subject to amortization for impairment on an annual basis (during the fourth quarter) or more frequently whenever events or circumstances indicate that the carrying value may not be recoverable. ~~In the fourth quarter of 2019, we recorded impairment losses of $240.0 million and $137.1 million related to the Nutrisystem tradename and goodwill, respectivel~~y. The COVID-19 pandemic has had and is having an adverse impact on the overall economy, resulting in rapidly changing market and economic conditions that have impacted the Company. In March 2020, we experienced a significant decline in the Company’s market capitalization and, as discussed above under ~~Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations – Overview”~~, in the actual and forecasted operating results of our Healthcare segment, in addition to the unfavorable change in market conditions. As a result, management concluded that there were triggering events during the first quarter of 2020 necessitating an impairment evaluation of our goodwill and indefinite-lived intangible assets. During the first quarter of 2020, we recorded an impairment loss of $199.5 million, including $80.0 million related to the Nutrisystem tradename and $119.5 million related to goodwill allocated to the Nutrition segment~~. At June 30, 2020, we had approximately $535.1 million and $593.5 million of goodwill and intangible assets, respectively, remaining. Following the impairment loss, as of June 30, 2020, there is no excess of estimated fair value over carrying value (“headroom”) for the Nutrition reporting unit.~~ If we determine that the carrying values of our goodwill and/or intangible assets should be further impaired, we may incur additional non-cash charges to earnings, which could have a material adverse effect on our results of operations for the period in which the additional impairment occurs.

~~A failure of our information technology or systems could adversely affect our business.~~

Our ability to deliver our products and services depends on effectively using information technology. We rely upon our information technology and systems, employees, and third parties for operating and monitoring all major aspects of our business. These technologies and systems and, therefore, our operations could be damaged or interrupted by natural disasters, power loss, network failure, improper operation by our employees, data privacy or security breaches, computer viruses, computer hacking, network penetration or other illegal intrusions, epidemics or pandemics (such as the COVID-19 pandemic), or other unexpected events. Any disruption in the operation of our information technology or systems, regardless of the cause, could adversely impact our operations, which may adversely affect our financial condition, results of operations and cash flows.

A cybersecurity incident could result in the loss of confidential data, give rise to remediation and other expenses, expose us to liability under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), consumer protection laws, common law theories or other laws, subject us to litigation and federal and state governmental inquiries, damage our reputation, and otherwise be disruptive to our business.

The nature of our business involves the receipt, storage and use of personal data about the participants in our programs, including individually identifiable health information, as well as employees and customers. Additionally, we rely upon third parties that are not directly under our control to store and use portions of that personal data as well. The secure maintenance of this and other confidential information or other proprietary information is critical to our business operations. To protect our information systems from attack, damage and unauthorized use, we have implemented multiple layers of security, including technical safeguards, processes, and our people. Our defenses are monitored and routinely tested internally and by external parties. Despite these efforts, threats from malicious persons and groups, new vulnerabilities, technology failures, and advanced attacks against information systems create risk of cybersecurity incidents. We cannot provide assurance that we or our third-party vendors or other service providers will not be subject to cybersecurity incidents, which may result in unauthorized access by third parties, loss, misappropriation, disclosure or corruption of customer, employee, or our information; member

personal health information; or other data subject to privacy laws. In addition, COVID-19 may have an adverse impact on our information technology systems and our ability to securely preserve confidential information, including as a result of telecommuting issues associated with our employees working remotely. Such cybersecurity incidents or delays in responding to or remedying damage caused by such incidents may lead to a disruption in our systems or business, costs to modify, enhance, or remediate our cybersecurity measures, liability under privacy, security and consumer protection laws or litigation under these or other laws, including common law theories, and subject us to enforcement actions, fines, regulatory proceedings or litigation against us, damage to our business reputation, a reduction in participation and sales of our products and services, and legal obligations to notify customers or other affected individuals about an incident, which could cause us to incur substantial costs and negative publicity, any of which could have a material adverse effect on our financial condition and results of operations and harm our business reputation.

As a result, cybersecurity and the continued development and enhancement of our controls, processes and practices remain a priority for us. We may be required to expend significant additional resources in our efforts to modify or enhance our protective measures against evolving threats or to investigate and remediate any cybersecurity vulnerabilities.

Our business is subject to changing privacy and security laws, rules and regulations, including HIPAA, the Payment Card Industry Data Security Standards, the Telephone Consumer Protection Act and other state privacy regulations, which impact our operating costs and for which failure to adhere could negatively impact our business.

Our business is subject to various privacy and data security laws, regulations, and codes of conduct that apply to our business units, which may include the rules and regulations of the Payment Card Industry Data Security Standards and the Telephone Consumer Protection Act (“TCPA”). In addition, we are Health Information Trust Alliance (“HITRUST”) Common Security Framework certified, which is an industry operating standard applied to our data security practices. Some of these state laws and regulations may be inconsistent across jurisdictions and subject to evolving and differing (sometimes conflicting) interpretations and applications. While we are using internal and external resources to monitor compliance with and to continue to modify our data processing practices and policies in order to comply with evolving privacy laws, relevant regulatory authorities could determine that our data handling practices fail to address all the requirements of certain new laws, which could subject us to penalties and/or litigation. Government regulators, privacy advocates and class action attorneys are increasingly scrutinizing how companies collect, process, use, store, share and transmit personal data. This increased scrutiny may result in new interpretations of existing laws as well as new laws, regulations, and industry standards concerning privacy, data protection, and information security proposed and enacted in various jurisdictions, thereby further impacting our business. For example, the California Consumer Privacy Act of 2018 (“CCPA”), went into effect on January 1, 2020, and it applies broadly to information that identifies or is associated with any California household or individual, and compliance with the new law requires that we implement several operational changes, including processes to respond to individuals’ data access and deletion requests. Failure to comply with the CCPA may result in attorney general enforcement action and damage to our reputation. The CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches that may increase data breach litigation. We may also be exposed to litigation, regulatory fines, penalties or other sanctions if the personal, confidential or proprietary information of our customers is mishandled or misused by any of our suppliers, counterparties or other third parties, or if such third-parties do not have appropriate controls in place to protect such personal, confidential or proprietary information. Additionally, the Federal Trade Commission (“FTC”) and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the collection, use, dissemination and security of data. The obligations imposed by the CCPA and other similar laws that may be enacted at the federal and state level may require us to modify our business practices and policies and to incur substantial expenditures in order to comply.

