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Share Name | Share Symbol | Market | Type |
---|---|---|---|
GNC Holdings Inc | NYSE:GNC | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.55 | 0 | 01:00:00 |
[
X
]
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
For the quarterly period ended March 31, 2019
|
|
|
[ ]
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
For the transition period from
to
.
|
Delaware
|
20-8536244
|
(State or other jurisdiction of
|
(I.R.S. Employer
|
Incorporation or organization)
|
Identification No.)
|
|
|
300 Sixth Avenue
|
15222
|
Pittsburgh, Pennsylvania
|
(Zip Code)
|
(Address of principal executive offices)
|
|
Title of each class
|
|
Trading Symbol
|
|
Name of each exchange on which registered
|
Class A common stock, par value $0.001 per share
|
|
GNC
|
|
New York Stock Exchange
|
Large accelerated filer [
]
|
Accelerated filer [
X
]
|
Non-accelerated filer [ ]
|
Smaller reporting company [ ]
|
Emerging growth company [ ]
|
|
|
|
PAGE
|
|
|
||
|
|
|
|
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
|
|
|
|||
|
|||
|
|||
|
|||
|
|||
|
|||
|
|||
|
|||
|
|||
|
|||
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
Current assets:
|
|
||||||
Cash and cash equivalents
|
$
|
137,117
|
|
|
$
|
67,224
|
|
Receivables, net
|
119,352
|
|
|
127,317
|
|
||
Inventory (Note 4)
|
410,951
|
|
|
465,572
|
|
||
Forward contracts for the issuance of convertible preferred stock
|
—
|
|
|
88,942
|
|
||
Prepaid and other current assets
|
17,528
|
|
|
55,109
|
|
||
Total current assets
|
684,948
|
|
|
804,164
|
|
||
Long-term assets:
|
|
|
|
|
|
||
Goodwill
|
79,111
|
|
|
140,764
|
|
||
Brand name
|
300,720
|
|
|
300,720
|
|
||
Other intangible assets, net
|
75,463
|
|
|
92,727
|
|
||
Property, plant and equipment, net
|
95,574
|
|
|
155,095
|
|
||
Right-of-use assets (Note 8)
|
401,456
|
|
|
—
|
|
||
Equity method investments (Note 6)
|
97,803
|
|
|
—
|
|
||
Other long-term assets
|
35,062
|
|
|
34,380
|
|
||
Total long-term assets
|
1,085,189
|
|
|
723,686
|
|
||
Total assets
|
$
|
1,770,137
|
|
|
$
|
1,527,850
|
|
Current liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
174,682
|
|
|
$
|
148,782
|
|
Current portion of long-term debt (Note 5)
|
—
|
|
|
158,756
|
|
||
Current lease liabilities (Note 8)
|
117,093
|
|
|
—
|
|
||
Deferred revenue and other current liabilities
|
107,770
|
|
|
120,169
|
|
||
Total current liabilities
|
399,545
|
|
|
427,707
|
|
||
Long-term liabilities:
|
|
|
|
|
|
||
Long-term debt (Note 5)
|
888,353
|
|
|
993,566
|
|
||
Deferred income taxes
|
15,304
|
|
|
39,834
|
|
||
Lease liabilities (Note 8)
|
401,617
|
|
|
—
|
|
||
Other long-term liabilities
|
43,007
|
|
|
82,249
|
|
||
Total long-term liabilities
|
1,348,281
|
|
|
1,115,649
|
|
||
Total liabilities
|
1,747,826
|
|
|
1,543,356
|
|
||
Contingencies (Note 9)
|
|
|
|
|
|
||
|
|
|
|
||||
Mezzanine equity:
|
|
|
|
||||
Convertible preferred stock (Note 10)
|
211,395
|
|
|
98,804
|
|
||
|
|
|
|
||||
Stockholders’ deficit:
|
|
|
|
|
|
||
Common stock
|
130
|
|
|
130
|
|
||
Additional paid-in capital
|
1,009,041
|
|
|
1,007,827
|
|
||
Retained earnings
|
538,439
|
|
|
613,637
|
|
||
Treasury stock, at cost
|
(1,725,349
|
)
|
|
(1,725,349
|
)
|
||
Accumulated other comprehensive loss
|
(11,345
|
)
|
|
(10,555
|
)
|
||
Total stockholders’ deficit
|
(189,084
|
)
|
|
(114,310
|
)
|
||
Total liabilities, mezzanine equity and stockholders’ deficit
|
$
|
1,770,137
|
|
|
$
|
1,527,850
|
|
|
Three months ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
|
||||||
Revenue
(Note 3)
|
$
|
564,764
|
|
|
$
|
607,533
|
|
Cost of sales, including warehousing, distribution and occupancy
|
361,673
|
|
|
400,659
|
|
||
Gross profit
|
203,091
|
|
|
206,874
|
|
||
Selling, general, and administrative
|
148,303
|
|
|
160,730
|
|
||
Loss on net asset exchange for the formation of the joint ventures (Note 6)
|
19,514
|
|
|
—
|
|
||
Other income, net
|
(208
|
)
|
|
(245
|
)
|
||
