GNC 2010 Annual Report Download - page 56

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Table of Contents
Operating Income
As a result of the foregoing, consolidated operating income increased $11.4 million or 6.7% to $181.2 million for the year ended
December 31, 2009 compared to $169.8 million for the same period in 2008. Operating income, as a percentage of net revenue, was 10.6% for
the year ended December 31, 2009 and 10.3% for the year ended December 31, 2008.
Retail. Operating income increased $12.2 million, or 8.7%, to $153.1 million for the year ended December 31, 2009 compared to
$140.9 million for the same period in 2008. The increase was primarily the result of higher dollar margins on increased sales volumes and
reduced advertising spending, partially offset by increases in occupancy costs, compensation costs and other SG&A expenses.
Franchise. Operating income is unchanged at $80.8 million for each of the years ended December 31, 2009 and 2008.
Manufacturing/Wholesale. Operating income increased $6.1 million, or 9.0%, to $73.5 million for the year ended December 31, 2009
compared to $67.4 million for the same period in 2008. This increase was primarily the result of increased margins from our South Carolina
manufacturing facility, partially offset by decreases in Rite Aid license fee revenue.
Warehousing and Distribution Costs. Unallocated warehousing and distribution costs decreased $0.6 million, or 1.3%, to $53.6 million for
the year ended December 31, 2009 compared to $54.2 million for the same period in 2008. The decrease was primarily due to decreases in
fuel costs.
Corporate Costs. Corporate overhead costs increased $7.5 million, or 11.7%, to $72.6 million for the year ended December 31, 2009
compared to $65.1 million for the same period in 2008. The increase was primarily due to an increase in compensation expense and
professional fees in 2009. In addition, 2008 compensation expense includes a $1.1 million reduction due to a change in our vacation policy
effective March 31, 2008.
Interest Expense
Interest expense decreased $13.0 million, or 15.7%, to $70.0 million for the year ended December 31, 2009 compared to $83.0 million for
the same period in 2008. This decrease was primarily attributable to decreases in interest rates on our variable rate debt in 2009 as compared
to 2008 and $25.3 million in principal payments during 2009.
Income Tax Expense
We recognized $41.6 million of income tax expense (or 37.4% of pre-tax income) during the year ended December 31, 2009 compared to
$32.0 million (or 36.9% of pre-tax income) for the same period of 2008. For the year ended December 31, 2009, a $0.5 million discrete tax
benefit was recorded while a $2.0 million discrete tax benefit was recorded for the year ended December 31, 2008.
Net Income
As a result of the foregoing, consolidated net income increased $14.8 million to $69.6 million for the year ended December 31, 2009
compared to $54.8 million for the same period in 2008. 50