March 25, 2020
Just one week after filing with the Securities and Exchange Commission that it wouldn't be filing its annual report before the mandated deadline, GNC Holdings Inc. released its earnings late Tuesday.
The fiscal year ended Dec. 31, so GNC was required to release its report by March 30. The March 17 SEC filing said the report would be filed "on or before the 15th calendar day following the prescribed due date," so its release was somewhat surprising.
The company will host a conference call regarding the earnings at 8:30 a.m. EDT Wednesday.
For fiscal 2019:
The company lost $35.1 million, a drastic fall from its earnings of $69.8 million in fiscal 2018.
Comp sales in company-owned stores, including GNC.com, fell $41.2 million or 2.9%.
Revenue fell $285.3 million to $2.07 million from $2.35 million in fiscal 2018.
Per share of stock, the loss was 64 cents; in 2018, each share earned 83 cents.
Adjusted earnings per share was 25 cents, compared with 34 cents a year ago.
The decrease in revenue, the company said, was due to the Nutra manufacturing business was transferred to a joint venture (loss of $107.5 million); the closure of company-owned stores ($66.7 million); the transfer of the China business to a joint venture ($27.4 million) and a change in the contract with Rite Aid ($15.7 million).
For the fourth quarter:
The company lost $33.5 million, down from an income of $58.8 million a year ago.
Sales in the U.S. and Canada dropped $32.6 million or 7.3% to $412.4 million compared with $445 million in fiscal 2018.
E-commerce revenue increased 15% from Q4 2018.
The loss per share of stock was 46 cents, compared with earnings of 69 cents per share in 2018.
Adjusted loss per share was 7 cents, compared with 13 cents a year ago.
Debt looms over GNC's future
It’s likely the call will focus on the company's attempts to refinance its debt.
According to the earnings report, the company reduced its debt by $290 million during the fiscal year and ended Q4 with $183 million in liquidity.
But is that enough to keep the company going?
In the March 17 SEC filing, the company stated that, as of Dec. 31, it was carrying $154.7 million of debt that is due to mature on Aug. 15 and $441.5 million of debt "with a springing maturity date of May 2020 under certain circumstances."
"Management does not expect to have sufficient cash flows from operations to repay the indebtedness … when they become due," the statement continued. And because the company hasn't yet refinanced the $441.5 million loan, "Management has concluded there is substantial doubt regarding the company's ability to continue as an ongoing concern within one year from the expected issuance date of the company's consolidated financial statements."
Apparently, though, efforts to refinance that debt continue, even in the face of the coronavirus pandemic and resulting economic slowdown.
CEO Ken Martindale is quoted in the earnings report as saying, "Certainly, COVID-19 has created a difficult business environment, and slowed the process of refinancing our debt. As we work through these issues we remain highly focused on the health and safety of GNC associates and customers, which includes meeting the growing demand for our immunity and wellness products."
During the Q3 earnings call in October, Martindale said the company was trying to restructure its debt by the end of the year.
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