General Nutrition Centers, Inc. ("GNC" or the "Company"), the largest global specialty retailer of nutritional supplements, today reported its financial results for the quarter ended March 31, 2009.
General Nutrition Centers, Inc. 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.
For the first quarter of 2009, the Company reported consolidated revenues of $439.9 million, an increase of 2.7% over the consolidated revenues of $428.1 million for the same quarter of 2008. Revenue increased in the Company's retail business segment by 3.9%; while the franchise segment and the manufacturing/wholesale segment each had revenue declines of less than 1%. Same store sales improved 5.4% in domestic company-owned stores (including internet sales) and 6.9% in Canadian company-owned stores (in local currency). Domestic same store sales were positively impacted by 0.5% due to the Easter holiday occurring in the second quarter of 2009 as compared to falling in the first quarter of 2008. This was the 15th consecutive quarter of positive same store sales in the Company's domestic retail stores.
For the first quarter of 2009, the Company reported net income of $19.4 million, a $6.1 million, or 45.8% increase over net income of $13.3 million for the same quarter in the prior year. Net income, as a percentage of revenue, was 4.4% in the first quarter of 2009 as compared to 3.1% in the first quarter of 2008.
In the first quarter of 2009, the Company generated net cash from operations of $34.3 million, incurred capital expenditures of approximately $5.5 million, and paid approximately $4.9 million in principal on outstanding debt. At March 31, 2009, the ending cash balance for the Company was $65.6 million.
For the first quarter of 2009, the Company reported earnings before income taxes, depreciation and amortization (EBITDA) of $61.6 million compared to $54.9 million for the same quarter of 2008, an increase of $6.7 million. Included as part of compensation expense for each of the first quarters of 2009 and 2008 was $0.7 million of non-cash stock-based compensation expense. Excluding this non-cash expense, adjusted EBITDA was $62.3 million, a $6.7 million or 11.9% increase over the adjusted EBITDA of $55.6 million in the same quarter of 2008. Adjusted EBITDA improved to 14.2% as a percentage of revenue in the first quarter of 2009, compared to 13.0% in the first quarter of 2008.
EBITDA and adjusted EBITDA are non-GAAP financial measures within the meaning of the Securities and Exchange Commission's Regulation G. Management has included this information because it believes it represents a more effective means by which to measure the Company's operating performance. This press release contains a reconciliation of the non-GAAP measure to the financial measure calculated and presented in accordance with GAAP which is most directly comparable to the applicable non-GAAP financial measure.
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. As of March 31, 2009, GNC has more than 5,200 retail locations throughout the United States (including 944 franchise and 1,733 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 first quarter 2009 financial results on Thursday, May 7, 2009 at 11:00 am EDT. To listen to this call dial 1-866-468-1032 inside the U.S. and 1-832-445-1665 outside the U.S. The conference identification number for all callers is 97358113. 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. While GNC believes there is a reasonable basis for its expectations and beliefs, they are inherently uncertain, and the Company may not realize its expectations and its beliefs may not prove correct. GNC undertakes 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:
-- uncertainty of continuing weakening of the economy and its impact on us and our partners;
-- 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
-- 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;
-- 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 franchisees.