PITTSBURGH, Oct. 26, 2017 /PRNewswire/ -- GNC Holdings, Inc.
(NYSE: GNC) (the "Company") reported consolidated revenue of
$609.5 million in the third quarter
of 2017, compared with consolidated revenue of $628.0 million in the third quarter of 2016.
Same store sales increased 1.3% in domestic company-owned stores
(including GNC.com sales) in the third quarter of 2017. In domestic
franchise locations, same store sales decreased 1.7%.
For the third quarter of 2017, the Company reported net income
of $21.5 million compared with
$32.4 million in the prior year
quarter. Diluted earnings per share ("EPS") was $0.31 for the third quarter of 2017 compared with
$0.47 in the prior year quarter.
Adjusted EPS was $0.32 and
$0.59 in the three months ended
September 30, 2017 and 2016,
respectively. The impact of hurricanes Harvey, Irma and Maria
are estimated to have resulted in a $0.02 reduction to Adjusted EPS in the quarter
ended September 30, 2017.
"GNC made good progress in the third quarter, retuning to
positive same store sales. Transactions, the e-commerce business
and enrollment in our new loyalty programs continued to improve,
and it is clear that our strengthened model is creating a solid
foundation for growth," said Ken
Martindale, chief executive officer. "This year, the team
laid a strong foundation for us to build upon. Going forward,
we will continue to focus on growing sales and on giving customers
innovative, highly differentiated products and experiences."
"After spending time over the past few weeks with Ken, I am more
confident than ever that we have the right person to lead the GNC
team in the execution of the One New GNC strategy while adjusting
as necessary to deliver the optimum results for our shareholders,"
said Bob Moran, Chairman of the Board of Directors.
Key Updates
- Transaction growth continued in the third quarter, up 12.4%,
resulting in positive same store sales of 1.3%.
- As of October 25, 2017, 9.6
million consumers had joined the Company's loyalty programs, of
which approximately 585,000 were enrolled in the PRO Access
membership.
- As an element of the Company's omnichannel strategy, early in
2017, the Company launched a GNC storefront on Amazon which
continues to exceed the Company's expectations.
- Supply chain focus in 2017 reduced overall enterprise inventory
including lower weeks of supply while maintaining in-stocks.
- The Company continues to take steps to improve the customer
experience through technology to make it easier for store
associates to engage with the customer. For example, the tablets
can now be used by store associates to enroll customers into the
loyalty programs and facilitate product recommendations supporting
customer regimens.
Sale of Lucky Vitamin
In order for the Company to focus on its strategic plan around
the One New GNC, it completed an asset sale of Lucky Vitamin on
September 30, 2017 for $7.1 million, resulting in a loss of $1.7 million. The proceeds were received in
October 2017. Excluding this loss on sale and $19.4 million of long-lived asset impairments
recorded in the second quarter of 2017, Lucky Vitamin revenue and
operating loss was $66.2 million and
$0.1 million in the nine months ended
September 30, 2017, respectively, of
which $20.8 million and $0.1 million relates to the third quarter of
2017.
Segment Operating Performance
U.S. & Canada
Revenues in the U.S. and Canada
segment decreased $18.4 million, or
3.5%, to $507.1 million for the three
months ended September 30, 2017 compared with $525.5 million in the prior year quarter.
E-commerce sales were 10.2% of U.S. and Canada revenue in the quarter ended
September 30, 2017 compared with 8.2% in the prior year
quarter. GNC.com sales were up 41.9% for the three months
ended September 30, 2017 as we
anniversary significant changes in our e-commerce pricing and
promotion strategy in August 2016,
which eliminated channel conflict and bulk sales. These
changes allowed GNC to successfully launch on Amazon in
January 2017 and position the Company
for meaningfully positive same store e-commerce sales again in the
fourth quarter. In addition, the recently completed
re-platforming of the website from a third-party to a cloud-based
solution provides more flexibility and control for new features and
enhancements including advanced personalization capability,
improved merchandising and opportunity for omnichannel expansion,
which is creating the ability to better optimize the e-commerce
business.
The decrease in revenue compared with the prior year quarter was
primarily due to the discontinuation of the Gold Card Member
Pricing program in the U.S. and the introduction of the Company's
new loyalty programs, which resulted in lower revenue of
$12.0 million, and a decrease in
sales to franchisees of $7.5 million,
partially offset by an increase in same store sales of 1.3% for
company-owned stores, including GNC.com.
