UNITED STATES

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 quarterly period ended ~~September 30, 2018~~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 .

Commission File Number: 001-35113

GNC Holdings, Inc.

(Exact name of registrant as specified in its charter)



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)

Registrant’s telephone number, including area code: (412) 288-4600

Securities registered pursuant to Section 12(b) of the Act:



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

Indicate by 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. [ X ] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

[ X ] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act:



Large accelerated filer [ X ]	Accelerated filer [ X]	Non-accelerated filer [ ]	Smaller reporting company [ ]	Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[ ] Yes

[ X ] No

As of ~~October 31, 2018,~~April 25, 2019, there were ~~83,884,711~~83,969,311 outstanding shares of Class A common stock, par value $0.001 per share (the “common stock”), of GNC Holdings, Inc.

TABLE OF CONTENTS



		PAGE
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Consolidated Balance Sheets as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018	1
	Unaudited Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	2
	Unaudited Consolidated Statements of Comprehensive ~~(Loss)~~ Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	3
	Unaudited Consolidated Statements of Stockholders’ Deficit for the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	4
	Unaudited Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	5
	Unaudited Supplemental Cash Flow Information as of ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	6
	Condensed Notes to Unaudited Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2826
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40
~~Item 4.~~	~~Controls and Procedures~~Signatures	40
~~PART II - OTHER INFORMATION~~
~~Item 1.~~	~~Legal Proceedings~~	41
~~Item 1A.~~	~~Risk Factors~~	42
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	43
~~Item 3.~~	~~Defaults Upon Senior Securities~~	43
~~Item 4.~~	~~Mine Safety Disclosures~~	43
~~Item 5.~~	~~Other Information~~	43
~~Item 6.~~	~~Exhibits~~	44
~~Signatures~~		45

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

GNC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(unaudited)

(in thousands)


	September 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Current assets:
Cash and cash equivalents	$	33,348		$	64,001		$	137,117		$	67,224
Receivables, net	131,951			126,650			119,352			127,317
Inventory (Note 4)	489,639			485,732			410,951			465,572
Forward contracts for the issuance of convertible preferred stock							—			88,942
Prepaid and other current assets	76,536			66,648			17,528			55,109
Total current assets	731,474			743,031			684,948			804,164
Long-term assets:
Goodwill	140,844			141,029			79,111			140,764
Brand name	324,400			324,400			300,720			300,720
Other intangible assets, net	94,461			99,715			75,463			92,727
Property, plant and equipment, net (Note 5)	159,136			186,562
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	29,272			25,026			35,062			34,380
Total long-term assets	748,113			776,732			1,085,189			723,686
Total assets	$	1,479,587		$	1,519,763		$	1,770,137		$	1,527,850
Current liabilities:
Accounts payable	$	159,100		$	153,018		$	174,682		$	148,782
Current debt (Note 6)	204,480			—
Current portion of long-term debt (Note 5)							—			158,756
Current lease liabilities (Note 8)							117,093			—
Deferred revenue and other current liabilities	121,475			114,081			107,770			120,169
Total current liabilities	485,055			267,099			399,545			427,707
Long-term liabilities:
Long-term debt (Note 6)	1,040,646			1,297,023
Long-term debt (Note 5)							888,353			993,566
Deferred income taxes	43,090			56,060			15,304			39,834
Lease liabilities (Note 8)							401,617			—
Other long-term liabilities	81,479			85,502			43,007			82,249
Total long-term liabilities	1,165,215			1,438,585			1,348,281			1,115,649
Total liabilities	1,650,270			1,705,684			1,747,826			1,543,356
Contingencies (Note 8)
Contingencies (Note 9)

Mezzanine equity:
Convertible preferred stock (Note 10)							211,395			98,804

Stockholders’ deficit:
Common stock	130			130			130			130
Additional paid-in capital	1,006,121			1,001,315			1,009,041			1,007,827
Retained earnings	554,797			543,814			538,439			613,637
Treasury stock, at cost	(1,725,349		)	(1,725,349		)	(1,725,349		)	(1,725,349		)
Accumulated other comprehensive loss	(6,382		)	(5,831		)	(11,345		)	(10,555		)
Total stockholders’ deficit	(170,683		)	(185,921		)	(189,084		)	(114,310		)
Total liabilities and stockholders’ deficit	$	1,479,587		$	1,519,763
Total liabilities, mezzanine equity and stockholders’ deficit							$	1,770,137		$	1,527,850

The accompanying notes are an integral part of the Consolidated Financial Statements.

GNC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(unaudited)

(in thousands, except per share amounts)



	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 September 30, Nine months ended September 30,
2018 2017 2018 2017

Revenue (Note 3)
$ 580,185
$ 612,953
$ 1,805,662
$ 1,918,139
Cost of sales, including warehousing, distribution and occupancy 395,483
411,661
1,206,351
1,277,202
Gross profit 184,702
201,292
599,311
640,937
Selling, general, and administrative 149,903
156,051
469,164
481,618
Long-lived asset impairments 14,556
3,861
14,556
23,217
Other loss (income), net 282
1,579
357
(40 )
Operating income 19,961
39,801
115,234
136,142
Interest expense, net (Note 6) 35,732
16,339
90,448
48,300
Loss on debt refinancing (Note 6) —
—
16,740
—
(Loss) income before income taxes (15,771 ) 23,462
8,046
87,842
Income tax (benefit) expense (Note 11) (7,181 ) 2,406
(2,895 ) 25,398
Net (loss) income $ (8,590 ) $ 21,056
$ 10,941
$ 62,444
(Loss) earnings per share (Note 9):

Basic $ (0.10 ) $ 0.31
$ 0.13
$ 0.91
Diluted $ (0.10 ) $ 0.31
$ 0.13
$ 0.91
Weighted average common shares outstanding (Note 9):

Basic 83,412
68,354
83,326
68,296
Diluted 83,412
68,569
83,431
68,411

The accompanying notes are an integral part of the Consolidated Financial Statements.

GNC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive ~~(Loss)~~ Income

(unaudited)

(in thousands)

Three months ended September 30, Nine months ended September 30,
2018 2017 2018 2017

Net (loss) income $ (8,590 ) $ 21,056
$ 10,941
$ 62,444
Other comprehensive income (loss):

Net change in interest rate swaps:
Periodic revaluation of interest rate swap, net of tax (expense) benefit of ($0.4 million) and $0.1 million 963
—
(212 ) —
Reclassification adjustment for interest recognized in Consolidated Statement of Operations, net of tax expense of $0.3 million 610
—
623
—
Net change in unrecognized gain on interest rate swaps, net of tax 1,573
—
411
—
Foreign currency translation gain (loss) 834
1,705
(962 ) 3,305
Other comprehensive income (loss) 2,407
1,705
(551 ) 3,305
Comprehensive (loss) income $ (6,183 ) $ 22,761
$ 10,390
$ 65,749



	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

The accompanying notes are an integral part of the Consolidated Financial Statements.

GNC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Deficit

(unaudited)

(in thousands)


	Common Stock				Treasury Stock				Additional Paid-in Capital				Retained Earnings		Accumulated Other Comprehensive Loss				Total Stockholders’ Deficit			Common Stock						Treasury Stock				Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss				Total Stockholders’ Deficit
	Class A											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	)
	Shares		Dollars					Treasury Stock				Additional Paid-in Capital				Retained Earnings							Accumulated Other Comprehensive Loss				Total Stockholders’ Deficit
Balance at December 31, 2017	83,567		$	130							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			—		—				—			—			42				—				42
Restricted stock awards	397		—		—					—				—			—				—			149			—			—				—			—			—				—
Minimum tax withholding requirements	(79	)	—		—				(296		)		—		—				(296		)	(54	)		—			—				(223		)	—			—				(223		)
Stock-based compensation	—		—		—				5,102				—		—				5,102			—			—			—				1,512			—			—				1,512
Balance at September 30, 2018	83,885		$	130	$	(1,725,349	)		$	1,006,121			$	554,797	$	(6,382	)		$	(170,683	)

Balance at December 31, 2016	68,399		$	114	$	(1,725,349	)		$	922,687			$	693,682	$	(8,697	)		$	(117,563	)
Comprehensive income	—		—		—				—				62,444		3,305				65,749
Dividend forfeitures on restricted stock	—		—		—				—				285		—				285
Restricted stock awards	636		1		—				—				—		—				1
Minimum tax withholding requirements	(32	)	—		—				(252		)		—		—				(252		)
Stock-based compensation	—		—		—				6,025				—		—				6,025
Balance at September 30, 2017	69,003		$	115	$	(1,725,349	)		$	928,460			$	756,411	$	(5,392	)		$	(45,755	)
Balance at March 31, 2018																						83,662			$	130		$	(1,725,349	)		$	1,002,604		$	550,046		$	(6,677	)		$	(179,246	)

The accompanying notes are an integral part of the Consolidated Financial Statements.

GNC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)


	Nine months ended September 30,						Three months ended March 31,
	2018			2017			2019			2018
Cash flows from operating activities:
Net income	$	10,941		$	62,444
Adjustments to reconcile net income to net cash provided by 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	36,002			43,688			10,190			12,105
Income from equity investments							(955		)	—
Amortization of debt costs	14,583			9,893			7,988			3,609
Stock-based compensation	5,102			6,025			1,334			1,512
Long-lived asset impairments	14,556			23,217
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	(276		)	(314		)	(21		)	—
Loss on debt refinancing	16,740			—			—			16,740
Third-party fees associated with refinancing	(16,322		)	—			—			(15,753		)
Changes in assets and liabilities:
(Increase) decrease in receivables	(6,080		)	1,204			(12,567		)	11,840
(Increase) decrease in inventory	(5,794		)	45,753
(Increase) in inventory							(6,886		)	(22,766		)
Increase in prepaid and other current assets	(6,552		)	(5,205		)	(3,658		)	(9,473		)
Increase (decrease) in accounts payable	6,860			(19,732		)
Decrease in deferred revenue and accrued liabilities	(10,565		)	(19,891		)
Increase in accounts payable							57,722			21,791
Increase in deferred revenue and accrued liabilities							(627		)	388
Other operating activities	(3,506		)	2,486			(4,848		)	(1,111		)
Net cash provided by operating activities	55,689			149,568			68,711			25,072

Cash flows from investing activities:
Capital expenditures	(13,355		)	(26,210		)	(3,017		)	(3,732		)
Refranchising proceeds	2,136			3,410			710			465
Store acquisition costs	(220		)	(1,930		)	(43		)	(116		)
Net cash used in investing activities	(11,439		)	(24,730		)
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	261,500			177,500			22,000			50,000
Payments on revolving credit facility	(261,500		)	(256,500		)	(22,000		)	(32,500		)
Proceeds from the issuance of convertible preferred stock							199,950			—
Payments on Tranche B-1 Term Loan	(3,413		)	(40,853		)	(147,312		)	(1,138		)
Payments on Tranche B-2 Term Loan	(32,100		)	—			(114,000		)	(10,700		)
Original Issuance Discount and revolving credit facility fees	(35,235		)	—
Deferred fees associated with pending equity transaction	(3,443		)	—
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	(296		)	(252		)	(120		)	(223		)
Net cash used in financing activities	(74,487		)	(120,105		)	(84,411		)	(31,960		)

Effect of exchange rate changes on cash and cash equivalents	(416		)	921			22			141
Net (decrease) increase in cash and cash equivalents	(30,653		)	5,654
Net increase (decrease) in cash and cash equivalents							69,893			(10,130		)
Beginning balance, cash and cash equivalents	64,001			34,464			67,224			64,001
Ending balance, cash and cash equivalents	$	33,348		$	40,118		$	137,117		$	53,871

The accompanying notes are an integral part of the Consolidated Financial Statements.

GNC HOLDINGS, INC. AND SUBSIDIARIES

Supplemental Cash Flow Information

(unaudited)

~~(in thousands)~~


	As of September 30,				As of March 31,
	2018		2017		2019		2018
Non-cash investing activities:					(in thousands)
Capital expenditures in current liabilities	$	1,177	$	2,141	$	1,115	$	1,203
Receivable related to the sale of Lucky Vitamin	—		7,117
Non-cash financing activities:
Original issuance discount (Note 6)	$	13,231	$	—
Original issuance discount (Note 5)					$	—	$	19,587

Refer to Note 8, "Leases" for supplemental cash flow information related to the Company's leases.

The accompanying notes are an integral part of the Consolidated Financial Statements.

GNC HOLDINGS, INC. AND SUBSIDIARIES

Condensed Notes to the Unaudited Consolidated Financial Statements

NOTE 1. NATURE OF BUSINESS

GNC Holdings, Inc., a Delaware corporation (“Holdings,” and collectively with its subsidiaries and, unless the context requires otherwise, its and their respective predecessors, the “Company”), is a global health and wellness brand with a diversified, ~~multi-channel~~omni-channel business. The Company's assortment of performance and nutritional supplements, vitamins, herbs and greens, health and beauty, food and drink and other general merchandise features innovative private-label products as well as nationally recognized third-party brands, many of which are exclusive to GNC.

The ~~Company is vertically integrated as its~~Company's operations consist of purchasing raw materials, formulating and manufacturing products and selling the finished products through its three reportable segments, U.S. and Canada, International, and Manufacturing / ~~Wholesale.~~Wholesale (refer to Note 12, "Segments" for more information). Corporate retail store operations are located in the United States, Canada, Puerto Rico ~~China~~ and Ireland. In addition, the Company offers products on the internet through GNC.com and third-party ~~websites, and prior to the sale of its assets on September 30, 2017, LuckyVitamin.com.~~websites. Franchise locations exist in the United States and approximately 50 other countries. The Company operates its primary manufacturing facility in South Carolina and distribution centers in Arizona, Indiana, Pennsylvania and South Carolina. The Company manufactures approximately half of its branded products and merchandises various third-party products. Additionally, the Company licenses the use of its trademarks and trade ~~names.~~ names

~~The processing, formulation, packaging, labeling~~In February 2019, the Company entered into two joint ventures to operate its e-commerce business and ~~advertising~~retail business, respectively, in China, which will accelerate its presence and maximize the Company's opportunities for growth in the Chinese supplement market. Under the terms of the ~~Company’s products are subject~~agreement, the Company contributed its China business and retained 35% interest in the joint ventures. In March 2019, the Company announced a strategic joint venture with International Vitamin Corporation ("IVC") regarding the Company's manufacturing business, which enables the Company to ~~regulation by various federal agencies, including~~increase its focus on product innovation while IVC manages manufacturing and integrates with the ~~Food and Drug Administration,~~Company's supply chain thereby driving more efficient usage of capital. Under the Federal Trade Commission, the Consumer Product Safety Commission, the United States Department of Agriculture and the Environmental Protection Agency. These activities are also regulated by various agenciesterms of the ~~states~~agreement, the Company received $101 million and ~~localities~~contributed its Nutra manufacturing and Anderson facility net assets in ~~which~~exchange for an initial 43% interest in the ~~Company’s products are sold.~~new joint venture.

NOTE 2. BASIS OF PRESENTATION

The accompanying unaudited Consolidated Financial Statements, which have been prepared in accordance with the applicable rules of the Securities and Exchange Commission ("SEC"), include all adjustments ~~(consisting of~~(of a normal and recurring nature) that management considers necessary to fairly state the Company's results of operations, financial position and cash flows. The ~~December~~March 31, ~~2017~~2019 Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). These interim Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Footnotes included in the Company’s audited financial statements in its Annual Report on Form 10-K for the year ended December 31, ~~2017 ("2017~~2018, as filed with the SEC on March 13, 2019 (the "2018 10-K"). Interim results are not necessarily indicative of the results that may be expected for the remainder of the year ending December 31, ~~2018.~~2019.

Recently Adopted Accounting Pronouncements

Adoption of the New Lease Standard

In ~~December 2017,~~February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-12, which simplifies the application of certain hedge accounting guidance to better align hedge accounting with an organization’s risk management activities in the financial statements. This standard eliminated the separate measurement and reporting of hedge ineffectiveness. Mismatches between changes in value of the hedged item and hedging instrument may still occur but they will no longer be separately reported. For cash flow and net investment hedges, all changes in value of the hedging instrument included in the assessment of effectiveness will be deferred in other comprehensive income and recognized in earnings at the same time that the hedged item affects earnings. The standard is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. The Company adopted this standard during the second quarter of fiscal 2018, which was applied to the interest rate swaps entered into described below in Note 6 "Long-Term Debt / Interest Expense." The adoption of this standard did not have a material effect on the Company's Consolidated Financial Statements.

In May 2017, the FASB issued ASU 2017-09, which amends the scope of modification accounting for share-based payment arrangements. This standard states that an entity should account for the effects of a modification unless all of the following are met: 1) the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified (if the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification); 2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and 3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The standard is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company adopted this standard during the first quarter of fiscal 2018 which did not have an impact to the Consolidated Financial Statements.

In August 2016, the FASB issued ASU 2016-15, which addresses changes to the classification of certain cash receipts and cash payments within the statement of cash flows in order to address diversity in practice. In connection with the adoption of this ASU, the Company presented the third-party fees relating to the term loan refinancing as an operating cash flow on the Consolidated Statement of Cash Flows. In November 2016, the FASB issued ASU 2016-18, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash and restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The adoption of ASU 2016-18 did not have an impact to the Consolidated Statement of Cash Flows. Both standards were effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017.

~~Adoption of New Revenue Recognition Standard~~

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which updates revenue recognition guidance relating to contracts with customers. This standard states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017. The Company adopted ASU 2014-09 and its related amendments (collectively known as "ASC 606") during the first quarter of fiscal 2018 using the full retrospective method.

The adoption of ASC 606 does not impact recognition of point-of-sale revenue in company-owned stores, most wholesale sales, royalties and sublease revenue, together which account for approximately 90% of the Company’s revenue. The new standard has no impact on the timing or classification of the Company’s cash flows as reported in the Consolidated Statement of Cash Flows and is not expected to have a significant impact on the Company’s Consolidated Statement of Operations in future periods. The Company recorded a reduction to retained earnings, net of tax, at January 1, 2016 (opening balance) and December 31, 2016 of approximately $23 million primarily relating to an increase in deferred franchise fees. Below is a description of the changes that resulted from the new standard.

~~Franchise fees.~~ The Company's previous accounting policy for franchise and license fees received for new store openings and renewals was to recognize these fees when earned per the contract terms, which is when a new store opened or at the start of a new term. In accordance with the new guidance, these fees are now deferred and recognized over the applicable license term as the Company satisfies the performance obligation of granting the customer access to the rights of the Company’s intellectual property. This change impacted all of the Company’s reportable segments. In addition, franchise fees received as part of a sale of a company-owned store to a franchisee are now recorded as described above as part of revenue and will no longer be presented as part of gains on refranchising.

~~Cooperative advertising and other franchise support fees.~~ The Company previously classified advertising and other franchise support fees received from domestic franchisees as a reduction to selling, general and administrative expense and cost of sales on the Consolidated Statement of Operations. In accordance with the new guidance, these fees are now required to be classified as revenue within the U.S. and Canada segment. The new standard does not impact the timing of recognition of this income or the Consolidated Balance Sheet.

~~Specialty manufacturing.~~ The Company previously recognized revenue for products manufactured and sold to customers at a point in time when risk of loss, title and insurable risks have transferred to the customer, net of estimated returns and allowances. Under the new standard, revenue is required to be recognized over time as manufacturing occurs if the customized goods have no alternative use to the manufacturer, and the manufacturer has an enforceable right to payment for performance completed to date. This change impacts contract manufacturing sales

to third-parties recorded in the Manufacturing / Wholesale segment. The Company is now recording a reduction to inventory as applicable custom manufacturing services are completed with a corresponding contract asset including the applicable markup, recorded within prepaid and other current assets on the Consolidated Balance Sheet.

~~E-commerce revenues.~~ The Company previously recorded revenue to its e-commerce customers upon delivery. Under the new guidance, the Company is now recognizing revenue upon shipment based on meeting the transfer of control criteria. The Company has made a policy election to treat shipping and handling as costs to fulfill the contract, and as a result, any fees received from customers are included in the transaction price allocated to the performance obligation of providing goods with a corresponding amount accrued within cost of sales for amounts paid to applicable carriers. The Company has not revised prior period balances for e-commerce revenues because the changes are not material.

~~Loyalty.~~ Effective with the launch of the One New GNC on December 29, 2016, the Company introduced a free points-based myGNC Rewards loyalty program system-wide in the U.S. The Company utilized the new revenue recognition standard to account for this program in 2017, the difference of which was immaterial relative to the standard in effect at that time.

~~Refer to Note 3 "Revenue" for additional information relating to the impact of adopting ASC 606.~~

~~Revisions to Prior Periods~~

As a result of adopting ASC 606 on January 1, 2018, the Company has revised its comparative financial statements for the years ended December 31, 2016 and 2017, and applicable interim periods within those years, as if ASC 606 had been effective for those periods. Additionally, the cumulative effect of applying the new guidance to all contracts with customers that were not completed was recorded as an adjustment to retained earnings as of January 1, 2016.

