GNC 2009 Annual Report Download - page 47

Table of Contents
In July, 2007, we extended our alliance with Rite Aid through December 31, 2014, with Rite Aid committing to open 1,125 new store-within-
a-store locations by that date. We currently have over 1,700 locations inside Rite Aid stores.
We believe that the strength of our company and its leadership position in the health and wellness sector provides significant future
opportunities that should allow us to capitalize on favorable demographics and consumer trends. In our experience our customers have
continued to focus on their personal health and well-being during economic downturns, nonetheless; a continued downturn or an uncertain
outlook in the economy may materially adversely affect our business and financial results.
While our results for the year ended December 31, 2008 do not reflect a negative impact of the general downturn of the economy, the
downturn could affect our business and operating results in the future. Our results are dependent on a number of factors impacting consumer
spending, including, but not limited to, general economic and business conditions, consumer confidence, consumer debt levels, availability of
consumer credit, and the level of customer traffic within malls and other shopping environments. Consumer purchases of products, including
ours, may decline during recessionary periods. If consumer purchases of products decline, we could be impacted in the following ways:
• retail sales at our company stores could decline;
• demand for our branded products produced at our manufacturing plant could decline;
• demand for products produced for distributors and other retailers / wholesalers could diminish;
• our domestic franchisees may opt not to renew their franchise licenses, which in turn would lower our franchise product revenue; and
• our international franchisees may experience decreased revenue resulting in lower royalties and product revenue to us.
Additionally, the strengthening of the U.S. dollar in the international arena may impact us, as our international franchisees' purchases of
inventory from us and payments of royalties to us are made in U.S. dollars.
In light of these matters, we are approaching 2009 cautiously, and anticipate our future growth to be driven by existing assets, as opposed to
new capital. Our planned capital expenditures are primarily for maintenance of our existing store base and manufacturing facility. We will weigh
the potential benefits of future opportunities carefully to ensure that they maximize return to us.
Related Parties
For the year ended December 31, 2008 and for the period March 16, 2007 to December 31, 2007, we had related party transactions with
Ares and OTPP and affiliates. For the period January 1, 2007 to March 15, 2007 and the year ended December 31, 2006, we had related party
transactions with Apollo Management V and its affiliates. For further discussion of these transactions, see Item 13, "Certain Relationships and
Related Transactions" and the "Related Party Transactions" note to our consolidated financial statements included in this Form 10-K.
Results of Operations
The following information presented as of December 31, 2008, 2007, and 2006 and for the year ended December 31, 2008, for the period
January 1 to March 15, 2007, for the period March 16, 2007 to December 31, 2007, and the year ended December 31, 2006 was derived from
our audited consolidated financial statements and accompanying notes. In the table below and in the accompanying discussion, the period from
January 1 to March 15, 2007 and from March 16 to December 31, 2007 have been combined for discussion purposes as we believe this
enhances comparability to the other years presented rather than a discussion of the separate periods. This approach is not consistent with
generally accepted accounting principles and yields results that are not comparable on a period-to-period basis due to the new basis of
accounting established at the Acquisition date. Material differences that were generated as a result of the Merger are explained in the
appropriate sections. 41