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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark one)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	~~March~~June 3130, 2020
☐	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~~GNCIQ

~~New York Stock Exchange~~*

* On June 30, 2020, the Company’s common stock was suspended from trading on the New York Stock Exchange (the “NYSE”) because of the Debtors’ filing of the Chapter 11 Cases. Effective July 1, 2020, trades in the Company’s common stock began being quoted on the OTC Pink Marketplace under the symbol “GNCIQ.” On July 1, 2020, the NYSE filed a Form 25 to delist the Company’s common stock and to remove it from registration under Section 12(b) of the Exchange Act.

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. ☒ 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). ☒ 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

☐

Accelerated filer

☒

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 ☒ No

~~As of May 6, 2020, there were 84,607,231 outstanding shares of Class A common stock, par value $0.001 per share (the “common stock”), of GNC Holdings, Inc.~~1

Table of Contents

As of August 5, 2020, there were 84,040,526 outstanding shares of Class A common stock, par value $0.001 per share (the “common stock”), of GNC Holdings, Inc.

Table of Contents

TABLE OF CONTENTS

PAGE

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited Debtor-In-Possession)

Unaudited Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019

Unaudited Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019

Unaudited Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019

Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019

Unaudited Consolidated Statements of Comprehensive Income for the three months ended March 31, 2020 and 2019

Unaudited Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2020 and 2019

Unaudited Consolidated Unaudited Consolidated Statements of Stockholders’ Deficit for the three months ended March 31, 2020 and 2019

Unaudited Consolidated Statements of Stockholders’ Deficit for the three and six months ended June 30, 2020 and 2019

Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019

Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019

Unaudited Supplemental Cash Flow Information for the three months ended March 31, 2020 and 2019

Unaudited Supplemental Cash Flow Information for the six months ended June 30, 2020 and 2019

Condensed Notes to Unaudited Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

2943

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

4261

Item 4.

Controls and Procedures

4262

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

4362

Item 1A.

Risk Factors

4464

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

4568

Item 3.

Defaults Upon Senior Securities

4568

Item 4.

Mine Safety Disclosures

4568

Item 5.

Other Information

4568

Item 6.

Exhibits

4669

Signatures

4770

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited Debtor-In-Possession)

GNC HOLDINGS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)

Consolidated Balance Sheets

(unaudited)

(in thousands)

	March 31, 2020		December 31, 2019
	June 30, 2020		December 31, 2019
Current assets:
Cash and cash equivalents	$	~~137~~80,~~444~~740	$	117,046
Receivables, net of allowance of $27,390 and $22,648, respectively (Note 2)	83,932		101,234
Restricted cash (Note 3)	15,688		—
Receivables due from related parties (Note 8)	6,547		8,946
Receivables, net of allowance for credit losses of $32,726 and $22,648, respectively (Note 2)	77,413		101,234
Inventory (Note 4)	367,402		387,655
Receivables due from related parties (Note 9)	10,094		8,946
Prepaid and other current assets	34,348		24,880
Inventory (Note 5)	275,170		387,655
Total current assets	629,673		639,761
Prepaid and other current assets	37,183		24,880
Total current assets	496,288		639,761
Long-term assets:
Goodwill (Note 6)	73,552		79,109
Goodwill (Note 7)	73,552		79,109
Brand name (Note 6)	189,000		300,720
Brand name (Note 7)	189,000		300,720
Other intangible assets, net (Note 6)	69,891		71,298
Other intangible assets, net	68,493		71,298
Property, plant and equipment, net (Note 5)	72,054		86,916
Property, plant and equipment, net (Note 6)	66,597		86,916
Right-of-use assets	305,788		350,579
Right-of-use assets (Note 6)	248,340		350,579
Equity method investments (Note 8)	42,520		97,930
Equity method investments (Note 9)	42,077		97,930
Deferred tax assets	12,389		—
Investment in GNC Canada (Note 3)	13,570		—
Other long-term assets	21,090		24,274
Deferred tax assets (Note 15)	26,542		—
Total long-term assets	786,284		1,010,826
Other long-term assets	18,603		24,274
Total assets	$	1,415,957	$	1,650,587
Total long-term assets	746,774		1,010,826
Total assets	$	1,243,062	$	1,650,587
Current liabilities:
Accounts payable	$	143,535	$	150,742
Debtor-in-possession financing (Note 3)	$	305,000	$	—
Accounts payable due to related parties (Note 8)	21,136		11,720
Accounts payable	6,435		150,742
Current portion of long-term debt (Note 7)	895,022		180,566
Accounts payable due to related parties (Note 9)	3,340		11,720
Current lease liabilities	106,704		112,005
Current portion of long-term debt (Note 8)	—		180,566
Deferred revenue and other current liabilities	94,812		105,792
Current lease liabilities	—		112,005
Total current liabilities	1,261,209		560,825
Deferred revenue and other current liabilities	40,507		105,792
Total current liabilities	355,282		560,825
Long-term liabilities:
Long-term debt (Note 7)	—		681,999
Long-term debt (Note 8)	—		681,999
Deferred income taxes	—315		31,586
Lease liabilities	~~305~~2,~~194~~018		330,510
Other long-term liabilities	~~40,549~~208		41,535
Total long-term liabilities	~~345~~2,~~743~~541		1,085,630
Total liabilities	1,606,952		1,646,455
Total liabilities not subject to compromise	357,823		1,646,455
Contingencies (Note 10)
Liabilities subject to compromise	1,153,564		—
Mezzanine equity:
Total liabilities	1,511,387		1,646,455
Convertible preferred stock (Note 11)	211,395		211,395
Stockholders’ deficit:
Common stock	131		131
Additional paid-in capital	1,013,394		1,012,076
Retained earnings	318,519		518,605
Treasury stock, at cost	(1,725,349)		(1,725,349)
Accumulated other comprehensive loss	(9,085)		(12,726)
Total stockholders’ deficit	(402,390)		(207,263)
Total liabilities, mezzanine equity and stockholders’ deficit	$	1,415,957	$	1,650,587

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

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GNC HOLDINGS, INC. AND SUBSIDIARIES


Contingencies (Note 11)
Mezzanine equity:
Convertible preferred stock (Note 12)	211,395		211,395

Stockholders’ deficit:
Common stock	131		131
Additional paid-in capital	1,013,854		1,012,076
Retained earnings	234,850		518,605
Treasury stock, at cost	(1,725,349)		(1,725,349)
Accumulated other comprehensive loss	(3,206)		(12,726)
Total stockholders’ deficit	(479,720)		(207,263)
Total liabilities, mezzanine equity and stockholders’ deficit	$	1,243,062	$	1,650,587

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

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GNC HOLDINGS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)

Consolidated Statements of Operations

(unaudited)

(in thousands, except per share amounts)

	Three months ended March 31,
	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
Revenue (Note 3)	$	472,581	$	564,764
Revenue (Note 4)	$	343,538	$	533,997	$	816,119	$	1,098,760
Cost of sales, including warehousing, distribution and occupancy	~~335~~255,~~865~~305		~~361~~340,~~673~~253		591,171		701,925
Gross profit	~~136~~88,~~716~~233		~~203~~193,~~091~~744		224,948		396,835
Selling, general, and administrative	144,542		148,303
Selling, general and administrative	127,115		143,840		271,657		292,143
Long-lived asset impairments and other store closing costs	~~157~~20,~~515~~201		—		177,715		—
Loss on net asset exchange for the formation of the joint ventures (Note 8)	1,655		19,514
Loss on net asset exchange for the formation of the joint ventures (Note 9)	—		1,779		1,655		21,293
Other income, net	(~~962~~565)		(~~208~~593)		(1,528)		(801)
Operating (loss) income	(~~166~~58,~~034~~518)		3548,~~482~~718		(224,551)		84,200
Interest expense, net (Note 7)	47,444		32,956
Interest expense, net (Note 8)	22,057		24,964		69,502		57,920
Loss on forward contracts for the issuance of convertible preferred stock	—		16,787
Gain on convertible debt repurchase	—		(3,214)		—		(3,214)
Loss before income from equity method investments and income taxes	(213,478)		(14,261)
Loss on forward contracts for the issuance of convertible preferred stock	—		—		—		16,787
Income tax (benefit) expense (Note 14)	(53,035)		1,956
Reorganization items, net	15,429		—		15,429		—
Loss before income from equity method investments	(160,443)		(16,217)
(Loss) income before income from equity method investments and income taxes	(96,004)		26,968		(309,482)		12,707
(Loss) income from equity method investments (Note 8)	(39,643)		955
Income tax (benefit) expense (Note 15)	(11,386)		13,030		(64,421)		14,986
Net loss	$	(200,086)	$	(15,262)
(Loss) income before income from equity method investments	(84,618)		13,938		(245,061)		(2,279)
Loss per share (Note 12):
Income (loss) from equity method investments (Note 9)	949		2,120		(38,694)		3,075
Basic	$	(2.45)	$	(0.23)
Net (loss) income	$	(83,669)	$	16,058	$	(283,755)	$	796
Diluted	$	(2.45)	$	(0.23)
(Loss) earnings per share (Note 13):
Weighted average common shares outstanding (Note 12):
Basic	$	(1.06)	$	0.13	$	(3.51)	$	(0.09)
Basic	83,897		83,510
Diluted	$	(1.06)	$	0.11	$	(3.51)	$	(0.09)
Diluted	83,897		83,510
Weighted average common shares outstanding (Note 13):
Basic	83,936		83,663		83,916		83,587
Diluted	83,936		140,942		83,916		83,587

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

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GNC HOLDINGS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)

Consolidated Statements of Comprehensive Income (Loss)

(unaudited)

(in thousands)

	Three months ended March 31,
	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
Net loss	$	(200,086)	$	(15,262)
Net (loss) income	$	(83,669)	$	16,058	$	(283,755)	$	796
Other comprehensive gain (loss):
Net change in interest rate swaps:
Periodic revaluation of interest rate swap, net of tax(1)	~~(3,542)~~—		(12,~~464~~830)		(3,542)		(4,295)
Reclassification adjustment for interest recognized in Consolidated Statement of Operations, net of tax(2)	~~871~~—		~~236~~268		871		504
Net change in unrecognized loss on interest rate swaps, net of tax	~~(2,671)~~—		(12,~~228~~562)		(2,671)		(3,791)
Deferred loss recognized on interest rate swap, net of $3.4 million tax expense	~~7,459~~—		—		7,459		—
Foreign currency translation (loss) gain	(1,147)		438
Foreign currency translation gain (loss)	251		186		(896)		625
Other comprehensive gain (loss)	3,641		(790)
Deconsolidation of GNC Canada - currency translation	5,628		—		5,628		—
Comprehensive loss	$	(196,445)	$	(16,052)
Other comprehensive gain (loss)	5,879		(2,376)		9,520		(3,166)
Comprehensive (loss) income	$	(77,790)	$	13,682	$	(274,235)	$	(2,370)

(1)Net of tax benefit of $1.3 million for the three months ended June 30, 2019, and net of tax benefit of $1.6 million and $01.79 million, respectively, for the ~~three~~six months ended ~~March~~June 3130, 2020 and 2019.

(2)Net of tax expense of $0.41 million, respectively, for the three months ended June 30, 2019, and net of tax expense of $0.14 million and $0.2 million, respectively, for the ~~three~~six months ended ~~March~~June 3130, 2020 and 2019.

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

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GNC HOLDINGS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)

Consolidated Statements of Stockholders’ Deficit

(unaudited)

(in thousands)

	Common Stock					Treasury Stock		Paid-inCapital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Deficit
	Class A
	Shares	Dollars
Balance at December 31, 2019	84,564	$	131	$	(1,725,349)	$	1,012,076	$	518,605	$	(12,726)	$	(207,263)
Comprehensive income	—	—		—		—		(200,086)		3,641		(196,445)
Restricted stock awards	68	—		—		—		—		—		—
Minimum tax withholding requirements	(24)	—		—		(54)		—		—		(54)
Stock-based compensation	—	—		—		1,372		—		—		1,372
Balance at March 31, 2020	84,608	131		(1,725,349)		1,013,394		318,519		(9,085)		(402,390)
Comprehensive income	—	—		—		—		(83,669)		5,879		(77,790)
Restricted stock awards	(546)	—		—		—		—		—		—
Minimum tax withholding requirements	(21)	—		—		(10)		—		—		(10)
Stock-based compensation	—	—		—		470		—		—		470
Balance at June 30, 2020	84,041	$	131	$	(1,725,349)	$	1,013,854	$	234,850	$	(3,206)	$	(479,720)
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)
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)
Comprehensive income	—	—		—		—		16,058		(2,376)		13,682
Restricted stock awards	628	—		—		—		—		—		—
Minimum tax withholding requirements	(15)	—		—		(108)		—		—		(108)
Stock-based compensation	—	—		—		1,658		—		—		1,658
Balance at June 30, 2019	84,579	$	130	$	(1,725,349)	$	1,010,591	$	554,497	$	(13,721)	$	(173,852)

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

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GNC HOLDINGS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

	Three months ended March 31,
	Six months ended June 30,
	2020		2019
Cash flows from operating activities:
Net loss	$	(200,086)	$	(15,262)
Net (loss) income	$	(283,755)	$	796
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization expense	714,~~858~~845		1018,~~190~~704
Loss (income) from equity method investments	39,643		(955)
Non-cash reorganization items, net	13,386		—
Amortization of debt costs	16,814		7,988
Loss (income) from equity method investments	38,694		(3,075)
Stock-based compensation	1,372		1,334
Amortization of debt costs	21,954		12,364
Long-lived asset impairments and other store closing costs	157,515		—
Stock-based compensation	1,842		2,992
Long-lived asset impairments and other store closing costs	177,715		—
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	1,655		1921,~~514~~293
Gain on convertible notes repurchase	—		(3,214)
Interest expense recognized on interest rate swap	10,810		—
Deferred income tax benefit	(47,677)		(5,064)
Distribution from equity investments	1,399		—
Other	(2,107)		(21)
Deferred income tax benefit	(61,344)		(5,859)
Other	(2,106)		(398)
Changes in assets and liabilities:
Decrease (increase) in receivables	1720,~~824~~559		(124,~~567~~400)
Decrease (increase) in inventory	1788,~~578~~146		(~~6,886~~706)
Increase in prepaid and other current assets	(8,401)		(3,658)
Decrease (increase) in prepaid and other current assets	(12,841)		874
Increase in accounts payable	3,346		57,722
Increase (decrease) in accounts payable	(51,772)		24,886
Decrease in deferred revenue and accrued liabilities	(22,686)		4,437
Increase (decrease) in deferred revenue and accrued liabilities	53,125		(222)
Decrease in net lease liabilities	(733,~~035~~998)		(818,~~485~~556)
Other operating activities	(1,~~492~~755)		3,~~637~~057
Net cash (used in) provided by operating activities	(123,~~085~~441)		6865,~~711~~323
Cash flows from investing activities:
Capital expenditures	(3,858)		(3,017)
Refranchising proceeds, net of store acquisition costs	180		667
Proceeds from net asset exchange	18,211		101,000
Capital contribution to the newly formed joint ventures	—		(13,079)
Net cash provided by investing activities	14,533		85,571
Cash flows from financing activities:
Borrowings under revolving credit facility	30,000		22,000
Payments on revolving credit facility	—		(22,000)
Proceeds from the issuance of convertible preferred stock	—		199,950
Payments on Tranche B-1 Term Loan	—		(147,312)
Payments on Tranche B-2 Term Loan	(11,719)		(114,000)
Original issuance discount and revolving credit facility fees	—		(10,365)
Fees associated with the issuance of convertible preferred stock	—		(12,564)
Minimum tax withholding requirements	(54)		(120)
Net cash provided by (used) in financing activities	18,227		(84,411)
Effect of exchange rate changes on cash and cash equivalents	(277)		22
Net increase in cash and cash equivalents	20,398		69,893
Beginning balance, cash and cash equivalents	117,046		67,224
Ending balance, cash and cash equivalents	$	137,444	$	137,117

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Cash flows from investing activities:
Capital expenditures	(5,970)		(6,460)
Refranchising proceeds, net of store acquisition costs	408		1,520
Proceeds from net asset exchange	18,211		101,000
Deconsolidation of GNC Canada	(4,293)		—
Capital contribution to the joint ventures	—		(13,079)
Interest rate swap settlement	(8,990)		—
Net cash (used in) provided by investing activities	(634)		82,981
Cash flows from financing activities:
Proceeds from debtor-in-possession financing	30,000		—
Fees associated with the issuance of debtor-in-possession financing	(7,300)		—
Borrowings under revolving credit facility	60,000		22,000
Payments on revolving credit facility	(60,000)		(22,000)
Proceeds from the issuance of convertible preferred stock	—		199,950
Payments on Tranche B-1 Term Loan	—		(147,312)
Payments on Tranche B-2 Term Loan	(37,628)		(123,774)
Payments on convertible notes repurchase	—		(24,708)
Original issuance discount and revolving credit facility fees	—		(10,365)
Fees associated with the issuance of convertible preferred stock	—		(12,814)
Minimum tax withholding requirements	(64)		(228)
Net cash used in financing activities	(14,992)		(119,251)

Effect of exchange rate changes on cash and cash equivalents and restricted cash	(1,551)		(384)
Net (decrease) increase in cash and cash equivalents and restricted cash	(20,618)		28,669
Beginning balance, cash and cash equivalents and restricted cash	117,046		67,224
Ending balance, cash and cash equivalents and restricted cash	$	96,428	$	95,893

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

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GNC HOLDINGS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)

Supplemental Cash Flow Information

(unaudited)

	As of March 31,
	2020	2019
Non-cash investing activities (1):	(in thousands)
Net assets contributed to the joint ventures (Note 8)	—	202,487

(in thousands)

(1)Capital expenditures included in current liabilities were not material during the three months ended March, 31, 2020 and March 31, 2019, respectively.


	Six months ended June 30,
	2020		2019
Non-cash investing activities ⁽¹⁾:
Net assets contributed to the joint ventures (Note 9)	$	—	$	202,487
Net assets removed in deconsolidation of GNC Canada (Note 3)	14,342		—

(1) Capital expenditures included in current liabilities were not material during the six months ended June 30, 2020 and June 30, 2019.

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

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GNC HOLDINGS, INC. AND SUBSIDIARIES

Condensed Notes to the Unaudited Consolidated Financial Statements

NOTE 1. NATURE OF BUSINESS

GNC Holdings, Inc., a Delaware corporation ("GNC," “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, 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's operations consist of three reportable segments, U.S. and Canada, International, and Manufacturing / Wholesale (refer to Note ~~13,~~14. "Segments" for more information). Corporate retail store operations are located in the United States, Canada, Puerto Rico, Ireland and, prior to the joint venture transaction with Harbin Pharmaceutical Group Co., Ltd ("Harbin") in February 2019, China. Franchise locations exist in the United States and approximately 50 other countries. Products can also be purchased through GNC.com, Amazon.com and other marketplaces and select wholesale partners. Additionally, the Company licenses the use of its trademarks and trade names. Prior to the formation of the manufacturing joint venture with International Vitamin Corporation ("IVC") (the "Manufacturing JV") in March 2019, the Company purchased raw materials, manufactured products and sold the finished products through its reportable segments. Following the establishment of the Manufacturing JV, the Company's operations consist of wholesale and retail sales. Refer to Note 89. "Equity Method Investments" for more information ofon the Company's joint ventures.

Voluntary Filing Under Chapter 11

On June 23, 2020 (the “Petition Date”), the Company and certain of its U.S. subsidiaries (collectively, the “Debtors”) filed a Restructuring Support Agreement (the "RSA") and commenced voluntary Chapter 11 proceedings (the “Chapter 11 Cases”) under Title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). See Note 3. "Reorganization and Chapter 11 Proceedings" for listing of our non-Debtor subsidiaries. The Debtors have requested that the Chapter 11 proceedings be jointly administered under the caption In re GNC Holdings, Inc., et al., Case No. 20-11662. Documents and other information related to the Chapter 11 Cases is available online through Prime Clerk, our claims administrator for the Chapter 11 Cases. In addition, the Company’s Canadian subsidiary voluntarily commenced parallel proceedings under the Companies' Creditors Arrangement Act ("CCAA") in Canada in the Ontario Superior Court of Justice on June 24, 2020 (the “Canadian Petition Date”). As a result, we deconsolidated General Nutrition Centres Company (“GNC Canada”), our wholly owned subsidiary, subsequent to the Canadian Petition Date. As such, all amounts presented in these Consolidated Financial Statements and notes thereto exclude the operating results and cash flows of GNC Canada subsequent to June 24, 2020 and the assets, liabilities and equity of GNC Canada as of June 30, 2020. Prior period amounts have not been adjusted.

The Consolidated Financial Statements included herein have been prepared in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 852, Reorganizations. See Note 3. "Reorganization and Chapter 11 Proceedings" for further details.

Going Concern

AsThe ~~further discussed below, the~~ Company has ancontinued ~~accelerated~~to ~~maturity~~experience ~~payment~~negative ~~due~~same onstore ~~May~~sales ~~16,~~and ~~2020~~declining ~~(the~~gross ~~“Springing Maturity Date”) that it does not have the ability to pay~~profit. ~~Since~~ ~~the~~The Company has ~~not~~closed ~~refinanced~~underperforming ~~the~~stores ~~$738.7 million~~under ofits ~~Tranche~~store ~~B-2~~optimization ~~Term~~strategy ~~Loan~~and ~~(the~~implemented ~~"Tranche~~cost ~~B-2~~reduction ~~Term~~measures ~~Loan),~~to ~~FILO~~help ~~Term~~mitigate ~~Loan (~~the ~~"FILO~~effect ~~Term~~of ~~Loan")~~these declines and ~~Revolving~~improve ~~Credit~~its ~~Facility~~financial ~~(the~~position ~~"Revolving~~and ~~Credit~~liquidity. ~~Facility") that will become due on the Springing Maturity Date~~However, ~~management~~our business has ~~concluded~~been ~~there~~further isadversely ~~substantial~~affected ~~doubt~~by ~~regarding~~ the ~~Company's~~outbreak ~~ability~~of tothe ~~continue~~coronavirus, asor aCOVID-19. ~~going~~Due ~~concern~~to ~~within~~the ~~one~~COVID-19 ~~year~~pandemic, ~~from~~U.S. ~~the~~and ~~issuance~~Canada ~~date~~company-owned ofand ~~the~~franchise ~~Company’s~~retail ~~Consolidated~~store ~~Financial~~temporary ~~Statements.~~closures ~~Failure~~reached toapproximately ~~complete~~1,400 astores, ~~refinancing~~ or ~~other restructuring~~40%, ~~obtain~~in anApril ~~extension~~2020 ofand ~~the~~have ~~Springing~~steadily ~~Maturity~~re-opened ~~Date~~since asthen. 551 ~~defined~~of inthese ~~the~~stores ~~Credit~~have ~~Agreements,~~been ~~reach~~permanently anclosed ~~agreement~~ with ~~required~~an ~~lender~~effective ~~groups~~date ~~under~~in ~~the~~June ~~Credit Agreements prior to May 16~~2020, ~~2020~~in orconnection ~~to reach an agreement~~ with the ~~Company's~~Chapter ~~stakeholders~~11 onCases ~~the~~in ~~terms~~which ofthe anBankruptcy ~~out-of-court~~Court ~~restructuring~~authorized ~~would~~the ~~have~~Debtors ato ~~material~~reject ~~adverse~~certain ~~effect~~unexpired onU.S ~~the~~and ~~Company's~~Canada ~~liquidity,~~company-owned ~~financial condition~~ and ~~results~~franchise ofleases ~~operations~~as ~~and~~discussed ~~may~~further ~~result~~ in ~~filing~~Note a3. ~~voluntary~~"Reorganization ~~petition~~and ~~for relief under~~ Chapter 11 ~~of the United States Bankruptcy Code in order to implement a restructuring plan~~Proceedings. " As of ~~March~~June 3130, 2020, the Company's ~~outstanding~~had ~~indebtedness~~over ~~has~~100, ~~been~~or ~~classified~~4%, asof ~~current on~~ the ~~Company's~~U.S. ~~Consolidated~~and ~~Balance~~Canada ~~Sheets.~~company-owned Inand ~~addition,~~franchise ~~the~~retail ~~Company~~stores ~~accelerated~~temporarily ~~the~~closed ~~amortization~~due ofto ~~original~~the ~~issuance~~COVID-19 ~~discount~~pandemic. There ~~and~~is ~~deferred~~significant ~~financing~~uncertainty ~~fees~~relating ~~for~~to the ~~Tranche~~impacts Bof COVID-219 ~~Term~~on ~~Loan,~~the ~~FILO~~Company’s ~~Term~~business ~~Loan~~going ~~and~~forward ~~the~~due ~~Revolving~~to ~~Credit~~various ~~Facility~~global ~~of $12.4 million~~macroeconomic, tooperational ~~the~~and ~~Springing~~supply ~~Maturity~~chain ~~Date~~risks.

The Company has continued to experience negative same store sales and declining gross profit. The Company has closed underperforming stores under its store optimization strategy and implemented cost reduction measures to help mitigate the effect of these declines and improve its financial position and liquidity. At March 31, 2020, the Company has substantial indebtedness including $156.4 million of outstanding indebtedness under the Notes issued under that certain Indenture dated as of August 10, 2015, among the Company, certain of its subsidiaries, and The Bank of New York Mellon Trust Company, N.A, maturing on August 15, 2020 (the "Notes") and $434.8 million of outstanding indebtedness under the Amended and Restated Term Loan Credit Agreement, dated as of February 28, 2018, among GNC Corporation, GNC Nutrition Centers, Inc., as Borrower, the lenders and agents parties thereto, and JPMorgan Chase Bank, N.A., as administrative agent (the “Tranche B-2 Term Loan Credit Agreement" and the term loan thereunder, the "Tranche B-2 Term Loan"). The Company made an excess cash flow payment of $25.9 million that was due in April 2020 which reduced the outstanding amount of the Tranche B-2 Term Loan. The Tranche B-2 Term Loan becomes due on the earlier to occur of (i) the maturity date of March 4, 2021 or (ii) May 16, 2020 if more than $50 million of the Notes are outstanding on such date. Each of the Revolving Credit Facility under the Credit Agreement, dated as of February 28, 2018, among GNC Corporation, GNC Nutritional Centers, Inc., as Administrative Borrower, certain of its subsidiaries, as subsidiary borrowers, the lenders and agents parties thereto, and JPMorgan Chase Bank, N.A., as administrative agent (the “ABL Credit Agreement,” and together with the Tranche B-2 Term Loan Credit Agreement, the "Credit Agreements") and the FILO Term Loan under the ABL Credit Agreement, which otherwise mature in August 2022 and December 2022 respectively, also include an accelerated maturity date of May 16, 2020 if more than $50 million of the Notes are outstanding on such

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~~date.~~Additionally, ~~The~~economic ~~Company~~conditions ~~does~~and ~~not~~the ~~have~~risks and uncertainties associated with the Chapter 11 Cases, raise substantial doubt about our ability to ~~reduce~~continue as a going concern. We currently expect that the ~~outstanding~~Company’s ~~balance~~cash flows, cash on hand and financing obtained during the ~~Notes~~course ~~from~~of ~~$156~~bankruptcy should provide sufficient liquidity for the Company during the Chapter 11 Cases.~~4 million~~ toHowever, ~~below~~the ~~$50 million~~significant ~~with~~risks ~~projected~~and ~~cash~~uncertainties onrelated ~~hand~~to the Company’s liquidity and ~~new~~the ~~borrowings~~Chapter ~~under~~11 Cases raise substantial doubt about the ~~Revolving~~company’s ~~Credit~~ability ~~Facility,~~to ~~assuming~~continue ~~such~~as ~~borrowings~~a ~~remain~~going ~~available.~~concern within twelve months from the report release date of August 10, 2020.

The ~~outbreak~~accompanying ofConsolidated ~~novel~~Financial ~~strain~~Statements ofhave ~~coronavirus~~been ~~COVID-19~~prepared in conformity with U.S. generally accepted accounting principles ("~~COVID-19~~GAAP") ~~caused~~assuming ~~business~~that ~~disruption~~the inCompany ~~the~~will ~~International~~continue ~~segment~~as ~~beginning~~a ingoing ~~January~~concern, ~~2020. In~~which ~~late~~contemplates ~~February~~continuity ~~2020~~of operations, the ~~situation~~realization ~~escalated~~of asassets and the ~~scope~~satisfaction of liabilities and commitments in the ~~COVID-19~~normal ~~outbreak~~course ~~worsened~~of business. The Company's ability to ~~directly~~continue ~~impact~~as ~~areas~~a ~~outside~~going concern is dependent on many factors, including the consummation of the ~~Asia-Pacific~~Chapter ~~region,~~11 ~~with~~Cases ~~Europe~~in ~~and~~a timely manner, the ~~United~~ability ~~States~~to ~~recognizing~~reopen ~~outbreaks~~its stores as a result of the potential recovery from COVID-19 and its ability to restructure certain leasing arrangements pursuant to the provisions of the Bankruptcy Code. AsThe Company filed a Plan of ~~March~~Reorganization 31(the "Plan") on July 15, 2020, with the ~~Company~~Bankruptcy ~~had~~Court ~~temporarily~~which ~~closed~~supports ~~approximately~~our ~~30%~~going concern assessment. However, the outcome of the ~~U.S.~~Chapter ~~and~~11 ~~Canada~~Cases ~~company-owned~~is ~~and~~subject ~~franchise~~to ~~stores~~significant asuncertainty aand ~~result~~depends upon factors outside of the ~~COVID-19~~Company’s ~~pandemic.~~control, ~~There~~including isactions ~~significant~~of ~~uncertainty~~the onBankruptcy Court and the Company’s ~~business~~creditors. ~~going~~There ~~forward~~can ~~due~~be tono ~~various~~assurance ~~global~~that ~~macroeconomic,~~the ~~operational~~Company will confirm and ~~supply~~consummate ~~chain~~the ~~risks~~Plan as acontemplated ~~result~~by the RSA entered into by the Debtors on June 23, 2020 or complete an alternative plan of ~~COVID-19~~reorganization.

~~The~~Delisting ~~Company was in compliance with the debt covenant reporting and compliance obligations under the Credit Agreements as~~ of ~~March~~Common ~~31,~~Units 2020. Management does not believe that the Company has the ability to comply with the financial covenants under the Senior Credit Facility Agreements over the next twelve months given the current circumstances stemming from ~~the COVID-19 pandemic.~~NYSE

~~The~~On ~~Company~~June is30, in2020, the ~~process of reviewing a range of refinancing options to refinance the~~ Company’s ~~outstanding~~common ~~indebtedness. The~~stock ~~Company~~was ~~has~~suspended ~~been~~from ~~working~~trading ~~with~~on ~~an independent committee of~~ the ~~Board~~New ~~supported~~York byStock ~~independent~~Exchange ~~financial~~(the ~~and~~“NYSE”) ~~legal~~as ~~advisors~~a toresult ~~conduct~~of ~~its~~the ~~review~~Debtors’ ~~and~~filing ~~has~~of ~~had~~the aChapter ~~series~~11 ofCases. ~~discussions~~Effective ~~with~~July ~~financing~~1, ~~sources~~2020, trades in the ~~United~~Company’s ~~States~~common ~~and~~stock ~~Asia.~~are ~~The~~quoted ~~Company~~on ~~will~~the ~~continue~~OTC toPink ~~explore~~Marketplace ~~all~~under ~~options~~the tosymbol ~~refinance~~“GNCIQ.” ~~and~~On ~~restructure~~July ~~its~~1, ~~indebtedness.~~2020, ~~While~~ the ~~Company~~NYSE ~~continues~~filed ~~to work through~~ a ~~number~~Form of25 ~~refinancing alternatives~~ to ~~address~~delist ~~its upcoming debt maturities,~~ the Company’s ~~cannot~~common ~~make~~stock ~~any~~and ~~assurances~~to ~~regarding~~remove ~~the~~it ~~likelihood,~~from ~~certainty~~registration orunder ~~exact~~Section ~~timing~~12(b) of ~~any~~the ~~alternatives~~Exchange Act.