Operating income decreased $35.6
million to $29.7 million for
the three months ended September 30, 2017 compared with
$65.3 million for the same period in
2016. Excluding non-cash impairment charges, the loss on the sale
of Lucky Vitamin and gains on refranchising as detailed in the
table below, operating income was $35.1
million in the current quarter or 6.9% of segment revenue
compared with $68.0 million in the
prior year quarter or 13.0% of segment revenue. The decrease in
operating income rate compared with the prior year quarter was
primarily due to lower domestic retail product margin rate
resulting from the impact of loyalty program changes associated
with the One New GNC, expense deleverage associated with lower
sales, higher salaries and benefits of $5.2
million and higher marketing expense of $1.8 million related to incremental online
advertising.
International
Revenues in the International segment increased $8.0 million, or 19.3%, to $49.1 million in the current quarter compared
with $41.1 million in the prior year
quarter. Revenues from the China
business increased by $4.8 million in
the current quarter compared with the prior year quarter and
revenues from international franchisees increased by $2.8 million.
Operating income increased $2.1
million, or 14.3%, to $16.8
million for the three months ended September 30, 2017
compared with $14.7 million in the
prior year quarter. Operating income was 34.2% of segment revenue
in the current quarter compared with 35.7% in the prior year
quarter.
Manufacturing / Wholesale
Revenues in the Manufacturing / Wholesale segment, excluding
intersegment sales, decreased $8.0
million, or 13.1%, to $53.3
million for the three months ended September 30, 2017
compared with $61.3 million in the
prior year quarter. Third-party contract manufacturing sales
decreased $5.4 million, or 14.9%, to
$31.2 million for the three months
ended September 30, 2017 compared with $36.6 million in the prior year quarter primarily
due to lower demand associated with decreased sales for certain
customers. Sales to wholesale partners decreased $2.6 million, or 10.5% from $24.7 million in the prior year quarter to
$22.1 million in the current quarter
primarily due to lower demand from certain customers and the
termination of Drugstore.com that occurred in September 2016. Intersegment sales increased
$5.0 million from $53.0 million in the prior year quarter to
$58.0 million in the current quarter
reflecting the Company's increasing focus on proprietary
products.
Operating income increased $2.1
million, or 12.1%, to $19.5
million for the three months ended September 30, 2017 compared with $17.4 million in the prior year quarter, and as a
percentage of segment revenue was 17.5% and 15.2%, respectively,
primarily due to higher intersegment sales, which resulted in
favorable manufacturing variances.
Year-to-Date Performance
For the first nine months of 2017, the Company reported
consolidated revenue of $1,895.3
million, a decrease of 3.8% compared with consolidated
revenue of $1,970.1 million for the
first nine months of 2016. Revenue decreased 4.0% and 10.3% in the
U.S. and Canada and Manufacturing
/ Wholesale (excluding intersegment sales) segments, partially
offset by an increase of 9.1% in the International segment.
For the nine months ended September 30,
2017, the Company reported net income of $61.0 million, compared with net income of
$147.2 million for the nine months
ended September 30, 2016 and EPS of
$0.89 and $2.10, respectively. Adjusted EPS was
$1.10 in the nine months ended
September 30, 2017 compared with $2.07 in the nine months ended September 30, 2016.
Operating Metrics
As of September 30, 2017, the Company had 3,468 corporate
stores in the U.S. and Canada,
1,126 domestic franchise locations, 2,414 Rite Aid franchise
store-within-a-store locations and 2,075 international locations.
The Company now has 9,083 store locations worldwide.
For the quarter ended September 30,
2017, the Company generated net cash from operating
activities of $76.7 million, a 97.4%
increase compared with the prior year quarter of $38.9 million. The increase was primarily
due to lower inventory (which increases free cash flow) through
supply chain optimization. The Company launched a supply
chain initiative at the end of 2016 which is now delivering
quantifiable results. The initiatives include reductions in
lead time, addressing slow moving items, and strengthening
forecasting practices. Additional focus has also been placed
on consistency of in-stocks across all channels and testing store
service improvements. Going forward, management sees ongoing
opportunity to optimize inventory.
