PITTSBURGH, Feb. 13, 2014-- GNC Holdings, Inc. (NYSE: GNC)
(the "Company"), a leading global specialty retailer of health and
wellness products, today reported its financial results for the quarter
and year-to-date period ended December 31, 2013.
In
addition to presenting the Company's financial results in conformity
with U.S. generally accepted accounting principles ("GAAP"), the Company
is also presenting results on an "adjusted" basis to exclude the impact
of certain expenses related to the Company's secondary offerings in the
first, third and fourth quarters of 2012 (each, an "Offering"),
incremental term loan and re-pricings ("Term Loan Transactions") in the
third and fourth quarters of 2012 and fourth quarter of 2013, and supply
chain transition ("Transportation Network Transition") in the fourth
quarter of 2013. For more information, see the attached reconciliations
of non-GAAP financial measures.
Fourth Quarter Performance
For the fourth quarter of 2013, the Company reported consolidated revenue of $613.7 million, an increase of 8.6% over consolidated revenue of $565.0 million
for the fourth quarter of 2012. Revenue increased in each of the
Company's segments: retail by 7.8%, franchise by 9.4%, and
manufacturing/wholesale by 13.3%.
Same
store sales increased 5.0% in domestic company-owned stores (including
GNC.com sales) in the fourth quarter of 2013 representing the Company's
34th consecutive quarter of positive same store sales growth. In
domestic franchise locations, same store sales increased 3.3%.
For the fourth quarter of 2013, the Company reported GAAP net income of $47.7 million, compared to $47.4 million for the fourth quarter of 2012. GAAP net income for the fourth quarter of 2013 included non-recurring expenses totaling $12.2 million associated with the Transportation Network Transition, and $8.3 million
associated with the Term Loan Transactions. Excluding these
non-recurring expenses and the related tax impact, adjusted net income
for the fourth quarter of 2013 increased $10.8 million to $60.6 million, 21.7% over adjusted net income of $49.8 million for the fourth quarter of 2012. Adjusted diluted earnings per share were $0.63 for the fourth quarter of 2013, a 26.0% increase over adjusted diluted earnings per share of $0.50 for the fourth quarter of 2012.
In the fourth quarter of 2013, the Company's effective tax rate was 28.5%, reflecting a total of $4.7 million in net discrete tax benefits related primarily to the reduction of certain deferred tax liabilities and reserves.
Joe Fortunato,
Chairman, President & CEO, said, "Despite the challenging retail
environment, our business performed well, generating solid top and
bottom line growth in the quarter. This culminated in a strong year
where we delivered a 22.3% increase in adjusted earnings per share and
returned more than $350 million to
shareholders, all the while making significant investments in the
business which allows us to maintain growth momentum and to capitalize
on our industry growth, optimize our customer base, and position the
Company for new growth opportunities."
International Expansion
The Company has reached a master franchise agreement with Rusvit for its market entry into Russia. Rusvit - headquartered in Moscow - is lead by founder and Chairman Alex Kovaler, who has been instrumental in building successful consumer businesses in Russia, including Wendy's, Nathan's and RC Cola. Beginning in 2014, a GNC presence will be established initially in Moscow with stores, kiosks and store-within-a-store locations with premier retailers.
Fourth Quarter Segment Operating Performance
For the fourth quarter of 2013, retail segment revenue grew 7.8% to $443.5 million, compared to $411.5 million for the fourth quarter of 2012, driven primarily by a 5.0% same store sales increase, the addition of $6.6 million from DiscountSupplements.com (UK) – which was acquired on October 2, 2013 - and 154 net new stores since the end of the fourth quarter of 2012. Operating income decreased by 1.0%, from $69.4 million to $68.6 million,
and was 15.5% of segment revenue for the fourth quarter 2013, compared
to 16.9% for the fourth quarter of 2012. Operating income was
negatively impacted primarily by planned gross product margin
investments and lower Gold Card revenue recognition related to the
Member Pricing rollout, and incremental promotions initiated to
effectively react to the challenging retail environment in November and
December.