Reporting requirements under both the Tranche B-2 Term Loan and the Credit Agreement require the Company to provide annual audited financial statements accompanied by an opinion of an independent public accountant without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit (other than a “going concern” statement, explanatory note or like qualification or exception resulting solely from an upcoming maturity date under the Tranche B-2 Term Loan or the Notes). Management believes the Company satisfied this requirement in the 2019 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the "SEC") on March 25, 2020 (the "2019 10-K"). If the lenders take a contrary position, (a) they could decide to instruct the administrative agent under the Senior Credit Agreements to deliver a written notice thereof to the borrower, and if the alleged default continued uncured for 30 days thereafter it would become an alleged event of default (unless waived by the lenders) and (b) the Company intends to contest such position and any action the lenders may attempt to take as a result thereof. If the lenders were to prevail in any such dispute, the required lenders could instruct the administrative agent to exercise remedies under the Senior Credit Agreements, including accelerating the maturity of the loans, terminating commitments under the revolving credit facility under the ABL Credit Agreement and requiring the posting of cash collateral in respect of outstanding letters of credit issued under the Revolving Credit Facility ($4.5 million at March 31, 2020). If this were to occur, management would enter into discussions with the lenders to waive the default or forebear from the exercise of remedies. Failure to obtain such a waiver, complete a refinancing or other restructuring, obtain an extension of the Springing Maturity Date as defined in the Credit Agreements or to reach an agreement with required lender groups under the Credit Agreements prior to May 16, 2020 or to reach an agreement with the Company's stakeholders on the terms of an out-of-court restructuring would have a material adverse effect on the Company's liquidity, financial condition and results of operations and may result in filing a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in order to implement a restructuring plan.

The Company’s Consolidated Financial Statements as of March 31, 2020 are being prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

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 ~~(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 31, 2019 Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by ~~accounting~~GAAP. ~~principles~~These ~~generally~~interim ~~accepted~~Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes included in the Company’s audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on March 25, 2020 (the "2019 10-K"). Interim results are not necessarily indicative of the results that may be expected for the remainder of the year ending December 31, 2020.

8The preparation of the financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases these estimates on assumptions that it believes to be reasonable under the circumstances, including considerations for the impact from the outbreak of the COVID-19 pandemic on the Company's business due to various global macroeconomic, operational and supply chain risks as a result of COVID-19. Actual results could differ from the original estimates, requiring adjustments to these balances in future periods. Furthermore, while operating as debtors-in-possession ("DIP") under Chapter 11, the Debtors may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business and subject to restrictions of the DIP financing and applicable orders of the Bankruptcy Court, for amounts other than those reflected in the accompanying unaudited Consolidated Financial Statements. Any such actions occurring during the Chapter 11 Cases confirmed by the Bankruptcy Court could materially impact the amounts and classifications of assets and liabilities reported in the unaudited Consolidated Financial Statements.

Restricted cash comprises current cash that is restricted as to withdrawal or usage. As of June 30, 2020, the Company had $15.7 million of restricted cash related to funds in escrow from the postpetition DIP financing obtained in the course of bankruptcy.

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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, 2019, as filed with the SEC on March 25, 2020 (the "2019 10-K"). Interim results are not necessarily indicative of the results that may be expected for the remainder of the year ending December 31, 2020.

The preparation of the financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases these estimates on assumptions that it believes to be reasonable under the circumstances, including considerations for the impact from the outbreak of the COVID-19 pandemic on the Company's business due to various global macroeconomic, operational and supply chain risks as a result of COVID-19. Actual results could differ from the original estimates, requiring adjustments to these balances in future periods.

Recently Adopted Accounting Pronouncements

In August 2018, the ~~Financial~~FASB issued Accounting Standards ~~Board~~Update ("~~FASB~~ASU") ~~issued ASU~~ 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, 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. Accordingly, the Company has adopted this ASU in the first quarter of 2020, which did not have a material impact on its Consolidated Financial Statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments, which introduces a new model to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. This standard is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company has adopted this ASU in the first quarter of 2020, which did not have a material impact on its Consolidated Financial Statements.

The majority of the Company's domestic store and e-commerce revenues are received as cash at the point of sales. The majority of the Company's franchise and wholesale revenues are billed with varying terms for payment. An allowance for credit losses is established based on the aging of the accounts receivable balances, financial condition of our franchisees and other third-party customers, historical write-off experience and current and future economic and market conditions.

The allowance for credit losses related to accounts receivable ~~as of March 31~~, ~~2020~~ and changes for the three and six months then ended June 30, 2020 are as follows:

(in thousands)	Balance at December 31, 2019		Charged to costs and expenses		Deduction		Balance at March 31, 2020		Charged to costs and expenses		Deduction		Balance at June 30, 2020
Vendor allowance(1)	$	14,033	$	5,439	$	(6,707)	$	12,765	$	2,698	$	—	$	15,463
Trade accounts receivable allowance (2)	8,615		9,224		(3,214)		14,625		3,164		(526)		17,263

(1) Changes to vendor allowance reserves are recorded as cost of sales on the Consolidated Statement of Operations.

(2) Changes to trade accounts receivable allowance are recorded as selling, general and administrative on the Consolidated Statement of Operations.

The Company records credit losses for vendor allowance reserves and trade accounts receivable for balances estimated to be uncollectible considering the aging of receivable balances and financial condition of our vendors and franchisees. Due to the estimated adverse impacts from COVID-19, the Company recognized aan $8.7 million allowance for credit losses for its franchisees and other third-party customers and $4.6 million vendor allowance reserves during the ~~three~~first ~~months~~quarter ~~ended~~of ~~March 31,~~ 2020 ~~based on the current and estimated adverse impacts from the COVID-19~~. Refer to Note 1516. "Subsequent Events" for more information on the uncertainty that exists regarding the impacts of COVID-19.

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Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes, which simplifies accounting for income taxes by eliminating certain exceptions to ASC 740 related to the general approach for intraperiod tax allocation, methodology for calculating income taxes in an interim period and recognition of deferred taxes when there are investment ownership changes. The new guidance also simplifies aspects of accounting for franchise taxes and interim period effects of enacted changes in tax laws or rates. The new guidance provides clarification on accounting for transactions that result in a step-up in the tax basis of goodwill and allocation of consolidated income tax expense to separate financial statements of entities not subject to income tax. This ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, and early adoption is permitted. The Company is evaluating the impact this standard will have on its Consolidated Financial Statements and related disclosures.

~~NOTE 3. REVENUE~~ 11

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NOTE 3. Reorganization and Chapter 11 Proceedings

On the Petition Date, the Chapter 11 Cases were filed. The Debtors filed certain motions and applications intended to limit the disruption of the Chapter 11 Cases on its operations. Since the commencement of the Chapter 11 Cases, the Debtors have continued to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

Chapter 11 Accounting

The Company has applied ASC 852 in preparing our Consolidated Financial Statements. ASC 852 requires the financial statements for periods subsequent to the Petition Date to distinguish transactions and events that are directly associated with the Company's reorganization from the ongoing operations of the business. Accordingly, certain expenses and gains incurred during the Chapter 11 Cases are recorded within Reorganization items, net in the unaudited Consolidated Statements of Operations. In addition, prepetition obligations that are unsecured or undersecured that may be impacted by the Chapter 11 Cases have been classified on the unaudited Consolidated Balance Sheet at June 30, 2020 as liabilities subject to compromise. These liabilities are reported at the amounts the Company currently anticipates will be allowed by the Bankruptcy Court, even if they may be settled for lesser amounts.

Under the Bankruptcy Code, the Debtors may assume, assume and assign or reject executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a prepetition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors of performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach subject, in the case of the rejection of unexpired leases of real property, to certain caps on damages. Counterparties to such rejected contracts or leases may assert unsecured claims in the Bankruptcy Court against the applicable Debtor’s estate for such damages. Generally, the assumption or assumption and assignment of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance thereunder. Accordingly, any description of an executory contract or unexpired lease with the Debtor in this quarterly report, including where applicable a quantification of the Company’s obligations under any such executory contract or unexpired lease with the Debtor is qualified by any overriding rejection rights the Company has under the Bankruptcy Code.

Leases

Due to the adverse impacts of COVID-19, the Company withheld rent and other occupancy payments beginning in April 2020 for certain of its retail locations as management negotiated with landlords for rent concessions. The Company had unpaid rent and other occupancy payments of approximately $47 million as of June 30, 2020. In the event that withholding these rent payments would constitute an event of default per the lease agreement, management intends to negotiate resolution with the landlord. If such negotiations are not successful, the lease liabilities associated with those leases could become immediately due and payable. We also intend to reject certain lease arrangements throughout the Chapter 11 Cases.

On July 20, 2020, the Bankruptcy Court authorized the Debtors to reject certain unexpired U.S and Canada company-owned and franchise leases, 551 of which were rejected with an effective termination date in June 2020. As a result, for each rejected lease, we have extinguished the related right-of-use asset and lease liability, and recorded the expected allowed claim amount in liabilities subject to compromise ("LSTC") as of June 30, 2020, the effects of which were not material.

As of June 30, 2020, the Company identified a trigger event as it relates to the impairment of certain right-of-use assets. See further discussion in Note 6. "Property, Plant and Equipment, Net." For any leases not rejected by the Bankruptcy Court as of August 10, 2020, we have continued to account for these leases under ASC 842, amortizing the right-of-use assets and evaluating for impairment and/or revisions to the assets' useful lives. We anticipate rejecting additional leases in the course of bankruptcy. As of the Petition Date, we have classified all lease liabilities within LSTC.

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Automatic Stay

Subject to certain specific exceptions under the Bankruptcy Code, the Chapter 11 Cases automatically stayed most judicial or administrative actions against the Debtors and efforts by creditors to collect on or otherwise exercise rights or remedies with respect to pre-petition claims. Absent an order from the Bankruptcy Court, substantially all of the Debtors’ pre-petition liabilities are subject to settlement under the Bankruptcy Code.

Deconsolidation of GNC Canada

GNC Canada filed parallel proceedings in the Canadian Court. Any significant business decision which would impact our Canadian business requires the approval of both the U.S. and Canadian Courts as they have equal and plenary authority. As joint control by the U.S. and Canadian Courts does not constitute continued common control by the parent, the Company has deconsolidated GNC Canada effective as of the Canadian Petition Date consistent with ASC 810, Consolidation. Additionally, as the Company does not have significant influence over GNC Canada while in bankruptcy, GNC will record and account for its investment in GNC Canada using the cost method under ASC 321, Investments - equity securities, as of the date of deconsolidation. The operating results of GNC Canada are reflected in our Consolidated Statements of Operations through the date of deconsolidation.

We recorded a $5.0 million loss within Reorganization items, net related to the deconsolidation of GNC Canada during the three and six months ended June 30, 2020. The loss reflects the re-measurement of our net investment in GNC Canada to its estimated fair value of $13.6 million. Included in the loss was the reclassification of $5.6 million of cumulative foreign currency translation adjustments related to GNC Canada from Accumulated other comprehensive loss.

Subsequent to the deconsolidation, transactions with GNC Canada are no longer eliminated in consolidation and are considered related party transactions. Transactions between GNC and GNC Canada were not material during the 6 days ended June 30, 2020.

Prepetition professional fees

Expenses, gains and losses that are realized or incurred before the Petition Date and in relation to the Chapter 11 Cases are recorded under selling, general and administrative charges on our Consolidated Statements of Operations. Prepetition professional fees related to the Chapter 11 Cases were $34.2 million for the three and six months ended June 30, 2020.

Debtor-In-Possession (“DIP”) Financing

Debtor-in-Possession Credit Agreements

In connection with the Chapter 11 Cases, on June 24, 2020, GNC Corporation and General Nutrition Centers, Inc. (collectively, the “Borrower”) entered into the following DIP financing arrangements (collectively, the "DIP Credit Agreements"):

1. The Borrower entered into a Debtor-in-Possession Term Loan Credit Agreement (the “DIP Term Loan Credit Agreement”), with GLAS Trust Company, LLC, as administrative agent and collateral agent, and the lenders party thereto (collectively, the “TL DIP Lenders”), to obtain a senior secured super-priority DIP term loan (the “DIP Term Loan Facility”), consisting of:

(i) $100 million of new cash (the “New Money DIP”), which term loan shall accumulate interest based on an adjusted LIBOR rate plus an applicable margin of 13.00%, with a 1.00% LIBOR floor, and

(ii) $100 million in aggregate principal of the prepetition Tranche B-2 Term Loans which were converted into a separate tranche of DIP Facility loans (the “Rollup Term Loans”) on July 21, 2020. As of June 30, 2020, the prepetition Tranche B-2 Term Loans were classified in LSTC.

2. The Borrower entered into a Debtor-in-Possession Amended and Restated ABL Credit Agreement (the “DIP FILO Credit Agreement”), with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent,

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and the lenders party thereto (collectively, the “FILO DIP Lenders”), to obtain a senior secured super-priority DIP FILO facility (the “DIP Rollover Facility”). The DIP Rollover Facility consists of the refinancing of all $275 million of the Debtors’ prepetition FILO term loan under its ABL Credit Agreement, dated as of February 28, 2018 (as amended, the “ABL Credit Agreement”). The DIP Rollover Facility is subject to interest based on an adjusted LIBOR rate plus an applicable margin of 9.00%, with a 1.00% LIBOR floor.

DIP Term Loan Facility

Amounts borrowed against the DIP Term Loan Facility as of June 30, 2020 were $30.0 million, of which $15.7 million was held in escrow in accordance with terms of the DIP Term Loan Credit Agreement. The amounts in escrow were recorded as restricted cash within the Consolidated Balance Sheets.

The TL DIP Lenders shall provide an additional $70 million in new money term loans in addition to the $30 million in new money term loans provided pursuant to the Interim DIP Order and $100 million in amounts outstanding pursuant to the Debtors’ prepetition term loan facility would be “rolled-up” into amounts outstanding under the DIP Term Loan Facility, which term loan shall accumulate interest based on an adjusted LIBOR rate plus an applicable margin of 13.00%, with a 1.00% LIBOR floor. The TL DIP Lenders are entitled to receive cash interest payments on the New Money DIP and Rollup Term Loans through the pendency of the Chapter 11 Cases. The associated fees and expenses under the New Money DIP include (i) a 6.00% backstop premium, (ii) a 4.00% upfront fee and (iii) a 3.00% exit fee.

Borrowings under the DIP Term Loan Facility are secured by (i) a super priority lien on the collateral under the existing term loan (the “Term Loan Facility”) under the Amended and Restated Term Loan Agreement, dated as of February 28, 2018 (the "Term Loan Agreement"), as well as the unencumbered collateral of the Debtors, and (ii) a second priority lien on the existing collateral under the existing ABL Facility, junior to the lien in favor of the lenders thereunder. The DIP Term Loan Credit Agreement has various customary covenants, as well as covenants mandating compliance by the Debtors with a 13-week budget, variance testing and reporting requirements, among others.

The scheduled maturity of the DIP Term Loan Facility will be the earlier of six months from June 24, 2020 or the date of consummation of the Plan approved in the RSA, after which consummation (i) the outstanding New Money DIP amounts under the DIP Term Loan Facility would convert into the Exit FLFO Facility (as defined below), and (ii) the Rollup Term Loans would convert into the Exit FLSO Facility (as defined below), in each case upon the consummation of the Plan and the conclusion of the Chapter 11 Cases.

DIP Rollover Facility

The DIP FILO Credit Agreement amends and restates the ABL Credit Agreement and provided Borrower with approximately $30 million of additional liquidity by (i) removing certain cash dominion blockers effective upon Borrower’s paydown of the revolving credit facility under the ABL Credit Agreement (which paydown Borrower completed immediately upon receipt of interim approval of the DIP Facilities from the Bankruptcy Court), (ii) and adding $17.5 million to the borrowing base.

The scheduled maturity of the DIP Rollover Facility will be the earlier of six months from June 24, 2020 or the date of consummation of the Plan approved in the RSA, after which consummation the outstanding amounts under the DIP Rollover Facility would convert into a new FILO exit facility (the “FILO Exit Facility”) to the DIP FILO Credit Agreement upon the consummation of the Plan. The FILO Exit Facility contemplates a four-year maturity with an initial interest rate of LIBOR plus 9.00% with a 1% LIBOR floor, with the ability to step down to LIBOR plus 7.00% with a 1.00% LIBOR floor if certain conditions are satisfied, with mandatory prepayments required in certain circumstances. Other terms are customary and/or consistent with the DIP Rollover Facility or the ABL Credit Agreement.

The DIP Rollover Facility is subject to any additional fees, or to budget reporting covenants beyond those required under the Term Loan DIP Credit Agreement.

DIP Backstop Commitment Letter

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On June 23, 2020, prior to commencement of the Chapter 11 Cases, the Company and certain of its subsidiaries received a DIP Backstop Commitment Letter (the “Commitment Letter”) from the TL DIP Lenders for financing of (i) the New Money DIP and (ii) the Rollup Term Loans.

If the Plan is consummated, the Commitment Letter contemplates that the New Money DIP will convert on a dollar-for-dollar basis into a first-lien-first-out term loan exit facility (the “Exit FLFO Facility”). The Exit FLFO Facility is contemplated to have a 4-year maturity and an interest rate of LIBOR plus an applicable margin of 10.00%, with a 1.00% LIBOR floor, with the borrowings thereunder secured by the same liens as the borrowings under the DIP Term Loan Facility. The Rollup Term Loans, together with an additional $50 million converted from the amounts outstanding under the Term Loan Facility, will convert on a dollar-for-dollar basis into a first-lien-second-out term loan exit facility (the “Exit FLSO Facility”). The Exit FLSO Facility is contemplated to have a 4.25-year term and an interest rate of, at the option of the borrower, LIBOR plus 9.00% cash interest (with a 1.00% LIBOR floor) plus an additional 3.00% interest paid-in-kind or LIBOR plus 11.50% cash interest (with a 1.00% LIBOR floor), with the borrowings thereunder secured by the same liens as the borrowings under the DIP Term Loan Facility, but with second-out payment priority.

Restructuring Support Agreement

On June 23, 2020, the Debtors entered into the RSA with creditors holding, in the aggregate, approximately (a) 92% of the aggregate outstanding principal amount of the Company’s Tranche B-2 Term Loan (the TL DIP Lenders), and (b) 87% of the aggregate outstanding principal amount of the Company’s ABL FILO Term Loan (the FILO DIP Lenders, and collectively with the TL Creditors, the “Consenting Creditors”).

The RSA incorporates the economic terms agreed to by the parties for the Plan. The RSA also contemplates that a significant majority of the Consenting Creditors have agreed that the Company will pursue on a parallel path basis a going concern sale of the business of the Debtors pursuant to Section 363 of the Bankruptcy Code the highest and best sale offer pursuant to this sale process, the “Sale Transaction”). As further discussed in Note 16. "Subsequent Events," on August 7, 2020, the Company reached an agreement for a stalking horse bid with Harbin Pharmaceutical Group Holding Co., Ltd ("Harbin Buyer") ("the Bid") and the Debtors will seek the Bankruptcy Court’s approval of the Bid and any related bid protections. Any such Sale Transaction would be executed through an auction process supervised by the Bankruptcy Court at which higher and better bids may be presented.

The DIP financing will provide the Debtors with at least $130 million in liquidity during the Chapter 11 Cases. If the Plan is consummated in exchange for providing the liquidity offered by the DIP Credit Agreements and in consideration for converting $100 million of prepetition Tranche B-2 Term Loans into the Exit FLSO Facility (as defined and described above), the holders of the prepetition Tranche B-2 Term Loans will also own 100% of the common stock in the reorganized Debtors (the “New Common Shares”), subject to dilution by a management incentive plan providing for 10% of the New Common Shares to be awarded to management and employees as well as a proposed equity distribution to general unsecured creditors. If the Plan is approved and the class of unsecured creditors votes to accept the approved Plan, they will have a choice to receive 3-year warrants for 5% of the pro forma equity of the reorganized Debtors or elect to receive their pro rata share of $250,000 in cash.

Pursuant to the RSA, each of the Debtors and Consenting Creditors has made certain customary commitments to each other. The Debtors have agreed to, among other things, use commercially reasonable efforts to implement the restructuring contemplated by the RSA; implement the Plan in a timely manner if the Sale Transaction is not consummated; respond to diligence and status update requests from certain of the Consenting Creditors’ representatives; and satisfy certain other covenants. The Consenting Creditors have committed to support and vote for the Plan and have agreed to use commercially reasonable efforts to take, or refrain from taking, certain actions in furtherance of such support. Certain of the Consenting Creditors have also agreed to provide debtor-in-possession financing pursuant to the DIP Credit Agreements.

The RSA contains milestones for the progress of the Chapter 11 Cases (the “Milestones”), which include the dates by which the Debtors are required to, among other things, obtain certain orders of the Bankruptcy Court and consummate the Debtors’ emergence from bankruptcy. Among other dates set forth in the RSA, the agreement contemplates that the Bankruptcy Court shall have entered the Interim DIP order no later than three business days after the Petition Date, the Final DIP Order no later than 35 days after the Petition Date and the Disclosure Statement Order no later than 45 days after the Petition Date and that the Company shall have emerged from

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bankruptcy no later than 141 days after the Petition Date, subject in each case to an extension or waiver of such dates by the requisite Consenting Creditors under the terms of the RSA. As of August 10, 2020, GNC has achieved or extended all Milestones required up to the report release date of August 10, 2020.

The transactions contemplated by the RSA are subject to approval by the Bankruptcy Court, among other conditions. Accordingly, no assurance can be given that the transactions described therein will be consummated.

Plan of Reorganization

On July 15, 2020, the Debtors filed a joint plan of reorganization (the “Plan of Reorganization”) and a related disclosure statement (as amended, the “Disclosure Statement”) with the Bankruptcy Court. On August 7, 2020, the Debtors filed an amended Plan of Reorganization. On August 19, 2020, the Bankruptcy Court will hold a hearing to consider approval of the Disclosure Statement.

Reorganization Items, net

The accounting standards require that the Consolidated Financial Statements, for the periods incurred after the Petition Date as a direct result of the Chapter 11 Cases, distinguish transactions and events that are directly associated with the Chapter 11 Cases from the ongoing operations of the business. Accordingly, certain expenses (including professional fees), realized gains and losses, and provisions for losses that are realized or incurred during the Chapter 11 Cases are recorded in reorganization items, net in the Consolidated Statements of Operations. Reorganization items, net represent amounts incurred after the Petition Date as a direct result of the Bankruptcy and are consisted of the following for the three and six months ended June 30, 2020:


	Three months ended June 30, 2020		Six months ended June 30, 2020
	(in thousands)
Debtor-in-possession financing costs	$	7,300	$	7,300
Professional fees	2,043		2,043
Prepetition debt issuance costs and debt discount	1,039		1,039
Loss on deconsolidation of GNC Canada	5,047		5,047
Total reorganization items, net	$	15,429	$	15,429


	Six months ended June 30,
	2020		2019
Cash paid during the period for:
Reorganization items, net	$	7,532	$	—

Claims and Claims Resolution Process

To the best of our knowledge, after making reasonable efforts, we have notified all of our known current or potential creditors that the Debtors have filed the Chapter 11 Cases. On July 21, 2020 each of the Debtors filed their respective Schedules of Assets and Liabilities (the “Schedules”) and Statements of Financial Affairs (the “Statements”) (collectively, the “Schedules and Statements”) with the Bankruptcy Court. These documents set forth, among other things, the assets and liabilities of each of the Debtors, the unexpired leases of the Debtors, including executory contracts to which each of the Debtors is a party, are subject to the qualifications and assumptions included therein, and are subject to amendment or modification as our Chapter 11 Cases proceed. The Schedules and Statements may be subject to further amendment or modification after filing.

Pursuant to the Federal Rules of Bankruptcy Procedure, creditors who wish to assert prepetition claims against us and whose claim (i) is not listed in the Schedules and Statements or (ii) is listed in the Schedules and Statements as disputed, contingent, or unliquidated, must file a proof of claim with the Bankruptcy Court prior to the bar date set by the court. The general bar date for creditors to file claims or contest claim amounts is scheduled for August 28, 2020 and the governmental bar date is scheduled for December 21, 2020 (collectively, the "Bar Dates").

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As of August 7, 2020, approximately 763 claims totaling $62.7 million have been filed with the Bankruptcy Court against the Debtors by approximately 633 claimants. We expect additional claims to be filed prior to the Bar Dates. In addition, creditors who have already filed claims may amend or modify their claims in ways we cannot reasonably predict. The amounts of these additional claims and/or amendments or modifications to claims already filed may be material. We anticipate the claims filed against the Debtors in the Chapter 11 Cases will be numerous. We expect the process of resolving claims filed against the Debtors to be complex and lengthy. We plan to investigate and evaluate all filed claims in connection with the Chapter 11 Cases. As part of the process, we will work to resolve differences in amounts scheduled by the Debtors and the amounts claimed by creditors, including through the filing of objections with the Bankruptcy Court where necessary. Accordingly, the ultimate number and amount of claims that will be allowed against the Debtors is not presently known, nor can the ultimate recovery with respect to allowed claims be reasonably estimated.

See Note 12. "Mezzanine Equity," for further details discussing classification of mezzanine equity.

Liabilities Subject to Compromise

The accompanying unaudited Consolidated Balance Sheet as of June 30, 2020 includes amounts classified as liabilities subject to compromise, which represent unsecured or undersecured prepetition liabilities. These amounts include the Company's current estimate of known or potential obligations to be resolved in connection with the Chapter 11 Cases and may differ from actual future settlement amounts paid. Differences between liabilities estimated and claims filed, or to be filed, will be investigated and resolved in connection with the claims resolution process. The Company will continue to evaluate these liabilities throughout the Chapter 11 Cases and adjust estimates as necessary. Liabilities subject to compromise consisted of the following:


	June 30, 2020
	(in thousands)
Accounts payable	$	61,128
Accrued interest	3,744
Lease liabilities	329,790
Other liabilities	188,971
Tranche B-2 Term Loan	410,834
Notes	159,097
Total Liabilities subject to compromise	$	1,153,564

The principal balance on the Tranche B-2 Term Loan and Notes of $410.8 million and $159.1 million, respectively, has been reclassified from long-term debt to LSTC as of June 30, 2020. See also Note 8. "Debt / Interest Expense" for further details.

Effective as of the Petition Date, we ceased recording interest expense on outstanding prepetition debt subject to compromise. Contractual interest expense represents amounts due under the contractual terms of outstanding prepetition debt classified as LSTC. For the quarter ended June 30, 2020, contractual interest expense of $0.8 million related to LSTC has not been recorded in the Consolidated Financial Statements.

Accrued interest on the prepetition debt subject to compromise was also reclassified from accrued liabilities to LSTC as of June 30, 2020. We have not made any interest payments on our prepetition debt subject to compromise since the commencement of the Chapter 11 Cases.

Employee Retention Program

On July 20, 2020, the Bankruptcy Court approved the Debtors' Key Employee Retention Program ("KERP"). The KERP is designed to enhance retention of key employees and provides a maximum award pool of approximately $3.1 million.

Debtor Financial Statements

Debtors Condensed Combined Financial Statements

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The Company has seventeen wholly-owned entities that are considered non-debtors (“Non-Debtors”).

•Nutra Insurance Company

•GNC Korea Limited

•GNC Hong Kong Limited

•GNC (Shanghai) Trading Co., Ltd.

•GNC China JV Holdco Limited

•GNC (Shanghai) Food Technology Limited

•GNC South Africa (Pty) Ltd.

•GNC Jersey One Limited

•GNC Jersey Two Unlimited

•THSD Unlimited Company

•GNC Live Well Ireland

•GNC Colombia SAS

•GNC Newco Parent, LLC

•Nutra Manufacturing, LLC

•GNC Supply Purchaser, LLC

•GNC Intermediate IP Holdings, LLC

•GNC Intellectual Property Holdings, LLC

With the exception of cash and cash equivalents, brand name and equity method investments in the amounts of $5.1 million, $24.8 million and $42.1 million, respectively, the balance sheet, results of operations and cash flow activity of the Non-Debtors is not material to the consolidated financial statements of GNC as of and for the period ended June 30, 2020. See Note 9. "Equity Method Investments" for more information on the Company's equity method investments.

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NOTE 4. REVENUE

Revenue is recognized when obligations under the terms of a contract with the customer are 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 is excluded from revenue.

Due to the deconsolidation of GNC Canada, as further discussed in Note 1. "Nature of Business," all amounts presented in this footnote exclude the operating results of GNC Canada subsequent to June 24, 2020.

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 March 31,
	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
U.S. company-owned product sales: (1)	(in thousands)
Protein	$	7351,~~808~~509	$	8077,~~257~~160	$	125,317	$	157,345
Performance supplements	6742,~~992~~694		7473,~~778~~083		110,685		147,824
Weight management	2016,~~516~~122		3029,~~779~~607		36,639		60,373
Vitamins	4836,~~962~~866		4744,~~056~~936		85,828		91,944
Herbs / Greens	1310,~~805~~699		15,~~873~~536		24,504		31,391
Wellness	3926,~~082~~185		4746,~~200~~370		65,267		93,515
Health / Beauty	3929,~~485~~869		46,~~388~~535		69,354		92,888
Food / Drink	1911,~~199~~370		2826,~~243~~259		30,569		54,483
General merchandise	43,~~871~~218		65,~~800~~519		8,089		12,318
Total U.S. company-owned product sales	$228,532	~~327,720~~	$365,005	~~377,374~~	556,252		742,081
Wholesale sales to franchisees	5136,~~056~~444		5859,~~257~~869		87,500		118,126
Royalties and franchise fees	76,~~327~~907		8,~~472~~175		14,234		16,647
Sublease income	109,~~242~~738		10,~~976~~498		19,980		21,474
Cooperative advertising and other franchise support fees	42,~~408~~605		54,~~067~~754		7,013		9,821
Other (2)	2315,~~428~~980		2927,~~011~~759		39,408		57,067
Total U.S. and Canada revenue	$	~~424~~300,~~181~~206	$	~~489~~476,~~157~~060	$	724,387	$	965,216

(1)Includes e-commerce sales.

(2)Includes revenue primarily related to operations in Canada through deconsolidation date of June 24, 2020, and the loyalty programs, myGNC Rewards and PRO Access.

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International Revenues

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

	Three months ended March 31,
	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(in thousands)
Wholesale sales to franchisees	$	2015,~~183~~637	$	2527,~~437~~019	$	35,820	$	52,456
Royalties and franchise fees	64,~~508~~001		6,~~202~~332		10,509		12,319
Other (1)	69,~~854~~295		96,~~284~~097		16,149		15,596
Total International revenue	$	3328,~~545~~933	$	4039,~~923~~448	$	62,478	$	80,371

(1)Includes revenue related to China operations prior to the transfer of the China business to the HK JV and China JV, which was effective February 13, 2019, wholesale sales to the HK JV and China JV, and revenue from company-owned locations in Ireland.

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Manufacturing / Wholesale Revenue

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

	Three months ended March 31,
	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(in thousands)
Third-party contract manufacturing(1)	$	—	$	~~15,783~~—	$	—	$	15,783
Intersegment sales(1)	—		~~35,505~~—		—		35,505
Wholesale partner sales	14,~~855~~399		18,~~901~~489		29,254		37,390
Total Manufacturing / Wholesale revenue	$	14,~~855~~399	$	7018,~~189~~489	$	29,254	$	88,678

(1)As a result of the transfer of the Nutra manufacturing business to the newly formed Manufacturing JV effective March 1, 2019, no third-party contract manufacturing and intersegment sales were recognized thereafter.