~~The impact of the adoption of ASC 606 on the Company's Consolidated Balance Sheet as of December 31, 2017 was as follows:~~

As Previously Reported Franchise Fees Specialty Manufacturing Total Adjustments As Revised

(in thousands)

Inventory $ 506,858
$ —
$ (21,126 ) $ (21,126 ) $ 485,732
Prepaid and other current assets 42,320
—
24,328
24,328
66,648
Total current assets 739,829
—
3,202
3,202
743,031
Total assets $ 1,516,561
$ —
$ 3,202
$ 3,202
$ 1,519,763

Deferred revenue and other current liabilities $ 108,672
$ 5,409
$ —
$ 5,409
$ 114,081
Total current liabilities 261,690
5,409
—
5,409
267,099
Deferred income taxes 64,121
(8,868 ) 807
(8,061 ) 56,060
Other long-term liabilities 55,721
29,781
—
29,781
85,502
Total long-term liabilities 1,416,865
20,913
807
21,720
1,438,585
Total liabilities 1,678,555
26,322
807
27,129
1,705,684
Retained earnings 567,741
(26,322 ) 2,395
(23,927 ) 543,814
Total stockholders' deficit (161,994 ) (26,322 ) 2,395
(23,927 ) (185,921 )
Total liabilities and stockholders' deficit $ 1,516,561
$ —
$ 3,202
$ 3,202
$ 1,519,763

~~The impact of the adoption of ASC 606 on the Consolidated Statements of Operations for the three and nine months ended September 30, 2017 was as follows:~~

Three months ended September 30, 2017
As Previously Reported Franchise Fees Specialty Manufacturing Cooperative Advertising and Other Franchise Support Fees Total Adjustments As Revised
(in thousands, except per share amounts)
Revenue $ 609,469
$ (360 ) $ (1,925 ) $ 5,769
$ 3,484
$ 612,953
Cost of sales ⁽¹⁾
412,663
—
(1,681 ) 679
(1,002 ) 411,661
Gross profit 196,806
(360 ) (244 ) 5,090
4,486
201,292
SG&A ⁽²⁾
150,961
—
—
5,090
5,090
156,051
Long-lived asset impairments 3,861
—
—
—
—
3,861
Other income, net 1,539
40
—
—
40
1,579
Operating income 40,445
(400 ) (244 ) —
(644 ) 39,801
Interest expense, net 16,339
—
—
—
—
16,339
Income before income taxes 24,106
(400 ) (244 ) —
(644 ) 23,462
Income tax expense 2,643
(146 ) (91 ) —
(237 ) 2,406
Net income $ 21,463
$ (254 ) $ (153 ) $ —
$ (407 ) $ 21,056
Earnings per share:
Basic $ 0.31
$ —
$ —
$ —
$ —
$ 0.31
Diluted $ 0.31
$ —
$ —
$ —
$ —
$ 0.31

Nine months ended September 30, 2017
As Previously Reported Franchise Fees Specialty Manufacturing Cooperative Advertising and Other Franchise Support Fees Total Adjustments As Revised
(in thousands, except per share amounts)
Revenue $ 1,895,301
$ 1,976
$ 2,703
$ 18,159
$ 22,838
$ 1,918,139
Cost of sales ⁽¹⁾
1,272,801
—
2,285
2,116
4,401
1,277,202
Gross profit 622,500
1,976
418
16,043
18,437
640,937
SG&A ⁽²⁾
465,575
—
—
16,043
16,043
481,618
Long-lived asset impairments 23,217
—
—
—
—
23,217
Other income, net (110 ) 70
—
—
70
(40 )
Operating income 133,818
1,906
418
—
2,324
136,142
Interest expense, net 48,300
—
—
—
—
48,300
Income before income taxes 85,518
1,906
418
—
2,324
87,842
Income tax expense 24,544
701
153
—
854
25,398
Net income $ 60,974
$ 1,205
$ 265
$ —
$ 1,470
$ 62,444
Earnings per share:
Basic $ 0.89
$ 0.02
$ —
$ —
$ 0.02
$ 0.91
Diluted $ 0.89
$ 0.02
$ —
$ —
$ 0.02
$ 0.91

~~(1) Includes warehousing, distribution and occupancy.~~

~~(2) Defined as selling, general and administrative expense.~~

~~The impact of adoption of ASC 606 on the Company's reportable segments for the three and nine months ended September 30, 2017 was as follows:~~

Three months ended September 30, 2017
As Previously Reported Franchise Fees Specialty Manufacturing Cooperative Advertising and Other Franchise Support Fees Total Adjustments As Revised
(in thousands)
Revenue:

U.S. and Canada $ 486,282
$ 332
$ —
$ 5,769
$ 6,101
$ 492,383
International 49,057
(599 ) —
—
(599 ) 48,458
Manufacturing / Wholesale:
Intersegment revenues 58,037
—
—
—
—
58,037
Third party 53,304
(93 ) (1,925 ) —
(2,018 ) 51,286
Subtotal Manufacturing / Wholesale 111,341
(93 ) (1,925 ) —
(2,018 ) 109,323
Total reportable segment revenues 646,680
(360 ) (1,925 ) 5,769
3,484
650,164
Other 20,826
—
—
—
—
20,826
Elimination of intersegment revenues (58,037 ) —
—
—
—
(58,037 )
Total revenue $ 609,469
$ (360 ) $ (1,925 ) $ 5,769
$ 3,484
$ 612,953
Operating income:

U.S. and Canada $ 31,572
$ 292
$ —
$ —
$ 292
$ 31,864
International 16,768
(599 ) —
—
(599 ) 16,169
Manufacturing / Wholesale 19,505
(93 ) (244 ) —
(337 ) 19,168
Total reportable segment operating income 67,845
(400 ) (244 ) —
(644 ) 67,201
Corporate costs (25,558 ) —
—
—
—
(25,558 )
Other (1,842 ) —
—
—
—
(1,842 )
Unallocated corporate and other (27,400 ) —
—
—
—
(27,400 )
Total operating income $ 40,445
$ (400 ) $ (244 ) $ —
$ (644 ) $ 39,801

Nine months ended September 30, 2017
As Previously Reported Franchise Fees Specialty Manufacturing Cooperative Advertising and Other Franchise Support Fees Total Adjustments As Revised
(in thousands)
Revenue:

U.S. and Canada $ 1,537,265
$ 1,394
$ —
$ 18,159
$ 19,553
$ 1,556,818
International 132,105
(83 ) —
—
(83 ) 132,022
Manufacturing / Wholesale:
Intersegment revenues 175,335
—
—
—
—
175,335
Third party 159,749
665
2,703
—
3,368
163,117
Subtotal Manufacturing / Wholesale 335,084
665
2,703
—
3,368
338,452
Total reportable segment revenues 2,004,454
1,976
2,703
18,159
22,838
2,027,292
Other 66,182
—
—
—
—
66,182
Elimination of intersegment revenues (175,335 ) —
—
—
—
(175,335 )
Total revenue $ 1,895,301
$ 1,976
$ 2,703
$ 18,159
$ 22,838
$ 1,918,139
Operating income:

U.S. and Canada $ 133,520
$ 1,324
$ —
$ —
$ 1,324
$ 134,844
International 46,908
(83 ) —
—
(83 ) 46,825
Manufacturing / Wholesale 53,989
665
418
—
1,083
55,072
Total reportable segment operating income 234,417
1,906
418
—
2,324
236,741
Corporate costs (79,839 ) —
—
—
—
(79,839 )
Other (20,760 ) —
—
—
—
(20,760 )
Unallocated corporate and other (100,599 ) —
—
—
(100,599 )
Total operating income $ 133,818
$ 1,906
$ 418
$ —
$ 2,324
$ 136,142

~~Recently Issued Accounting Pronouncements~~

In August 2018, the FASB issued ASU 2018-15, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-used software. This standard is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of the new standard to have a material impact to the Consolidated Financial Statements.

~~In February 2016, the FASB~~ issued ASU 2016-02, which requires lessees to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments for all leases with a term greater than 12 months. This standard is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2018 and is required to be applied using a modified retrospective approach. In July 2018, the FASB issued ASU 2018-11, which provides companies with the option to apply the new lease standard either at the beginning of the earliest comparative period presented or in the period of adoption. The Company ~~will elect this~~adopted ASU 2016-02 and its related amendments (collectively known as "ASC 842") during the first quarter of fiscal 2019 electing the optional transition relief amendment that allows for a cumulative-effect adjustment in the period of adoption and ~~will~~did not restate prior periods. In transitioning to ASC 842, the Company elected to use the practical expedient package available under the guidance for leases that commenced before the effective date and did not elect to use hindsight. The Company has completed scoping of its lease portfolio, identified its significant leases and made progress in developing accounting policies and policy elections upon adoption of the new standard. In addition, the Company is currently implementing aimplemented new lease management and accounting ~~software to comply with the new standard~~system and ~~is evaluating~~updated its processes and internal controls to ~~identify any resulting changes upon adoption.~~ comply with the new standard.

The Company leases substantially all of our retail stores in the U.S. and Canada segment, including most of the domestic franchise stores that are leased and sublease to franchisees, the four distribution centers in the United

States and retail stores in Ireland. In addition, the Company has leased office locations, vehicles and equipment to support our store and supply chain operations. All of the Company's leases are classified as operating leases.

The Company determines if a ~~significant number~~contract contains a lease at inception. The lease liabilities are recognized based on the present value of the future minimum lease payments over the term at the commencement date for leases exceeding 12 months. The lease agreements generally contain lease and non-lease components. Non-lease components primarily include payments for maintenance and utilities. The minimum lease payments include only fixed lease components, as well as any variable rate payments that depend on an index, initially measured using the index at the lease commencement date. Lease terms may include options to renew when it is reasonably certain that the Company will exercise an option. The Company estimates its incremental borrowing rate, which is estimated to approximate the interest rate on a collateralized basis with similar terms and payments for each lease, using a portfolio approach. The right-of-use assets recognized are initially equal to the lease liability, adjusted for any lease payments made on or before the commencement dates and lease incentives.

The Company recognized lease liabilities of $550.2 million on January 1, 2019. A right-of-use asset of $504.2 million was recognized based on the lease liability, adjusted for the reclassification of deferred rent of $53.3 million and prepaid rent of $7.3 million. Additionally, the Company recognized $79.8 million of right-of-use asset impairment charges for certain of the Company's stores for which it was previously determined that the carrying value of the such stores' assets were not recoverable. The right-of-use asset impairment charges were recorded as a ~~result, expects this guidance~~reduction to January 1, 2019 (opening day) retained earnings, net of tax of $19.8 million. The new lease standard has no impact on the timing or classification of the Company's cash flows as reported in the Consolidated Statement of Cash Flows.

The lease liabilities for the operating leases are amortized using the effective interest method. The right-of-use asset is amortized by taking the difference between total rent expense recorded on straight line basis and the lease liability amortization. When the right-of-use asset for an operating lease is impaired, lease expense is no longer recognized on a straight-line basis. For impaired leases, the Company continues to amortize the lease liability using the same effective interest method as before the impairment charge and the right-of-use asset is amortized on a straight-line basis.

Refer to Note 8 "Leases" for additional information relating to the impact of adopting ASC 842.

Recently Issued Accounting Pronouncements

NOTE 3. REVENUE

Revenue is recognized when obligations under the terms of a contract with the customer are ~~satisfied; generally,~~satisfied. Generally, this occurs with the transfer of control of products or services. The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below. Revenue is measured as the amount of consideration expected to be received in exchange for transferring goods or providing services. Applicable sales tax collected concurrent with revenue-producing activities ~~are~~is excluded from revenue.

U.S. and Canada Revenue

The following is a summary of revenue disaggregated by major source in the U.S. and Canada segment:


	Three months ended September 30,				Nine months ended September 30,				Three months ended March 31,
	2018		2017		2018		2017		2019		2018
U.S. company-owned product sales: ⁽¹⁾	(in thousands)								(in thousands)
Protein	$	76,738	$	83,652	$	251,480	$	266,621	$	80,257	$	87,670
Performance supplements	68,809		69,770		217,525		217,787		74,778		75,616
Weight management	29,575		32,622		108,048		112,897		30,779		39,787
Vitamins	48,322		51,015		148,188		154,363		47,056		50,371
Herbs / Greens	15,872		16,817		48,975		49,552		15,873		16,158
Wellness	46,245		47,888		143,626		147,484		47,200		47,701
Health / Beauty	43,332		48,027		138,911		145,624		46,388		48,054
Food / Drink	28,325		23,248		82,394		72,818		28,243		25,360
General merchandise	5,637		6,732		18,577		21,941		6,800		7,062
Total U.S. company-owned product sales	$	362,855	$	379,771	$	1,157,724	$	1,189,087	$	377,374	$	397,779
Wholesale sales to franchisees	58,199		59,413		176,034		189,776		58,257		57,160
Royalties and franchise fees	7,939		8,649		25,219		27,472		8,472		8,748
Sublease income	11,087		12,170		34,485		37,128		10,976		11,765
Cooperative advertising and other franchise support fees	4,739		5,769		16,245		18,159		5,067		5,533
Gold Card revenue recognized in U.S.⁽²⁾	—		—		—		24,399
Other ⁽³⁾	31,700		26,611		96,543		70,797
Other ⁽²⁾									29,011		31,429
Total U.S. and Canada revenue	$	476,519	$	492,383	$	1,506,250	$	1,556,818	$	489,157	$	512,414


(1)	Includes GNC.com sales.


(2)	The Gold Card Member Pricing program in the U.S. was discontinued in December 2016 in connection with the launch of the One New GNC which resulted in $24.4 million of deferred Gold Card revenue being recognized in the first quarter of 2017, net of $1.4 million in applicable coupon redemptions.


~~(3)~~	Includes revenue primarily related to Canada operations and loyalty programs, myGNC Rewards and PRO Access. ~~The increase compared to the prior year period primarily relates to the Company's loyalty programs.~~

International ~~Revenue~~Revenues

The following is a summary of the revenue disaggregated by major source in the International reportable segment:


	Three months ended September 30,				Nine months ended September 30,				Three months ended March 31,
	2018		2017		2018		2017		2019		2018
	(in thousands)								(in thousands)
Wholesale sales to franchisees	$	32,321	$	28,941	$	81,266	$	80,747	$	25,437	$	21,760
Royalties and franchise fees	7,150		6,509		20,347		19,360		6,202		6,621
Other^(*)	11,936		13,008		38,494		31,915
Other⁽¹⁾									9,284		11,684
Total International revenue	$	51,407	$	48,458	$	140,107	$	132,022	$	40,923	$	40,065

~~(*)~~(1) Includes revenue primarily related to China operations prior to the newly formed joint ventures in China effective February 13, 2019 and company-owned stores located in Ireland.

Manufacturing / Wholesale Revenue

The following is a summary of the revenue disaggregated by major source in the Manufacturing / Wholesale reportable segment:


	Three months ended September 30,				Nine months ended September 30,				Three months ended March 31,
	2018		2017		2018		2017		2019		2018
	(in thousands)								(in thousands)
Third-party contract manufacturing(1)	$	31,212	$	29,260	$	94,514	$	97,222	$	15,783	$	32,722
Intersegment sales(1)	63,695		58,037		193,596		175,335		35,505		64,663
Wholesale partner sales	21,047		22,026		64,791		65,895		18,901		22,332
Total Manufacturing / Wholesale revenue	$	115,954	$	109,323	$	352,901	$	338,452	$	70,189	$	119,717

(1) The decrease in third-party contract manufacturing and intersegment sales for the three months ended March 31, 2019 compared to the prior year quarter is due to the transaction with IVC for the newly formed manufacturing joint venture effective March 1, 2019.

Revenue by Geography

The following is a summary of the revenue by ~~geography.~~

geography:


	Three months ended September 30,				Nine months ended September 30,				Three months ended March 31,
	2018		2017		2018		2017		2019		2018
Total revenues by geographic areas:	(in thousands)
Total revenues by geographic areas⁽¹⁾:									(in thousands)
United States	$	545,332	$	574,053	$	1,696,887	$	1,808,745	$	535,943	$	572,231
Foreign	34,853		38,900		108,775		109,394		28,821		35,302
Total revenues (*)	$	580,185	$	612,953	$	1,805,662	$	1,918,139
Total revenues									$	564,764	$	607,533

~~(*) Prior year revenue includes revenue from Lucky Vitamin, which was sold on September 30, 2017.~~

~~Revenue Recognition Policies~~

~~Within the U.S. and Canada segment, retail sales in company-owned stores~~(1) Geographic areas are ~~recognized at the point of sale. Revenue related to e-commerce sales is recognized upon shipment~~defined based on meeting the transfer of control criteria. The Company has made a policy election to treat shipping and handling as costs to fulfill the contract, and as a result, any fees received from customers are included in the transaction price allocated to the performance obligation of providing goods with a corresponding amount accrued within cost of sales for amounts paid to applicable carriers. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenue. A provision for anticipated returns is recorded through a reduction of sales and cost of sales (for product that can be resold or returned to vendors) in the period that the related sales are recorded.

Effective with the launch of the One New GNC on December 29, 2016, the Company introduced myGNC Rewards, a free points-based loyalty program while discontinuing its Gold Card Member Pricing program system-

wide in the U.S. The loyalty program enables customers to earn points based on their purchases. Points earned by members are valid for one year and may be redeemed for cash discounts on any product the Company sells at both company-owned or franchise locations. The Company defers the estimated standalone selling price of points related to this program as a reduction to revenue as points are earned by allocating a portion of the transaction price the customer pays to a loyalty program liability within deferred revenue and other current liabilities on the Consolidated Balance Sheet. The estimated selling price of each point is based on the estimated value of product for which the point is expected to be redeemed, net of points not expected to be redeemed, based on historical redemption rates. When a customer redeems earned points, revenue is recognized with a corresponding reduction to the program liability.

Also effective with the launch of the One New GNC, the Company began offering a paid membership program, PRO Access, for $39.99 per year, which provides members with the delivery of sample boxes throughout the membership year, as well as the offering of certain other benefits including the opportunity to earn triple points on a periodic basis. The boxes include sample merchandise and other materials. The Company allocates the transaction price of the membership to the sample boxes and other benefits based on estimated relative stand-alone prices. The membership price paid is recorded within deferred revenue and other current liabilities on the Consolidated Balance Sheet and recognized as revenue as the underlying performance obligations are satisfied.

Revenue from gift cards is recognized when the gift card is redeemed. Gift cards do not have expiration dates and are not required to be escheated to government authorities. Utilizing historical redemption rates, the Company recognizes revenue for amounts not expected to be redeemed proportionately as other gift card balances are redeemed.

Revenues from domestic and international franchisees include wholesale product sales, franchise fees and royalties, as well as cooperative advertising and other franchise support fees specific to domestic franchisees. Revenues are recorded within the U.S. and Canada segment for domestic franchisees and the International segment for international franchisees. The Company's franchisees purchase a significant amount of the products they sell in their retail stores from the Company at wholesale prices. Revenue on product sales to franchisees and other franchise support fees (including construction, equipment and other administrative fees) are recognized upon transfer of control to the franchisee, net of estimated returns and allowances. Franchise license fees, royalties and continuing services, such as cooperative advertising, are not separate and distinct performance obligations as they are highly dependent on each other in supporting the overall brand. Franchise fees for the license are paid in advance, and are deferred and recognized over the applicable license term as the Company satisfies the performance obligation of granting the customer access to the rights of its intellectual property. Franchise royalties and cooperative advertising contributions are variable consideration based on a percentage of the franchisees' retail sales, which are recognized in the period the franchisees' underlying sales occur, and are not included in the upfront transaction price for the overall performance obligation relating to providing access to the Company's intellectual property.

The Manufacturing / Wholesale segment sells product to the Company's other segments, which is eliminated in consolidation, and third-party customers. Revenue is recognized over time, net of estimated returns and allowances, as manufacturing occurs if the customized goods have no alternative use (specially made for the end customer) and the Company has an enforceable right to payment for performance completed to date (even if such right is not enforced in practice). The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. The Company uses the cost-to-cost measure of progress for its contracts because it best depicts the transfer of control to the customer which occurs as the Company incurs costs on its contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred. Costs to fulfill include labor, materials, other direct costs and an allocation of indirect costs, which are recognized as cost of sales as revenue is recognized. Services for specialty manufacturing contracts typically have an expected duration of less than one year.legal entity jurisdiction.

Balances from Contracts with Customers

Contract assets ~~relating to specialty manufacturing include~~represent amounts related to the Company's contractual right to consideration for completed performance obligations not yet ~~invoiced, and were $27.9 million and $24.3 million at September 30, 2018 and~~invoiced. As of December 31, ~~2017, respectively,~~2018, the Company had contract assets of $25.5 million for specialty manufacturing recorded within prepaid and other current assets on the ~~accompanying~~ Consolidated Balance ~~Sheets~~Sheet (with a corresponding reduction to inventory at cost). Due to the contribution of the Nutra manufacturing net assets to the manufacturing joint venture with IVC on March 1, 2019, the Company has no contract assets on the Consolidated Balance Sheet as of March 31, 2019.

Contract liabilities include payments received in advance of performance under the ~~contract.~~

~~The following table presents changes in~~contract, and are realized with the ~~Company’s contract liabilities:~~

Nine months ended September 30, 2018
Balance at beginning of period Recognition of revenue included in beginning balance Contract liability, net of revenue recognized during the period Balance at end of period
(in thousands)
Deferred franchise and license fees $ 38,011
$ (7,739 ) $ 4,128
$ 34,400
PRO Access and loyalty program points 24,464
(22,942 ) 24,512
26,034
Gift card liability ^(*)
4,172
(2,430 ) 159
1,901

~~(*) Net of estimated breakage~~

associated revenue recognized under the contract. The Company's PRO Access and loyalty program points are recorded within deferred revenue and other current liabilities on the Consolidated Balance Sheets. Deferred franchise and license fees are recorded within deferred revenue and other current liabilities and other long-term liabilities on the Consolidated Balance Sheets.

The following table presents changes in the Company’s contract liabilities during the three months ended March 31, 2019:



	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

As of ~~September 30, 2018,~~March 31, 2019, the Company had deferred franchise ~~and license~~ fees with unsatisfied performance obligations extending throughout ~~2028~~2029 of ~~$34.4~~$31.3 million, of which approximately $7.2 million is expected to be recognized over the next 12 months. The Company has elected to use the practical expedient allowed under the rules of adoption to not disclose the duration of the remaining unsatisfied performance obligations for contracts with an original expected length of one year or less.

NOTE 4. INVENTORY

The net realizable value of inventory consisted of the following:



	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

September 30, 2018
December 31, 2017 ^(*)
(in thousands)
Finished product ready for sale $ 423,963
$ 432,092
Work-in-process, bulk product and raw materials 59,542
51,225
Packaging supplies 6,134
2,415
Inventory $ 489,639
$ 485,732

~~(*)~~(1) The ~~balances~~decrease in work-process, buck and raw materials and packaging supplies as of March 31, 2019 compared with December 31, ~~2017 have been revised in connection~~2018 is due to the transaction with IVC for the ~~adoption of ASC 606 to include a reduction to inventory as applicable custom~~newly formed manufacturing ~~services are completed. Refer to Note 2, "Basis of Presentation" for more information.~~joint venture effective March 1, 2019.