For the fourth quarter of 2013, franchise segment revenue grew 9.4% to $103.1 million, compared to $94.3 million
for the fourth quarter of 2012, driven primarily by increased wholesale
product sales and royalty income in both domestic and international
franchise operations. Operating income increased 17.7%, from $33.4 million to $39.3 million,
and was 38.1% of segment revenue for the fourth quarter of 2013,
compared to 35.4% for the fourth quarter of 2012. The increase in
operating income percentage was driven by higher gross profit margin.
For the fourth quarter of 2013, manufacturing/wholesale segment revenue, excluding intersegment revenue, increased 13.3% to $67.1 million, compared to $59.2 million for the fourth quarter of 2012. Operating income increased 24.8% from $22.3 million to $27.8 million
and was 41.5% of segment revenue for the fourth quarter of 2013
compared to 37.7% for the fourth quarter of 2012. The increase in
operating income percentage was driven primarily by a higher mix of
proprietary product sales.
Total operating income for the fourth quarter of 2013 was $86.3 million, as compared to $87.5 million for the fourth quarter of 2012. Fourth quarter 2013 operating income included $12.2 million in costs associated with the Transportation Network Transition.
Full Year Performance
For full year 2013, the Company reported consolidated revenue of $2,630.3 million, an increase of 8.2% over consolidated revenue of $2,430.0 million
for the full year 2012. Revenue increased in each of the Company's
segments: retail and franchise both by 7.9%, and manufacturing/wholesale
by 11.1%.
For the full year 2013, the Company reported GAAP net income of $265.0 million, compared to $240.2 million for the full year 2012. The Company reported adjusted net income of $278.0 million for the full year 2013, 10.6% of revenue and a 13.8% increase compared to $244.2 million
for the full year 2012, after adjusting for expenses related to the
Offerings, Term Loan Transactions and Transportation Network
Transition. Adjusted diluted earnings per share were $2.85 for the full year 2013, a 22.3% increase over 2012 adjusted results of $2.33.
For
the full year 2013, the Company opened 149 net new domestic
company-owned stores, 192 net new international franchise locations, 63
net new domestic franchise locations, 34 net new Rite Aid franchise
store-within-a-store locations, 5 net new company-owned stores in Canada, and 2 new company-owned stores in China. The Company now operates 8,593 stores worldwide.
For the full year 2013, the Company generated net cash from operating activities of $238.1 million, increased its term loan by $252.5 million, incurred capital expenditures of $50.2 million, repurchased $310.6 million in common stock, paid $57.4 million in cash dividends on our common stock and used $27.6 million for the acquisition of Discount Supplements. The Company generated $186.3 million
in free cash flow (which it defines as cash provided by operating
activities less cash used in investing activities excluding
acquisitions) and at December 31, 2013, the Company's cash balance was $226.2 million.
Capital Structure
The Company's Board of Directors declared a cash dividend of $0.16
per share of its common stock for the first quarter of 2014,
representing a 6.7% increase over its prior quarterly dividend. The
dividend will be payable on or about March 28, 2014 to stockholders of record at the close of business on March 14,
2014. The Company currently intends to pay regular quarterly
dividends; however, the declaration of such future dividends is subject
to the final determination of the Company's Board of Directors.
In the fourth quarter of 2013, the Company repurchased $72.2 million in shares of its common stock. The Company has $440.7 million remaining on its previously authorized $500 million
share repurchase authorization. Additional details of the program can
be found in the section entitled Forward-Looking Statements Involving
Known and Unknown Risks and Uncertainties.
At the end of 2013, diluted shares outstanding were approximately 94.8 million.
Current 2014 Outlook
The
Company's initial outlook for 2014 is based on current expectations and
includes "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934.
Below is the Company's initial outlook for 2014:
- Consolidated earnings per diluted share ("EPS") of approximately $3.18 - $3.24 for the full year 2014, a 12% - 14% increase over 2013 Adjusted EPS of $2.85.