In order to be successful, we must attract, engage, retain and integrate key employees and have adequate succession plans in place, and failure to do so could have an adverse effect on our ability to manage our business.

Our success depends, in large part, on our ability to attract, engage, retain and integrate qualified executives and other key employees throughout all areas of our business. Identifying, developing internally or hiring externally, training and retaining highly skilled managerial and other personnel are critical to our future, and competition for experienced employees can be intense. Failure to successfully recruit executives and key employees or the loss of any executives and key employees could have a significant impact on our operations. The loss of services of any

key personnel, the inability to retain and attract qualified personnel in the future, or delays in hiring may harm our business and results of operations. Further, changes in our management team may be disruptive to our business, and any failure to successfully integrate key newly hired employees could adversely affect our business and results of operations.

~~We face competition for staffing, which may increase our labor costs and reduce profitability.~~

We compete with other healthcare and services providers in recruiting qualified management, including executives with the required skills and experience to operate and grow our business, and staff personnel for the day-to-day operations of our business. These challenges may require us to enhance wages and benefits to recruit and retain qualified management and other professionals. Difficulties in attracting and retaining qualified management and other professionals, or in controlling labor costs, could have a material adverse effect on our profitability.

~~We are or may become a party to litigation that could potentially force us to pay significant damages and/or harm our reputation.~~

We are subject to certain legal proceedings, which potentially involve large claims and significant defense costs (see Part II, Item 1. "Legal Proceedings" in this report). These legal proceedings and any other claims that we may face in the future, whether with or without merit, could result in costly litigation, and divert the time, attention, and resources of our management. The coverage limits of our insurance policies may not be adequate to cover all such claims and some claims may not be covered by insurance. Additionally, insurance coverage with respect to some claims against us or our directors and officers may not be available on terms that would be favorable to us, or the cost of such coverage could increase in the future. Further, although we believe that we have conducted our operations in compliance with applicable statutory and contractual requirements and that we have meritorious defenses to outstanding claims, it is possible that resolution of these legal matters could have a material adverse effect on our results of operations. In addition, legal expenses associated with the defense of these matters may be material to our results of operations in a particular financial reporting period.

~~Third parties may infringe on our brands, trademarks and other intellectual property rights, which may have an adverse impact on our business.~~

We currently rely on a combination of trademark and other intellectual property laws and confidentiality procedures to establish and protect our proprietary rights, including our brands. If we fail to successfully enforce our intellectual property rights, the value of our brands, services and products could be diminished and our business may suffer. Our precautions may not prevent misappropriation of our intellectual property. Any legal action that we may bring to protect our brands and other intellectual property could be unsuccessful and expensive and could divert management’s attention from other business concerns. In addition, legal standards relating to the validity, enforceability and scope of protection of intellectual property, especially in Internet-related businesses, are uncertain and evolving. We cannot assure you that these evolving legal standards will sufficiently protect our intellectual property rights in the future.

Third parties may make claims against us alleging infringement of their intellectual property rights. Any intellectual property claims, regardless of merit, could be time-consuming and expensive to litigate or settle and could significantly divert management’s attention from other business concerns. In addition, if we were unable to successfully defend against such claims, we may have to pay damages, stop selling the service or product or stop using the software, technology or content found to be in violation of a third party’s rights, seek a license for the infringing service, product, software, technology or content or develop alternative non-infringing services, products, software, technology or content. If we cannot license on reasonable terms, develop alternatives or stop using the service, product, software, technology or content for any infringing aspects of our business, we may be forced to limit our service and product offerings. Any of these results could reduce our revenue and our ability to compete effectively, increase our costs or harm our business.

~~Damage to our reputation could harm our business, including our competitive position and business prospects.~~

Our ability to attract and retain customers, members and employees is impacted by our reputation. Harm to our reputation can arise from various sources, including employee misconduct, cyber security breaches, unethical behavior, litigation or regulatory outcomes, which could, among other consequences, increase the size and number of litigation claims and damages asserted or subject us to enforcement actions, fines and penalties and cause us to incur related costs and expenses.

We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act (the “FCPA”) and similar anti-bribery laws of other countries in which we provided services prior to the sale of our total population health services (“TPHS”) business.

Because of the international operations that we previously conducted as part of our TPHS business that we sold to Sharecare, Inc. in July 2016, we could be adversely affected by violations of the FCPA and similar anti-bribery laws of other countries in which we provided services prior to the sale. The FCPA and similar anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to government officials or other third parties for the purpose of obtaining or retaining business or gaining any business advantage. While our policies mandated compliance with these anti-bribery laws, we cannot provide assurance that our internal control policies and procedures always protected us from reckless or criminal acts committed by our employees, contractors or agents. Failure to comply with the FCPA and similar legislation prior to the sale of our TPHS business could result in the imposition of civil or criminal fines and penalties and could disrupt our business and adversely affect our results of operations, cash flows and financial condition.