NOTE 5. ~~PROPERTY, PLANT AND EQUIPMENT, NET~~

During the quarter ended September 30, 2018, the Company performed a detailed review of its store portfolio and identified stores in the U.S. and Canada that will be closed within the next three years at the end of their lease terms. This review also identified other stores in which the Company is considering alternatives such as seeking lower rent or a shorter term. In connection with the review of the store portfolio, the Company recorded $14.6 million of impairment charges in the quarter ended September 30, 2018 within the U.S. and Canada segment, of which $9.5 million related to its property, plant and equipment for certain underperforming stores and $5.1 million related to other store closing costs, presented as long-lived asset impairments in the accompanying Consolidated Statement of Operations. During the quarter ended September 30, 2017, the Company recorded $3.9 million in long-lived asset impairment charges related to certain underperforming stores and the impact of Hurricane Maria on the Company’s stores located in Puerto Rico. Underperforming stores were generally defined as those with historical and expected future losses or stores that management intends on closing in the near term.

The impairment test was performed at the individual store level as this is the lowest level which identifiable cash flows are largely independent of other groups of assets and liabilities. If the undiscounted estimated cash flows were less than the carrying value of the asset group, an impairment charge was calculated by subtracting the estimated fair value of property and equipment from its carrying value. Fair value was estimated using a discounted cash flow method (income approach) utilizing the undiscounted cash flows computed in the first step of the test.

~~NOTE 6.~~ LONG-TERM DEBT / INTEREST EXPENSE

Long-term debt consisted of the following:



	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

September 30,
2018 December 31,
2017
(in thousands)
Tranche B-1 Term Loan (net of $0.1 million and $0.9 million discount) $ 148,402
$ 1,130,320
Tranche B-2 Term Loan (net of $24.9 million discount) 647,366
—
FILO Term Loan (net of $11.6 million discount) 263,403
—
Unpaid original issuance discount 13,231
—
Notes 173,591
167,988
Debt issuance costs (867 ) (1,285 )
Total debt 1,245,126
1,297,023
Less: current debt (204,480 ) —
Long-term debt $ 1,040,646
$ 1,297,023

~~Refinancing of Senior Credit Facility~~

On February 28, 2018, the Company amended and restated its Senior Credit Facility, (the “Amendment”, and the Senior Credit Facility as so amended, the "Term Loan Agreement") formerly consisting of a $1,131.2 million term loan facility due in March 2019 and a $225.0 million revolving credit facility that was scheduled to mature in September 2018. The Amendmentwhich included an extension of the maturity date ~~for $704.3 million~~of a portion of the ~~$1,131.2 million~~ term loan ~~facility~~ from March 2019 to March 2021 (the ~~“Tranche~~"Tranche B-2 Term Loan"). However, if more than $50.0 million of the Company's Notes have not been repaid, converted or effectively discharged prior to such date (“Existing Indenture Discharge”), the maturity date becomes May 2020, subject to certain adjustments. The ~~Amendment also terminated the existing $225.0 million revolving credit facility.~~

~~After the effectiveness of the Amendment, the~~ remaining term loan ~~of $151.9 million as of February 28, 2018 continues~~continued to have a maturity date of March 2019 ~~(the "Tranche~~("the Tranche B-1 Term Loan"). Provided that all outstanding amounts under the convertible senior notes exceeding $50.0 million have not been repaid, refinanced, converted or effectively discharged prior to May 2020 ("Springing Maturity Date"), the maturity date of the Tranche B-2 Term Loan becomes the Springing Maturity Date, subject to certain adjustments. In connection with the debt refinancing, the Company recognized a loss of $16.7 million during the first quarter of 2018, which primarily includes third-party fees. As of March 31, 2019, the Company had paid down the Tranche B-1 Term Loan and had $446.8 million Tranche B-2 Term Loan outstanding. The Company also had a new asset-based credit agreement (the "ABL Credit Agreement"), consisting of:

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.

The Tranche B-2 Term Loan requires annual aggregate principal payments of at least $43 million and bears interest at a rate of, at the Company's option, LIBOR plus a margin of ~~9.25%~~8.75% per annum subject to change under certain circumstances (with a minimum and maximum ~~possible interest rate of LIBOR plus a~~ margin of 8.25% and 9.25%, respectively, per annum), or prime plus a margin of 7.75% per annum subject to change under certain circumstances (with a minimum and maximum

margin of 7.25% and 8.25%, respectively, per annum). ~~Payments and interest associated with~~Any mandatory repayments as defined in the credit agreement shall be applied to the remaining annual aggregate principal payments in direct order of maturity. As discussed in further detail below, in November 2018, the Company paid $100 million on the Tranche ~~B-1~~B-2 Term Loan ~~are consistent with past terms.~~and elected to use the payment to satisfy the scheduled amortization payments on the Term Loan Facility through December 2020. The Term Loan Agreement is secured by a (i) first lien on certain assets of the Company primarily consisting of capital stock issued by General Nutrition Centers, Inc. ("Centers") and its subsidiaries, intellectual property and equipment (“Term Priority Collateral”) and (ii) second lien on certain assets of the Company primarily consisting of inventory and accounts receivable (“ABL Priority Collateral”). The Term Loan Agreement is guaranteed by all material, wholly-owned domestic subsidiaries of the Company (the “U.S. Guarantors”) and by General Nutrition Centres Company, an unlimited liability company organized under the laws of Nova Scotia (together with the U.S. Guarantors, the “Guarantors”).

~~On February 28 2018, the Company also entered into a new asset-based credit agreement (the "ABL Credit Agreement"), consisting of:~~

•a new $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, if the Existing Indenture Discharge has not occurred); and

•a $275.0 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, if the Existing Indenture Discharge has not occurred).

There are no scheduled amortization payments associated with the FILO Term Loan, which bears interest at a rate of LIBOR plus a margin of 7.00% per annum subject to decrease under certain circumstances (with a minimum possible interest rate of LIBOR plus a margin of 6.50% per annum). Outstanding borrowings under the Revolving Credit Facility bear interest at a rate of LIBOR plus ~~1.50% or prime plus 0.50% (both subject~~1.75% (subject to an increase or decrease of 0.25% ~~to 0.50%~~ based on the amount available to be drawn under the Revolving Credit Facility). The Company is also

required to pay an annual fee to revolving lenders equal to a maximum of 2.0% (subject to adjustment based on the amount available to be be drawn under the Revolving Credit Facility) on outstanding letters of credit and an annual commitment fee of 0.375% on the undrawn portion of the Revolving Credit Facility subject to an increase to 0.5% based on the amount available to ~~draw~~drawn under the Revolving Credit Facility. The FILO Term Loan and Revolving Credit Facility are secured by a (i) first lien on ABL Priority Collateral and (ii) second lien on Term Priority Collateral. The FILO Term Loan and Revolving Credit Facility are guaranteed by the Guarantors.

In connection with the debt refinancing, the Company recognized a loss of $16.7 million in the first quarter of 2018, which primarily includes third-party fees relating to the Tranche B-2 Term Loan and the FILO Term Loan, and is presented as an operating outflow on the accompanying Consolidated Statement of Cash Flows. In addition, the Company incurred $43.4 million consisting of an original issuance discount (“OID”) to the Tranche B-2 Term Loan and the FILO Term Loan lenders, of which $30.2 million has been paid. The remaining $13.2 million is due to the Tranche B-2 Term Loan lenders at 2% of the outstanding balance the earlier of March 2019 or after a qualifying event in which the Company receives net cash proceeds as defined in the credit agreement, the amount of which is subject to change based on the timing and amount of such cash proceeds. The OID together with $5.1 million in fees incurred relating to the Revolving Credit Facility (included within other long-term assets on the Consolidated Balance Sheet) will be amortized through the applicable maturity dates as an increase to interest expense. The $30.2 million portion of OID paid together with the Revolving Credit Facility fees resulted in $35.2 million presented as a financing outflow on the accompanying Consolidated Statement of Cash Flows. Included within the current debt above is the Tranche B-1 Term Loan balance, scheduled amortization payments on the Tranche B-2 Term Loan over the next 12 months and the 2% OID that is due to the Tranche B-2 Term Loan lenders by March 2019.

Under the Company’s Term Loan Agreement and ABL Credit Agreement (collectively, the "Credit Facilities"), the Company is required to make certain mandatory prepayments, including a requirement to prepay first the Tranche B-2 Term Loan (until repaid in full), and second the FILO Term Loan (until repaid in full, but only if such prepayment is permitted under the ABL Credit Agreement)~~, and third the Tranche B-1 Term Loan,~~ in each case annually with amounts based on excess cash flow, as defined in the Company’s Credit Facilities, based on the results of the Company for the prior fiscal year. The ~~first such~~ payment will be ~~due with respect to the year ending December 31, 2018. The payment will be either~~ 75% ~~or 50%~~ of excess cash flow for each such fiscal year, ~~as determined by~~subject to a reduction to 50% based on the attainment of a certain Consolidated Net First Lien Leverage Ratio, and will be reduced by certain scheduled debt ~~amortization payments and debt maturity payments that occur during~~payment amounts. The Company made the ~~fiscal year and in the subsequent year up to the date the~~first excess cash flow payment ~~is required~~in April 2019 of $9.8 million with respect to ~~be paid.~~the year ending December 31, 2018. The Company ~~estimates the amount of~~expects this excess cash flow payment to be between $0$25 million and ~~$25 million. The proceeds from~~$35 million at 50% with respect to the ~~Harbin transaction, if received~~year ending December 31, 2019, which is expected to be paid in the second quarter of 2020.

At March 31, 2019, the interest rates under the Tranche B-2 Term Loan and ~~used to pay down~~ the ~~debt prior to~~FILO Term Loan were 11.3% and 9.5%, respectively. At December 31, 2018, ~~is expected to result in~~ the ~~Company's excess cash flow payment being at 50%.~~

~~At September 30, 2018, the contractual~~ interest ~~rates~~rate under the Tranche B-1 Term Loan, Tranche B-2 Term Loan, and the FILO Term Loan were ~~4.8%~~5.7%, ~~11.5%~~11.8%, and ~~9.3%~~9.5%, ~~respectively, which consist of LIBOR plus the applicable margin rate.~~respectively. At ~~December~~March 31, ~~2017, the contractual interest rate under the Tranche B-1 Term Loan was 4.1%. At September 30, 2018,~~2019, the Company had ~~$94.2~~$74.2 million available under the Revolving Credit Facility, after giving effect to ~~$5.8~~$6.2 million utilized to secure letters of ~~credit. See below under "Interest Rate Swaps" for discussion~~credit and $0.6 million reduction to borrowing ability as a result of ~~the interest rate swaps.~~decrease in net collateral.

The Company’s Credit Facilities contain customary covenants, including limitations on the ability of GNC Corporation, Centers, and Centers' subsidiaries to, among other things, incur debt, grant liens on their assets, enter into mergers or liquidations, sell assets, make investments or acquisitions, make optional payments in respect of, or modify, certain other debt instruments, pay dividends or other payments on capital stock, or enter into arrangements that restrict their ability to pay dividends or grant liens. In addition, the Term Loan Agreement requires compliance, as of the end of each fiscal quarter of the Company, with a maximum Consolidated Net First Lien Leverage Ratio initially set at 5.50 to 1.00 through December 31, 2018 and decreasing to 5.00 to 1.00 from March 31, 2019 to December 31, 2019 and 4.25 to 1.00 thereafter. Depending on the amount available to be drawn under the Revolving Credit Facility, the ABL Credit Agreement requires compliance as of the end of each fiscal quarter of the Company with a minimum Fixed Charge Coverage Ratio of 1.00 to 1.00. The Company is currently in compliance, and expects to remain in compliance over the next twelve months, with the terms of its Credit Facilities.

~~On November 7, 2018, The Company entered into an Amendment to~~In connection with the ~~Securities Purchase Agreement with~~strategic investment from Harbin Pharmaceutical Group ~~Holdings~~ Co., ~~Ltd.~~Ltd ("Harbin") ~~for~~and the ~~purchase of 299,950 shares of Convertible Preferred Stock described in Note 12, "Subsequent Events". Harbin's $300 million investment will be funded in three separate tranches. On November 8, 2018,~~manufacturing joint venture with IVC, the Company received ~~the initial~~(i) $100 million investment ~~for the purchase of 100,000 shares of Convertible Preferred Stock. The Company~~from Harbin in November 2018, which was utilized ~~the $100 million~~ to pay a portion of the Tranche B-2 Term Loan ~~due in March 2021 pursuant to the Amendment to its Senior Credit Facility~~ and elected to use the payment to

satisfy the scheduled amortization payments ~~on the Term Loan Facility~~ through December ~~2020.~~2020, (ii) approximately $200 million from Harbin in the first quarter of 2019 and (iii) $101 million from IVC in the first quarter of 2019. The Company applied such proceeds to pay down the remaining ~~net proceeds, after deducting legal and advisory fees, will be available to satisfy the amount due under~~balance of the Tranche B-1 Term Loan that matured in March 2019. ~~There is no assurance that the~~The remaining ~~applicable closing conditions will be satisfied or waived prior to March 2019 when the obligation is due.~~

Management believes that the Company will have sufficient liquidity to meet its obligations, as they become due, for the next twelve months. In the event that the remaining payments anticipated from the Securities Purchase Agreement, are either delayed or not made at all, management believes that the Company will have adequate cash on hand,proceeds together with cash generated from ~~operations and amounts available under the Revolving Credit Facility~~operating activities were utilized to ~~satisfy~~pay $114.0 million of the Tranche ~~B-1~~B-2 and the original issuance discount due to the Tranche B-2 Term Loan ~~repayment~~lenders at 2% of ~~$147.3 million due in March 2019, net of a $1.1 million principal payment expected in December 2018. To~~ the extent that actual available cash differs materially from the current cash flow forecast, management has the ability to consider certain discretionary payments or asset sales to increase the amount of available cash.outstanding balance.

Convertible Debt

The Company maintains a $188.6 million in principal amount of 1.5% convertible senior notes due in 2020 (the "Notes"). The Notes consist of the following components:



	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

September 30, 2018 December 31, 2017
(in thousands)
Liability component
Principal $ 188,565
$ 188,565
Conversion feature (13,167 ) (18,065 )
Discount related to debt issuance costs (1,807 ) (2,512 )
Net carrying amount $ 173,591
$ 167,988

Interest Rate Swaps

On June 13, 2018, the Company entered into two interest rate swaps with notional amounts of $275 million and $225 million to limit the exposure toof its variable interest rate debt by effectively converting it to a fixed interest rate. The Company receives payments based on the one-month LIBOR and makes payments based on a fixed rate. The Company receives payments with a floor of 0.00% and 0.75%, respectively, on the $275 million and $225 million interest rate swaps, which aligns with the related debt instruments. The interest rate swap agreements had an effective date of June 29, 2018. The $225 million interest rate swap expires on February 28, 2021, and the $275 million interest rate swap expires on June 30, 2021. The notional amount of the $225 million interest rate swap is scheduled to decrease to $175 million on June 30, 2019, $125 million on June 30, 2020 and $75 million on December 31, 2020. The Company designated these instruments as cash flow hedges ~~and~~ deemed effective upon initiation. The interest rate swaps are recognized on the balance sheet at fair value. Changes in fair value are recorded within other comprehensive gain (loss) on the Consolidated Balance Sheet and reclassified into the Consolidated Statement of Operations as interest expense in the period in which the underlying transaction affects earnings.

The fair values of the derivative financial instruments included in the Consolidated Balance Sheets consisted of the following:



(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

At ~~September 30, 2018, the fair value of the interest rate swaps~~March 31, 2019, there was ~~an asset of $0.6 million included within other long-term assets in the Company's accompanying Consolidated Balance Sheet with~~ a ~~corresponding~~ cumulative unrealized ~~gain~~loss of ~~$0.4~~$3.4 million, net of tax, related to these interest rate swaps included in accumulated other comprehensive ~~gain (loss).~~income loss. This ~~gain~~loss would be immediately recognized in the Consolidated Statement of Operations if these instruments fail to meet certain cash flow hedge requirements. As of ~~September 30, 2018,~~March 31, 2019, the amount included in accumulated other comprehensive ~~gain~~loss related to the interest rate swaps to be reclassified into earnings during the next 12 months is not material. Refer to Note 7, "Fair Value Measurements of Financial Instruments" for more information on how the interest rate swaps are valued.

Interest Expense

Interest expense consisted of the following:



	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

Three months ended September 30, Nine months ended September 30,
2018 2017 2018 2017
(in thousands)

Tranche B-1 Term Loan coupon $ 1,755
$ 10,803
$ 11,496
$ 30,509
Tranche B-2 Term Loan coupon 20,447
—
45,976
—
FILO Term Loan coupon 6,901
—
15,241
—
Revolving Credit Facility 285
—
655
—
Terminated revolving credit facility —
1,188
316
3,982
Amortization of discount and debt issuance costs 3,659
550
8,954
1,800
Subtotal 33,047
12,541
82,638
36,291
Notes:
Coupon 707
1,078
2,121
3,210
Amortization of conversion feature 1,655
2,422
4,898
7,156
Amortization of discount and debt issuance costs 244
321
731
938
Total Notes 2,606
3,821
7,750
11,304
Other 79
(23 ) 60
705
Interest expense, net $ 35,732
$ 16,339
$ 90,448
$ 48,300

NOTE 6. EQUITY METHOD INVESTMENTS

In February 2019, the Company contributed its China business in exchange for 35% ownership of each of the newly formed joint ventures (the “HK JV” and the "China JV"). The HK JV includes the operation of the cross-border China e-commerce business, and has an exclusive right to use the Company’s trademarks to manufacture and distribute the Company’s products in China (excluding Hong Kong, Taiwan and Macau) via e-commerce channels. The China JV is a retail-focused joint venture to operate GNC's brick-and-mortar retail business in China and it will have an exclusive right to use the Company's trademarks to manufacture and distribute the Company's products in China (excluding Hong Kong, Taiwan and Macau) via retail stores and pharmacies. The HK JV closed in February 2019 and the China JV agreement is expected to be completed in the second or third quarter of 2019 following the satisfaction of certain routine regulatory and legal requirements.

In March 2019, the Company received $101 million from IVC and contributed the net assets of the Nutra manufacturing and Anderson facilities in exchange for an initial 43% equity interest in a newly formed joint venture (the “Manufacturing JV”). In addition, the Company made a capital contribution of $10.7 million to the Manufacturing JV for its share of short-term working capital needs. Over the next four years, GNC expects to receive an additional $75 million, adjusted up or down based on the Manufacturing JV's future performance, from IVC as IVC’s ownership of the joint venture increases to 100%. The Manufacturing JV is responsible for the manufacturing of the products previously produced by the Company’s Nutra manufacturing facility.

Gain (loss) from the net asset exchange

In connection with the formation of the joint ventures, the Company deconsolidated its China business and the Nutra manufacturing business effective in the first quarter of 2019 and recorded a pre-tax gain of $5.8 million and loss of $25.3 million, respectively, which is recorded within loss on net asset exchange for the formation of the joint ventures on the Consolidated Statements of Operations. The $5.8 million gain from the Harbin transaction is calculated based on the difference between the fair value of the 35% equity interest in the HK JV and China JV, less the carrying value of the contributed China business, including $2.4 million of cash, and third-party closing fees. The $25.3 million loss from the Manufacturing JV transaction is calculated based on the fair value of the 43% equity interest retained in the Manufacturing JV and the $101 million in cash received, less the carrying value of the contributed Nutra and Anderson facilities and third-party closing fees.

The Company's interest in the joint ventures are accounted for as equity method investments due to the Company’s ability to exercise significant influence over the management decisions of the joint ventures. Under the equity method, the Company's share of profits and losses from the joint ventures is recorded within equity income (loss) from equity method investments in the Consolidated Statement of Operations. The following table provides a reconciliation of equity method investments on the Company’s Consolidated Balance Sheets:



	March 31, 2019		December 31, 2018
	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	$	—

In connection with the transaction with IVC, the Company entered into a lease for warehouse space within the Anderson facility. Refer to Note 8, "Leases" for more information on the lease with the Manufacturing JV. Subsequent to the formation of the Manufacturing JV, the Company purchased approximately $21 million finished goods from the Manufacturing JV during the period ended March 31, 2019 and had approximately $20 million and $4 million accounts payable and accounts receivable, respectively, outstanding as of March 31, 2019. The intra-entity transactions between the Company and the HK JV, which primarily consist of wholesale sales, were immaterial during the period ended March 31, 2019.

NOTE 7. FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

Accounting Standards Codification 820, Fair Value Measurements and Disclosuresdefines fair value as a market-based measurement that should be determined based on the assumptions that marketplace participants would use in pricing an asset or liability. As a basis for considering such assumptions, the standard establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

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.

The carrying amounts of cash and cash equivalents, receivables, accounts payable, accrued liabilities and the Revolving Credit Facility approximate their respective fair values. Based on the interest rates currently available and their underlying risk, the carrying value of franchise notes receivable recorded in other long-term assets approximates its fair value.

The carrying ~~values~~value and estimated fair ~~values~~value of the ~~interest rate swap assets and~~forward contracts for the ~~term loans,~~issuance of convertible preferred stock, the Term Loan Facility, net of discount, ~~and~~ Notes (net of the equity component classified in stockholders' equity and discount) and the interest rate swaps were as follows:


	September 30, 2018				December 31, 2017				March 31, 2019				December 31, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in thousands)								(in thousands)
Assets:
Interest rate swaps	$	596	$	596	$	—	$	—
Forward contracts for the issuance of convertible preferred stock									$	—	$	—	$	88,942	$	88,942
Liabilities:
Tranche B-1 Term Loan	$	148,402	$	146,176	$	1,130,320	$	930,592	$	—	$	—	$	147,289	$	145,080
Tranche B-2 Term Loan	647,366		642,511		—		—		446,799		430,938		554,760		511,766
FILO Term Loan	263,403		269,330		—		—		264,768		267,204		264,086		260,125
Notes	173,591		135,184		167,988		85,044		177,440		134,854		175,504		131,628
Interest rate swaps									4,989		4,989		3,210		3,210

The forward contracts for the issuance of convertible preferred stock are measured at fair value, as of the valuation date, using a single factor binomial lattice model (the "Lattice Model") which incorporates the terms and conditions of the convertible preferred stock and is based on changes in the prices of the underlying common share price over successive periods of time. Key assumptions of the Lattice Model include the current price of the underlying stock and its historical and expected volatility, risk-neutral interest rates and the instruments remaining term. These assumptions require significant management judgment and are considered Level 3 inputs. The forward contracts were revalued at each reporting period with changes in fair value recognized in the Consolidated Statements of Operations. The forward contracts settled upon issuance on January 2, 2019 and February 13, 2019.