For the nine months ended September 30,
2017, the Company generated net cash from operating
activities of $149.6 million and
invested $26.2 million in capital
expenditures. The Company generated free cash flow of $124.8 million (which it defines as cash provided
by operating activities less cash used in investing activities
excluding acquisitions except for store acquisitions).
As of September 30, 2017, the
Company's cash and cash equivalents were $40.1 million, long-term debt was $1.4 billion and the Company had $246.1 million available under the Revolving
Credit Facility.
Conference Call
GNC has scheduled a live webcast to report its third quarter
2017 financial results on October 26,
2017 at 8:30 a.m. Eastern
time. To participate on the live call listeners in
North America may dial (888)
778-9065 and international listeners may dial (719) 325-2281. In
addition, a live webcast of the call will be available on
www.gnc.com via the Investor Relations section under "About GNC." A
replay of this webcast will be available through November 26, 2017.
About Us
GNC Holdings, Inc. (NYSE: GNC) - Headquartered in Pittsburgh, PA - is a leading global specialty
health, wellness and performance retailer.
GNC connects customers to their best selves by offering a
premium assortment of heath, wellness and performance products,
including protein, performance supplements, weight management
supplements, vitamins, herbs and greens, wellness supplements,
health and beauty, food and drink and other general merchandise.
This assortment features proprietary GNC and nationally recognized
third-party brands.
GNC's diversified, multi-channel business model generates
revenue from product sales through company-owned retail stores,
domestic and international franchise activities, third-party
contract manufacturing, e-commerce and corporate partnerships. As
of September 30, 2017, GNC had
approximately 9,000 locations, of which approximately 6,800 retail
locations are in the United States
(including approximately 2,400 Rite Aid franchise
store-within-a-store locations) and franchise operations in
approximately 50 countries.
Forward-Looking Statements Involving Known and Unknown Risks
and Uncertainties
This release contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
with respect to the Company's 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 regarding dividend,
share repurchase plan, strategy and outlook. While GNC believes
there is a reasonable basis for its expectations and beliefs, they
are inherently uncertain. The Company may not realize its
expectations and its beliefs may not prove correct. Many factors
could affect future performance and cause actual results to differ
materially from those matters expressed in or implied by
forward-looking statements, including but not limited to
unfavorable publicity or consumer perception of the Company's
products; costs of compliance and any failure on management's part
to comply with new and existing governmental regulations governing
our products; limitations of or disruptions in the manufacturing
system or losses of manufacturing certifications; disruptions in
the distribution network; or failure to successfully execute the
Company's growth strategy, including any inability to expand
franchise operations or attract new franchisees, any inability to
expand company-owned retail operations, any inability to grow the
international footprint, any inability to expand the e-commerce
businesses, or any inability to successfully integrate businesses
that are acquired. The Company 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. For a listing of factors that may
materially affect such forward-looking statements, please refer to
the Company's Annual Report on Form 10-K for the year ended
December 31, 2016.
Same store sales for company-owned stores include point-of-sale
retail sales from all domestic stores which have been operating for
twelve full months following the opening period. The Company is an
omnichannel retailer with capabilities that allow a customer to use
more than one channel when making a purchase, including in-store
and through e-commerce channels which include its wholly-owned
website GNC.com and third party websites (the sales from which are
included in the GNC.com business unit) where product assortment and
price are controlled by the Company, in which purchases are
fulfilled by direct shipment to the customer from one of the
Company's distribution facilities as well as third party e-commerce
vendors. In-store sales are reduced by sales originally consummated
online or through mobile devices and subsequently returned
in-store. Sales of membership programs, including the new PRO
Access loyalty program and former Gold Card program, which is no
longer offered in the U.S., as well as the net change in the
deferred points liability associated with the myGNC Rewards
program, are excluded from same store sales.
Same store sales are calculated on a daily basis for each store
and exclude the net sales of a store for any period if the store
was not open during the same period of the prior year. When a
store's square footage has been changed as a result of
reconfiguration or relocation in the same mall or shopping center,
the store continues to be treated as a same store. If, during the
period presented, a store was closed, relocated to a different mall
or shopping center, or converted to a franchise store or a
company-owned store, sales from that store up to and including the
closing day or the day immediately preceding the relocation or
conversion are included as same store sales as long as the store
was open during the same period of the prior year. Corporate stores
are included in same store sales after the thirteenth month
following a relocation or conversion to a company-owned store.
