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8-K - 8-K - GENERAL NUTRITION CENTERS, INC.a11-6501_18k.htm

Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE

 

General Nutrition Centers, Inc. Reports

Fourth Quarter and Fiscal Year 2010 Results

 

PITTSBURGH, February 25, 2011 /PRNewswire/ — General Nutrition Centers, Inc. (“GNC” or the “Company”), a leading global specialty retailer of nutritional products, today reported its financial results for the year and quarter ended December 31, 2010.

 

For the fourth quarter of 2010, the Company reported net income of $19.8 million, a $7.1 million, or 56.3%, increase over net income of $12.7 million for the fourth quarter of 2009.  Net income as a percentage of revenue was 4.6% in the fourth quarter of 2010, as compared to 3.1% in the fourth quarter of 2009.

 

For the fourth quarter of 2010, the Company reported consolidated revenue of $435.7 million, an increase of 7.9% over the consolidated revenue of $403.9 million for the fourth quarter of 2009.  Revenue increased in each of the Company’s segments: retail by 6.4%, franchise by 12.8%, and manufacturing/wholesale by 10.7%.  Same store sales improved 5.8% in domestic company-owned stores (including e-commerce sales), representing the 22nd consecutive quarter of positive same store sales.

 

Earnings before interest, income taxes, depreciation, amortization, non-cash stock-based compensation expense, and strategic alternative costs (“Adjusted EBITDA”) for the fourth quarter of 2010 was $58.4 million, a $7.8 million, or 15.3%, increase over the Adjusted EBITDA of $50.6 million for the fourth quarter of 2009.  Adjusted EBITDA was 13.4% as a percentage of revenue in the fourth quarter of 2010, compared to 12.5% in the fourth quarter of 2009.

 

The Company recognized $4.9 million of income tax expense during the fourth quarter of 2010.  This represented 19.8% of pre-tax income and was affected by non-recurring income tax benefits related principally to an adjustment to the Company’s valuation allowance.

 

For the fourth quarter of 2010, the Company generated net cash from operations of $44.2 million, incurred capital expenditures of approximately $11.6 million, and paid approximately $0.4 million in principal on outstanding debt.  At December 31, 2010, the Company’s cash balance was $150.6 million.

 

In the fourth quarter of 2010, the Company opened 46 net new domestic company-owned stores, six net new domestic franchise locations, 36 net new international franchise locations and 20 net new franchise store-within-a-store Rite Aid locations.

 

Joe Fortunato, Chief Executive Officer, said, “Our fourth quarter concluded another strong year for GNC.  Our leadership in health and wellness, particularly in our core vitamin and sports categories, continues to position us to drive retail segment revenue and profit growth, provides opportunities for unique partnerships like Pepsi and PetSmart, and establishes a platform for long term expansion, both domestically and internationally.”

 

For the year ended December 31, 2010, the Company reported net income of $98.2 million, a $28.6 million, or 41.0%, increase over net income of $69.6 million for the year ended December 31, 2009.  Net income as a percentage of revenue was 5.4% for the year ended December 31, 2010, compared to 4.1% for the year ended December 31, 2009.

 



 

For the year ended December 31, 2010, the Company reported consolidated revenue of $1,822.4 million, an increase of $115.4 million, or 6.8%, over the consolidated revenue of $1,707.0 million for the year ended December 31, 2009.  Revenue increased in the Company’s retail and franchise segments by 7.0% and 11.2%, respectively, and declined in the manufacturing/wholesale segment by 1.2%.  For the year ended December 31, 2010, same store sales improved 5.6% in domestic company-owned stores (including e-commerce sales).

 

Adjusted EBITDA was $268.2 million for the year ended December 31, 2010, a $37.5 million, or 16.3%, increase over the Adjusted EBITDA of $230.7 million for the year ended December 31, 2009.  Adjusted EBITDA improved to 14.7% as a percentage of revenue for the year ended December 31, 2010, compared to 13.5% for the year ended December 31, 2009.

