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 have to return 25% of these bonuses if the company does not emerge from Chapter 11 within one year.

On October 7^th, 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.

Required

Using only the material provided in this case:

I) For each quarter compute these ratios:

1. Operating Profit margin, 2) Asset turnover, and 3) Return on assets (using operating profit)

	Dec-2017	Mar-2018	Jun-2018	Sep-2018	Dec-2018	Mar-2019	Jun-2019	Sep-2019	Dec-2019	Mar-2020	Jun-2020
Operating Profit Margin	31.83%	34.05%	33.62%	31.84%	31.47%	35.96%	36.28%	32.59%	32.94%	28.93%	25.68%
Asset Turnover	36.70%	39.87%	40.83%	38.96%	36.43%	34.25%	30.88%	29.60%	28.21%	30.82%	25.84%
Return on Assets	11.68%	13.58%	13.73%	12.40%	11.47%	12.32%	11.20%	9.65%	9.29%	8.92%	6.64%

II) Compute the % year-to-year (same-quarter to same-quarter) change in : 1) Revenues, 2) Income, 3) Operating Profit margin, 4) Asset turnover, 5) Operating ROA, 6) Cash, 7) Total assets, and 8) Debt. Because there are many negative values, when calculating the % changes use the absolute values of the numbers in the denominator)

III) Assess and discuss the patterns you see.

IV) Discuss whether or not you believe GNC will be able to emerge from bankruptcy within 1 year. Be specific and refer to your calculations and your analysis from III.

