<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the twelve weeks ended April 27, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-19592
GENERAL NUTRITION COMPANIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 04-3056351
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
921 Penn Avenue 15222
Pittsburgh, Pennsylvania (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (412) 288-4600
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
As of June 7, 1996, the number of shares outstanding of the registrant's
common stock was 85,527,922.
<PAGE> 2
GENERAL NUTRITION COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 27, February 3,
(In thousands, except share data) 1996 1996
- --------------------------------------------------------------------------------------------------------------------
ASSETS (unaudited)
<S> <C> <C>
Current Assets:
Restricted Cash $ 953 $ 961
Receivables 45,055 38,292
Inventories 162,247 147,723
Deferred taxes 9,647 9,647
Other current assets 15,431 13,699
-------- --------
Total current assets 233,333 210,322
Property, plant and equipment, net 151,533 145,969
Other assets 32,035 28,515
Deferred financing fees, net of accumulated amortization of $1,022 and $889 3,544 3,141
Goodwill, net of accumulated amortization of $48,888 and $46,667 295,814 295,865
-------- --------
$716,259 $683,812
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 99,404 $ 75,905
Accrued salaries, wages, vacations and related taxes 13,448 18,225
Accrued income taxes 17,536 4,465
Accrued interest 595 492
Other current liabilities 37,097 36,127
Redeemable preferred stock 953 961
Long-term debt, current portion 1,215 21,466
-------- --------
Total current liabilities 170,248 157,641
Long-term debt 157,846 197,006
Deferred taxes on income 2,508 2,508
Commitments and contingencies -- --
Shareholders' Equity:
Common Stock, $.01 par value:
Authorized 200,000,000 shares, issued and outstanding
90,006,371 shares at April 27, 1996 and
87,744,019 shares at February 3, 1996 900 877
Additional paid-in capital 293,348 253,521
Stock options outstanding 3,816 4,769
Currency translation adjustment (177) (102)
Accumulated earnings 87,770 67,592
-------- --------
385,657 326,657
-------- --------
$716,259 $683,812
======== ========
</TABLE>
Notes to Consolidated Financial Statements are an integral part of these
statements.
2
<PAGE> 3
GENERAL NUTRITION COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
- -------------------------------------------------------------------------------
<TABLE>
12 Weeks Ended
-------------------------
April 27, April 29,
1996 1995
--------- ---------
<S> <C> <C>
Net revenue $230,167 $192,002
Cost of sales, including costs of
warehousing, distribution and
occupancy 141,332 116,059
Selling, general and administrative 49,386 42,748
Amortization of goodwill 2,221 1,911
-------- --------
Operating earnings 37,228 31,284
Interest expense 2,948 5,362
-------- --------
Earnings before income taxes 34,280 25,922
Income taxes 14,102 10,821
-------- --------
Net earnings $ 20,178 $ 15,101
======== ========
Primary earnings per share $ 0.22 $ 0.19
======== ========
Average number of shares outstanding 92,206 80,342
======== ========
Fully diluted earnings per share $ 0.22 $ 0.18
======== ========
Average number of shares outstanding 92,210 88,538
======== ========
</TABLE>
3
<PAGE> 4
GENERAL NUTRITION COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
12 Weeks 12 Weeks
Ended Ended
April 27, April 29,
(In thousands) 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 20,178 $ 15,101
-------- --------
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 9,176 6,871
Amortization of deferred financing fees 133 133
Other, principally loss on disposal of fixed assets 1,195 75
Change in operating assets and liabilities:
(Increase) decrease in receivables (6,810) 675
(Increase) decrease in inventories (14,493) 99
Increase in accrued taxes 13,071 10,560
Increase in other assets (6,337) (4,878)
Increase in accounts payable and accrued liabilities 24,461 10,432
-------- --------
Total adjustments 20,396 23,967
-------- --------
Net cash provided by operating activities 40,574 39,068
-------- --------
Cash flows from investing activities:
Capital expenditures (13,681) (10,737)
Increase in franchisee notes receivable (1,533) (1,016)
Payments for store acquisitions (2,216) --
Loan to related party (1,750) --
-------- --------
Net cash used in investing activities (19,180) (11,753)
-------- --------
Cash flows from financing activities:
Net payments on revolving credit facility (24,999) (21,300)
Retirement of long-term debt (34,001) (4,000)
Decrease in capital lease obligations (411) (2,275)
Redemption of redeemable preferred stock (8) (62)
Net proceeds from issuance of common stock 38,628 260
Increase in deferred financing fees (536) --
-------- --------
Net cash used in financing activities (21,327) (27,377)
Effect of exchange rate changes on cash (75) --
-------- --------
Net decrease in cash (8) (62)
Beginning balance, cash 961 1,095
-------- --------
Ending balance, cash $ 953 $ 1,033
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 2,724 $ 5,355
Income taxes $ 598 $ 81
</TABLE>
Notes to Consolidated Financial Statements are an integral part of these
statements.