The fair values of the term loans were determined using the instrument’s trading value in markets that are not active, which are considered Level 2 inputs. The fair value of the Notes was determined based on quoted market prices and bond terms and conditions, which are considered Level 2 inputs. The Company's interest rate swaps are carried at fair value, which is based primarily on Level 2 inputs utilizing readily observable market data, such as LIBOR forward rates, for all substantial terms of the interest rate swap contracts and the assessment of nonperformance risk.

NOTE 8. LEASES

The Company has operating leases for retail stores, distribution centers, other leased office locations, vehicles and certain equipment with remaining lease terms of 1 year to 14 years, some of which include options to extend the leases for up to 10 years. On the Company’s Consolidated Balance Sheets as of March 31, 2019, the Company had lease liabilities of $518.7 million, of which $117.1 million are classified as current, and right-of-use assets of $401.5 million.

The Company has elected to apply the short-term lease exemption for all asset classes and excluded them from the balance sheet. Lease payments for short-term leases are recognized on a straight-line basis over the lease term. The short-term rent expense recognized during the three months ended March 31, 2019 is immaterial. The components of the Company's rent expense, which is recorded within cost of sales on the Consolidated Statements of Operations, was as follows:



	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

(1) Includes percent and contingent rent, landlord related taxes and common operating expenses.

The weighted average remaining lease term and weighted average discount rate were as follows:



	Three months ended March 31, 2019

Weighted average remaining lease term	4.6 years
Weighted average discount rate	10	%

Supplemental cash flow information related to leases was as follows:



	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

The Company recorded sublease revenue, within revenue on the Consolidated Statements of Operations, of $11.0 million and $11.8 million in the three months ended March 31, 2019 and 2018, respectively, relating to subleases with its franchisees, which includes rental income and other occupancy related items.

Maturities of the lease liabilities (undiscounted lease payments, as defined in Note 2 "Basis of Presentation") as of March 31, 2019 were as follows:



	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

(1) Includes various leases for warehouses, vehicles, and various equipment at our facility

As of March 31, 2019, leases that the Company has entered into but have not yet commenced are immaterial.

In connection with the transaction with IVC for the Manufacturing JV effective March 1, 2019, the Company leased warehouse space within the Anderson facility from the Manufacturing JV for a term of one year. The lease was accounted for as sale leaseback transaction and classified as an operating lease included in the current lease liabilities on the Consolidated Balance Sheet.

Disclosures related to periods prior to adoption of ASU 2016-02

The Company adopted ASU 2016-02 using a modified retrospective adoption method at January 1, 2019 as noted in Note 2. "Basis of Presentation." As required, the following disclosure is provided for periods prior to adoption. Minimum future rent obligations for non-cancelable operating leases, excluding optional renewal periods, were as follows for the period ending December 31, 2018 and exclude landlord related taxes, common operating expenses, and percent and contingent rent.



	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

(1) Includes various leases for warehouses, vehicles, and various equipment at our facility

NOTE 9. CONTINGENCIES

The Company is engaged in various legal actions, claims and proceedings arising in the normal course of business, including claims related to breach of contracts, product liability matters, intellectual property matters and employment-related matters resulting from the Company's business activities.

The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred and the amount of such loss can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal matters that could affect the amount of any accrual and developments that would make a loss contingency both probable and reasonably estimable. If a loss contingency is not both probable and estimable, the Company does not establish an accrued liability.

The Company's contingencies are subject to substantial uncertainties, including for each such contingency the following, among other factors: (i) the procedural status of the case; (ii) whether the case has or may be certified as a class action suit; (iii) the outcome of preliminary motions; (iv) the impact of discovery; (v) whether there are significant factual issues to be determined or resolved; (vi) whether the proceedings involve a large number of parties and/or parties and claims in multiple jurisdictions or jurisdictions in which the relevant laws are complex or unclear;

(vii) the extent of potential damages, which are often unspecified or indeterminate; and (viii) the status of settlement discussions, if any, and the settlement posture of the parties. Consequently, except as otherwise noted below with regard to a particular matter, the Company cannot predict with any reasonable certainty the timing or outcome of the legal matters described below, and the Company is unable to estimate a possible loss or range of ~~loss.~~loss for such matters. If the Company ultimately is required to make any payments in connection with an adverse outcome in any of the matters discussed below, it is possible that it could have a material adverse effect on the Company's business, financial condition, results of operations or cash flows.

As a manufacturer and retailer of nutritional supplements and other consumer products that are ingested by consumers or applied to their bodies, the Company has been and is currently subjected to various product liability claims. Although the effects of these claims to date have not been material to the Company, it is possible that current and future product liability claims could have a material adverse effect on its business or financial condition, results of operations or cash flows. The Company currently maintains product liability insurance with a deductible/retention of $4.0 million per claim with an aggregate cap on retained loss of $10.0 million per policy year. The Company typically seeks and has obtained contractual indemnification from most parties that supply raw materials for its products or that manufacture or market products it sells. The Company also typically seeks to be added, and has been added, as an additional insured under most of such parties' insurance policies. However, any such indemnification or insurance is limited by its terms and any such indemnification, as a practical matter, is limited to the creditworthiness of the indemnifying party and its insurer, and the absence of significant defenses by the insurers. Consequently, the Company may incur material product liability claims, which could increase its costs and adversely affect its reputation, revenue and operating income.

Litigation

DMAA / Aegeline Claims. Prior to December 2013, the Company sold products manufactured by third parties that contained derivatives from geranium known as 1.3-dimethylpentylamine/ dimethylamylamine/ 13-dimethylamylamine, or "DMAA," which were recalled from the Company's stores in November 2013, and/or Aegeline, a compound extracted from bael trees. As of ~~September 30, 2018,~~March 31, 2019, the Company was named in 27 personal injury lawsuits involving products containing DMAA and/or Aegeline.

~~As a general matter, the proceedings associated with these personal injury cases, which generally seek indeterminate money damages, are in the early stages, and any losses that may arise from~~The majority of these matters are ~~not probable or reasonably estimable at this time.~~currently stayed pending final resolution. One matter is scheduled for trial in June 2019.

The Company is contractually entitled to indemnification by its third-party vendors with regard to these matters, although the Company’s ability to obtain full recovery in respect of any such claims against it is dependent upon the creditworthiness of the vendors and/or their insurance coverage and the absence of any significant defenses available to ~~its insurer.~~their insurers.

California Wage and Break Claims. On February 29, 2012, former Senior Store Manager, Elizabeth Naranjo, individually and on behalf of all others similarly situated, sued General Nutrition Corporation in the Superior Court of the State of California for the County of Alameda. The ~~class action~~ complaint contains eight causes of action, alleging, among other matters, meal, rest break and overtime violations for which indeterminate money damages for wages, penalties, interest, and legal fees are sought. In June 2018, the Court granted in part and denied in part the Company's Motion for Decertification. In August 2018, the plaintiff voluntarily dismissed the class action claims alleging overtime violations. As of ~~September 30, 2018,~~March 31, 2019, an immaterial liability has been accrued in the accompanying financial statements. The Company intends to vigorously defend against the remaining class action claims asserted in this ~~action, and to seek decertification as to some or all of the claims following additional discovery. It~~action. Trial is ~~expected that the trial will occur in~~currently scheduled for September 2019.

Pennsylvania Fluctuating Workweek. On September 18, 2013, Tawny Chevalier and Andrew Hiller commenced a class action in the Court of Common Pleas of Allegheny County, Pennsylvania. Plaintiff asserted a claim against the Company for a purported violation of the Pennsylvania Minimum Wage Act ("PMWA"), challenging the Company's utilization of the "fluctuating workweek" method to calculate overtime compensation, on behalf of all employees who worked for the Company in Pennsylvania and who were paid according to the fluctuating workweek method. In October 2014, the Court entered an order holding that the use of the fluctuating workweek method violated the PMWA. In September 2016, the Court entered judgment in favor of Plaintiffs and the class in an immaterial amount, which has been recorded as a charge in the accompanying Consolidated Financial Statements. Plaintiffs subsequently filed a petition for an award of attorney's fees, costs and incentive payment. The court awarded an immaterial amount in legal fees. The Company appealed ~~from~~ the adverse judgment and the award of attorney's fees. On December 22, 2017, the Pennsylvania Superior Court held that the Company correctly determined the "regular rate" by dividing

weekly compensation by all hours worked (rather than 40), but held that the regular rate must be multiplied by 1.5 (rather than 0.5) to determine the amount of overtime owed. Taking accumulated interest into account, the net result of the Superior Court's decision was to reduce the Company's liability by an immaterial amount, which has been reflected in the accompanying Consolidated Financial Statements. The Company filed a petition for appeal to the Pennsylvania Supreme Court on January 22, 2018. The Pennsylvania Supreme Court accepted the Company's petition for appeal and the Company filed its appellant’s brief on August 27, 2018. ~~The appellees filed their brief on September 26, 2018. It is anticipated that oral~~Oral argument ~~will occur~~occurred in ~~early to mid-2019.~~April 2019 and the Company awaits the Court’s ruling.

Jason Olive v. General Nutrition Corp. In April 2012, Jason Olive filed a complaint in the Superior Court of California, County of Los Angeles, for misappropriation of likeness in which he alleges that the Company continued to use his image in stores after the expiration of the license to do so in violation of common law and California statutes. Mr. Olive is seeking compensatory, punitive and statutory damages and attorneys’ fees and costs. The trial in this matter began on July 20, 2016 and concluded on August 8, 2016. The jury awarded plaintiff immaterial amounts for actual damages and emotional distress damages, which are accrued in the accompanying Consolidated Financial Statements. The jury refused to award plaintiff any of the profits he sought to disgorge, or punitive damages. The court entered judgment in the case on October 14, 2016. In addition to the verdict, the Company and Mr. Olive sought attorneys' fees and other costs from the Court. The Court refused to award attorney's fees to either side but awarded plaintiff an immaterial amount for costs. Plaintiff has appealed the judgment, and separately, the order denying attorney's fees. The Company has cross-appealed the judgment and the Court's denial of attorney fees. Argument occurred in October 2018. On November 2, 2018, the Court affirmed the ~~trail~~trial court's decision in part and reversed in part, reversing the denial of Mr. Olive's motion for attorneys' fees and remanding the matter to the trial court for further proceedings regarding his attorneys' fees and costs. On November 16, 2018, the Company filed a motion for reconsideration of the Court’s decision. On December 27, 2018, the Court reversed, in part, its November 2, 2018 ruling and held that there was no prevailing party for the purposes of the attorneys’ fee award. Olive has filed a petition for review with the Supreme Court of the State of California and the Company has opposed that petition. On April 17, 2019, the California Supreme Court denied Olive’s petition for review.

Oregon Attorney General. On October 22, 2015, the Attorney General for the State of Oregon sued ~~GNC~~the Company in Multnomah County Circuit Court for alleged violations of Oregon’s Unlawful Trade Practices Act, in connection with its sale in Oregon of certain third-party products. The Company is vigorously defending itself against these allegations. Along with its Amended Answer and Affirmative Defenses, the Company filed a counterclaim for declaratory relief, asking the court to make certain rulings in favor of the Company, and adding USPlabs, LLC and SK Laboratories as counterclaim defendants. In March 2018, the Oregon Attorney General filed a motion for summary judgment relating to its first claim for relief, which the Company contested. The Company filed a cross motion for

summary judgment on the first claim for relief, which the Oregon Attorney General contested. Following oral argument in August 2018, the Court denied the State’s motion for summary judgment and granted in part and denied in part the Company’s motion for summary judgment. The parties are in the process of exchanging discovery. Trial is currently scheduled to begin in September 2019.

As any losses that may arise from this matter are not probable or reasonably estimable at this time, no liability has been accrued in the accompanying Consolidated Financial Statements.Moreover, the Company does not anticipate that any such losses are likely to have a material impact on the Company, its business or results of operations. The Company is contractually entitled to indemnification and defense by its third-party vendors. Ultimately, however, the Company's ability to obtain full recovery in respect of any such claims against it is dependent upon the creditworthiness of its vendors and/or their insurance coverage and the absence of any significant defenses available to their insurers.

~~Holland and Barrett License Litigation.~~ On September 18, 2014, the Company's wholly-owned affiliate General Nutrition Investment Company ("GNIC") commenced proceedings in the U.K. High Court to determine if the license agreement from March 2003 between GNIC and Holland & Barrett International Ltd and Health and Diet Centers Ltd. (“Defendants”) was validly terminated. GNIC alleged that termination of the entire agreement was warranted due to several material breaches by Defendants, and that the agreement should be terminated related to five licensed GNC trademarks for lack of use for more than five years. On April 7, 2017, the Court issued its judgment that found that GNIC's notice of termination was invalid and while there were several breaches of the agreement, none were sufficiently material to justify termination. Under U.K. procedural rules, GNIC is required to pay some portion of Defendant’s legal costs. As a result, the Company recorded a charge of $2.1 million in the first quarter of 2017 and subsequently reached an agreement with the Defendants in relation to costs. The Defendants appealed part of the Court's judgment concerning findings in relation to the licensed GNIC trademarks, and that appeal was heard at the U.K.'s Court of Appeal in June 2018. In July 2018, the Court found in favor of the Defendants and GNIC was ordered to pay an immaterial amount for Defendants' costs related to the appeal.

E-Commerce Pricing Matters. In April 2016, Jenna Kaskorkis, et al. filed a complaint against General Nutrition Centers, Inc. followed by similar cases brought forth by Ashley Gennock in May 2016 and Kenneth Harrison in December 2016. Plaintiffs allege that the Company's promotional pricing on its website was misleading and did not fairly represent promotions based on average retail prices over a trended period of time being consistent with prices advertised as

promotional. The Company attended a mediation with counsel for all plaintiffs and reached a tentative agreement in the third quarter of 2017 on many of the key terms of a settlement. The matters have been effectively stayed while the parties remain in discussions. The Company currently expects any settlement to be in a form that does not require the recording of a contingent liability, except an immaterial amount the Company has accrued in the accompanying Consolidated Financial Statements.

Government Regulation

In November 2013, the Company received a subpoena from the U.S. Department of Justice ("DOJ") for information related to its investigation of a third party product vendor, USPlabs, LLC. The Company fully cooperated with the investigation of the vendor and the related products, all of which were discontinued in 2013. In December 2016, the Company reached agreement with the DOJ in connection with the Company's cooperation, which agreement acknowledges the Company relied on the representations and written guarantees of USPlabs and the Company's representation that it did not knowingly sell products not in compliance with the ~~FDCA.~~Federal Food, Drug and Cosmetic Act (the "FDCA"). Under the agreement, which includes an immaterial payment to the federal government, the Company will take a number of actions to broaden industry-wide knowledge of prohibited ingredients and improve compliance by vendors of third party products. These actions are in keeping with the leadership role the Company has taken in setting industry quality and compliance standards, and the Company's commitment over the course of the agreement (60 months) to support a combination of its own and the industry's initiatives. Some of these actions include maintaining and continuously updating a list of restricted ingredients that will be prohibited from inclusion in any products that are sold by the Company. Vendors selling products to the Company for the sale of such products by the Company will be required to warrant that the products sold do not contain any of these restricted ingredients. In addition, the Company will develop and maintain a list of ingredients that the Company believes comply with the applicable provisions of the FDCA.

Environmental Compliance

~~In March 2008,~~

As part of soil and groundwater remediation conducted at the Nutra manufacturing facility pursuant to an investigation conducted in partnership with the South Carolina Department of Health and Environmental Control (the "DHEC") requested that the Company investigate contamination associated with historical activities at its South Carolina facility. These investigations have identified chlorinated solvent impacts in soils and groundwater that extend offsite from the facility. The Company entered into a Voluntary Cleanup Contract with the DHEC regarding the matter on September 24, 2012. Pursuant to such contract, the Company has, we completed additional investigations with the DHEC's ~~approval. The Company installed~~approval, including the installation and ~~began operating~~operation of a pilot vapor extraction system under a portion of the facility in the second half of 2016, which was an immaterial cost to the ~~Company, with DHEC's approval to assess the effectiveness of such a remedial system.~~Company. After an initial monitoring period, ~~of monitoring,~~ in October of 2017 the DHEC approved a work plan for extended monitoring of such system and the contamination into 2021. ~~The~~While the Company contributed the net assets of the Nutra manufacturing and Anderson facilities to the Manufacturing JV in March of 2019 (refer to Note 6 “Equity Method Investments” for additional information), we retained certain liabilities, including historical environmental liabilities, related to the facilities. As such, the Company and the Manufacturing Joint Venture will continue to consult with the DHEC on the next steps in the work after their review of the results of the extended monitoring is complete. At this stage of the investigation, however, it is not possible to estimate the timing and extent of any additional remedial action that may be required, the ultimate cost of remediation, or the amount of ~~the Company's~~our potential liability. Therefore, no liability has been recorded in the Company's Consolidated Financial Statements.

In addition to the foregoing, the Company is subject to numerous federal, state, local and foreign environmental and health and safety laws and regulations governing its operations, including the handling, transportation and disposal of ~~the Company's~~ non-hazardous and hazardous substances and wastes, as well as emissions and discharges from its operations

into the environment, including discharges to air, surface water and groundwater. Failure to comply with such laws and regulations could result in costs for remedial actions, penalties or the imposition of other ~~liabilities.~~liabilities, including certain historic liabilities retained by the Company pursuant to the terms of the Manufacturing JV. New laws, changes in existing laws or the interpretation thereof, or the development of new facts or changes in their processes could also cause the Company to incur additional capital and operating expenditures to maintain compliance with environmental laws and regulations and environmental permits. The Company is also subject to laws and regulations that impose liability and cleanup responsibility for releases of hazardous substances into the environment without regard to fault or knowledge about the condition or action causing the liability. Under certain of these laws and regulations, such liabilities can be imposed for cleanup of previously owned or operated properties, or for properties to which substances or wastes that were sent in connection with current or former operations at its facilities. ~~The presence of contamination from such substances or wastes could also adversely affect the Company's ability to sell or lease its properties, or to use them as collateral for financing.~~

From time to time, the Company has incurred costs and obligations for correcting environmental and health and safety noncompliance matters and for remediation at or relating to certain of the Company's current or former properties or properties at which the Company's waste has been disposed. However, compliance with the provisions of national, state and local environmental laws and regulations has not had a material effect upon the Company's capital expenditures, earnings, financial position, liquidity or competitive position. The Company believes it has complied with, and is currently complying with, its environmental obligations pursuant to environmental and health and safety laws and regulations and that any liabilities for noncompliance will not have a

material adverse effect on its business, financial performance or cash flows. However, it is difficult to predict future liabilities and obligations, which could be material.

NOTE 10. MEZZANINE EQUITY

Holdings is authorized to issue up to 60.0 million shares of preferred stock, par value $0.001 per share. On February 13, 2018, the Company entered into a Securities Purchase Agreement (as amended from time to time, the “Securities Purchase Agreement”) by and between the Company and Harbin Pharmaceutical Group Holdings Co., Ltd. (the “Investor”), pursuant to which the Company agreed to issue and sell to the Investor, and the Investor agreed to purchase from the Company, 299,950 shares of a newly created series of convertible preferred stock of the Company, designated the “Series A Convertible Preferred Stock” (the “Convertible Preferred Stock”), for a purchase price of $1,000 per share, or an aggregate of approximately $300 million (the “Securities Purchase”). The Convertible Preferred Stock is convertible into 56.1 million shares of the Company's Common Stock at an initial conversion price of $5.35 per share, subject to customary anti-dilution adjustments. On November 7, 2018, The Company entered into an Amendment to the Securities Purchase Agreement with the Investor. Pursuant to the terms of the Securities Purchase Agreement, the Investor assigned its interest in the Securities Purchase Agreement to Harbin and funded the $300 million investment in three separate tranches. The shares of Convertible Preferred Stock was issued as follows: (i) 100,000 shares of Convertible Preferred Stock issued on November 8, 2018 for a total purchase price of $100 million (the "Initial Issuance"), (ii) 50,000 shares of Convertible Preferred Stock issued on January 2, 2019 for a total purchase price of $50 million (the "Second Issuance") and (iii) 149,950 shares of Convertible Preferred Stock issued on February 13, 2019 for a total purchase price of approximately $150 million (the “Third Issuance”).

Holders of shares of Convertible Preferred Stock are entitled to receive cumulative preferential dividends, payable quarterly in arrears, at an annual rate of 6.5% of the stated value of $1,000 per share, subject to increase in connection with the payment of dividends in kind. Dividends are payable, at the Company's option, in cash from legally available funds or in kind by issuing additional shares of Convertible Preferred Stock with such stated value equal to the amount of payment being made or by increasing the stated value of the outstanding Convertible Preferred Stock by the amount per share of the dividend or in a combination thereof.

As of March 31, 2019, the Company had issued a total of 299,950 shares of Convertible Preferred Stock. The Convertible Preferred Stock was recorded as Mezzanine Equity, net of issuance cost, on the Consolidated Balance Sheets because they are redeemable at the option of the holder if a fundamental change occurs, which includes change in control or delisting. The guaranteed Second Issuance and Third Issuance were considered forward contracts that represented an obligation to both parties until the shares were issued. The forward contracts were recorded at fair value on the Consolidated Balance Sheets as of December 31, 2018, with any changes in fair value recorded in earnings in the Consolidated Statements of Operations. The Company recorded a $16.8 million loss on forward contracts for the issuance of Convertible Preferred Stock during the quarter ended March 31, 2019. Upon issuance of the shares associated with the forward contracts, the carrying value of the forward contracts were recorded to Mezzanine Equity.

