PITTSBURGH, Mar 18, 2004 /PRNewswire via COMTEX/ -- General Nutrition Centers, Inc. ("GNC" or the "Company"), the largest global specialty retailer of nutritional supplements, today reported its financial results for the quarter and year ended December 31, 2003. After the close of business on December 4, 2003, in a transaction sponsored by Apollo Management, L.P. and certain other co- investors, a newly created entity named General Nutrition Centers, Inc. acquired the equity interests of General Nutrition Companies, Inc. ("Oldco") from Royal Numico NV and Numico USA, Inc. As such, the financial results described and presented below represent the aggregate of the financial results of Oldco from January 1, 2003 to December 4, 2003 and the results of General Nutrition Centers, Inc. from December 5, 2003 to December 31, 2003.
The Company reported consolidated revenues of $343.7 million for the quarter ended December 31, 2003 compared to consolidated revenues of $300.8 million for the same quarter of the prior year, an increase of 14.3%. The incremental revenues of $42.9 million were driven primarily by significant increases in same store sales in both GNC's Company-owned stores as well as franchised locations. For the fourth quarter of 2003, same store sales increased by 11.0% in domestic Company-owned stores and 10.0% for domestic franchised stores. Internationally, same store sales increased by 11.3% for the fourth quarter of 2003 in Company-owned stores in Canada and by 6.9% in international franchised stores. In addition, the increase in consolidated revenues was also driven by incremental third-party sales gained in the Company's manufacturing division during the fourth quarter of 2003.
For the quarter ended December 31, 2003, the Company generated Consolidated Adjusted EBITDA of $33.4 million compared to Consolidated Adjusted EBITDA of $9.5 million for the comparable quarter ended December 31, 2002, an increase of 251.6%. The Company's significant growth in EBITDA resulted primarily from the increase of revenues from the same store sales increases outlined above, increased gross margins at Company-owned store locations as well as normalized advertising expenditures in the fourth quarter of 2003 versus the prior year's quarter, which had higher than normal advertising expenses associated with promotion of the Company's then recently completed store reset program.
"We are extremely pleased with the results for the fourth quarter of 2003, in which we experienced significant increases in both consolidated revenues and Consolidated Adjusted EBITDA. In the fourth quarter, our product categories continued to exhibit the strong momentum that began in the third quarter of 2003, with particular strength in the diet and sports nutrition categories," commented Lou Mancini, the Company's Chief Executive Officer. "We are excited about the prospects for our business for 2004 and intend to introduce several new products throughout the year to further distinguish GNC as the premier destination specialty retailer for nutritional and wellness products in the world."
For the fiscal year ended December 31, 2003, GNC reported consolidated revenue of $1.429 billion, which was an increase of 0.3% when compared to the $1.425 billion reported for the prior year. For the full year 2003, same store sales increased by 0.1% in domestic Company-owned stores and 0.8% in domestic franchised stores. Internationally, same store sales increased by 0.3% in Company-owned stores in Canada and by 4.5% in international franchised stores. Consolidated Adjusted EBITDA for 2003 was $156.9 million compared to Consolidated Adjusted EBITDA of $184.0 million for the year ended December 31, 2002. The decline in Consolidated Adjusted EBITDA in 2003 was attributable to a new pricing strategy implemented in December 2002, increased competitive activity which resulted in lower gross margins, and the initiative to replace ephedra-related product sales with other diet and energy products.
GNC will be hosting an investor conference call to discuss the fourth quarter and year end 2003 financial results on Friday morning, March 19, 2004, at 11:00 a.m. EST. You are cordially invited to listen and participate by dialing the following toll-free number: (888) 423-4863 Pin: 418309. Outside the U.S. dial: (703) 871-3834 Pin: 418309. If you are unable to listen to the call at that time, the replay will be available 24 hours per day from 2:30 pm on March 19 to March 27, 2004, by dialing the following toll-free number: (888) 266-2081. Outside the U.S. dial: (703) 925-2533 (Replay Pin: 418309).