4
<PAGE> 5
GENERAL NUTRITION COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF REPORTING. In the opinion of General Nutrition Companies, Inc.
(the "Company"), the information furnished includes all adjustments
necessary for fair presentation of the consolidated financial position of
the Company at April 27, 1996 and February 3, 1996 and the results of
operations for the twelve weeks ended April 27, 1996 and April 29, 1995.
All such adjustments are of a normal and recurring nature.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted
accounting principles have been either condensed or omitted. It is
suggested that these consolidated financial statements be read in
conjunction with the financial statements and footnotes included in the
Company's 1995 Annual Report and Annual Report on Form 10-K for the
fiscal year ended on February 3, 1996 filed with the Securities and
Exchange Commission. The Consolidated Financial Statements include the
accounts of the Company and its wholly-owned subsidiaries after the
elimination of intercompany balances and transactions. The results of
operations and cash flows for the twelve weeks ended April 27, 1996 are
not necessarily indicative of the operating results for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2. ACCOUNTING CHANGES. In March 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," which establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used,
and for long-lived assets and certain identifiable intangibles to be
disposed of. This statement is effective beginning in 1996. The Company
implemented SFAS No. 121 in the first quarter. Neither the Company's
financial position nor the results of its operations were materially
affected by the implementation. The Company will continue to analyze, on
a regular basis, its assets for recoverability. In particular, the
assets acquired through the purchase of Nature Food Centres, Inc. in 1994
have not met management's profit expectations. During the first quarter,
management implemented changes in personnel and marketing strategy aimed
at improving the performance of these stores. Based upon current
operating projections which give effect to these changes, no impairment
exists relative to these assets. Management will continue to monitor the
performance of the stores and evaluate the future use and recoverability
of these assets.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation." This statement is
effective beginning in 1996. The new standard defines a fair value
method of accounting for stock options and similar equity instruments.
Pursuant to the new standard, companies are encouraged, but not required,
to adopt the fair value method of accounting for employee stock-based
transactions. Companies are also permitted to continue to account for
such transactions under Accounting Principles Board Opinion ("APBO") No.
25, "Accounting for Stock Issued to Employees," but would be required to
disclose in a note to the financial statements pro forma net income and
5
<PAGE> 6
earnings per share as if the Company had applied the new method of
accounting. In the first quarter, the Company elected not to adopt the
fair value method of accounting for employee stock-based transactions and
will continue to account for such transactions under the provisions of
APBO No. 25.
3. CASH. The Company utilizes a cash management system under which a book
balance cash overdraft exists for the Company's primary disbursement
accounts. This overdraft represents uncleared checks in excess of cash
balances in bank accounts. The Company's funds are borrowed on an as
needed basis to pay for clearing checks. At April 27, 1996, and February
3, 1996, cash overdrafts of $17.6 million and $8.9 million respectively,
were included in accounts payable. At April 27, 1996, the Company had
$240.4 million available on its revolving credit facility after excluding
$3.3 million restricted for letters of credit.
