GNC Holdings Inc. (NYSE: GNC), a leading global specialty retailer of health and wellness products, today reported its financial results for the quarter and year ended December 31, 2012.
Fourth quarter performance
For the fourth quarter of 2012, the Company reported consolidated revenue of $565.0 million, an increase of 10.9 percent over consolidated revenue of $509.6 million for the fourth quarter of 2011. Revenue increased in the Company's retail and franchise segments both by 12.7 percent, and decreased in the manufacturing/wholesale segment by 2.4 percent due to an approximately $5 million reduction in third-party contract manufacturing sales in order to optimize manufacturing capacity for new proprietary domestic and international products. Same store sales increased 7.1 percent in domestic company-owned stores (including GNC.com sales), representing the Company's 30th consecutive quarter of positive same store sales growth. The Company estimates Hurricane Sandy negatively impacted domestic company-owned same store sales by approximately 125 basis points, or $4 million. In domestic franchise locations, same store sales increased 11.4 percent, and were minimally impacted by Hurricane Sandy.
Adjusted EBITDA, which the Company defines as net income before interest, income taxes, depreciation, amortization, sponsor obligation payments, transaction related costs and executive severance, for the fourth quarter of 2012 was $100.6 million, an $18.1 million, or 22.0 percent, increase over adjusted EBITDA of $82.5 million for the fourth quarter of 2011. Adjusted EBITDA was 17.8 percent of revenue for the fourth quarter of 2012, compared to 16.2 percent for the fourth quarter of 2011.
For the fourth quarter of 2012, the Company reported GAAP net income of $47.4 million, compared to $37.7 million for the fourth quarter of 2011. Net income for the fourth quarter of 2012 included $3.2 million of pre-tax debt extinguishment costs associated with the Repricing and $0.3 million of non-recurring expenses associated with the Offering. Excluding these expenses and the related tax impact, adjusted net income for the fourth quarter of 2012 was $49.8 million, an $11.5 million or 30.1 percent increase over adjusted net income of $38.3 million for the fourth quarter of 2011. Adjusted diluted earnings per share were $0.50 for the fourth quarter of 2012, a 42.9 percent increase over adjusted diluted earnings per share of $0.35 for the fourth quarter of 2011.
"2012 was a year of tremendous execution and financial performance across every segment of the business. We expanded our customer base, gained market share, improved operating margins, generated strong free cash flow and effectively returned capital to shareholders," said Joe Fortunato, chairman, president and CEO.
"In our retail segment we consistently generated strong same store sales - even on top of the double-digit performance in 2011—resulting in a 21.6 percent same store sales increase on a two-year basis. We fostered extremely successful GNC proprietary product lines like AMP Vitapaks®, Total Lean™, Beyond Raw® and Genetix, and our new stores are showing increasingly strong initial year sales productivity. Our online banners grew the top line more than 25 percent, and continued to expand operating margins. We meaningfully increased our Gold Card membership and customer email addresses. Together, this culminated in substantial segment earnings flow through of nearly 40 percent, and a segment operating profit margin of 19.4 percent."
He continues, "And while the retail business contributes largely to our success, other business segments had an equally strong year and provide a foundation for expanding the brand well into the future. Some 2012 highlights include:
- A consistent and successful domestic franchise business which generated a 15 percent comp for the year—with each quarter exceeding 22 percent on a two-year basis, similar to our company owned stores—expanded operating margins, and is maintaining excellent compliance standards;
- A high growth international franchise business which produced a 10 percent franchisee-reported local currency comp, grew the store base by 15 percent and increased wholesale sales by over 30 percent. We are positioned for sustained growth in our current 54 franchise countries and see long-term expansion opportunities in major geographies across the globe; and
- Demonstrating brand extension success with our PetSmart and Sam's Club businesses.
As we look to 2013, we have positioned the Company for continued success by launching our new marketing campaign, accelerating our new product development pipeline, enhancing our Member Pricing initiative, and fortifying our international expansion opportunities. Collectively, this is our growth framework for 2013 and beyond."
Full year performance
For the full year 2012, the Company reported consolidated revenue of $2,430.0 million, an increase of 17.3 percent over consolidated revenue of $2,072.2 million for the full year 2011. Revenue increased in each of the Company's segments: retail by 17.6 percent, franchise by 21.9 percent, and manufacturing/wholesale by 8.2 percent. Same store sales increased 11.5 percent in domestic company-owned stores (including GNC.com sales). In domestic franchise locations, same store sales increased 15.0 percent.
Adjusted EBITDA for the full year 2012 was $479.0 million, a $132.3 million, or 38.2 percent, increase over $346.7 million for the full year 2011. Adjusted EBITDA was 19.7 percent of revenue for the full year 2012, compared to 16.7 percent for the full year 2011.
For the full year 2012, the Company reported net income of $240.2 million, compared to $132.3 million for the full year 2011. Adjusting for expenses related to the Offerings, Incremental Term Loan and Repricing, adjusted net income for the full year 2012 was $244.2 million, 10.0 percent of revenue and a 49.3 percent increase over adjusted net income for 2011. Adjusted diluted earnings per share were $2.33 for the full year 2012, a 53.3 percent increase over $1.52 for 2011.
For the full year 2012, the Company opened 142 net new domestic company-owned stores, 240 net new international franchise locations, 56 net new Rite Aid franchise store-within-a-store locations, 25 net new domestic franchise locations, and 3 new company-owned stores in Canada, and also closed 3 company-owned stores in Canada.
For the full year 2012, the Company generated net cash from operating activities of $221.2 million, incurred capital expenditures of $41.9 million, repurchased $360.0 million in common stock under share repurchase programs, and paid $45.2 million in common stock dividends. The Company generated $177.4 million in free cash flow (which it defines as cash provided by operating activities less cash used in investing activities) and at December 31, 2012, the Company's cash balance was $158.5 million.