As of December 31, 2003, General Nutrition Centers, Inc., headquartered in Pittsburgh, Pennsylvania, operated 2,748 company-owned stores in the U.S. and Canada and had 1,355 domestic franchised locations, 988 Rite Aid "store- within-a-store" locations and 654 international franchised locations. The Company has begun to execute its program to close 117 underperforming stores and has made substantial progress to date with the store closures expected to largely be completed by April 30, 2004. GNC is the largest global specialty retailer of nutritional supplements, which includes vitamin, mineral and herbal supplements (VMHS), sports nutrition products, diet and energy products and specialty supplements.
The schedule of Revenue, EBITDA and Consolidated Adjusted EBITDA as presented include the aggregate of the results of the two companies for the year ended December 31, 2003. Consolidated Adjusted EBITDA includes the adjustments more fully described in our Senior Subordinated Notes Offering Memorandum dated November 25, 2003.
This release refers to non-GAAP financial measures, such as EBITDA and Consolidated Adjusted EBITDA. "EBITDA" is defined as earnings before interest, taxes, depreciation and amortization. This non-GAAP financial measure is not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. Non- GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Management believes the presentation of EBITDA is relevant and useful because EBITDA is a measurement industry analysts utilize when evaluating GNC's operating performance. Management also believes EBITDA enhances an investor's understanding of GNC's results of operations because it measures GNC's operating performance exclusive of interest and non-cash charges for depreciation and amortization. Management also provides this non-GAAP measurement as a way to help investors better understand its core operating performance, enhance comparisons of GNC's core operating performance from period to period and to allow better comparisons of GNC's operating performance to that of its competitors.
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. All of these forward-looking statements, which can be identified by the use of terminology such as "subject to," "believe," "expects," "may," "will," "should," "can," or "anticipates," or the negative thereof, or variations thereon, or comparable terminology, or by discussions of strategy which, although believed to be reasonable, are inherently uncertain. Factors which may materially affect such forward-looking statements include: (i) slow or negative growth in the nutritional supplement industry; (ii) interruption of business or negative impact on sales and earnings due to acts of war, terrorism, bio-terrorism, civil unrest or disruption of mail service; (iii) adverse publicity regarding nutritional supplements; (iv) increased competition; (v) increased costs; (vi) loss or retirement of key members of management; (vii) increases in the cost of borrowings and unavailability of additional debt or equity capital; (viii) changes in general worldwide economic and political conditions in the markets in which GNC may compete from time to time; (ix) the inability of GNC to gain and/or hold market share of its wholesale and/or retail customers anywhere in the world; (x) unavailability of electricity in certain geographical areas; (xi) the inability of GNC to obtain and/or renew insurance; (xii) exposure to, and expense of defending and resolving, product liability claims and other litigation; (xiii) the ability of GNC to successfully implement its business strategy; (xiv) the inability of GNC to manage its retail, wholesale, manufacturing and other operations efficiently; (xv) consumer acceptance of GNC's products; (xvi) the inability of GNC to renew leases on its retail locations; (xvii) inability of GNC's retail stores to maintain profitability; (xviii) the absence of clinical trials for many of GNC's products; (xix) sales and earnings volatility and/or trends; (xx) fluctuations in foreign currencies, including the Canadian Dollar; (xxi) import-export controls on sales to foreign countries; (xxii) the inability of GNC to secure favorable new sites for, and delays in opening, new retail locations; (xxiii) introduction of new federal, state, local or foreign legislation or regulation or adverse determinations by regulators anywhere in the world; (xxiv) the mix of GNC's products and the profit margins thereon; (xxv) the availability and pricing of raw materials; (xxvi) risk factors discussed in GNC's Offering Memorandum dated November 25, 2003; and (xxvii) other factors beyond GNC's control.
Readers are cautioned not to place undue reliance on forward-looking statements. GNC cannot guarantee future results, trends, events, levels of activity, performance or achievements. GNC does not undertake and specifically declines any obligation to update, republish or revise forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated events.