Operating income
|
35,482
|
|
|
46,389
|
|
||
Interest expense, net (Note 5)
|
32,956
|
|
|
21,773
|
|
||
Loss on debt refinancing
|
—
|
|
|
16,740
|
|
||
Loss on forward contracts for the issuance of convertible preferred stock
|
16,787
|
|
|
—
|
|
||
(Loss) income before income taxes
|
(14,261
|
)
|
|
7,876
|
|
||
Income tax expense (Note 13)
|
1,956
|
|
|
1,686
|
|
||
(Loss) income before income from equity method investments
|
(16,217
|
)
|
|
6,190
|
|
||
Income from equity method investments (Note 6)
|
955
|
|
|
—
|
|
||
Net (loss) income
|
$
|
(15,262
|
)
|
|
$
|
6,190
|
|
(Loss) earnings per share
(Note 11)
:
|
|
|
|
|
|
||
Basic
|
$
|
(0.23
|
)
|
|
$
|
0.07
|
|
Diluted
|
$
|
(0.23
|
)
|
|
$
|
0.07
|
|
Weighted average common shares outstanding
(Note 11)
:
|
|
|
|
|
|
||
Basic
|
83,510
|
|
|
83,232
|
|
||
Diluted
|
83,510
|
|
|
83,368
|
|
|
Three months ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
|
||||||
Net (loss) income
|
$
|
(15,262
|
)
|
|
$
|
6,190
|
|
Other comprehensive loss:
|
|
|
|
|
|
||
Net change in interest rate swaps:
|
|
|
|
||||
Periodic revaluation of interest rate swap, net of tax benefit of $0.7 million
|
(1,464
|
)
|
|
—
|
|
||
Reclassification adjustment for interest recognized in Consolidated Statement of Operations, net of tax expense of $0.1 million
|
236
|
|
|
—
|
|
||
Net change in unrecognized loss on interest rate swaps, net of tax
|
(1,228
|
)
|
|
—
|
|
||
Foreign currency translation gain (loss)
|
438
|
|
|
(846
|
)
|
||
Other comprehensive loss
|
(790
|
)
|
|
(846
|
)
|
||
Comprehensive (loss) income
|
$
|
(16,052
|
)
|
|
$
|
5,344
|
|
|
Common Stock
|
|
Treasury Stock
|
|
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other Comprehensive
Loss
|
|
Total
Stockholders’ Deficit |
|||||||||||||||
|
Class A
|
|
|
|
|
|
||||||||||||||||||||
|
Shares
|
|
Dollars
|
|
|
|
|
|
||||||||||||||||||
Balance at December 31, 2018
|
83,886
|
|
|
$
|
130
|
|
|
$
|
(1,725,349
|
)
|
|
$
|
1,007,827
|
|
|
$
|
613,637
|
|
|
$
|
(10,555
|
)
|
|
$
|
(114,310
|
)
|
Impact of the adoption of ASC 842
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(59,936
|
)
|
|
—
|
|
|
(59,936
|
)
|
||||||
Comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,262
|
)
|
|
(790
|
)
|
|
(16,052
|
)
|
||||||
Dividend forfeitures on restricted stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Restricted stock awards
|
121
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Minimum tax withholding requirements
|
(41
|
)
|
|
—
|
|
|
—
|
|
|
(120
|
)
|
|
—
|
|
|
—
|
|
|
(120
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
1,334
|
|
|
—
|
|
|
—
|
|
|
1,334
|
|
||||||
Balance at March 31, 2019
|
83,966
|
|
|
$
|
130
|
|
|
$
|
(1,725,349
|
)
|
|
$
|
1,009,041
|
|
|
$
|
538,439
|
|
|
$
|
(11,345
|
)
|
|
$
|
(189,084
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at December 31, 2017
|
83,567
|
|
|
$
|
130
|
|
|
$
|
(1,725,349
|
)
|
|
$
|
1,001,315
|
|
|
$
|
543,814
|
|
|
$
|
(5,831
|
)
|
|
$
|
(185,921
|
)
|
Comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,190
|
|
|
(846
|
)
|
|
5,344
|
|
||||||
Dividend forfeitures on restricted stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
42
|
|
|
—
|
|
|
42
|
|
||||||
Restricted stock awards
|
149
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Minimum tax withholding requirements
|
(54
|
)
|
|
—
|
|
|
—
|
|
|
(223
|
)
|
|
—
|
|
|
—
|
|
|
(223
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
1,512
|
|
|
—
|
|
|
—
|
|
|
1,512
|
|
||||||
Balance at March 31, 2018
|
83,662
|
|
|
$
|
130
|
|
|
$
|
(1,725,349
|
)
|
|
$
|
1,002,604
|
|
|
$
|
550,046
|
|
|
$
|
(6,677
|
)
|
|
$
|
(179,246
|
)
|
|
Three months ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
Cash flows from operating activities:
|
|
||||||
Net (loss) income
|
$
|
(15,262
|
)
|
|
$
|
6,190
|
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
|
|
|
|
|
|
||
Depreciation and amortization expense
|
10,190
|
|
|
12,105
|
|
||