The Company also provides retail comparable same stores sales of
its franchisees as well as its Canada business if meaningful to current
results. While retail sales of franchisees are not included in the
Company's Consolidated Financial statements, the metric serves as a
key performance indicator for its franchisees, which ultimately
impacts wholesale sales and royalties and fees received from
franchisees. The Company computes same store sales for its
franchisees and Canada business
consistent with the description of corporate same store sales
above. Same store sales for international franchisees and
Canada exclude the impact of
foreign exchange rate changes relative to the U.S. dollar.
Management has included non-GAAP financial measures in this
press release because it believes they represent an effective
supplemental means by which to measure the Company's operating
performance. Management believes that net income and earnings per
share, adjusted to exclude impairment charges on long-lived assets,
gains on refranchising and certain other expenses as reflected in
this release, and free cash flow are useful to investors as they
enable the Company and its investors to evaluate and compare the
Company's results from operations in a more meaningful and
consistent manner by excluding specific items which are not
reflective of ongoing operating results. However, these measures
are not measurements of the Company's performance under GAAP and
should not be considered as alternatives to earnings per share, net
income or any other performance measures derived in accordance with
GAAP, or as an alternative to GAAP cash flow from operating
activities, or as a measure of the Company's profitability or
liquidity. For more information, see the attached
reconciliations of non-GAAP financial measures.
GNC HOLDINGS, INC. AND SUBSIDIARIES Consolidated
Statements of Income (in thousands, except per share
amounts)
|
|
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
(unaudited)
|
Revenue
|
$
|
609,469
|
|
|
$
|
627,964
|
|
|
$
|
1,895,301
|
|
|
$
|
1,970,087
|
|
Cost of sales,
including warehousing, distribution and occupancy
|
412,663
|
|
|
412,556
|
|
|
1,272,801
|
|
|
1,280,136
|
|
Gross
profit
|
196,806
|
|
|
215,408
|
|
|
622,500
|
|
|
689,951
|
|
Selling, general, and
administrative
|
150,961
|
|
|
148,392
|
|
|
465,575
|
|
|
430,448
|
|
Gains on
refranchising
|
(230)
|
|
|
(383)
|
|
|
(384)
|
|
|
(18,283)
|
|
Long-lived asset
impairments
|
3,861
|
|
|
3,045
|
|
|
23,217
|
|
|
3,045
|
|
Other loss (income),
net
|
1,769
|
|
|
(539)
|
|
|
274
|
|
|
(441)
|
|
Operating
income
|
40,445
|
|
|
64,893
|
|
|
133,818
|
|
|
275,182
|
|
Interest expense,
net
|
16,339
|
|
|
15,360
|
|
|
48,300
|
|
|
45,078
|
|
Income before
income taxes
|
24,106
|
|
|
49,533
|
|
|
85,518
|
|
|
230,104
|
|
Income tax
expense
|
2,643
|
|
|
17,179
|
|
|
24,544
|
|
|
82,907
|
|
Net
income
|
$
|
21,463
|
|
|
$
|
32,354
|
|
|
$
|
60,974
|
|
|
$
|
147,197
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
Basic
|
$
|
0.31
|
|
|
$
|
0.47
|
|
|
$
|
0.89
|
|
|
$
|
2.11
|
|
Diluted
|
$
|
0.31
|
|
|
$
|
0.47
|
|
|
$
|
0.89
|
|
|
$
|
2.10