Revenue by Geography

The following is a summary of revenue by geography:

	Three months ended March 31,
	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
Total revenues by geographic areas(1):	(in thousands)
United States	$	~~452~~334,~~873~~411	$	~~535~~510,~~943~~762	$	787,284	$	1,048,805
Foreign	199,~~708~~127		2823,~~821~~235		28,835		49,955
Total revenues	$	~~472~~343,~~581~~538	$	~~564~~533,~~764~~997	$	816,119	$	1,098,760

(1) Geographic areas are defined based on legal entity jurisdiction.

Balances from Contracts with Customers

Contract liabilities include payments received in advance of performance under the contract, and are realized with the 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.

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The following table presents changes in the Company’s contract liabilities:

Three months ended March 31, 2020

Six months ended June 30, 2020

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

28,293

~~(2,722)~~$

(4,934)

~~1,303~~$

2,168

2625,~~874~~527

PRO Access and loyalty program points (1)

22,896

(1116,~~879~~909)

1112,~~096~~194

2218,~~113~~181

Gift card liability (1)

3,110

(1,~~367~~502)

~~207~~274

1,~~950~~882

	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 (1)	24,836		(12,423)	12,863	25,276
Gift card liability (1)	3,416		(1,523)	181	2,074

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	Six months ended June 30, 2019
	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	$	33,464	$	(5,533)	$	2,247	$	30,178
PRO Access and loyalty program points⁽¹⁾	24,836		(18,093)		19,207		25,950
Gift card liability⁽¹⁾	3,416		(1,793)		343		1,966

(1) Net of estimated breakage

As of ~~March~~June 3130, 2020, the Company had deferred franchise fees with unsatisfied performance obligations extending throughout 2030 of $2625.95 million, of which ~~approximately~~ $65.07 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 45. INVENTORY

The net realizable value of inventory consisted of the following:

	March 31, 2020		December 31, 2019
	June 30, 2020		December 31, 2019
	(in thousands)
Finished product ready for sale	$	~~367~~275,~~402~~170	$	387,655
Inventory	$	~~367~~275,~~402~~170	$	387,655

As a result of the COVID-19 pandemic, the Company ~~has~~ temporarily closed ~~approximately~~up ~~1,100,~~to ~~or 30~~40%, ~~of the U.S. and Canada~~ company-owned and franchise stores asfrom of March ~~31,~~through June 2020, and sales trends have significantly declined beginning in the second half of March 2020. ~~Some of the stores temporarily closed may be closed permanently in the future.~~ Due to the store closures, decline in sales trends and estimated adverse impacts on the Company's business as a result of COVID-19, the Company recorded $18.2 million inventory obsolescence reserves during the first quarter ~~ended~~of ~~March 31,~~ 2020, of which $17.8 million was recorded within the U.S. and Canada segment and $0.4 million was recorded within the Manufacturing and Wholesale segment. As a result of filing the Chapter 11 Cases on June 23, 2020, the Company expects vendors may withhold payment to GNC for certain allowances/credits in order to satisfy certain allowed claims that we have classified within LSTC and therefore recorded $12.6 million in inventory reserves during the three months ended June 30, 2020 within the U.S and Canada segment. Refer to Note 3. "Reorganization and Chapter 11 Proceedings" for more information on the Chapter 11 Cases.

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NOTE 56. PROPERTY, PLANT AND EQUIPMENT, NET

AsThe ~~previously~~following ~~disclosed,~~is as a ~~result~~summary of the COVID-19 pandemic, the Company has temporarily closed approximately 1,100, or 30%, of the U.S. and Canada company-owned and franchise stores as of March 31, 2020 and sales trends have significantly declined in the second half of March 2020. Some of the stores temporarily closed may be closed permanently in the future. Due to the store closures, decline in sales trends and estimated adverse impact from COVID-19, the Company recorded $40.3 million of impairment charges and other store closing costs, of which $21.2 million related to right-of-use asset impairments, $11.2 million related to property and equipment impairment and $7.9 million related to other store closing costs, presented as long-lived asset impairments and other store closing costs in the accompanying Consolidated Statement of Operations. Refer to Note 15. "Subsequent Events" for more information on the uncertainty that exists regarding the impacts of COVID-19.:

The impairment test was performed at the individual store level, as it is the lowest level in 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 the asset group from its carrying value. Fair value for property, plant and equipment was estimated using a discounted cash flow method (income approach) utilizing the undiscounted cash flows computed in the first step of the test. Fair value for right-of-use asset was estimated using a discounted cash flow method (income approach) based on market participant assumptions.


	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(in thousands)
Right-of-use asset	$	18,199	$	—	$	39,422	$	—
Property and equipment	2,002		—		13,227		—
Other store closing costs	—		—		7,897		—
Total impairment and other store closing costs	$	20,201	$	—	$	60,546	$	—

~~During~~As ~~the~~a ~~three~~result ~~months~~of ~~ended~~the ~~March~~COVID-19 31pandemic, ~~2020,~~ the Company ~~sold~~temporarily closed up to 40% of its company-owned ~~location~~and franchise stores from March through June 2020, and sales trends have significantly declined beginning in ~~Boston~~the second half of March 2020. During the first quarter of 2020, MAdue to the store closures, decline in sales trends and estimated adverse impact from COVID-19, the Company recorded a$40.3 million of impairment charges and other store closing costs, of which $221.12 million ~~pre~~related to right-~~tax~~of-use ~~gain~~asset ~~from~~impairments, ~~the~~$11.2 million ~~sale~~related ~~recognized~~to ~~within~~property and equipment impairment and $7.9 million related to other ~~income,~~store ~~net~~closing costs. Refer to Note 16. "Subsequent Events" for more information on the ~~Company's~~uncertainty ~~Consolidated~~that ~~Statements~~exists regarding the impacts of ~~Operations~~COVID-19.

~~NOTE~~In 6connection with the Chapter 11 Cases, the Company launched liquidation sales in June 2020 in approximately 500 U. ~~GOODWILL~~S ~~AND~~and ~~INTANGIBLE~~Canada ~~ASSETS~~company-owned stores which are expected to close during the third quarter of 2020. As a result of the liquidation sales and planned store closures, the Company recorded $20.2 million impairment charges, of which $18.2 million related to right-of use asset impairments and $2.0 million related to property and equipment impairment. Refer to Note 3. "Reorganization and Chapter 11 Proceedings" for more information on the Chapter 11 Cases.

~~Due~~The toimpairment ~~the~~test ~~significant~~was ~~decline~~performed inat the ~~Company's~~individual ~~share~~store ~~price~~level, inas it is the ~~first~~lowest ~~quarter~~level ofin ~~2020~~which ~~and~~identifiable ~~current~~cash ~~circumstances~~flows ~~and~~are ~~estimated~~largely ~~adverse~~independent ~~impacts~~of ~~from~~other ~~the~~groups ~~COVID-19~~of ~~pandemic,~~assets ~~management~~and ~~concluded~~liabilities. aIf ~~triggering~~the ~~event~~undiscounted ~~occurred~~estimated incash ~~the~~flows ~~first~~were ~~quarter~~less ~~requiring~~than anthe ~~impairment~~carrying ~~test~~value of ~~its~~the ~~definite-lived~~asset ~~intangible assets~~group, ~~indefinite-lived~~an ~~intangible~~impairment ~~brand~~charge ~~name~~was ~~asset~~calculated ~~and~~by subtracting the ~~goodwill~~estimated fair value of ~~all~~the ~~reporting~~asset ~~units.~~group ~~Refer~~from toits ~~Note~~carrying 15value. ~~"Subsequent~~Fair ~~Events"~~value for ~~more~~property, ~~information~~plant onand equipment was estimated using a discounted cash flow method (income approach) utilizing the ~~uncertainty~~undiscounted ~~that~~cash ~~exists~~flows ~~regarding~~computed in the ~~impacts~~first step of ~~COVID-19~~the test. Fair Novalue ~~impairment~~for right-of-use assets was ~~recorded~~estimated ~~for~~using ~~the~~a ~~Company's~~discounted ~~definite-lived~~cash ~~intangible~~flow ~~assets.~~method (income approach) based on market participant assumptions.

During the first quarter of 2020, the Company sold its owned location in Boston, MA and recorded a $2.1 million pre-tax gain from the sale recognized within other income, net on the Company's Consolidated Statement of Operations.

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NOTE 7. GOODWILL AND INTANGIBLE ASSETS

Due to the significant decline in the Company's share price in the first quarter of 2020 and estimated adverse impacts from the COVID-19 pandemic, management concluded a triggering event occurred in the first quarter requiring an impairment test of its definite-lived intangible assets, indefinite-lived intangible brand name asset and the goodwill of all reporting units. No impairment was recorded for the Company's definite-lived intangible assets.

Brand Name

~~Management~~In the first quarter of 2020, management performed an impairment test for its brand intangible asset, and concluded that the estimated fair value under the relief from royalty method (income approach) was less than its carrying value, which resulted in an impairment charge of $111.7 million. The brand name impairment test was performed in totality as it represents a single unit of account and $88.6 million of the charge was allocated to the U.S. and Canada and the remaining amount was allocated to the International segment. Key assumptions included in the estimation of the fair value include the following:

•Future cash flow assumptions - Future cash flow assumptions include retail sales from the Company’s corporate retail store operations, GNC.com retail sales, wholesale partner sales, China JV and HK JV retail sales, and domestic and international franchise retail sales. Sales were based on organic growth and were derived from historical experience and assumptions regarding future growth, including considerations for the impact from the outbreak of the COVID-19 pandemic on the Company's business. The Company's analysis incorporated an assumed period of cash flows of 10 years with a terminal value.

•Royalty rate - The royalty rates utilized consider external market evidence and internal financial metrics including a review of available returns after the consideration of property, plant and equipment, working capital and other intangible assets. The royalty rate used to estimate the fair values of the Company's reporting units was within a range of 0% - 3%.

•Discount rate - The discount rate was based on an estimated weighted average cost of capital ("WACC") for each business supported by the GNC brand name. The components of WACC are the cost of equity and the cost of debt, each of which requires judgment by management to estimate. The Company developed its cost of equity estimate based on perceived risks and predictability of future cash flows. The WACC used to estimate the fair values of the Company's reporting units was within a range of 20% to 22%. Any difference between the WACC among reporting units is primarily due to the precision with which management expects to be able to predict the future cash flows of each reporting unit.

13No impairment was recorded during the second quarter of 2020 for brand name.

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between the WACC among reporting units is primarily due to the precision with which management expects to be able to predict the future cash flows of each reporting unit.

Goodwill

Management performed an impairment test of the Company's goodwill. The results of the impairment test indicated no impairments for GNC.com, International Franchise and Wholesale reporting units. However, The Health Store reporting unit had a fair value below its carrying value, which resulted in a $5.5 million goodwill impairment charge, which was recorded within the International segment.

The Company estimated the fair values of its reporting units in the first quarter of 2020 using a discounted cash flow method (income approach) weighted 50% and a guideline company method (market approach) weighted 50%. The key assumptions used under the income approach include the following:

•Future cash flow assumptions - The Company's projections for its reporting units were based on organic growth and were derived from historical experience and assumptions regarding future growth and profitability trends, including considerations for the impact from the outbreak of the COVID-19 pandemic on the Company's business. The Company's analysis incorporated an assumed period of cash flows of 10 years with a terminal value.

•Discount rate - The discount rate was based on an estimated weighted average cost of capital ("WACC") for each reporting unit. The components of WACC are the cost of equity and the cost of debt, each of which requires judgment by management to estimate. The Company developed its cost of equity estimate based on perceived risks and predictability of future cash flows. The WACC used to estimate the fair values of the Company's reporting units was within a range of 20% to 22%. Any difference between the WACC among reporting units is primarily due to expectation of achieving the future cash flows of each reporting unit. 23

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•Discount rate - The discount rate was based on an estimated WACC for each reporting unit. The components of WACC are the cost of equity and the cost of debt, each of which requires judgment by management to estimate. The Company developed its cost of equity estimate based on perceived risks and predictability of future cash flows. The WACC used to estimate the fair values of the Company's reporting units was within a range of 20% to 22%. Any difference between the WACC among reporting units is primarily due to expectation of achieving the future cash flows of each reporting unit.

The guideline company method involves analyzing transaction and financial data of publicly-traded companies to develop multiples, which are adjusted to account for differences in growth prospects and risk profiles of the reporting unit and comparable.

No impairment was recorded during the second quarter of 2020 for goodwill.

Goodwill Roll-Forward

The following table summarizes the Company's goodwill activity by reportable segment:

	U.S. and Canada		International		Manufacturing / Wholesale			Total
	(in thousands)
Goodwill at December 31, 2019
Gross	$	389,895	$	43,330	$	141,299		$	574,524
Accumulated impairments	(380,644)		—		(114,771)			(495,415)
Goodwill	9,251		43,330		26,528			79,109
2020 Activity:
Impairment	—		(5,451)		—			(5,451)
Translation effect of exchange rates	—		(106)		—			(106)
Total 2020 activity	—		(5,557)		—		—	(5,557)
Balance at March 31, 2020
Balance at June 30, 2020
Gross	389,895		43,224		141,299			574,418
Accumulated impairments	(380,644)		(5,451)		(114,771)			(500,866)
Goodwill	$	9,251	$	37,773	$	26,528		$	73,552

Intangible Assets

The following table reflects the gross carrying amount and accumulated amortization for each major definite-lived intangible assets:

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		March 31, 2020										December 31, 2019
		June 30, 2020										December 31, 2019
	Weighted-Average Life	Cost		Accumulated Amortization/Impairment		Carrying Amount		Cost		Accumulated Amortization/Impairment		Carrying Amount
	~~(in thousands)~~	(in thousands)
Brand name	Indefinite	$	720,000	$	(531,000)	$	189,000	$	720,000	$	(419,280)	$	300,720
Retail agreements	30.3	31,000		(1314,~~882~~145)		1716,~~118~~855		31,000		(13,619)		17,381
Franchise agreements	25	70,000		(3637,~~517~~217)		3332,~~483~~783		70,000		(35,817)		34,183
Manufacturing agreements	25	40,000		(2021,~~867~~267)		1918,~~133~~733		40,000		(20,467)		19,533
Other intangibles	~~6.8~~7	~~627~~640		(~~541~~581)		8659		639		(529)		110
Franchise rights	3	$7,566	~~7,566~~	$(7,503)	~~(7,495)~~	$63	71	$7,566	~~7,566~~	$(7,475)	~~(7,475)~~	$91	91
Total		$	869,~~193~~206	$	(~~610~~611,~~302~~713)	$	~~258~~257,~~891~~493	$	869,205	$	(497,187)	$	372,018

NOTE 78. DEBT / INTEREST EXPENSE

Debt consisted of the following:

	March 31,2020		December 31,2019
	June 30,2020		December 31,2019
	(in thousands)
Tranche B-2 Term Loan (net of $2.0 million and $7.0 million discount)	434,773		441,500
DIP Financing:
FILO Term Loan (net of $1.1 million and $8.2 million discount)	273,898		266,814
DIP Financing - New Money DIP	$	30,000	$	—
Notes (net of $2.4 million and $3.9 million conversion feature and $0.3 million and $0.5 million discount)	156,427		154,675
DIP Financing - DIP FILO	275,000		—
Revolving Credit Facility	30,000		—
Total DIP Financing	305,000		—
Debt issuance costs	(76)		(424)
Liabilities subject to compromise:
Total debt	895,022		862,565
Tranche B-2 Term Loan	410,834		—
Less: current debt	(895,022)		(180,566)
Notes	159,097		—
Long-term debt	$	—	$	681,999
Total liabilities subject to compromise	569,931		—
Long-term debt, including the current portion:
Tranche B-2 Term Loan (net of $7.0 million discount)	—		441,500
FILO Term Loan (net of $8.2 million discount)	—		266,814
Notes (net of $3.9 million conversion feature and $0.5 million discount)	—		154,675
Debt issuance costs	—		(424)
Total long-term debt, including the current portion	—		862,565
Total debt	$	874,931	$	862,565

OnDIP 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"), which included an extension of the maturity date of the Tranche B-2 Term Loan. In the event that all outstanding amounts under the convertible senior notes exceeding $50 million are not repaid, refinanced, converted or effectively discharged prior to May 16, 2020, the Springing Maturity Date, the maturity date of the Tranche B-2 Term Loan will become the Springing Maturity Date, subject to certain adjustments. As of March 31, 2020, the Company had $434.8 million, net of discount, outstanding under the Tranche B-2 Term Loan. On February 28, 2018, the Company also entered into the ABL Credit Agreement, consisting of: Financing

•aAs ~~$275.0~~described ~~million~~further ~~asset-based~~in ~~Term~~Note ~~Loan~~3. ~~Facility~~"Reorganization ~~advanced~~and onChapter a11 ~~“first-in~~Proceedings, ~~last-out” basis (the~~ "~~FILO~~ ~~Term~~in ~~Loan")~~connection with athe ~~maturity~~Chapter ~~date~~11 ~~of December 2022 (which maturity date will become May 2020~~Cases, ~~subject~~the toCompany ~~certain~~entered ~~adjustments,~~into ~~should~~ the ~~Springing~~DIP ~~Maturity~~Credit ~~Date~~Agreements beon ~~triggered);~~June ~~and~~24, 2020.

•aPrepetition $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 transfer of the Nutra manufacturing and Anderson facility net assets to the manufacturing joint venture (the "Manufacturing JV") with International Vitamin Corporation ("IVC"), the Revolving Credit Facility commitment was reduced from $100 million to $81 million effective March 2019. As of March 31, 2020, there were $30.0 million borrowings outstanding on the Revolving Credit Facility. At March 31, 2020, the Company had $19.9 million available under the Revolving Credit Facility, after giving effect to $30.0 million borrowing outstanding, $4.5 million utilized to secure letters of credit and a $26.6 million reduction to borrowing ability as a result of decrease in net collateral.Debt

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), which included an extension of the maturity date of the Tranche B-2 Term Loan. In the event that all outstanding amounts under the convertible senior notes exceeding $50.0 million are not repaid, refinanced, converted or effectively discharged prior to May 16, 2020, the Springing Maturity Date, the maturity date of the Tranche B-2 Term Loan became the Springing Maturity Date, subject to certain adjustments. On February 28, 2018, the Company also entered into the ABL Credit Agreement, consisting of:

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~~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 8~~$275.~~75%~~0 per annum subject to change under certain circumstances (with a minimum and maximum 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). Any mandatory repayments as defined in the credit agreement shall be applied to the remaining annual aggregate principal payments in direct order of maturity. The Company paid $100 million ~~on the Tranche B~~asset-2based Term Loan inFacility ~~November~~advanced ~~2018 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~~-in, ~~Inc. ("Centers") and its subsidiaries, intellectual property and equipment (“Term Priority Collateral~~last-out”) ~~and~~basis (~~ii) second lien on certain assets of~~ the ~~Company~~"FILO ~~primarily consisting of inventory and accounts receivable (“ABL Priority Collateral”). The~~ Term Loan") ~~Agreement~~with isa ~~guaranteed~~maturity bydate ~~all material, wholly-owned domestic subsidiaries~~ of ~~the~~December ~~Company~~2022 (~~the~~which ~~“U.S.~~maturity ~~Guarantors”)~~date ~~and~~will bybecome ~~General~~May ~~Nutrition Centres Company~~2020, ansubject ~~unlimited~~to ~~liability~~certain ~~company~~adjustments, ~~organized~~should ~~under~~ the ~~laws~~Springing ofMaturity ~~Nova~~Date ~~Scotia~~be ~~(together~~triggered); ~~with~~and ~~the U.S. Guarantors, the “Guarantors”).~~

•a $100.0 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 transfer of the Nutra manufacturing and Anderson facility net assets to the Manufacturing JV with IVC, the Revolving Credit Facility commitment was reduced from $100.0 million to $81.0 million effective March 2019. As of March 31, 2020, there were $30.0 million borrowings outstanding on the Revolving Credit Facility. At June 30, 2020, the Company had $19.9 million available under the Revolving Credit Facility, after giving effect to $30.0 million borrowing outstanding, $4.5 million utilized to secure letters of credit and a $26.6 million reduction to borrowing ability as a result of decrease in net collateral.

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 8.75% per annum subject to change under certain circumstances (with a minimum and maximum 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). Any mandatory repayments as defined in the credit agreement shall be applied to the remaining annual aggregate principal payments in direct order of maturity. The Company paid $100 million on the Tranche B-2 Term Loan in November 2018 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. 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 GNC Canada, an unlimited liability company organized under the laws of Nova Scotia (together with the U.S. Guarantors, the “Guarantors”).

There are no scheduled amortization payments associated with the FILO Term Loan, which bears interest at a rate of, at the Company's option, 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) or prime plus a margin of 6.00% per annum subject to decrease under certain circumstances (with a minimum possible interest rate of prime plus a margin of 5.50% per annum). Outstanding borrowings under the Revolving Credit Facility bear interest at a rate of LIBOR plus 1.50% per annum (subject to an increase of 0.25% or 0.50% based on the amount available to be drawn under the Revolving Credit Facility) or prime plus a margin of 0.50% per annum (subject to an increase of 0.25% or 0.50% based on the amount to be drawn under the Revolving Credit Facility). The Company is also required to pay an annual fee to revolving lenders equal to 1.5% per annum (subject to an increase of 0.25% or 0.50% based on the amount available to 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, which is subject to an increase to 0.5% based on the amount available to be 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.

Under the Company’s Credit Agreements, 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) 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 payment will be 75% of excess cash flow for each such fiscal year, 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 payment amounts. Based on the Company's results for the year ended December 31, 2019, the Company made an excess cash flow payment of $25.9 million in April 2020. The Company made an excess cash flow payment of $9.8 million in April 2019 with respect to the year ending December 31, 2018.

AtAs ~~March 31,~~discussed ~~2020,~~in ~~the~~Note ~~Company's~~3, ~~contractual~~“Reorganization ~~interest~~and ~~rates~~Chapter ~~under~~11 ~~the Tranche B-2 Term Loan~~Proceedings,” the ~~FILO~~Chapter ~~Term~~11 ~~Loan~~Cases ~~and~~automatically ~~the~~stayed ~~Revolving~~actions ~~Credit~~against ~~Facility~~the ~~were~~Debtors ~~10.1%, 8.0%~~ and ~~4.0%,~~efforts ~~respectively,~~by ~~which~~creditors ~~consist~~to ofcollect ~~LIBOR~~on ~~plus~~or ~~the~~otherwise ~~applicable~~exercise ~~margin~~rights ~~rate~~or ~~and~~remedies inwith ~~the~~respect ~~case~~to ofprepetition ~~Revolving~~debt. ~~Credit~~All ~~Facility~~of atthe ~~Prime~~Debtors’ ~~rate~~prepetition ~~plus~~debt ~~the~~excluding ~~applicable~~those ~~margin~~amounts ~~rate.~~converted Atinto ~~December~~DIP 31financing, ~~2019,~~are ~~the~~included ~~interest~~in ~~rates~~liabilities ~~under~~subject ~~the~~to ~~Tranche~~compromise ~~B-2~~as ~~Term~~of ~~Loan~~June ~~and the FILO Term Loan were 10.6%~~30, ~~and 8~~2020.~~8%, respectively.~~

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. Despite these limitations, the Company has the ability to discharge the liabilities of GNC Holdings, Inc. in the ordinary course of business through a variety of alternatives, including a restricted payment basket, a junior lien debt incurrence basket, and repayment of intercompany debt.26

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orAt ~~(ii)~~June 30, ~~$12.5 million~~2020, ~~then~~ the ~~ABL~~Company's ~~Credit~~contractual ~~Agreement~~interest ~~requires~~rates ~~compliance~~under ~~as of~~ the ~~end~~Tranche ofB-2 ~~each~~Term ~~fiscal~~Loan, ~~quarter~~the ~~with~~FILO aTerm ~~minimum~~Loan ~~Fixed~~and ~~Charge~~the ~~Coverage~~Revolving ~~Ratio~~Credit ofFacility were 10.1%, 8.000% toand 14.~~00. The~~0%, ~~Company~~respectively, iswhich ~~currently~~consist inof ~~compliance~~LIBOR ~~with~~plus the ~~terms~~applicable ofmargin ~~its~~rate ~~Credit~~and ~~Agreements.~~in ~~Given current circumstances around~~ the ~~COVID-19~~case ~~pandemic~~of asRevolving ~~discussed~~Credit ~~further~~Facility inat ~~Note~~Prime ~~15,~~rate ~~"Subsequent~~plus ~~Events",~~the ~~there~~applicable ~~can~~margin berate. noAt ~~assurances~~December as31, ~~our~~2019, ~~ability~~the tointerest ~~remain~~rates inunder ~~compliance~~the ~~with~~Tranche ~~the~~B-2 ~~financial~~Term ~~covenants~~Loan ~~under~~and the ~~Senior~~FILO ~~Credit~~Term ~~Facility~~Loan ~~Agreements~~were ~~over~~10.6%, ~~the~~and ~~next~~8.8%, ~~twelve months~~respectively.

AsThe Company’s Credit Facilities contain customary covenants, including limitations on the ability of ~~March 31~~the Borrower to, ~~2020~~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. Despite these limitations, the Company ~~maintains~~has ~~$159.1~~the ~~million~~ability into ~~principal~~discharge ~~amount~~the liabilities of ~~its~~GNC 1Holdings, Inc.5% ~~convertible~~in ~~Notes.~~the ~~The~~ordinary ~~Notes~~course ~~consist~~of business through a variety of ~~the~~alternatives, ~~following~~including ~~components:~~a restricted payment basket, a junior lien debt incurrence basket, and repayment of intercompany debt.

	March 31, 2020		December 31, 2019
	(in thousands)
Liability component
Principal	$	159,097	$	159,097
Conversion feature	(2,356)		(3,898)
Discount related to debt issuance costs	(314)		(524)
Net carrying amount	$	156,427	$	154,675

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 currently set at 4.25 to 1.00. If the Company’s availability under the Revolving Credit Facility is less than the greater of (i) 12.5% of the borrowing base or (ii) $12.5 million, then the ABL Credit Agreement requires compliance as of the end of each fiscal quarter with a minimum Fixed Charge Coverage Ratio of 1.00 to 1.00.

AsPrior ~~mentioned~~to inthe ~~Note~~issuance ~~1, "Nature~~ of ~~Business,"~~our ~~substantial~~Form ~~doubt~~10-Q ~~exists~~for ~~concerning~~ the ~~Company's~~quarter ~~ability~~ended ~~to reduce~~March ~~the~~31, ~~outstanding~~2020, ~~balance~~we ondetermined ~~the~~that ~~Notes to below $50.0 million. Given this, if~~ we ~~cannot~~did ~~reduce~~not have the ~~outstanding~~ability ~~balance~~to ~~under~~pay the ~~Notes~~accelerated ~~prior~~maturity topayment ~~May~~due ~~16,~~on ~~2020,~~ the Springing Maturity Date, ~~the~~and ~~Tranche~~therefore ~~B-2~~obtained ~~Term~~an ~~Loan,~~extension ~~the~~for ~~Revolving Credit Facility and~~ the ~~FILO~~accelerated ~~Term Loan~~ maturity ~~will~~payment ~~accelerate. While the Company continues~~ to ~~work~~June ~~through a number of refinancing alternatives to address its upcoming debt maturities~~30, ~~the Company cannot make any assurances regarding the likelihood, certainty or exact timing of any alternatives~~2020. On ~~As of March 31, 2020, all debt has been reclassified to current on~~ the ~~Consolidated~~Petition ~~Balance Sheets. In addition~~Date, the ~~Company~~filing ~~accelerated the amortization~~ of ~~original issuance discount and deferred financing fees for~~ the ~~Tranche~~Chapter ~~B-2~~11 ~~Term~~Cases ~~Loan,~~constituted ~~FILO~~an ~~Term~~event ~~Loan~~of ~~and~~default ~~the~~that ~~Revolving~~accelerated ~~Credit~~obligations ~~Facility~~under ~~of $12.4 million to~~ the ~~Springing~~following ~~Maturity~~debt ~~Date.~~instruments and agreements:

•the Amended and Restated Term Loan Agreement, dated as of February 28, 2018 (as amended), among the Borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto with respect to approximately $410.8 million of borrowings outstanding, plus accrued and unpaid interest thereon;

•the ABL Credit Agreement, dated as of February 28, 2018 (as amended), among the Borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto with respect to approximately $335 million of borrowings outstanding, plus accrued and unpaid interest thereon; and

•the indenture, dated August 10, 2015, by and among the Company, as issuer, certain other subsidiaries of the Company, as guarantors, and BNY Mellon Trust Company, N.A., as the trustee with respect to an aggregate principal amount of approximately $157.6 million of 1.5% convertible senior unsecured notes due 2020 (the "Indenture").

As of June 30, 2020, the Company maintains $159.1 million in principal amount of its 1.5% convertible Notes outstanding. The Notes, classified within LSTC at June 30, 2020 and debt at December 31, 2019, consist of the following components:


	June 30, 2020		December 31, 2019
	(in thousands)
Liability component
Principal	$	159,097	$	159,097
Conversion feature	—		(3,898)
Discount related to debt issuance costs	—		(524)
Net carrying amount	$	159,097	$	154,675

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 of 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 has scheduled decreases 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 deemed effective upon initiation. The interest rate swaps are recognized on the balance sheet at fair value. When the cash flow hedges are deemed effective, changes in fair value are recorded within other comprehensive loss on the Consolidated Balance Sheets and reclassified into the Consolidated Statement of Operations as interest expense in the period in which the underlying transaction affects earnings.

1727

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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 has scheduled decreases 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 deemed effective upon initiation. The interest rate swaps are recognized on the balance sheet at fair value. When the cash flow hedges are deemed effective, changes in fair value are recorded within other comprehensive loss on the Consolidated Balance Sheets and reclassified into the Consolidated Statement of Operations as interest expense in the period in which the underlying transaction affects earnings.

As of March 31, 2020, the Company's expectation was that it could not reduce the outstanding balance on the Notes to below $50 million before the Springing Maturity date, which would result in acceleration of the maturity date of the Tranche B-2 and the FILO Term Loan. As such, the Company deemed the cash flow hedges as ineffective as the forecasted hedging transactions were not expected to occur by the end of the originally specified time period. The Company reclassified a $10.8 million pre-tax loss previously deferred within accumulated other comprehensive loss to interest expense during the three months ended March 31, 2020.

In connection with the closing of the debtor-in-possession financing, the Company agreed to settle and terminate the outstanding swap agreements for $9.8 million on June 29, 2020, of which $9.0 million was classified in the Consolidated Statement of Cash Flows as cash flows from investing activities for the settlement of the liability and $0.8 million classified as cash flows from operating activities for settlement of the interest.

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

Fair Value at

Balance Sheet Classification

~~March~~June 3130, 2020

December 31, 2019

(in thousand)

(in thousands)

Other current liabilities

~~9,080~~—

5,013

Other long-term liabilities

~~1,730~~—

1,927

Total liabilities

~~10,810~~—

6,940

As mentioned above, if the Company cannot reduce the outstanding balance on the Notes to below $50 million before the Springing Maturity date, the maturity date of the Tranche B-2 and the FILO Term Loan will accelerate. Management does not expect to have sufficient cash flows from operations to repay the indebtedness before the Springing Maturity date. As such, the Company deemed the cash flow hedges as ineffective as the forecasted hedging transactions will not occur by the end of the originally specified time period. The Company reclassified a $10.8 million pre-tax loss previously deferred within accumulated other comprehensive loss to interest expense during the three months ended March 31, 2020.