~~A significant percentage of Healthcare segment revenues is derived from health plan customers.~~

A significant percentage of our Healthcare segment revenues is derived from health plan customers. The health plan industry may continue to consolidate, and we cannot assure you that we will be able to retain health plan customers, or continue to provide our products and services to such health plan customers on terms at least as favorable to us as currently provided, if they are acquired by other health plans that already participate in competing programs or are not interested in our programs. Increasing vertical integration efforts involving health plans and healthcare providers or entities that provide wellness services may increase these challenges. Our health plan customers that are part of larger healthcare enterprises may have greater bargaining power, which may lead to further pressure on the prices for our products and services. In addition, a reduction in the number of covered lives enrolled with our health plan customers or in the payments we receive could adversely affect our results of operations. Our health plan customers are subject to continuing competition and reduced reimbursement rates from governmental and private sources, which could lead current or prospective customers to seek reduced fees or choose to reduce or delay the purchase of our services. Finally, health plan customers could offer (and in some cases are offering) services themselves that compete directly with our offerings, stop providing our offerings to certain or all of their members (as one of our customers, United Healthcare, has done), or offer fitness benefits in addition to SilverSneakers and Prime Fitness, whichtaxes could adversely affect our business and results of operations.

~~We currently derive a significant percentage of our Healthcare segmentrevenues from three customers.~~

For the year ended December 31, 2019, three customers each comprised more than 10%, and together comprised approximately 45%, of our Healthcare segment’s revenues. Our primary contracts with two of these customers continue through December 31, 2022, and our primary contract with the third customer continues through December 31, 2021. The loss or restructuring of a contract with any of these three customers or any other significant customers of our Healthcare segment could have a material adverse effect on our business and results of operations. None of these three contracts allows the customer to terminate for convenience prior to the expiration of the contract.

~~Our inability to renew and/or maintain contracts with our Healthcare segmentcustomers and/or fitness partner locations under existing terms or restructure these contracts under favorable terms could adversely affect our business and results of operations.~~

If our Healthcare segment customers and/or fitness partner locations choose not to renew their contracts with us (which occurs from time to time), our business and results of operations could be materially adversely affected. Loss of a significant fitness partner or health plan customer or a reduction in a health plan customer's enrolled lives (including as a result of increased unemployment and the resulting loss of health insurance coverage) could have a material adverse effect on our business and results of operations. In addition, a restructuring of a contract with a health plan customer and/or fitness partner on terms that aren’t favorable to us could adversely affect our business and results of operations. Moreover, the businesses of our fitness partner locations have been and will likely continue to be adversely affected by the closure of locations, any public health directives, or social distancing measures applicable upon reopening of locations and reduced overall consumer demand for fitness center use as a result of the COVID-19 pandemic. If a significant portion of our fitness partner network is unable to return to normal operations within a reasonable period of time as a result of financial or operational stresses brought on by the COVID-19 pandemic, we may be unable to make alternative arrangements with substitute fitness partners on favorable terms or at all.

~~Reductions in Medicare Advantage health plan reimbursement rates or changes in plan designs may negatively impact our Healthcare segmentbusiness and results of operations.~~

A significant portion of our Healthcare segment revenue is indirectly derived from the monthly premium payments paid by the U.S. Department of Health and Human Services to our health plan customers for services they provide to Medicare Advantage beneficiaries. As a result, our results of operations are, in part, dependent on government funding levels for Medicare Advantage programs. An executive order issued in October 2019 seeks to encourage innovative Medicare Advantage benefit structures and plan designs, including through changes to supplemental benefits. Any changes that limit or reduce Medicare Advantage reimbursement levels, such as reductions in or limitations of reimbursement amounts or rates under these programs, reductions in funding of these programs, expansion of benefits without adequate funding, elimination of coverage for certain benefits, or elimination of coverage affecting the services that we provide, could have a material adverse effect on our Healthcare segment health plan customers, and as a result, on our business and results of operations.

~~Our results of operations could be adversely affected by severe or unexpected weather, epidemics, pandemics or outbreaks of disease.~~

Adverse weather conditions or other extreme changes in the weather may cause people to refrain, or prevent people, from visiting fitness partner locations and using our Healthcare segment services. Additionally, widespread health epidemics or outbreaks of disease, such as influenza or COVID-19, may cause members to avoid public gathering places and negatively impact their use of our services. As some of the fees that we charge our customers are based on member participation, a decrease in member participation could adversely affect our business and results of operations.

Compliance with existing or newly adopted federal and state laws and regulations or new or revised interpretations of such requirements could adversely affect our results of operations or may require us to spend substantial amounts, and the failure to comply with applicable laws and regulations could subject us to penalties or negatively impact our ability to provide services.

Our Healthcare segment customers are subject to considerable state and federal government regulation, and a substantial majority of our Healthcare segment business involves providing services to Medicare Advantage beneficiaries. As a result, we are subject directly to various federal laws and regulations, including the federal False Claims Act, billing and reimbursement requirements and other provisions related to fraud and abuse. In addition, our contracts with Medicare Advantage plans require us to comply with a number of regulatory provisions and to permit these health plan customers to perform compliance audits of our processes and programs. Many of these regulations are vaguely written and subject to differing interpretations that may, in certain cases, result in unintended consequences that could impact our ability to effectively deliver services. Further, we are required to comply with most requirements of the HIPAA privacy and security laws and regulations and may be subject to criminal or civil penalties for violations of these regulations. Certain of our services, including health utilization management and certain claims payment functions, require licensure and may be regulated by government agencies. We are subject to ~~a variety of legal requirements in order to obtain and maintain such licenses, but little guidance is available to determine the scope of some of these requirements.~~

~~We continually monitor the extent to which~~U.S. federal and state ~~legislation~~income, payroll, property, sales and use, and other types of taxes in numerous jurisdictions. Significant judgment is required in determining our provisions for income taxes. Changes in tax rates, enactments of new tax laws, revisions of tax regulations, govern our operations. New federal or state laws or regulations or new interpretations of existing requirements that affect our operations could have a material adverse effect on our results of operations. If we are found to have violated applicable laws, to have caused any of our Healthcare segment customers to submit falseand claims or ~~make false statements, or to have failed to comply~~litigation with our contractual compliance obligations, we could be required to restructure our Healthcare segment operations, be subject to contractual penalties, including termination of our Healthcare segment customer agreements, and be subject to significant civil and criminal penalties.