GNC Holdings Jun 2018 Sep 2018 Dec 2013 Mar 2019 Jun 2019 Sep 2019 Dec 2019 Mar 2020 Jun 2020 5 43,353 $ 33,348 5 67,224 $ 137,117 $ 95893 $ 121.457 S 117,046 S 137.444 $ 124,178 131 951 127317 119,352 110 996 111,053 101234 MS 387,655 83932 6542 367 402 80,740 15.688 77,413 10,094 275,170 493,653 489.639 410,951 405 426 394,763 465 572 38,542 SS 109 804 164 73.033 34 34 76,536 731 474 17,528 64,54 15.746 28.061 17,378 545051 24 880 19.761 37.133 490,28 629 673 140, 324,400 96,200 140,144 324,400 94.461 159.13 140,764 300.720 92.727 155.95 79.112 300,720 75,463 95.574 401 456 97.803 79266 300.720 74.128 91.966 379,954 99.709 79,043 300.720 72,710 89,104 362,774 99.729 79,109 300.720 71 298 86916 350.579 97.910 73,552 189.000 69 91 7205 305 78 43520 173,664 Consolidated Balance Sheets Numbers are in Thousands (000) Three months anded Dec 2017 Mar 2018 Current assets Cash and cash equivalents $ 64.001 $ 53.871 Restricted Notes Receivables, net otallowance for credit losses 126 550 114,712 Recevable due tromated Data Nota 5076 Inventory Note 5) 485,732 78.677 Forward contracts for the ance of convertible arter stock Prepaid and other currents 56648 755.228 Total current assets 741031 Long term assets Goodwill not 71 141029 141 200 Brand name Note 7) 324 400 324,400 Other intangible assen 99,715 97,963 Property, plant and equipment (Note INGS 179547 Right of use assets Note Equity method investments Notes Investment in GNC Canada (Notea 3 Detaxas Note 15) Other long term assets 25.026 29,423 Tots longtemet 176.73 772.53 Total assets $ 1.519,753 $1,527.751 Current liabilities Debtor in passion financing (Note 3) Accounts payable $ 153.01 $ 175,151 Accounts payable due to related parties Nate) Current portionaflangterm debt Note 8) 213,111 Currenties Deterred revenue and other current bites 11401 115,213 Total current abilities 267099 SO3,475 Long term liabilities: Long term deb Note 1.257,033 1062.77 Deterd income taxes 56060 56.923 LA Other long term beties 85 502 83,831 Total longterm abilities 1.43 SNS 1.203.532 Total abilities not subject to compromise Liabilities subject to compromise Total abilities 1.705,684 1,707,007 73,552 189.000 58,493 597 248,340 42,077 13,570 20.542 18.603 740,774 $1,243,062 29.710 764,857 $1.499,074 29.272 741113 $1479,587 34 380 723 $1,527.850 35.0E2 1. ONS $1.770,137 34.403 1.000, 140 $1,588.207 34.752 1.030 $1,583,881 24,274 1.0 10.12 $1,650,587 12.10 21.090 78624 $1.415.957 $ 159,272 $ 159,100 5 148.782 $ S 1744 R2 $ 144,726 $ 166,527 $ 305 000 6,43 3,340 205,617 204.40 158.75 150.742 11.720 180,56 112005 105.792 56025 $ 143,15 21.136 895 322 106,704 94 812 1261204 152,919 115,47 97,169 5320 119,050 121,475 4RS OSS 117.09 107.770 1905 120,165 427.70 113,519 104.502 16114 40 SOT 355.22 3.560 1.04.09 50.279 1.040.646 43.090 39 34 3351 15,304 401.617 43,007 1 348281 54.740 13, 929 373.219 45.629 1.287,517 703.007 15.223 347,65 47.518 1,116,066 #1.999 31.586 330 510 41.535 1080 164645 84.799 81.479 1 165 215 105 194 40 549 345,743 82.249 1.115,649 1.121,147 315 2.018 208 2,541 357,822 1,153,564 1,511,387 1.665,132 1.650,270 1,5 43,35 1.747,326 1,650.664 1,643,154 1.646 ASS 1.606 952 Contingencies Note 111 Mezzanine equity: Convertible preferred stock Note 121 304 211,395 211.195 211.195 211.195 211.195 211,95 Stockholders' decit Common stock Additional paid in capital Retained earning Treasury sock at cost Accumulated other comprehensive oss Total stockholders' deficit Total abilities, mezanine equity and stockholders deficit 130 1.00 1.315 541814 11.725 349 (S. 11 (185.9211 $ 1.519,753 130 1,002,604 550.046 1.725,149 ) (179.2401 $1,527,761 130 1,004,563 563.387 (1,725,349 130 1.005,121 S54,797 (1.725,349) N21 170,683) $1 A79,587 130 1,007827 613,637 3.725,349 10.SI (114,3101 51.527,50 130 1.099,042 538.410 (1.725,349 130 1.610.591 554.49% (1325,3491 (11.7211 173.252 $1,6 R8.207 130 1,011,857 S52,095 1.725,349 (14.4011 131 1012076 SIGOS (1.725,1491 (12,721 (207,2031 $1,650,87 131 1.013394 318,319 (1.725,3491 9.ONSI 402,3901 $1,415,957 131 1,013,854 234,850 11.725,34 12201 479,7201 $1,241,062 16 $1.499,074 (19.0841 $1,770,137 (175.66 $1,633,331 GNC Holdings Consolidated Statements of Operations Three months onded Dec 2017 Mar 2013 Jun 2013 Sep-2018 Dec 2013 Mar 2019 Jun 2019 Sep 2015 Dec 2019 $499.075 Revenue Note 4) 5 Cost of sales, including warehousing, dibution and occupa Gross profit 557,737 380.190 177.547 $ 507533 400 655 206,874 $ $17.944 $ 410,209 207.725 $ 580,185 395.4 184702 547,861 375,427 172.414 $ 564,754 361.63 203.091 $ 533.397 340.253 193,744 $ 470,351 215,432 Mar 2020 2020 $ 472.581 335 136.716 Jun 2020 2020 $ 343,533 255,305 23 162262 160.710 158.5 151.721 14.11.08 143840 135,795 141.000 149, 14,556 127.115 20,201 2451 46,385 21.773 16,740 144.542 157 515 1.45 992 1166,0341 47 444 320 48,834 32,943 19,514 203 15,482 32.956 282 19.961 35,732 1.779 593 48.718 24.964 (1,2141 20.799 36,6321 172 26,654 24.456 2.511 13,9 29.802 365 (5.1) 22.057 16,787 Selle Roneral and administrative 137.96 Long lived asset impairments and other store closing costs Lowonnet et exchange for the formation of the joint venture Notes) Other income, et 785) Operating income 40,346 Interest expense.net Note 8) Gain on convertible de repurchase Lesson forward contracts for the issuance of convertible preferred stock Reorganisation items.net Impairment of capitales 434.577 Loss Income before income fromequity method investmen 299 150 Income Tax bandit expense Note 15) 19, 1311 Loss income before income from equity method investmen 209.25 Inco mostrom equity method investments Note Net foss) income (209.8251 Los camnings per share Note 13) Basic 2.991 Weighted average common shares outstanding INote 135 Basic 70.251 B29421 23 23.GO 49,429 4101 7,876 2.198 14.556 15.7711 71811 18,590 15,941 2.500 13.341 157.515 213.478 51,0351 (14,2611 1,954 116 2171 955 1515.2621 5.190 26958 11.00 13.938 2.120 15.058 15,429 20.201 (90004 11:38 (8461 94 ($ 33,569) 24,150 133,690 1.104 (33,490) 3.535 1.117 {$2,4181 9.641 ($200,086) $ 5.190 $ $ 13,341 $8,5901 58,839 $ $ 0.07 $ 0.16 $0 101 0.69 sa za s 0.13 So 093 {$2.45) S10 83,232 83,332 83.412 83,476 83,510 83.663 83,823 83,823 83 897 33.936 GNC Holdings Jun 2018 Sep 2018 Dec 2013 Mar 2019 Jun 2019 Sep 2019 Dec 2019 Mar 2020 Jun 2020 5 43,353 $ 33,348 5 67,224 $ 137,117 $ 95893 $ 121.457 S 117,046 S 137.444 $ 124,178 131 951 127317 119,352 110 996 111,053 101234 MS 387,655 83932 6542 367 402 80,740 15.688 77,413 10,094 275,170 493,653 489.639 410,951 405 426 394,763 465 572 38,542 SS 109 804 164 73.033 34 34 76,536 731 474 17,528 64,54 15.746 28.061 17,378 545051 24 880 19.761 37.133 490,28 629 673 140, 324,400 96,200 140,144 324,400 94.461 159.13 140,764 300.720 92.727 155.95 79.112 300,720 75,463 95.574 401 456 97.803 79266 300.720 74.128 91.966 379,954 99.709 79,043 300.720 72,710 89,104 362,774 99.729 79,109 300.720 71 298 86916 350.579 97.910 73,552 189.000 69 91 7205 305 78 43520 173,664 Consolidated Balance Sheets Numbers are in Thousands (000) Three months anded Dec 2017 Mar 2018 Current assets Cash and cash equivalents $ 64.001 $ 53.871 Restricted Notes Receivables, net otallowance for credit losses 126 550 114,712 Recevable due tromated Data Nota 5076 Inventory Note 5) 485,732 78.677 Forward contracts for the ance of convertible arter stock Prepaid and other currents 56648 755.228 Total current assets 741031 Long term assets Goodwill not 71 141029 141 200 Brand name Note 7) 324 400 324,400 Other intangible assen 99,715 97,963 Property, plant and equipment (Note INGS 179547 Right of use assets Note Equity method investments Notes Investment in GNC Canada (Notea 3 Detaxas Note 15) Other long term assets 25.026 29,423 Tots longtemet 176.73 772.53 Total assets $ 1.519,753 $1,527.751 Current liabilities Debtor in passion financing (Note 3) Accounts payable $ 153.01 $ 175,151 Accounts payable due to related parties Nate) Current portionaflangterm debt Note 8) 213,111 Currenties Deterred revenue and other current bites 11401 115,213 Total current abilities 267099 SO3,475 Long term liabilities: Long term deb Note 1.257,033 1062.77 Deterd income taxes 56060 56.923 LA Other long term beties 85 502 83,831 Total longterm abilities 1.43 SNS 1.203.532 Total abilities not