Income from equity investments
|
(955
|
)
|
|
—
|
|
||
Amortization of debt costs
|
7,988
|
|
|
3,609
|
|
||
Stock-based compensation
|
1,334
|
|
|
1,512
|
|
||
Loss on forward contracts related to the issuance of convertible preferred stock
|
16,787
|
|
|
—
|
|
||
Loss on net asset exchange for the formation of the joint ventures
|
19,514
|
|
|
—
|
|
||
Gains on refranchising
|
(21
|
)
|
|
—
|
|
||
Loss on debt refinancing
|
—
|
|
|
16,740
|
|
||
Third-party fees associated with refinancing
|
—
|
|
|
(15,753
|
)
|
||
Changes in assets and liabilities:
|
|
|
|
|
|
||
(Increase) decrease in receivables
|
(12,567
|
)
|
|
11,840
|
|
||
(Increase) in inventory
|
(6,886
|
)
|
|
(22,766
|
)
|
||
Increase in prepaid and other current assets
|
(3,658
|
)
|
|
(9,473
|
)
|
||
Increase in accounts payable
|
57,722
|
|
|
21,791
|
|
||
Increase in deferred revenue and accrued liabilities
|
(627
|
)
|
|
388
|
|
||
Other operating activities
|
(4,848
|
)
|
|
(1,111
|
)
|
||
Net cash provided by operating activities
|
68,711
|
|
|
25,072
|
|
||
|
|
|
|
|
|
||
Cash flows from investing activities:
|
|
|
|
|
|
||
Capital expenditures
|
(3,017
|
)
|
|
(3,732
|
)
|
||
Refranchising proceeds
|
710
|
|
|
465
|
|
||
Store acquisition costs
|
(43
|
)
|
|
(116
|
)
|
||
Proceeds from net asset exchange
|
101,000
|
|
|
—
|
|
||
Capital contribution to the newly formed joint ventures
|
(13,079
|
)
|
|
—
|
|
||
Net cash provided by (used in) investing activities
|
85,571
|
|
|
(3,383
|
)
|
||
|
|
|
|
|
|
||
Cash flows from financing activities:
|
|
|
|
|
|
||
Borrowings under revolving credit facility
|
22,000
|
|
|
50,000
|
|
||
Payments on revolving credit facility
|
(22,000
|
)
|
|
(32,500
|
)
|
||
Proceeds from the issuance of convertible preferred stock
|
199,950
|
|
|
—
|
|
||
Payments on Tranche B-1 Term Loan
|
(147,312
|
)
|
|
(1,138
|
)
|
||
Payments on Tranche B-2 Term Loan
|
(114,000
|
)
|
|
(10,700
|
)
|
||
Original issuance discount and revolving credit facility fees
|
(10,365
|
)
|
|
(35,216
|
)
|
||
Fees associated with the issuance of convertible preferred stock
|
(12,564
|
)
|
|
(2,183
|
)
|
||
Minimum tax withholding requirements
|
(120
|
)
|
|
(223
|
)
|
||
Net cash used in financing activities
|
(84,411
|
)
|
|
(31,960
|
)
|
||
|
|
|
|
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
22
|
|
|
141
|
|
||
Net increase (decrease) in cash and cash equivalents
|
69,893
|
|
|
(10,130
|
)
|
||
Beginning balance, cash and cash equivalents
|
67,224
|
|
|
64,001
|
|
||
Ending balance, cash and cash equivalents
|
$
|
137,117
|
|
|
$
|
53,871
|
|
|
As of March 31,
|
||||||
|
2019
|
|
2018
|
||||
Non-cash investing activities:
|
(in thousands)
|
||||||
Capital expenditures in current liabilities
|
$
|
1,115
|
|
|
$
|
1,203
|
|
Non-cash financing activities:
|
|
|
|
||||
Original issuance discount (Note 5)
|
$
|
—
|
|
|
$
|
19,587
|
|
|
Three months ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
U.S. company-owned product sales:
(1)
|
(in thousands)
|
||||||
Protein
|
$
|
80,257
|
|
|
$
|
87,670
|
|
Performance supplements
|
74,778
|
|
|
75,616
|
|
||
Weight management
|
30,779
|
|
|
39,787
|
|
||
Vitamins
|
47,056
|
|
|
50,371
|
|
||
Herbs / Greens
|
15,873
|
|
|
16,158
|
|
||
Wellness
|
47,200
|
|
|
47,701
|
|
||
Health / Beauty
|
46,388
|
|
|
48,054
|
|
||
Food / Drink
|
28,243
|
|
|
25,360
|
|
||
General merchandise
|
6,800
|
|
|
7,062
|
|
||
Total U.S. company-owned product sales
|
$
|
377,374
|
|
|
$
|
397,779
|
|
Wholesale sales to franchisees
|
58,257
|
|
|
57,160
|
|
||
Royalties and franchise fees
|
8,472
|
|
|
8,748
|
|
||
Sublease income
|
10,976
|
|
|
11,765
|
|
||
Cooperative advertising and other franchise support fees
|
5,067
|
|
|
5,533
|
|
||
Other
(2)
|
29,011
|
|
|
31,429
|
|
||
Total U.S. and Canada revenue
|
$
|
489,157
|
|
|
$
|
512,414
|
|
(1)
|
Includes GNC.com sales.
|
(2)
|
Includes revenue primarily related to Canada operations and loyalty programs, myGNC Rewards and PRO Access.