Interest Expense

As discussed in Note 3. "Reorganization and Chapter 11 Proceedings," upon the Petition Date, GNC ceased recording interest expense on prepetition debt subject to compromise. For the quarter ended June 30, 2020, contractual interest expense of $0.8 million related to LSTC has not been recorded in the Consolidated Financial Statements. Interest expense consisted of the following:

	Three months ended March 31,
	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(in thousands)
Tranche B-1 Term Loan coupon	$	—	$	928
DIP Financing	$	58	$	—	$	58	$	—
Tranche B-2 Term Loan coupon	12,339		16,468
Tranche B-1 Term Loan coupon	—		—		—		928
FILO Term Loan coupon	6,826		6,751
Tranche B-2 Term Loan coupon	10,310		12,954		22,649		29,422
Revolving Credit Facility	149		123
FILO Term Loan coupon	6,861		6,826		13,687		13,578
Amortization of discount and debt issuance costs	15,055		6,043
Revolving Credit Facility	534		96		683		219
Subtotal	34,369		30,313
Amortization of discount and debt issuance costs	3,499		2,522		18,554		8,565
Subtotal	21,262		22,398		55,631		52,712
Notes:
Coupon	~~596~~551		~~707~~729		1,147		1,436
Amortization of conversion feature	1,~~542~~442		1,~~701~~611		2,984		3,312
Amortization of discount and debt issuance costs	~~217~~200		~~244~~242		417		486
Total Notes	2,~~355~~193		2,~~652~~582		4,548		5,234
Loss on interest rate swap	10(1,~~810~~356)		—		9,454		—
Other	(9042)		(916)		(131)		(26)
Interest expense, net	$	4722,~~444~~057	$	3224,~~956~~964	$	69,502	$	57,920

~~NOTE~~During 8the first quarter, the Company accelerated the amortization of original issuance discount and deferred financing fees for the Tranche B-2 Term Loan, FILO Term Loan and the Revolving Credit Facility of $12.4 million ~~EQUITY~~to ~~METHOD~~the ~~INVESTMENTS~~Springing Maturity Date.

~~The~~NOTE Company's interests in the Manufacturing, HK and China joint ventures are accounted for as equity method investments due to the Company’s ability to exercise significant influence over management decisions of the joint ventures9. ~~Under~~EQUITY ~~the~~METHOD ~~equity~~INVESTMENTS method, the Company's share of profits and losses from the joint ventures is recorded within income from equity method investments on the Consolidated Statement of Operations. The following table provides a reconciliation of equity method investments on the Company’s Consolidated Balance Sheets:

18 The Company's interests in the Manufacturing, HK and China joint ventures, which are Non-Debtors as discussed in Note 3. "Reorganization and Chapter 11 Proceedings," are accounted for as equity method investments due to the Company’s ability to exercise significant influence over 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 income from equity method investments on the Consolidated Statement of Operations. The following table provides a reconciliation of equity method investments on the Company’s Consolidated Balance Sheets:

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	March 31, 2020		December 31, 2019
	June 30, 2020		December 31, 2019
	(in thousands)
Manufacturing JV	$	56,684	$	75,434
Manufacturing JV capital contribution	10,714		10,714
HK JV and China JV	10,~~200~~206		10,342
Income from equity method investments	45,~~618~~567		5,296
Distributions received from equity method investments	(35,~~856~~254)		(3,856)
Manufacturing JV other-than-temporary impairment	(35,840)		—
Total Equity method investments	$	42,520	$	97,930
Total equity method investments	$	42,077	$	97,930

In February 2019, the Company contributed its China business in exchange for 35% ownership of each of the formed joint ventures with Harbin, the HK JV and 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~~Company JVanticipates ~~agreement~~completing isthe ~~expected~~formation toof bea ~~completed~~second, retail-focused joint venture located in China (the “China JV”) with Harbin in the second ~~quarter~~half of 2020, following the satisfaction of certain routine regulatory and legal requirements.

In March 2019, the Company entered into a strategic joint venture with IVC regarding the Company's manufacturing business. The Manufacturing JV is responsible for the manufacturing of the products previously produced by the Company at the Nutra manufacturing facility. The Company received $99.2 million from IVC and contributed the net assets of the Nutra manufacturing and Anderson facilities in exchange for an initial 43% equity interest in the Manufacturing JV. In addition, the Company made a capital contribution of $10.7 million to the Manufacturing JV to fund its share of short-term working capital needs. Under the terms of the agreement, IVC has the ability to pay an additional $75.0 million over a four year period from the effective date of the transaction as IVC's ownership of the joint venture increases to 100%. The subsequent purchase price for each year is $18.8 million, adjusted up or down based on the ~~the~~ Company's future purchases from the Manufacturing JV. The Company received the first subsequent purchase price of $15.6 million during the first quarter of 2020. As a result, the Company's ownership of the Manufacturing JV decreased to 32% in March 2020.

Gain (loss) from the net asset exchange

In connection with the formation of the joint ventures effective in the first quarter of 2019, the Company deconsolidated its China business and its Nutra manufacturing business which resulted in a pre-tax gain of $5.8 million and loss of $27.1 million, respectively, 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 was 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 $27.1 million loss from the Manufacturing JV transaction was calculated based on the fair value of the 43% equity interest retained in the Manufacturing JV and the $101 million in cash received, less a $1.8 million working capital purchase price adjustment in the second quarter of 2019, less the carrying value of the contributed Nutra and Anderson facilities and third-party closing fees.

As mentioned above, the Company received $15.6 million from IVC in connection with the subsequent purchase of the ownership of the Manufacturing JV in the first quarter of 2020, which resulted in a pre-tax loss of $3.1 million on net asset exchange calculated based on the difference between the cash receipt and the purchase price of $18.8 million. The loss was recorded in (loss) income from equity method investment within the Consolidated Statement of Operations. Additionally, in the first quarter of 2020, the Company recognized a $1.7 million purchase price adjustment related to the Harbin transaction, which was recorded as a loss on net asset exchange within the Consolidated Statements of Operations during the three months ended March 31, 2020.

1930

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Other-Than-Temporary Impairment

Due to the current and estimated adverse impacts from the COVID-19 pandemic and the Company's store closures, management expects a decrease in future purchases from the Manufacturing JV resulting in a decline in the value of its equity method investment in the Manufacturing JV. The decline in value was determined to be other-than-temporary which required the equity method investment to be written down to its fair value. The Company recognized $35.8 million other-than-temporary impairment related to its equity method investment in the Manufacturing JV, which was recorded within (loss) income from equity method investment on the Consolidated Statement of Operations during the three months ended March 31, 2020. This impairment charge was derived using Level 3 inputs and was primarily driven by the projected future purchase price of the equity interest in the Manufacturing JV from IVC under the terms of the agreement. As a result of the impairment, the carrying amount of the Company's equity method investment in the Manufacturing JV was $35.8 million less than its share of underlying equity in net assets as of ~~March~~June 3130, 2020. No impairment triggers were identified as it relates to our equity method investments as of June 30, 2020.

Related Party ~~transactions~~Transactions

The Company's ~~purchased~~related ~~approximately~~party ~~$36.4~~transactions ~~million~~with ~~and $21.0 million of finished goods from~~ the Manufacturing ~~JV during the three months ended March 31~~, 2020 and March 31, 2019, respectively, and had approximately $21.1 million and $11.7 million accounts payable outstanding as of March 31, 2020 and December 31, 2019, respectively. In connection with the HK ~~JV, the Company recognized revenue, primarily from wholesale sales~~ and ~~royalties,~~China ofjoint ~~$3.8~~ventures ~~million~~are ~~and $2.2 million for the three months ended March 31, 2020 and March 31, 2019, respectively, and had $6.5 million and $8.9 million accounts receivable outstanding~~ as ~~of March 31, 2020 and December 31, 2019, respectively.~~ follows:

NOTE 9. FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS


	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(in thousands)
Manufacturing JV finished goods purchases	$	39,783	$	51,632	$	76,220	$	72,392
HK JV revenue, primarily wholesale and royalties	6,537		2,087		10,349		4,274

Accounting Standards Codification 820, Fair Value Measurements and Disclosures defines 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:


	June 30, 2020		December 31, 2019
	(in thousands)
Manufacturing JV accounts payable¹	$	18,714	$	11,720
HK JV accounts receivable	10,094		8,946

¹On Petition Date, all prepetition Manufacturing JV accounts payable has been classified in LSTC.

NOTE 10. FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

ASC 820, Fair Value Measurements and Disclosures defines 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, restricted cash, 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 value and estimated fair value of the forward contracts for the issuance of convertible preferred stock, the Term Loan Facility, net of discount, Notes (net of the equity component classified in stockholders' equity and discount) and the interest rate swaps were as follows:31

	March 31, 2020						December 31, 2019
	CarryingAmount		FairValue		CarryingAmount		FairValue
	(in thousands)
Liabilities:
Tranche B-2 Term Loan	$	434,773	$	239,125	$	441,500	$	414,321
FILO Term Loan	273,898		231,786		266,814		265,851
Notes	156,427		148,606		154,675		148,488
Interest rate swaps	10,810		10,810		6,940		6,940

The fair values of the term loans were determined using the instruments' 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

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~~swaps~~ The ~~are~~carrying ~~carried~~value atand estimated fair value, ~~which~~of isthe ~~based~~Term ~~primarily~~Loan onFacility, ~~Level~~net 2of ~~inputs~~discount, ~~utilizing~~Notes ~~readily~~(net ~~observable~~of ~~market~~the ~~data,~~equity ~~such~~component asclassified ~~LIBOR~~in ~~forward~~stockholders' ~~rates,~~equity ~~for~~and ~~all~~discount) ~~substantial~~and ~~terms of~~ the interest rate ~~swap~~swaps ~~contracts~~were ~~and~~as ~~the assessment of nonperformance risk.~~ follows:

As described in Note 5, "Property, Plant and Equipment, Net," and Note 6, "Goodwill and Intangible Assets, Net," the Company recorded long-lived asset impairments during the three months ended March 31, 2020. This resulted in the following assets being measured at fair value on a non-recurring basis using Level 3 inputs:


	June 30, 2020						December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in thousands)
Liabilities not subject to compromise:
Tranche B-2 Term Loan	$	—	$	—	$	441,500	$	414,321
FILO Term Loan	—		—		266,814		265,851
Notes	—		—		154,675		148,488
DIP Financing - New Money DIP	30,000		30,000		—		—
DIP Financing - DIP FILO	275,000		275,000		—		—
Interest rate swaps	—		—		6,940		6,940
Liabilities subject to compromise:
Tranche B-2 Term Loan	$	410,834	$	292,033	$	—	$	—
Notes	159,097		795		—		—

• The fair values of the ~~indefinite-lived~~term ~~brand~~loans ~~name~~were ~~intangible~~determined ~~asset~~using the instruments' 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 ~~March~~fair 31value, ~~2020;~~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.

~~•goodwill~~As ata ~~March~~result 31of the Debtors filing for relief under Chapter 11 as further discussed in Note 3. "Reorganization and Chapter 11 Proceedings," ~~2020~~GNC’s prepetition debt, except for the ~~Health~~FILO ~~Store~~Term ~~reporting~~Loan ~~unit;~~which rolled into the DIP ABL FILO Facility, is classified as liabilities subject to compromise as of June 30, 2020. As of June 30, 2020, the estimated carrying amount and fair value of GNC’s DIP Term Loan is $275.0 million and is classified as Level 2 within the fair value hierarchy. The fair values of debt instruments classified as Level 2 instruments are valued using market prices we obtain from external third parties.

~~•property~~As described in Note 6. "Property, Plant and ~~equipment~~Equipment, Net," and ~~right-of-use~~Note ~~assets~~7. at"Goodwill ~~certain~~and ofIntangible Assets, Net," the Company's ~~stores~~recorded atlong-lived ~~March~~asset 31impairments during the six months ended June 30, 2020;. This resulted in the following assets being measured at fair value on a non-recurring basis using Level 3 inputs:

•~~equity~~the ~~method~~indefinite-lived ~~investment~~brand inname ~~the~~intangible ~~Manufacturing~~asset JV at ~~March~~June 3130, 2020. ;

~~NOTE~~•goodwill ~~10. CONTINGENCIES~~at June 30, 2020 for the Health Store reporting unit;

•property and equipment and right-of-use assets at certain of the Company's stores at June 30, 2020;

•equity method investment in the Manufacturing JV at June 30, 2020.

NOTE 11. CONTINGENCIES

On June 23, 2020, the Debtors filed the Chapter 11 Cases seeking relief under the Bankruptcy Code. The commencement of the Chapter 11 Cases automatically stayed all of the proceedings and actions against the Debtors. See Note 3. "Reorganization and Chapter 11 Proceedings" for a description of the Chapter 11 Cases.

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'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 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, prior to the formation of the Manufacturing JV, 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.32

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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 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, prior to the formation of the Manufacturing JV, 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. GNC was granted an automatic stay order by the Bankruptcy Court continuing the provisions under existing insurance arrangements. 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 ~~March~~June 3130, 2020, the Company was named in 27 personal injury lawsuits involving products containing DMAA and/or Aegeline. On July 22, 2020, all matters pending in the United States District Court for the District of Hawaii were dismissed.

~~These~~The remaining matters are currently stayed pending final resolution.

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 their insurers.

21California 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 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. In November 2019, GNC filed a renewed Motion for Decertification, which was denied by the Court in January 2020. There is no trial date currently scheduled. As of June 30, 2020, 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.

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 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

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~~California~~the ~~Wage~~regular ~~and~~rate ~~Break~~must ~~Claims. On~~be ~~February~~multiplied ~~29,~~by ~~2012,~~1.5 ~~former~~(rather ~~Senior~~than ~~Store~~0.5) ~~Manager,~~to ~~Elizabeth~~determine ~~Naranjo,~~the ~~individually~~amount ~~and~~of onovertime ~~behalf~~owed. ofTaking ~~all~~accumulated ~~others~~interest ~~similarly~~into ~~situated~~account, ~~sued~~the ~~General~~net ~~Nutrition~~result ~~Corporation~~of in the Superior Court's ofdecision ~~the~~was ~~State~~to ofreduce ~~California for~~ the ~~County~~Company's ofliability ~~Alameda.~~by ~~The~~an ~~complaint~~immaterial ~~contains eight causes of action~~amount, ~~alleging,~~which ~~among~~has ~~other~~been ~~matters,~~reflected ~~meal,~~in ~~rest~~the ~~break~~accompanying ~~and~~Consolidated ~~overtime~~Financial ~~violations~~Statements. ~~for~~The ~~which~~Company ~~indeterminate~~filed ~~money~~a ~~damages~~petition for ~~wages,~~appeal ~~penalties,~~to ~~interest,~~the ~~and~~Pennsylvania ~~legal~~Supreme ~~fees~~Court ~~are~~on ~~sought. In~~January ~~June~~22, 2018,. ~~the~~The ~~Court~~Pennsylvania ~~granted~~Supreme inCourt ~~part~~accepted ~~and denied in part~~ the Company's ~~Motion~~petition for ~~Decertification.~~appeal Inand ~~August 2018,~~ the ~~plaintiff~~Company ~~voluntarily~~filed ~~dismissed~~its ~~the~~appellant’s ~~class~~brief ~~action~~on ~~claims~~August ~~alleging~~27, ~~overtime violations~~2018. InThe ~~November~~Pennsylvania ~~2019,~~Supreme ~~GNC filed a renewed Motion for Decertification, which was denied by the~~ Court ruled in ~~January~~favor ~~2020. Trial~~of ~~is currently scheduled for July 2020~~Plaintiffs. AsThe ofcase ~~March 31, 2020, an immaterial liability~~ has been ~~accrued~~remanded ~~in the accompanying financial statements. The Company intends~~ to ~~vigorously defend against~~ the ~~remaining~~trial ~~class~~court ~~action~~for ~~claims~~final ~~asserted in this action~~resolution.

~~Pennsylvania~~Oregon ~~Fluctuating~~Attorney ~~Workweek~~General. On ~~September~~October 1822, ~~2013~~2015, ~~Tawny~~the ~~Chevalier~~Attorney ~~and~~General ~~Andrew~~for ~~Hiller~~the ~~commenced~~State aof ~~class~~Oregon ~~action~~sued in the ~~Court~~Company ofin ~~Common~~Multnomah ~~Pleas of Allegheny~~ County, ~~Pennsylvania.~~Circuit ~~Plaintiff~~Court ~~asserted a claim against the Company~~ for aalleged ~~purported~~violations ~~violation~~ of ~~the~~Oregon’s ~~Pennsylvania~~Unlawful ~~Minimum~~Trade ~~Wage~~Practices Act ~~("PMWA")~~, ~~challenging~~in ~~the~~connection ~~Company's~~with ~~utilization~~its ofsale ~~the~~in ~~"fluctuating~~Oregon ~~workweek" method to calculate overtime compensation, on behalf~~ of ~~all~~certain ~~employees~~third-party ~~who~~products. ~~worked~~The ~~for the~~ Company inis ~~Pennsylvania~~vigorously ~~and~~defending ~~who~~itself ~~were~~against ~~paid~~these ~~according~~allegations. toAlong ~~the~~with ~~fluctuating~~its ~~workweek~~Amended ~~method.~~Answer Inand ~~October~~Affirmative ~~2014~~Defenses, the ~~Court~~Company ~~entered~~filed ana ~~order~~counterclaim ~~holding~~for ~~that~~declaratory ~~the~~relief, ~~use~~asking of the ~~fluctuating~~court ~~workweek~~to ~~method~~make ~~violated~~certain ~~the~~rulings ~~PMWA. In September 2016, the Court entered judgment~~ in favor of ~~Plaintiffs and~~ the ~~class~~Company, inand anadding ~~immaterial amount~~USPlabs, ~~which~~LLC ~~has~~and ~~been~~SK ~~recorded~~Laboratories as acounterclaim ~~charge~~defendants. In inMarch 2018, the ~~accompanying~~Oregon ~~Consolidated~~Attorney ~~Financial~~General ~~Statements. Plaintiffs subsequently~~ filed a ~~petition~~motion for ansummary ~~award~~judgment ofrelating ~~attorney's~~to ~~fees,~~its ~~costs~~first ~~and~~claim ~~incentive~~for ~~payment.~~relief, ~~The~~which ~~court~~the ~~awarded~~Company ~~an immaterial amount in legal fees~~contested. The Company ~~appealed~~filed ~~the~~a ~~adverse~~cross ~~judgment~~motion ~~and~~for ~~the~~summary ~~award~~judgment ofon ~~attorney's fees. On December 22, 2017,~~ the ~~Pennsylvania~~first ~~Superior~~claim ~~Court~~for ~~held that the Company correctly determined the "regular rate" by dividing weekly compensation by all hours worked (rather than 40)~~relief, ~~but~~which ~~held that~~ the ~~regular~~Oregon ~~rate~~Attorney ~~must~~General ~~be multiplied by 1~~contested.5 Following ~~(rather~~oral ~~than~~argument ~~0.5)~~in toAugust ~~determine the amount of overtime owed. Taking accumulated interest into account~~2018, the ~~net result of the Superior~~ Court's ~~decision~~denied ~~was to reduce~~ the ~~Company'~~State’s ~~liability~~motion byfor ansummary ~~immaterial~~judgment ~~amount,~~and ~~which~~granted ~~has been reflected~~ in ~~the~~part ~~accompanying~~and ~~Consolidated~~denied ~~Financial~~in ~~Statements.~~part ~~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~~motion for ~~appeal~~summary ~~and the Company filed its appellant’s brief on August 27, 2018~~judgment. The ~~Pennsylvania~~parties ~~Supreme~~are ~~Court ruled~~ in ~~favor~~the process of ~~Plaintiffs~~exchanging discovery. There ~~The~~is ~~case~~no ~~has been remanded to the~~ trial ~~court~~date ~~for~~currently ~~final resolution~~scheduled.

Oregon Attorney General. On October 22, 2015, the Attorney General for the State of Oregon sued 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 2020.

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.

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. A tentative agreement was reached in the third quarter of 2017 on many of the key terms of a settlement. In December 2019, the Court approved the settlement agreement. ~~The Company currently expects any settlement to be in a form that does not require the recording of a contingent liability.~~

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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 Federal Food, Drug and Cosmetic Act (the "FDCA"). Under the agreement, which included 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

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"), the Company completed additional investigations with the DHEC's approval, including the installation and 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. After an initial monitoring period, in October of 2017 the DHEC approved a work plan for extended monitoring of such system and the contamination into 2021. 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 8 “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 JV 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 our potential liability. Therefore, no liability has been recorded in the Company's Consolidated Financial Statements.

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plan for extended monitoring of such system and the contamination into 2021. 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 9. “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 JV 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 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 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, 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.

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.

23NOTE 12. 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, pursuant to which the Company agreed to issue and sell to Harbin, and Harbin 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 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 Harbin. Pursuant to the terms of the Securities Purchase Agreement, Harbin 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 were 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

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~~NOTE~~equal ~~11.~~to ~~MEZZANINE~~the ~~EQUITY~~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.

~~Holdings~~As ~~is authorized to issue up to 60.0 million shares~~ of ~~preferred stock~~June 30, ~~par value $0.001 per share. On February 13~~2020, ~~2018,~~ the Company ~~entered~~had ~~into~~issued a ~~Securities~~total ~~Purchase~~of ~~Agreement~~299,950 ~~(as~~shares ~~amended~~of ~~from~~Convertible ~~time~~Preferred toStock. ~~time,~~The ~~the~~Convertible ~~“Securities~~Preferred ~~Purchase~~Stock ~~Agreement”)~~was byrecorded ~~and~~as ~~between~~Mezzanine ~~the~~Equity, ~~Company~~net ~~and~~of ~~Harbin~~issuance ~~Pharmaceutical Group Holdings Co.~~cost, ~~Ltd.~~on (the ~~“Investor”),~~Consolidated ~~pursuant~~Balance toSheets ~~which~~because the ~~Company~~shares ~~agreed~~are toredeemable ~~issue~~at ~~and sell to~~ the ~~Investor,~~option ~~and~~of the ~~Investor~~holder ~~agreed~~if toa ~~purchase~~fundamental ~~from~~change ~~the Company~~occurs, ~~299,950~~which ~~shares~~includes ofchange ain ~~newly~~control ~~created~~or ~~series of convertible preferred stock of the Company~~delisting, ~~designated~~where the ~~“Series~~common Astock ~~Convertible~~ceases ~~Preferred~~to ~~Stock”~~be ~~(the~~listed ~~“Convertible~~or ~~Preferred~~quoted ~~Stock”),~~on ~~for~~ a ~~purchase~~national ~~price~~securities ~~of $1~~exchange,~~000~~ ~~per share, or an aggregate of approximately $300 million~~ (~~the~~a ~~“Securities~~"Fundamental ~~Purchase”~~Change"). The ~~Convertible~~guaranteed ~~Preferred~~Second ~~Stock~~Issuance isand ~~convertible~~Third ~~into~~Issuance ~~56.1~~were ~~million~~considered ~~shares~~forward ofcontracts ~~the~~that ~~Company's~~represented ~~Common Stock at~~ an ~~initial~~obligation ~~conversion~~to ~~price~~both ofparties ~~$5.35~~until ~~per~~the ~~share,~~shares ~~subject~~were ~~to customary anti-dilution adjustments~~issued. ~~On November 7, 2018,~~ The ~~Company~~forward ~~entered~~contracts ~~into~~were anrecorded ~~Amendment~~at tofair ~~the~~value ~~Securities~~on ~~Purchase Agreement with~~ the ~~Investor.~~Consolidated ~~Pursuant~~Balance toSheets ~~the~~as ~~terms~~ of ~~the~~December ~~Securities~~31, ~~Purchase Agreement~~2018, ~~the~~with ~~Investor~~any ~~assigned~~changes ~~its interest~~ in ~~the~~fair ~~Securities~~value ~~Purchase~~recorded ~~Agreement~~in toearnings ~~Harbin~~in ~~and funded~~ the ~~$300~~Consolidated ~~million~~Statements ~~investment~~of ~~in three separate tranches~~Operations. The ~~shares~~Company ofrecorded ~~Convertible~~a ~~Preferred~~$16.8 ~~Stock~~million ~~were~~loss ~~issued as follows: (i) 100,000 shares of Convertible Preferred Stock issued~~ on ~~November~~forward 8,contracts ~~2018~~ for ~~a total purchase price of $100 million (~~the ~~"Initial~~issuance ~~Issuance"), (ii) 50,000 shares~~ of Convertible Preferred Stock ~~issued~~during onthe ~~January~~first 2,quarter of 2019. ~~for~~Upon aissuance ~~total purchase price~~ of ~~$50 million (~~the ~~"Second Issuance") and (iii) 149,950~~ shares ofassociated ~~Convertible~~with ~~Preferred~~the ~~Stock~~forward ~~issued on February 13~~contracts, ~~2019~~the ~~for~~carrying avalue ~~total~~of ~~purchase~~the ~~price~~forward ofcontracts ~~approximately~~were ~~$150~~recorded ~~million~~to ~~(the~~Mezzanine ~~“Third Issuance”)~~Equity.

~~Holders~~As ofa ~~shares~~result of ~~Convertible~~the ~~Preferred~~delisting ~~Stock~~of ~~are~~our ~~entitled~~common tostock ~~receive~~from ~~cumulative~~the ~~preferential~~NYSE ~~dividends,~~on ~~payable~~June ~~quarterly~~30, ~~in arrears~~2020, ata anFundamental ~~annual~~Change ~~rate~~occurred. ofSubsequent ~~6.5%~~adjustment of the ~~stated~~amount ~~value~~presented ofin ~~$1,000~~temporary ~~per~~equity ~~share,~~is ~~subject~~unnecessary toif ~~increase~~it inis ~~connection~~not ~~with~~probable that the ~~payment~~instrument ofwill ~~dividends~~become ~~in kind~~redeemable. With ~~Dividends~~the ~~are~~triggering ~~payable~~of the Fundamental Change, atunder the ~~Company's~~Convertible ~~option~~Preferred Stock Agreement, inthe ~~cash~~holders ~~from~~could ~~legally~~request ~~available~~redemption ~~funds~~of ortheir inshares ~~kind~~at bythe ~~issuing~~stated ~~additional~~value ~~shares~~plus ofany ~~Convertible~~accumulated ~~Preferred~~and ~~Stock~~unpaid ~~with~~dividends. However, ~~such~~an ~~stated~~automatic ~~value~~stay ~~equal~~has been granted to ~~the~~GNC ~~amount~~that ofprohibits ~~payment~~among ~~being~~other ~~made~~things, sales or bytransfers ~~increasing~~of equity securities. The commencement of the ~~stated~~Chapter ~~value~~11 Cases automatically stayed all of the ~~outstanding~~proceedings and actions against the Debtors and specified that holders of Convertible Preferred Stock byare ~~the~~not ~~amount~~entitled ~~per~~to ~~share~~dividends ofduring the ~~dividend~~course orof inbankruptcy aand ~~combination~~there ~~thereof.~~is no current option to redeem the shares.

As of ~~March 31~~June 30, 2020, the Company ~~had~~has ~~issued~~not aaccrued ~~total~~for ofdividends ~~299,950~~on ~~shares~~the of Convertible Preferred Stock.; ~~The Convertible Preferred Stock was recorded as Mezzanine Equity~~however, ~~net of issuance cost, on~~ the Consolidated Balance Sheets because the shares are redeemable at the option of the holder if a fundamental change occurs, which includes change in control or delisting (a "Fundamental Change"). 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~~has acontinued ~~$16.8 million loss on forward contracts for~~ the ~~issuance~~accumulation of ~~Convertible~~dividends ~~Preferred~~through ~~Stock~~June ~~during the first quarter of 2019. Upon issuance of the shares associated with the forward contracts~~30, ~~the carrying value of the forward contracts were recorded to Mezzanine Equity~~2020.

The Convertible Preferred Stock is not currently redeemable and is only redeemable upon a Fundamental Change at the stated value plus any accumulated and unpaid dividends on such shares on the fundamental change date. The Company does not believe a Fundamental Change is considered probable until it occurs. Subsequent adjustment of the amount presented in temporary equity is unnecessary if it is not probable that the instrument will become redeemable. As ~~the Convertible Preferred Stock is only redeemable upon a Fundamental Change, the occurrence~~ of which is not probable, we will not accrete the Convertible Preferred Stock to its redemption value until it occurs. As such, the Company will recognize changes in the redemption value to the Convertible Preferred Stock as they occur and adjust the carrying value to the redemption value at the end of each reporting period as if the end of the reporting period were also the redemption date for the Convertible Preferred Stock. As of MarchJune 3130, 2020, the stated value of the Convertible Preferred Stock is $300.0 million (299,950 shares at $1,000 per share) and there are accumulated and unpaid dividends on such shares of $2530.02 million. As of December 31, 2019, the stated value of the Convertible Preferred Stock was $300.0 million (299,950 shares at $1,000 per share) and there were accumulated and unpaid dividends on such share of $19.8 million.

24NOTE 13. EARNINGS PER SHARE

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NOTE 12. EARNINGS PER SHARE

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

	Three months ended March 31,
	Three months ended June 30,			Six months ended June 30,
	2020	2019	2020	2019
	(in thousands)
Basic weighted average shares	83,~~897~~936	83,~~510~~663	83,916	83,587
Effect of dilutive stock-based compensation awards	—	—
Effect of dilutive Convertible Preferred Stock	—	57,093	—	—
Diluted weighted average shares	83,897	83,510
Effect of dilutive stock-based compensation awards	—	186	—	—
Diluted weighted average shares	83,936	140,942	83,916	83,587

For the three months ended March 31, 2020 and 2019, all 6.8 million and 4.0 million, respectively, outstanding stock-based awards were excluded from the computation of diluted earnings per shares ("EPS") because the Company was in a net loss position and as a result, inclusion of the awards would have been anti-dilutive. 36

~~The~~Table ~~Company~~of has applied the if-converted method to calculate dilution on the Convertible Preferred Stock and the Notes in the current quarter, which has resulted in all 59.9 million and 2.4 million shares underlying the Convertible Preferred Stock and the Notes, respectively, being anti-dilutive. Contents

The following awards and convertible stock were excluded from the computation of diluted EPS because the impact was antidilutive:


	Three months ended June 30,			Six months ended June 30,
	2020	2019	2020	2019
	(in thousands)
Antidilutive:

Stock-based awards	6,018	3,768	6,398	4,292
Convertible Preferred Stock	60,896	—	60,409	49,979
Total excluded from diluted EPS	66,914	3,768	66,807	54,271

The Company applied the if-converted method to calculate dilution on the Notes, which has resulted in all the 2.4 million underlying convertible shares in all periods being anti-dilutive.

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

	Three months ended March 31,
	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(in thousands, except per share data)
Loss per common share - Basic
(Loss) earnings per common share - Basic
Net loss	$	(200,086)	$	(15,262)
Net (loss) income	$	(83,669)	$	16,058	$	(283,755)	$	796
Cumulative undeclared convertible preferred stock dividend	5,~~195~~280		34,~~716~~950		10,475		8,667
Net loss attributable to common shareholders	(205,281)		(18,978)
Net (loss) income attributable to common shareholders	(88,949)		11,108		(294,230)		(7,871)
Weighted average common shares outstanding - basic	83,~~897~~936		83,~~510~~663		83,916		83,587
Loss per common share - basic	$	(2.45)	$	(0.23)
(Loss) earnings per common share - basic	$	(1.06)	$	0.13	$	(3.51)	$	(0.09)
Loss per common share - Diluted
(Loss) earnings per common share - Diluted
Net loss	$	(200,086)	$	(15,262)
Net (loss) income	$	(83,669)	$	16,058	$	(283,755)	$	796
Cumulative undeclared convertible preferred stock dividends	5,~~195~~280		~~3,716~~—		10,475		8,667
Net loss attributable to common shareholders	(205,281)		(18,978)
Net (loss) earnings attributable to common shareholders	(88,949)		16,058		(294,230)		(7,871)
Weighted average common shares outstanding - diluted	83,~~897~~936		83140,~~510~~942		83,916		83,587
Loss per common share - diluted	$	(2.45)	$	(0.23)
(Loss) earnings per common share - diluted	$	(1.06)	$	0.11	$	(3.51)	$	(0.09)

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NOTE 1314. SEGMENTS

The Company aggregates its operating segments into three reportable segments, which include U.S. and Canada (until GNC Canada was deconsolidated on June 24, 2020), International and Manufacturing / Wholesale. Warehousing and distribution costs have been allocated to each reportable 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 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, prior to the formation of the Manufacturing JV, manufactured and sold product to the U.S. and Canada and International segments at cost with a markup, which was eliminated at consolidation.