 

For the year ended December 31, 2010, the Company generated net cash from operations of $141.7 million, incurred capital expenditures of $32.5 million and paid approximately $1.7 million in principal on outstanding debt.

 

For the year ended December 31, 2010, the Company opened 83 net new domestic Company-owned stores, two net new Company-owned stores in Canada, 130 net new international franchise locations and 134 net new franchise store-within-a-store Rite Aid locations, and closed six net domestic franchise locations.

 

General Nutrition Centers, Inc., headquartered in Pittsburgh, Pa., is a leading global specialty retailer of health and wellness products, including vitamins, minerals, and herbal supplements products, sports nutrition products and diet products. General Nutrition Centers, Inc. is an indirect wholly owned subsidiary of GNC Parent LLC, which was acquired by affiliates of Ares Management LLC and Ontario Teachers’ Pension Plan Board through a merger on March 16, 2007.

 

As of December 31, 2010, GNC has more than 7,200 locations, of which more than 5,600 retail locations are in the United States (including 903 franchise and 2,003 Rite Aid franchise store-within-a-store locations) and franchise operations in 46 countries (including distribution centers where retail sales are made).  The Company — which is dedicated to helping consumers Live Well — also offers products and product information online at GNC.com.  GNC has scheduled a conference call and webcast to report its fourth quarter 2010 financial results on Friday, February 25, 2011 at 11:00 am EST.  To listen to this call, dial 1-866-468-1032 inside the U.S. and 1-706-679-4448 outside the U.S.  The conference identification number for all participants is 45800271.  A webcast of the call will also be available through the “About GNC” link on www.gnc.com through March 25, 2011.

 

This release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations and business that is not historical information. Forward-looking statements can be identified by the use of terminology such as “subject to,” “believes,” “anticipates,” “plans,” “expects,” “intends,” “estimates,” “projects,” “may,” “will,” “should,” “can,” the negatives thereof, variations thereon and similar expressions, or by discussions of strategy. While GNC believes there is a reasonable basis for its expectations and beliefs, they are inherently uncertain, and the Company may not realize its expectations and its beliefs may not prove correct.  GNC undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Actual results could differ materially from those described or implied by such forward-looking statements. For a listing of factors that may materially affect such forward-looking statements, please refer to our quarterly and annual filings with the Securities and Exchange Commission.

 

Adjusted EBITDA is a non-GAAP financial measure within the meaning of the Securities and Exchange Commission’s Regulation G. Management has included this information because it believes it represents a more effective means by which to measure the Company’s operating performance. This press release contains a reconciliation of the non-GAAP measure to the financial measure calculated and presented in accordance with GAAP which is most directly comparable to the applicable non-GAAP financial measure.

 

2



 

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands)

 

 

 

Three months ended

 

Year ended

 

 

 

 

 

 

 

(audited)

 

 

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

435,727

 

$

403,896

 

$

1,822,396

 

$

1,707,007

 

 

 

 

 

 

 

 

 

 

 

Cost of sales, including costs of warehousing, distribution and occupancy

 

285,998

 

267,196

 

1,180,033

 

1,116,437

 

Gross profit

 

149,729

 

136,700

 

642,363

 

590,570

 

 

 

 

 

 

 

 

 

 

 

Compensation and related benefits

 

69,013

 

66,725

 

273,579

 

263,046

 

Advertising and promotion

 

11,173

 

9,857

 

51,392

 

50,034

 

Other selling, general and administrative

 

25,250

 

22,448

 

99,623

 

96,454

 

Strategic alternative costs

 

3,480

 

 

3,480

 

 

Foreign currency (gain) loss

 

(147

)

(128

)

(296

)

(155

)

Operating income

 

40,960

 

37,798

 

214,585

 

181,191

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

16,243

 

16,937

 

65,529

 

69,953

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

24,717

 

20,861

 

149,056

 

111,238

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

4,889

 

8,179

 

50,883

 

41,619

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

19,828

 

$

12,682

 

