General Nutrition Centers, Inc. Reports FY09 Q2 Results

General Nutrition Centers, Inc. ("GNC" or the "Company"), the largest global specialty retailer of nutritional products, today reported its financial results for the quarter ended June 30, 2009.

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.

For the second quarter of 2009, the Company reported consolidated revenues of $432.4 million, an increase of 2.3% over the consolidated revenues of $422.7 million for the same quarter of 2008. Revenue increased in each of the Company's business segments, retail by 0.8%, franchise by 6.3% and manufacturing/wholesale by 7.4%. Same store sales improved 0.3% in domestic company-owned stores (including internet sales) and 0.2% in Canadian company-owned stores (in local currency). This was the 16(th) consecutive quarter of positive same store sales in the Company's domestic retail stores. Domestic same store sales were negatively impacted by 0.6% due to the Easter holiday occurring in the second quarter of 2009 as compared to the first quarter of 2008. Also, in May 2009, the FDA warned consumers to stop using certain Hydroxycut products produced by Iovate Health Science, Inc. and sold in the Company's stores. Iovate issued a voluntary recall with which the Company complied. Excluding the impact of customer refunds and lost sales related to this recall, the Company's same store sales would have improved by 3.8% in the second quarter of 2009 compared to the same quarter in 2008.

For the second quarter of 2009, the Company reported earnings before income taxes, depreciation and amortization ("EBITDA") of $57.4 million compared to $57.2 million for the same quarter of 2008, an increase of $0.2 million. Included as part of compensation expense in the second quarters of 2009 and 2008 was $0.7 million and $0.8 million, respectively, of non-cash stock-based compensation expense. Excluding this non-cash expense, adjusted EBITDA for the second quarter of 2009 was $58.1 million, a $0.1 million, or 0.2%, increase over the adjusted EBITDA of $58.0 million in the same quarter of 2008. Adjusted EBITDA for the second quarter of 2009 includes an estimated $3.8 million negative impact from the Hydroxycut recall. Adjusted EBITDA was 13.4% as a percentage of revenue in the second quarter of 2009, compared to 13.7% in the second quarter of 2008.

For the second quarter of 2009, the Company reported net income of $18.0 million, a $1.0 million, or 5.6%, increase over net income of $17.0 million for the same quarter of 2008. Net income, as a percentage of revenue, was 4.2% in the second quarter of 2009 as compared to 4.0% in the second quarter of 2008.

In the second quarter of 2009, the Company generated net cash from operations of $22.0 million, incurred capital expenditures of approximately $5.8 million, and paid approximately $14.7 million in principal on outstanding debt. At June 30, 2009, the ending cash balance for the Company was $66.6 million.

Joe Fortunato, Chief Executive Officer, said, "Once again GNC's financial results were strong despite the continuing recession and the impact of the Hydroxycut recall. The strength of our brand and core product categories of vitamins and sports nutrition compensated for the short term loss of sales and margin in the diet category as a result of the recall. Also, our performance highlights the fact that we are significantly less dependent on the diet portion of the business than in the past. Overall, our strong and stable core categories, vertical integration advantages, and ongoing solid performance of our franchise and manufacturing areas, provide GNC with a substantial foundation for future growth."

For the first six months of 2009, the Company reported consolidated revenues of $872.3 million, an increase of $21.5 million, or 2.5%, over the consolidated revenues of $850.8 million for the first six months of 2008. Revenue increased in each of the Company's business segments, retail by 2.3%, franchise by 2.8%, and manufacturing / wholesale by 3.5%. Same store sales improved by 2.9% in domestic company-owned stores (including internet sales) and 3.5% in Canadian company-owned stores (in local currency). Excluding the impact of customer refunds and lost sales related to the Hydroxycut recall, domestic same store sales would have improved by 4.6% in the first six months of 2009 compared to the same period in 2008.

For the first six months of 2009, the Company reported EBITDA of $119.0 million compared to $112.1 million for the same period in 2008, an increase of $6.9 million. Included as part of compensation expense in the first six months of 2009 and 2008 was $1.3 million and $1.5 million, respectively, of non-cash stock-based compensation expense. Excluding this non-cash expense, adjusted EBITDA was $120.3 million for the first six months of 2009, a $6.7 million, or 6.0%, increase over the adjusted EBITDA of $113.6 million for the first six months of 2008. Adjusted EBITDA improved to 13.8% as a percentage of revenue in the first six months of 2009 compared to 13.3% in the first six months of 2008.

For the first six months of 2009, the Company reported net income of $37.4 million; a $7.1 million, or 23.3%, increase over the net income of $30.3 million for the same period in 2008. Net income, as a percentage of revenue, was 4.3% in the first six months of 2009 compared to 3.6% in the same period in 2008.

In the first six months of 2009, the Company generated net cash from operations of $56.3 million, incurred capital expenditures of $11.3 million, and paid approximately $19.6 million in principal on outstanding debt.

EBITDA and adjusted EBITDA are non-GAAP financial measures 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.

GNC, headquartered in Pittsburgh, Pa., is the largest global specialty retailer of nutritional products including vitamin, mineral, herbal and other specialty supplements and sports nutrition, diet and energy products. As of June 30, 2009, GNC has more than 6,700 locations, of which more than 5,300 retail locations were in the United States (including 936 franchise and 1,756 Rite Aid franchise store-within-a-store locations) and franchise operations in 45 international markets. 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 second quarter 2009 financial results on Thursday, August 13, 2009 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 callers is 22209643. A webcast of the call will also be available through the "About GNC" link on www.gnc.com.

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. Factors that may materially affect such forward-looking statements include, among others:

-- uncertainty of continuing weakening of the economy and its impact on the Company and its partners;
-- significant competition in GNC's industry;
-- unfavorable publicity or consumer perception of the Company's products;
-- the incurrence of material products liability and product recall costs;
-- costs of compliance and the Company's failure to comply with governmental regulations;
-- costs of litigation and the failure to successfully defend lawsuits and other claims against the Company;
-- the failure of the Company's franchisees to conduct their operations profitably and limitations on its ability to terminate or replace under-performing franchisees;
-- economic, political and other risks associated with the Company's international operations;
-- the Company's failure to keep pace with the demands of its customers for new products and services;
-- the lack of long-term experience with human consumption of some of the Company's products with innovative ingredients;
-- disruptions in the Company's manufacturing system or losses of manufacturing certifications;
-- increases in the frequency and severity of insurance claims, particularly for claims for which the Company is self-insured;
-- loss or retirement of key members of management;
-- increases in the cost of borrowings and unavailability of additional debt or equity capital;
-- the impact of the Company's substantial indebtedness on its operating income and ability to grow;
-- the failure to adequately protect or enforce the Company's intellectual property rights against competitors;
-- changes in applicable laws relating to the Company's franchise operations; and
-- the Company's inability to expand its franchise operations to attract new franchisees.

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