~~Due~~In toconnection with the ~~current~~Chapter 11 Cases, the Company launched liquidation sales in June 2020 in approximately 500 U.S and ~~estimated~~Canada ~~adverse~~company-owned ~~impacts~~stores ~~from~~which are expected to close during the ~~COVID-19~~third ~~pandemic~~quarter of 2020. As a result, during the three and six months ended ~~March~~June 3130, 2020, GNC recorded $20.2 million impairment charges within U.S. and Canada and recorded $12.6 million inventory reserves within U.S. and Canada as the Company expects vendors may withhold payment to GNC for certain allowances/credits in order to satisfy certain allowed claims that we have classified within LSTC. During the six months ended June 30, 2020, due to the estimated adverse impacts from the COVID-19 pandemic, the Company recorded $~~157~~177.5 7 million long-lived asset impairments and other store closing costs ($~~128~~149.91 million within U.S. and Canada; $28.6 million within International), $22.8 million reserves related to inventory obsolescence and vendor allowances ($22.4 million within U.S. and Canada; $0.4 million within Manufacturing / Wholesale), and $8.7 million allowance for doubtful accounts ($7.9 million within U.S. and Canada; $0.8 million within International). Refer to Note 153. "Reorganization and Chapter 11 Proceedings" for more information on the Chapter 11 Cases and Note 16. "Subsequent Events" for more information on the uncertainty that exists regarding the impacts of COVID-19.

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

	Three months ended March 31,
	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(in thousands)
Revenue:
U.S. and Canada	$	~~424~~300,~~181~~206	$	~~489~~476,~~157~~060	$	724,387	$	965,216
International	3328,~~545~~933		4039,~~923~~448		62,478		80,371
Manufacturing / Wholesale:
Intersegment revenues	—		~~35,505~~—		—		35,505
Third-party contract manufacturing	—		15,783
Third-party	—		—		—		15,783
Wholesale partner sales	14,~~855~~399		18,~~901~~489		29,254		37,390
Subtotal Manufacturing / Wholesale	14,~~855~~399		7018,~~189~~489		29,254		88,678
Total reportable segment revenues	~~472~~343,~~581~~538		~~600~~533,~~269~~997		816,119		1,134,265
Elimination of intersegment revenues	—		~~(35,505)~~—		—		(35,505)
Total revenue	$	~~472~~343,~~581~~538	$	~~564~~533,~~764~~997	$	816,119	$	1,098,760
Operating income:
U.S. and Canada	$	(~~131~~19,~~200~~675)	$	5249,~~100~~202	$	(150,875)	$	101,302
International	~~(17~~8,~~382)~~231		14,~~050~~269		(9,151)		28,319
Manufacturing / Wholesale	6,~~931~~730		1512,~~344~~118		13,661		27,462
Total reportable segment operating income	(~~141~~4,~~651~~714)		8175,~~494~~589		(146,365)		157,083
Corporate costs	(2453,~~835~~804)		(2625,~~261~~079)		(78,638)		(51,340)
Loss on net asset exchange for the formation of the joint ventures	~~(1,655)~~—		(191,~~514~~779)		(1,655)		(21,293)
Other	~~2,107~~—		(~~237~~13)		2,107		(250)
Unallocated corporate costs, loss on net asset exchange and other	(2453,~~383~~804)		(4626,~~012~~871)		(78,186)		(72,883)
Total operating (loss) income	(~~166~~58,~~034~~518)		3548,~~482~~718		(224,551)		84,200
Interest expense, net	4722,~~444~~057		3224,~~956~~964		69,502		57,920
Loss on forward contracts for the issuance of convertible preferred stock	—		16,787
Reorganization items, net	15,429		—		15,429		—
Loss before income taxes	$	(213,478)	$	(14,261)
Gain on purchase of convertible debt	—		(3,214)		—		(3,214)
Loss on forward contracts for the issuance of convertible preferred stock	—		—		—		16,787
(Loss) income before income taxes	$	(96,004)	$	26,968	$	(309,482)	$	12,707

Refer to Note 3,4. "Revenue" for more information on the Company's reportable segments.

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NOTE 1415. INCOME TAXES

The Coronavirus Aid, Relief, and Economic Security Act ("CARES" Act) signed into law on March 27, 2020 in response to the COVID-19 pandemic, provides additional avenues of financial relief and assistance to individuals and businesses, including tax relief. The CARES Act includes, among other items, provisions relating to payroll tax credits and deferrals, net operating loss carry back periods, alternative minimum tax credits, and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also temporarily and retroactively increases the limitation on the deductibility of interest expense under Internal Revenue Code Section 163(j)(1) from 30% to 50% of adjusted taxable income for tax years beginning in 2019 and 2020. The Company is currently evaluating the impact of the provisions of the CARES Act.

The Company recognized $5311.04 million of income tax benefit during the three months ended ~~March~~June 3130, 2020 compared with $213.0 million of income tax expense in the prior year quarter. The Company's income tax benefit/expense is based on income, statutory tax rates and ~~tax~~the ~~planning opportunities~~ available incarryback ~~the~~of ~~jurisdictions~~net inoperating ~~which it operates~~losses. 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 2020 annual effective tax rate was impacted by a $2740.68 million partial valuation allowance for attributes expected to be generated in 2020 that may not be realizable, the other-than-temporary impairment of the Manufacturing JV, and the benefit of the federal tax rate differential related to federal net operating losses generated during the current year that are expected to be carried back to prior years at a 35% rate. The 2019 effective tax rate was significantly impacted by a gain for tax purposes resulting from the transfer of the Nutra manufacturing net assets to the Manufacturing JV and the establishment of a partial valuation allowance for attributes generated in the 2019 year that may not be realizable. The tax impacts of unusual or infrequent items are recorded discretely in the interim period in which they occur. During the three months ended March 31, 2020, the Company discretely recorded a permanent $4.8 million benefit related to the release of valuation allowances on the Federal interest expense limitation generated in 2019, resulting from the passage of the CARES Act which retroactively changed the 2019 Federal interest expense limitation from 30% to 50% of adjusted taxable income.

During the fourth quarter of the year ended December 31, 2019, as further discussed in Note 1,. "Nature of Business," management concluded that there is substantial doubt regarding the Company’s ability to continue as a going concern. Management considered this in concluding that certain deferred tax assets were no longer more likely than not realizable. As a result, ~~increase~~increases in valuation allowance of $2740.68 million and $27.1 million on the Company’s deferred tax assets were recorded as of ~~March~~June 3130, 2020 and December 31, 2019, respectively, which related principally to Federal deferred tax assets, state NOL carryforwards, and other state tax attributes. These increases were partially offset by valuation allowance decreases of $4.8 million as of ~~March~~June 3130, 2020 and December 31, 2019. The Company’s deferred tax assets of $26.5 million as of June 30, 2020 are considered realizable, as the majority of the deferred tax assets are related to federal net operating losses generated in the current year that are expected to be carried back to prior years at a 35% federal income tax rate based on the new CARES Act legislation.

At ~~March~~June 3130, 2020 and December 31, 2019, the Company had $1011.86 million and $10.7 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 $2.8 million at ~~March~~June 3130, 2020 and $2.1 million at December 31, 2019, 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.

Holdings 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 1516. SUBSEQUENT EVENTS

~~The Company is closely monitoring the current and future potential impact of the~~ COVID-19 pandemic on all aspects of our business and geographies, including how it will impact our customers, employees, suppliers, vendors, business partners and distribution channels. The Company incurred significant disruptions during the three months ended March 31, 2020 from COVID-19, and the Company's estimates on the future impact that COVID-19 will have on the Company's financial position and operating results is subject to numerous uncertainties. These uncertainties include the severity of the virus, the duration of the outbreak, governmental, business or other actions (which could include limitations on our operations), impacts on the Company's supply chain, the effect on customer

27The Company is closely monitoring the current and future potential impact of the COVID-19 pandemic on all aspects of our business and geographies, including how it will impact our customers, employees, suppliers, vendors, business partners and distribution channels. The Company incurred significant disruptions during the three and six months ended June 30, 2020 from COVID-19, and the Company's estimates on the future impact that COVID-19 will have on the Company's financial position and operating results is subject to numerous uncertainties.

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These uncertainties include the severity of the virus, the duration of the outbreak, governmental, business or other actions (which could include limitations on our operations), impacts on the Company's supply chain, the effect on customer demand, store closures or changes to our operations. The health of the Company's workforce, and the ability to meet staffing needs in stores, distribution facilities, wholesale operations and other critical functions cannot be predicted and is vital to our operations. Further, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, consumer spending as well as other unanticipated consequences remain unknown. As of ~~May~~August 65, 2020, ~~approximately~~the 1Company had less than 100,~~300,~~ or 403%, of the U.S. and Canada company-owned and franchise retail stores ~~were~~ closed due to the COVID-19 pandemic.

In addition, the Company cannot predict with certainty the impact that COVID-19 will have on its customers, vendors, suppliers and other business partners; however, any material effect on these parties could adversely impact the Company. The situation surrounding COVID-19 remains fluid, and the Company is actively managing its response in collaboration with customers, government officials, team members and business partners and assessing potential impacts to its financial position and operating results, as well as adverse developments in the business.

~~Due~~Stalking toHorse the adverse impacts of COVID-19, the Company withheld rent and other occupancy payments beginning in April 2020 for certain of its retail locations as management negotiates with landlords for rent concessions. The Company withheld rent and other occupancy payments of approximately $19 million in April 2020 and approximately $16 million in May 2020. In the event that withholding these rent payments would constitute an event of default per the lease agreement, management intends to negotiate resolution with the landlord. If such negotiations are not successful, the lease liabilities associated with those leases could become immediately due and payable. The Company has elected FASB's modification guidance to account for rent concessions related to the effects of the COVID-19 pandemic. The Company will not apply the lease modification guidance under ASC 842 to rent concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract. If other terms of the lease are changed or renegotiated in connection with the concession process, then the changes will be treated as a modification in accordance with ASC 842. Agreement

28On August 7, 2020, the Debtors entered into a Stalking Horse Agreement (the “Stalking Horse Agreement”) with Harbin Buyer. Pursuant to the terms of the Stalking Horse Agreement, the Debtors have agreed to sell substantially all of their assets (the “Assets,” and such sale, the “Sale”) to Harbin Buyer, and Harbin Buyer has agreed to assume from the Debtors certain specified liabilities as further set forth in the Stalking Horse Agreement (the “Assumed Liabilities”). The Stalking Horse Agreement contemplates that the Company will form (a) a new Delaware limited liability company as a wholly owned subsidiary (“GNC Newco”) and (b) a new Nova Scotia unlimited liability company as a wholly owned subsidiary of GNC Newco (“GNC Canada Newco”). At the closing (the “Closing”) of the transactions contemplated by the Stalking Horse Agreement, (i) the Debtors will transfer all of the Assets and Assumed Liabilities to GNC Newco (other than those Assets and Assumed Liabilities in Canada, which will be transferred to GNC Canada Newco), (ii) GNC Newco will redeem and cancel all of the issued and outstanding equity capital of GNC Newco held by the Company or its affiliates, and (iii) GNC Newco will issue all of the equity capital of GNC Newco to Harbin Buyer or its designated affiliate, such that, following such issuance, Harbin Buyer or its designated affiliate (as applicable) will hold 100% of the issued and outstanding equity capital of GNC Newco.

The purchase price under the Stalking Horse Agreement will comprise (a) indebtedness under the Second Lien Credit Agreement (as defined in the Stalking Horse Agreement) in a principal amount equal to $210.0 million, subject to adjustment as provided therein, (b) the payment of an amount in cash equal to $550.0 million, subject to adjustment as provided therein, (c) the issuance of up to $10.0 million in convertible junior notes to the Debtors’ unsecured creditors, subject to the satisfaction of certain conditions and (d) the assumption of the Assumed Liabilities (together, the “Purchase Price”). In addition, under the Stalking Horse Agreement, Harbin Buyer is obligated to make a $57.0 million good faith deposit (the “Deposit”) to be held in a segregated escrow account, with the Deposit being released to the Company upon the earlier to occur of (i) the Closing, in which case the amount of the Deposit will be credited against the cash portion of the Purchase Price and (ii) a Buyer Default Termination (as defined in the Stalking Horse Agreement). If the Stalking Horse Agreement is terminated other than due to a Buyer Default Termination, the Deposit will be returned to Harbin Buyer.

The Stalking Horse Agreement, which is subject to Court approval, is intended to constitute a “stalking horse bid” for the Assets in accordance with the Debtors’ motion to modify the bidding procedures order (the “Bidding Procedures Order”), which was approved by a final order of the Court on Court on July 22, 2020, to extend the deadline by which the Debtors are authorized to enter into a Stalking Horse Agreement to August 7, 2020 (the “Stalking Horse Extension Motion”). The Stalking Horse Agreement includes certain bid protections for Harbin Buyer payable in accordance with the terms thereof, including a break-up fee equal to $22.8 million and an expense reimbursement of up to $3.0 million of reasonable and documented out of pocket fees (the “Bid Protections”). A hearing to consider the Stalking Horse Extension Motion, and the entry of a final order approving the modified Bidding Procedures Order, is scheduled to be held before the Bankruptcy Court on August 19, 2020 at 1.00 p.m. ET.

The Bidding Procedures Order established certain bidding procedures for an auction that allows other qualified bidders to submit higher or otherwise better offers to purchase all or substantially all of the Assets (any such offer, a “Competing Transaction”). The Bid Protections are payable upon certain termination events set forth in

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the Stalking Horse Agreement, including the consummation of a Competing Transaction (subject to certain exceptions).

The Bidding Procedures Order set the deadline (the “Bid Deadline”) to submit bids for the Debtors’ assets as September 11, 2020. Upon the receipt of at least one qualified offer from other bidders proposing a Competing Transaction by the Bid Deadline, the Debtors will hold an auction with respect to the Assets on or about September 15, 2020.

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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 six months ended ~~March~~June 3130, 2020 and 2019 was prepared by management, is unaudited, and was derived from our unaudited 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 includes 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 to," "believe," "anticipate," "plan," "expect," "intend," "estimate," "project," "may," "will," "should," "would," "could," "can," the negatives thereof, variations thereon and similar expressions, or by discussions of strategy.

All forward-looking statements, including, without limitation, our examination of historical operating trends, are based upon our current expectations and include various assumptions. We believe there is a reasonable basis for our expectations and beliefs, but they are inherently uncertain and subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our 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 2019 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the "SEC") on March 25, 2020 (the "2019 10-K") and as set forth in Part II, Item 1A. "Risk Factors" included herein.

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 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 Form 10-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, 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, some of which are exclusive to GNC. We derive our revenues principally from: product sales through our company-owned stores; online sales primarily through our website, GNC.com, as well as third-party websites; domestic and international franchise activities, and select wholesale partnerships. We sell products through a worldwide network of approximately 76,~~300~~700 locations operating under the GNC brand name.

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; proprietary product and innovation capabilities; and differentiated service model designed to enhance the customer experience.

~~Uncertainty~~Voluntary ~~Relating~~Reorganization tounder ~~COVID-19~~Chapter 11

~~Our~~On ~~business~~June ~~has~~23, ~~been~~2020 ~~materially~~(the ~~and~~"Petition ~~adversely~~Date"), ~~affected~~we byand ~~the~~certain ~~outbreak~~ of ~~the~~our ~~novel~~U.S. ~~coronavirus~~subsidiaries ~~known~~(collectively, asthe ~~“COVID-19”.~~"Debtors") ~~During~~filed ~~March~~a ~~2020,~~prearranged ~~many~~plan ~~state~~of ~~governments~~reorganization ~~ordered~~(the ~~all~~“Plan”) ~~but~~under ~~certain~~Title ~~essential~~11 ~~businesses~~of ~~closed~~the ~~and~~United ~~imposed~~States ~~significant~~Code ~~limitations on~~ (the ~~circulation~~"Bankruptcy ofCode") in the ~~populace.~~United ~~Approximately~~States ~~1,300,~~Bankruptcy orCourt ~~40%,~~for the District of Delaware (the U"Bankruptcy Court").S. ~~and~~The ~~Canada~~Debtors’ ~~company-owned~~voluntary ~~and~~Chapter ~~franchise~~11 ~~retail~~proceedings ~~stores~~(the ~~were~~"Chapter ~~closed~~11 asCases") ofare ~~May~~being 6,jointly ~~2020~~administered ~~due~~for toprocedural ~~the~~purposes ~~COVID-19~~under ~~pandemic.~~the ~~Some~~caption ofIn ~~the~~re ~~stores~~GNC ~~temporarily~~Holdings, ~~closed~~Inc., ~~may~~Inc., beet ~~closed~~al., ~~permanently~~Case inNo. ~~the future~~20-11662. In ~~response~~addition, ~~the~~our ~~company~~Canadian ~~has~~subsidiary

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~~significantly~~("GNC ~~reduced~~Canada") ~~inventory~~voluntarily ~~purchases~~commenced ~~and~~parallel ~~capital~~proceedings ~~expenditures,~~under asthe ~~well~~CCAA asin ~~taken~~Canada ~~actioned~~in ~~measures~~the toOntario ~~decrease~~Superior ~~costs~~Court ~~by nearly $40 million in 2020 consisting~~ of ~~employee furloughs~~Justice, ~~marketing~~Case ~~reductions,~~No. ~~store hours reductions and deferral of non~~CV-~~essential spend~~20-00642970-00CL.

~~Due~~We toare ~~the~~currently ~~current~~operating ~~and~~our ~~future~~business ~~potential~~as ~~impact of COVID~~debtors-~~19,~~in-possession ~~including~~in ~~uncertainties~~accordance onwith the ~~severity~~applicable provisions of the ~~virus,~~Bankruptcy ~~the~~Code ~~duration~~and orders of the ~~outbreak,~~Bankruptcy ~~governmental~~Court. After we filed our Chapter 11 petitions, ~~business~~the orBankruptcy ~~other~~Court ~~actions~~granted ~~(which~~certain ~~could~~relief ~~include~~requested ~~limitations~~by onthe ~~our~~Debtors ~~operations),~~enabling ~~impacts~~us onto conduct our ~~supply~~business ~~chain,~~activities in the ~~effect~~ordinary oncourse, ~~customer demand~~including, ~~temporary~~among other things and ~~permanent~~subject ~~store~~to ~~closures~~the orterms ~~changes~~and conditions of such orders, authorizing us to ~~our~~pay ~~operations~~employee wages and benefits, weto ~~have~~pay ~~recorded~~taxes and certain governmental fees and charges, to ~~carrying~~continue ~~amount~~to ofoperate ~~inventory,~~our ~~accounts~~cash ~~receivable,~~management ~~goodwill,~~system ~~indefinite-lived~~in ~~intangibles~~the ordinary course, and to pay the prepetition claims of certain of our ~~equity~~vendors. ~~method~~For ~~investment~~goods and ~~other~~services ~~long-lived~~provided ~~assets~~following ~~during~~ the ~~three~~Petition ~~months~~Date, ~~ended~~we ~~March~~intend ~~31,~~to ~~2020.~~pay vendors in full under normal terms.

~~Refer~~Subject to ~~Item~~certain 1exceptions, ~~"Financial~~under ~~Statement~~the Bankruptcy Code,~~" Note~~ 15the filing of the Chapter 11 Cases automatically enjoined, ~~"Subsequent~~or ~~Events"~~stayed, ~~for~~the ~~additional~~continuation ~~information~~of onmost judicial or administrative proceedings or filing of other actions against the ~~uncertainty~~Debtors ~~relating~~or their property to ~~COVID-19~~recover, collect or secure a claim arising prior to the Petition Date. Accordingly, although the filing of the Chapter 11 Cases triggered defaults under the Debtors’ funded debt obligations, creditors are stayed from taking any actions against the Debtors as a result of such defaults, subject to certain limited exceptions permitted by the Bankruptcy Code. Absent an order of the Bankruptcy Court, substantially all of the Debtors’ pre-petition liabilities are subject to settlement under the Bankruptcy Code.

For the duration of the Chapter 11 Cases, our operations and ability to develop and execute our business plan are subject to the risks and uncertainties associated with the Chapter 11 process as described in Item 1A. “Risk Factors.” As a result of these risks and uncertainties, the amount and composition of our assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 Cases, and the description of our operations, properties and liquidity and capital resources included in this quarterly report may not accurately reflect its operations, properties and liquidity and capital resources following the Chapter 11 Cases.

In particular, subject to certain exceptions, under the Bankruptcy Code, the Debtors may assume, assume and assign or reject executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a pre-petition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors of performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach subject, in the case of the rejection of unexpired leases of real property, to certain caps on damages. Counterparties to such rejected contracts or leases may assert unsecured claims in the Bankruptcy Court against the applicable Debtor’s estate for such damages. Generally, the assumption or assumption and assignment of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance thereunder. Accordingly, any description of an executory contract or unexpired lease with the Debtor in this quarterly report, including where applicable a quantification of our obligations under any such executory contract or unexpired lease with the Debtor is qualified by any overriding rejection rights we have under the Bankruptcy Code. Further, nothing herein is or shall be deemed an admission with respect to any claim amounts or calculations arising from the rejection of any executory contract or unexpired lease and the Debtors expressly preserve all of their rights with respect thereto.

Deconsolidation of GNC Canada

As noted above, GNC Canada filed parallel proceedings in the Canadian Court. Any significant business decision which would impact our Canadian business requires the approval of both the U.S. and Canadian Courts as they have equal and plenary authority. As joint control by the U.S. and Canadian Courts does not constitute continued common control by the parent, we have deconsolidated GNC Canada effective as of June 24, 2020. The operating results of GNC Canada are reflected in our Consolidated Statements of Operations through the date of deconsolidation.

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Uncertainty Relating to COVID-19

Our business has been materially and adversely affected by the outbreak of the novel coronavirus known as COVID-19. During March 2020, many state governments ordered all but certain essential businesses closed and imposed significant limitations on the circulation of the populace due to the COVID-19 pandemic. U.S. and Canada company-owned and franchise retail stores closures reached approximately 1,400 stores, or 40%, in April 2020 and have steadily re-opened since then. Some of these stores have been permanently closed effective in June in connection with the Chapter 11 Cases and the rejection of certain unexpired U.S and Canada company-owned and franchise leases. As of August 5, 2020, we had less than 100, or 3%, of the U.S. and Canada company-owned and franchise retail stores closed due to the COVID-19 pandemic. In response, we have significantly reduced inventory purchases and capital expenditures, as well as taken actioned measures to decrease costs by nearly $40 million in 2020 consisting of employee furloughs, marketing reductions, store hours reductions and deferral of non-essential spend.

Due to the expected impact of COVID-19, including uncertainties on the severity of the virus, the duration of the outbreak, governmental, business or other actions (which could include limitations on our operations), impacts on our supply chain, the effect on customer demand, temporary and permanent store closures or changes to our operations, we have recorded charges to carrying amount of inventory, accounts receivable, goodwill, indefinite-lived intangibles, our equity method investment and other long-lived assets during the six months June 30, 2020.

Refer to Item 1. "Financial Statements," Note 16. "Subsequent Events" for additional information on the uncertainty relating to COVID-19.

Our Current Strategy

Key elements of our business strategy and areas of internal focus for ~~the~~us ~~Company~~ are as follows:

•Leading brand of nutritional supplements. GNC has been in business for more than 80 years and ~~the~~we ~~Company~~are is built on a core foundation as a brand builder of high-quality nutritional supplements. Based on our worldwide network of approximately 76,~~300~~700 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~~help with 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 customer support and service we offer, differentiate us and allow 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 storefront and other marketplaces or through our select wholesale partners. Our high quality ingredients are rigorously tested before going into GNC products, undergoing multiple quality checks toso ~~ensure~~ that they meet our high standards for identity, strength, purity, composition and limits in contaminants.

We believe our sector-leading innovation capability is a significant competitive advantage. Our strategic partnership with International Vitamin Corporation ("IVC") allows us to continue to focus on further innovation while IVC drives increased efficiencies in manufacturing. Refer to Note 89. "Equity Method Investments" for more information. GNC has demonstrated strength in developing unique, branded, and scientifically verified products and has a long history of delivering new ingredients and reformulations. We directly employ scientists, nutritionists, formulators and quality control experts and have access to a wide range of world-class 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 in-store associates as "coaches" with regular training that focuses on solution-based selling, and through in-store technology that allows associates to view customers’ purchase history and preferences in real time via tablets. With that knowledge, and help from sales tools built into the tablet platform, our in-store associates can engage customers in conversation, share product information and testimonials before and after 45

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~~pictures,~~nutritional ~~recommend~~supplement ~~solutions~~consumer ~~and~~often ~~help~~desires ~~customers~~and ~~add~~seeks ~~complimentary~~out ~~products~~product expertise and ~~build~~knowledgeable ~~wellness~~customer ~~regimens~~service.

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 channels, differentiates us from online-only and other 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, our Amazon.com storefront and other marketplaces, customers can research and purchase our products online. We believe our store base is a competitive advantage with respect to our online presence and platform, allowing customers to experience our products and get expert advice from our in-store associates "coaches" as desired.

Our omni-channel model can enhance the customer experience and increase the lifetime value of a GNC customer, and we plan to continue to implement strategies over the next 12-18 months to blend our digital , online and in-store platforms to provide a seamless omni-channel shopping experience. 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 providing additional educational content, information and advice on GNC.com.

•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 ~~Statement~~Statements," Note 89. "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 indicator that senior management focuses on is operating income for each segment, which is discussed in detail within the section titled "Results of Operations"," as well as revenue and same store sales growth.

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

U.S. Company-Owned Same Store Sales, including GNC.com	Q1	Q2	YTD
2020 total same store sales	(10.1)%	(32.4)%	(20.9)%
2019 total same store sales	(1.6)%	(4.6)%	(3.1)%

Same store sales include point-of-sale retail sales from all our company-owned domestic stores that have been operating for twelve full months following the opening day and retail sales from GNC.com. We are an omni-channel retailer with capabilities that allow a customer to use more than one channel when making a purchase, including in-store and e-commerce channels. Our e-commerce channels 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 purchases are fulfilled by direct shipment to the ~~customer from one of our distribution facilities or from third-party e-commerce vendors. In-store sales are reduced~~

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customer from one of our distribution facilities 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 PRO Access loyalty program and the net change in the deferred points liability associated with the myGNC Rewards program, are excluded from same store sales.

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 permanently 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 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.

~~During~~Beginning in March 2020, many state governments ordered all but certain essential businesses closed and imposed significant limitations on the circulation of the populace. ~~Approximately~~due ~~1,100,~~to ~~or 30%, of~~ the UCOVID-19 pandemic.S. ~~and~~As ~~Canada~~a ~~company-owned~~result ~~and~~of ~~franchise~~the ~~retail~~COVID-19 ~~stores~~pandemic, ~~were~~we temporarily closed ~~due~~up to ~~the~~40% ~~COVID~~company-19owned ~~pandemic~~and asfranchise ofstores from March ~~31,~~through June 2020, and sales trends have significantly declined beginning in the second half of March ~~due~~2020. to COVID-19 related temporary closures are also included in the calculation of same store sales. The impact from the COVID-19 ~~pandemic~~temporary closures on U.S. Company-owned same store sales, ~~including GNC.com,~~ was estimated by ~~comparing~~excluding the ~~same~~net ~~store~~ sales inof ~~the~~a ~~last~~store ~~two~~from ~~weeks~~the incalculation ~~March~~of tosame ~~the~~store ~~weekly~~sales ~~same~~if the store ~~sales~~was ~~trends~~temporarily inclosed at the ~~first~~end ~~quarter~~ of ~~2020~~each ~~prior~~month toas a result of the ~~pandemic~~COVID-19 ~~outbreak~~pandemic.

Non-GAAP Measures

We have included certain non-GAAP financial measures below, which have been adjusted to exclude the impact of certain transactions ~~occuring~~occurring during the periods presented, because we believe such measures represent an effective supplemental means by which to measure our operating performance. We believe that (i) net (loss) income, (ii) diluted earnings per share ("EPS"), (iii) EBITDA, each on an as adjusted basis to exclude certain items, and (iv) free cash flow are useful metrics to investors and enable management and our investors to evaluate and compare our results from operations in a more meaningful and consistent manner by excluding specific items that are not reflective of ongoing operating results. However, these metrics are not a measurement of our operating performance under GAAP and should not be considered as an alternative to net (loss) income, EPS, 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.

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

(in thousands, except per share data)

	Three months ended March 31,
	Three months ended June 30,
	2020						2019
	Net Loss		Diluted EPS (1)		Net ~~(Loss)~~ Income		Diluted EPS (1)
	(unaudited)
Reported	$	(~~200~~83,~~086~~669)	$	(21.4506)	$	~~(15~~16,~~262)~~058	$	(0.~~23)~~11
Loss on net asset exchange for the formation of the joint ventures	1,655		0.02		19,514		0.15
Vendor allowance reserves (2)	12,597		0.15		—		—
Loss from equity method investment	3,125		0.04		—		—
Long-lived asset impairment	20,201		0.24		—		—
Amortization of discount in connection with early debt payment	156		—		3,119		0.02
Restructuring expense (3)	34,177		0.41		—		—
Amortization of discount and deferred financing fees in connection with the accelerated debt maturity date (2)	12,390		0.15		—		—
Reorganization items, net (4)	15,429		0.18		—		—
Loss on forward contracts related to the issuance of convertible preferred stock	—		—		16,787		0.13
Interest expense recognized on interest rate swap	(1,356)		(0.02)		—		—
Long-lived asset impairments and other store closing costs	157,515		1.88		—		—
Loss on net asset exchange for the formation of the joint ventures	—		—		1,779		0.01
Manufacturing JV other-than-temporary impairment	35,840		0.43		—		—
Gain on convertible notes repurchase	—		—		(3,214)		(0.02)
Inventory and vendor allowance reserves (3)	22,799		0.27		—		—
Other (5)	1,513		0.02		464		—
Allowance for doubtful accounts (4)	8,703		0.10		—		—
Tax effect (6)	(25,111)		(0.30)		3,219		0.02
Interest expense recognized on interest rate swap (5)	10,810		0.13		—		—
Adjusted	$	(26,219)	$	(0.38)	$	18,306	$	0.13
Other (6)	(821)		(0.01)		713		0.01
Weighted average diluted common shares outstanding	83,936				140,942
Tax effect (7)	(63,043)		(0.75)		(5,837)		(0.05)
Adjusted	$	(10,957)	$	(0.19)	$	19,034	$	0.15
Weighted average diluted common shares outstanding	83,897				126,628

(1) The Company applies the if-converted method to calculate dilution impact of the convertible senior notes and the convertible preferred stock. For reported and adjusted diluted EPS for the three months ended ~~March~~June 3130, 2020 ~~and for reported diluted EPS for the three months ended March 31~~, ~~2019,~~ the underlying shares of the convertible preferred stock and the convertible senior notes are anti-dilutive. Therefore, the diluted EPS included a reduction to net (loss) income for the cumulative undeclared dividends of $5.~~2 million and $~~3.7 million, ~~respectively,~~ for the ~~first~~second quarter of 2020 ~~and 2019~~. For ~~adjusted~~reported ~~diluted~~and adjusted EPS for the three months ended ~~March~~June 3130, 2019, the underlying shares of the convertible preferred stock is dilutive.

(2) ~~The~~As ~~Company~~a ~~accelerated~~result of filing the ~~amortization~~Chapter of11 ~~discount~~Cases ~~and~~on ~~deferred~~June ~~financing~~23, ~~fees~~2020, ~~related~~the Company expects vendors may withhold payment to ~~the~~GNC ~~Tranche~~for ~~B-2~~certain ~~Term~~allowances/credits ~~Loan,~~in ~~FILO~~order ~~Term~~to ~~Loan~~satisfy ~~and~~certain ~~the~~allowed ~~Revolving~~claims ~~Credit~~that ~~Facility~~we ashave aclassified ~~result~~within ofLSTC, ~~the~~and ~~expected~~therefore ~~acceleration~~GNC ofrecorded $12.6 million in inventory reserves during the ~~debt~~three ~~maturity~~months ~~date~~ended June 30, 2020. Refer to ~~the~~Item ~~Springing~~1. ~~Maturity~~"Financial ~~Date~~Statements," Note 3. "Reorganization and Chapter 11 Proceedings " and Note 5. "Inventory" for additional information.