|
|
Three months ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in thousands)
|
||||||
Wholesale sales to franchisees
|
$
|
25,437
|
|
|
$
|
21,760
|
|
Royalties and franchise fees
|
6,202
|
|
|
6,621
|
|
||
Other
(1)
|
9,284
|
|
|
11,684
|
|
||
Total International revenue
|
$
|
40,923
|
|
|
$
|
40,065
|
|
|
Three months ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in thousands)
|
||||||
Third-party contract manufacturing
(1)
|
$
|
15,783
|
|
|
$
|
32,722
|
|
Intersegment sales
(1)
|
35,505
|
|
|
64,663
|
|
||
Wholesale partner sales
|
18,901
|
|
|
22,332
|
|
||
Total Manufacturing / Wholesale revenue
|
$
|
70,189
|
|
|
$
|
119,717
|
|
|
Three months ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
Total revenues by geographic areas
(1)
:
|
(in thousands)
|
||||||
United States
|
$
|
535,943
|
|
|
$
|
572,231
|
|
Foreign
|
28,821
|
|
|
35,302
|
|
||
Total revenues
|
$
|
564,764
|
|
|
$
|
607,533
|
|
|
Three months ended March 31, 2019
|
||||||||||||
|
Balance at Beginning of Period
|
|
Recognition of revenue included in beginning balance
|
|
Contract liability, net of revenue, recognized during the period
|
|
Balance at the End of Period
|
||||||
|
(in thousands)
|
||||||||||||
Deferred franchise and license fees
|
$
|
33,464
|
|
|
(2,861
|
)
|
|
668
|
|
|
$
|
31,271
|
|
PRO Access and loyalty program points
|
24,836
|
|
|
(12,423
|
)
|
|
12,863
|
|
|
25,276
|
|
||
Gift card liability
|
3,416
|
|
|
(1,523
|
)
|
|
181
|
|
|
2,074
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
(in thousands)
|
||||||
Finished product ready for sale
|
$
|
410,951
|
|
|
$
|
416,113
|
|
Work-in-process, bulk product and raw materials
(1)
|
—
|
|
|
46,520
|
|
||
Packaging supplies
(1)
|
—
|
|
|
2,939
|
|
||
Inventory
|
$
|
410,951
|
|
|
$
|
465,572
|
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
|
(in thousands)
|
||||||
Tranche B-1 Term Loan
|
$
|
—
|
|
|
$
|
147,289
|
|
Tranche B-2 Term Loan (net of $11.4 million and $17.5 million discount)
|
446,799
|
|
|
554,760
|
|
||
FILO Term Loan (net of $10.2 million and $10.9 million discount)
|
264,768
|
|
|
264,086
|
|
||
Unpaid original issuance discount
|
—
|
|
|
11,445
|
|
||
Notes
|
177,440
|
|
|
175,504
|
|
||
Debt issuance costs
|
(654
|
)
|
|
(762
|
)
|
||
Total debt
|
888,353
|
|
|
1,152,322
|
|
||
Less: current debt
|
—
|
|
|
(158,756
|
)
|
||
Long-term debt
|
$
|
888,353
|
|
|
$
|
993,566
|
|
•
|
a
$264.8 million
asset-based Term Loan Facility advanced on a “first-in, last-out” basis (the "FILO Term Loan") with a maturity date of December 2022 (which maturity date will become May 2020, subject to certain adjustments, should the Springing Maturity Date be triggered); and
|
•
|
a
$100 million
asset-based Revolving Credit Facility (the "Revolving Credit Facility") with a maturity date of August 2022 (which maturity date will become May 2020, subject to certain adjustments, should the Springing Maturity Date be triggered). In connection with the contribution of the Nutra manufacturing and Anderson facility net assets to the manufacturing joint venture with IVC, the Revolving Credit Facility decreased from
$100 million
to
$81 million
effective March 2019. As of March 31, 2019 there were
no
borrowings outstanding on the Revolving Credit Facility.
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
(in thousands)
|
||||||
Liability component
|
|
|
|
||||
Principal
|
$
|
188,565
|
|
|
$
|
188,565
|
|
Conversion feature
|
(9,788
|
)
|
|
(11,489
|
)
|
||
Discount related to debt issuance costs
|
(1,337
|
)
|
|
(1,572
|
)
|
||
Net carrying amount
|
$
|
177,440
|
|
|
$
|
175,504
|
|
(in thousands, except percentages)
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
Fair Value at
|
|||||||||||
|
Notional Amount
|
|
Fixed Rate
|
|
Balance Sheet Classification
|
|
March 31, 2019
|
|
December 31, 2018
|
|||||||
|
|
|
|
|
|
|
|
|
|
|||||||
Accounting cash flow hedges:
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swap
|
$
|
275,000
|
|
|
2.82
|
%
|
|
Other long-term liabilities
|
|
$
|
3,641
|
|
|
$
|
2,371
|
|
Interest rate swap
|
225,000
|
|
|
2.74
|
%
|
|
Other long-term liabilities
|
|
1,348
|
|
|
839
|
|
|||
Net carrying amount
|
$
|
500,000
|
|
|
|
|
Total liabilities
|
|
$
|
4,989
|
|
|
$
|
3,210
|
|
|
Three months ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in thousands)
|
||||||
|
|
|
|
||||
Tranche B-1 Term Loan coupon
|
$
|
928
|
|
|
$
|
8,058
|
|
Tranche B-2 Term Loan coupon
|
16,468
|
|
|
6,824
|
|
||
FILO Term Loan coupon
|
6,751
|
|
|
2,122
|
|
||
Revolving Credit Facility
|
123
|
|
|
132
|
|
||
Terminated revolving credit facility
|
—
|
|
|
316
|
|
||
Amortization of discount and debt issuance costs
|
6,043
|
|
|
1,755
|
|
||
Subtotal
|
30,313
|
|
|
19,207
|
|
||
Notes:
|
|
|
|
||||
Coupon
|
707
|
|
|
707
|
|
||
Amortization of conversion feature
|
1,701
|
|
|
1,610
|
|
||
Amortization of discount and debt issuance costs
|
244
|
|
|
244
|
|
||
Total Notes
|
2,652
|
|
|
2,561
|
|
||
Other
|
(9
|
)
|
|
5
|
|
||
Interest expense, net
|
$
|
32,956
|
|
|
$
|
21,773
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|||||
|
(in thousands)
|
|||||||
Manufacturing JV
|
$
|
75,434
|
|
|
$
|
—
|
|
|
Manufacturing JV capital contribution
|
10,714
|
|
|
—
|
|
|||
HK JV and China JV
|
10,700
|
|
|
—
|
|
|||
Income from equity method investments
|
955
|
|
|
—
|
|
|||
Total Equity method investments
|
$
|
97,803
|
|
|
$
|
—
|
|
Level 1 — observable inputs such as quoted prices in active markets for identical assets and liabilities;
|
Level 2 — observable inputs such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, other inputs that are observable, or can be corroborated by observable market data; and
|
Level 3 — unobservable inputs for which there are little or no market data, which require the reporting entity to develop its own assumptions.