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
68,354
|
|
|
68,190
|
|
|
68,296
|
|
|
69,808
|
|
Diluted
|
68,569
|
|
|
68,315
|
|
|
68,411
|
|
|
69,939
|
|
GNC
HOLDINGS, INC. AND SUBSIDIARIES Reconciliation of
Net Income and Diluted EPS to Adjusted Net Income and Adjusted
Diluted EPS (in thousands, except per share
data)
|
|
|
Three months
ended
September 30,
|
|
2017
|
|
2016
|
|
Net
Income
|
|
Diluted
EPS
|
|
Net
Income
|
|
Diluted
EPS
|
|
(unaudited)
|
Reported
|
$
|
21,463
|
|
|
$
|
0.31
|
|
|
$
|
32,354
|
|
|
$
|
0.47
|
|
Gains on
refranchising
|
(230)
|
|
|
—
|
|
|
(383)
|
|
|
—
|
|
Long-lived asset
impairments (1)
|
3,861
|
|
|
0.06
|
|
|
3,045
|
|
|
0.04
|
|
Loss on sale of Lucky
Vitamin
|
1,696
|
|
|
0.02
|
|
|
—
|
|
|
—
|
|
SG&A
(2)
|
4,062
|
|
|
0.06
|
|
|
9,526
|
|
|
0.14
|
|
Tax effect of items
above
|
(2,671)
|
|
|
(0.04)
|
|
|
(4,394)
|
|
|
(0.06)
|
|
Reduction to
valuation allowance on DTA (3)
|
(5,953)
|
|
|
(0.09)
|
|
|
—
|
|
|
—
|
|
Adjusted
|
$
|
22,228
|
|
|
$
|
0.32
|
|
|
$
|
40,148
|
|
|
$
|
0.59
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted common shares outstanding
|
68,569
|
|
|
|
|
68,315
|
|
|
|
|
|
|
|
|
Nine months
ended
September 30,
|
|
2017
|
|
2016
|
|
Net
Income
|
|
Diluted
EPS
|
|
Net
Income
|
|
Diluted
EPS
|
|
(unaudited)
|
Reported
|
$
|
60,974
|
|
|
$
|
0.89
|
|
|
$
|
147,197
|
|
|
$
|
2.10
|
|
Gains on
refranchising
|
(384)
|
|
|
(0.01)
|
|
|
(18,283)
|
|
|
(0.26)
|
|
Long-lived asset
impairments (1)
|
23,217
|
|
|
0.34
|
|
|
3,045
|
|
|
0.05
|
|
Loss on sale of Lucky
Vitamin
|
1,696
|
|
|
0.02
|
|
|
—
|
|
|
—
|
|
SG&A
(2)
|
6,159
|
|
|
0.09
|
|
|
9,526
|
|
|
0.13
|
|
Tax effect of items
above
|
(10,552)
|
|
|
(0.14)
|
|
|
3,261
|
|
|
0.05
|
|
Reduction to
valuation allowance on DTA (3)
|
(5,953)
|
|
|
(0.09)
|
|
|
—
|
|
|
—
|
|
Adjusted
|
$
|
75,157
|
|
|
$
|
1.10
|
|
|
$
|
144,746
|
|
|
$
|
2.07
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted common shares outstanding
|
68,411
|
|
|
|
|
69,939
|
|
|
|
|
(1) Current quarter
relates to under-performing stores, generally defined as those with
historical and expected future losses or stores that management
intends on closing in the near term, and includes the impact of
Hurricane Maria on stores located in Puerto Rico. Prior year
quarter relates to under-performing stores. Current year-to-date
period includes $19.4 million in charges related to Lucky
Vitamin.
|
|
(2) Current quarter
includes $2.8 million of executive placement costs primarily
related to make-whole stock-based compensation awards including the
impact of accelerated vesting associated with a Section 83(b) tax
election. Prior year quarter includes $4.5 million of
severance expense associated with the departure of the former
CEO. Current quarter and prior year quarter also include $1.3
million and $5.1 million in legal-related charges,
respectively. Current year-to-date period also includes a
$2.1 million legal-related charge.
|
|
(3) Relates to a a
reduction to a valuation allowance based on a change in
circumstances, which caused a change in judgment about the
realizability of a deferred tax asset ("DTA") related to net
operating losses.