As of March 31, 2019, there were $4.7 million cumulative undeclared dividends related to the issued and outstanding Convertible Preferred Stock, of which $3.7 million relate to dividends accumulated in the first quarter of 2019. The cumulative undeclared dividends will not be recorded on the Consolidated Balance Sheets until they are declared. The dividends accumulated in the current period are deducted from earnings available to common stockholders when computing earnings per share. Refer to Note 11, "Earnings Per Share" for more information. As of March 31, 2019, the Company does not believe the redemption of the Convertible Preferred Stock is probable as the occurrence of the contingent events is deemed not probable.

NOTE 9.11. EARNINGS PER SHARE

The following table represents the Company's basic and dilutive weighted-average shares:



	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

Three months ended September 30, Nine months ended September 30,
2018 2017 2018 2017
(in thousands)
Basic weighted average shares 83,412
68,354
83,326
68,296
Effect of dilutive stock-based compensation awards —
215
105
115
Diluted weighted average shares 83,412
68,569
83,431
68,411

For the three months ~~and nine months~~ ended September 30, 2018 and 2017, the following awards were not included in the computation of diluted EPS because the effect of doing so would be anti-dilutive or because certain conditions have not been met with respect to the Company's performance awards.

Three months ended September 30, Nine months ended September 30,

2018^(*)
2017 2018 2017
(in thousands)
Anti-dilutive:
Time-based options and restricted stock awards 3,076
2,381
3,022
2,179
Performance-based restricted stock awards 1,241
—
1,013
—
Performance-based restricted stock awards with a market condition 294
—
—
—
Contingently issuable:
Performance-based restricted stock awards —
62
—
67
Performance-based restricted stock awards with a market condition —
387
308
416
Total stock-based awards excluded from diluted EPS 4,611
2,830
4,343
2,662

~~(*) For the quarter ended September 30, 2018,~~March 31, 2019, all ~~4.6~~4.0 million outstanding stock-based awards were excluded from the computation of diluted ~~EPS~~earnings per share ("EPS") because the Company was in a net loss position and as a result, inclusion of the awards would have been anti-dilutive.

For the three months ended March 31, 2018, the following awards were not included in the computation of diluted EPS because the impact of applying the treasury stock method was antidilutive or because certain conditions have not been met with respect to the Company's performance awards.



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

The Company has applied the if-converted method to calculate dilution on the Convertible Preferred Stock and the Notes in the ~~nine months ended September 30, 2018,~~current quarter, which has resulted in all 42.9 million and 2.9 million shares underlying ~~convertible shares being anti-dilutive. The treasury stock method was used in~~ the ~~prior year periods, which also resulted in~~Convertible Preferred Stock and the ~~underlying shares~~Notes, respectively, being anti-dilutive.

The computations for basic and diluted earnings per common share are as follows:



	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

NOTE ~~10.~~12. SEGMENTS

The Company aggregates its operating segments into three reportable segments, which include U.S. and Canada, International and Manufacturing / Wholesale. ~~The Company fully allocates warehousing~~Warehousing and distribution costs have been allocated to ~~its~~each reportable ~~segments.~~segment based on estimated utilization and benefit. The Company's chief operating decision maker (its chief executive officer) evaluates segment operating results based primarily on performance indicators, including revenue and operating income. Operating income of each reportable segment excludes certain items that are managed at the consolidated level, such as corporate costs. The Manufacturing / Wholesale segment manufactures and sells product to the U.S. and Canada and International segments at cost with a markup, which is eliminated at consolidation. ~~In connection with the asset sale of Lucky Vitamin on September 30, 2017, their results are included within Other for applicable prior periods to ensure comparability.~~

The following table represents key financial information for each of the Company's reportable segments:



	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

Three months ended September 30, Nine months ended September 30,
2018 2017 2018 2017
(in thousands)
Revenue:

U.S. and Canada $ 476,519

$ 492,383

$ 1,506,250

$ 1,556,818
International 51,407

48,458

140,107

132,022
Manufacturing / Wholesale:

Intersegment revenues 63,695

58,037

193,596

175,335
Third party 52,259

51,286

159,305

163,117
Subtotal Manufacturing / Wholesale 115,954

109,323

352,901

338,452
Total reportable segment revenues 643,880

650,164

1,999,258

2,027,292
Other —
20,826
—
66,182
Elimination of intersegment revenues (63,695 )
(58,037 )
(193,596 )
(175,335 )
Total revenue $ 580,185

$ 612,953

$ 1,805,662

$ 1,918,139
Operating income:

U.S. and Canada $ 11,466

$ 31,864

$ 100,559

$ 134,844
International 16,468

16,169

46,624

46,825
Manufacturing / Wholesale 16,869

19,168

47,722

55,072
Total reportable segment operating income 44,803

67,201

194,905

236,741
Corporate costs (24,732 ) (25,558 ) (79,511 ) (79,839 )
Other (110 ) (1,842 ) (160 ) (20,760 )
Unallocated corporate costs and other (24,842 )
(27,400 )
(79,671 )
(100,599 )
Total operating income 19,961

39,801

115,234

136,142
Interest expense, net 35,732
16,339
90,448
48,300
Loss on debt refinancing —
—
16,740
—
(Loss) income before income taxes $ (15,771 ) $ 23,462
$ 8,046
$ 87,842

Refer to Note 3, ~~"Revenue,"~~"Revenue" for more information on the Company's reportable segments.

NOTE ~~11.~~13. INCOME TAXES

The Company recognized ~~$7.2~~$2.0 million of income tax ~~benefit~~expense during the three months ended ~~September 30, 2018~~March 31, 2019 compared with ~~$2.4~~$1.7 million ~~of income tax expense~~ in the prior year quarter. The ~~Company recognized $2.9 millionof income tax benefit during the nine months ended September 30, 2018 compared with $25.4 million of~~Company's income tax expense is based on income, statutory tax rates and tax planning opportunities available in the ~~same period~~jurisdictions in ~~2017.~~which it operates. The Company’s year-to-date tax provision is calculated by applying the most recent annualized effective tax rate to year-to-date pre-tax ordinary income. The Company’s most recent annualized effective tax rate was impacted by a gain for tax purposes resulting from the newly formed manufacturing joint venture as well as the establishment of a partial valuation allowance for attributes generated in the current year that may not be realizable. The tax impact of unusual or infrequent items are recorded discretely in the interim period in which they occur. The Company discretely recorded the tax impact of the loss on forward contracts for the ~~quarter ended September 30, 2018~~issuance of convertible preferred stock. This loss was ~~significantly impacted by $3.6 million in discrete tax benefits associated with finalization of the Company's 2017 federal~~not deductible for income tax ~~return.~~purposes.

At ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the Company had ~~$6.4~~$6.6 million and ~~$5.8~~$6.9 million of unrecognized tax benefits, respectively, excluding interest and penalties, which if recognized, would affect the effective tax rate. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company accrued ~~$1.9~~$2.1 million at ~~September 30, 2018~~March 31, 2019 and $2.0 million at December 31, ~~2017,~~2018, for potential interest and penalties associated with uncertain tax positions. To the extent interest and penalties are not assessed with respect to the ultimate settlement of uncertain tax positions, amounts previously accrued will be reversed as a reduction to income tax expense.

On December 22, 2017, Staff Accounting Bulletin No. 118 was issued to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act. The Consolidated Financial Statements for the year ended December 31, 2017 included an immaterial provisional tax impact related to deemed repatriated earnings. The ultimate impact may differ from these provisional amounts, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made and additional regulatory guidance that may be issued. Any subsequent adjustment will be recorded to current tax expense in the quarter of 2018 when the analysis is complete.

GNC Holdings, Inc. files a consolidated federal tax return and various consolidated and separate tax returns as prescribed by the tax laws of the state, local and international jurisdictions in which it and its subsidiaries operate. The statutes of limitation for the Company’s U.S. federal income tax returns are closed for years through 2013. The Company has various state and local jurisdiction tax years open to examination (the earliest open period is generally 2011).

~~NOTE 12. SUBSEQUENT EVENTS~~

As previously disclosed in the Company’s 2017 10-K, on February 13, 2018, the Company entered into a Securities Purchase Agreement (as amended from time to time, the “Securities Purchase Agreement”) by and between the Company and Harbin Pharmaceutical Group Holdings Co., Ltd. (the “Investor”), pursuant to which the Company agreed to issue and sell to the Investor, 299,950 shares of a newly created series of convertible perpetual preferred stock of the Company, designated as “Series A Convertible Preferred Stock” (the “Convertible Preferred Stock”), for a purchase price of $1,000 per share, or an aggregate of approximately $300 million. The Convertible Preferred Stock is convertible into shares of the common stock of the Company (the “Common Stock”) at an initial conversion price of $5.35 per share, subject to customary antidilution adjustments. Pursuant to the terms of the Securities Purchase Agreement, the Investor assigned its interest in the Securities Purchase Agreement to Harbin Pharmaceutical Group Co., Ltd., a company incorporated in the People’s Republic of China. In addition, the Securities Purchase Agreement provides for the parties to use their respective reasonable best efforts to negotiate in good faith definitive documentation with respect to a commercial joint venture in China which would be controlled 65% by the Investor and 35% by the Company.

On November 7, 2018, the Company and Harbin entered into an Amendment to the Securities Purchase Agreement (the “SPA Amendment”) for the funding of the Convertible Preferred Stock purchase and entered into definitive documentation (the "JV Framework Agreement") with respect to joint ventures in Hong Kong and China (collectively, the "China JV").

Pursuant to the SPA Amendment, the Company and Harbin agreed to complete the securities purchase as follows: (i) 100,000 shares of Preferred Stock issued by November 9, 2018 for a total purchase price of $100 million (the “Initial Issuance”), (ii) 50,000 shares of Preferred Stock issued by December 28, 2018 for a total purchase price of $50 million (the “First Subsequent Issuance”) and (iii) 149,950 shares of Preferred Stock issued by February 13, 2019 for a total purchase price of approximately $150 million (the “Second Subsequent Issuance” and together with the Initial Issuance and the First Subsequent Issuance, the “Issuances”). The SPA Amendment also provides that Harbin will be entitled to designate two directors to the Company's board following the closing of the Initial Issuance,

~~and an additional three directors (including at least two independent directors) upon completion of the Second Subsequent Issuance.~~

The execution of the JV Framework Agreement satisfies the closing condition related to the definitive documentation of the China JV. In addition, Harbin has advised the Company that the required foreign exchange registration with the State Administration of Foreign Exchange (SAFE) for the People’s Republic of China has been completed. The companies completed the Initial Issuance on November 8, 2018. Each of the First Subsequent Issuance and the Second Subsequent Issuance are subject to customary closing conditions. The formation and completion of the China JV is conditioned upon completion of the Second Subsequent Issuance. There can be no assurance that the remaining applicable closing conditions will be satisfied or waived within the timeframes described above.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q. The following information presented for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ was prepared by management, is unaudited, and was derived from our unaudited ~~Consolidated Financial Statements~~consolidated financial statements and accompanying notes. In the opinion of management, all adjustments necessary for a fair statement of our financial position and operating results for such periods and as of such dates have been included.

Forward-Looking Statements

This Quarterly Report on Form 10-Q and any documents incorporated by reference herein or therein include forward-looking statements within the meaning of federal securities laws. Forward-looking statements include statements that may relate to our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs and other information that is not historical information. Forward-looking statements can often be identified by the use of terminology such as ~~“subject~~"subject to,~~” “believes,” “anticipates,” “plans,” “expects,” “intends,” “estimates,” “projects,” “may,” “will,” “should,” “can,”~~" "believe," "anticipate," "plan," "expect," "intend," "estimate," "project," "may," "will," "should," "would," "could," "can," the negatives thereof, variations thereon and similar expressions, or by discussions ~~regarding dividend, share repurchase plan,~~of strategy ~~and outlook.~~

All forward-looking statements, including, without limitation, our examination of historical operating trends, are based upon our current expectations and various assumptions. We believe there is a reasonable basis for our expectations and beliefs, but they are inherently ~~uncertain. We may not realize our expectations,~~uncertain and ~~our beliefs may not prove correct. Many factors could affect future performance~~subject to significant business, economic, competitive, regulatory 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 our products; costs of compliance and any failure on our 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; conditions to the subsequent closings of the Harbin transaction may not be satisfied; the occurrence of any event, change or other circumstances that could give rise to the termination of the Securities Purchase Agreement with Harbin; other risks, contingencies and uncertainties, most of which are difficult to ~~consummation~~predict and many of the Harbin transaction, including the risk that the Harbin transaction, the first subsequent closing and/or the second subsequent closing will not be consummated within the expected time period or at all; or failure to successfully execute thewhich are beyond our 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.control. A detailed discussion of risk and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section titled “Risk Factors” in our ~~2017~~2018 10-K.

In addition, we operate in a highly competitive and rapidly changing environment; therefore, new risk factors can arise, and it is not possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on our business or the extent to which any individual risk factor, or combination of risk factors, may cause results to differ materially from those contained in any forward-looking statement. Consequently, forward-looking statements should be regarded solely as our current plans, estimates and beliefs. You should not place undue reliance on forward-looking ~~statements.~~statements as a prediction of actual results. We cannot guarantee future results, events, levels of activity, performance or achievements. The forward-looking statements included in this Quarterly Report on Form10-Q are made as of the date of this filing. We do not undertake and specifically decline any obligation to update, republish or revise forward-looking statements to reflect future events or circumstances or to reflect the occurrences of unanticipated events.

Business Overview

GNC is a global health and wellness brand with a diversified, ~~multi-channel~~omni-channel business. Our assortment of performance and nutritional supplements, vitamins, herbs and greens, health and beauty, food and drink and other general merchandise features innovative private-label products as well as nationally recognized third-party brands,

many of which are exclusive to GNC. We derive our revenues principally from company-owned retail locations, domestic and international franchise activities, e-commerce, ~~third-party contract manufacturing,~~ and corporate partnerships. We have approximately ~~8,500~~8,200 locations in approximately 50 countries.

We believe the competitive strengths that position us as a leader in the specialty nutritional supplement space include our: well-recognized brand; stable base of long-term customers; geographically diverse store base; vertically integrated operations and differentiated service model designed to enhance the customer experience.

Our Current Strategy

InKey elements of our business strategy are detailed below:


•	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.

Our objective is to offer a broad and deep mix of products for consumers interested in living well, whether they are looking to treat a health-related issue, maintain their overall wellness, or improve their performance. Our premium, value-added offerings include both proprietary GNC-branded products and other nationally recognized third-party brands.

We believe our depth of brands, exclusive products and range of merchandise, combined with the ~~first quarter of 2018,~~customer support and service we ~~extended~~offer, differentiates us and allows us to effectively compete against food, drug and mass channel players, specialty stores, independent vitamin, supplement and natural food shops and online retailers.

•

Product development and innovation.We 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.

We believe our ~~debt maturity and announced~~sector-leading innovation capability is a significant competitive advantage. Our strategic partnership with ~~Harbin Pharmaceutical Group Co., Ltd., which includes the issuance of convertible preferred stock~~International Vitamin Corporation ("IVC") will allow us to further focus on innovation while IVC drives increased efficiencies in manufacturing. Refer to Item 1, "Financial Statements, "Note 6, "Equity Method Investments" for more information. GNC has demonstrated strength in developing unique, branded, and ~~a commercial joint venture.~~

In November 2018, we also announced the completion of the funding of a $100 million investment by Harbin Pharmaceutical Group Co., Ltd. (“Harbin”) in GNC. We have issued 100,000 shares of convertible preferred stock to Harbin in connection with the funding of the first tranche of the previously announced $300 million strategic investment by Harbin. Harbin has agreed to fund an additional $50 million investment by December 28, 2018 and the final tranche of approximately $150 million by February 13, 2019. GNC and Harbin will complete the formation of the previously announced joint ventures in Hong Kong and China upon the funding of the final tranche of Harbin’s investment in GNC.

~~Proprietary~~scientifically verified products and ~~innovation capabilities.~~has a long history of delivering new ingredients and reformulations. We directly employ scientists, nutritionists, formulators, chemists, engineers and quality control experts and have access to a wide range of world-class medical research facilities and consultants.


•	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.

We further differentiate ourselves from competitors through development of our well-trained sales associates, who are aided in becoming trusted advisors with regular training that focuses on solution-based selling, and through in-store technology such as tablets, which allow associates to view customers’ purchase history and preferences. With that knowledge, and help from sales tools built into the tablet platform, associates can engage customers in conversation, share product information and testimonials before and after pictures, recommend solutions and help customers add complimentary products and build wellness regimens.

Our loyalty programs allow us to develop and maintain a large and loyal customer base, provide targeted offers and information, and connect with our customers on a regular basis. We harness data generated by these programs to better understand customers’ buying behaviors and needs, so we can deliver a stronger experience, bring like-minded consumers into the channel and make well-informed decisions about the business.

•

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.

Through GNC.com and our Amazon.com storefront, customers can research and purchase our products online. We believe ~~that product innovation is critical to~~ our growth, brand image superiority and competitive advantage. Through market research, interactions with customers and partnerships with leading industry vendors, we work to identify shifting consumer trends that can inform our product development process. We believe that our brand portfolio of proprietary products, which are available in our stores, on GNC.com, on our market place on Amazon.com and other third-party websites, advances GNC's brand presence and our general reputation as a leading retailer of health and wellness products. GNC brand mix for domestic system-wide sales increased to 52% in the third quarter of 2018 compared with 45% in the third quarter of 2017.

~~During the third quarter, we launched the nature-inspired Earth Genius product line that spans multiple categories and TamaFlex, an exclusive blend of botanicals proven effective for joint health.~~

~~Loyalty programs.~~ As of September 30, 2018, our loyalty membership increased 10.7% to 16.2 million members compared with June 30, 2018. Included in our loyalty membership at September 30, 2018 are approximately 1.0 million members enrolled in PRO Access.

~~Customer experience~~. Our goal is to create a consistent and satisfying experience for all of our customers, whether they find us in a retail store, online, or on a mobile device, and we are investing in omnichannel capabilities and the in-store experience. Our store base is a competitive advantage, ~~over online-only competitors especially as we continue~~allowing customers to ~~develop~~experience our ~~associates to deliver thoughtful assistance~~products and ~~advice.~~

get expert advice from an associate.

~~International~~. Our ~~international business is~~omni-channel model can enhance the customer experience and increase the lifetime value of a ~~growth opportunity~~GNC customer, and we are ~~focused~~implementing strategies to blend our digital, online and in-store platforms. These initiatives include increased cross-channel marketing, online and in-store subscription services, giving customers the option of picking up online purchases in GNC stores, shipping products purchased via e-commerce directly from stores, and additional educational content, information and advice on developing partnerships that can grow our reach in attractive global markets. The partnership with Harbin will continue to strengthen our balance sheet and position us to fully leverage the opportunity in China through Harbin’s extensive distribution, marketing and sales infrastructure.

GNC.com.

~~Store Optimization~~. As we focus on optimizing profitability, we performed a detailed review of our store portfolio and identified approximately 700-900 stores in the U.S. and Canada that will be closed within the next three years at the end of their lease terms. This review also identified other stores in which we are considering alternatives such as seeking lower rent or a shorter term.

•

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.

Key Performance Indicators

The primary key performance indicators that senior management focus on include revenue and operating income for each segment, which are discussed in detail within the section titled "Results of Operations", as well as same store sales growth.

The table below presents the key components of U.S Company-owned same store sales:


	2018						2017						Three months ended March 31,
	Q1 3/31		Q2 6/30		Q3 9/30		Q1 3/31		Q2 6/30		Q3 9/30		2019		2018
Contribution to same store sales
Domestic Retail same store sales	(1.2	)%	(4.2	)%	(3.4	)%	(3.6	)%	(0.5	)%	(1.2	)%	(1.9	)%	(1.2	)%
GNC.com contribution to same store sales	1.7	%	3.8	%	1.3	%	(0.3	)%	(0.4	)%	2.5	%	0.3	%	1.7	%
Total Same Store Sales	0.5	%	(0.4	)%	(2.1	)%	(3.9	)%	(0.9	)%	1.3	%	(1.6	)%	0.5	%

Same store sales ~~for company-owned stores~~ include point-of-sale retail sales from all our company-owned domestic stores which have been operating for twelve full months following the opening ~~period.~~day and retail sales from GNC.com. We are an ~~omnichannel~~omni-channel 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 our wholly-owned website GNC.com and third-party websites, including Amazon (the sales from which are included in the GNC.com business unit) where product assortment and price are controlled by us, ~~and the~~in which purchases ~~from which~~ are fulfilled by direct shipment to the customer from one of our distribution facilities ~~as well as~~or from 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. Excluding the impact of higher loyalty points redemption in the current year periods compared with the prior year periods as our program matures, same store sales decreased 1.3% in the three months ended September 30, 2018 and increased 0.8% in the nine months ended September 30, 2018 for U.S. company-owned stores including GNC.com.

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.

We also provide retail comparable same ~~store~~stores sales of our franchisees as well as our Canada business if meaningful to current results. While retail sales of franchisees are not included in the Consolidated Financial Statements, the metric serves as a key performance indicator of our franchisees, which ultimately impacts wholesale sales and royalties and fees received from franchisees. We compute same store sales for our 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.

