GNC Holdings On June 23rd, 2020 GNC Holdings filed for Chapter 11 (reorganization) bankruptcy. GNC had long struggled with its debt, raising capital by issuing about $100 million in preferred stock in both the 4th quarter of 2018 and 1st quarter of 2019. When the Covid-19 pandemic hit, it forced the company to close about 40 percent of its stores (at least temporarily) and to write down $157 million in assets and record a $200 million loss. Five days prior to the bankruptcy filing GNC paid almost $4 million in cash bonuses to senior executives: $2.2 million to the CEO, $795,000 to the CFO, and a total of $918,000 to three other C-level executives. These individuals would have to return 25% of these bonuses if the company did not emerge from Chapter 11 within one year. On October 7th, 2020 GNC was acquired by Harbin Pharmaceutical Group Holding Co., Ltd. For $770 million. About 7% of the liabilities subject to compromise will be settled. This will reduce those liabilities to just under $81 million.

Assess and discuss a detailed analysis of the patterns you see. Do you think Hardin was wise to pay $760 million for GNC?

Year-to-Year Dec 2017-2018 Mar 2018-2019 Dec 2018-2019 Mar 2019-2020 June 2019-2020 Revenues Income Operating Profit Margin Asset Turnover Operating ROA Cash Total Assets Debt 1.77% 128.04% 47.52% 2.29% 48.72% 5.04% 0.53% 9.52% 7.04% 346.56% 17.72% 19.77% 33.99% 154.53% 15.86% 2.39% June 2018-2019 13.58% 20.37% 15.33% 23.27% 11.50% 121.19% 12.62% 0.87% Sept 2018-2019 13.98% 71.85% 55.23% 24.42% 17.33% 265.41% 13.81% 14.15% 156.92% 22.22% 20.53% 38.19% 74.11% 8.03% 6.68% 16.32% 1211.01% 659.22% 4.61% 684.99% 0.24% 20.01% 8.06% 35.67% 621.04% 286.71% 12.63% 263.13% 15.80% 26.37% 8.44% 0.13% Jun-2020 $ $ Quarters Revenue (Note 4) Net (loss) income Operating Profit Margin Asset Turnover Operating ROA Cash Dec-2017 557,737.00 $ (209,825.00) $ 7.23% 36.70% 2.65% 64,001 $ 1,519,763 $ 1,705,684 Mar-2018 607,533.00 $ 6,190.00 $ 7.64% 39.77% 3.04% 53,871 $ 1,527,761 $ 1,707,007 Jun-2018 617,944.00 $ 13,341.00 $ 7.91% 41.22% 3.26% 43,353 $ 1,499,074 $ 1,665,132 Sep-2018 580,185.00 $ (8,590.00 $ 3.44% 39.21% 1.35% 33,348 $ 1,479,587 $ 1,650,270 Dec-2018 547,861.00 $ 58,839.00 $ 3.80% 35.86% 1.36% 67,224 $ 1,527,850 $ 1,543,356 Mar-2019 564,764.00 $ (15,262.00) $ 6.28% 31.91% 2.00% 137,117 $ 1,770,137 $ 1,747,826 Jun-2019 Sep-2019 Dec-2019 533,997.00 $ 499,076.00 $ 470,351.00 $ 16,058.00 $ (2,418.00) $ (33,490.00) $ 9.12% 5.34% 2.95% 31.63% 29.64% 28.50% 2.89% 1.58% 0.84% 95,893 $ 121,857 $ 117,046 $ 1,688,207 $ 1,683,881 $ 1,650,587 $ 1,650,664 1,648,154 1,646,455 Mar-2020 472,581.00 $ (200,086.00) $ -35.13% 33.38% -11.73% 137,444 $ 1,415,957 $ 1,606,952 343,538.00 (83,669.00) -17.03% 27.64% -4.71% 80,740 1,243,062 1,511,387 $ $ Total Assets Debt Year-to-Year Dec 2017-2018 Mar 2018-2019 Dec 2018-2019 Mar 2019-2020 June 2019-2020 Revenues Income Operating Profit Margin Asset Turnover Operating ROA Cash Total Assets Debt 1.77% 128.04% 47.52% 2.29% 48.72% 5.04% 0.53% 9.52% 7.04% 346.56% 17.72% 19.77% 33.99% 154.53% 15.86% 2.39% June 2018-2019 13.58% 20.37% 15.33% 23.27% 11.50% 121.19% 12.62% 0.87% Sept 2018-2019 13.98% 71.85% 55.23% 24.42% 17.33% 265.41% 13.81% 14.15% 156.92% 22.22% 20.53% 38.19% 74.11% 8.03% 6.68% 16.32% 1211.01% 659.22% 4.61% 684.99% 0.24% 20.01% 8.06% 35.67% 621.04% 286.71% 12.63% 263.13% 15.80% 26.37% 8.44% 0.13% Jun-2020 $ $ Quarters Revenue (Note 4) Net (loss) income Operating Profit Margin Asset Turnover Operating ROA Cash Dec-2017 557,737.00 $ (209,825.00) $ 7.23% 36.70% 2.65% 64,001 $ 1,519,763 $ 1,705,684 Mar-2018 607,533.00 $ 6,190.00 $ 7.64% 39.77% 3.04% 53,871 $ 1,527,761 $ 1,707,007 Jun-2018 617,944.00 $ 13,341.00 $ 7.91% 41.22% 3.26% 43,353 $ 1,499,074 $ 1,665,132 Sep-2018 580,185.00 $ (8,590.00 $ 3.44% 39.21% 1.35% 33,348 $ 1,479,587 $ 1,650,270 Dec-2018 547,861.00 $ 58,839.00 $ 3.80% 35.86% 1.36% 67,224 $ 1,527,850 $ 1,543,356 Mar-2019 564,764.00 $ (15,262.00) $ 6.28% 31.91% 2.00% 137,117 $ 1,770,137 $ 1,747,826 Jun-2019 Sep-2019 Dec-2019 533,997.00 $ 499,076.00 $ 470,351.00 $ 16,058.00 $ (2,418.00) $ (33,490.00) $ 9.12% 5.34% 2.95% 31.63% 29.64% 28.50% 2.89% 1.58% 0.84% 95,893 $ 121,857 $ 117,046 $ 1,688,207 $ 1,683,881 $ 1,650,587 $ 1,650,664 1,648,154 1,646,455 Mar-2020 472,581.00 $ (200,086.00) $ -35.13% 33.38% -11.73% 137,444 $ 1,415,957 $ 1,606,952 343,538.00 (83,669.00) -17.03% 27.64% -4.71% 80,740 1,243,062 1,511,387 $ $ Total Assets Debt