PITTSBURGH, April 25, 2019 (GLOBE NEWSWIRE) -- GNC Holdings, Inc. (NYSE: GNC)  reported consolidated revenue of $564.8 million in the first quarter of 2019, compared with consolidated revenue of $607.5 million in the first quarter of 2018. The decrease in revenue was primarily a result of the transfer of the Nutra manufacturing and China e-commerce businesses to the newly formed joint ventures and the closure of company-owned stores from our store portfolio optimization strategy.

Key Updates

• Integration of the recently announced joint ventures with Harbin Pharmaceutical Group ("Harbin") and International Vitamin Corporation ("IVC") currently on track with expectations
• Retired legacy B-1 Term Loan on March 4th and reduced the extended B-2 Term Loan during the first quarter of 2019 by $114 million. In aggregate, retired over $350 million in debt since beginning of fourth quarter of 2018.
• Ended first quarter with $211 million in liquidity
• Recently launched CBD topical products in 23 states and the District of Columbia
• GNC brand mix increased to 52% compared with 50% in the first quarter of 2018

For the first quarter of 2019, the Company reported a net loss of $15.3 million compared with net income of $6.2 million in the prior year quarter. Diluted loss per share was $0.23 in the current quarter compared with diluted earnings per share ("EPS") of $0.07 in the prior year quarter. In the first quarter of 2019, the Company recorded a $16.8 million loss on forward contracts related to the issuance of convertible preferred stock as a result of the Harbin investment and a $19.5 million loss on the exchange of net assets for the newly formed joint ventures. In the prior year quarter the Company recorded a $16.7 million loss on debt refinancing. Excluding these items and other expenses as outlined in the table below, adjusted net income was $19.0 million¹ in the current quarter, compared with adjusted net income of $20.1 million¹ in the prior year quarter. Adjusted EPS was $0.15¹ in the current quarter compared with $0.24¹ in the prior year quarter.

Adjusted EBITDA, as defined and reconciled to net (loss) income in the table below, was $65.9 million², or 11.7% of revenue in the current quarter compared with $59.3 million², or 9.8% of revenue in the prior year quarter.

"We are pleased with the EBITDA margin improvement we delivered in the first quarter of 2019." said Ken Martindale, GNC's Chairman and CEO. "During the past six months we have completed a number of important partnerships, including the strategic investment by Harbin and the joint ventures with Harbin and IVC, which further enable our team to focus on our core business. In addition, during that period, we have improved our balance sheet by retiring over $350 million in debt."

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¹ This Non-GAAP financial measure is reconciled to GAAP below, under the caption "Reconciliation of Net (Loss) Income and Diluted EPS to Adjusted Net Income and Adjusted EPS"
² This Non-GAAP financial measure is reconciled to GAAP below, under the caption "Reconciliation of Net (Loss) Income to Adjusted EBITDA"

Segment Operating Performance

U.S. & Canada

Revenues in the U.S. and Canada segment decreased $23.2 million, or 4.5%, to $489.2 million for the three months ended March 31, 2019 compared with $512.4 million in the prior year quarter. E-commerce sales were 7.4% of U.S. and Canada revenue for the three months ended March 31, 2019 compared with 7.1% in the prior year quarter.

The decrease in revenue compared with the prior year quarter was primarily due to the closure of company-owned stores under our store portfolio optimization strategy, which contributed an approximate $14 million decrease in revenue, and negative same store sales of 1.6%, which resulted in a revenue decrease of $6.2 million. In domestic franchise locations, same store sales for the first quarter of 2019 increased 0.6% over the prior year quarter.

Operating income increased $8.6 million to $52.1 million, or 10.7% of segment revenue, for the three months ended March 31, 2019 compared with $43.5 million, or 8.5% of segment revenue, for the same period in 2018. The increase in operating income percentage was due to lower occupancy and marketing costs, partially offset by a decrease in product margin rate.

International

Revenues in the International segment increased $0.8 million, or 2.1%, to $40.9 million for the three months ended March 31, 2019 compared with $40.1 million in the prior year quarter, primarily due to an increase in sales to our international franchisees of $4.6 million partially offset by a decline in China sales of $3.4 million to $4.5 million mostly due to the transfer of the cross-border e-commerce China business to the newly formed joint venture effective February 13, 2019.

Operating income decreased $0.4 million to $14.1 million, or 34.3% of segment revenue, for the three months ended March 31, 2019 compared with $14.5 million, or 36.1% of segment revenue, for the same period in 2018. The decrease in operating income percentage was primarily due to a lower margin rate driven by a change in revenue mix.

Manufacturing / Wholesale

Revenues in the Manufacturing / Wholesale segment, excluding intersegment sales, decreased $20.4 million, or 37.0%, to $34.7 million for the three months ended March 31, 2019 compared with $55.1 million in the prior year quarter primarily due to the transaction with IVC for the newly formed manufacturing joint venture effective March 1, 2019.

Operating income increased $0.3 million to $15.3 million, or 21.9% of segment revenue, for the three months ended March 31, 2019 compared with $15.0 million, or 12.5% of segment revenue, in the prior year quarter. The increase in operating income percentage was primarily due to a decrease in revenues as a result of the newly formed manufacturing joint venture. Although revenue decreased, the operating income reduction was minimal as GNC continues to recognize margin on product sold in March, but purchased prior to the formation of the joint venture. The remaining increase in operating income is the result of an increase in GNC brand sales.

Cash Flow and Liquidity Metrics

For the three months ended March 31, 2019, the Company generated net cash from operating activities of $68.7 million compared with $25.1 million for the three months ended March 31, 2018. The increase was driven by favorable working capital changes primarily due to an increase in accounts payable as a result of the Company's cash management efforts and an increase in accounts payable related to the establishment of the manufacturing joint venture.

For the three months ended March 31, 2019, the Company generated $154.3 million³ in free cash flow which includes $101 million proceeds from the Nutra manufacturing transaction, compared with $37.4 million for the three months ended March 31, 2018. The Company defines free cash flow as cash provided by operating activities (excluding fees relating to the debt refinancing) less cash used in investing activities. At March 31, 2019, the Company’s cash and cash equivalents were $137.1 million and debt was $888.4 million. No borrowings were outstanding on the Revolving Credit Facility at the end of the first quarter of 2019.

About Us

GNC Holdings, Inc. (NYSE: GNC) is a global health and wellness brand that helps people live well. The company is known and trusted for quality performance and nutritional supplements, and its broad assortment features innovative private-label products as well as national recognized third-party brands, many of which are exclusive to GNC.

GNC’s diversified, omni-channel business model has global reach and a well-recognized, trusted brand, and provides customers with excellent service, product knowledge and solutions. The company reaches consumers worldwide through company-owned retail locations, and domestic and international franchise activities, and e-commerce. GNC also has exceptional innovation and product development capabilities, manufactures products for third parties and generates revenue through corporate partnerships. As of March 31, 2019, GNC had approximately 8,200 locations, of which approximately 6,000 retail locations are in the United States (including approximately 2,100 Rite Aid licensed store-within-a-store locations) and the remainder are franchise locations in approximately 50 countries.