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
||||||||
|
(in thousands)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Forward contracts for the issuance of convertible preferred stock
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
88,942
|
|
|
$
|
88,942
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Tranche B-1 Term Loan
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
147,289
|
|
|
$
|
145,080
|
|
Tranche B-2 Term Loan
|
446,799
|
|
|
430,938
|
|
|
554,760
|
|
|
511,766
|
|
||||
FILO Term Loan
|
264,768
|
|
|
267,204
|
|
|
264,086
|
|
|
260,125
|
|
||||
Notes
|
177,440
|
|
|
134,854
|
|
|
175,504
|
|
|
131,628
|
|
||||
Interest rate swaps
|
4,989
|
|
|
4,989
|
|
|
3,210
|
|
|
3,210
|
|
|
Three months ended March 31, 2019
|
||
|
(in thousands)
|
||
Company-owned and franchise stores:
|
|
||
Operating leases
|
$
|
36,602
|
|
Variable lease costs
(1)
|
21,509
|
|
|
Total company-owned and franchise stores
|
58,111
|
|
|
Other
|
2,188
|
|
|
Total rent expense
|
$
|
60,299
|
|
|
Three months ended March 31, 2019
|
|
|
|
|
Weighted average remaining lease term
|
4.6 years
|
|
Weighted average discount rate
|
10
|
%
|
|
Three months ended March 31, 2019
|
||
|
(in thousands)
|
||
Operating cash flow information:
|
|
||
Cash paid for amounts included in the measurement of operating lease liabilities
|
$
|
44,936
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
$
|
6,442
|
|
|
Operating Leases for Company-Owned and Franchise Stores
|
|
Operating Leases for Other
(1)
|
|
Total Operating Leases
|
|
Sublease
Income from Franchisees
|
|
Rent on Operating Leases, net of Sublease Revenue
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
2019 (remainder)
|
$
|
120,954
|
|
|
$
|
4,270
|
|
|
$
|
125,224
|
|
|
$
|
(23,783
|
)
|
|
$
|
101,441
|
|
2020
|
135,834
|
|
|
4,964
|
|
|
140,798
|
|
|
(27,829
|
)
|
|
112,969
|
|
|||||
2021
|
109,994
|
|
|
3,643
|
|
|
113,637
|
|
|
(22,697
|
)
|
|
90,940
|
|
|||||
2022
|
84,925
|
|
|
2,342
|
|
|
87,267
|
|
|
(17,882
|
)
|
|
69,385
|
|
|||||
2023
|
63,125
|
|
|
1,180
|
|
|
64,305
|
|
|
(13,384
|
)
|
|
50,921
|
|
|||||
Thereafter
|
136,071
|
|
|
6,703
|
|
|
142,774
|
|
|
(29,548
|
)
|
|
113,226
|
|
|||||
Total future obligations
|
$
|
650,903
|
|
|
$
|
23,102
|
|
|
$
|
674,005
|
|
|
$
|
(135,123
|
)
|
|
$
|
538,882
|
|
Less amounts representing interest
|
|
|
|
|
|
(155,295
|
)
|
|
|
|
|
|
|||||||
Present value of lease obligations
|
|
|
|
|
|
|
$
|
518,710
|
|
|
|
|
|
|
Operating Leases for Company-Owned and Franchise Stores
|
|
Operating Leases for Other
(1)
|
|
Total Operating Leases
|
|
Sublease
Income from Franchisees
|
|
Rent on Operating Leases, net of Sublease Revenue
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
2019
|
$
|
162,910
|
|
|
$
|
6,071
|
|
|
$
|
168,981
|
|
|
$
|
(29,867
|
)
|
|
$
|
139,114
|
|
2020
|
126,312
|
|
|
5,574
|
|
|
131,886
|
|
|
(23,631
|
)
|
|
108,255
|
|
|||||
2021
|
95,000
|
|
|
4,185
|
|
|
99,185
|
|
|
(16,782
|
)
|
|
82,403
|
|
|||||
2022
|
64,735
|
|
|
2,479
|
|
|
67,214
|
|
|
(10,285
|
)
|
|
56,929
|
|
|||||
2023
|
39,798
|
|
|
1,290
|
|
|
41,088
|
|
|
(4,717
|
)
|
|
36,371
|
|
|||||
Thereafter
|
56,200
|
|
|
6,703
|
|
|
62,903
|
|
|
(4,238
|
)
|
|
58,665
|
|
|||||
Total future obligations
|
$
|
544,955
|
|
|
$
|
26,302
|
|
|
$
|
571,257
|
|
|
$
|
(89,520
|
)
|
|
$
|
481,737
|
|
|
Three months ended March 31,
|
||||
|
2019
|
|
2018
|
||
|
(in thousands)
|
||||
Basic weighted average shares
|
83,510
|
|
|
83,232
|
|
Effect of dilutive stock-based compensation awards
|
—
|
|
|
136
|
|
Diluted weighted average shares
|
83,510
|
|
|
83,368
|
|
Antidilutive:
|
|
|
Time-based options and restricted stock awards
|
3,206
|
|
Performance-based restricted stock awards
|
536
|
|
Contingently issuable:
|
|
|
Performance-based restricted stock awards
|
—
|
|
Performance-based restricted stock awards with a market condition
|
315
|
|
Total stock-based awards excluded from diluted EPS
|
4,057
|
|
|
Three months ended March, 31
|
||||||
|
2019
|
|
2018
|
||||
|
(in thousands, except per share data)
|
||||||
Earnings (loss) per common share - Basic
|
|
|
|
||||
Net (loss) income
|
$
|
(15,262
|
)
|
|
$
|
6,190
|
|
Cumulative undeclared convertible preferred stock dividend
|
3,716
|
|
|
—
|
|
||