|
GNC
HOLDINGS, INC. AND SUBSIDIARIES U.S. Company-Owned
Same Store Sales (including GNC.com)
|
|
|
2017
|
|
2016
|
|
Q1
3/31
|
|
Q2
6/30
|
|
Q3
9/30
|
|
Q1
3/31
|
|
Q2
6/30
|
|
Q3
9/30
|
Total same store
sales
|
(3.9)
|
%
|
|
(0.9)
|
%
|
|
1.3
|
%
|
|
(2.3)
|
%
|
|
(3.9)
|
%
|
|
(8.6)
|
%
|
Drivers of same
store sales:
|
|
|
|
|
|
|
|
|
|
|
|
Number of
transactions
|
9.3
|
%
|
|
12.3
|
%
|
|
12.4
|
%
|
|
(4.1)
|
%
|
|
(5.5)
|
%
|
|
(6.6)
|
%
|
Average transaction
amount
|
(12.1)
|
%
|
|
(11.8)
|
%
|
|
(9.9)
|
%
|
|
1.8
|
%
|
|
1.7
|
%
|
|
(2.2)
|
%
|
Contribution to
same store sales:
|
|
|
|
|
|
|
|
|
|
|
|
Domestic retail same
store sales
|
(3.6)
|
%
|
|
(0.5)
|
%
|
|
(1.2)
|
%
|
|
(1.9)
|
%
|
|
(3.4)
|
%
|
|
(6.5)
|
%
|
GNC.com contribution
to same store sales
|
(0.3)
|
%
|
|
(0.4)
|
%
|
|
2.5
|
%
|
|
(0.4)
|
%
|
|
(0.5)
|
%
|
|
(2.1)
|
%
|
Total same store
sales
|
(3.9)
|
%
|
|
(0.9)
|
%
|
|
1.3
|
%
|
|
(2.3)
|
%
|
|
(3.9)
|
%
|
|
(8.6)
|
%
|
GNC
HOLDINGS, INC. AND SUBSIDIARIES Consolidated Balance
Sheets (in thousands)
|
|
|
September
30,
|
|
December
31,
|
|
2017
|
|
2016
|
|
(unaudited)
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
40,118
|
|
|
$
|
34,464
|
|
Receivables,
net
|
133,111
|
|
|
129,178
|
|
Inventory
|
534,427
|
|
|
583,212
|
|
Prepaid and other
current assets
|
41,683
|
|
|
39,400
|
|
Total
current assets
|
749,339
|
|
|
786,254
|
|
Long-term
assets:
|
|
|
|
Goodwill
|
165,231
|
|
|
176,062
|
|
Brand name
|
720,000
|
|
|
720,000
|
|
Other intangible
assets, net
|
101,485
|
|
|
111,229
|
|
Property, plant and
equipment, net
|
207,578
|
|
|
232,292
|
|
Other long-term
assets
|
25,398
|
|
|
30,005
|
|
Total
long-term assets
|
1,219,692
|
|
|
1,269,588
|
|
Total
assets
|
$
|
1,969,031
|
|
|
$
|
2,055,842
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
152,513
|
|
|
$
|
179,933
|
|
Revolving credit
facility
|
48,000
|
|
|
—
|
|
Current portion of
term loan facility
|
—
|
|
|
12,562
|
|
Deferred revenue and
other current liabilities
|
107,176
|
|
|
115,171
|
|
Total current
liabilities
|
307,689
|
|
|
307,666
|
|
Long-term
liabilities:
|
|
|
|
Long-term
debt
|
1,381,906
|
|
|
1,527,891
|
|
Deferred income
taxes
|
248,538
|
|
|
259,203
|
|
Other long-term
liabilities
|
55,607
|
|
|
56,129
|
|
Total
long-term liabilities
|
1,686,051
|
|
|
1,843,223
|
|
Total
liabilities
|
1,993,740
|
|
|
2,150,889
|
|
Stockholders'
deficit:
|
|
|
|
Common
stock
|
115
|
|
|
114
|
|
Additional paid-in
capital
|
928,460
|
|
|
922,687
|
|
Retained
earnings
|
777,457
|
|
|
716,198
|
|
Treasury stock, at
cost
|
(1,725,349)
|
|
|
(1,725,349)
|
|
Accumulated other
comprehensive loss
|
(5,392)
|
|
|
(8,697)
|
|
Total
stockholders' deficit
|
(24,709)
|
|
|
(95,047)
|
|
Total liabilities
and stockholders' deficit
|
$
|
1,969,031
|
|
|
$
|
2,055,842
|
|
|
|
The Company
reclassified $12.9 million of deferred income taxes within total
current assets to deferred income taxes within total long-term
liabilities at December 31, 2016 to conform to the current year
presentation in connection with the adoption of Accounting
Standards Update 2015-17, which requires an entity to classify
deferred tax assets and liabilities as noncurrent on the balance
sheet.
