General Nutrition Centers, Inc. Reports Fourth Quarter and Fiscal Year 2010 Results

PITTSBURGH, Feb. 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, 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.

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.

Segment Financial Data and Store Counts

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

Franchise Segment –Franchise-operated domestic and international locations

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

Consolidated unallocated costs (a)

Consolidated Store Count Activity

SOURCE General Nutrition Centers, Inc.