Net income (loss) attributable to common shareholders
|
(18,978
|
)
|
|
6,190
|
|
||
Weighted average common shares outstanding - basic
|
83,510
|
|
|
83,232
|
|
||
Earnings (loss) per common share - basic
|
$
|
(0.23
|
)
|
|
$
|
0.07
|
|
Earnings (loss) per common share - Diluted
|
|
|
|
||||
Net (loss) income
|
$
|
(15,262
|
)
|
|
$
|
6,190
|
|
Cumulative undeclared convertible preferred stock dividend
|
3,716
|
|
|
—
|
|
||
Net income (loss) attributable to common shareholders
|
(18,978
|
)
|
|
6,190
|
|
||
Weighted average common shares outstanding - diluted
|
83,510
|
|
|
83,368
|
|
||
Earnings (loss) per common share - diluted
|
$
|
(0.23
|
)
|
|
$
|
0.07
|
|
|
Three months ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in thousands)
|
||||||
Revenue:
|
|
|
|
|
|
||
U.S. and Canada
|
$
|
489,157
|
|
|
$
|
512,414
|
|
International
|
40,923
|
|
|
40,065
|
|
||
Manufacturing / Wholesale:
|
|
|
|
|
|
||
Intersegment revenues
|
35,505
|
|
|
64,663
|
|
||
Third party
|
34,684
|
|
|
55,054
|
|
||
Subtotal Manufacturing / Wholesale
|
70,189
|
|
|
119,717
|
|
||
Total reportable segment revenues
|
600,269
|
|
|
672,196
|
|
||
Elimination of intersegment revenues
|
(35,505
|
)
|
|
(64,663
|
)
|
||
Total revenue
|
$
|
564,764
|
|
|
$
|
607,533
|
|
Operating income:
|
|
|
|
|
|
||
U.S. and Canada
|
$
|
52,100
|
|
|
$
|
43,490
|
|
International
|
14,050
|
|
|
14,464
|
|
||
Manufacturing / Wholesale
|
15,344
|
|
|
14,964
|
|
||
Total reportable segment operating income
|
81,494
|
|
|
72,918
|
|
||
Corporate costs
|
(26,261
|
)
|
|
(26,479
|
)
|
||
Loss on net asset exchange for the formation of the joint ventures
|
(19,514
|
)
|
|
—
|
|
||
Other
|
(237
|
)
|
|
(50
|
)
|
||
Unallocated corporate costs, loss on net asset exchange and other
|
(46,012
|
)
|
|
(26,529
|
)
|
||
Total operating income
|
35,482
|
|
|
46,389
|
|
||
Interest expense, net
|
32,956
|
|
|
21,773
|
|
||
Loss on debt refinancing
|
—
|
|
|
16,740
|
|
||
Loss on forward contracts for the issuance of convertible preferred stock
|
16,787
|
|
|
—
|
|
||
(Loss) income before income taxes
|
$
|
(14,261
|
)
|
|
$
|
7,876
|
|
•
|
Leading brand of nutritional supplements.
GNC has been in business for more than 80 years and the Company is built on a core foundation as a brand builder of high-quality nutritional supplements. Based on our worldwide network of approximately 8,200 locations and our online channels, we are a leading global brand of health, wellness and performance products.
|
•
|
Product development and innovation.
W
e develop high-quality, innovative nutritional supplement products that can be purchased only through our store locations, GNC.com, our Amazon.com marketplace and our select wholesale partners. Our high quality ingredients are rigorously tested before going into GNC products, undergoing multiple quality checks to ensure that they meet our high standards for identity, strength, purity, composition and limits in contaminants.
|
•
|
A differentiated retail customer experience.
Our retail strategy is to deliver a compelling experience at every customer touch point. We operate in a highly personalized, aspirational sector and believe that the nutritional supplement consumer often desires and seeks out product expertise and knowledgeable customer service.
|
•
|
Omni-channel development.
We believe our diversified, omni-channel model, which includes company-owned stores, domestic and international franchise locations, wholesale locations and e-commerce, can differentiate us from online-only competitors. Our strategy is to give consumers a seamless, integrated experience across digital, mobile and store channels and in every interaction they have with GNC.
|
•
|
International growth.
We see opportunity to expand internationally within the large global supplement market which is expected to continue to grow. In particular, our partnership with Harbin Pharmaceutical Group Co., Ltd ("Harbin") allows us to further expand our business in China. Harbin’s expertise in distribution and regulation is the ideal match for our highly valued brand and assortment of products in the China market. Refer to Item 1, "Financial Statements, "Note 6, "Equity Method Investments" for more information.
|
•
|
Driving constructive industry dialogue.