subject to compromise Liabilities subject to compromise Total abilities 1.705,684 1,707,007 73,552 189.000 58,493 597 248,340 42,077 13,570 20.542 18.603 740,774 $1,243,062 29.710 764,857 $1.499,074 29.272 741113 $1479,587 34 380 723 $1,527.850 35.0E2 1. ONS $1.770,137 34.403 1.000, 140 $1,588.207 34.752 1.030 $1,583,881 24,274 1.0 10.12 $1,650,587 12.10 21.090 78624 $1.415.957 $ 159,272 $ 159,100 5 148.782 $ S 1744 R2 $ 144,726 $ 166,527 $ 305 000 6,43 3,340 205,617 204.40 158.75 150.742 11.720 180,56 112005 105.792 56025 $ 143,15 21.136 895 322 106,704 94 812 1261204 152,919 115,47 97,169 5320 119,050 121,475 4RS OSS 117.09 107.770 1905 120,165 427.70 113,519 104.502 16114 40 SOT 355.22 3.560 1.04.09 50.279 1.040.646 43.090 39 34 3351 15,304 401.617 43,007 1 348281 54.740 13, 929 373.219 45.629 1.287,517 703.007 15.223 347,65 47.518 1,116,066 #1.999 31.586 330 510 41.535 1080 164645 84.799 81.479 1 165 215 105 194 40 549 345,743 82.249 1.115,649 1.121,147 315 2.018 208 2,541 357,822 1,153,564 1,511,387 1.665,132 1.650,270 1,5 43,35 1.747,326 1,650.664 1,643,154 1.646 ASS 1.606 952 Contingencies Note 111 Mezzanine equity: Convertible preferred stock Note 121 304 211,395 211.195 211.195 211.195 211.195 211,95 Stockholders' decit Common stock Additional paid in capital Retained earning Treasury sock at cost Accumulated other comprehensive oss Total stockholders' deficit Total abilities, mezanine equity and stockholders deficit 130 1.00 1.315 541814 11.725 349 (S. 11 (185.9211 $ 1.519,753 130 1,002,604 550.046 1.725,149 ) (179.2401 $1,527,761 130 1,004,563 563.387 (1,725,349 130 1.005,121 S54,797 (1.725,349) N21 170,683) $1 A79,587 130 1,007827 613,637 3.725,349 10.SI (114,3101 51.527,50 130 1.099,042 538.410 (1.725,349 130 1.610.591 554.49% (1325,3491 (11.7211 173.252 $1,6 R8.207 130 1,011,857 S52,095 1.725,349 (14.4011 131 1012076 SIGOS (1.725,1491 (12,721 (207,2031 $1,650,87 131 1.013394 318,319 (1.725,3491 9.ONSI 402,3901 $1,415,957 131 1,013,854 234,850 11.725,34 12201 479,7201 $1,241,062 16 $1.499,074 (19.0841 $1,770,137 (175.66 $1,633,331 GNC Holdings Consolidated Statements of Operations Three months onded Dec 2017 Mar 2013 Jun 2013 Sep-2018 Dec 2013 Mar 2019 Jun 2019 Sep 2015 Dec 2019 $499.075 Revenue Note 4) 5 Cost of sales, including warehousing, dibution and occupa Gross profit 557,737 380.190 177.547 $ 507533 400 655 206,874 $ $17.944 $ 410,209 207.725 $ 580,185 395.4 184702 547,861 375,427 172.414 $ 564,754 361.63 203.091 $ 533.397 340.253 193,744 $ 470,351 215,432 Mar 2020 2020 $ 472.581 335 136.716 Jun 2020 2020 $ 343,533 255,305 23 162262 160.710 158.5 151.721 14.11.08 143840 135,795 141.000 149, 14,556 127.115 20,201 2451 46,385 21.773 16,740 144.542 157 515 1.45 992 1166,0341 47 444 320 48,834 32,943 19,514 203 15,482 32.956 282 19.961 35,732 1.779 593 48.718 24.964 (1,2141 20.799 36,6321 172 26,654 24.456 2.511 13,9 29.802 365 (5.1) 22.057 16,787 Selle Roneral and administrative 137.96 Long lived asset impairments and other store closing costs Lowonnet et exchange for the formation of the joint venture Notes) Other income, et 785) Operating income 40,346 Interest expense.net Note 8) Gain on convertible de repurchase Lesson forward contracts for the issuance of convertible preferred stock Reorganisation items.net Impairment of capitales 434.577 Loss Income before income fromequity method investmen 299 150 Income Tax bandit expense Note 15) 19, 1311 Loss income before income from equity method investmen 209.25 Inco mostrom equity method investments Note Net foss) income (209.8251 Los camnings per share Note 13) Basic 2.991 Weighted average common shares outstanding INote 135 Basic 70.251 B29421 23 23.GO 49,429 4101 7,876 2.198 14.556 15.7711 71811 18,590 15,941 2.500 13.341 157.515 213.478 51,0351 (14,2611 1,954 116 2171 955 1515.2621 5.190 26958 11.00 13.938 2.120 15.058 15,429 20.201 (90004 11:38 (8461 94 ($ 33,569) 24,150 133,690 1.104 (33,490) 3.535 1.117 {$2,4181 9.641 ($200,086) $ 5.190 $ $ 13,341 $8,5901 58,839 $ $ 0.07 $ 0.16 $0 101 0.69 sa za s 0.13 So 093 {$2.45) S10 83,232 83,332 83.412 83,476 83,510 83.663 83,823 83,823 83 897 33.936