GNC 2009 Annual Report Download - page 51

Table of Contents
Warehousing and distribution costs. Warehousing and distribution costs increased $3.3 million, or 6.1%, to $57.5 million for the year ended
December 31, 2008 compared to $54.2 million for the same period in 2007. The increase was primarily due to increases in shipping and fuel
costs and an increase in wages to support internet fulfillment. Consolidated warehousing and distribution costs, as a percentage of net revenue,
were 3.5% for each of the years ended December 31, 2008 and 2007.
Occupancy costs. Occupancy costs increased $10.6 million, or 5.2%, to $214.6 million for the year ended December 31, 2008 compared to
$204.0 million for the same period in 2007. This increase was the result of higher lease-related costs of $6.5 million, primarily a result of
scheduled increases in lease-related costs and the addition of 29 corporate stores since December 31, 2007, an increase in depreciation
expense of $2.9 million, and increases in other occupancy related expenses of $1.2 million. Consolidated occupancy costs, as a percentage of
net revenue, were 13.0% for the year ended December 31, 2008 and 13.1% for the year ended December 31, 2007.
Selling, General and Administrative ("SG&A") Expenses
Our consolidated SG&A expenses, including compensation and related benefits, advertising and promotion expense, other selling, general
and administrative expenses, and amortization expense, decreased $0.6 million, or 0.2%, to $403.6 million, for the year ended December 31,
2008 compared to $404.2 million for the same period in 2007. These expenses, as a percentage of net revenue, were 24.4% for the year ended
December 31, 2008 compared to 26.0% for the year ended December 31, 2007.
Compensation and related benefits. Compensation and related benefits decreased $10.3 million, or 4.0%, to $249.8 million for the year
ended December 31, 2008 compared to $260.1 million for the same period in 2007. The decrease was the result of $15.3 million in Merger-
related costs included in 2007. In addition there were $0.8 million of other compensation expense decreases. These decreases were offset by
full-time and part-time wages of $5.4 million to support an increased sales volume and store base and non-cash stock compensation of
$0.4 million.
Advertising and promotion. Advertising and promotion expenses decreased $0.4 million, or 0.9%, to $55.1 million for the year ended
December 31, 2008 compared to $55.5 million during the same period in 2007. Advertising expense decreased as a result of a decrease in
television and print advertising of $6.6 million offset by increases in agency fees of $2.0 million, store signage of $3.0 million and other
advertising related costs of $1.2 million.
Other SG&A. Other SG&A expenses, including amortization expense, increased $10.1 million, or 11.4%, to $98.7 million for the year ended
December 31, 2008 compared to $88.6 million for the same period in 2007. This increase was due to increases in (1) third party commission
expense on sales of $2.0 million, (2) telecommunications expenses of $2.0 million due to the installation of a new POS register system,
(3) depreciation and amortization expense of $1.7 million, (4) professional fees of $1.7 million, (5) banking fees of $1.0 million as a result of
increased retail sales, (6) bad debt expense of $0.4 million, and (7) other selling, general and administrative expenses of $1.3 million.
Merger-related Costs
Costs incurred by Holdings, and recognized by us, in relation to the Merger, were $34.6 million for the year ended December 31, 2007.
These costs were comprised of selling-related expenses of $26.4 million, a contract termination fee paid to our previous owner of $7.5 million
and other costs of $0.7 million. 45