Non-GAAP Measures

We have included ~~the year-over-year change in segment operating income as a percentage of revenue for our U.S. and Canada and International segments~~non-GAAP financial measures below, ~~under "Results of Operations"~~which have been adjusted to exclude the impact of certain ~~items~~transactions because we believe ~~it represents~~such measures represent an effective supplemental means by which to measure our ~~segment’s~~ operating performance. We believe that ~~this metric is~~(i) net (loss) income, (ii) diluted earnings per share, and (iii)

EBITDA, each on an as adjusted basis to exclude certain prior year items, are useful metrics to investors ~~as it enables our~~and enable management and our investors to evaluate and compare our ~~segment’s~~ results from operations in a more meaningful and consistent manner by excluding specific items that are not reflective of ongoing operating results. However, ~~this metric is~~these metrics are not a measurement of our ~~segment’s~~operating performance under GAAP and should not be considered as an alternative to earnings per share, net ~~income, operating~~(loss) 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 our profitability or liquidity. ~~Further, management believes that~~

Reconciliation of Net (Loss) Income and Diluted EPS to Adjusted Net Income and Adjusted EPS

(in thousands, except per share data)



	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

Reconciliation of Net (Loss) Income to Adjusted EBITDA

(in thousands)



	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

(1) The Company applies the ~~presentation of adjusted SG&A, corporate costs, and other non-GAAP measures, presented herein are helpful~~if-converted method to ~~investors as they provide for greater comparability~~calculate the dilution impact of the ~~financial statements between periods.~~convertible senior notes and the convertible preferred stock. For the reported diluted EPS calculation for the three months ended March 31, 2019, the underlying shares of the convertible preferred stock and the convertible senior notes are anti-dilutive. For the adjusted diluted EPS calculation for the three months ended March 31, 2019, the underlying shares of the convertible preferred stock are dilutive and the convertible senior notes are anti-dilutive. Additionally, the reported diluted EPS calculation for the first quarter of 2019 includes the cumulative undeclared dividends of approximately $3.7 million within reported net income. As a result, amounts in the 2019 Diluted EPS column do not sum.

(2) 2019 includes $0.7 million retention and an immaterial refranchising gain. 2018 included $0.8 million retention. The retention expense recognized in 2019 and 2018 relates to an incentive program to retain senior executives and certain other key personnel below the executive level who are critical to the execution and success of the Company's strategy. The total amount awarded was approximately $10 million, of which $1 million was forfeited, which vests in four installments of 25% each over two years. Vesting dates are on November 2018, February 2019, August 2019 and February 2020.

(3) For the three months ended March 31, 2019, the Company utilized a blended federal rate plus a net state rate that excluding the impact of certain state NOL's, state credits and valuation allowance. Additionally, the loss on forward contracts related to the issuance of convertible preferred stock had no tax impact. The Company utilized an annual effective tax rate in 2018, adjusted to exclude discrete items and the tax impact of loss on debt financing.

Results of Operations

(Calculated as a percentage of consolidated revenue unless indicated otherwise)


	Three months ended September 30,				Nine months ended September 30,				Three months ended March 31,
	2018		2017		2018		2017		2019		2018
Revenues:
U.S. and Canada	82.1	%	80.3	%	83.4	%	81.2	%	86.6	%	84.3	%
International	8.9	%	7.9	%	7.8	%	6.9	%	7.3	%	6.6	%
Manufacturing / Wholesale:
Intersegment revenues	11.0	%	9.5	%	10.7	%	9.1	%	6.3	%	10.6	%
Third party	9.0	%	8.4	%	8.8	%	8.5	%	6.1	%	9.1	%
Subtotal Manufacturing / Wholesale	20.0	%	17.9	%	19.5	%	17.6	%	12.4	%	19.7	%
Other	—	%	3.4	%	—	%	3.4	%
Elimination of intersegment revenue	(11.0	)%	(9.5	)%	(10.7	)%	(9.1	)%	(6.3	)%	(10.6	)%
Total net revenues	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Operating expenses:
Cost of sales, including warehousing, distribution and occupancy	68.2	%	67.2	%	66.8	%	66.6	%	64.0	%	65.9	%
Gross profit	31.8	%	32.8	%	33.2	%	33.4	%	36.0	%	34.1	%
Selling, general and administrative	25.8	%	25.5	%	26.0	%	25.1	%	26.3	%	26.5	%
Long-lived asset impairments	2.5	%	0.6	%	0.8	%	1.2	%
Other loss (income), net	—	%	0.3	%	—	%	—	%
Loss on net asset exchange for the formation of the joint ventures									3.5	%	—	%
Other income, net									—	%	—	%
Total operating expenses	96.5	%	93.6	%	93.6	%	92.9	%	93.8	%	92.4	%
Operating income:
U.S. and Canada ^(*)	2.4	%	6.5	%	6.7	%	8.7	%	10.7	%	8.5	%
International ^(*)	32.0	%	33.4	%	33.3	%	35.5	%	34.3	%	36.1	%
Manufacturing / Wholesale ^(*)	14.5	%	17.5	%	13.5	%	16.3	%	21.9	%	12.5	%
Unallocated corporate costs and other
Corporate costs	(4.3	)%	(4.2	)%	(4.4	)%	(4.2	)%	(4.6	)%	(4.4	)%
Loss on net asset exchange for the formation of the joint ventures									(3.5	)%	—	%
Other	—	%	(0.3	)%	—	%	(1.1	)%	—	%	—	%
Subtotal unallocated corporate and other costs	(4.3	)%	(4.5	)%	(4.4	)%	(5.3	)%
Subtotal unallocated corporate, loss on net asset exchange and other costs									(8.1	)%	(4.4	)%
Total operating income	3.4	%	6.5	%	6.4	%	7.1	%	6.3	%	7.7	%
Interest expense, net	6.2	%	2.7	%	5.0	%	2.5	%	5.8	%	3.6	%
Loss on debt refinancing	—	%	—	%	0.9	%	—	%	—	%	2.8	%
Loss on forward contracts for the issuance of convertible preferred stock									3.0	%	—	%
(Loss) income before income taxes	(2.7	)%	3.8	%	0.4	%	4.6	%	(2.5	)%	1.3	%
Income tax (benefit) expense	(1.2	)%	0.4	%	(0.2	)%	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	(1.5	)%	3.4	%	0.6	%	3.3	%	(2.6	)%	1.0	%

(*) Calculated as a percentage of segment revenue.

The following table summarizes the number of our ~~stores~~locations for the periods indicated:


	Nine months ended September 30,				Three months ended March 31,
	2018		2017		2019		2018
U.S. & Canada
Company-owned^(a):
Beginning of period balance	3,423		3,513		3,206		3,423
Store openings	18		47
Acquired franchise stores^(b)	20		46
Openings					5		5
Acquired franchise locations^(b)					6		6
Franchise conversions^(c)	(4	)	(2	)	(1	)	—
Store closings	(174	)	(136	)
Closings					(87	)	(49	)
End of period balance	3,283		3,468		3,129		3,385
Domestic Franchise:
Beginning of period balance	1,099		1,178		1,037		1,099
Store openings	10		22
Acquired franchise stores^(b)	(20	)	(46	)
Openings					3		5
Acquired franchise locations^(b)					(6	)	(6	)
Franchise conversions^(c)	4		2		1		—
Store closings	(45	)	(30	)
Closings					(17	)	(15	)
End of period balance	1,048		1,126		1,018		1,083
International^(d):
Beginning of period balance	2,015		1,973		1,957		2,015
Store openings	42		207
Store closings	(89	)	(105	)
Openings					24		16
Closings					(24	)	(22	)
China locations contributed to the partnership with Harbin					(5	)	—
End of period balance	1,968		2,075		1,952		2,009
Store-within-a-store (Rite Aid):
Beginning of period balance	2,418		2,358		2,183		2,418
Store openings	42		62
Store closings ^(e)	(218	)	(6	)
Openings					11		16
Closings					(85	)	(6	)
End of period balance	2,242		2,414		2,109		2,428
Total Stores	8,541		9,083
Total Locations					8,208		8,905

(a) Includes Canada.

(b) Stores that were acquired from franchisees and subsequently converted into company-owned stores.

(d) Includes franchise locations in approximately 50 countries (including distribution centers where sales are ~~made)~~made and store-within-a-store) and company-owned stores located in ~~Ireland and~~Ireland. Prior year also includes company-owned locations in China.

~~(e) In 2018, store closings primarily related to Walgreens acquisition of certain Rite Aid locations.~~.

Comparison of the Three Months Ended~~September 30, 2018~~March 31, 2019 (current quarter) and ~~2017~~2018 (prior year quarter)

Revenues

Our consolidated net revenues decreased ~~$32.8~~$42.7 million, or ~~5.3%~~7.0%, to ~~$580.2~~$564.8 million for the three months ended ~~September 30, 2018~~March 31, 2019 compared with ~~$613.0~~$607.5 million for the same period in ~~2017.~~2018. The decrease in revenue was primarily ~~attributable~~a result of the transfer of the Nutra manufacturing and China e-commerce businesses to the ~~sale~~newly formed joint ventures and the closure of ~~Lucky Vitamin on September 30, 2017, which resulted in a $20.8 million reduction to revenue, and lower sales associated with store closures at the end of their lease term, which is a component of~~company-owned stores from our store portfolio optimization strategy.

U.S. and Canada. Revenues in our U.S. and Canada segment decreased ~~$15.9~~$23.2 million, or ~~3.2%~~4.5%, to ~~$476.5~~$489.2 million for the three months ended ~~September 30, 2018~~March 31, 2019 compared with ~~$492.4~~$512.4 million in the prior year quarter. The $23.2 million decrease in revenue in the current quarter as compared with the prior year quarter was primarily due to the following:

The ~~net~~ decrease in the number of ~~U.S.~~ corporate stores from ~~September 30, 2017~~3,385 at March 31, 2018 to ~~September 30, 2018~~3,129 at March 31, 2019 from our store portfolio optimization strategy contributed an approximate $9$14 million decrease to revenue;

A decrease in U.S. company-owned same store sales of ~~2.1%~~1.6%, which includes GNC.com sales, which resulted in a ~~$7.7~~$6.2 million decrease to ~~revenue (excluding~~revenue. GNC.com contributed an increase of 0.3% to the ~~impact of higher loyalty points redemption in the current quarter compared with the prior year quarter as the program matures,~~ same store ~~sales decreased 1.3%).~~sales. E-commerce sales were ~~7.2%~~7.4% of U.S. and Canada revenue in the current quarter compared with ~~6.2%~~7.1% in the prior year quarter; and

A decrease in ~~domestic franchise~~Canada company-owned stores revenue of ~~$3.6~~$2.8 million primarily due to ~~$79.7~~a decrease in same store sales of 4.1%

International. Revenues in our International segment increased $0.8 million, or 2.1%, to $40.9 million in the current quarter compared with $76.1 million in prior year quarter due to the impact of a decrease in retail same store sales of 4.1% and a decrease in the number of franchise stores from 1,126 at September 30, 2017 to 1,048 at September 30, 2018;

A decrease in Canada company-owned stores of $2.7 million from $24.1 million in the prior year period to $21.4 million in the current year period primarily due to negative same store sales of 5.6%; and

Partially offsetting the above decreases in revenue was an increase of $7.5 million related to our loyalty programs, PRO Access paid membership fees and the myGNC Rewards change in deferred points liability.

~~International.~~ ~~Revenues in our International segment increased $2.9 million, or 6.1%, to $51.4 million in the current quarter compared with $48.5~~$40.1 million in the prior year quarter. Revenue from our international franchisees increased ~~$3.9~~$4.6 million in the current quarter compared to the prior year quarter primarily due to strong performance from franchisees in Singapore and South Korea. Revenue from our China business decreased by $3.4 million to $4.5 million in the current quarter compared with the prior year ~~quarter with an increase in retail same store sales~~mostly due to the transfer of ~~1.5%. Revenues from our~~the cross-border e-commerce China business ~~decreased by $0.8 million in~~to the ~~current quarter compared with the prior year quarter due to lower wholesale sales.~~newly formed joint venture effective February 13, 2019.

Manufacturing / Wholesale.Revenues in our Manufacturing / Wholesale segment, excluding intersegment sales, ~~increased $1.0~~decreased $20.4 million, or ~~1.9%~~37.0%, to ~~$52.3~~$34.7 million for the three months ended ~~September 30, 2018~~March 31, 2019 compared with ~~$51.3~~$55.1 million in the prior ~~year quarter.~~year. Third-party contract manufacturing sales ~~increased $1.9~~decreased $16.9 million, or ~~6.7%~~51.8%, to ~~$31.2~~$15.8 million for the three months ended ~~September 30, 2018~~March 31, 2019 compared with ~~$29.3~~$32.7 million in the prior year ~~quarter.~~quarter primarily due to the transaction with IVC for the newly formed manufacturing joint venture effective March 1, 2019. Sales to our wholesale partners decreased ~~$1.0~~$3.4 million, or ~~4.4%,~~15.4% from ~~$22.0~~$22.3 million in the prior year quarter to ~~$21.0~~$18.9 million in the current ~~quarter. Intersegment~~quarter primarily due to the termination of the consignment agreement with Rite Aid in the fourth quarter of 2018. Additionally, intersegment sales ~~increased $5.7~~decreased $29.2 million from ~~$58.0~~$64.7 million in the prior year quarter to ~~$63.7~~$35.5 million in the current quarter ~~reflecting our increasing focus on proprietary products.~~due to the transaction with IVC for the newly formed manufacturing joint venture effective March 1, 2019.

Cost of Sales and Gross Profit

Cost of sales, which includes product costs, warehousing, distribution and occupancy costs decreased ~~$16.2~~$39.0 million to ~~$395.5~~$361.7 million for the three months ended ~~September 30, 2018~~March 31, 2019 compared with ~~$411.7~~$400.7 million in the prior year quarter. Gross profit decreased ~~$16.6~~$3.8 million from ~~$201.3~~$206.9 million ~~for the quarter ended September 30, 2017 to $184.7 million in the current quarter, and as a percentage of revenue, decreased from 32.8%~~ in the prior year quarter to ~~31.8%~~$203.1 million in the current quarter, but increased as a percentage of revenue, from 34.1% for the quarter ended March 31, 2018 to 36.0% in the current quarter. The ~~decrease~~increase in gross profit rate was ~~primarily~~ due to lower ~~domestic retail product margin rate~~occupancy expense as a result of ~~adjustments to promotional pricing in response to~~ the ~~competitive environment in the early portion~~adoption of the ~~quarter, lower vendor funding~~new lease standard, savings from store closures associated with the store optimization program and ~~impacts from the new loyalty program, partially offset by a higher sales mix of proprietary product which contribute higher margins relative to third-party sales.~~

rent reductions.

Selling, General and Administrative (“SG&A”) Expense

SG&A expense, including compensation and related benefits, advertising and other expenses, decreased ~~$6.2~~$12.4 million, or ~~3.9%~~7.7%, from ~~$156.1~~$160.7 million in the prior year quarter to ~~$149.9~~$148.3 million in the current quarter. SG&A expense, as a percentage of revenue, was ~~25.8%~~26.3% and ~~25.5%~~26.5% for the three months ended ~~September 30, 2018 and 2017, respectively.~~

During the three months ended September 30, 2018, we recognized $2.1 million in expense related to a retention program adopted in the first quarter of 2018 to retain senior executives and certain other key personnel below the executive level who are critical to the execution and success of our strategy. The total amount awarded was approximately $10 million, which vests in four installments of 25% each over the next two years on the earlier of February 2019 or the closing of the Harbin transaction, February 2019, AugustMarch 31, 2019 and ~~February 2020. We also incurred $0.3 million related to China joint venture start-up costs~~2018, respectively. The decrease in the current quarter. During the prior year quarter, we recorded $2.8 million of stock-based compensation and other executive placement costs associated with the hiring of our new Chief Executive Officer. In addition, we incurred $1.3 million in legal-related charges in both the current quarter and the prior year quarter.

~~Excluding the impact of these items,~~ SG&A expense ~~decreased $5.8~~as a percentage of revenue was primarily driven by more normalized marketing expense and partially offset by higher salaries and benefits as a percent of revenue.

Other Income, net

Other income, net, of $0.2 million in the current quarter and prior year quarter, included foreign currency gains.

Operating Income

As a result of the foregoing, consolidated operating income decreased $10.9 million, or 23.5%, to $35.5 million for the three months ended March 31, 2019 compared with $46.4 million in the prior year quarter, and as a percentage of revenue, was ~~25.2%~~6.3% and ~~24.8%~~7.7% for the three months ended ~~September 30, 2018~~March 31, 2019 and ~~2017, respectively.~~2018. The ~~$5.8 million~~ decrease ~~in SG&A expense~~ was ~~primarily~~ due to a $19.5 million loss on the ~~sale~~exchange of net assets for the ~~Lucky Vitamin e-commerce business effective September 30, 2017~~newly formed joint ventures recognized in the first quarter of 2019.

U.S. and ~~lower marketing expense, partially offset by an increase in store commissions related~~Canada.Operating income increased $8.6 million to ~~incremental associate commissions and higher sales mix of proprietary product.~~

~~Long-lived Asset Impairments~~

~~We recorded long-lived asset impairment and other store closing charges totaling $14.6~~$52.1 million for the three months ended ~~September 30, 2018 associated~~March 31, 2019 compared with ~~the store portfolio optimization. We recorded $3.9~~$43.5 million ~~in long-lived asset impairment charges~~ for the ~~three months ended September 30, 2017. The charges~~same period in 2018. Operating income as a percentage of segment revenue was 10.7% in the current quarter and prior year quarter primarily relate to certain of our corporate stores for which estimated future undiscounted cash flows could not support the carrying values of property and equipment. In addition,compared with 8.5% in the prior year ~~quarter charge includes the impact~~quarter. The increase in operating income as a percentage of ~~Hurricane Maria on our stores located in Puerto Rico.~~

~~Other Loss, net~~

~~Other loss, net, of $0.3 million in the current quarter includes a foreign currency loss~~segment revenue was primarily due to lower occupancy and marketing costs, partially offset by a ~~refranchising gain. Other loss, net, of $1.6 million~~decrease in ~~the prior year quarter primarily consists of a $1.7 million loss as a result of the sale of substantially all of the assets of the Lucky Vitamin e-commerce business.~~product margin rate.

International.Operating ~~Income~~

~~As a result of the foregoing, consolidated operating~~ income decreased ~~$19.8~~$0.4 million, or ~~49.8%~~2.9%, to ~~$20.0~~$14.1 million for the three months ended ~~September 30, 2018~~March 31, 2019 compared with ~~$39.8~~$14.5 million in the prior year quarter. Operating income ~~as a percentage of revenue,~~ was 3.4% and 6.5% for the three months ended September 30, 2018 and 2017, respectively. Operating income in the current quarter was significantly impacted by long-lived asset impairment and other store closing charges as noted above.

~~U.S. and Canada.~~Operating income decreased $20.4 million to $11.5 million for the three months ended September 30, 2018 compared with $31.9 million for the same period in 2017. As we mentioned above, we recorded long-lived asset impairments and other store closing costs of $14.6 million in the current quarter, and long-lived asset impairments of $3.9 million in prior year quarter. Excluding these items and immaterial gains on refranchising, operating income was $26.0 million or 5.5%34.3% of segment revenue in the current quarter compared with ~~$35.6 million or 7.2% of segment revenue~~36.1% in the prior year quarter. The decrease ~~compared with the prior year was primarily due to product margin rate as explained above under "Cost of Sales and Gross Profit" and an increase~~ in ~~store commissions related to incremental associate commissions and a higher sales mix of proprietary product, partially offset by comparative effect of lower marketing expense in the current quarter.~~

~~International. Operating~~operating income ~~of $16.5 million for the three months ended September 30, 2018 was relatively flat compared with prior year quarter, and~~ as a percentage of segment revenue was 32.0% in the current quarter compared with 33.4% in the prior year quarter. The current quarter included $1.0 million related to China joint venture start-up costs, of which $0.6 million related to costs incurred in the first six months of 2018 within corporate costs and was reclassified to International in the current quarter. Excluding the China joint venture start-up costs, operating

income was $17.4 million, or 33.9% of segment revenue, in the current quarter compared with $16.2 million, or 33.4% of segment revenue, for the same period in 2017. The increase in operating income percentage was primarily due to lower margin rate driven by a ~~higher mix of franchise sales, which contribute higher margins relative to China sales.~~change in revenue mix.

Manufacturing / Wholesale. Operating income ~~decreased $2.3~~increased $0.3 million, or ~~12.0%~~2.5%, to ~~$16.9~~$15.3 million for the three months ended ~~September 30, 2018~~March 31, 2019 compared with ~~$19.2~~$15.0 million in the prior year quarter. Operating income as a percentage of segment revenue ~~decreased from 17.5%~~increased from12.5% in the prior year quarter to ~~14.5%~~21.9% in the current quarter primarily due to a ~~lower~~decrease in revenues as a result of the Manufacturing JV. Although revenue decreased, the operating income reduction was minimal as GNC continues to recognize margin ~~rate from third-party contract manufacturing, partially offset by higher intersegment sales, which contribute higher margins.~~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.

Corporate costs. Corporate costs decreased ~~$0.9~~$0.2 million to ~~$24.7~~$26.3 million for the three months ended ~~September 30, 2018~~March 31, 2019 compared with ~~$25.6~~$26.5 million in the prior year quarter. ~~The current quarter includes retention~~

Loss on net asset exchange for the formation of ~~$2.1~~the joint ventures. We contributed our China business in exchange for 35% equity interest each of the new HK JV and China JV. In addition, we contributed our Nutra manufacturing and Anderson facility net assets to the Manufacturing JV in exchange for $101 million ~~as explained above,~~ and ~~a $1.3 million legal-related charge. Additionally, $0.6 million related to China joint venture start-up costs incurred~~an initial 43% equity interest in the first six month of 2018 was reclassified to International in the current quarter. The prior year quarter includes $2.8 million of stock-based compensation and other executive placement costs associated with the hiring of our new Chief Executive Officer and a $1.3 million legal-related charge. Excluding the above charges, corporate costs inManufacturing JV during the three months ended ~~September 30, 2018 were relatively flat compared to the prior year quarter.~~March 31, 2019. As a result, we recognized a pre-tax loss of $19.5 million.

Interest Expense, net

Interest expense was ~~$35.7~~$33.0 million in the three months ended ~~September 30, 2018~~March 31, 2019 compared with ~~$16.3~~$21.8 million in the three months ended ~~September 30, 2017~~March 31, 2018 primarily due to a higher interest rate in the current quarter on the Tranche B-2 ~~Term Loan~~ and the FILO Term Loan in connection with the debt ~~refinancing.~~

~~Income Tax (Benefit) Expense~~

We recognized $7.2 million of income tax benefit during the three months ended September 30, 2018 compared with $2.4 million of income tax expense for the same period in 2017. The effective tax rate in the current quarter was significantly impacted by $3.6 million in discrete tax benefits associated with finalization of the Company’s 2017 federal income tax return. The effective tax rate in the prior year quarter was significantly impacted by a reduction to a valuation allowance of $6.0 million. The valuation allowance was adjusted based on a change in circumstances which caused a change in judgment about the realizability of a deferred tax asset related to net operating losses.