(3) ~~Included~~ ~~$18.2~~Includes ~~million~~expenses ~~inventory~~realized ~~obsolescence~~or ~~reserves~~incurred ~~recorded~~before asthe aPetition ~~reduction~~Date ~~to inventory~~ and ~~$4.6~~in ~~million~~relation ~~vendor~~to ~~allowance~~the ~~recorded~~Chapter as11 aCases ~~reduction~~recorded tounder ~~accounts~~selling, ~~receivables~~general ~~due~~and toadministrative ~~the~~charges ~~current~~on ~~and~~our ~~estimated~~Consolidated ~~adverse~~Statements ~~impacts~~of ~~from~~Operations ~~the~~as ~~COVID-19~~well ~~pandemic.~~as ~~The~~previously ~~inventory~~capitalized ~~and~~debt ~~vendor~~refinancing ~~allowance~~fees ~~reserves~~ were ~~recognized~~written ~~within~~off ~~cost of sales~~ in the ~~Consolidated~~second ~~Statement~~quarter of ~~Operations Refer~~2020 toin ~~Item~~connection 1,with ~~"Financial~~the ~~Statement,"~~filing ~~Note 2, "Basis~~ of ~~Presentation",~~the ~~Note~~Chapter 4,11 ~~"Inventory", and Note 15, "Subsequent Events" for additional information~~Cases.

(4) ~~Represents~~The ~~credit~~Company ~~losses~~has ~~for~~applied ASC 852 in preparing its ~~franchisees~~Consolidated ~~and~~Financial ~~other~~Statements. ~~third-party~~ASC ~~customers~~852 ~~during~~requires the ~~three~~financial ~~months~~statements ~~ended~~for ~~March~~periods ~~31,~~subsequent ~~2020~~to ~~based~~the onPetition ~~the~~Date ~~current~~to distinguish transactions and ~~estimated~~events ~~adverse~~that ~~impacts~~are directly associated with the Company's reorganization from the ~~COVID-19~~ongoing operations of the business. Accordingly, certain expenses and gains incurred during the Chapter 11 Cases are recorded within Reorganization items, net in the unaudited Consolidated Statements of Operations.

(5) The ~~Company~~three ~~reclassified~~months ~~the~~ended ~~loss~~June ~~related~~30, to2020 ~~the~~included ~~interest~~$1.2 ~~rate~~million ~~swap~~severance ~~that was previously deferred within accumulated other comprehensive loss to interest~~ expense asand ~~the~~$0.3 ~~forecasted~~million ~~hedging~~executive ~~transactions~~incentive. ~~will~~The ~~not~~three ~~occur~~months byended ~~the~~June ~~end~~30, of2019 ~~the~~included ~~originally~~retention ~~specified time period as a result~~ of ~~the~~$0.8 ~~expected~~million ~~acceleration~~and ofimmaterial ~~the~~refranchising ~~debt maturity date~~gains.

(6) ~~The~~For the three months ended ~~March~~June 3130, 2020 ~~included~~and a2019, ~~$2.1 million gain from~~ the ~~sale of the~~ Company ~~owned~~utilized ~~location~~a inblended ~~Boston,~~federal ~~MA,~~rate ~~offset~~plus bya ~~$0.8~~net ~~million~~state ~~severance~~rate ~~and~~that ~~$0.3~~excluded ~~million loss from~~ the ~~cancellation~~impact of the annual franchise conference as a result of COVID-19 and $0.2 million of retention. The three months ended March 31, 2019 included retention of $0.7 million and immaterial refranchising gains. The retention expense is relates to an incentive program to retain senior executives and certain ~~other~~state ~~key personnel below the executive level who are critical to the execution and success of the Company~~NOL's ~~strategy. The total amount awarded was approximately $10 million~~, ofstate ~~which~~credits ~~$1 million was forfeited, which vested in four installments of 25% each over two years. Vesting dates were on November 2018, February 2019, August 2019~~ and ~~February~~valuation ~~2020~~allowance.

(7) For the three months ended March 31, 2020 and 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 in 2019 had no tax impact.48

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	Six months ended June 30,
	2020						2019
	Net Loss		Diluted EPS ⁽¹⁾		Net Income		Diluted EPS ⁽¹⁾
	(unaudited)
Reported	$	(283,755)	$	(3.51)	$	796	$	(0.09)
Loss on net asset exchange for the formation of the joint ventures	1,655		0.02		21,293		0.16
Loss from equity method investment	3,125		0.04		—		—
Restructuring expense ⁽²⁾	34,177		0.41				—
Reorganization items, net ⁽³⁾	15,429		0.18		—		—
Amortization of discount and deferred financing fees in connection with the accelerated debt maturity date ⁽⁴⁾	12,390		0.15				—
Long-lived asset impairments and other store closing costs	177,715		2.12		—		—
Manufacturing JV other-than-temporary impairment	35,840		0.43		—		—
Inventory and vendor allowance reserves ⁽⁵⁾	35,396		0.42		—		—
Allowance for credit losses ⁽⁶⁾	8,703		0.10		—		—
Interest expense recognized on interest rate swap⁽⁷⁾	9,454		0.11		—		—
Amortization of discount in connection with early debt payment	156		—		3,119		0.02
Loss on forward contracts related to the issuance of convertible preferred stock	—		—		16,787		0.13
Gain on convertible notes repurchase	—		—		(3,214)		(0.02)
Other ⁽⁸⁾	692		0.01		1,177		0.01
Tax effect ⁽⁹⁾	(88,154)		(1.05)		(2,617)		(0.02)
Adjusted	$	(37,177)	$	(0.57)	$	37,341	$	0.28

Weighted average diluted common shares outstanding	83,916				133,787

(1) The Company applies the if-converted method to calculate dilution impact of the convertible senior notes and the convertible preferred stock. For reported and adjusted diluted EPS for the six months ended June 30, 2020, the underlying shares of the convertible preferred stock and the convertible senior notes are anti-dilutive. Therefore, the diluted EPS included a reduction to net (loss) income for the cumulative undeclared dividends of $10.5 million for the six months ended June 30, 2020. For reported and adjusted EPS for the six months ended June 30, 2019, the underlying shares of the convertible preferred stock are dilutive.

(2) Previously capitalized debt refinancing fees were written off in the second quarter of 2020 in connection with the filing of the Chapter 11 Cases and expenses realized or incurred before the Petition Date and in relation to the Chapter 11 Cases are recorded under selling, general and administrative charges on our Consolidated Statements of Operations.

(3) The Company has applied ASC 852 in preparing its Consolidated Financial Statements. ASC 852 requires the financial statements for periods subsequent to the Petition Date to distinguish transactions and events that are directly associated with the Company's reorganization from the ongoing operations of the business. Accordingly, certain expenses and gains incurred during the Chapter 11 Cases are recorded within Reorganization items, net in the unaudited Consolidated Statements of Operations.

(4) The Company accelerated the amortization of discount and deferred financing fees related to the Tranche B-2 Term Loan, FILO Term Loan and the Revolving Credit Facility as a result of the expected acceleration of the debt maturity date to the Springing Maturity Date.

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(5) Included $22.8 million inventory obsolescence and vendor allowance reserves due to the current and estimated adverse impacts from the COVID-19 pandemic, and $12.6 million in inventory reserves as a result of filing the Chapter 11 Cases on June 23, 2020 in which the Company expects vendors may withhold payment to GNC for certain allowances/credits in order to satisfy certain allowed claims that we have classified within LSTC. Refer to Item 1. "Financial Statements," Note 3. "Reorganization and Chapter 11 Proceedings " and Note 5. "Inventory" for additional information.

(6) Represents credit losses for its franchisees and other third-party customers during the three months ended March 31, 2020 based on the current and estimated adverse impacts from the COVID-19.

(7) During the first quarter of 2020, the Company deemed the cash flow hedges as ineffective as the forecasted hedging transactions were not expected to occur by the end of the originally specified time period. The Company reclassified a $10.8 million pre-tax loss previously deferred within accumulated other comprehensive loss to interest expense and subsequent changes in fair value within interest expense in the current period.

(8) The six months ended June 30, 2020 included $2.0 million severance, $0.5 million executive incentive, and $0.3 million loss from the cancellation of the annual franchise conference as a result of COVID-19, partially offset by a $2.1 million gain from the sale of the Company owned location in Boston, MA. The six months ended June 30, 2019 included retention of $1.6 million and immaterial refranchising gains.

(9) For the three months ended June 30, 2020 and 2019, the Company utilized a blended federal rate plus a net state rate that excluded the impact of certain state NOL's, state credits and valuation allowance.

Reconciliation of Net Loss to Adjusted EBITDA

(in thousands)

	Three months ended March 31,
	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(unaudited)
Net loss	$	(200,086)	$	(15,262)
Net (loss) income	$	(83,669)	$	16,058	$	(283,755)	$	796
Income tax expense	(5311,~~035~~386)		113,~~956~~030		(64,421)		14,986
Interest expense, net	4722,~~444~~057		3224,~~956~~964		69,501		57,920
Depreciation and amortization	76,~~858~~987		108,~~190~~514		14,845		18,704
Loss on net asset exchange for the formation of the joint ventures	1,655		19,514
Restructuring expense	34,177		—		34,177		—
Loss from equity method investment	3,125		—
Reorganization items, net	15,429		—		15,429		—
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	—		1,779		1,655		21,293
Long-lived asset impairments and other store closing costs	157,515		—
Loss from equity method investment	—		—		3,125		—
Manufacturing JV other-than-temporary impairment	35,840		—
Loss on forward contracts related to the issuance of convertible preferred stock	—		—		—		16,787
Obsolete inventory reserves and vendor allowance (1)	22,799		—
Gain on convertible notes repurchase	—		(3,214)		—		(3,214)
Allowance for doubtful accounts (2)	8,703		—
Long-lived asset impairments and other store closing costs	20,201		—		177,715		—
Other (3)	(821)		713
Manufacturing JV other-than-temporary impairment	—		—		35,840		—
Adjusted EBITDA	$	30,997	$	66,854
Obsolete inventory reserves and vendor allowance	12,597		—		35,396		—
Allowance for doubtful accounts	—		—		8,703		—
Other	1,513		464		692		1,177
Adjusted EBITDA	$	17,906	$	61,595	$	48,902	$	128,449

(1) Included $18.2 million inventory obsolescence reserves recorded as a reduction to inventory and $4.6 million vendor allowance recorded as a reduction to accounts receivables due to the estimated adverse impacts from the COVID-19 pandemic. The inventory and vendor allowance reserves were recognized within cost of sales in the Consolidated Statement of Operations. Refer to Item 1, "Financial Statement," Note 2, "Basis of Presentation", Note 4, "Inventory", and Note 15, "Subsequent Events" for additional information. 50

~~(2)~~Table ~~Represents~~of credit losses for its franchisees and other third-party customers during the three months ended March 31, 2020 based on the current and estimated adverse impacts from the COVID-19 under the current circumstances. Contents

(3) The three months ended March 31, 2020 included a $2.1 million gain from the sale of the Company owned location in Boston, MA, offset by $0.8 million severance and $0.3 million loss from the cancellation of the annual franchise conference as a result of COVID-19 and $0.2 million of retention. The three months ended March 31, 2019 included retention of $0.7 million and immaterial refranchising gains. The retention expense is 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 vested in four installments of 25% each over two years. Vesting dates were on November 2018, February 2019, August 2019 and February 2020.

GNC HOLDINGS, INC. AND SUBSIDIARIES

Reconciliation of Net Cash (Used in) Provided by Operating Activities to Free Cash Flow

(in thousands)

	Three months ended March 31,
	Six months ended June 30,
	2020		2019
	(unaudited)
Net cash (used in) provided by operating activities	$	(3,441)	$	65,323
Net cash (used in) provided by operating activities	$	(12,085)	$	68,711
Capital expenditures	(5,970)		(6,460)
Capital expenditures	(3,858)		(3,017)
Free cash flow	$	(9,411)	$	58,863
Free cash flow	$	(15,943)	$	65,694

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Results of Operations

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

	Three months ended March 31,
	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
Revenues:
U.S. and Canada	8987.84	%	8689.61	%	88.7	%	87.8	%
International	78.14	%	7.34	%	7.7	%	7.3	%
Manufacturing / Wholesale:
Intersegment revenues	—	%	~~6.3~~—	%	—	%	3.2	%
Third-party contract manufacturing	—	%	~~2.8~~—	%	—	%	1.4	%
Wholesale partner sales	34.12	%	3.35	%	3.6	%	3.5	%
Subtotal Manufacturing / Wholesale	34.12	%	123.45	%	3.6	%	8.1	%
Elimination of intersegment revenue	—	%	~~(6.3)~~—	%	—	%	(3.2)	%
Total net revenues	100.0	%	100.0	%	100.0	%	100.0	%
Operating expenses:
Cost of sales, including warehousing, distribution and occupancy	7174.13	%	6463.07	%	72.4	%	63.9	%
Gross profit	2825.97	%	36.03	%	27.6	%	36.1	%
Selling, general and administrative	3037.60	%	26.39	%	33.3	%	26.6	%
Long-lived asset impairments	335.39	%	—	%	21.8	%	—	%
Loss on net asset exchange for the formation of the joint ventures	~~0.4~~—	%	3(0.52)	%	(0.2)	%	(1.9)	%
Other income, net	(0.2)	%	—(0.1)	%	(0.2)	%	(0.1)	%
Total operating expenses	~~135~~117.20	%	9390.82	%	127.1	%	88.5	%
Operating income:
U.S. and Canada (*)	(306.96)	%	10.73	%	(20.8)	%	10.5	%
International (*)	~~(51~~28.8)4	%	3436.35	%	(14.6)	%	35.2	%
Manufacturing / Wholesale (*)	46.7	%	2165.95	%	46.7	%	31.0	%
Unallocated corporate costs and other
Corporate costs	(515.37)	%	(4.67)	%	(9.6)	%	(4.7)	%
Loss on net asset exchange for the formation of the joint ventures	~~(0.4)~~—	%	(30.53)	%	(0.2)	%	(1.9)	%
Other	~~0.4~~—	%	—	%	0.3	%	—	%
Subtotal unallocated corporate, loss on net asset exchange and other costs	(515.37)	%	(85.10)	%	(9.5)	%	(6.6)	%
Total operating (loss) income	(3517.10)	%	69.31	%	(27.5)	%	7.7	%
Interest expense, net	106.04	%	54.87	%	8.5	%	5.3	%
Loss on forward contracts for the issuance of convertible preferred stock	—	%	3.0	%
Reorganization items	4.5	%	—	%	1.9	%	—	%
Loss before income from equity method investments and income taxes	(45.1)	%	(2.5)	%
Gain on purchase of convertible debt	—	%	(0.6)	%	—	%	(0.3)	%
Income tax (benefit) expense	(11.2)	%	0.3	%
Loss on forward contracts for the issuance of convertible preferred stock	—	%	—	%	—	%	1.5	%
Net loss before income from equity method investments	(33.9)	%	(2.8)	%
Loss before income from equity method investments and income taxes	(27.9)	%	5.0	%	(37.9)	%	1.2	%
(Loss) income from equity method investments	(8.4)	%	0.2	%
Income tax (benefit) expense	(3.3)	%	2.4	%	(7.9)	%	1.4	%
Net loss	(42.3)	%	(2.6)	%
Net loss before income from equity method investments	(24.6)	%	2.6	%	(30.0)	%	(0.2)	%
(Loss) income from equity method investments	0.3	%	0.4	%	(4.7)	%	0.3	%
Net (loss) income	(24.3)	%	3.0	%	(34.7)	%	0.1	%

(*) Calculated as a percentage of segment revenue.

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

	Three months ended March 31,
	Six months ended June 30,
	2020	2019
U.S. & Canada
Company-owned(a):
Beginning of period balance	2,902	3,206
Openings	34	513
Acquired franchise locations(b)	5	614
Franchise conversions(c)	—	(14)
Closings (d)	(92556)	(87159)
End of period balance	2,~~818~~355	3,~~129~~070
Domestic Franchise:
Beginning of period balance	956	1,037
Openings	67	3
Acquired franchise locations(b)	(5)	(611)
Franchise conversions(c)	—	14
Closings (d)	(2595)	(1733)
End of period balance	~~932~~863	1,~~018~~000
International(e):
Beginning of period balance	1,915	1,957
Openings	1522	2450
Closings	(2045)	(2453)
China locations contributed to the China joint venture	—	(5)
End of period balance	1,~~910~~892	1,~~952~~949
Store-within-a-store (Rite Aid):
Beginning of period balance	1,759	2,183
Openings	3132	1119
Closings(f)	(~~162~~165)	(85201)
End of period balance	1,~~628~~626	2,~~109~~001
Total Locations	76,~~288~~736	8,~~208~~020

_______________________________________________________________________________

(a) Includes Canada.

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

(d) Excludes approximately 1,100 of the U.S. and Canada company-owned and franchise retail temporary closed stores due to COVID-19 as of ~~March~~June 3130, 2020.

(e) Includes franchise locations in approximately 50 countries (including distribution centers where sales are made and store-within-a-store locations) and company-owned locations in Ireland.

(f) Rite Aid store-within-a-store closings were primarily a result of the Walgreens acquisition of certain Rite Aid locations.

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Comparison of the Three Months Ended ~~March~~June 3130, 2020 (current quarter) and 2019 (prior year quarter)

Revenues

Our consolidated net revenues decreased $92190.25 million, or 1635.37%, to $~~472~~343.65 million for the three months ended ~~March~~June 3130, 2020 compared with $~~564~~534.80 million for the same period in 2019. The decrease in revenue was largely due to U.S. company-owned negative same store sales of 1032.14%, ~~the~~due ~~closure~~to ofthe ~~company~~COVID-~~owned~~19 ~~stores~~pandemic, ~~under~~retail ~~our ongoing~~ store ~~portfolio~~closures ~~optimization~~associated ~~strategy,~~with the ~~transfer~~store ofoptimization ~~the~~program ~~Nutra manufacturing to the Manufacturing joint venture ("Manufacturing JV") in the first quarter of 2019~~ and lower Domestic and International franchise revenue.

U.S. and Canada. Revenues in our U.S. and Canada segment decreased $65175.09 million, or 1336.39%, to $~~424~~300.2 million for the three months ended ~~March~~June 3130, 2020 compared with $~~489~~476.21 million in the prior year quarter. The $65175.09 million decrease was primarily due to the following:

•A decrease in U.S. company-owned same store sales of 1032.14%, which includes GNC.com sales, resulted in a $35109.81 million decrease to revenue, of which approximately $2074 million was attributable to the impact of COVID-19 temporary store closures. U.S. and Canada company-owned and franchise retail stores closures reached approximately 1,400 stores, or 40%, in ~~the~~April ~~second~~2020 ~~half~~and have steadily re-opened since then. Some of ~~March~~these ~~compared~~stores have been permanently closed effective in June in connection with ~~sales~~the ~~trends~~Chapter ~~during~~11 Cases and the ~~first~~rejection ~~quarter~~of certain unexpired U.S and Canada company-owned and franchise leases as discussed further in Item 1. "Financial Statements," Note 3. "Reorganization and Chapter 11 Proceedings." As of ~~2020~~June ~~prior~~30, we had over 100, or 4%, of the U.S. and Canada company-owned and franchise retail stores were closed due to the ~~pandemic~~COVID-19 ~~outbreak~~pandemic. E-commerce sales comprised 1017.6% of U.S. and Canada revenue in the current quarter compared with 78.41% in the prior year quarter attributable to the impact of COVID-19 decreasing in-store purchases and driving sales online;

•The decrease in the number of corporate stores from 3,~~129~~070 at ~~March~~June 3130, 2019 to 2,~~818~~355 at ~~March~~June 3130, 2020 as a result of our store portfolio optimization strategy contributed a $~~20.7~~3 million decrease to revenue;

•A decrease in domestic franchise revenue of $825.32 million due to a decrease in same store sales of 1017.26% due to COVID-19 and decrease in number of franchise stores from 1,~~018~~000 at ~~March~~June 3130, 2019 to ~~932~~863 at ~~March~~June 3130, 2020; and

•A decrease in Canada same stores sales of 1157.74% resulted in a $210.58 million decrease to revenue primarily due to COVID-19.

International. Revenues in our International segment decreased $710.45 million, or 1826.07%, to $3328.59 million in the current quarter compared with $4039.94 million in the prior year quarter primarily due to the outbreak of COVID-19 which caused business disruption in the International segment ~~beginning in January 2020~~. Revenue from our international franchisees decreased by $614.40 million in the current quarter compared with the prior year quarter primarily due to lower sales in ~~the~~Hong ~~Asian~~Kong, ~~markets~~Mexico, South Korea, UAE and Singapore as a result of the COVID-19 pandemic. Revenue from sales to the HK joint venture, primarily from wholesale sales, increased $4.5 million in the current quarter compared with the prior year quarter.

Manufacturing / Wholesale. Revenues in our Manufacturing / Wholesale segment, ~~excluding intersegment sales,~~ decreased $194.81 million, or 5722.21%, to $14.94 million for the three months ended ~~March~~June 3130, 2020 compared with $3418.75 million in the prior year quarter ~~primarily~~ due to ~~the~~decreases ~~transfer~~in ofwholesale ~~the~~partner ~~Nutra manufacturing business to the Manufacturing JV~~sales. Sales to our wholesale partners decreased ~~$4.0 million, or 21.4%, from $18.9 million in the prior year quarter to $14.9 million in the current quarter~~ largely due to the ~~closures~~expiration of ~~our~~the ~~Rite~~PetSmart ~~Aid store-within-a-store as a result of Walgreens' acquisition of certain Rite Aid locations. There were no intersegment~~ sales agreement in the ~~current~~fourth quarter ~~due to the transfer~~ of ~~the Nutra manufacturing business to the Manufacturing JV in March~~ 2019~~, compared to $35~~.5 ~~million in the prior year quarter.~~

Cost of Sales and Gross Profit

Cost of sales, which includes product costs, warehousing, distribution and occupancy costs, decreased $2585.80 million to $~~335~~255.93 million for the three months ended ~~March~~June 3130, 2020 compared with $~~361~~340.73 million in the prior year quarter. Gross profit decreased $66105.45 million from $~~203~~193.17 million in the prior year quarter to $~~136~~88.72 million in the current quarter. ~~Based~~In onconnection ~~the~~with ~~estimated adverse impact from~~ the ~~COVID-19~~Chapter ~~pandemic~~11 Cases, we recorded $2212.8 6 million in inventory reserves ~~related~~in towhich ~~inventory~~we ~~obsolescence~~expect ~~and~~vendors ~~vendor~~may ~~allowances~~withhold inpayment ~~the~~to ~~current~~GNC ~~quarter,~~for ofcertain ~~which~~allowances/credits ~~$22.4~~in ~~million~~order ~~was~~to ~~within~~satisfy ~~U.S.~~certain ~~and~~allowed ~~Canada~~claims ~~segment~~that ~~and~~we ~~$0.4~~have ~~million~~classified ~~was~~ within ~~Manufacturing / Wholesale segment~~LSTC. Excluding these reserves in the current quarter, gross profit as a percentage of revenue was 3329.84% for the three months ended ~~March~~June 3130, 2020 compared with 36.03% in the prior year quarter. The decrease in gross profit rate was primarily due to deleverage in occupancy expense associated with lower sales~~, partially offset by the transfer of the Nutra manufacturing business to the Manufacturing JV in the first quarter of prior year~~.

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

SG&A expense, including compensation and related benefits, advertising and other expenses, decreased $316.87 million, or 211.56%, from $~~148~~143.38 million in the prior year quarter to $~~144~~127.51 million in the current quarter. SG&A expense, as a percentage of revenue, was 3037.60% and 26.39% for the three months ended ~~March~~June 3130, 2020 and 2019, respectively.

During the three months ended ~~March~~June 3130, 2020 ~~and 2019~~, we ~~recognized~~recorded $034.2 million ~~and~~for ~~$0.7~~restructuring ~~million,~~costs ~~respectively,~~in ~~related~~connection towith ~~a retention program adopted in~~ the ~~first~~filing ~~quarter~~ of ~~2018~~the toChapter ~~retain~~11 ~~senior~~Cases ~~executives~~($28.0 ~~and~~million ~~certain~~of ~~other~~restructuring ~~key~~professional ~~personnel~~fees, ~~who are critical to the execution~~ and ~~success of our strategy~~$6. ~~The~~2 ~~total~~million ~~amount~~write-off ~~awarded~~of ~~was~~debt ~~approximately~~refinancing ~~$10~~fees) ~~million,~~and ~~of which approximately~~ $1.5 million ~~was forfeited, which vested~~ in ~~four~~certain ~~installments~~other ofexpenses ~~25%~~as ~~each~~detained ~~over~~within ~~two~~the ~~years~~table ~~through~~"Reconciliation ~~February~~of ~~2020.~~Net InLoss ~~addition,~~and inDiluted ~~connection~~EPS ~~with~~to ~~the~~Adjusted ~~COVID-19~~Net ~~pandemic~~(Loss) inIncome ~~the~~and ~~current~~Adjusted ~~quarter,~~Diluted weEPS" ~~recorded $8~~above.7 During ~~million~~the ~~allowance~~three ~~for~~months ~~credit~~ended ~~losses~~June ~~for~~30, ~~certain vendors and franchisees~~2019, ofwe ~~which~~recognized $70.98 million ~~was~~related ~~recorded~~to ~~within~~a ~~U.S.~~retention ~~and~~program ~~Canada~~adopted ~~segment~~in ~~and~~the ~~$0.8~~first ~~million~~quarter ~~was~~of ~~recorded~~2018 ~~within~~to ~~Manufacturing~~retain /senior ~~Wholesale~~executives ~~segment,~~ and ~~$1.1 million for~~ certain other ~~expenses~~key aspersonnel ~~detailed~~who ~~within~~are critical to the ~~table~~execution ~~"Reconciliation~~and success of ~~Net~~our ~~Loss~~strategy ~~and~~which ~~Diluted~~vested ~~EPS~~in tofour ~~Adjusted~~installments ~~Net~~of ~~(Loss)~~25% ~~Income~~each ~~and~~over ~~Adjusted~~two ~~Diluted~~years ~~EPS"~~through ~~above.~~February 2020.

Excluding the impact of these items, SG&A expense decreased $1351.05 million in the current quarter compared with the prior year quarter, and, as a percentage of revenue, was 2826.56% and 26.18% for the three months ended ~~March~~June 3130, 2020 and 2019, respectively. The decrease in SG&A expense was primarily due to lower salaries and benefits associated with the store portfolio optimization, corporate incentive and cost saving initiatives. The increase in SG&A expense as a percentage of revenue was primarily driven by deleverage in salaries and benefits associated with a decrease in sales, and to a lesser extent an increase in consulting fees.

Long-lived Asset Impairments and ~~other~~Other ~~store~~Store ~~closing~~Closing ~~costs~~Costs

We recorded $~~157~~20.52 million of long-lived asset impairments ~~and~~as ~~other~~a ~~store~~result ~~closing costs, consisting~~ of ~~$111.7 million related to brand name (of which $88.6 million was allocated to~~ the ~~U.S.~~liquidation ~~and~~sales ~~Canada segment~~ and ~~the~~planned ~~remaining~~store ~~was~~closures ~~allocated~~during to the ~~International~~Chapter ~~segment)~~11 Cases, of which $4018.32 million related to ~~long~~right-~~lived~~of ~~assets~~use ~~and~~asset ~~other~~impairments ~~store closing costs~~ and $52.50 million related to ~~goodwill~~property ~~for~~and ~~The~~equipment ~~Health Store reporting unit within the International segment~~impairment.

Refer to Item 1,. "Financial Statements," Note 5,6. "Property, Plant and Equipment, ~~net~~Net" ~~and Note 6, "Goodwill and Intangible Assets"~~ for more information.

Other Income, net

Other income, net, of $1.0.6 million in the current quarter ~~included~~was aprimarily ~~$2.1~~related ~~million~~to ~~gain~~was ~~from~~a ~~the~~result ~~sale~~ of ~~the Company owned location in Boston, MA, offset by a $1.1 million~~ foreign currency ~~loss~~gains. Other income, net, of $0.26 million in the prior year quarter included foreign currency gains and refranchising gains.

Operating Income

As a result of the foregoing, consolidated operating loss was $~~166~~58.05 million for the three months ended ~~March~~June 3130, 2020 compared with operating income of $3548.57 million in the prior year quarter. Operating loss in the current quarter was significantly impacted by ~~$157.5 million~~restructuring ~~long-lived~~fees ~~asset~~of ~~impairment and other store closing charges,~~ $2234.82 million ~~reserves~~and ~~related to~~ inventory ~~obsolescence~~reserves ~~and~~of ~~vendor allowance and~~ $812.76 million ~~allowance for credit losses in connection with the current and estimated adverse impacts from the COVID-19 pandemic~~. ~~Refer to Item 1, "Financial Statements," Note 15, "Subsequent Events" for more information about the COVID-19 impacts.~~

U.S. and Canada. Operating loss was $~~131~~19.27 million for the three months ended ~~March~~June 3130, 2020 compared with operating income of $5249.12 million for the same period in 2019. Operating loss in the current quarter included $8820.~~6 million~~2 ~~non-cash brand impairment and $40.3~~ million of long-lived asset ~~store impairment charges and other store closing costs. In addition~~impairments, ~~as mentioned above, in connection with the COVID-19 pandemic, we recorded~~ $2212.4 6 million for inventory ~~and vendor~~ reserves, ~~$7.9 million allowances for credit losses,~~ and $1.12 million in ~~certain~~severance ~~other expenses detailed within table "Reconciliation of Net Loss and Diluted EPS to Adjusted Net (Loss) Income and Adjusted Diluted EPS" above~~expense. Excluding these items and immaterial gains on refranchising in the prior year quarter, operating income was $2914.1 million, or 64.97% of segment revenue, in the current quarter compared with $5248.18 million, or 10.73% of segment revenue, in the prior year quarter. The decrease in operating income percentage in the current quarter compared to the prior year quarter was primarily due to occupancy, salaries and benefits and other SG&A deleverage in connection with the decrease in sales ~~and higher marketing expense~~.

38 International. Operating income was $8.2 million for the three months ended June 30, 2020. Operating income was 28.4% of segment revenue, compared with $14.1 million, or 36.2% of segment revenue, for the same period in 2019. The decrease in operating income percentage was primarily due to a lower margin rate as a result of a change in revenue mix within the segment driven by lower international franchise wholesale sales and higher wholesale sales to the HK JV.

Manufacturing / Wholesale. Operating income decreased $5.4 million, or 44.5%, to $6.7 million for the three months ended June 30, 2020 compared with $12.1 million in the prior year quarter. Operating income as a percentage of segment revenue decreased from 65.5% in the prior year quarter to 46.7% in the current quarter. Prior year operating income margins were positively impacted as the Manufacturing / Wholesale segment recognized profit margin that resulted from maintaining consistent pricing to what was charged to our other

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~~International.~~operating ~~Operating~~segments ~~loss~~prior ~~was~~to ~~$17.4~~the ~~million~~inception ~~for~~of the ~~three~~Manufacturing ~~months ended March 31, 2020~~JV. ~~Excluding~~A ~~non-cash~~decrease ~~brand~~in ~~impairment~~revenue offor ~~$23.1 million~~our ~~and~~other ~~goodwill~~operating ~~impairment~~segments ~~of $5.5 million~~ in the current quarter, ~~operating~~has ~~income~~resulted ~~was $11.2 million, or 33.4% of segment revenue, compared with $14.1 million, or 34.3% of segment revenue, for the same period~~ in ~~2019. The~~a decrease in ~~operating~~the ~~income~~profit ~~percentage was primarily due to a lower~~ margin ~~rate~~recognized ~~driven~~compared ~~by a change in revenue mix within the segment as a result of the transfer of the China business~~ to the ~~joint~~prior ~~ventures~~year ~~effective February 13, 2019~~quarter.