4. RECLASSIFICATIONS. Certain amounts in previously issued financial
statements have been reclassified to conform to the 1996 presentation.
5. INVENTORIES. Inventories consist of the following:
<TABLE>
<CAPTION>
April 27, February 3,
1996 1996
-------- ---------
(In thousands)
<S> <C> <C>
Product ready for sale $133,259 $122,666
Unpackaged bulk product and raw materials 25,601 21,678
Packaging supplies 3,387 3,379
-------- --------
$162,247 $147,723
======== ========
</TABLE>
6. LEGAL. Certain Company subsidiaries are named as defendants in legal
actions brought in federal and state courts by certain parties seeking
damages resulting from the ingestion of certain products containing
manufactured L-Tryptophan. No provision has been made in the financial
statements for any loss that may result to the Company as a result of
these actions. See Note 13 in the Company's Annual Report on Form 10-K
for the fiscal year ended on February 3, 1996.
7. SIGNIFICANT AND SUBSEQUENT EVENTS. In February 1996, the Company made a
$34.0 million payment on the outstanding bank debt, utilizing proceeds
from the sale of the Company's common stock. At June 6, 1996,
subsequent to the close of the quarter, the Company had used
approximately $65.9 million to repurchase 4.465 million shares of the
Company's common stock and has also sold European put options to
purchase an additional 2.0 million shares of its common stock at an
average price of $17.75 per share in October of 1996.
6
<PAGE> 7
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
REVENUE. Consolidated revenue for the twelve weeks ended April 27,
1996 was $230.2 million, an increase of $38.2 million or 19.9% compared with
the same period in 1995. The total number of system-wide stores, which
includes Company-owned and franchise stores, increased to 2,652 and system
wide retail sales increased 17.8% to $250.4 million in the first quarter of
1996. Below is a comparison of revenue for each of the Company's business
segments for the twelve week periods:
<TABLE>
<CAPTION>
12 Weeks % of 12 Weeks % of
Ended Total Ended Total
April 27, 1996 Revenue April 29, 1995 Revenue
-------------- ------- -------------- -------
(In Thousands)
<S> <C> <C> <C> <C>
RETAIL $169,867 73.8% $152,047 79.2%
FRANCHISING 43,287 18.8 31,157 16.2
MANUFACTURING 17,013 7.4 8,798 4.6
-------- ----- -------- -----
TOTAL $230,167 100.0% $192,002 100.0%
======== ===== ======== =====
</TABLE>
RETAIL REVENUE. Revenue in the retail segment increased 11.7% in the
first twelve weeks of 1996 as compared with the same period in 1995. The
increase of $17.8 million was the result of the increase in the number of
operating locations from 1,400 at April 29, 1995 to 1,644 at April 27, 1996,
and comparable store sales increases of 3.3% for the quarter. Stores purchased
through the acquisition of Nature Food Centres, Inc. (NFC) in August 1994 that
were not converted to the General Nutrition Center (GNC) format are not
included in the comparable store sales. At April 27, 1996, there were 99 NFC
locations, located primarily in the northeastern United States, still in
operation that are not performing to management expectation in the current NFC
format. At April 27, 1996, management determined that 10 of the remaining NFC
locations will be converted to the GNC format. Additionally, during the first
quarter, management implemented changes in personnel and marketing strategy
aimed at improving the performance of these stores. Management will continue
to monitor the performance of the stores and evaluate the future use and
recoverability of these assets.
FRANCHISING REVENUE. Revenue in the franchising segment increased
38.9% in the first quarter of 1996 when compared to the same period in 1995 as
the number of operating franchises grew to 1,008 at April 27, 1996 versus 793
at April 29, 1995. Franchising revenue is generated primarily from the sale of
products to franchisees at wholesale prices and royalty income generated from
the franchisee retail sales. These two components represented 93.2% and 93.3%
of total franchising revenue in the first quarter of 1996 and 1995
respectively. Also included in revenue are franchise fees, interest income on
franchise notes receivable, and revenue generated from the sales of existing
stores to franchisees. Franchisee retail comparable store sales increased
12.7% for the quarter when compared with the same period in 1995.