~~Net (Loss) Income~~

~~As a result of the foregoing, consolidated net loss was $8.6 million for the three months ended September 30, 2018 compared with a consolidated net income of $21.1 million for the same period in 2017~~.

~~Diluted (Loss) Earnings Per Share~~

~~Diluted loss per share was $0.10 for the three months ended September 31, 2018 compared with diluted earnings per share of $0.31 for the three months ended September 30, 2017.~~

~~Comparison of the Nine Months EndedSeptember 30, 2018 (current year period) and 2017 (prior year period)~~

~~Revenues~~

Our consolidated net revenues were $1,805.7 million for the nine months ended September 30, 2018, a decrease of $112.4 million, or 5.9%, compared with $1,918.1 million for the same period in 2017. The decrease was primarily the result of the sale of Lucky Vitamin on September 30, 2017, which resulted in a $66.2 million reduction to revenue, the termination of the U.S. Gold Card Member Pricing program in the prior year, which resulted in a $23.0 million decrease in revenue and lower sales associated with store closures at the end of their lease term, which is a component of our store portfolio optimization strategy.

~~U.S. and Canada.~~ Revenues in our U.S. and Canada segment decreased $50.5 million, or 3.2%, to $1,506.3 million for the nine months ended September 30, 2018 compared with $1,556.8 million in the prior year period. The $50.5 million decrease in revenue in the current year period as compared with the prior year period was primarily due to the following:

~~The net decrease in the number of U.S. company-owned stores from September 30, 2017 to September 30, 2018 contributed an approximate $24 million decrease to revenue;~~

A decrease in U.S. company-owned same store sales of 0.6%, which includes GNC.com sales, resulted in a $7.3 million decrease to revenue (excluding the impact of higher loyalty points redemption in the current year period compared with the prior year period as the program matures, same store sales increased 0.8%). E-commerce sales were 7.5% of U.S. and Canada revenue in the current year period compared with 5.7% in the prior year period;

A decrease in domestic franchise revenue of $19.4 million from $253.4 million in the prior year period to $234.0 million in the current year period primarily due to the impact of a decrease in retail same store sales decrease of 3.3% and a decrease in the number of franchise stores from 1,126 at September 30, 2017 to 1,048 at September 30, 2018;

~~A decrease in Canada company-owned stores of $5.4 million from $72.1 million in the prior year period to $66.7 million in the current year period primarily due to negative same store sales of 7.9%;~~

A decrease of $23.0 million relating to the termination of the U.S. Gold Card Member Pricing program in the prior year period, which resulted in the recognition of domestic Gold Card deferred revenue of $24.4 million, net of $1.4 million of applicable coupon redemptions; and

~~Partially offsetting the above decreases in revenue was an increase of $30.3 million related to our loyalty programs, PRO Access paid membership fees~~refinancing and the ~~myGNC Rewards change in deferred points liability.~~

~~International.~~ Revenues in our International segment increased $8.1 million, or 6.1%, to $140.1 million in the current year period compared with $132.0 million in the prior year period, primarily due to an increase in our China businessamortization of ~~$6.3 million due to higher e-commerce sales and an increase in sales from our international franchisees of $1.2 million.~~

~~Manufacturing / Wholesale.~~Revenues in our Manufacturing / Wholesale segment, excluding intersegment sales, decreased $3.8 million, or 2.3%, to $159.3 million for the nine months ended September 30, 2018 compared with $163.1 million in the prior year period. Third-party contract manufacturing sales decreased $2.7 million, or 2.8%, from $97.2 million in the prior year period to $94.5 million in the current year period. Sales to our wholesale partners decreased $1.1 million, or 1.7% from $65.9 million in the prior year period to $64.8 million in the current year period. Intersegment sales increased $18.3 million from $175.3 million in the prior year period to $193.6 million in the current year period reflecting our increasing focus on proprietary products.

~~Cost of Sales and Gross Profit~~

Cost of sales decreased $70.8 million to $1,206.4 million for the nine months ended September 30, 2018 compared with $1,277.2 million in the prior year period. Gross profit decreased $41.6 million from $640.9 million in the prior year period to $599.3 million in the current year period. Gross profit, as a percentage of revenue, decreased slightly to 33.2% in the current year period compared with 33.4% in the prior year period. The gross profit rate change is primarily due to the comparative effect of the prior year period recognition of $23.0 million in net deferred Gold Card revenue as explained above and the impact of the new loyalty program in the current year period, partially offset by a higher domestic retail product margin rate reflecting a higher mix of proprietary sales which contribute higher margins relative to third-party sales.

~~Selling, General and Administrative Expense~~

SG&A expense decreased $12.4 million, or 2.6%, from $481.6 million in the prior year period to $469.2 million in the current year period, and as a percentage of revenue, was 26.0% and 25.1% for the nine months ended September 30, 2018 and 2017, respectively.

During the nine months ended September 30, 2018, we recognized $5.2 million related to the aforementioned retention program, $1.0 million related to China joint venture start-up costs and a legal-related charge of $1.3 million. During the nine months ended September 31, 2017, we incurred legal-related charges of $3.4 million as well as $2.8 million executive placement costs as explained above.

Excluding the impact of these items, SG&A expense decreased $13.7 million, or 2.9%, and was 25.6% and 24.8% as a percentage of revenue in the current year and prior year periods, respectively. The decrease in SG&A expense was primarily due to the sale of our Lucky Vitamin e-commerce business effective September 30, 2017 and lower marketing expense due to the comparative effect of the prior year period media campaign to support the One New GNC, partially offset by an increase in store commissions associated with a higher sales mix of proprietary product and higher commissions to support e-commerce sales.

~~Long-lived Asset Impairments~~

We recorded long-lived asset impairment and other store closing charges totaling $14.6 million in the nine months ended September 30, 2018 associated with the store portfolio optimization strategy. We recorded $23.2 million in long-lived asset impairment charges in the nine months ended September 30, 2017 of which $19.4 million relates to the Lucky Vitamin e-commerce business, the assets of which were sold on September 30, 2017. The remaining amount relates to certain of our underperforming corporate stores and the impact of Hurricane Maria on our stores located in Puerto Rico.

~~Other Loss (Income), net~~

Other loss, net, of $0.4 million in the current year period includes a foreign currency loss partially offset by a refranchising gain. Other income, net, in the prior year period primarily consists of a $1.7 million loss attributed to the sale of the assets of the Lucky Vitamin e-commerce business, fully offset by immaterial insurance and lease settlements, foreign currency gains and a refranchising gain.

~~Operating Income~~

As a result of the foregoing, consolidated operating income decreased $20.9 million, or 15.4%, to $115.2 million for the nine months ended September 30, 2018 compared with $136.1 million in the prior year period. Operating income, as a percentage of revenue, was 6.4% and 7.1% for the nine months ended September 30, 2018 and 2017, respectively.

~~U.S. and Canada.~~Operating income decreased $34.2 million to $100.6 million for the nine months ended September 30, 2018 compared with $134.8 million for the same period in 2017. Operating income, as a percentage of segment revenue, was 6.7% in the current year period compared with 8.7% in the prior year period. In the current year period we recorded long-lived asset impairments and other store closing costs totaling $14.6 million and immaterial refranchising gains, and in the prior year period we recorded long-lived asset impairments of $3.9 million and immaterial refranchising gains. Excluding these items and the comparative prior year impact of the recognition of deferred Gold Card revenue and marketing costs incurred in support of the One New GNC media campaign as described above, operating income was 7.6% as a percentage of segment revenue in the current year period compared with 7.9% in the prior year period.

~~International.~~Operating income decreased $0.2 million, or 0.4%, to $46.6 million for the nine months ended September 30, 2018 compared with $46.8 million in the prior year period. Operating income was 33.3% of segment revenue in the current year period compared with 35.5% in the prior year period. Excluding joint venture start-up costs of $1.0 million in the current year period, operating income was $47.6 million, or 34.0% of segment revenue, compared with $46.8 million, or 35.5% of segment revenue, for the same period in 2017. The decrease in operating income percentage was primarily due to a higher mix of China sales, which contribute lower margins relative to franchise sales. In addition, as we invest to grow the brand in China, marketing expense increased in our China business compared with the prior year period.

~~Manufacturing / Wholesale~~. Operating income decreased $7.4 million, or 13.3%, to $47.7 million for the nine months ended September 30, 2018 compared with $55.1 million in the prior year period. Operating income as a percentage of segment revenue decreased from 16.3% in the prior year period to 13.5% in the current year period primarily due to a lower margin rate from third-party contract manufacturing, partially offset by higher intersegment sales, which contributed higher margins.

~~Corporate costs.~~ Corporate costs decreased $0.3 million to $79.5 million for the nine months ended September 30, 2018 compared with $79.8 million in the prior year period. Excluding the retention and a legal-related charge in the current year period and the executive placements costs and legal-related charges in the prior year period as explained above, corporate costs decreased $0.6 million in the current year period compared with the prior year period.

~~Interest Expense, net~~

Interest expense was $90.4 million in the nine months ended September 30, 2018 compared with $48.3 million in the nine months ended September 30, 2017 primarily due to a higher interest rate on the Tranche B-2 Term Loan and the FILO Term Loanoriginal issuance discount in connection with the ~~debt refinancing.~~

early payment on Tranche B-2 Term Loan.

Loss on Debt Refinancing

~~The~~In connection with the refinancing of the Senior Credit Facility ~~resulted~~ in the three months ended March 31, 2018, we recorded a loss of $16.7 million, ~~in the current year period,~~ which primarily includes third-party fees relating to the Tranche B-2 Term Loan and the FILO Term Loan.

Loss on Forward Contracts for the Issuance of Convertible Preferred Stock

A loss of $16.8 million was recorded in the three months ended March 31, 2018 for the change in fair value of the forward contracts related to the issuance of convertible preferred stock. Refer to ~~Item 1, "Financial Statements,"~~ Note ~~6, "Long-Term Debt / Interest Expense"~~10, "Mezzanine Equity" for more information.

Income Tax ~~(Benefit)~~ Expense

We recognized ~~$2.9 million of income tax benefit during the nine months ended September 30, 2018 compared with $25.4~~$2.0 million of income tax expense during the three months ended March 31, 2019 compared with $1.7 million for the same period in ~~2017. The effective tax rate~~2018.

Income from Equity Method Investments

In connection with the formation of the HK JV and Manufacturing JV in the ~~current year period was significantly impacted by $3.6 million in discrete tax benefits associated with finalization~~first quarter of 2019, we recognize 35% and 43% of the ~~Company's 2017 federal~~joint ventures' net income, ~~tax return. The effective tax rate in~~respectively. We recognized $0.9 million equity income from the prior year period was significantly impacted by a reduction to a valuation allowance of $6.0 million. The valuation allowance was adjusted based on a change in circumstances which caused a change in judgment aboutmanufacturing joint venture and an immaterial equity income from the ~~realizability of a deferred tax asset related to net operating losses.~~HK JV during the three months ended March 31, 2019.

Net (Loss) Income

As a result of the foregoing, consolidated net income decreased ~~$51.5~~$21.5 million to ~~$10.9~~a net loss of $15.3 million for the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 compared with ~~$62.4~~net income of $6.2 million for the same period in ~~2017.~~2018.

Diluted (Loss) Earnings Per Share

Diluted loss per share was $0.23 for the three months ended March 31, 2019 compared with diluted earnings per share ~~decreased from $0.91 for the nine months ended September 30, 2017 to $0.13~~of $0.07 for the same period in 2018 due to a decrease in net income and an increase in the weighted average diluted shares outstanding resulting from the exchange of the Company's Notes on December 20, 2017 for an aggregate 14.6 million newly issues shares of Class A common stock.2018.

Liquidity and Capital Resources

~~On February 28, 2018,~~As of March 31, 2019, we ~~amended our Senior Credit Facility. Refer to Item 1, "Financial Statements," Note 6, "Long-Term Debt / Interest Expense" for a description of~~had $74.2 million available under the ~~Amendment to our Senior~~Revolving Credit Facility, after giving effect to $6.2 million utilized to secure letters of credit and $0.6 million reduction to borrowing ability as a result of decrease in net collateral. Our ability to make scheduled payments of principal on, to pay interest on or to refinance our ~~new Term Loan Agreement~~debt and ~~ABL Credit Agreement.~~

~~On November 7, 2018, we entered into~~to satisfy our other debt obligations will depend on our future operating performance, which will be affected by general economic, financial and other factors beyond our control. We expect to make an ~~Amendment~~excess cash flow payment between $25 million and $35 million at 50% with respect to the ~~Securities Purchase Agreement with Harbin for~~year ending December 31, 2019, which is expected to be paid in the ~~purchase~~second quarter of 299,950 shares of Convertible Preferred Stock described in Item 1, "Financial Statements," Note 12, "Subsequent Events". Harbin's $300 million investment will be funded in three separate tranches. On November 8, 2018, we received the initial $100 million investment for the purchase of 100,000 shares of Convertible Preferred Stock. 2020.

We utilized the $100 million to pay a portion of the Tranche B-2 Term Loan due in March 2021 pursuant to the Amendment to our Senior Credit Facility and elected to use the payment to satisfy the scheduled amortization payments on the Term Loan Facility through December 2020. The remaining net proceeds, after deducting legal and advisory fees, will be available to satisfy the amount due under the Tranche B-1 Term Loan in March 2019. There is no assurancecurrently anticipate that ~~the remaining applicable closing conditions will be satisfied or waived prior to March 2019 when the obligation is due.~~

Management believes that we will have sufficient liquidity to meet our obligations, as they become due, for the next twelve months. In the event that the remaining payments anticipated from the Securities Purchase Agreement, are either delayed or not made at all, management believes that we will have adequate cash on hand, cash generated from operations, ~~and~~together with amounts available under the Revolving Credit Facility, will be sufficient to ~~satisfy~~service our debt (including the expected excess cash flow payment), meet our operating expenses and fund capital expenditures over the next 12 months. If all outstanding amounts under the convertible senior notes ("Notes") in excess of $50.0 million have not been repaid, refinanced, converted or effectively discharged prior to May 2020 ("Springing Maturity Date"), the maturity date of the Tranche ~~B-1 Term Loan repayment of $147.3 million due in March 2019, net of~~B-2 becomes the Springing Maturity Date, subject to certain adjustments. In the event that a ~~$1.1 million principal payment expected to be made in December 2018. To~~refinancing does not occur before the ~~extent~~Springing Maturity Date, management believes that ~~actual available cash differs materially from~~ the ~~current cash flow forecast, management has~~Company will have the ability to ~~consider certain discretionary payments or asset sales to increase~~repay $138.6 million of the ~~amount of available cash.~~Notes with projected cash on hand and the Revolving Credit Facility. We are currently in compliance with our debt covenant reporting and compliance obligations under our Credit Facilities and expect to remain in compliance during ~~the next twelve months.~~

~~We are focused on all opportunities to best position the business for long-term growth and success. As such, we will continue to proactively explore opportunities to enhance our capital structure.~~

2019.

Cash Provided by Operating Activities

Cash provided by operating activities ~~was $55.7~~increased by $43.6 million from $25.1 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2018 ~~compared with $149.6~~to $68.7 million for the ~~nine~~three months ended ~~September 30, 2017. The decrease was~~March 31, 2019 due to favorable working capital changes primarily due to ~~the comparative effect of~~an increase in accounts payable as a ~~$48.8 million inventory reduction in the prior year as part~~result of the ~~supply chain optimization which was launched at~~Company's cash management efforts and the ~~end of 2016. The remaining decrease was primarily~~increase in accounts payable related to ~~reduced operating performance,~~ the ~~refinancing~~establishment of ~~our long-term debt, which resulted in $16.3 million in fees paid to third-parties and higher interest payments, partially offset by lower tax payments.~~the Manufacturing JV.

Cash Used in Investing Activities

Cash provided by investing activities was $85.6 million for the three months ended March 31, 2019 compared with cash used in investing activities ~~was $11.4 million and $24.7~~of $3.4 million for the ~~nine~~same period in 2018 primarily due to the $101 million cash proceeds received from IVC in exchange for 57% ownership in the Manufacturing JV. In addition, we made a capital contribution of $10.7 million to the Manufacturing JV for our share of short-term working capital needs and contributed $2.4 million cash from our China business to the China joint ventures. Capital expenditures for the three months ended ~~September 30, 2018 and 2017, respectively, and includes capital expenditures of $13.4~~March 31, 2019 was $3.0 million ~~and $26.2~~compared with $3.7 million ~~respectively.~~for the same period in 2018.

We expect capital expenditures to be approximately $20 to $30 million in ~~2018,~~2019, which includes investments for store development, IT infrastructure and maintenance. We anticipate funding our ~~2018~~2019 capital requirements with cash flows from operations and, if necessary, borrowings under the Revolving Credit Facility.

Cash Used in Financing Activities

For the ~~nine~~three months ended ~~September 30,~~March 31, 2019, cash used in financing activities was $84.4 million, primarily consisting of $147 million in payments on the Tranche B-1 Term Loan, $114 million in payments on the Tranche B-2 Term Loan, a $10.4 million original issuance discount (“OID”) paid to the Tranche B-2 Term Loan lender at 2% of the outstanding balance, and $12.6 million in fees paid for the issuance of convertible preferred stock, partially offset by approximately $200 million of proceeds from the issuance of convertible preferred stock.

For the three months ended March 31, 2018, cash used in financing activities was ~~$74.5~~$32.0 million, primarily consisting of $35.2 million in an OID paid to lenders and fees associated with our new Revolving Credit Facility associated with the debt ~~refinancing. In addition,~~refinancing and we made ~~$35.5~~$11.8 million in amortization payments on our term loan ~~balances. The OID on the Tranche B-2 Term Loan includes $13.2 million, which will be paid the earlier of March 2019 or after a qualifying event in which we receive~~balances, partially offset by net cash proceeds as defined in the credit agreement, and has been included in Item 1, "Financial Statements," as a non-cash financing activity within the "Supplemental Cash Flow Information" of the Consolidated Statements of Cash Flows.

For the nine months ended September 30, 2017, cash used in financing activities was $120.1 million, primarily consisting of our April 19, 2017 excess cash flow payment on the Tranche B-1 Term Loan and net paymentsborrowings under the ~~old revolving credit facility, which was terminated in connection with the Amendment to the Senior~~Revolving Credit Facility ~~in February 2018.~~of $17.5 million.

Contractual Obligations

On February 28, 2018, we amended and restated our Senior Credit Facility formerly consisting of a $1,131.2 million term loan facility due in March 2019 and a $225.0 million revolving credit facility that matured in September 2018. The Amendment included an extension of the maturity date for $704.3 million of the $1,131.2 million term loan facility from March 2019 to March 2021 (the "Tranche B-2 Term Loan"). However, if more than $50.0 million of the Company's Notes have not been repaid, converted or effectively discharged prior to such date (“Existing Indenture Discharge”), the maturity date becomes May 2020, subject to certain adjustments. The Amendment also terminated the existing $225.0 million revolving credit facility.

After the effectiveness of the Amendment, the remaining term loan of $151.9 million as of February 28, 2018 continues to have a maturity date of March 2019 (the "Tranche B-1 Term Loan"). The Amendment requires annual aggregate principal payments of at least $43 million related to the Tranche B-2 Term Loan and bears interest at a rate of LIBOR plus a margin of 9.25% per annum subject to change under certain circumstances (with a minimum and maximum possible interest rate of LIBOR plus a margin of 8.25% and 9.25%, respectively, per annum). Payments and interest associated with the Tranche B-1 Term Loan are consistent with past terms.

~~On February 28, 2018, we also entered into a new asset-based credit agreement, consisting of:~~

•a new $100 million asset-based Revolving Credit Facility with a maturity date of August 2022 (which maturity date will become May 2020, subject to certain adjustments, if the Existing Indenture Discharge has not occurred); and

On June 13, 2018, we entered into two interest rate swaps with notional amounts of $275 million and $225 million to limit our exposure to our variable interest rate debt. The interest rate swaps effectively converted a portion of the variable interest rate on the Tranche B-2 Term Loan and FILO Term Loan to a fixed rate. We receive payments based on the one-month LIBOR and make payments based on a fixed rate. We receive payments with a floor of 0.00% and 0.75%, respectively, on the $275 million and $225 million interest rate swaps, which aligns with the related debt instruments. The interest rate swap agreements had an effective date of June 29, 2018. The $225 million interest rate swap expires on February 28, 2021, and the $275 million interest rate swap expires on June 30, 2021. The notional amount of the $225 million interest rate swap is scheduled to decrease to $175 million on June 30, 2019, $125 million on June 30, 2020 and $75 million on December 31, 2020.

There have been no ~~other~~ material changes in our contractual obligations as disclosed in the ~~2017~~2018 10-K.

Critical Accounting Estimates

We adopted ASU ~~2014-09, Revenue from Contracts with Customers,~~2016-02, Leases, during the first quarter of fiscal ~~2018 using~~2019 and elected the ~~full retrospective method.~~optional transition relief amendment that allows for a cumulative-effect adjustment in the period of adoption and did not restate prior periods. We revised our accounting policy on leases in conjunction with the adoption of the new lease standard. Refer to Item 1, "Financial Statements,"Note ~~3, "Revenue"~~2, "Basis of Presentation" for more information.

