GNC 2010 Annual Report Download - page 28

Table of Contents
Hydroxycut products that we began to sell in our stores. Although sales in the second half of 2009 of the new reformulated Hydroxycut trailed
pre-recall levels, strong sales in our core sports, vitamins and herbs, along with other new third party diet products, helped to mitigate the
Hydroxycut sales decline.
Our operations are subject to environmental and health and safety laws and regulations that may increase our cost of operations or
expose us to environmental liabilities.
Our operations are subject to environmental and health and safety laws and regulations, and some of our operations require
environmental permits and controls to prevent and limit pollution of the environment. We could incur significant costs as a result of violations of,
or liabilities under, environmental laws and regulations, or to maintain compliance with such environmental laws, regulations, or permit
requirements.
Because we rely on our manufacturing operations to produce nearly all of the proprietary products we sell, disruptions in our
manufacturing system or losses of manufacturing certifications could adversely affect our sales and customer relationships.
Our manufacturing operations produced approximately 35% and 34% of the products we sold for years ended December 31, 2009 and
2008, respectively. Other than powders and liquids, nearly all of our proprietary products are produced in our manufacturing facility located in
Greenville, South Carolina. During 2009, no one vendor supplied more than 10% of our raw materials. In the event any of our third-party
suppliers or vendors becomes unable or unwilling to continue to provide raw materials in the required volumes and quality levels or in a timely
manner, we would be required to identify and obtain acceptable replacement supply sources. If we are unable to obtain alternative supply
sources, our business could be adversely affected. Any significant disruption in our operations at our Greenville, South Carolina facility for any
reason, including regulatory requirements and loss of certifications, power interruptions, fires, hurricanes, war or other force of nature, could
disrupt our supply of products, adversely affecting our sales and customer relationships.
If we fail to protect our brand name, competitors may adopt trade names that dilute the value of our brand name.
We have invested significant resources to promote our GNC brand name in order to obtain the public recognition that we have today.
However, we may be unable or unwilling to strictly enforce our trademark in each jurisdiction in which we do business. In addition, because of
the differences in foreign trademark laws concerning proprietary rights, our trademark may not receive the same degree of protection in foreign
countries as it does in the United States. Also, we may not always be able to successfully enforce our trademark against competitors or against
challenges by others. For example, a third party is currently challenging our right to register in the United States certain marks that incorporate
our "GNC Live Well" trademark. This third party initiated proceedings in the United States Patent and Trademark Office to cancel four
registrations for our "GNC Live Well" mark. Subsequently, we permitted three of these registrations to lapse. Other third parties are also
challenging our "GNC Live Well" trademark in foreign jurisdictions. Our failure to successfully protect our trademark could diminish the value
and effectiveness of our past and future marketing efforts and could cause customer confusion. This could in turn adversely affect our revenues
and profitability.
Intellectual property litigation and infringement claims against us could cause us to incur significant expenses or prevent us from
manufacturing, selling, or using some aspect of our products, which could adversely affect our revenues and market share.
We are currently and may in the future be subject to intellectual property litigation and infringement claims, which could cause us to incur
significant expenses or prevent us from manufacturing, selling or using some aspect of our products. Claims of intellectual property
infringement also may require us to enter into costly royalty or license agreements. However, we may be unable to obtain royalty or license
agreements on terms acceptable to us or at all. Claims that our technology or
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