We remain focused on continuously raising the bar on transparency and quality throughout the dietary supplement industry. We believe that over time the implementation of higher standards and more stringent industry self-regulation regarding manufacturing practices, ingredient traceability and product transparency will prove beneficial for the industry and lead to improved dialogue with regulators, stronger consumer trust and greater confidence in our industry.
|
|
Three months ended March 31,
|
||||
|
2019
|
|
2018
|
||
Contribution to same store sales
|
|
|
|
||
Domestic Retail same store sales
|
(1.9
|
)%
|
|
(1.2
|
)%
|
GNC.com contribution to same store sales
|
0.3
|
%
|
|
1.7
|
%
|
Total Same Store Sales
|
(1.6
|
)%
|
|
0.5
|
%
|
|
Three months ended March 31,
|
||||||||||||||
|
2019
|
|
2018
|
||||||||||||
|
Net (Loss) Income
|
|
Diluted EPS
(1)
|
|
Net Income
|
|
Diluted EPS
|
||||||||
|
(unaudited)
|
||||||||||||||
Reported
|
$
|
(15,262
|
)
|
|
$
|
(0.23
|
)
|
|
$
|
6,190
|
|
|
$
|
0.07
|
|
Loss on debt refinancing
|
—
|
|
|
—
|
|
|
16,740
|
|
|
0.20
|
|
||||
Amortization of discount in connection with early debt payment
|
3,119
|
|
|
0.02
|
|
|
—
|
|
|
—
|
|
||||
Loss on net asset exchange for equity method investments
|
19,514
|
|
|
0.15
|
|
|
—
|
|
|
—
|
|
||||
Loss on forward contract related to the issuance of convertible preferred stock
|
16,787
|
|
|
0.13
|
|
|
—
|
|
|
—
|
|
||||
Other
(2)
|
713
|
|
|
0.01
|
|
|
808
|
|
|
0.01
|
|
||||
Tax effect of items above
(3)
|
(5,837
|
)
|
|
(0.05
|
)
|
|
(3,654
|
)
|
|
(0.04
|
)
|
||||
Adjusted
|
$
|
19,034
|
|
|
$
|
0.15
|
|
|
$
|
20,084
|
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average diluted common shares outstanding
|
126,628
|
|
|
|
|
83,368
|
|
|
|
|
Three months ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(unaudited)
|
||||||
Net (loss) income
|
$
|
(15,262
|
)
|
|
$
|
6,190
|
|
Income tax expense
|
1,956
|
|
|
1,686
|
|
||
Interest expense, net
|
32,956
|
|
|
21,773
|
|
||
Equity income from equity method investments
|
(955
|
)
|
|
—
|
|
||
Loss on debt refinancing
|
—
|
|
|
16,740
|
|
||
Depreciation and amortization
|
10,190
|
|
|
12,105
|
|
||
Loss on net asset exchange for equity method investments
|
19,514
|
|
|
—
|
|
||
Loss on forward contracts related to the issuance of convertible preferred stock
|
16,787
|
|
|
—
|
|
||
Other
(2)
|
713
|
|
|
808
|
|
||
Adjusted EBITDA
|
$
|
65,899
|
|
|
$
|
59,302
|
|
|
Three months ended March 31,
|
||||
|
2019
|
|
2018
|
||
Revenues:
|
|
|
|
||
U.S. and Canada
|
86.6
|
%
|
|
84.3
|
%
|
International
|
7.3
|
%
|
|
6.6
|
%
|
Manufacturing / Wholesale:
|
|
|
|
||
Intersegment revenues
|
6.3
|
%
|
|
10.6
|
%
|
Third party
|
6.1
|
%
|
|
9.1
|
%
|
Subtotal Manufacturing / Wholesale
|
12.4
|
%
|
|
19.7
|
%
|
Elimination of intersegment revenue
|
(6.3
|
)%
|
|
(10.6
|
)%
|
Total net revenues
|
100.0
|
%
|
|
100.0
|
%
|
Operating expenses:
|
|
|
|
||
Cost of sales, including warehousing, distribution and occupancy
|
64.0
|
%
|
|
65.9
|
%
|
Gross profit
|
36.0
|
%
|
|
34.1
|
%
|
Selling, general and administrative
|
26.3
|
%
|
|
26.5
|
%
|
Loss on net asset exchange for the formation of the joint ventures
|
3.5
|
%
|
|
—
|
%
|
Other income, net
|
—
|
%
|
|
—
|
%
|
Total operating expenses
|
93.8
|
%
|
|
92.4
|
%
|
Operating income:
|
|
|
|
||
U.S. and Canada
(*)
|
10.7
|
%
|
|
8.5
|
%
|
International
(*)
|
34.3
|
%
|
|
36.1
|
%
|
Manufacturing / Wholesale
(*)
|
21.9
|
%
|
|
12.5
|
%
|
Unallocated corporate costs and other
|
|
|
|
||
Corporate costs
|
(4.6
|
)%
|
|
(4.4
|
)%
|
Loss on net asset exchange for the formation of the joint ventures
|
(3.5
|
)%
|
|
—
|
%
|
Other
|
—
|
%
|
|
—
|
%
|
Subtotal unallocated corporate, loss on net asset exchange and other costs
|
(8.1
|
)%
|
|
(4.4
|
)%
|
Total operating income
|
6.3
|
%
|
|
7.7
|
%
|
Interest expense, net
|
5.8
|
%
|
|
3.6
|
%
|
Loss on debt refinancing
|
—
|
%
|
|
2.8
|
%
|
Loss on forward contracts for the issuance of convertible preferred stock
|
3.0
|
%
|
|
—
|
%
|
(Loss) income before income taxes
|
(2.5
|
)%
|
|
1.3
|
%
|
Income tax expense
|
0.3
|
%
|
|
0.3
|
%
|
Net (loss) income before equity income from equity method investments
|
(2.8
|
)%
|
|
1.0
|
%
|
Equity income from equity method investments
|
0.2
|
%
|
|
—
|
%
|
Net (loss) income
|
(2.6
|
)%
|
|
1.0