~~Manufacturing~~Corporate ~~/ Wholesale~~Costs. ~~Operating~~Corporate ~~income~~costs ~~decreased~~increased $828.47 million, ~~or 54.8%,~~ to $653.98 million for the three months ended ~~March~~June 3130, 2020 compared with $1525.31 million in the prior year quarter~~. Operating~~ ~~income~~attributed asprimarily ~~a percentage of segment revenue increased from 21.9% in the prior year quarter~~ to ~~46.7%~~restructuring infees ~~the~~of ~~current quarter~~$34.2 ~~Revenue~~million, ~~decreased~~and ascertain aother ~~result~~expenses of ~~the~~$1.5 ~~transfer~~million ~~of the Nutra manufacturing business to the Manufacturing JV~~ as ~~described~~explained above. ~~However~~ Additionally, ~~operating income margins were positively impacted as~~ the ~~Manufacturing~~prior /year ~~Wholesale~~quarter ~~segment~~included ~~recognized~~retention ~~profit~~expense ~~margin~~$0.8 ~~that~~million. ~~resulted~~Excluding ~~from~~these ~~maintaining~~expenses, ~~consistent~~corporate ~~pricing~~costs todecreased ~~what~~$1.5 ~~was~~million ~~charged~~in tothe ~~our~~current ~~other~~quarter ~~operating~~compared ~~segments~~with ~~prior to~~ the ~~inception~~prior ofyear ~~the Manufacturing JV~~quarter.

Corporate costs. Corporate costs decreased $1.5 million to $24.8 million for the three months ended March 31, 2020 compared with $26.3 million in the prior year quarter. As explained above, the current quarter and prior year quarter included retention expense of $0.2 million and $0.7 million, respectively. Excluding these expenses, corporate costs decreased $0.9 million in the current quarter compared with the prior year quarter.

Loss on Net Asset Exchange for the Formation of the Joint Ventures. During the first quarter of 2020, we recognized a $1.7 million purchase price adjustment related to the Harbin transaction. During the first quarter of 2019, we recognized a pre-tax loss of $19.5 million related to the contribution of our China business to the HK JV and China JV and the contribution of our Nutra manufacturing and Anderson facility net assets to the Manufacturing JV. Refer to Item 1, "Financial Statements," Note 8, "Equity Method Investment" for more information.

Interest Expense, net

Interest expense was $4722.41 million for the three months ended ~~March~~June 3130, 2020 compared with $3325.0 million for the three months ended ~~March~~June 3130, 2019 primarily due to ~~$12.4 million accelerated amortization of~~ the ~~discounts~~reduction ~~and deferred financing fees~~ in ~~connection with the accelerated maturity date for the Tranche B~~long-2,term ~~FILO Term Loan and the Revolving Credit Facility and $10~~debt.8 Refer ~~million expense recognized for the amount previously deferred within accumulated other comprehensive loss related~~ to ~~the~~Item ~~interest~~1. ~~rate~~"Financial ~~swap cash flow hedges being deemed ineffective as of March 31~~Statements," ~~2020. Refer to~~ Note 7,8. "Debt / Interest Expense" for more information.

Gain on Convertible Debt Repurchase

In the second quarter of 2019, we repurchased $29.5 million in aggregate principal amount of the Notes for $24.7 million in cash. The convertible debt repurchase resulted in a gain of $3.2 million, which included the unamortized conversion feature of $1.3 million and unamortized discount of $0.2 million in the second quarter of 2019. Refer to Item 1. "Financial Statements," Note 8. "Debt / Interest Expense" for more information.

Income Tax (Benefit) Expense

We recognized $11.4 million of income tax benefit during the three months ended June 30, 2020 compared with $13.0 million of income tax expense for the same period in 2019. Our 2020 annual effective tax rate was impacted by a partial valuation allowance for attributes expected to be generated in 2020 that may not be realizable, the other-than-temporary impairment of the Manufacturing JV, and the benefit of the federal tax rate differential related to federal net operating losses generated during the current year that are expected to be carried back to prior years at a 35% rate. The 2019 effective tax rate was significantly impacted by a gain for tax purposes resulting from the transfer of the Nutra manufacturing net assets to the Manufacturing JV and the establishment of a partial valuation allowance for attributes generated in the 2019 year that may not be realizable.

Income from Equity Method Investments

We recognized earnings of $0.9 million from equity method investments during the three months ended June 30, 2020 compared with income from equity method investments of $2.1 million in the prior year quarter. Refer to Item 1. "Financial Statements," Note 9. "Equity Method Investments" for more information.

Net Loss

As a result of the foregoing, consolidated net loss was $83.7 million for the three months ended June 30, 2020 compared with net income of $16.1 million for the same period in 2019. Excluding certain expenses as reconciled in the table above, under the caption "Reconciliation of Net Loss and Diluted EPS to Adjusted Net (Loss) Income and Adjusted Diluted EPS," adjusted net loss was $26.2 million for the current quarter compared with adjusted net income of $18.3 million for the same period in 2019.

Diluted Loss Per Share

Diluted loss per share was $1.06 for the three months ended June 30, 2020 compared with diluted earnings per share of $0.11 for the same period in 2019. Excluding certain expenses as reconciled in the table above, under the caption "Reconciliation of Net Income and Diluted EPS to Adjusted Net (Loss) Income and Adjusted Diluted EPS," adjusted diluted loss per share was $0.38 for the current quarter compared with diluted earnings per share of $0.13 for the same period in 2019.

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Comparison of the Six Months Ended June 30, 2020 (current year period) and 2019 (prior year period)

Revenues

Our consolidated net revenues decreased $282.7 million, or 25.7%, to $816.1 million for the six months ended June 30, 2020 compared with $1,098.8 million for the same period in 2019. The decrease in revenue was largely due to U.S. company-owned negative same store sales of 20.9% due to the COVID-19 pandemic, the closure of company-owned stores under our ongoing store portfolio optimization strategy, lower Domestic franchise revenue, the transfer of the Nutra manufacturing to the Manufacturing JV in the first quarter of 2019 and lower International franchise revenue.

U.S. and Canada. Revenues in our U.S. and Canada segment decreased $240.8 million, or 25.0%, to $724.4 million for the six months ended June 30, 2020 compared with $965.2 million in the prior year period. The $240.8 million decrease was primarily due to the following:

•A decrease in U.S. company-owned same store sales of 20.9%, which includes GNC.com sales, resulted in a $145.0 million decrease to revenue, of which approximately $98.9 million was attributable to the impact of COVID-19 temporary store closures. U.S. and Canada company-owned and franchise retail stores closures reached approximately 1,400 stores, or 40%, in April 2020 and have steadily re-opened since then. Some of these stores have been permanently closed effective in June in connection with the Chapter 11 Cases and the rejection of certain unexpired U.S and Canada company-owned and franchise leases as discussed further in Item 1. "Financial Statements," Note 3. "Reorganization and Chapter 11 Proceedings." As of June 30, we had over 100, or 4%, of the U.S. and Canada company-owned and franchise retail stores were closed due to the COVID-19 pandemic. E-commerce sales comprised 13.5% of U.S. and Canada revenue in the current quarter compared with 7.7% in the prior year quarter attributable to the impact of COVID-19 decreasing in-store purchases and driving sales online;

•The decrease in the number of corporate stores from 3,070 at June 30, 2019 to 2,355 at June 30, 2020 as a result of our store portfolio optimization strategy contributed a $48.8 million decrease to revenue;

•A decrease in domestic franchise revenue of $33.5 million due to a decrease in same store sales of 13.8% and decrease in number of franchise stores from 1,000 at June 30, 2019 to 863 at June 30, 2020; and

•A decrease in Canada same stores sales of 32.9% resulted in a $13.3 million decrease to revenue.

International. Revenues in our International segment decreased $17.9 million, or 22.3%, to $62.5 million in the six months ended June 30, 2020 compared with $80.4 million in the prior year period primarily due to the outbreak of COVID-19 which caused business disruption in the International segment beginning in January 2020. Revenue from our international franchisees decreased by $20.5 million in the current year period compared with the prior year period primarily due to lower sales in the Hong Kong, South Korea, Mexico, Singapore, UAE and Philippines as a result of the COVID-19 pandemic. Revenue from sales to the HK joint venture, primarily from wholesale sales, increased $6.1 million in the current quarter compared with the prior year quarter.

Manufacturing / Wholesale. Revenues in our Manufacturing / Wholesale segment, excluding intersegment sales, decreased $23.9 million, or 45.0%, to $29.3 million for the six months ended June 30, 2020 compared with $53.2 million in the prior year period primarily due to the transfer of the Nutra manufacturing business to the Manufacturing JV. Sales to our wholesale partners decreased $8.1 million, or 21.8%, from $37.4 million in the prior year period to $29.3 million in the current year period largely due to expiration of the PetSmart agreement in the fourth quarter of 2019 and closures of our Rite Aid store-within-a-store as a result of Walgreens' acquisition of certain Rite Aid locations. There were no intersegment sales in the current year period due to the transfer of the Nutra manufacturing business to the Manufacturing JV in March 2019, compared to $35.5 million in the prior year period.

Cost of Sales and Gross Profit

Cost of sales, which includes product costs, warehousing, distribution and occupancy costs, decreased $110.7 million to $591.2 million for the six months ended June 30, 2020 compared with $701.9 million in the prior year period. Gross profit decreased $171.9 million from $396.8 million in the prior year period to $224.9 million in the current year period. Based on the estimated adverse impact from the COVID-19 pandemic and Chapter 11 Cases in which we expect vendors may withhold payment to GNC for certain allowances/credits in order to satisfy certain allowed claims that we have classified within LSTC, we recorded $35.4 million in reserves related to

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inventory obsolescence and vendor allowances in the current year period. Excluding these expenses in the current quarter, gross profit as a percentage of revenue was 31.9% for the six months ended June 30, 2020 compared with 36.1% in the prior year quarter. The decrease in gross profit rate was primarily due to deleverage in occupancy expense associated with lower sales.

Selling, General and Administrative Expense

SG&A expense, including compensation and related benefits, advertising and other expenses, decreased $20.4 million, or 7.0%, from $292.1 million in the prior year period to $271.7 million in the current year period. SG&A expense, as a percentage of revenue, was 33.3% and 26.6% for the six months ended June 30, 2020 and 2019, respectively.

During the six months ended June 30, 2020, we recognized $34.2 million for restructuring costs in connection with the filing of the Chapter 11 Cases ($28.0 million of restructuring professional fees, and $6.2 million write-off of debt refinancing fees), $8.7 million allowance for credit losses for certain vendors and franchisees in connection with the adverse impact from COVID-19, $2.5 million in certain other expenses as detained within the table "Reconciliation of Net Loss and Diluted EPS to Adjusted Net (Loss) Income and Adjusted Diluted EPS" above. During the six months ended June 30, 2019, we recognized $1.6 million related to a retention program adopted in the first quarter of 2018 to retain senior executives and certain other key personnel who are critical to the execution and success of our strategy which vested in four installments of 25% each over two years through February 2020.

Excluding the impact of these items, SG&A expense decreased $64.6 million in the current quarter compared with the prior year quarter, and, as a percentage of revenue, was 27.7% and 26.4% for the six months ended June 30, 2020 and 2019, respectively. The decrease in SG&A expense was primarily due to lower salaries and benefits associated with the store portfolio optimization, corporate incentive and cost saving initiatives.

Long-lived Asset Impairments and Other Store Closing Costs

We recorded $177.7 million long-lived asset impairments and other store closing costs, consisting of $111.7 million related to brand name (of which $88.6 million was allocated to the U.S. and Canada segment and the remaining was allocated to the International segment), $60.5 million related to long-lived assets and other store closing costs, and $5.5 million related to goodwill impairment for The Health Store reporting unit within the International segment.

Refer to Item 1. "Financial Statements," Note 6. "Property, Plant and Equipment, Net" and Note 7. "Goodwill and Intangible Assets" for more information.

Other Income, net

Other income, net, of $1.5 million in the current year period included a $2.1 million gain from the sale of our owned location in Boston, MA, offset by a $0.6 million foreign currency loss. Other income, net, of $0.8 million in the prior year period included foreign currency gains and refranchising gains.

Operating Income

As a result of the foregoing, consolidated operating loss was $224.6 million for the six months ended June 30, 2020 compared with operating income of $84.2 million in the prior year period. Operating loss in the current year period was significantly impacted $177.7 million long-lived asset impairment and other store closing charges, $35.4 million reserves related to inventory obsolescence and vendor allowance, $34.2 million in prepetition restructuring fees and $8.7 million allowance for credit losses in connection with the current and estimated adverse impacts from the COVID-19 pandemic and certain other expenses as detailed within the table "Reconciliation of Net Loss and Diluted EPS to Adjusted Net (Loss) Income and Adjusted Diluted EPS" above.

U.S. and Canada. Operating loss was $150.9 million for the six months ended June 30, 2020 compared with operating income of $101.3 million for the same period in 2019. Operating loss in the current year period included $88.6 million non-cash brand impairment and $60.5 million of long-lived asset store impairment charges and other store closing costs. In addition, as mentioned above, in connection with adverse impacts from the COVID-19 pandemic and Chapter 11 Cases, we recorded $35.4 million inventory and vendor reserves, $8.7 million allowances for credit losses, and $0.7 million in certain other expenses detailed within table "Reconciliation of Net Loss and Diluted EPS to Adjusted Net (Loss) Income and Adjusted Diluted EPS" above. Excluding these items and immaterial gains on refranchising in the prior year period, operating income was $43.2 million, or 6.0% of segment revenue, in the current year period compared with $100.9 million, or 10.5% of segment revenue, in the prior year period. The decrease in operating income percentage in the current period compared to the prior year period was

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primarily due to occupancy, salaries and benefits and other SG&A deleverage in connection with the decrease in sales.

International. Operating loss was $9.2 million for the six months ended June 30, 2020. Excluding non-cash brand impairment of $23.1 million and goodwill impairment of $5.5 million in the current year period, operating income was $19.4 million, or 31.1% of segment revenue, compared with $28.3 million, or 35.2% of segment revenue, for the same period in 2019. The decrease in operating income percentage was primarily due to a lower margin rate driven by a change in revenue mix within the segment as a result of the transfer of the China business to the joint ventures effective February 13, 2019.

Manufacturing / Wholesale. Operating income decreased $13.8 million, or 50.3%, to $13.7 million for the six months ended June 30, 2020 compared with $27.5 million in the prior year period. Operating income as a percentage of segment revenue increased from 31.0% in the prior year period to 46.7% in the current year period. Revenue decreased as a result of the transfer of the Nutra manufacturing business to the Manufacturing JV as described above. However, operating income margins were positively impacted as the Manufacturing / Wholesale segment recognized profit margin that resulted from maintaining consistent pricing to what was charged to our other operating segments prior to the inception of the Manufacturing JV.

Corporate Costs. Corporate costs increased $27.3 million to $78.6 million for the six months ended June 30, 2020 compared with $51.3 million in the prior year period attributable primarily to restructuring fees of $34.2 million, and $1.7 million in certain other expenses as discussed above. Additionally, as explained above, the prior year period included retention expense $1.6 million. Excluding these expenses, corporate costs decreased $5.4 million in the current year period compared with the prior year period.

Loss on Net Asset Exchange for the Formation of the Joint Ventures. During the first six months of 2020, we recognized a $1.7 million purchase price adjustment related to the Harbin transaction. During the first six months of 2019, we recognized a pre-tax loss of $21.3 million related to the contribution of our China business to the HK JV and China JV and the contribution of our Nutra manufacturing and Anderson facility net assets to the Manufacturing JV. Refer to Item 1. "Financial Statements," Note 9. "Equity Method Investment" for more information.

Interest Expense, net

Interest expense was $69.5 million for the six months ended June 30, 2020 compared with $57.9 million for the six months ended June 30, 2019. The increase was primarily due to $12.4 million accelerated amortization of the discounts and deferred financing fees in connection with the accelerated maturity date for the Tranche B-2, FILO Term Loan and the Revolving Credit Facility and $10.8 million expense recognized for the amount previously deferred within accumulated other comprehensive loss related to the interest rate swap cash flow hedges being deemed ineffective as of June 30, 2020, partially offset by lower interest expense as a result of the reduction in long-term debt. Refer to Note 8. "Debt / Interest Expense" for more information.

Gains on Convertible Debt Repurchase

In the second quarter of 2019, we repurchased $29.5 million in aggregate principal amount of the Notes for $24.7 million in cash. The convertible debt repurchase resulted in a gain of $3.2 million in the six months ended June 30, 2019, which included the unamortized conversion feature of $1.3 million and unamortized discount of $0.2 million. Refer to Item 1. "Financial Statements," Note 8. "Debt / Interest Expense" for more information.

Loss on Forward Contracts for the Issuance of Convertible Preferred Stock

A loss of $16.8 million was recorded in the ~~three~~six months ended ~~March~~June 3130, 2019 for the change in fair value of the forward contracts related to the issuance of convertible preferred stock. There was no such loss incurred in the current period. Refer to Item 1,. "Financial Statements," Note ~~11,~~12. "Mezzanine Equity" for more information.

Income Tax (Benefit) Expense

We recognized $5364.0 4 million of income tax benefit during the ~~three~~six months ended ~~March~~June 3130, 2020 compared with $215.0 million of income tax expense for the same period in 2019. ~~The~~Our ~~Company’s~~ 2020 annual effective tax rate was impacted by a partial valuation allowance for attributes expected to be generated in 2020 that may not be realizable, the other-than-temporary impairment of the Manufacturing JV, and the benefit of the federal tax rate differential related to federal net operating losses generated during the current year that are expected to be carried back to prior years at a 35% rate. The 2019 effective tax rate was significantly impacted by a gain for tax purposes resulting from the transfer of the Nutra manufacturing net assets to the Manufacturing JV and the establishment of a partial valuation allowance for attributes generated in the 2019 year that may not be realizable.

~~(Loss) Income from Equity Method Investments~~ 59

We recognized a loss of $39.6 million from equity method investments during the three months ended March 31, 2020 compared with income from equity method investments of $1.0 million in the prior year quarter. During the first quarter of 2020, the loss from equity method investments included a $35.8 million other-than-temporary impairment for the Manufacturing JV as the estimated fair value of the equity method investment in the Manufacturing JV was less than its carrying value, $3.1 million loss in connection with IVC's first subsequent purchase of the Manufacturing JV and $0.7 million loss from our share of the equity method investments. Refer to Item 1, "Financial Statements," Note 8, "Equity Method Investments" for more information.

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(Loss) Income from Equity Method Investments

We recognized a loss of $38.7 million from equity method investments during the six months ended June 30, 2020 compared with income from equity method investments of $3.1 million in the prior year period. During the first six months of 2020, the loss from equity method investments included a $35.8 million other-than-temporary impairment for the Manufacturing JV as the estimated fair value of the equity method investment in the Manufacturing JV was less than its carrying value, a $3.1 million loss in connection with IVC's first subsequent purchase of the Manufacturing JV. Refer to Item 1. "Financial Statements," Note 9. "Equity Method Investments" for more information.

Net Loss

As a result of the foregoing, consolidated net loss was $~~200~~283.1 8 million for the ~~three~~six months ended ~~March~~June 3130, 2020 compared with net ~~loss~~income of $150.3 8 million for the same period in 2019. Excluding certain expenses as reconciled in the table above, under the caption "Reconciliation of Net Loss and Diluted EPS to Adjusted Net (Loss) Income and Adjusted Diluted EPS"," adjusted net loss was $1137.0 2 million for the current ~~quarter~~year period compared with adjusted net income of $1937.0 3 million for the same period in 2019.

Diluted Loss Per Share

Diluted loss per share was $23.4551 for the ~~three~~six months ended ~~March~~June 3130, 2020 compared with diluted loss per share of $0.2309 for the same period in 2019. The diluted loss per share included cumulative undeclared dividends of $510.25 million and $38.7 million, respectively, for the current and prior year quarters. Excluding certain expenses as reconciled in the table above, under the caption "Reconciliation of Net Income and Diluted EPS to Adjusted Net (Loss) Income and Adjusted Diluted EPS"," adjusted diluted loss per share was $0.1957 for the current ~~quarter~~year period compared with diluted earnings per share of $0.1528 for the same period in 2019.

Liquidity and Capital Resources

AsOur commencement of ~~March 31,~~the ~~2020,~~Chapter we11 ~~had~~Cases ~~$19.9~~constituted ~~million~~a ~~available~~default under ~~the~~certain ~~Revolving~~of ~~Credit~~its ~~Facility,~~debt ~~after~~instruments ~~giving~~that ~~effect~~accelerated toour ~~$30.0~~obligations ~~million~~under ~~borrowing~~the ~~outstanding,~~Amended ~~$4.5~~and ~~million~~Restated ~~utilized~~Term toLoan ~~secure~~Agreement, ~~letters~~ABL ofCredit ~~credit~~Agreement and ~~$26~~the Indenture.6 Under ~~million~~the ~~reduction~~Bankruptcy toCode, ~~borrowing~~holders ~~ability as a result~~ of athe ~~decrease~~Tranche inB-2 ~~net~~Term ~~collateral. During~~Notes ~~April~~and ~~2020,~~FILO weTerm ~~borrowed~~Loan anare ~~additional~~stayed ~~$30.0~~from ~~million~~taking onany ~~the~~action ~~Revolving~~against ~~Credit~~us ~~Facility~~as ~~and~~a asresult of ~~April~~this ~~30,~~event ~~2020,~~of ~~we had $60~~default.~~0 million borrowing outstanding.~~

AsOn ~~further~~June ~~discussed below~~24, 2020 we ~~have~~entered aninto ~~accelerated~~senior ~~maturity~~secured ~~payment~~super-priority ~~due~~debtor-in-possession ~~on May 16, 2020~~ (~~the~~"DIP") ~~“Springing~~financing ~~Maturity~~consisting ~~Date”)~~of ~~that~~$100 wemillion doof ~~not~~new ~~have~~cash (the ~~ability~~"New toMoney ~~pay. Since~~DIP") weand ~~have not refinanced the~~ $~~738.7~~ 100 million of ~~Tranche~~principal ~~B-2~~rolled ~~Term~~up ~~Loan~~from (the "Tranche B-2 Term ~~Loan"),~~Loans ~~FILO Term Loan~~ (the "~~FILO~~Rollup Term ~~Loan~~Loans"). Of ~~and Revolving Credit Facility (~~the ~~"Revolving~~New ~~Credit~~Money ~~Facility")~~DIP, ~~that~~we ~~will~~borrowed ~~become~~$30 ~~due on the Springing Maturity Date~~million, ~~management has concluded there is substantial doubt regarding our ability to continue as a going concern within one year from the issuance date~~ of ~~our~~which ~~Consolidated Financial Statements~~$15.7 ~~Failure~~million towas ~~complete~~deposited ain ~~refinancing~~escrow ~~or other restructuring, obtain an extension of the Springing Maturity Date~~ as ~~defined~~restricted incash. We ~~the~~also ~~Credit~~entered ~~Agreements,~~into ~~reach~~senior ansecured ~~agreement~~super-priority ~~with~~DIP ~~required~~financing ~~lender~~consisting ~~groups under the Credit Agreements prior to May 16, 2020 or to reach an agreement with our stakeholders on the terms~~ of ~~an out-of-court restructuring would have~~ a ~~material~~refinancing ~~adverse~~of ~~effect~~$275 onmillion ~~our liquidity, financial condition and results~~ of ~~operations~~FILO ~~and~~Term ~~may~~Loans ~~result~~converted ininto ~~filing~~DIP afinancing ~~voluntary petition for relief under Chapter 11 of~~ (the ~~United~~"DIP ~~States~~ABL ~~Bankruptcy~~FILO ~~Code in order to implement a restructuring plan~~Facility"). No Asamounts ofwere ~~March 31, 2020, our~~ outstanding ~~indebtedness has been classified as current~~ on the ~~Company's~~DIP ~~Consolidated~~ABL ~~Balance~~FILO ~~Sheets.~~Facility Inas ~~addition, we accelerated the amortization~~ of ~~original~~June ~~issuance discount and deferred financing fees for the Tranche B-2 Term Loan~~30, ~~FILO Term Loan and the Revolving Credit Facility of $12~~2020.~~4 million to the Springing Maturity Date.~~

The Chapter 11 Cases and adverse impacts from COVID-19 have deteriorated our operational results and cash flows and may continue to do so in the future. We have continued to experience negative same store sales and declining gross profit. We have closed underperforming stores under its store optimization strategy and implemented cost reduction measures to help mitigate the effect of these declines and improve its financial position and liquidity. These Atfactors ~~March~~raise ~~31, 2020, we have~~ substantial ~~indebtedness~~doubt ~~including~~about ~~$156.4 million~~our ofability ~~outstanding~~to ~~indebtedness~~continue ~~under the Notes issued under that certain Indenture dated~~ as ofa ~~August~~going ~~10,~~concern. ~~2015, among the Company, certain of its subsidiaries, and~~ The ~~Bank~~accompanying ofConsolidated ~~New~~Financial ~~York~~Statements ~~Mellon~~have ~~Trust~~been ~~Company,~~prepared ~~N.A,~~in ~~maturing~~conformity onwith ~~August~~accounting ~~15,~~principles ~~2020~~accepted ~~(the~~in ~~"Notes") and $434.8 million of outstanding indebtedness under~~ the ~~Amended~~United ~~and~~States ~~Restated Term Loan Credit Agreement, dated as~~ of ~~February~~America 28, 2018, among GNC Corporation, GNC Nutrition Centers, Inc., as Borrower, the lenders and agents parties thereto, and JPMorgan Chase Bank, N.A., as administrative agent (the “Tranche B-2 Term Loan Credit Agreement" and the term loan thereunder, the "Tranche B-2 Term Loan"). We made an excess cash flow payment of $25.9 million that was due in April 2020 which ~~reduced~~contemplate the ~~outstanding~~our ~~amount~~continuation of the Tranche B-2 Term Loan. The Tranche B-2 Term Loan becomes due on the earlier to occur of (i) the maturity date of March 4, 2021 or (ii) May 16, 2020 if more than $50 million of the Notes are outstanding on such date. Each of the Revolving Credit Facility under the Credit Agreement, dated as ofa ~~February~~going ~~28, 2018, among GNC Corporation, GNC Nutritional Centers, Inc~~concern., as Administrative Borrower, certain of its subsidiaries, as subsidiary borrowers, the lenders and agents parties thereto, and JPMorgan Chase Bank, N.A., as administrative agent (the “ABL Credit Agreement,” and together with the Tranche B-2 Term Loan Credit Agreement, the "Credit Agreements") and the FILO Term Loan under the ABL Credit Agreement, which otherwise mature in August 2022 and December 2022 respectively, also include an accelerated maturity date of May 16, 2020 if more than $50 million of the Notes are outstanding on such date. We do not have the ability to reduce the outstanding balance on the Notes from $156.4 million to below $50 million with projected cash on hand and new borrowings under the Revolving Credit Facility, assuming such borrowings remain available.

40In order to decrease our level of indebtedness and maintain our liquidity at levels sufficient to meet its commitments, we have undertaken a number of actions, including closing stores and further reducing its recurring operating expenses. We believe that even after taking these actions, it did not have sufficient liquidity to satisfy its debt service obligations, meet other financial obligations, comply with its debt covenants, and execute its business plan. As a result, the Debtors filed petitions for reorganization under Chapter 11 of the Bankruptcy Code.

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The outbreak of novel strain of coronavirus COVID-19 caused business disruption in the International segment beginning in January 2020. In late February 2020, the situation escalated as the scope of the COVID-19 outbreak worsened to directly impact areas outside of the Asia-Pacific region, with Europe and the United States recognizing outbreaks of COVID-19. As of March 31, 2020, we had temporarily closed approximately 30% of the U.S. and Canada company-owned and franchise stores as a result of the COVID-19 pandemic. There is significant uncertainty on our business going forward due to various global macroeconomic, operational and supply chain risks as a result of COVID-19.

We were in compliance with the debt covenant reporting and compliance obligations under the Credit Agreements as of March 31, 2020. Management does not believe that we have the ability to comply with the financial covenants under the Senior Credit Facility Agreements over the next twelve months given the current circumstances stemming from the COVID-19 pandemic

We are in the process of reviewing a range of refinancing options to refinance our outstanding indebtedness. We have been working with an independent committee of the Board supported by independent financial and legal advisors to conduct its review and have had a series of discussions with financing sources in the United States and Asia. We will continue to explore all options to refinance and restructure its indebtedness. While we continue to work through a number of refinancing alternatives to address its upcoming debt maturities, we cannot make any assurances regarding the likelihood, certainty or exact timing of any alternatives.

Reporting requirements under both the Tranche B-2 Term Loan and the Credit Agreement require the Company to provide annual audited financial statements accompanied by an opinion of an independent public accountant without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit (other than a “going concern” statement, explanatory note or like qualification or exception resulting solely from an upcoming maturity date under the Tranche B-2 Term Loan or the Notes). Management believes the we satisfied this requirement in the 2019 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the "SEC") on March 25, 2020 (the "2019 10-K"). If the lenders take a contrary position, (a) they could decide to instruct the administrative agent under the Senior Credit Agreements to deliver a written notice thereof to the borrower, and if the alleged default continued uncured for 30 days thereafter it would become an alleged event of default (unless waived by the lenders) and (b) the Company intends to contest such position and any action the lenders may attempt to take as a result thereof. If the lenders were to prevail in any such dispute, the required lenders could instruct the administrative agent to exercise remedies under the Senior Credit Agreements (the "Revolving Credit Facility"), including accelerating the maturity of the loans, terminating commitments under the revolving credit facility under the ABL Credit Agreement and requiring the posting of cash collateral in respect of outstanding letters of credit issued under the Revolving Credit Facility ($4.5 million at March 31, 2020). If this were to occur, management would enter into discussions with the lenders to waive the default or forebear from the exercise of remedies. Failure to obtain such a waiver, complete a refinancing or other restructuring, obtain an extension of the Springing Maturity Date as defined in the Credit Agreements or to reach an agreement with required lender groups under the Credit Agreements prior to May 16, 2020 or to reach an agreement with the our stakeholders on the terms of an out-of-court restructuring would have a material adverse effect on our liquidity, financial condition and results of operations and may result in filing a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in order to implement a restructuring plan.

Due to the adverse impacts of COVID-19, we withheld rent and other occupancy payments beginning in April 2020 for certain of our retail locations as management negotiates with landlords for rent concessions. The Company withheld rent and other occupancy payments of approximately $19 million in April 2020 and approximately $16 million in May 2020. In the event that withholding these rent payments would constitute an event of default per the lease agreement, management intends to negotiate resolution with the landlord. If such negotiations are not successful, the lease liabilities associated with those leases could become immediately due and payable.

Cash (Used in) Provided by Operating Activities

Cash used in operating activities was $123.14 million for the ~~three~~six months ended ~~March~~June 3130, 2020 compared with cash provided by operating activities of $6865.73 million for the ~~three~~six months ended ~~March~~June 3130, 2019. The decrease in cash from operating activities was driven by a decrease in operating income, as discussed above, and unfavorable working capital changes.

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Cash Provided by Investing Activities

Cash ~~provided~~used byin investing activities was $140.56 million for the ~~three~~six months ended ~~March~~June 3130, 2020 compared with $85.6 million for the same period in 2019. During the three months ended March 31, 2020, we received $15.6 million for the first subsequent purchase price from IVC for additional equity interest in the Manufacturing JV and $2.6 million in proceeds from the sale of the Company owned location in Boston, MA. In the prior year quarter, we received $101 million cash ~~proceeds~~provided ~~from~~by ~~IVC in exchange for IVC's 57% of ownership of the Manufacturing JV. In addition, in 2019 we made a capital contribution of~~ $1083.7 million to the Manufacturing JV for our share of short-term working capital needs and contributed cash of $2.4 million from our China business to the HK JV and China JV. Capital expenditures for the three months ended March 31, 2020 were $3.9 million compared with $3.0 million for the same period in 2019.