|
GNC
HOLDINGS, INC. AND SUBSIDIARIES Consolidated
Statements of Cash Flows (in thousands)
|
|
|
Nine months
ended
September 30,
|
|
2017
|
|
2016
|
|
(unaudited)
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
60,974
|
|
|
$
|
147,197
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization expense
|
43,688
|
|
|
43,547
|
|
Amortization of debt
costs
|
9,893
|
|
|
9,419
|
|
Stock-based
compensation
|
6,025
|
|
|
7,191
|
|
Long-lived asset
impairments
|
23,217
|
|
|
3,045
|
|
Gains on
refranchising
|
(384)
|
|
|
(18,283)
|
|
Changes in assets and
liabilities:
|
|
|
|
Decrease in
receivables
|
1,204
|
|
|
3,519
|
|
Decrease (Increase)
in inventory
|
43,468
|
|
|
(71,760)
|
|
(Increase) in prepaid
and other current assets
|
(2,502)
|
|
|
(5,342)
|
|
(Decrease) Increase
in accounts payable
|
(19,732)
|
|
|
35,700
|
|
(Decrease) Increase
in deferred revenue and accrued liabilities
|
(18,769)
|
|
|
13,515
|
|
Other operating
activities
|
2,486
|
|
|
1,999
|
|
Net cash provided
by operating activities
|
149,568
|
|
|
169,747
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(26,210)
|
|
|
(35,368)
|
|
Refranchising
proceeds
|
3,410
|
|
|
30,306
|
|
Store acquisition
costs
|
(1,930)
|
|
|
(1,918)
|
|
Net cash used in
investing activities
|
(24,730)
|
|
|
(6,980)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Borrowings under
revolving credit facility
|
177,500
|
|
|
197,000
|
|
Payments on revolving
credit facility
|
(256,500)
|
|
|
(103,000)
|
|
Payments on term loan
facility
|
(40,853)
|
|
|
(3,412)
|
|
Debt issuance
costs
|
—
|
|
|
(1,712)
|
|
Proceeds from
exercise of stock options
|
—
|
|
|
343
|
|
Gross excess tax
benefit from stock-based compensation
|
—
|
|
|
162
|
|
Minimum tax
withholding requirements
|
(252)
|
|
|
(1,126)
|
|
Cash paid for
treasury stock
|
—
|
|
|
(229,169)
|
|
Dividends paid to
shareholders
|
—
|
|
|
(41,613)
|
|
Net cash used in
financing activities
|
(120,105)
|
|
|
(182,527)
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
921
|
|
|
501
|
|
Net increase
(decrease) in cash and cash equivalents
|
5,654
|
|
|
(19,259)
|
|
Beginning balance,
cash and cash equivalents
|
34,464
|
|
|
56,462
|
|
Ending balance, cash
and cash equivalents
|
$
|
40,118
|
|
|
$
|
37,203
|
|
GNC
HOLDINGS, INC. AND SUBSIDIARIES Reconciliation of
Net Cash Provided by Operating Activities to Free Cash
Flow
(in
thousands)
|
|
|
Nine months
ended
September 30,
|
|
2017
|
|
2016
|
|
(unaudited)
|
|
|
|
|
Net cash provided
by operating activities
|
$
|
149,568
|
|
|
$
|
169,747
|
|
Capital
expenditures
|
(26,210)
|
|
|
(35,368)
|
|
Refranchising
proceeds
|
3,410
|
|
|
30,306
|
|
Store acquisition
costs
|
(1,930)
|
|
|
(1,918)
|
|
Free cash
flow
|
$
|
124,838
|
|
|
$
|
162,767
|
|
|
|
|
|
GNC
HOLDINGS, INC. AND SUBSIDIARIES Segment Financial
Data (in thousands)
|
|
|
Three months
ended
September
30,
|
|
Nine months
ended September
30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
(unaudited)
|
Revenue:
|
|
|
|
|
|
|
|
U.S. and
Canada
|
$
|
507,108
|
|
|
$
|
525,505
|
|
|
$
|
1,603,447
|
|
|
$
|
1,671,048
|
|
International
|
49,057
|
|
|
41,118
|
|
|
132,105
|
|
|
121,037
|
|
Manufacturing /
Wholesale:
|
|