~~Healthcare reform efforts may result in a reduction to our revenues from government health programs and private insurance companies or otherwise directly or indirectly impact our business.~~

The healthcare industry is subject to various political, regulatory, scientific, and technological influences. Efforts at federal and state levels of government have resulted in laws and regulations intended to effect significant change within the healthcare system. The ~~Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”)~~, the most prominent of these efforts, affects coverage, delivery, and reimbursement of healthcare services. Among other effects, several of its provisions may increase the costs and/or reduce the revenues of our customers or prospective customers. For example, the ACA eliminates pre-existing condition exclusions by commercial health plans, bans annual benefit limits, and mandates minimum medical loss ratios for health plans. On April 27, 2020, the United States Supreme Court held that Congress owes health insurers approximately $12 billion as startup costs incurred in the first three years of the ACA. Since this decision, judgments and stipulations for judgment have been entered for individual insurers identifying the amount owed by the federal government.

However, there is substantial uncertainty regarding the net effect and future of the ACA. The presidential administration and Congress have made significant changes to the ACA, its implementation and its interpretation. Effective January 2019, Congress eliminated the penalty associated with the ACA’s individual mandate. As a result, a federal court in Texas ruled in December 2018 that the individual mandate was unconstitutional and determined that the rest of the ACA was, therefore, invalid. In December 2019, the Fifth Circuit Court of Appeals upheld this decision with respect to the individual mandate but remanded for further consideration of how this affects the rest of the law. The law remains in effect pending appeal. It is possible that the reforms imposed by the ACA or uncertainty regarding significant changes or court challenges to the law will adversely affect the profitability of our Healthcare segment customers and cause our Healthcare segment customers or prospective customers to reduce or delay the purchase of our services or to demand reduced fees. Because of this uncertainty and many other variables, including the ACA’s complexity and the difficulty of predicting the impact of changes on other healthcare industry participants and the ultimate outcome of court challenges, we are unable to predict all of the ways in which the ACA could impact us. Furthermore, we could also be impacted by other legislative and regulatory healthcare reform initiatives. For example, beginning in 2020, the Creating High-quality Results and Outcomes Necessary to Improve Chronic (CHRONIC) Care Act of 2018 allows Medicare Advantage plans to cover supplemental benefits that are not primarily health-related, but that have the reasonable expectation of improving or maintaining health. Additionally, some presidential candidates and members of Congress have proposed measures that would expand government-sponsored coverage, including single-payor proposals (often referred to as "Medicare for All"). Further, the outcome of the 2020 federal election and its potential impact on health reform efforts is unknown.

Our Nutrition segment's future growth and profitability will depend in large part upon the effectiveness and efficiency of our marketing expenditures and our ability to select effective markets and media in which to advertise.

~~Our Nutrition segment'sfuture growth and profitability will depend in large part upon the effectiveness and efficiency of our marketing expenditures, including our ability to:~~

Our planned marketing expenditures for our Nutrition segment may not result in increased revenue or generate sufficient levels of brand name and program awareness. We may not be able to manage our Nutrition segment's~~marketing expenditures on a cost-effective basis whereby our Nutrition segmentcustomer acquisition costs may exceed the contribution profit generated from each additional customer.~~

Our Nutrition segment relies on third parties to provide it with adequate food supply, freight and fulfillment and Internet and networking services, the loss or disruption of any of which could cause our revenue, earnings or reputation to suffer.

~~Food Manufacturers and Other Suppliers~~. Our Nutrition segment relies solely on third-party manufacturers to supply all of the food and other products we sell as well as packaging materials. If we are unable to obtain sufficient quantity, quality and variety of food, other products and packaging materials in a timely and low-cost manner from our manufacturers, we will be unable to fulfill our Nutrition segment~~customers’ orders in a timely manner, which may cause us to lose revenue and market share or incur higher costs, as well as damage the value of our brands.~~

~~Freight and Fulfillment~~. Currently, all of our Nutrition segment customer order fulfillment is handled by one third-party provider. Also, almost all of our direct to consumer Nutrition segment customer orders are shipped by one third-party provider and almost all of our orders for Nutrition segmentretail programs were shipped by another third-party provider. Should these providers be unable to service our needs for even a short duration, our revenue and business could be adversely affected. Additionally, the cost and time associated with replacing these providers on short notice would add to our costs. Any replacement fulfillment provider would also require startup time, which could cause us to lose sales and market share.

~~Internet and Networking. Our Nutrition segment~~business also depends on a number of third parties for Internet access and networking, and we have limited control over these third parties. Should our Nutrition segment's network connections go down, our ability to fulfill orders would be delayed. Further, if our Nutrition segment'swebsites or call center become unavailable for a noticeable period of time due to Internet or communication failures, our business could be adversely affected, including harm to our brands and loss of sales.

