General Nutrition Centers, Inc. ("GNC" the "Company" or "we"), the largest global specialty retailer of nutritional supplements, today reported its financial results for the third quarter ended September 30, 2008.
The Company is an indirect wholly owned subsidiary of GNC Parent LLC, which was acquired by affiliates of Ares Management LLC ("Ares") and Ontario Teachers' Pension Plan Board ("Teachers") through a merger (the "Merger") on March 16, 2007. As a result, the financial results presented in this press release represent the aggregate of the financial results of the Company from January 1, 2007 through March 15, 2007, predecessor, and the results from March 16, 2007 to September 30, 2007 and for the nine months ended September 30, 2008, successor.
For the third quarter of 2008, the Company reported revenues of $414.2 million, a 4.8% increase over the same quarter in 2007. This increase was the result of increased revenues in each of the Company's business segments: Retail by 3.2%; Franchise by 2.7%; and Manufacturing/Wholesale by 19.4%. Same store sales improved 1.5% in domestic company-owned stores (including internet sales), and 5.5% in Canadian stores.
For the third quarter of 2008, the Company reported earnings before interest, income taxes, depreciation and amortization (EBITDA) of $54.3 million compared to $44.0 million for the same quarter in 2007. Included in the third quarter of 2007 was $7.1 million of non-cash purchase accounting adjustments resulting from the Merger. Included as part of compensation expense for the third quarters of 2008 and 2007 was $0.7 million of non-cash stock-based compensation expense. Excluding these non-cash and purchase accounting related expenses, Adjusted EBITDA was $55.0 million for the third quarter of 2008, a 6.2% increase over Adjusted EBITDA of $51.8 million for the third quarter of 2007, on top of a 18.5% third quarter 2007 Adjusted EBITDA growth.
Revenue for the first nine months of 2008 was $1,265.0 million, a 7.5% increase over the same period in 2007. For the first nine months of 2008, the Company reported EBITDA of $166.4 million compared to $79.9 million for the same period in 2007. Compensation expense for the first nine months of 2008 and 2007 included $2.2 million and $1.7 million, respectively, of non-cash stock-based compensation expense. EBITDA for the first nine months of 2007 reflected $65.3 million of transaction and purchase accounting costs related to the Merger. Excluding non-cash compensation expense and Merger-related transaction costs, Adjusted EBITDA was $168.6 million for the first nine months of 2008 compared to $146.9 million in the same period of 2007, a 14.8% increase. This is in addition to a 14.9% Adjusted EBITDA growth in the first nine months of 2007.
The transaction costs and Merger-related expenses incurred in the first nine months of 2007 included: $34.6 million of transaction fees and expenses; $15.3 million of compensation expenses (including $3.8 million of non-cash stock-based compensation resulting from the cancellation of all outstanding stock options); and $15.4 million of non-cash purchase accounting adjustments recorded as part of cost of sales.
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 5,000 retail locations throughout the United States (including more than 950 franchise and 1,650 Rite Aid store-within-a-store locations) and franchise operations in 44 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 third quarter financial results on Tuesday, November 11, 2008 at 11:00 am ET. To listen to this call dial 1-800-471-6718 inside the U.S. and dial 1-630-691- 2735 outside the U.S. The conference identification number for all callers is 23123532. 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. 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:
-- general economic conditions, including weakening of the economy and
-- 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