$

98,173

 

$

69,619

 

 

 

 

Three months ended

 

Year ended

 

 

 

 

 

 

 

(audited)

 

 

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

19,828

 

$

12,682

 

$

98,173

 

$

69,619

 

Interest expense, net

 

16,243

 

16,937

 

65,529

 

69,953

 

Income tax expense

 

4,889

 

8,179

 

50,883

 

41,619

 

Depreciation and amortization

 

13,140

 

12,031

 

46,993

 

46,665

 

Non-cash stock-based compensation expense

 

793

 

793

 

3,169

 

2,855

 

Strategic alternative costs

 

3,480

 

 

3,480

 

 

Adjusted EBITDA

 

$

58,373

 

$

50,622

 

$

268,227

 

$

230,711

 

 

We define Adjusted EBITDA as net income before interest expense (net), income tax expense, depreciation, amortization, non-cash stock-based compensation expense, and strategic alternative costs. Management uses Adjusted EBITDA as a tool to measure operating performance of the business. We use Adjusted EBITDA as one criterion for evaluating our performance relative to our competitors and also as a measurement for the calculation of management incentive compensation. Although we primarily view Adjusted EBITDA as an operating performance measure, we also consider it to be a useful analytical tool for measuring our liquidity, our leverage capacity, and our ability to service our debt and generate cash for other purposes. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income, operating income, or any other performance measures derived in accordance with GAAP, or as an alternative to GAAP cash flow from operating activities, as a measure of our profitability or liquidity.

 

3



 

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)

 

 

 

December 31,

 

December 31,

 

 

 

2010

 

2009

 

 

 

(audited)

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

150,641

 

$

75,089

 

Receivables, net

 

104,633

 

94,355

 

Inventories, net

 

381,787

 

370,492

 

Prepaids and other current assets

 

39,625

 

42,219

 

Total current assets

 

676,686

 

582,155

 

 

 

 

 

 

 

Long-term assets:

 

 

 

 

 

Goodwill, brands and other intangibles, net

 

1,492,465

 

1,499,123

 

Property, plant and equipment, net

 

193,428

 

199,581

 

Other long-term assets

 

19,896

 

22,743

 

Total long-term assets

 

1,705,789

 

1,721,447

 

 

 

 

 

 

 

Total assets

 

$

2,382,475

 

$

2,303,602

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

98,295

 

$

95,904

 

Other current liabilities

 

135,393

 

103,683

 

Total current liabilities

 

233,688

 

199,587

 

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

 

Long-term debt

 

1,030,429

 

1,058,085

 

Other long-term liabilities

 

321,965

 

328,414

 

Total long-term liabilities

 

1,352,394

 

1,386,499

 

 

 

 

 

 

 

Total liabilities

 

1,586,082

 

1,586,086

 

 

 

 

 

 

 

Total stockholder’s equity

 

796,393

 

717,516

 

 

 

 

 

 

 

Total liabilities and stockholder’s equity

 

$

2,382,475

 

$

2,303,602

 

 

4



 

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Year ended

 

 

 

December 31,

 

December 31,

 

 

 

2010

 

2009

 

 

 

(audited)

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income

 

$

98,173

 

$

69,619

 

 

 

 

 

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization expense

 

46,993

 

46,665

 

Amortization of deferred financing costs

 

4,694

 

4,478

 

Non-cash stock-based compensation

 

3,169

 

2,855

 

Other

 

7,307

 

30,042

 

Changes in:

 

 

 

 

 

Receivables

 

(10,145

)

(3,488

)

Inventory

 

(26,161

)

(15,661

)

Accounts payable

 

2,338

 

(28,119

)

Other working capital

 

15,347

 

7,566

 

Net cash provided by operating activities

 

141,715

 

113,957

 

 

 

 

 

 

 

Capital expenditures.