- A high single digit increase in consolidated revenue for the full year 2014. This is based on achieving a domestic company-owned same store sales result – including the impact of GNC.com – of flat for the first quarter of 2014 reflecting a very challenging January and February retail environment, and a mid single digit increase for the remainder of 2014.
- Tax rate of approximately 36.5% – 37% for the full year 2014.
- Capital expenditures of approximately $70 million for the full year 2014, including expenditures for the Company's previously announced fourth distribution center.
- Depreciation & amortization of approximately $56 million, combined, for the full year 2014.
- New store expectations for the full year 2014: approximately 200 total net new domestic retail locations (including both company owned and franchised stores), approximately 200-225 net new international locations, and approximately 45 net new GNC-Rite Aid store-within-a-store locations.
About Us
GNC Holdings, Inc., headquartered in Pittsburgh, PA,
is a leading global specialty retailer of health and wellness products,
including vitamins, minerals, and herbal supplement products, sports
nutrition products and diet products, and trades on the New York Stock
Exchange under the symbol "GNC."
The
Company – which is dedicated to helping consumers Live Well – has a
diversified, multi-channel business model and derives revenue from
product sales through company-owned retail stores, domestic and
international franchise activities, third party contract manufacturing,
e-commerce and corporate partnerships. GNC's broad and deep product
mix, which is focused on premium, value-added nutritional products, is
sold under GNC proprietary brands, including Mega Men®, Ultra Mega®,
Total Lean™, Pro Performance®, Pro Performance® AMP, Beyond Raw®, and
under nationally recognized third party brands. As of December 31, 2013, GNC has more than 8,500 locations, of which more than 6,300 retail locations are in the United States
(including 1,012 franchise and 2,215 Rite Aid franchise
store-within-a-store locations) and franchise operations in more than 50
countries (including distribution centers where retail sales are made).
Conference Call
GNC has scheduled a conference call and webcast to report its fourth quarter 2013 financial results on February 13, 2014 at 5:00 pm Eastern time.
To listen to this call, dial 1-877-232-1784 inside the U.S. and
706-679-4448 outside the U.S. The conference identification number for
all participants is 77376767. A webcast of the call will also be
available on www.gnc.com in the Investor Relations section under "About GNC" through March 14, 2014.
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 our
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 our products; costs of compliance and our failure
to comply with new and existing governmental regulations governing our
products, including, but not limited to, proposed dietary supplement
legislation and regulations; limitations of or disruptions in our
manufacturing system or losses of manufacturing certifications;
disruptions in our distribution network; or failure to successfully
execute our growth strategy, including any inability to expand our
franchise operations or attract new franchisees, any inability to expand
our company owned retail operations, any inability to grow our
international footprint, any inability to expand our e-commerce
businesses, or any inability to successfully integrate businesses that
we acquire. 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, 2012 and
subsequent our Quarterly Reports on Form 10-Q filed with the
Securities and Exchange Commission.
The
Company is authorized to repurchase from time to time shares of its
outstanding common stock on the open market or in privately negotiated
transactions. The Company may finance any repurchases with cash,
potential financing transactions, or a combination of the foregoing.
The timing and amount of stock repurchases will depend on a variety of
factors, including the market conditions as well as corporate and
regulatory considerations. The share repurchase program may be
suspended, modified or discontinued at any time and the Company has no
obligation to repurchase any amount of its common stock under the
program. The Company intends to make all repurchases in compliance with
applicable regulatory guidelines and to administer the plan in
accordance with applicable laws, including Rule 10b-18 and, as
applicable, Rule 10b-5 of the Securities Exchange Act of 1934, as
amended.
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
adjusted net income, adjusted diluted earnings per share 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. Adjusted net
income, adjusted diluted earnings per share and free cash flow are not
measurements of the Company's financial performance under GAAP and
should not be considered as alternatives to net income, operating
income, or any other performance measures derived in accordance with
GAAP, or as an alternative to GAAP cash flow from operating activities,
as a measure of the Company's profitability or liquidity. For more
information, see the attached reconciliations of non-GAAP financial
measures.
By press release
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