In ~~addition,~~February 2019, we ~~entered into two~~contributed our China business in exchange for 35% ownership of each of the newly formed joint ventures (the “HK JV” and the "China JV"). In March 2019, we received $101 million from IVC and contributed the net assets of the Nutra manufacturing and Anderson facilities in exchange for an initial 43% equity interest ~~rate swaps~~ in ~~June 2018, which were designated~~a newly formed joint venture (the “Manufacturing JV”). Our interest in the joint ventures are accounted for as ~~cash flow hedges. Because the interest rate swap agreements are deemed effective, changes in fair value will be recorded within other comprehensive income/loss on the Consolidated Balance Sheet.~~equity method investments. Refer to Item 1, "Financial Statements,"Note 6, ~~"Long-Term Debt / Interest Expense" and Note 7, "Fair Value Measurements and Financial Instruments"~~"Equity Method Investments" for more information. The equity method is applied in situations where we have the ability to exercise significant influence, but not control, over the management decisions of the joint ventures. We evaluate the equity investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment is not recoverable. A significant amount of judgment is involved in determining whether an indicator of impairment has occurred. Factors that may trigger an impairment review include significant, sustained declines in an investee's revenue, earnings, and cash flow trends; adverse market conditions; the investee's ability to continue operations measures by several items, including liquidity; and other factors. Once an impairment indicator is identified, we use considerable judgment to determine if the impairment is other than temporary, in which case the equity investment is written down to its estimated fair value. An impairment that is other than temporary could significantly and adversely impact reported results of operations.

~~There~~Except as discussed above, there have been no ~~other~~ material changes to the application of critical accounting policies and significant judgments and estimates ~~since those~~as disclosed in our ~~2017~~2018 10-K.

Recent Accounting Pronouncements

Refer to Item 1, "Financial Statements," Note 2,~~"Basis~~ "Basis of ~~Presentation.~~Presentation," which is incorporated herein by reference.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

In June 2018, we entered into two interest rate swaps with notional amounts of $275 million and $225 million to limit our exposure to our variable interest rate debt. The interest rate swaps effectively converted a portion of the variable-rate debt to a fixed interest rate. See Part I, Item 1 "Financial Statements," Note 6, "Long-Term Debt / Interest Expense" for additional information.

There have been no ~~other~~ significant changes to our market risk since ~~those disclosed in our 2017 10-K.~~December 31, 2018. For a discussion of our exposure to market risk, refer to Part II, Item 7A "Quantitative and Qualitative Disclosures About Market Risk" of our ~~2017~~2018 10-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and our Chief Financial Officer ("CFO"), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act has been appropriately recorded, processed, summarized and reported on a timely basis and are effective in ensuring that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our CEO and CFO have concluded that, as of ~~September 30, 2018,~~March 31, 2019, our disclosure controls and procedures are ~~effective.~~effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

~~There~~During the three months ended March 31, 2019, we implemented a new lease management and accounting system and updated our processes and internal controls in conjunction with the adoption of the new lease accounting standard, ASU 2016-02, Leases, effective January 1, 2019. We have also updated our processes and internal controls in connection with the formation of the newly formed joint ventures during the three months ended March 31, 2019. These implementations resulted in a material change in a component of our internal control over financial reporting and were not ~~been any~~made in response to a deficiency in internal controls.

Except as discussed above, there are no changes in our internal ~~controls~~control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)) under the Exchange Act)that occurred during the ~~last~~ fiscal quarter ~~which~~ending March 31, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

~~DMAA /~~ We are engaged in various legal actions, claims and proceedings arising in the normal course of business, some of which are covered by insurance for which we have rights of indemnification. These actions, claims and proceedings are of the sort that are commonly encountered in the nutritional supplement retail industry, including claims related to breach of contracts, products liabilities, intellectual property matters and employment-related matters resulting from our business activities. Although the impact of the final resolution of these matters on the Company's financial condition, results of operations or cash flows is not known, management does not believe that the resolution of these lawsuits will have a material adverse effect on the financial condition, results of operations or liquidity of the Company.

DMAA/Aegeline Claims. ~~Prior~~ As disclosed in prior Annual Reports on Form 10-K and Quarterly Reports on Forms 10-Q, prior to December 2013, we sold products manufactured by third parties that contained derivatives from geranium known as 1.3-dimethylpentylamine/ dimethylamylamine/ 13-dimethylamylamine, or "DMAA," which were recalled from our stores in November 2013, and/or Aegeline, a compound extracted from bael trees. As of ~~September 30, 2018 we were named in the following~~March 31, 2019, individuals (on their own behalf or on behalf of minors or estates have filed 27 personal injury lawsuits involving products containing DMAA and/or ~~Aegeline:~~Aegeline, where we (or one of our wholly-owned subsidiaries) along with the third-party vendor, have been named as parties:

~~Susan Straub individually and as Administratrix of the Estate of Shane Staub v. USPlabs, LLC and General Nutrition Holdings, Inc,~~Case No. 140502403, filed May 20, 2014 in Common Pleas Court of Philadelphia County, Pennsylvania ~~(Case~~

Case No. ~~140502403),~~15-1-0847-05, filed May ~~20, 2014~~1, 2015, in the first Circuit Court, State of Hawaii

~~Jeremy Reed, Timothy Anderson, Dan Anderson, Nadia Black, et al. v. USPlabs, LLC, et al., GNC, Superior Court for California, County of San Diego (Case No. 37-2013-00074052-CU-PL-CTL),~~Cases filed ~~November 1, 2013~~

~~Kenneth Waikiki v. USPlabs, LLC, Doyle, Geissler, USPlabs OxyElite, LLC, et al. and GNC Corporation, et al., United States~~in the District Court for the District of Hawaii ~~(Case No. 3-00639 DMK),~~as follows:



- Case No. 3-00639 DMK, filed November 21, 2013	- Case No. CV 14-00029, filed January 23, 2014
- Case No. CV 14-00030, filed January 23, 2013	- Case No. CV 14-00031, filed January 23, 2014
- Case No. CV 14-00032, filed January 23, 2014	- Case No. CV14-00029, filed January 23, 2014
- Case No. 14-cv-00364 filed October 24, 2014	- Case No. CV14-00365 filed October 24, 2014
- Case No. CV14-00366 filed August 15, 2014	- Case No. 14-cv-00367 filed October 24, 2014
- Case No. CV-15-00228, filed June 17, 2016

Cases filed ~~November 21, 2013~~

~~Nicholas Akau v. USPlabs, LLC, GNC Corporation, et al., United States District Court for~~in the ~~District of Hawaii (Case No. CV 14-00029), filed January 23, 2014~~

~~Melissa Igafo v. USPlabs, LLC, GNC Corporation, et al., United States District Court for the District of Hawaii (Case No. CV 14-00030), filed January 23, 2013~~

~~Calvin Ishihara v. USPlabs, LLC, GNC Corporation, et al., United States District Court for the District of Hawaii (Case No. CV 14-00031), filed January 23, 2014~~

~~Gaye Anne Mattson v. USPlabs, LLC, GNC Corporation, et al., United States District for the District of Hawaii (Case No. CV 14-00032), filed January 23, 2014~~

~~Thomas Park v. GNC Holdings, Inc., USPlabs, LLC,~~ Superior Court of California ~~County of San Diego (Case No. 37-2014-110924), filed September 8, 2014~~as follows:

~~Nicholas Olson, Adrian Chavez, Rebecca Fullerton, Robert Gunter, Davina Maes and Edwin Palm v. GNC Corporation, USPlabs, LLC, Superior Court of California, County of~~ Orange ~~(Case No. 2014-00740258) filed August 18, 2014~~County:

Mereane Carlisle, Charles Paio, Chanelle Valdez, Janice Favella and Christine Mariano v. USPlabs, LLC et al., United states District Court for the District of Hawaii (Case No. CV14-00029), filed January 23, 2014

Nichole Davidson, William Dunlao, Gina Martin, Lee Ann Miranda, Yuka Colescott, Sherine Cortinas, and Shawna Nishimoto v. GNC Corporation and USPlabs, LLC, United States District Court for the District of Hawaii (Case No. 14-cv-00364) filed October 24, 2014

Rodney Ofisa, Christine Mosca, Margaret Kawamoto as guardian for Jane Kawamoto (a minor), Ginny Pia, Kimberlynne Tom, Faituitasi Tuioti, Ireneo Rabang, and Tihane Laupola v. GNC Corporation and USPlabs, LLC, United States District Court for the District of Hawaii (Case No. CV14-00365) filed October 24, 2014

Palani Pantohan, Deborah Cordiero, J. Royal Kanamu, Brent Pascula, Christie Shiroma, Justan Chun, Kasey Grace and Adam Miyasato v. USPlabs, LLC. et al., United States District Court for the District of Hawaii (Case No. CV14-00366) filed August 15, 2014

Keahi Pavao, Derek Kamiya, as personal representative of the Estate of Sonnette Marras, Gary Powell, on behalf of and as conservator for M.P.C.F.S.M., a minor child, R.P.O.C.S.S.M., a minor child, M.P.C.I.H.S.M., a minor child, M.K.C.S.M., a minor child, Michael Soriano, and Lance Taniguchi v. USPlabs, LLC, et al. United States District Court for the District of Hawaii (Case No. 14-cv-00367) filed October 24, 2014

~~Kai Wing Tsui and John McCutchen v. GNC Corporation, USPlabs, LLC, Superior Court of California, County of Los Angeles (Case No. BC559542), filed October 6, 2014~~

~~Cuong Bahn, Ismael Flores, Chue Xiong, Leilani Groden, Trudy Jenkins, and Mary Hess v. USPlabs, LLC et al., California Superior Court, Orange County (Case No. 30-2015-00776749),~~



- 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

~~Alexis Billones, Austin Ashworth, Karen Litre, Nancy Murray, Wendy Ortiz, Edward Pullen, and Corazon Vu v. USPlabs, LLC et al., California Superior Court,~~ San Diego County:



- 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

Los Angeles ~~County (Case No. BC575264), filed March 13, 2015~~County:

Asofiafia Morales, Richard Ownes, Lynn Campbell, Joseph Silzgy, Delphone Smith-Dean, Nicole Stroud, Barrett Mincey and Amanda Otten v. USPlabs, LLC et al., California Superior Court, Los Angeles County (Case No. BC575262),



- 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

~~Laurie Nadura, Angela Abril-Guthmiller, Sarah Rogers, Jennifer Apes, Ellen Beedie, Edmundo Cruz, and Christopher Almanza v. USPlabs, LLC et al., California Superior Court,~~ Monterey ~~County (Case No. M131321), filed March 13, 2015~~County:

Cynthia Novida, Demetrio Moreno, Mee Yang, Tiffone Parker, Christopher Tortal, David Patton and Raymond Riley v. USPlabs, LLC et al., California Superior Court, San Diego County (Case No. 37-2015-00008404),



- Case No. M131321, filed March 13, 2015	- Case No. M131322, filed March 13, 2015

~~Johanna Stussy, Lai Uyeno, Gwenda Tuika-Reyes, Zeng Vang, Kevin Williams, and Kristy Williams v. USPlabs, LLC, et al., California Superior Court,~~ Santa Clara ~~County (Case No. 115CV78045), filed March 13, 2015~~County:

Issam Tnaimou, Benita Rodriguez, Marcia Rouse, Marcel Macy, Joseph Worley, Joanne Zgrezepski, Crystal Franklin, Deanne Fry, and Caron Jones, in her own right, o/b/h Joshua Jones and o/b/o The Estate of James Jones v. USPlabs, LLC et al., California Superior Court, Monterey County (Case No. M131322), filed March 13, 2015

~~Kuulei Hirota v. USPlabs, LLC et al., First Circuit Court, State of Hawaii (Case No. 15-1-0847-05), filed May 1, 2015~~

~~Roel Vista v. USPlabs, LLC, GNC Corporation et al., California Superior Court, County of Santa Clara (Case No. CV-14-0037), filed January 24, 2014~~

Dominic Little, David Blake Allen, Jeff Ashworth, Naomi Book and Stanley Book as Conservators of the Estate of Justin Book, Martin Sanchez, John Bainter, Rich Wolnik, Brian Norris, Joseph Childs, Jimi Hernandez and Novallie Hill v. USPlabs, LLC, et al., California Superior Court, Los Angeles County (Case No. BC534065), filed January 23, 2014

David Ramirez, Michelle Sturgill, Joseph losefa, Yanira Bernal, Jacob Michels, Cynthia Gaona and Tamara Gandara v. USPlabs, LLC, et al., California Superior Court Orange County (Case No. 30-2015-00783256-CU-PL-CXC), filed April 16, 2015

~~Thad Estrada v. USPlabs, LLC, et al., United States District Court for the District of Hawaii (Case No. CV-15-00228), filed June 17, 2016~~



- Case No. 115CV78045, filed March 13, 2015	- Case No. CV-14-0037, filed January 24, 2014

The ~~proceedings associated with the~~ majority of these ~~personal injury cases, which generally seek indeterminate money damages, are in the early stages, and any liabilities that may arise from these~~ matters are ~~not probable or reasonably estimable at this time.~~currently stayed pending final resolution. One matter is scheduled for trial in June 2019.

We are contractually entitled to indemnification by our third-party vendor with regard to these matters, although our ability to obtain full recovery in respect of any such claims against us is dependent upon the creditworthiness of our vendor and/or its insurance coverage and the absence of any significant defenses available to its insurer.

Other Legal Proceedings. For additional information regarding certain ~~other~~ legal proceedings to which we are a party, see Item 1 "Financial Statements" Note 8,9, "Contingencies."

Item 1A. Risk Factors

There have been no material changes to the disclosures relating to this item from those set forth under Part I, Item 1A “Risk Factors” in the ~~2017~~2018 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table sets forth information regarding Holdings’ purchases of shares of common stock during the quarter ended ~~September 30, 2018:~~March 31, 2019:

Period ⁽¹⁾
Total Number of
Shares Purchased⁽²⁾

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

July 1 to July 31, 2018 —
$ —
—
$ 197,795,011
August 1 to August 31, 2018 —
$ —
—
$ 197,795,011
September 1 to September 30, 2018 21,576
$ 2.90
—
$ 197,795,011
Total 21,576
$ 2.90
—



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 ~~September 30, 2018.~~March 31, 2019.


(2)	~~Includes 21,576 shares withheld from employees to satisfy minimum tax withholding obligations associated with the vesting of restricted stock during the period.~~

~~(3)~~

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 ~~Holdings'~~the Company’s common stock. ~~Holdings~~The Company has utilized $802.2 million of the current repurchase program. As of ~~September 30, 2018,~~March 31, 2019, $197.8 million remains available for purchase under the program.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits



Exhibit
No.	Description
~~3.1~~	10.1	Amended and Restated ~~Certificate of Incorporation of GNC Holdings, Inc.~~Stockholders Agreement, dated February 13, 2019 (Incorporated by reference to Exhibit ~~3.1 to our Quarterly Report on~~10.1 of Form ~~10-Q~~8-K filed ~~with the Securities and Exchange Commission on August 1, 2013~~February 13, 2019 (File No. 001-35113)).
~~3.2~~	10.2	~~Sixth Amended~~Amendment to the Master Reorganization and ~~Restated Bylaws of GNC Holdings, Inc.~~Subscription Agreement, dated February 13, 2019 (Incorporated by reference to Exhibit ~~3.1 to our Current Report on~~10.2 of Form 8-K filed ~~with the Securities and Exchange Commission on November 7, 2018~~February 13, 2019 (File No. 001-35113)).
10.3	Master Transaction Agreement, dated March 1, 2019, by and among GNC Holdings, Inc., General Nutrition Corporation, GNC Newco Parent, LLC, Nutra Manufacturing, LLC, IVL, LLC, IVL Holding, LLC and International Vitamin Corporation (Incorporated by reference to Exhibit 10.1 of Form 8-K filed March 7, 2019 (File No. 001-35113))
10.4	Amended and Restated Limited Liability Company Agreement of Nutra Manufacturing, LLC, dated March 1, 2019, by and among GNC Newco Parent, LLC, Nutra Manufacturing, LLC, and IVL, LLC, (Incorporated by reference to Exhibit 10.2 of Form 8-K filed March 7, 2019 (File No. 001-35113))
10.5	Product Supply Agreement, dated March 1, 2019, by and between GNC Supply Purchaser, LLC and Nutra Manufacturing, LLC (Incorporated by reference to Exhibit 10.3 of Form 8-K filed March 7, 2019 (File No. 001-35113))
31.1*		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of ~~CEO~~Chief Executive Officer and ~~CFO~~Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase

*	Filed herewith.

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 persons undersigned thereunto duly authorized.



	GNC HOLDINGS, INC.
	(Registrant)

	/s/ Tricia K. Tolivar
Date: ~~November 9, 2018~~May 2, 2019	Tricia K. Tolivar
	Chief Financial Officer
	(Principal Financial Officer)

4541




	As Previously Reported			Franchise Fees			Specialty Manufacturing			Total Adjustments			As Revised
	(in thousands)
Inventory	$	506,858		$	—		$	(21,126	)	$	(21,126	)	$	485,732
Prepaid and other current assets	42,320			—			24,328			24,328			66,648
Total current assets	739,829			—			3,202			3,202			743,031
Total assets	$	1,516,561		$	—		$	3,202		$	3,202		$	1,519,763

Deferred revenue and other current liabilities	$	108,672		$	5,409		$	—		$	5,409		$	114,081
Total current liabilities	261,690			5,409			—			5,409			267,099
Deferred income taxes	64,121			(8,868		)	807			(8,061		)	56,060
Other long-term liabilities	55,721			29,781			—			29,781			85,502
Total long-term liabilities	1,416,865			20,913			807			21,720			1,438,585
Total liabilities	1,678,555			26,322			807			27,129			1,705,684
Retained earnings	567,741			(26,322		)	2,395			(23,927		)	543,814
Total stockholders' deficit	(161,994		)	(26,322		)	2,395			(23,927		)	(185,921		)
Total liabilities and stockholders' deficit	$	1,516,561		$	—		$	3,202		$	3,202		$	1,519,763



	Three months ended September 30, 2017
	As Previously Reported		Franchise Fees			Specialty Manufacturing			Cooperative Advertising and Other Franchise Support Fees		Total Adjustments			As Revised
	(in thousands, except per share amounts)
Revenue	$	609,469	$	(360	)	$	(1,925	)	$	5,769	$	3,484		$	612,953
Cost of sales ⁽¹⁾	412,663		—			(1,681		)	679		(1,002		)	411,661
Gross profit	196,806		(360		)	(244		)	5,090		4,486			201,292
SG&A ⁽²⁾	150,961		—			—			5,090		5,090			156,051
Long-lived asset impairments	3,861		—			—			—		—			3,861
Other income, net	1,539		40			—			—		40			1,579
Operating income	40,445		(400		)	(244		)	—		(644		)	39,801
Interest expense, net	16,339		—			—			—		—			16,339
Income before income taxes	24,106		(400		)	(244		)	—		(644		)	23,462
Income tax expense	2,643		(146		)	(91		)	—		(237		)	2,406
Net income	$	21,463	$	(254	)	$	(153	)	$	—	$	(407	)	$	21,056
Earnings per share:
Basic	$	0.31	$	—		$	—		$	—	$	—		$	0.31
Diluted	$	0.31	$	—		$	—		$	—	$	—		$	0.31



	Nine months ended September 30, 2017
	As Previously Reported			Franchise Fees		Specialty Manufacturing		Cooperative Advertising and Other Franchise Support Fees		Total Adjustments		As Revised
	(in thousands, except per share amounts)
Revenue	$	1,895,301		$	1,976	$	2,703	$	18,159	$	22,838	$	1,918,139
Cost of sales ⁽¹⁾	1,272,801			—		2,285		2,116		4,401		1,277,202
Gross profit	622,500			1,976		418		16,043		18,437		640,937
SG&A ⁽²⁾	465,575			—		—		16,043		16,043		481,618
Long-lived asset impairments	23,217			—		—		—		—		23,217
Other income, net	(110		)	70		—		—		70		(40		)
Operating income	133,818			1,906		418		—		2,324		136,142
Interest expense, net	48,300			—		—		—		—		48,300
Income before income taxes	85,518			1,906		418		—		2,324		87,842
Income tax expense	24,544			701		153		—		854		25,398
Net income	$	60,974		$	1,205	$	265	$	—	$	1,470	$	62,444
Earnings per share:
Basic	$	0.89		$	0.02	$	—	$	—	$	0.02	$	0.91
Diluted	$	0.89		$	0.02	$	—	$	—	$	0.02	$	0.91



	Nine months ended September 30, 2018
	Balance at beginning of period		Recognition of revenue included in beginning balance			Contract liability, net of revenue recognized during the period		Balance at end of period
	(in thousands)
Deferred franchise and license fees	$	38,011	$	(7,739	)	$	4,128	$	34,400
PRO Access and loyalty program points	24,464		(22,942		)	24,512		26,034
Gift card liability ^(*)	4,172		(2,430		)	159		1,901



	September 30, 2018		December 31, 2017 ^(*)
	(in thousands)
Finished product ready for sale	$	423,963	$	432,092
Work-in-process, bulk product and raw materials	59,542		51,225
Packaging supplies	6,134		2,415
Inventory	$	489,639	$	485,732



	September 30, 2018			December 31, 2017
	(in thousands)
Tranche B-1 Term Loan (net of $0.1 million and $0.9 million discount)	$	148,402		$	1,130,320
Tranche B-2 Term Loan (net of $24.9 million discount)	647,366			—
FILO Term Loan (net of $11.6 million discount)	263,403			—
Unpaid original issuance discount	13,231			—
Notes	173,591			167,988
Debt issuance costs	(867		)	(1,285		)
Total debt	1,245,126			1,297,023
Less: current debt	(204,480		)	—
Long-term debt	$	1,040,646		$	1,297,023



	Three months ended September 30,		Nine months ended September 30,
	2018^(*)	2017	2018	2017
	(in thousands)
Anti-dilutive:
Time-based options and restricted stock awards	3,076	2,381	3,022	2,179
Performance-based restricted stock awards	1,241	—	1,013	—
Performance-based restricted stock awards with a market condition	294	—	—	—
Contingently issuable:
Performance-based restricted stock awards	—	62	—	67
Performance-based restricted stock awards with a market condition	—	387	308	416
Total stock-based awards excluded from diluted EPS	4,611	2,830	4,343	2,662



Period ⁽¹⁾	Total Number of Shares Purchased⁽²⁾	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

July 1 to July 31, 2018	—	$	—	—	$	197,795,011
August 1 to August 31, 2018	—	$	—	—	$	197,795,011
September 1 to September 30, 2018	21,576	$	2.90	—	$	197,795,011
Total	21,576	$	2.90	—