GNC Corporation Reports Second Quarter 2006 Financial Results

PITTSBURGH, Aug 03, 2006 /PRNewswire via COMTEX/ -- GNC Corporation ("GNC" or the "Company"), the largest global specialty retailer of nutritional supplements, today reported its financial results for the second quarter ended June 30, 2006.

The Company reported consolidated revenues of $382.8 million for the quarter, a 14.8% increase over the same quarter in 2005. The increase in revenues was primarily the result of significant domestic comparable store sales growth of 11.5% for company-owned stores and 5.9% for franchise locations.

For the quarter, the Company generated earnings before interest, income taxes, depreciation and amortization (EBITDA) of $40.4 million compared to $31.1 million in the second quarter of 2005, a 29.6% increase. The increase in EBITDA was primarily generated by significant improvements in the retail and franchising businesses driven by the growth in comparable store sales. EBITDA for the second quarter of 2006 was reduced by $0.6 million of non-cash stock-based compensation expense. There was no non-cash stock-based compensation expense in the second quarter of 2005.
Net income for the second quarter of 2006 increased 84.0% to $13.1 million compared to $7.1 million in the second quarter of 2005.

"The results show another strong quarter for GNC and we believe clearly reflect a gain in market share that has been ongoing over the last several quarters" said President and Chief Executive Officer, Joseph Fortunato. "Once again we continue with strong results from corporate operations year over year and strong sales in all categories. Also, franchise locations continue to improve. All fundamentals in the business remain strong and as the leader in the industry we are extremely well positioned for continued growth and other opportunities in the health and wellness sector."

For the six months ended June 30, 2006, consolidated revenue increased by 14.9% to $769.7 million from $669.8 million in the comparable period of 2005. EBITDA for the six months ended June 30, 2006 increased 32.0% from the prior year period to $77.9 million from $59.0 million. EBITDA for the six months ended June 30, 2006 included a $4.8 million discretionary payment to GNC Corporation stock option holders in conjunction with the previously reported March 2006 payments to GNC Corporation common stockholders. Excluding this discretionary $4.8 million payment, Adjusted EBITDA increased to $82.7 million for the six months ended June 30, 2006, compared to $59.0 million in the six months ended June 30, 2005, a 40.1% increase. EBITDA for the six months ended June 30, 2006 was reduced by non-cash stock-based compensation expense of $1.2 million. There was no non-cash stock-based compensation expense in the six months ended June 30, 2005. EBITDA for the six months ended June 30, 2005 included income of $2.5 million from a transaction fee received by the Company following a transfer of its Australian franchise rights to an existing franchisee.

Net income for the six months ended June 30, 2006 increased 149.0% to $24.5 million compared to $9.8 million in the six months ended June 30, 2005.
For the six months ended June 30, 2006, the Company generated cash from operating activities of $33.9 million with ending cash on the balance sheet of $57.5 million. For the six months ended June 30, 2006, the Company had capital expenditures of $9.4 million and repaid $1.0 million of outstanding debt. At June 30, 2006, the Company had $472.3 million of total debt outstanding, with its revolving credit facility undrawn.

GNC, headquartered in Pittsburgh, Pennsylvania, is the largest global specialty retailer of nutritional supplements, which includes vitamins, minerals, herbal supplements (VMHS), sports nutrition products, diet and energy products and other wellness products. As of June 30, 2006, GNC Corporation operated 2,655 company-owned stores in the U.S. and Canada and had 1,098 domestic franchised locations, 1,183 Rite Aid "store-within-a-store" locations and 899 international franchised locations. The Company also sells products through its website, 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. 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
regulations;
* the failure of our franchisees to conduct their operations profitably
and limitations on our ability to terminate or replace under-performing
franchisees;
* economic, political and other risks associated with our international
operations;
* 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
certifications;
* 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; and
* the failure to adequately protect or enforce our intellectual property
rights against competitors.

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