~~Therefore, we are dependent on these third parties. The services we require from these parties may be disrupted by a number of factors, including the following:~~

Further, the COVID-19 pandemic (or another regional or global epidemic or pandemic, depending upon its location, duration and severity), could severely affect our Nutrition segment’s business, including as a result of impacts associated with preventive and precautionary measures that we and other businesses and governments may take. A regional or global epidemic or pandemic could also adversely affect our business by disrupting the operations of our call center, creating negative popular sentiment among consumers of delivered food, or by disrupting or delaying our third-party providers' ability to, among other things (i) supply the products that we sell as well as packaging materials, (ii) fulfill and deliver Nutrition segment customer orders and (iii) provide Internet and networking services. In addition, any significant change in the pricing or payment terms that we have with our third-party providers could adversely affect our liquidity. The COVID-19 pandemic has caused, and may cause in the future, delays in fulfilling orders for our Nutrition segment’s products at our warehouses ~~due to employees of our fulfillment provider testing positive for COVID-19~~. Due to the COVID-19 pandemic, we have incurred, and may incur in the future, charges related to increased labor rates and overtime for employees of our fulfillment provider, as well as additional shipping and related charges if it is necessary to transfer the fulfillment of certain orders to other warehouses that are farther from the customer’s delivery destination.

~~We may be subject to claims that our Nutrition segment personnel are unqualified to provide proper weight loss advice.~~

~~We offer counseling options from weight loss counselors, registered dietitians and certified diabetes educators with varying levels of training. We may be subject to claims from our Nutrition segment~~customers alleging that our personnel lack the qualifications necessary to provide proper advice regarding weight loss and related topics. We may also be subject to claims that our Nutrition segment personnel have provided inappropriate advice or have inappropriately referred or failed to refer customers to health care providers for matters other than weight loss. Such claimstaxing authorities could result in ~~lawsuits, damage to our reputation and divert management’s attention from our business, which would adversely affect our business.~~

~~Our Nutrition segment's weight loss programs do not include medical treatment or medical advice, and we do not engage physicians or nurses to monitor the progress of our Nutrition segmentcustomers. Many people who are overweight suffer from other physical conditions, and our target customers could be considered a high-risk population. A Nutrition segment~~customer who experiences health problems could allege or bring a lawsuit against us on the basis that those problems were caused or worsened by participating in our weight management programs or by consuming one or more of our individual products.substantially higher taxes. For example, ~~our Nutrition segment'spredecessor businesses suffered substantial losses due~~on March 31, 2021, President Biden unveiled his infrastructure plan, which includes a proposal to ~~health-related claims~~increase the federal corporate tax rate from 21% to 28% and ~~related publicity. If we become subject~~ to any such claims, while we would defend ourselves against such claims, we may ultimately be unsuccessful in our defense. Also, defending ourselves against such claims, regardless of their merit and ultimate outcome, would likely be lengthy and costly, and adversely affect our results of operations. Further, our general liability insurance may not cover claims of these types.

~~The weight management industry is highly competitive. If any of our competitors or~~impose a new ~~entrant into~~alternative minimum tax on book income as part of a package of tax reforms to help fund the ~~market with significant resources pursues a weight management program similar to ours, our Nutrition segment business could be significantly affected.~~

~~Competition is intense~~spending proposals in the ~~weight management industry and we must remain competitive in the areas of program efficacy, price, taste, customer service and brand recognition. The competitors of our Nutrition segment~~include companies selling pharmaceutical products and weight loss programs, digital tools and wearable trackers, as well as a wide variety of diet foods and meal replacement bars and shakes, appetite suppressants and nutritional supplements. Some of our Nutrition segment's~~competitors~~plan. If these proposals are ~~significantly larger than we are and have substantially greater resources. Our Nutrition segmentbusiness~~ultimately enacted, they could be adversely affected if someone with significant resources decided to imitate our weight management programs. For example, if a major supplier of pre-packaged foods decided to enter this market and made a substantial investment of resources in advertising and training diet counselors, our Nutrition segmentbusiness could be significantly affected. Any increased competition from new entrants into our Nutrition segment's industry or any increased success by existing competition could result in reductions in our Nutrition segment~~sales or prices, or both, which could have an adverse effect on our business and results of operations.~~

~~We are dependent on certain third-party agreements for a percentage of revenue.~~

Our Nutrition segment has agreements with certain third-party retailers. Under these agreements, these third parties control when and how often our Nutrition segment products are offered, and we are not guaranteed any minimum level of sales. Our Nutrition segment's largest third-party retailer has indicated to us that they will be reducing orders for, and the promotion of, our Nutrition segment products in 2020. If any third party elects not to renew their agreement with us or further reduces orders for our Nutrition segment products or the promotion of our Nutrition segment products, our revenue will suffer.

In addition, our third-party retailers may decide to stop selling our Nutrition segment products upon written notice, which may result in an increased level of reclamation claims. In the event any retailer terminates its relationship with us and the level of reclamation claims exceeds the estimated amount reserved on our balance sheet at the time of sale to the retailer, we will have to record an expense for the excess claims, which could adverselymaterially impact our results of operations and financial condition. Additionally, in certain instances, we could be prohibited from selling our Nutrition segment products through competitors of these third parties for a specified time after the termination of the agreements.

Furthermore, some retailers are experiencing fewer than usual customer visits at their locations as a result of the COVID-19 pandemic, which has adversely affected and could continue to adversely affect the sales of our products at those retailers.

~~New weight loss products or services may put us at a competitive disadvantage.~~

On an ongoing basis, many existing and potential providers of weight loss solutions, including many pharmaceutical firms with significantly greater financial and operating resources than we have, are developing new products and services. The creation of a weight loss solution, such as a drug therapy, that is perceived to be safe, effective and “easier” than a portion-controlled meal plan would put our Nutrition segment at a disadvantage in the marketplace and our results of operations could be negatively affected.

~~If our Nutrition segment’s efforts to attract and retain customer subscriptions are not successful, our business will be adversely affected.~~

Our Nutrition segment’s ability to continue to attract customer subscriptions will depend in part on our ability to consistently provide customers with compelling food choices that are desirable in taste and quality, effectively market our products, and offer convenience and value to our customers. The relative offerings, pricing, and other factors of our Nutrition segment’s competitors may adversely impact our ability to attract and retain customer subscriptions. If our Nutrition segment’s customers do not perceive our products to be of value, we may not be able to attract and retain customers. We must continually add new customer subscriptions both to replace canceled subscriptions and to grow our business beyond our current customer base. Further, if excessive numbers of our Nutrition segment’s customers cancel their subscriptions, we may be required to incur significantly higher marketing expenditures than we currently anticipate to replace these customers with new customers, and our results of operations may be adversely affected.

