GNC 2010 Annual Report Download - page 55

Table of Contents
Product costs. Product costs increased $29.5 million, or 3.6%, to $840.0 million for the year ended December 31, 2009 compared to
$810.5 million for the same period in 2008 as a result of increased sales volumes and raw materials costs. Consolidated product costs, as a
percentage of net revenue, were 49.2% for the year ended December 31, 2009 as compared to 48.9% for the year ended December 31, 2008.
Warehousing and distribution costs. Warehousing and distribution costs increased $0.1 million, or 0.2%, to $57.6 million for the year
ended December 31, 2009 compared to $57.5 million for the same period in 2008. The increase was primarily due to increased internet
fulfillment wages offset by decreases in fuel costs. Consolidated warehousing and distribution costs, as a percentage of net revenue, were
3.4% and 3.5% for the year ended December 31, 2009 and 2008, respectively.
Occupancy costs. Occupancy costs increased $4.2 million, or 2.0%, to $218.8 million for the year ended December 31, 2009 compared
to $214.6 million for the same period in 2008. This increase was the result of increases in depreciation expense of $2.9 million and lease
related costs of $1.4 million, offset by $0.1 million decrease in other costs. Consolidated occupancy costs, as a percentage of net revenue,
were 12.8% and 13.0% for the year ended December 31, 2009 and 2008, respectively.
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, increased $5.9 million, or 1.5%, to $409.5 million, for the year ended
December 31, 2009 compared to $403.6 million for the same period in 2008. These expenses, as a percentage of net revenue, were 24.0% for
the year ended December 31, 2009 compared to 24.4% for the year ended December 31, 2008.
Compensation and related benefits. Compensation and related benefits increased $13.2 million, or 5.3%, to $263.0 million for the year
ended December 31, 2009 compared to $249.8 million for the same period in 2008. The increase was due to: (1) $8.5 million in base wages to
support our increased store base and sales volume and to comply with the increases in minimum wage rates; (2) $1.4 million in health
insurance; (3) $1.2 million in commissions and incentive expense; and (4) other wage related expenditures of $1.0 million. In addition, 2008
expenses included a $1.1 million reduction in base wages due to a change in our vacation policy effective March 31, 2008.
Advertising and promotion. Advertising and promotion expenses decreased $5.1 million, or 9.1%, to $50.0 million for the year ended
December 31, 2009 compared to $55.1 million during the same period in 2008. Advertising expense decreased primarily as a result of
decreases in media costs of $2.3 million and print advertising costs of $3.4 million, partially offset by increases in other advertising costs of
$0.6 million.
Other SG&A. Other SG&A expenses, including amortization expense, decreased $2.2 million or 2.3%, to $96.5 million for the year ended
December 31, 2009 compared to $98.7 million for the year ended December 31, 2008. Decreases in bad debt expense of $2.3 million,
amortization expense of $1.2 million and other selling expenses of $0.3 million were partially offset by increases in telecommunications
expenses of $1.9 million due to the installation of a new point of sale ("POS") register system in 2008 and professional fees of $0.8 million. In
addition, 2009 other SG&A includes a $1.1 million gain from proceeds received from the Visa/Mastercard antitrust litigation settlement.
Foreign Currency (Loss) Gain
Foreign currency loss/gain for the year ended December 31, 2009 and 2008, resulted primarily from accounts payable activity with our
Canadian subsidiary. We recognized income of $0.1 million for the year ended December 31, 2009 and a loss of $0.7 million for the year ended
December 31, 2008. 49