During the six months ended June 30, 2020, we received $15.6 million from IVC in connection with the subsequent purchase of the ownership of the Manufacturing JV in the first quarter of 2020, which resulted in a pre-tax loss of $3.1 million on net asset exchange calculated based on the difference between the cash receipt and the purchase price of $18.8 million. In connection with the closing of the debtor-in-possession financing, we agreed to settle and terminate the outstanding swap agreements on June 29, 2020 for $9.8 million, of which $9.0 million was classified as an investing activity. Additionally, we deconsolidated GNC Canada effective as of the Canadian Petition Date including cash of $4.3 million.

In the prior year, we received $101.0 million cash proceeds from IVC in exchange for IVC's 57% of ownership of the Manufacturing JV. In addition, in 2019 we made a capital contribution of $10.7 million to the Manufacturing JV for our share of short-term working capital needs and contributed cash of $2.4 million from our China business to the HK JV and China JV. Capital expenditures for the six months ended June 30, 2020 were $6.0 million compared with $6.5 million for the same period in 2019.

Cash Used in Financing Activities

For the ~~three~~six months ended ~~March~~June 3130, 2020, cash ~~provided~~used byin financing activities was $1815.20 million, primarily consisting of $3037.06 million in ~~borrowings from the Revolving Credit Facility and $11.7 million in~~ payments on the Tranche B-2 Term Loan utilizing proceeds from IVC's purchase of equity interest in the Manufacturing JV during the first quarter of 2020, partially offset by $22.7 million ($30.0 million net of $7.3 million in fees) provided by the debtor-in-possession financing.

For the ~~three~~six months ended ~~March~~June 3130, 2019, cash used in financing activities was $84119.43 million, primarily consisting of $147.3 million in payments on the Tranche B-1 Term Loan, $114.0 million in payments on the Tranche B-2 Term Loan, $12.68 million fees associated with the issuance of ~~convertible~~Convertible ~~preferred~~Preferred ~~stock~~Stock and a $10.4 million original issuance discount ("OID") paid to the Tranche B-2 Term Loan lender at 2% of the outstanding balance, partially offset by approximately $200 million of proceeds from the issuance of the Convertible Preferred Stock.

Contractual Obligations

~~The~~Our ~~Company~~contractual ~~does~~obligations ~~not~~consist ~~expect~~mainly toof ~~have~~payments ~~the~~related ~~ability~~ to ~~reduce~~Long-term ~~the~~debt ~~outstanding~~and ~~balance~~related oninterest, ~~the~~operating ~~Notes~~leases ~~from~~related ~~$156.4 million~~ to ~~below~~real ~~$50 million~~estate ~~with~~used ~~projected~~in ~~cash on hand and new borrowings under~~ the ~~Revolving~~operation ~~Credit~~of ~~Facility,~~our ~~assuming~~business ~~such~~and ~~borrowings~~product ~~remain~~purchase ~~available,~~commitments. ~~before~~Due to the ~~Springing~~uncertain ~~Maturity~~of ~~Date.~~timing As of ~~March 31, 2020,~~ the ~~Company's~~Chapter ~~outstanding~~11 ~~indebtedness~~Cases, ~~has~~we ~~been~~cannot ~~classified~~reasonably asestimate ~~current on~~ the ~~Company's~~maturities ~~Consolidated~~of ~~Balance~~our ~~Sheets.~~prepetition ~~Refer~~and topost-petition ~~Liquidity~~debt and ~~Capital~~interest ~~Resource~~or ~~for more information. There have been no other material changes in~~ our ~~contractual~~ obligations asunder ~~disclosed~~lease ~~in the 2019 10-K~~agreements.

Critical Accounting Estimates

There have been no material changes to the application of critical accounting policies and significant judgments and estimates as disclosed in our 2019 10-K. As described in Item 1,. "Financial Statements," Note 5,6. "Property, Plant and Equipment, ~~net"~~Net," Note 6,7. "Goodwill and Other Long-lived Assets," and Note 8,9. "Equity Method Investment"," we recorded $~~157~~177.57 million in long-lived asset impairment and other store closing costs and $35.8 million other-than-temporary impairment for the Manufacturing JV. The calculation of these charges required the use of judgment and estimates that involve inherent uncertainties.

Recent Accounting Pronouncements

Refer to Note 2. "Basis of Presentation," which is incorporated herein by reference.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

~~There~~The ~~have~~following ~~been no significant~~ changes tohave ~~our~~occurred ~~market~~with ~~risk~~respect ~~since~~to ~~December 31, 2019. For a discussion of~~ our exposure to market risk, ~~refer~~since ~~to Part II~~December 31, ~~Item 7A "Quantitative and Qualitative Disclosures About Market Risk" of our~~ 2019 ~~Form 10-K.~~ :

Interest Rate Exposure

The Term Loan Facility and the asset-based Revolving Credit Facility are subject to changing interest rates. Effective as of the Petition Date, we ceased recording interest expense on outstanding prepetition debt subject to compromise, which reduced our interest rate exposure.

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On June 13, 2018, we entered into two interest rate swaps in an effort to manage interest rate exposure. As of March 31, 2020, our expectation was that it could not reduce the outstanding balance on the Notes to below $50 million before the Springing Maturity date, which would result in acceleration of the maturity date of the Tranche B-2 and the FILO Term Loan. As such, we deemed the cash flow hedges as ineffective as the forecasted hedging transactions were not expected to occur by the end of the originally specified time period. In connection with the Chapter 11 Cases, we entered into debtor-in-possession financing and agreed to settle and terminate the outstanding swap agreements on June 29, 2020.

For discussion of our exposure to market risk, refer to Part II, Item 7A "Quantitative and Qualitative Disclosures About Market Risk" of our 2019 Form 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 June 30, 2020, our disclosure controls and procedures are effective at the reasonable assurance level.

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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 March 31, 2020, our disclosure controls and procedures are effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There are no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ending ~~March~~June 3130, 2020, 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

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. 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 March 31, 2020, 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, where we (or one of our wholly-owned subsidiaries) along with the third-party vendor, have been named as parties: 62

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DMAA/Aegeline Claims. 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 June 30, 2020, 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, where we (or one of our wholly-owned subsidiaries) along with the third-party vendor, have been named as parties:

•Case No. 140502403, filed May 20, 2014 in Common Pleas Court of Philadelphia County, Pennsylvania

•Case No. 15-1-0847-05, filed May 1, 2015, in the first Circuit Court, State of Hawaii

•Cases filed in the District Court for the District of Hawaii 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


- Case No. 3-00639 DMK, filed November 21, 2013
- Case No. CV 14-00030, filed January 23, 2013
- Case No. CV 14-00032, filed January 23, 2014
- Case No. 14-cv-00364 filed October 24, 2014
- Case No. CV14-00366 filed August 15, 2014
- Case No. CV-15-00228, filed June 17, 2016
- Case No. CV14-00363, filed August 15, 2014
- Case No. CV 14-00031, filed January 23, 2014
- Case No. CV14-00029, filed January 23, 2014
- Case No. CV14-00365 filed October 24, 2014
- Case No. 14-cv-00367 filed October 24, 2014

•Cases filed in the Superior Court of California as follows:

◦Orange County:

- Case No. 2014-00740258 filed August 18, 2014 - Case No. 30-2015-~~00776749~~00783256-CU-PL-CXC, filed ~~March~~April 1216, 2015 - Case No. 30-2015-~~00783256-CU-PL-CXC~~00776749, filed ~~April~~March 1612, 2015

◦San Diego County:

- Case No. 37-2015-00008404, filed March 13, 2015 - Case No. 37-~~2014~~2013-~~110924~~00074052-CU-PL-CTL, filed ~~September~~November 81, ~~2014~~2013 - Case No. 37-~~2013~~2014-~~00074052-CU-PL-CTL~~110924, filed ~~November~~September 18, ~~2013~~2014

Los Angeles County:

- 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

◦Los Angeles County:

~~Monterey~~- ~~County:~~ Case No. BC559542, filed October 6, 2014 - Case No. BC575262, filed March 13, 2015 - Case No. BC575264, filed March 13, 2015 - Case No. BC534065, filed January 23, 2014

43◦Monterey County:

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

◦Santa Clara County:


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

~~These~~On July 22, 2020, all matters pending in the United States District Court for the District of Hawaii were dismissed. The remaining matters are currently stayed pending final resolution.

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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 legal proceedings to which we are a party, see Item 1. "Financial Statements" Note ~~10,~~11. "Contingencies."

Item 1A. Risk Factors

Other than as set forth below, 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 2019 10-K:

IfWe ~~the~~are ~~Company~~subject ~~cannot~~to ~~meet~~risks ~~the~~and ~~NYSE~~uncertainties ~~continued~~associated ~~listing~~with ~~requirements,~~our ~~the~~Chapter ~~NYSE~~11 ~~may delist the Company’s shares~~Cases.

~~Under~~As ~~the~~previously ~~continued~~reported ~~listing~~on ~~requirements~~June ~~of The New York Stock Exchange (“NYSE”)~~23, ~~amongst others~~2020, the ~~Company~~ isDebtors ~~considered~~filed tovoluntary bepetitions ~~out~~commencing ~~of compliance with~~ the ~~NYSE’s~~Chapter ~~minimum~~11 ~~price~~Cases ~~requirement~~under ifChapter ~~the~~11 ~~Company’s average closing price~~ of ~~its~~the ~~common~~Bankruptcy ~~stock~~Code ~~(“Shares”)~~in ~~over~~the aBankruptcy ~~consecutive~~Court. 30The ~~trading-day~~Debtors ~~period~~continue isto ~~less~~operate ~~than~~their ~~$1.00~~business ~~per~~as ~~share (the~~ “~~Share Price Deficiency~~debtors-in-possession”). Inunder ~~addition,~~ the 30jurisdiction ~~trading-day average market capitalization~~ of the ~~Company~~Bankruptcy isCourt ~~required~~and toin beaccordance ~~above~~with ~~$50 million (unless, at~~ the ~~same~~applicable ~~time,~~provisions ~~the~~of ~~Company’s total stockholders’ equity is equal to or greater than $50 million) (~~the ~~“Market~~Bankruptcy ~~Capitalization~~Code ~~Deficiency”).~~and Onorders ~~April~~of ~~22, 2020,~~ the ~~Company~~Bankruptcy ~~received written notification from the NYSE that it was not in compliance with either the minimum share price requirement or the market capitalization requirement~~Court.

Pursuant to ~~Section~~the ~~802.01C~~Restructuring ofSupport Agreement (substantially in the ~~NYSE~~form ~~Listed~~attached as Exhibit 10.1 to the Company’s ~~Manual~~Current Report on Form 8-K filed on June 24, 2020, the ~~Company~~“RSA”), ~~has~~the Debtors are pursuing on a ~~period~~parallel ofpath ~~six~~basis ~~months~~(1) ~~following~~a ~~its~~standalone ~~receipt~~plan of reorganization (the ~~written~~“Plan”) ~~notice~~and ~~from~~(2) a sale of the ~~NYSE~~business ~~with~~of ~~respect~~the Debtors pursuant to Section 363 of the ~~Share~~Bankruptcy ~~Price~~Code ~~Deficiency~~and tobased ~~regain~~on ~~compliance~~a ~~with~~potential ~~the~~stalking ~~minimum~~horse ~~share~~bid ~~price~~from ~~requirement.~~Harbin InBuyer ~~order~~and/or toother ~~regain~~co-investors ~~compliance,~~and/or ontheir ~~the~~respective ~~last~~designees ~~trading~~on ~~day~~terms ofand ~~any~~in ~~calendar~~accordance ~~month~~with ~~during~~documentation acceptable to the ~~cure~~Consenting ~~period,~~Creditors ~~the~~(as ~~Shares~~defined ~~must~~in ~~have~~the (iRSA) a(the ~~closing~~highest ~~price~~and ofbest atsale ~~least~~offer ~~$1.00~~pursuant ~~per~~to ~~Share~~this ~~and~~sale ~~(ii)~~process, anthe ~~average~~“Sale”). ~~closing~~A ~~price~~summary of atcertain ~~least~~material ~~$1.00~~terms ~~per~~in ~~Share~~the ~~over~~RSA was disclosed in the 30Company’s ~~trading~~Current ~~day~~Report ~~period~~on ~~ending~~Form 8-K filed on ~~the~~June ~~last~~24, ~~trading~~2020, ~~day~~which ofdescription ~~such~~is ~~month~~incorporated by referenced herein.

~~Pursuant~~In ~~to Section 802.02 of the NYSE Listed Company Manual~~2019, ~~the~~we ~~Company~~engaged ~~has~~financial aand ~~period~~legal ofadvisors ~~45 days from its receipt of written notice with respect~~ to ~~the~~assist ~~Market~~us ~~Capitalization Deficiency to submit a plan advising the NYSE of definitive actions the Company has taken~~in, oramong isother ~~taking~~things, ~~that~~analyzing ~~would~~various ~~bring~~strategic italternatives ~~into conformity with the market capitalization listing standard within 18 months of its receipt of written notice. If the NYSE accepts the plan, the Shares will continue~~ to beaddress ~~listed~~our onliquidity ~~the~~and ~~NYSE~~capital ~~during the 18-month period~~structure, ~~subject~~including tostrategic ~~compliance with other NYSE continued listing standards~~ and ~~continued~~refinancing ~~periodic~~alternatives ~~review~~to byrestructure ~~the~~our ~~NYSE~~indebtedness ofin ~~the~~private ~~Company’s progress with respect to its plan~~transactions. IfThese ~~the~~restructuring ~~plan~~efforts isled ~~not~~to ~~submitted on a timely basis, is not accepted, or is accepted but~~ the ~~Company~~execution ~~does~~of ~~not make progress consistent with~~ the ~~plan~~RSA ~~during the plan period, the Shares will be subject to suspension~~ and ~~delisting~~commencement ~~from~~of the ~~NYSE.~~Chapter In11 ~~addition,~~Cases ~~the NYSE can at any time suspend trading~~ in ~~a security and delist~~ the ~~stock~~Bankruptcy ifCourt iton ~~deems~~June it23, ~~necessary for the protection of investors~~2020.

IfThe ~~the~~Chapter ~~Shares~~11 ~~are~~Cases ~~suspended~~could ~~and~~have ~~delisted~~a ~~from~~material ~~the~~adverse ~~NYSE,~~effect ~~the Company expects that the Shares would be quoted~~ on anour ~~over-the-counter~~business, ~~(“OTC”)~~financial ~~market~~condition, ~~although~~results ~~there~~of isoperations noand ~~assurance~~liquidity. ~~that~~So anlong ~~active~~as ~~market in~~ the ~~Shares~~Chapter ~~would~~11 ~~develop. The~~Cases ~~OTC market is a significantly more limited market than the NYSE~~continue, ~~which~~our ~~could~~senior ~~affect~~management ~~the~~may ~~market~~be ~~price,~~required ~~trading~~to ~~volume,~~spend ~~liquidity~~a ~~and~~significant ~~resale~~amount ~~price~~ of ~~such~~time ~~Shares.~~and ~~Shares~~effort ~~that~~dealing ~~trade~~with on the ~~OTC~~reorganization ~~markets~~instead ~~also~~of ~~typically~~focusing ~~experience more volatility compared to securities that trade~~ on aour ~~national~~business ~~securities exchange~~operations. No ~~assurance~~Bankruptcy ~~can~~Court beprotection ~~given~~also ~~that~~may ~~the~~make ~~Company~~it ~~will~~more bedifficult ~~able~~ to ~~regain~~retain ~~compliance~~management ~~with~~and ~~these~~the ~~requirements~~key orpersonnel ~~maintain~~necessary ~~compliance~~to ~~with~~ the ~~other~~success ~~continued~~and ~~listing~~growth ~~requirements~~of ~~set~~our ~~forth in the NYSE Listed Company Manual~~business. IfIn ~~trading~~addition, induring the ~~Shares~~period isof ~~suspended~~time onwe ~~the NYSE or the Shares~~ are ~~delisted~~involved byin the ~~NYSE~~Chapter ~~for~~11 ~~any reason~~Cases, itour ~~could~~customers ~~negatively impact the Company as it would likely reduce the liquidity~~ and ~~market~~suppliers ~~price~~may oflose ~~the~~confidence ~~Shares;~~in ~~reduce~~our ~~the~~ability ~~number of investors willing~~ to ~~hold~~reorganize orour ~~acquire~~business ~~the~~successfully ~~Shares;~~and ~~negatively~~may ~~impact~~seek ~~the Company’s ability~~ to ~~access~~establish ~~equity~~alternative ~~markets~~commercial relationships.

44Other significant risks include or relate to the following:

•our ability to obtain the Bankruptcy Court’s approval with respect to motions or other requests made to the Bankruptcy Court in the Chapter 11 Cases, including maintaining strategic control as debtors-in-possession;

•our ability to consummate either the Plan or the Sale;

•the effects of the filing of the Chapter 11 Cases on our business and the interest of various constituents, including our stockholders;

•the high costs of Chapter 11 Cases and related fees;

•our ability to maintain relationships with suppliers, customers, employees and other third parties as a result of the Chapter 11 Cases;

•Bankruptcy Court rulings in the Chapter 11 Cases as well as the outcome of all other pending litigation and the outcome of the Chapter 11 Cases in general;

•the length of time that we will operate with Chapter 11 protection and the continued availability of operating capital during the pendency of the proceedings;

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~~and~~•third-party ~~obtain~~motions ~~financing;~~in ~~and~~the ~~impair~~Chapter ~~the~~11 ~~Company’s~~Cases, ~~ability~~which tomay ~~attract~~interfere ~~and~~with ~~retain~~our ~~employees~~ability byto ~~means~~consummate ofeither ~~equity~~the ~~compensation.~~Plan or the Sale;

•the potential adverse effects of the Chapter 11 Cases on our liquidity and results of operations; and

•our ability to continue as a going concern.

Because of the risks and uncertainties associated with the Chapter 11 Cases, we may not be able to accurately predict or quantify the ultimate impact the Chapter 11 Cases may have on our business, cash flows, liquidity, financial condition and results of operations, nor can we accurately predict the ultimate impact the Chapter 11 Cases may have on our corporate or capital structure.

Delays in the Chapter 11 Cases may increase the risks of our being unable to consummate either the Plan or the Sale and increase our costs associated with the Chapter 11 Cases.

The RSA contemplates the consummation of the Plan (or the Sale, if it can be consummated on terms and in accordance with documentation acceptable to the Consenting Creditors (as defined in the RSA)), but there can be no assurance that we will be able to consummate either the Plan or the Sale. A prolonged Chapter 11 proceeding could adversely affect our relationships with customers, suppliers and employees, among other parties, which in turn could adversely affect our business, competitive position, financial condition, liquidity and results of operations and our ability to continue as a going concern. A weakening of our financial condition, liquidity and results of operations could adversely affect our ability to implement either the Plan or the Sale (or any other plan of reorganization). If we are unable to consummate either the Plan or the Sale, we may be forced to liquidate our assets.

The RSA is subject to significant conditions and milestones that may be difficult for us to satisfy.

There are certain material conditions we must satisfy under the RSA, including the timely satisfaction of milestones in the Chapter 11 Cases, which include the consummation of either the Plan or the Sale. Our ability to timely complete such milestones is subject to risks and uncertainties, many of which are beyond our control.

If the RSA is terminated, our ability to confirm and consummate either the Plan or the Sale could be materially and adversely affected.

The RSA contains a number of termination events, upon the occurrence of which certain parties to the RSA may terminate the agreement. If the RSA is terminated as to all parties thereto, each of the parties thereto will be released from its obligations in accordance with the terms of the RSA. Such termination may result in the loss of support for the Plan and/or the Sale by the parties to the RSA, which could adversely affect our ability to confirm and consummate the Plan or the Sale. If neither the Plan nor the Sale is consummated, there can be no assurance that the Chapter 11 Cases would not be converted to Chapter 7 liquidation cases or that any new plan would be as favorable to holders of claims against the Debtors as contemplated by the RSA.

Even if the Plan or the Sale is consummated, we may not be able to achieve our stated goals and there is substantial doubt regarding our ability to continue as a going concern.

Even if the Plan or Sale or any other Chapter 11 plan of reorganization is consummated, we may continue to face a number of risks, such as changes in economic conditions, changes in our industry, changes in demand for our services and increasing expenses. Some of these risks become more acute when a case under the Bankruptcy Code continues for a protracted period without indication of how or when the case may be completed. As a result of these risks and others, we cannot guarantee that the Plan or the Sale will achieve our stated goals.

Furthermore, even if our debts are reduced or discharged through the Plan or Sale, we may need to raise additional funds through public or private debt or equity financing or other various means to fund our business after the completion of the Chapter 11 Cases. Our access to additional financing may be limited, if it is available at all. Therefore, adequate funds may not be available when needed or may not be available on favorable terms, or at all.

In certain instances, a Chapter 11 case may be converted to a case under Chapter 7 of the Bankruptcy Code.

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Upon a showing of cause, the Bankruptcy Court may convert our Chapter 11 Cases to a case under Chapter 7 of the Bankruptcy Code. In such event, a Chapter 7 trustee would be appointed or elected to liquidate our assets for distribution in accordance with the priorities established by the Bankruptcy Code. We believe that liquidation under Chapter 7 would result in significantly smaller distributions being made to our creditors than those provided for in either the Plan or the Sale because of (i) the likelihood that the assets would have to be sold or otherwise disposed of in a distressed fashion over a short period of time rather than in a controlled manner and as a going concern, (ii) additional administrative expenses involved in the appointment of a Chapter 7 trustee, and (iii) additional expenses and claims, some of which would be entitled to priority, that would be generated during the liquidation and from the rejection of leases and other executory contracts in connection with a cessation of operations.

As a result of the Chapter 11 Cases, our historical financial information may not be indicative of our future performance, which may be volatile.

During the Chapter 11 Cases, we expect our financial results to continue to be volatile as restructuring activities and expenses, contract terminations and rejections, and claims assessments significantly impact our Consolidated Financial Statements. As a result, our historical financial performance is likely not indicative of our financial performance after the date of the filing of the Chapter 11 Cases. In addition, if we emerge from Chapter 11, the amounts reported in subsequent consolidated financial statements may materially change relative to our historical consolidated financial statements, including as a result of revisions to our operating plans pursuant to the Plan or the Sale (as applicable). We also may be required to adopt fresh start accounting, in which case our assets and liabilities will be recorded at fair value as of the fresh start reporting date, which may differ materially from the recorded values of assets and liabilities on our consolidated balance sheets. Our financial results after the application of fresh start accounting may be different from historical trends.

We may be subject to claims that will not be discharged in the Chapter 11 Cases, which could have a material adverse effect on our financial condition and results of operations.

The Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from substantially all debts arising prior to consummation of a plan of reorganization. With few exceptions, all claims that arose prior to June 23, 2020 or before consummation of a plan of reorganization (i) would be subject to compromise and/or treatment under the plan of reorganization and/or (ii) would be discharged in accordance with the Bankruptcy Code and the terms of the plan of reorganization. Any claims not ultimately discharged pursuant to the plan of reorganization could be asserted against the reorganized entities and may have an adverse effect on our financial condition and results of operations on a post-reorganization basis.

The pursuit of the Chapter 11 Cases has consumed, and will continue to consume, a substantial portion of the time and attention of our management, which may have an adverse effect on our business and results of operations, and we may experience increased levels of employee attrition.

While the Chapter 11 Cases continue, our management will be required to spend a significant amount of time and effort focusing on the Chapter 11 Cases instead of focusing exclusively on our business operations. This diversion of attention may materially adversely affect the conduct of our business, and, as a result, our financial condition and results of operations, particularly if the Chapter 11 Cases are protracted.

Furthermore, during the pendency of the Chapter 11 Cases, we may experience increased levels of employee attrition, and our employees may face considerable distraction and uncertainty. A loss of key personnel or material erosion of employee morale could adversely affect our business and results of operations. Our ability to engage, motivate and retain key employees or take other measures intended to motivate and incentivize key employees to remain with us through the pendency of the Chapter 11 Cases is limited by restrictions on implementation of incentive programs under the Bankruptcy Code. The loss of services of members of our senior management team could impair our ability to execute our strategy and implement operational initiatives, which would be likely to have a material adverse effect on our financial condition, liquidity and results of operations. In addition, the longer the Chapter 11 Cases continue, the more likely it is that vendors and employees will lose confidence in our ability to reorganize our business successfully.

Our current operations and future growth may require significant additional capital, and the amount and terms of our indebtedness could impair our ability to fund our capital requirements. Financings under the Credit Agreements may be insufficient to fund our cash requirements through emergence from bankruptcy.

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Our business requires substantial capital. We may require additional capital in the event of growth opportunities, unanticipated maintenance requirements, or significant departures from our current business plan. Additional financing may not be available on a timely basis or on terms acceptable to us and within the limitations contained in the debtor-in-possession (“DIP”) credit agreements entered into in connection with the Chapter 11 Cases (the “DIP Credit Agreements”). The terms of the DIP Credit Agreements were previously disclosed in the Company’s Current Report on Form 8-K filed on June 24, 2020, which description is incorporated herein by reference.

Failure to obtain additional financing, should the need for it develop, could impair our ability to fund capital expenditure requirements and meet debt service requirements and could have an adverse effect on our business. Further, for the duration of the Chapter 11 Cases, we will be subject to various risks, including but not limited to (i) the inability to maintain or obtain sufficient financing sources for operations or to fund the Chapter 11 Cases and meet future obligations, and (ii) increased legal and other professional costs associated with the Chapter 11 Cases and our reorganization.

If the transactions contemplated by the RSA are not completed and the effective date of the Plan or the Sale does not occur prior to the maturity of the indebtedness under the DIP Credit Agreements, we may need to refinance such indebtedness. We may not be able to obtain some or all of any such financing on acceptable terms or at all.

We may be unable to comply with restrictions imposed by the DIP Credit Agreements.

The DIP Credit Agreements impose a number of restrictions on us. For example, the DIP Credit Agreements require us to maintain minimum levels of liquidity and various financial ratios and comply with various other financial covenants. Specifically, the terms of the DIP Credit Agreements require us to comply with covenants that are customary for DIP facilities of a similar type, including, but not limited to specified restrictions on indebtedness, liens, guarantee obligations, mergers, acquisitions, consolidations, liquidations and dissolutions, sales of assets, leases, payment of dividends and other restricted payments, voluntary payments of other indebtedness, investments, loans and advances, transactions with affiliates, sale and leaseback transactions and compliance with RSA milestones. The DIP Credit Agreements also require compliance with a variance covenant that compares actual operating disbursements and receipts and capital expenditures to the budgeted amounts set forth in the DIP budgets delivered to the agent and lenders thereunder from time to time pursuant to the terms of the DIP Credit Agreements. Our ability to comply with these provisions may be affected by events beyond our control and our failure to comply could result in an event of default under the DIP Credit Agreements.

Our common stock is quoted on the OTC Pink, and thus may have a limited market and lack of liquidity.

The recent delisting of our common stock on the NYSE, as well as NYSE’s filing of Form 25-NSE with respect to our common stock on July 1, 2020 could result in significantly lower trading volumes and reduced liquidity for investors seeking to buy or sell shares of our common stock. Our common stock is currently quoted on the OTC Pink, which may have an unfavorable impact on our stock price and liquidity. The OTC Pink Marketplace is a significantly more limited market than the NYSE or The Nasdaq Stock Market. The quotation of our shares on such marketplace may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could further depress the trading price of our common stock, and could have a long-term adverse impact on our ability to raise capital in the future. There can be no assurance that there will be an active market for our shares of common stock, either now or in the future, or that stockholders will be able to liquidate their investment or liquidate it at a price that reflects the value of the business. Accordingly, we urge extreme caution with respect to existing and future investments in our equity and other securities.

We believe it is likely that our common stock will substantially decrease in value as a result of the Chapter 11 Cases.

We have a significant amount of indebtedness that is senior to our current common stock in our capital structure. Our existing common stock has substantially decreased in value leading up to and during the Chapter 11 Cases. We do not foresee a market for our existing common stock after emergence from the Chapter 11 Cases. Accordingly, any trading in our common stock during the pendency of our Chapter 11 Cases is highly speculative and poses substantial risks to purchasers of our common stock.

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

Issuer Purchases of Equity Securities

We made no purchases of shares of Class A common stock for the quarter ended ~~March~~June 3130, 2020.

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 authorization to $1.0 billion of the Company’s common stock. As of ~~March~~June 3130, 2020, the Company has utilized $802.2 million of the current repurchase program and has $197.8 million remains available for purchase under the program.

Item 3. Defaults Upon Senior Securities

~~None~~The information set forth in Note 3 of the Notes to the Unaudited Condensed Consolidated Financial Statements included under Part 1. "Item 1. Financial Statements" of this quarterly report is incorporated into this item by reference.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit
No.	Description
10.1	First Amendment to the Term Loan Agreement, dated as of May 15, 2020 (Incorporated by reference to Exhibit 10.1 to Holdings' Current Report on Form 8-K (File No.: 001-35113), filed May 15, 2020.)
10.2	Second Amendment to the ABL Credit Agreement, dated as of May 15, 2020 (Incorporated by reference to Exhibit 10.2 to Holdings' Current Report on Form 8-K (File No.: 001-35113), filed May 15, 2020.)
10.3	Second Amendment to the Term Loan Agreement, dated as of June 12, 2020 (Incorporated by reference to Exhibit 10.1 to Holdings' Current Report on Form 8-K (File No.: 001-35113), filed June 15, 2020.)
10.4	Third Amendment to the ABL Credit Agreement, dated as of June 12, 2020 (Incorporated by reference to Exhibit 10.2 to Holdings' Current Report on Form 8-K (File No.: 001-35113), filed June 15, 2020.)
10.5 **	Restructuring Support Agreement, dated June 23, 2020 (Incorporated by reference to Exhibit 10.1 to Holdings' Current Report on Form 8-K (File No.: 001-35113), filed June 24, 2020.)
10.6	Harbin Term Sheet (Incorporated by reference to Exhibit 10.2 to Holdings' Current Report on Form 8-K (File No.: 001-35113), filed June 24, 2020.)
10.7	DIP Backstop Commitment Letter, dated June 23, 2020 (Incorporated by reference to Exhibit 10.3 to Holdings' Current Report on Form 8-K (File No.: 001-35113), filed June 24, 2020.)
10.8	Form of Letter Agreement (Incorporated by reference to Exhibit 10.4 to Holdings' Current Report on Form 8-K (File No.: 001-35113), filed June 24, 2020.)
10.9	Amendment to Employment Agreement of Kenneth A. Martindale, dated June 18, 2020 (Incorporated by reference to Exhibit 10.5 to Holdings' Current Report on Form 8-K (File No.: 001-35113), filed June 24, 2020.)
10.10 *†	Employment Agreement by and among General Nutrition Centers, Inc., a Delaware corporation that is an indirect wholly owned subsidiary of GNC Holdings, Inc., and Carl Seletz, dated January 14, 2013.
10.11*	Stalking Horse Agreement, by and among GNC Holdings, Inc. and certain of its subsidiaries listed on Schedule I thereto and Harbin, dated August 7, 2020.
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 Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted , as Adopted Certification of Chief Executive Officer and 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 - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL 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.
**	In accordance with Item 601(a)(5) of Regulation S-K, certain schedules or similar attachments to the exhibit have been omitted from this filing.
†	Management contract or compensatory plan or arrangement of the Company required to be filed as an exhibit.

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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: May 11, 2020			Tricia K. Tolivar
Date: August 10, 2020			Tricia K. Tolivar
			Chief Financial Officer
			(Principal Financial Officer)

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Filing Compare · GNC HOLDINGS, INC.