General Nutrition Centers, Inc. Reports Second Quarter 2007 Financial Results

PITTSBURGH, Aug 02, 2007 /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 second quarter ended June 30, 2007.

General Nutrition Centers, Inc. is an indirect wholly-owned subsidiary of GNC Parent LLC which was acquired on March 16, 2007 by affiliates of Ares Management LLC and Ontario Teachers' Pension Plan Board. As such, the financial results presented in this press release represent the aggregate of the financial results of General Nutrition Centers, Inc. from January 1, 2007 through March 15, 2007, predecessor, and the results from March 16, 2007 to June 30, 2007, successor.

For the quarter, the Company reported revenues of $389.5 million, a 1.8% increase over the same quarter in 2006. This increase was the result of a 3.9% increase in the retail segment and a 1.2% increase in franchising, offset by lower revenues in manufacturing/wholesale. In retail, same stores sales increased 1.6% in company-owned domestic stores and 11.0% in its Canadian stores.

For the quarter, the Company reported earnings before interest, income taxes, depreciation and amortization (EBITDA) of $40.1 million compared to $40.5 million for the same quarter in 2006. Included in EBITDA for the second quarter of 2007 was $6.8 million of non-cash purchase accounting adjustments included in cost of sales related to the acquisition of the Company on March 16, 2007.

Excluding this non-cash expense, adjusted EBITDA was $46.9 million for the second quarter of 2007, an increase of 15.8% over EBITDA of $40.5 million in the same quarter in 2006. Also included in EBITDA was $0.6 million of recurring non-cash compensation expense for each of the three months ended June 30, 2007 and June 30, 2006.

Revenue for the first six months of 2007 was $781.4 million, a 1.5% increase over the same period in 2006.
For the first six months of 2007, the Company reported EBITDA of $35.9 million compared to $78.1 million for the same quarter in 2006. Included in EBITDA, as a result of the acquisition, was $58.2 million of transaction- related costs which were recorded in the first six months operating results, including $34.6 million of transaction fees and expenses; $15.3 million of compensation expenses related to the transaction (including $3.8 million of non-cash stock based compensation resulting from the cancellation of all outstanding stock options), and $8.3 million of non-cash purchase accounting adjustments included in cost of sales. Included in expense for the first six months of 2006 was $4.8 million of discretionary payments made to stock option holders in conjunction with a distribution made to shareholders in March 2006. Excluding the above items, adjusted EBITDA was $94.1 million for the first six months of 2007, an increase of 13.5% over adjusted EBITDA of $82.9 million in the same period of 2006. Additionally, the Company recorded $1.1 million and $1.2 million of recurring non-cash stock-based compensation expense in the first six months of 2007 and 2006, respectively.

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. GNC has more than 4,800 retail locations throughout the United States (including more than 1,000 franchise and 1,270 Rite Aid store-within-a-store locations) and franchise operations in 49 international markets. The company -- which is dedicated to helping consumers Live Well -- also offers products and product information online at
GNC has scheduled a conference call and webcast to report its second quarter financial results on Thursday, August 2, at 11:00 am EDT. To listen to this call inside the U.S., dial 1-800-447-0521, and outside the U.S. dial 1-847-413-3238. A webcast of the call will be available through the "About GNC" link on The conference identification number for all callers is 18615176#.

GNC will post the second quarter financial results on a Form 10-Q equivalent report on its website
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. GNC believes there is a reasonable basis for our expectations and beliefs, but they are inherently uncertain, we may not realize our expectations and our beliefs may not prove correct. We undertake 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:

-- significant competition in our industry;
-- unfavorable publicity or consumer perception of our products;
-- the incurrence of material products liability and product recall costs;
-- costs of compliance and our failure to comply with governmental
-- the failure of our franchisees to conduct their operations profitably
and limitations on our ability to terminate or replace under-performing
-- economic, political and other risks associated with our international
-- our failure to keep pace with the demands of our customers for new
products and services;
-- the lack of long-term experience with human consumption of some of our
products with innovative ingredients;
-- disruptions in our manufacturing system or losses of manufacturing
-- increases in the frequency and severity of insurance claims,
particularly for claims for which we are 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 our substantial indebtedness on our operating income and
our ability to grow;
-- the failure to adequately protect or enforce our intellectual property
rights against competitors;
-- changes in applicable laws relating to our franchise operations; and
-- our inability to expand our franchise operations to attract new

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