Our Nutrition segment's competitors may pursue litigation against us based on our advertising or other marketing practices regardless of its merit and chances of success, especially if we engage in comparative advertising, which includes advertising that directly or indirectly mentions a competitor or a competitor’s weight loss program in comparison to our Nutrition segment programs. While we would defend ourselves against any such claims, our defense may ultimately be unsuccessful. Also, defending against such claims, regardless of their merit and ultimate outcome, may be lengthy and costly, strain our resources and divert management’s attention from their core responsibilities, which would have a negative impact on our business.

We have launched and expect to continue to launch new weight loss and nutrition programs and brands which may not be successful due to the failure of such programs or brands to achieve anticipated levels of market acceptance, which could adversely affect our Nutrition segment business, financial condition and results of operations.

There are a number of risks inherent in any new program or brand introduction, which could prevent us from achieving revenue growth and increasing our Nutrition segment's overall market share in the commercial weight loss and nutrition markets. Any new program or brand may fail to achieve the anticipated level of market acceptance or appeal to customer tastes and preferences. In addition, introduction costs, including product testing and marketing, may be greater than anticipated. If the new program or brand is not successful or falls short of anticipated market acceptance, we may be adversely affected by continued expenses and the diversion of management time to this initiative. Any or all of such events could have adverse effects on our business, financial condition and results of operations.

~~If we do not continue to receive referrals from existing Nutrition segmentcustomers, our Nutrition segment's customer acquisition cost may increase.~~

We rely on word-of-mouth advertising for a portion of our new Nutrition segment customers. If our brands suffer or the number of customers acquired through referrals drops due to other circumstances, our costs associated with acquiring new Nutrition segment customers and generating revenue will increase, which will, in turn, have an adverse effect on our profitability.

We use third-party marketing vendors to promote our Nutrition segment products. If the spokespersons affiliated with the third-party marketing vendors suffer adverse publicity or elect to not renew, our revenue could be adversely affected.

Our Nutrition segment's marketing strategy depends in part on celebrity spokespersons, as well as customer spokespersons, to promote our weight loss programs. Any of these spokespersons may become the subject of adverse news reports, negative publicity or otherwise be alienated from a segment of our Nutrition segment customer base, whether weight loss related or not. If so, such events may reduce the effectiveness of his or her endorsement and, in turn, adversely affect our revenue and results of operations. Additionally, if a spokesperson elects not to renew their agreement with us, our revenue may suffer.

~~Changes in customerpreferences could negatively impact our operating results.~~

Our Nutrition segment programs feature frozen and ready-to-go food selections, which we believe offer convenience and value to our customers. Our continued success depends, to a large degree, upon the continued popularity of our Nutrition segment programs versus various other weight loss, weight management and fitness regimens, such as low carbohydrate diets, appetite suppressants and diets featured in the published media. Changes in customer tastes and preferences away from our frozen or ready-to-go food and support and counseling services, and any failure to provide innovative responses to these changes, may have a materially adverse impact on our business, financial condition, operating results andtax provision, cash ~~flows.~~

Our success is also dependent on our food innovation including maintaining a robust array of food items and improving the quality of existing items. If we do not continually expand our food items or provide customers with items that are desirable in taste and quality, our business could be adversely impacted.

~~The seasonal nature of the business of our Nutrition segment could cause our operating results to fluctuate.~~

The business of our Nutrition segment is seasonal, with revenue generally greatest (and advertising expenses generally highest) in the first calendar quarter, also known as diet season. Weak performance during diet season could negatively impact our Nutrition segment’s performance for the remainder of the year. This seasonality could cause the market price of our Common Stock to fluctuate as the results of an interim financial period may not be indicative of our full year results. Seasonality also impacts relative revenue and profitability of each quarter of the year, both on a quarter-to-quarter and year-over-year basis.

~~The weight loss industry is subject to adverse publicity, which could harm our Nutrition segment business.~~

The weight loss industry receives adverse publicity from time to time, and the occurrence of such publicity could harm us, even if the adverse publicity is not directly related to us. In the early 1990s, our Nutrition segment's predecessor businesses were subject to extremely damaging adverse publicity relating to a large number of lawsuits alleging that the Nutrisystem weight loss program in use at that time led to gall bladder disease. This publicity was a factor that contributed to the bankruptcy of our Nutrition segment's predecessor businesses in 1993. In addition, our Nutrition segment's predecessor businesses were severely impacted by significant litigation and damaging publicity related to their customers’ use of fen-phen as an appetite suppressant, which the FDA ordered withdrawn from the market in September 1997. The significant decline in business resulting from the fen-phen problems caused our Nutrition segment's predecessor businesses to close all of their company-owned weight loss centers.

Congressional hearings about practices in the weight loss industry have also resulted in adverse publicity and a consequent decline in the revenue of weight loss businesses. Future research reports or publicity that is perceived as unfavorable or that question certain weight loss programs, products or methods could result in a decline in our revenue. Because of our dependence on customer perceptions, adverse publicity associated with illness or other undesirable effects resulting from the consumption of our Nutrition segment products or similar products by competitors, whether or not accurate, could also damage customer confidence in our Nutrition segment weight loss programs and result in a decline in revenue. Adverse publicity could arise even if the unfavorable effects associated with weight loss products or services resulted from the user’s failure to use such products or services appropriately.

