PITTSBURGH, May 5, 2005 /PRNewswire via COMTEX/ -- GNC Corporation ("GNC" or the "Company"), the largest global specialty retailer of nutritional supplements, today reported its financial results for the quarter ended March 31, 2005.
The Company reported consolidated revenues of $336.4 million for the quarter ended March 31, 2005 compared to $372.6 million for the same quarter of the prior year, a decrease of 9.7%. The decline in revenues of $36.2 million was driven primarily by decreases in same store sales in both GNC's Company-owned stores as well as franchised locations. For the first quarter of 2005, same store sales decreased by 7.8% in domestic Company-owned stores and 8.0% for domestic franchised stores. In addition, the Company had 40 fewer company-owned and 74 fewer domestic franchise retail locations than the first quarter of 2004. The decrease in retail sales from the first quarter of 2004 occurred primarily in the diet category which saw significant declines in sales largely due to a decrease in sales of low carb products.
For the quarter, the Company generated EBITDA of $27.9 million vs. $43.4 million in the first quarter of 2004, representing a 35.7% decrease. Included in the current year EBITDA was a $2.5 million transaction fee for the transfer of our Australian franchise rights to an existing franchisee in the Asia/Pacific region. This fee income was recorded in the financial statements in the "Other Income category." The decline in EBITDA from the prior year was primarily due to lower same store revenues, specifically in the diet category.
For the quarter, the Company generated cash from operating activities of $35.5 million with ending cash on the balance sheet of $77.8 million. Additionally, the Company utilized approximately $39.4 million to complete its debt refinancing in January, 2005. To improve future cash generation and earnings, the Company has recently made changes to reduce its workforce and corporate expenses and will continue to review its expense structure, adjusting to changing business conditions.
Robert J. DiNicola, Chairman of the Board and Interim CEO, stated, "Despite the decline in our performance for the quarter, we were able to institute some significant changes to our operation during the period. Our plan to competitively price our products more effectively and market them more aggressively while controlling our overall expense structure, helped to lay a foundation that will enable GNC to operate more productively in the future."
As of March 31, 2005, GNC, headquartered in Pittsburgh, Pennsylvania, operated 2,644 company-owned stores in the U.S. and Canada and had 1,261 domestic franchised locations, 1,043 Rite Aid "store-within-a-store" locations and 773 international franchised locations. 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.
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," "believes," "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, among others:
- slow or negative growth in the nutritional supplement industry
- the incurrence of material products liability
- interruption of business or negative impact on sales and earnings due
to acts of war, terrorism, bio-terrorism, civil unrest or disruption of
- the failure of our franchisees to conduct their operations profitably
- unfavorable publicity or consumer perception of our products
- increased competition
- cost of compliance with governmental regulations
- our failure to respond to changing consumer preferences and the demand
for new products and services
- loss or retirement of key members of management
- increases in the cost of borrowings and unavailability of additional
debt or equity capital
- our failure to comply with FTC regulations and existing consent decrees
- limitations from franchise regulations to terminate or replace
- the inability of GNC to gain and/or hold market share of its wholesale
and/or retail customers anywhere in the world
- economic, political and other risks associated with our international
- unavailability of electricity in certain geographical areas
- the inability of GNC to obtain and/or renew insurance
- our reliance on our manufacturing operations to produce nearly all of
the proprietary products we sell
- exposure to, and expense of defending and resolving, product liability
claims and the failure to adequately protect or enforce our
intellectual property rights against competitors
- The impact of our substantial indebtedness on our operating income and
growth prospects; and the impact of restrictions and covenants under
our indebtedness on our ability to grow and fully pursue business