7
<PAGE> 8
The change in the number of franchise locations and a breakdown of domestic and
international locations is as follows:
<TABLE>
<CAPTION>
Domestic International Total
<S> <C> <C> <C>
At February 3, 1996 848 111 959
Additions 61 4 65
Closures -- (1) (1)
Company purchases (15) -- (15)
--- --- -----
At April 27, 1996 894 114 1,008
=== === =====
</TABLE>
At April 27, 1996, there were 237 domestic franchises awarded that
are not yet open and development agreements to open 5 additional stores
domestically. In addition, at April 27, 1996, there were development
agreements to open 408 franchise stores internationally.
MANUFACTURING REVENUE. Total revenue from the manufacturing segment,
including intersegment sales both from the United States and $2.8 million from
the United Kingdom, increased 42.0% in the first quarter of 1996 compared with
the same period in 1995. Third party sales, including $2.6 million from the
U.K. facility, increased 93.4% in the first quarter compared with the same
period in 1995 as orders for commodity soft-gelatin capsules increased,
especially for Vitamin E products. Intersegment sales, which are eliminated
from consolidated revenue, increased 25.5% for the first quarter of 1996 when
compared with the same period in 1995, to meet the continuing increased
product requirements generated as a result of the Company's expansion
programs.
ANALYSIS OF CONSOLIDATED OPERATING COSTS AND EXPENSES
<TABLE>
<CAPTION>
12 Weeks 12 Weeks
Ended Ended
April 27, April 29,
1996 1995
--------- ---------
(In thousands)
<S> <C> <C>
Cost of sales, including costs of warehousing,
distribution and occupancy $141,332 $116,059
Percent of net revenue 61.4% 60.4%
Selling, general and administrative $51,607 $44,659
Percent of net revenue 22.4% 23.3%
Operating earnings $37,228 $31,284
Percent of net revenue 16.2% 16.3%
</TABLE>
Cost of sales, including costs of warehousing, distribution and
occupancy increased as a percentage of net revenue by 1.0% in the first quarter
of 1996 when compared with the same period in 1995. This increase was
primarily the result of increases in occupancy costs as a percentage of retail
revenue and an increase in franchise revenue in the quarter as a percentage of
total consolidated net revenue, as franchise margins are significantly lower
than margins in the retail segment.
Selling, general and administrative costs declined as a percentage of
net revenue by approximately 0.9% as the Company continued to leverage its
increased sales in the areas of salaries, advertising and other operating
supplies.
8
<PAGE> 9
NON-OPERATING INCOME (EXPENSE) ANALYSIS
Interest expense decreased to $2.9 million or 45.0% in the first
quarter of 1996 when compared with the same period in 1995. The decrease was
the result of a reduction in long term debt through the conversion of the
Company's junior subordinated debt into common stock in the second quarter of
1995 and a $34.0 million payment on the outstanding bank debt, utilizing
proceeds from the sale of the Company's common stock in February 1996.
REVIEW OF FINANCIAL CONDITION
ANALYSIS OF LIQUIDITY AND CAPITAL RESOURCES
In the twelve weeks ended April 27, 1996, the Company continued its
strong performance in each of its three business segments. The Company
continued to utilize funds, both internally generated and amounts available
under its revolving credit facility, to expand its store base. In the first
twelve weeks, 111 new stores were opened, of which 58 were Company-owned, and 53
were franchises opened in the United States. Additionally, 4 stores opened in
international markets.