~~The industry in which our Nutrition segment operatesis subject to governmental regulation that could increase in severity and hurt results of operations.~~

The industry in which our Nutrition segment operates is subject to federal, state and other governmental regulation. Certain federal and state agencies, such as the FTC, regulate and enforce such laws relating to advertising, disclosures to customers, privacy, customer pricing and billing arrangements and other customer protection matters. A determination by a federal or state agency, or a court, that any of our practices do not meet existing or new laws or regulations could result in liability, adverse publicity and restrictions on our business operations. Some advertising practices in the weight loss industry, in particular, have led to investigations from time to time by the FTC and other governmental agencies and many companies in the weight loss industry, including our Nutrition segment's predecessor businesses, have entered into consent decrees with the FTC relating to weight loss claims and other advertising practices. In addition, the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising require us and other weight loss companies to use a statement as to what the typical weight loss a customer can expect to achieve on our Nutrition segment programs when using a customer’s weight loss testimonial in advertising. Federal and state regulation of advertising practices generally, and in the weight loss industry in particular, may increase in scope or severity in the future, which could have a material adverse impact on our business.

Other aspects of the industry in which our Nutrition segment operates are also subject to government regulation. For example, the manufacturing, labeling and distribution of food products, including dietary supplements, are subject to strict USDA and FDA requirements and food manufacturers are subject to rigorous inspection and other requirements of the USDA and FDA, and companies operating in foreign markets must comply with those countries’ requirements for proper labeling, controls on hygiene, food preparation and other matters. If federal, state, local or foreign regulation of the weight loss industry increases for any reason, then we may be required to incur significant expenses, as well as modify our operations to comply with new regulatory requirements, which could harm our operating results. Additionally, remedies available in any potential administrative or regulatory actions may include product recalls and requiring us to refund amounts paid by all affected customers or pay other damages, which could be substantial.

Laws and regulations directly applicable to communications, operations or commerce over the Internet such as those governing intellectual property, privacy, libel and taxation, are becoming more prevalent and some remain unsettled. If we are required to comply with new laws or regulations or new interpretations of existing laws or regulations, or if we are unable to comply with these laws, regulations or interpretations, our business could be adversely affected.

Future laws or regulations, including laws or regulations affecting our marketing and advertising practices, relations with customers, employees, service providers, or our services and products, may have an adverse impact on us.

~~The sale of ingested products involves product~~tax liability, and ~~other risks.~~

Like other distributors of products that are ingested, we face an inherent risk of exposure to product liability claims if the use of our Nutrition segment products results in illness or injury. The foods that we resell in the U.S. are subject to laws and regulations, including those administered by the USDA and FDA that establish manufacturing practices and quality standards for food products. Product liability claims could have a material adverse effect on our business as existing insurance coverage may not be adequate. Distributors of weight loss food products, including dietary supplements, as well as our Nutrition segment's predecessor businesses, have been named as defendants in product liability lawsuits from time to time. The successful assertion or settlement of an uninsured claim, a significant number of insured claims or a claim exceeding the limits of our insurance coverage would harm us by adding costs to the business and by diverting the attention of senior management from the operation of our business. We may also be subject to claims that our Nutrition segment products contain contaminants, are improperly labeled, include inadequate instructions as to use or inadequate warnings covering interactions with other substances. Product liability litigation, even if not meritorious, is very expensive and could also entail adverse publicity for us and adversely affect our results of operations. In addition, the products we distribute, or certain components of those products, may be subject to product recalls or other deficiencies. Any negative publicity associated with these actions would adversely affect our brands and may result in decreased product sales and, as a result, lower revenue and profits.

~~The stock repurchase activity for the second quarter of 2020 was as follows:~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Delaware		62-1117144
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

Title of each class		Trading symbol		Name of each exchange on which registered
Common Stock - $.001 par value		TVTY		The Nasdaq Stock Market LLC

Large accelerated filer	☒☐	Accelerated filer	☐☒	Smaller reporting company	☐
Non-accelerated filer	☐			Emerging growth company	☐

			Page
Part I
	Item 1.	Financial Statements	3
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2823
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4534
	Item 4.	Controls and Procedures	4634

Part II
	Item 1.	Legal Proceedings	4735
	Item 1A.	Risk Factors	47
	~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	6235
	Item 6.	Exhibits	6335

(In thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
SilverSneakers	$	49,157	$	122,899	$	170,764	$	245,922
Prime Fitness		19,047		29,751		51,858		58,494
WholeHealth Living		4,747		4,467		9,796		9,041
Other ⁽¹⁾		8,972		364		9,197		551
	$	81,923	$	157,481	$	241,615	$	314,008

(In thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Nutrisystem direct to consumer	$	165,118	$	155,976	$	320,509	$	203,977
South Beach Diet direct to consumer		8,650		14,464	$	21,414		19,118
Retail		3,902		8,728		9,350		13,032
QVC		2,901		3,522		7,088		4,044
Other		104		206		277		292
	$	180,675	$	182,896	$	358,638	$	240,463

(In thousands)
Remaining 2020	$	1,789
2021		1,901
2022		1,192
2023		468
2024		297
2025		220
	$	5,867

(In thousands)	Healthcare		Nutrition			Consolidated
Balance, January 1, 2020	$	334,680	$	319,955		$	654,635
Impairment loss		—		(119,500	)	$	(119,500	)
Balance, June 30, 2020	$	334,680	$	200,455		$	535,135

	Level 2
(In thousands)	June 30, 2020		December 31, 2019
Liabilities:
Interest rate swap agreements	$	44,407	$	16,238

(In thousands)	For the Three Months Ended					For the Six Months Ended
Derivatives in Cash Flow Hedging Relationships	June 30, 2020			June 30, 2019		June 30, 2020			June 30, 2019
Loss related to effective portion of derivatives recognized in accumulated OCI, gross of tax effect	$	5,020		$	16,144	$	32,772		$	16,144
Gain (loss) related to effective portion of derivatives reclassified from accumulated OCI to interest expense, gross of tax effect	$	(3,482	)	$	160	$	(4,603	)	$	160

