GNC Corporation Reports Second Quarter and First Six Months 2005 Financial Results

PITTSBURGH, Aug 04, 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 and six-month period ended June 30, 2005.

The Company reported consolidated revenues of $333.3 million for the quarter ended June 30, 2005 compared to consolidated revenues of $347.7 million for the same quarter of the prior year, a decrease of 4.1%. The decrease in revenues of $14.4 million was primarily the result of decreases in domestic same store sales in both company-owned stores and franchise locations as well as a reduced store base. For the second quarter and the first six months of 2005, same store sales decreased by 5.2% and 6.5%, respectively, in domestic company-owned stores and 6.5% and 7.3%, respectively, for domestic franchised stores from the prior year period. As of June 30, 2005, GNC had 12 fewer domestic company-owned stores and 83 fewer domestic franchise locations versus June 30, 2004. The decline in domestic same store sales occurred primarily in the diet category, and was partially offset by growth in other product categories, especially sports nutrition.

As a result of decreases in domestic same store sales in both company- owned stores and franchise locations, EBITDA for the quarter ended June 30, 2005 decreased 23.0% to $31.1 million compared to $40.4 million in the prior year period.

For the quarter ended June 30, 2005, the Company generated consolidated net income of $7.1 million compared to $14.4 million for the prior year period.

For the six months ended June 30, 2005, consolidated revenue decreased by 7.0% to $669.8 million from $720.3 million in the comparable period of 2004. EBITDA for the six months ended June 30, 2005 decreased 29.6% from the prior year period to $59.0 million from $83.8 million. For the six months ended June 30, 2005, the Company generated $18.6 million in cash from operating activities, with ending cash on the consolidated balance sheet of $54.9 million. Additionally, in January 2005, the Company utilized $39.4 million of cash to repay a portion of its Senior Credit Facility in conjunction with the issuance of $150.0 million of 8-5/8% Senior Notes. At June 30, 2005, the Company had $474.4 million of total debt outstanding, with its revolver undrawn.

Bruce Barkus, newly appointed President and CEO of GNC comments, "I am extremely confident in our strategic direction focusing on product, price, and promotion. As a result of the key item strategy and competitive national pricing program instituted at the beginning of the year, we have made good progress in all categories except for diet, which continues to experience weak demand. By supporting these fundamentals with broad-based advertising, we are poised to increase store sales productivity and regain market share. These first six weeks have been truly rewarding as I have seen the exceptional talent within GNC and I look forward to great success."

As of June 30, 2005, GNC Corporation, headquartered in Pittsburgh, Pennsylvania, operated 2,638 company-owned stores in the U.S. and Canada and had 1,241 domestic franchised locations, 1,067 Rite Aid "store-within-a-store" locations and 800 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.

GNC will be hosting a conference call to report the second quarter 2005 financial results on August 4, 2005 at 11:00 am EDT. To listen to this call inside the U.S. dial: 1-800-471-6718, confirmation # 12337364, and outside the U.S. dial: 1-630-691-2735, confirmation # 12337364. A webcast of the call will be available on until August 18, 2005.

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;
- 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;
- 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; and
- the failure to adequately protect or enforce our intellectual property
rights against competitors.

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