The Company's first quarter cash flows from operating, investing and
financing activities as reflected in the Consolidated Statements of Cash Flows
are summarized as follows:
<TABLE>
<CAPTION>
12 Weeks 12 Weeks
Ended Ended
April 27, April 29,
1996 1995
--------- ---------
(In thousands)
<S> <C> <C>
Cash provided by (used in)
Operating activities . . . . . . . . . . . . . $ 40,574 $ 39,068
Investing activities . . . . . . . . . . . . . (19,180) (11,753)
Financing activities . . . . . . . . . . . . . (21,327) (27,377)
</TABLE>
OPERATING ACTIVITIES. Cash provided by operating activities improved
to $40.6 million or 3.9% in the first quarter of 1996 when compared with the
same period in 1995. Net income adjusted for non-cash expenses increased 38.3%
for the 12 weeks ended April 27, 1996 compared with the same period in 1995.
This improvement was offset by increases in accounts receivable, primarily from
product sales to the Company's franchisees, and inventory purchased to provide
for the requirements of the continuing store expansion programs, both domestic
and international.
INVESTING ACTIVITIES. The primary use of funds in each of the reported
periods, excluding the funds used in financing activities, was for capital
expenditures. The Company incurred capital expenditures of approximately $13.7
million and $10.7 million for the first twelve weeks of 1996 and 1995
respectively. The capital expenditures were used primarily for the Company's
new store expansion program and expansion at the warehousing and manufacturing
facilities. The Company has planned capital expenditures of approximately $66.0
million for 1996.
The Company also added to its Company-owned store base through
acquisitions of independently-owned stores and the repurchase of existing
franchise locations. In the first quarter of 1996, 18 stores were acquired at
a cost of $2.2 million.
Additionally, the Company increased the loan to its related party in
the joint operations of an office building in Pittsburgh, Pennsylvania by $1.75
million in the first quarter.
9
<PAGE> 10
Receivables from franchise notes increased by $1.5 million in the first
twelve weeks of 1996, as the number of domestic operating franchise locations
increased to 894 from 848 at February 3, 1996.
The funds required for the Company's future investing activities will
come from a number of sources including operating cash flow, the revolving
credit facility, and repayment of franchisee notes.
FINANCING ACTIVITIES. In March of 1996, the Company amended and
restated its credit agreement, increasing amounts available on its revolving
credit facility to $400 million and eliminating the bank term loan and
associated repayment amortization requirements. The new facility as amended in
June 1996, allows for $150 million to be used to repurchase the Company's
common stock as appropriate. At April 27, 1996, the Company had $240.4 million
available on its revolving credit facility. At June 6, 1996, subsequent to the
close of the quarter, the Company had used approximately $65.9 million to
repurchase 4.465 million shares of the Company's common stock at an average
price of $14.76 per share. The Company has also sold European put options to
purchase an additional 2.0 million shares of its common stock at an average
price of $17.75 per share in October of 1996.
In February 1996, the Company repaid $34.0 million of the long term
debt with proceeds from the sale of approximately 1.6 million shares of its
common stock at a net price of approximately $20.75 per share.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(11.1) Computation of net earnings per share is
attached.
(23) Interim review report of the Company's independent
accountants, Deloitte & Touche LLP, for the first
fiscal quarter ended April 27, 1996 is attached.
(23.1) Letter in lieu of consent of the Company's independent
accountants, Deloitte & Touche LLP, for the first
fiscal quarter ended April 27, 1996 is attached.
(27) Financial Data Schedule is attached.
No current reports on Form 8-K were filed during the
twelve-week period ended April 27, 1996.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
GENERAL NUTRITION COMPANIES, INC.
By: /s/ EDWIN J. KOZLOWSKI
----------------------------
Edwin J. Kozlowski
Executive Vice President, Chief
Financial Officer and Principal
Accounting Officer
DATE: June 11, 1996
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENERAL NUTRITION COMPANIES, INC.