(In thousands)	Statement of Operations Classification	Three Months Ended March 31, 2021
Interest rate swap agreements:
Net gain related to ineffective portion of derivatives, gross of tax effect	Other (income) expense, net	$	(1,130	)
Previously deferred loss related to de-designated swaps reclassified from accumulated OCI, gross of tax effect	Interest expense		304
		$	(826	)

(In thousands)	Net Change in Fair Value of Interest Rate Swaps
Accumulated OCI, net of tax, as of January 1, 2020	$	(12,091	)
Other comprehensive income (loss) before reclassifications, net of tax of $8,370		(24,402	)
Amounts reclassified from accumulated OCI, net of tax of $1,175		3,428
Accumulated OCI, net of tax, as of June 30, 2020	$	(33,065	)

	Three Months Ended June 30,						Six Months Ended June 30,
(In $000s)	2020			2019			2020			2019
Healthcare segment:
Revenues	$	81,923		$	157,481		$	241,615		$	314,008
Adjusted EBITDA		41,472			35,681			71,719			61,810
Adjusted EBITDA as a percentage of revenues		50.6	%		22.7	%		29.7	%		19.7	%
Nutrition segment:
Revenues	$	180,675		$	182,896		$	358,638		$	240,463
Adjusted EBITDA		33,363			34,667			31,916			48,010
Adjusted EBITDA as a percentage of revenues		18.5	%		19.0	%		8.9	%		20.0	%

	Year Ended March 31,
(In thousands)	2021			2020
Income from continuing operations, GAAP basis	$	19,944		$	8,275
Income tax expense		7,620			3,136
Interest expense		10,756			11,270
Depreciation expense		2,683			2,030
EBITDA from continuing operations, non-GAAP basis ⁽¹⁾	$	41,003		$	24,711
Acquisition, integration, project and CEO transition costs ⁽²⁾		1,321			5,049
Restructuring charges ⁽³⁾		—			482
Other (income)/expense ⁽⁴⁾		(1,130	)		—
Adjusted EBITDA from continuing operations, non-GAAP basis ⁽⁵⁾	$	41,194		$	30,242

ISSUER PURCHASES OF EQUITY SECURITIES
Period	Total Number of Shares Purchased ⁽¹⁾		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽²⁾		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ⁽²⁾
4/1/2020 - 4/30/2020		66	$	5.27		—	$	—
5/1/2020 - 5/31/2020		589		5.35		—		—
6/1/2020 - 6/30/2020		—		—		—		—
Total		655	$	5.34

10.1		Offer of Employment ~~Agreement by and~~Letter between the Company and ~~Richard M. Ashworth,~~Thomas Lewis dated ~~May 20, 2020 [incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated May 22, 2020, File No. 000-19364]~~as of October 4, 2018*

10.2		~~Form~~Amendment No.1 to Offer of ~~Restricted Stock Unit Award Agreement for Richard M. Ashworth (Inducement Award),~~Employment Letter between the Company and Thomas Lewis dated ~~June~~as of April 1, ~~2020 [incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K dated May 22, 2020, File No. 000-19364]~~2019*

10.3		~~Form~~Amendment No. 2 to Offer of ~~Restricted Stock Unit Award Agreement for Richard M. Ashworth,~~Employment Letter between the Company and Thomas Lewis dated ~~June 1,~~as of October 30, 2020 ~~[incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K dated May 22, 2020, File No. 000-19364]~~*

10.4		Amended and Restated Offer of Employment Letter between the Company and Raymond Bilbao dated as of October 30, 2020*

10.5		Change of Control Agreement between the Company and Raymond Bilbao dated as of July 3, 2018*

10.6		Form of ~~Market~~Restricted Stock Unit Award Agreement (for Executive Officers) for May 11, 2020 under the Company’s Second Amended and Restated 2014 Stock Incentive Plan*

10.7		Form of Restricted Stock Unit Award Agreement (for Directors) for May 11, 2020 under the Company’s Second Amended and Restated 2014 Stock Incentive Plan*

10.8		Form of Restricted Stock Unit Award Agreement (for Richard ~~M. Ashworth, dated June~~Ashworth) for July 1, 2020 ~~[incorporated by reference to Exhibit 10.4 to~~under the ~~Company's Current Report on~~ Company’s Second Amended and Restated 2014 Stock Incentive Plan*

10.9		Form ~~8-K dated May 22,~~of Restricted Stock Unit Award Agreement (for Executive Officers) for August 24, 2020 ~~File No. 000-19364]~~under the Company’s Second Amended and Restated 2014 Stock Incentive Plan*

10.10		Form of Restricted Stock Unit Award Agreement (for Directors) for August 24, 2020 under the Company’s Second Amended and Restated 2014 Stock Incentive Plan*

31.1		Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 made by Richard M. Ashworth, Chief Executive ~~Officer.~~Officer*

31.2		Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 made by Adam Holland, Chief Financial ~~Officer.~~Officer*

32		Certification Pursuant to 18 U.S.C section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 made by Richard M. Ashworth, Chief Executive Officer, and Adam Holland, Chief Financial ~~Officer.~~Officer*

101		The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2020,~~March 31, 2021, formatted in Inline XBRL: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statement of Changes in Stockholders' Equity; (v) Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial ~~Statements.~~Statements

104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2020,~~March 31, 2021, formatted in Inline XBRL (included in Exhibit 101 hereto).

*		Filed herewith

			Tivity Health, Inc.
			(Registrant)

Date:	~~August~~May 7, ~~2020~~2021	By	/s/ Adam C. Holland

			Chief Financial Officer
			(Principal Financial Officer)