 

(32,522

)

(28,682

)

Merger of the Company

 

(3,096

)

(11,268

)

Other

 

(455

)

(2,224

)

Net cash used in investing activities

 

(36,073

)

(42,174

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Dividend payment

 

(28,384

)

(13,600

)

Payments on long-term debt

 

(1,721

)

(25,327

)

Other

 

 

(323

)

Net cash used in financing activities

 

(30,105

)

(39,250

)

 

 

 

 

 

 

Effect of exchange rate on cash

 

15

 

249

 

Net increase in cash

 

75,552

 

32,782

 

Beginning balance, cash

 

75,089

 

42,307

 

Ending balance, cash

 

$

150,641

 

$

75,089

 

 

5



 

Segment Financial Data and Store Counts

 

Retail Segment — Company-owned stores in the U.S. and Canada as well as e-commerce

 

 

 

Three months ended

 

Year ended

 

 

 

December 31,

 

December 31,

 

$ in thousands

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

(audited)

 

Revenue

 

$

312,459

 

$

293,728

 

$

1,344,358

 

$

1,256,314

 

Comp Store Sales - Domestic

 

5.8

%

1.2

%

5.6

%

2.8

%

Operating income

 

$

34,625

 

$

29,865

 

$

181,873

 

$

153,142

 

 

Franchise Segment —Franchise-operated domestic and international locations

 

 

 

Three months ended

 

Year ended

 

 

 

December 31,

 

December 31,

 

$ in thousands

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

(audited)

 

Revenue

 

$

71,152

 

$

63,104

 

$

293,777

 

$

264,168

 

Operating income

 

$

23,658

 

$

19,557

 

$

95,318

 

$

80,800

 

 

Wholesale/Manufacturing Segment- Third-party contract manufacturing; wholesale and consignment sales with Rite Aid, PetSmart and www.drugstore.com

 

 

 

Three months ended

 

Year ended

 

 

 

December 31,

 

December 31,

 

$ in thousands

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

(audited)

 

Revenue

 

$

52,116

 

$

47,064

 

$

184,261

 

$

186,525

 

Operating income

 

$

18,281

 

$

19,378

 

$

69,421

 

$

73,450

 

 

Consolidated unallocated costs (a)

 

 

 

Three months ended

 

Year ended

 

 

 

December 31,

 

December 31,

 

$ in thousands

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

(audited)

 

Warehousing and distribution costs

 

$

(13,533

)

$

(13,099

)

$

(54,983

)

$

(53,557

)

Corporate costs

 

$

(22,071

)

$

(17,903

)

$

(77,044

)

$

(72,644

)

 


(a)          Part of consolidated operating income.

 

6



 

Consolidated Store Count Activity

 

 

 

Year ended December 31, 2010

 

 

 

Company-

 

Franchised stores

 

 

 

 

 

owned (2)

 

Domestic

 

International

 

Rite Aid

 

Total

 

Beginning of period balance

 

2,832

 

909

 

1,307

 

1,869

 

6,917

 

Store openings (1)

 

125

 

42

 

232

 

150

 

549

 

Store closings

 

(40

)

(48

)

(102

)

(16

)

(206

)

End of period balance

 

2,917

 

903

 

1,437

 

2,003

 

7,260

 

 

 

 

Year ended December 31, 2009

 

 

 

Company-

 

Franchised stores

 

 

 

 

 

owned (2)

 

Domestic

 

International

 

Rite Aid

 

Total

 

Beginning of period balance

 

2,774

 

954

 

1,190

 

1,712

 

6,630

 

Store openings (1)

 

98

 

31

 

187

 

177

 

493

 

Store closings

 

(40

)

(76

)

(70

)

(20

)

(206

)

End of period balance

 

2,832

 

909

 

1,307

 

1,869

 

6,917

 

 


(1) openings include new stores and corporate/franchise conversion activity

(2) including Canada

 

Contacts:

 

Investors:

 

Michael M. Nuzzo, Executive Vice President and CFO

 

 

(412) 288-2029

 

SOURCE:

 

General Nutrition Centers, Inc.

Web site:

 

http://www.gnc.com/

 

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