General Nutrition Centers, Inc. Reports Third Quarter 2010 Results

PITTSBURGH, Nov. 4, 2010 /PRNewswire/ -- General Nutrition Centers, Inc. ("GNC" or the "Company"), a leading global specialty retailer of nutritional products, today reported its financial results for the quarter ended September 30, 2010.

For the third quarter of 2010, the Company reported net income of $26.8 million, a $7.3 million, or 37.2%, increase over net income of $19.5 million for the third quarter of 2009.  Net income as a percentage of revenue was 5.8% in the third quarter of 2010, compared to 4.5% in the third quarter of 2009.

For the third quarter of 2010, the Company reported consolidated revenue of $465.7 million, an increase of 8.1% over consolidated revenue of $430.8 million for the third quarter of 2009.  Revenue increased in the Company's retail and franchise segments by 8.4% and 14.3%, respectively, and declined in the manufacturing/wholesale segment by 1.9%.  Same store sales improved 7.1% in domestic Company-owned stores, representing the 21st consecutive quarter of positive same store sales.  

Earnings before interest, income taxes, depreciation, amortization and non-cash stock-based compensation ("Adjusted EBITDA") for the third quarter of 2010 was $71.0 million, an $11.3 million, or 18.9%, increase over the Adjusted EBITDA of $59.7 million for the third quarter of 2009.  Adjusted EBITDA was 15.2% as a percentage of revenue in the third quarter of 2010, compared to 13.9% in the third quarter of 2009.

For the third quarter of 2010, the Company generated net cash from operations of $11.0 million, incurred capital expenditures of approximately $7.3 million, and paid approximately $0.4 million in principal on outstanding debt.  At September 30, 2010, the Company's cash balance was $121.7 million.  

In the third quarter of 2010, the Company opened 15 net new domestic Company-owned stores, 5 net new domestic franchise locations, 20 net new international franchise locations, and 11 net new franchise store-within-a-store Rite Aid locations, and closed 2 Company-owned stores in Canada.

Joe Fortunato, Chief Executive Officer, said, "I am pleased with the results of the third quarter, which represented  our 21st consecutive quarter of positive same stores sales growth at domestic, company owned stores.  Overall, our retail and our franchise businesses continued to drive revenue and adjusted EBITDA margin expansion.  In particular,  our strong brand, performance in the growth categories of Vitamins and Sports Nutrition, and science and innovation capabilities have enabled us to continue to offer differentiated premium products targeted at consumers focused on health and wellness as an integral part of their lifestyles.  The third quarter was also highlighted by the launch of our GNC Pets products line in PetSmart stores, which demonstrates our ability to effectively partner with other strong consumer companies and leverage our brand. "

For the first nine months of 2010, the Company reported net income of $78.3 million, a $21.4 million, or 37.6%, increase over net income of $56.9 million for the first nine months of 2009.  Net income as a percentage of revenue was 5.6% in the first nine months of 2010, compared to 4.4% in the first nine months of 2009.

For the first nine months of 2010, the Company reported consolidated revenue of $1,386.7 million, an increase of 6.4% over consolidated revenue of $1,303.1 million for the first nine months of 2009.  Revenue increased in the Company's retail and franchise segments by 7.2% and 10.7%, respectively, and declined in the manufacturing/wholesale segment by 5.2%.  Same store sales improved 5.5% in domestic Company-owned stores in the first nine months of 2010 compared to the same period in 2009.

Adjusted EBITDA for the first nine months of 2010 was $209.9 million, a $29.8 million, or 16.5%, increase over the Adjusted EBITDA of $180.1 million for the first nine months of 2009.  Adjusted EBITDA was 15.1% as a percentage of revenue in the first nine months of 2010, compared to 13.8% in the first nine months of 2009.  

For the first nine months of 2010, the Company generated net cash from operations of $97.6 million, incurred capital expenditures of approximately $21.0 million, and paid approximately $1.3 million in principal on outstanding debt.  Additionally, in March 2010, the Company declared and paid a dividend of $28.4 million to GNC Corporation, its direct parent.  

In the first nine months of 2010, the Company opened 37 net new domestic Company-owned stores, 2 net new Company-owned stores in Canada, 94 net new international franchise locations, and 114 net new franchise store-within-a-store Rite Aid locations, and closed 12 net domestic franchise locations.

General Nutrition Centers, Inc., headquartered in Pittsburgh, Pa., is a leading global specialty retailer of nutritional products including vitamin, mineral, herbal and other specialty supplements and sports nutrition, diet and energy 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 September 30, 2010, GNC has more than 7,100 locations, of which more than 5,500 retail locations are in the United States (including 897 franchise and 1,983 Rite Aid franchise store-within-a-store locations), and franchise operations in 45 countries.  The Company – which is dedicated to helping consumers Live Well – also offers products and product information online at www.gnc.com. GNC has scheduled a conference call and webcast to report its third quarter 2010 financial results on Thursday, November 4, 2010 at 11:00 am EDT.  To listen to this call, dial 1-866-468-1032 inside the U.S. and 1-832-445-1665 outside the U.S.  The conference identification number for all participants is 20903410.  A webcast of the call will also be available through the "About GNC" link on www.gnc.com through December 6, 2010.

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 and non-cash stock-based compensation. 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

Consolidated Store Count Activity

Web site: http://www.gnc.com

SOURCE General Nutrition Centers, Inc.