|
%
|
|
Three months ended March 31,
|
||||
|
2019
|
|
2018
|
||
U.S. & Canada
|
|
|
|
||
Company-owned
(a)
:
|
|
|
|
|
|
Beginning of period balance
|
3,206
|
|
|
3,423
|
|
Openings
|
5
|
|
|
5
|
|
Acquired franchise locations
(b)
|
6
|
|
|
6
|
|
Franchise conversions
(c)
|
(1
|
)
|
|
—
|
|
Closings
|
(87
|
)
|
|
(49
|
)
|
End of period balance
|
3,129
|
|
|
3,385
|
|
Domestic Franchise:
|
|
|
|
||
Beginning of period balance
|
1,037
|
|
|
1,099
|
|
Openings
|
3
|
|
|
5
|
|
Acquired franchise locations
(b)
|
(6
|
)
|
|
(6
|
)
|
Franchise conversions
(c)
|
1
|
|
|
—
|
|
Closings
|
(17
|
)
|
|
(15
|
)
|
End of period balance
|
1,018
|
|
|
1,083
|
|
International
(d)
:
|
|
|
|
||
Beginning of period balance
|
1,957
|
|
|
2,015
|
|
Openings
|
24
|
|
|
16
|
|
Closings
|
(24
|
)
|
|
(22
|
)
|
China locations contributed to the partnership with Harbin
|
(5
|
)
|
|
—
|
|
End of period balance
|
1,952
|
|
|
2,009
|
|
Store-within-a-store (Rite Aid):
|
|
|
|
|
|
Beginning of period balance
|
2,183
|
|
|
2,418
|
|
Openings
|
11
|
|
|
16
|
|
Closings
|
(85
|
)
|
|
(6
|
)
|
End of period balance
|
2,109
|
|
|
2,428
|
|
Total Locations
|
8,208
|
|
|
8,905
|
|
•
|
The decrease in the number of corporate stores from
3,385
at March 31, 2018 to
3,129
at March 31, 2019 from our store portfolio optimization strategy contributed an approximate $14 million decrease to revenue;
|
•
|
A decrease in U.S. company-owned same store sales of 1.6%, which includes GNC.com sales, which resulted in a $6.2 million decrease to revenue. GNC.com contributed an increase of 0.3% to the same store sales. E-commerce sales were 7.4% of U.S. and Canada revenue in the current quarter compared with 7.1% in the prior year quarter; and
|
•
|
A decrease in Canada company-owned stores revenue of $2.8 million primarily due to a decrease in same store sales of 4.1%
|
•
|
Case No. 140502403, filed May 20, 2014 in Common Pleas Court of Philadelphia County, Pennsylvania
|
•
|
Case No. 15-1-0847-05, filed May 1, 2015, in the first Circuit Court, State of Hawaii
|
•
|
Cases filed in the District Court for the District of Hawaii as follows:
|
•
|
Cases filed in the Superior Court of California as follows:
|
- Case No. 2014-00740258 filed August 18, 2014
|
- Case No. 30-2015-00776749, filed March 12, 2015
|
- Case No. 30-2015-00783256-CU-PL-CXC, filed April 16, 2015
|
- Case No. 37-2015-00008404, filed March 13, 2015
|
- Case No. 37-2014-110924, filed September 8, 2014
|
- Case No. 37-2013-00074052-CU-PL-CTL, filed November 1, 2013
|
- Case No. BC559542, filed October 6, 2014
|
- Case No. BC575264, filed March 13, 2015
|
- Case No. BC575262, filed March 13, 2015
|
- Case No. BC534065, filed January 23, 2014
|
- Case No. M131321, filed March 13, 2015
|
- Case No. M131322, filed March 13, 2015
|
- Case No. 115CV78045, filed March 13, 2015
|
- Case No. CV-14-0037, filed January 24, 2014
|
Period
(1)
|
Total Number of
Shares Purchased
|
|
Average
Price Paid
per Share
|
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or Programs
(3)
|
|
Dollar Value of Shares that
May Yet Be Purchased
under the Plans or
Programs
|
||||||
|
|
|
|
|
|
|
|
||||||
January 1 to January 31, 2019
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
197,795,011
|
|
February 1 to February 28, 2019
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
197,795,011
|
|
March 1 to March 31, 2019
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
197,795,011
|
|
Total
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
|
|
(1)
|
Other than as set forth in the table above, we made no purchases of shares of Class A common stock for the quarter ended
March 31, 2019
.
|
(2)
|
In August 2015, the Board approved a $500.0 million multi-year repurchase program in addition to the $500.0 million multi-year program approved in August 2014, bringing the aggregate share repurchase program to $1.0 billion of the Company’s common stock. The Company has utilized $802.2 million of the current repurchase program. As of
March 31, 2019
, $197.8 million remains available for purchase under the program.
|
|
GNC HOLDINGS, INC.
|
|
(Registrant)
|
|
|
|
/s/ Tricia K. Tolivar
|
Date: May 2, 2019
|
Tricia K. Tolivar
|
|
Chief Financial Officer
|
|
(Principal Financial Officer)
|
1 Year GNC Chart |
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