|
|
|
|
|
|
Intersegment revenues
|
58,037
|
|
|
53,016
|
|
|
175,335
|
|
|
172,603
|
|
Third-party
|
53,304
|
|
|
61,341
|
|
|
159,749
|
|
|
178,002
|
|
Subtotal
Manufacturing / Wholesale
|
111,341
|
|
|
114,357
|
|
|
335,084
|
|
|
350,605
|
|
Total reportable segment
revenues
|
667,506
|
|
|
680,980
|
|
|
2,070,636
|
|
|
2,142,690
|
|
Elimination of intersegment
revenues
|
(58,037)
|
|
|
(53,016)
|
|
|
(175,335)
|
|
|
(172,603)
|
|
Total
revenue
|
$
|
609,469
|
|
|
$
|
627,964
|
|
|
$
|
1,895,301
|
|
|
$
|
1,970,087
|
|
Operating
income:
|
|
|
|
|
|
|
|
U.S. and
Canada
|
$
|
29,730
|
|
|
$
|
65,292
|
|
|
$
|
112,336
|
|
|
$
|
256,142
|
|
International
|
16,768
|
|
|
14,676
|
|
|
46,908
|
|
|
41,428
|
|
Manufacturing /
Wholesale
|
19,505
|
|
|
17,395
|
|
|
53,989
|
|
|
53,719
|
|
Total reportable segment operating
income
|
66,003
|
|
|
97,363
|
|
|
213,233
|
|
|
351,289
|
|
Unallocated corporate
costs and other
|
(25,558)
|
|
|
(32,470)
|
|
|
(79,415)
|
|
|
(76,107)
|
|
Total operating
income
|
$
|
40,445
|
|
|
$
|
64,893
|
|
|
$
|
133,818
|
|
|
$
|
275,182
|
|
GNC
HOLDINGS, INC. AND SUBSIDIARIES Consolidated Store
Count Activity
|
|
|
Nine months
ended
September 30,
|
|
2017
|
|
2016
|
U.S. &
Canada
|
|
|
|
Company-owned(a):
|
|
|
|
Beginning of period
balance
|
3,513
|
|
|
3,584
|
|
Store openings
|
47
|
|
|
46
|
|
Acquired franchise
stores(b)
|
46
|
|
|
16
|
|
Franchise
conversions(c)
|
(2)
|
|
|
(96)
|
|
Store closings
|
(136)
|
|
|
(38)
|
|
End of period
balance
|
3,468
|
|
|
3,512
|
|
Domestic
Franchise:
|
|
|
|
Beginning of period
balance
|
1,178
|
|
|
1,084
|
|
Store openings
|
22
|
|
|
21
|
|
Acquired franchise
stores(b)
|
(46)
|
|
|
(16)
|
|
Franchise
conversions(c)
|
2
|
|
|
96
|
|
Store closings
|
(30)
|
|
|
(16)
|
|
End of period
balance
|
1,126
|
|
|
1,169
|
|
International(d):
|
|
|
|
Beginning of period
balance
|
1,973
|
|
|
2,095
|
|
Store openings
(e)
|
207
|
|
|
61
|
|
Store closings
|
(105)
|
|
|
(165)
|
|
End of period
balance
|
2,075
|
|
|
1,991
|
|
Store-within-a-store (Rite Aid):
|
|
|
|
Beginning of period
balance
|
2,358
|
|
|
2,327
|
|
Store openings
|
62
|
|
|
29
|
|
Store closings
|
(6)
|
|
|
(9)
|
|
End of period
balance
|
2,414
|
|
|
2,347
|
|
Total
Stores
|
9,083
|
|
|
9,019
|
|
|
(a) Includes
Canada.
|
|
(b) Stores that were
acquired from franchisees and subsequently converted into
company-owned stores.
|
|
(c) Company-owned
store locations sold to franchisees.
|
|
(d) Includes
franchise locations in approximately 50 countries (including
distribution centers where sales are made) and company-owned stores
located in Ireland (The Health Store) and China.
|
|
(e) Includes 145
stores-within-a-store in South Africa not formerly included in the
store count due to being distribution points. Effective at the end
of the third quarter of 2017, these stores were subject to
royalties on retail sales and as a result, have been included in
the store count.
|
Contacts:
|
|
Investors:
|
Matt Milanovich,
Senior Director - Investor Relations, Analysis & Strategy ,
(412) 402-7260; or
|
|
John Mills, Partner -
ICR, (646) 277-1254
|
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SOURCE GNC Holdings, Inc.