By: /s/ EDWIN J. KOZLOWSKI
----------------------------
Edwin J. Kozlowski
Executive Vice President, Chief
Financial Officer and Principal
Accounting Officer
DATE: June 11, 1996
13
<PAGE> 1
EXHIBIT 11.1
GENERAL NUTRITION COMPANIES, INC. AND SUBSIDIARIES
COMPUTATION OF NET EARNINGS PER SHARE
Primary earnings per share is computed by dividing net earnings by the
weighted average number of common shares and common stock equivalents
outstanding. Fully diluted earnings per share further assumes the
issuance of additional shares of common stock and the elimination of tax
effected interest expense for the conversion of convertible debentures.
<TABLE>
<CAPTION>
12 Weeks 12 Weeks
Ended Ended
April 27, April 29,
1996 1995
---------- -----------
(In thousands, except per share data)
<S> <C> <C>
Net earnings available for common shares .................. $ 20,178 $ 15,101
======== ========
Elimination of tax effected interest expense on convertible
debt for fully diluted per share calculations ........... $ -- $ 406
======== ========
Common stock .............................................. 89,563 76,864
Outstanding warrants ...................................... -- 1,366
Outstanding options ....................................... 2,643 2,112
-------- --------
Primary weighted average common shares .................... 92,206 80,342
======== ========
Common stock .............................................. 89,563 76,864
Outstanding warrants ...................................... -- 1,366
Outstanding options ....................................... 2,647 2,112
Conversion of convertible debt into common stock .......... -- 8,196
-------- --------
Fully diluted weighted average common shares .............. 92,210 88,538
======== ========
Primary earnings per share ................................ $ 0.22 $ 0.19
======== ========
Fully diluted earnings per share .......................... $ 0.22 $ 0.18
======== ========
</TABLE>
<PAGE> 1
EXHIBIT 23
INDEPENDENT ACCOUNTANTS' REPORT
To The Board of Directors and Stockholders of
General Nutrition Companies, Inc.
Pittsburgh, Pennsylvania
We have reviewed the accompanying consolidated balance sheet of General
Nutrition Companies, Inc. and subsidiaries as of April 27, 1996 and
the related consolidated statements of operations and cash flows for the
twelve weeks ended April 27, 1996 and April 29, 1995. These financial
statements are the responsibility of the Corporation's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and of making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such consolidated financial statements for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of General Nutrition Companies, Inc.
and subsidiaries as of February 3, 1996, and the related consolidated statements
of operations, stockholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated March 21, 1996, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated balance sheet as of
February 3, 1996 is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
Deloitte & Touche LLP
May 13, 1996
<PAGE> 1
EXHIBIT 23.1
DELOITTE & TOUCHE LLP <Logo>
June 10, 1996
General Nutrition Companies, Inc.
921 Penn Avenue
Pittsburgh, PA 15222
Dear Sirs:
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of General Nutrition Companies, Inc. and subsidiaries for the
twelve weeks ended April 27, 1996 and April 29, 1995, as indicated in our
report dated May 13, 1996; because we did not perform an audit, we expressed
no opinion on that information.
We are aware that our report referred to above, which was included in your
Quarterly Report on Form 10-Q for the quarter ended April 27, 1996, is
incorporated by reference in Registration Statement Nos. 33-58096, 33-68590,
33-93370 and 333-00128 on Form S-8.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
Yours truly,
Deloitte & Touche LLP
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> APR-27-1996
<CASH> 953
<SECURITIES> 0
<RECEIVABLES> 47,740
<ALLOWANCES> 2,685
<INVENTORY> 162,247
<CURRENT-ASSETS> 233,333
<PP&E> 274,604
<DEPRECIATION> 123,071
<TOTAL-ASSETS> 716,259
<CURRENT-LIABILITIES> 170,248
<BONDS> 0
<COMMON> 900
0
0
<OTHER-SE> 384,757
<TOTAL-LIABILITY-AND-EQUITY> 716,259
<SALES> 223,613
<TOTAL-REVENUES> 230,167
<CGS> 141,332
<TOTAL-COSTS> 141,332
<OTHER-EXPENSES> 51,607
<LOSS-PROVISION> 236
<INTEREST-EXPENSE> 2,948
<INCOME-PRETAX> 34,280
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