GNC 2010 Annual Report Download - page 67

Table of Contents
Self-Insurance
We have procured insurance for such areas as: (1) general liability; (2) product liability; (3) directors and officers liability; (4) property
insurance; and (5) ocean marine insurance. We are self-insured for such areas as: (1) medical benefits; (2) workers' compensation coverage in
the State of New York with a stop loss of $250,000; (3) physical damage to our tractors, trailers and fleet vehicles for field personnel use; and
(4) physical damages that may occur at the corporate store locations. We are not insured for certain property and casualty risks due to the
frequency and severity of a loss, the cost of insurance and the overall risk analysis. Our associated liability for this self-insurance was not
significant as of December 31, 2009 and 2008. Prior to the Numico acquisition, General Nutrition Companies, Inc. was included as an insured
under several of Numico's global insurance policies.
We carry product liability insurance with a retention of $3.0 million per claim with an aggregate cap on retained losses of $10.0 million.
We carry general liability insurance with retention of $110,000 per claim with an aggregate cap on retained losses of $600,000. The majority of
the Company's workers' compensation and auto insurance are in a deductible/retrospective plan. We reimburse the insurance company for the
workers compensation and auto liability claims, subject to a $250,000 and $100,000 loss limit per claim, respectively.
As part of the medical benefits program, we contract with national service providers to provide benefits to our employees for all medical,
dental, vision and prescription drug services. We then reimburse these service providers as claims are processed from our employees. We
maintain a specific stop loss provision of $250,000 per incident with a maximum limit up to $2.0 million per participant, per benefit year,
respectively. We have no additional liability once a participant exceeds the $2.0 million ceiling. Our liability for medical claims is included as a
component of accrued benefits as described in Note 10, "Accrued Payroll and Related Liabilities," to our consolidated financial statements
included in this report, and was $2.0 million and $2.2 million as of December 31, 2009 and 2008, respectively.
Goodwill and Indefinite-Lived Intangible Assets
On an annual basis, we perform a valuation of the goodwill and indefinite lived intangible assets associated with our operating segments.
To the extent that the fair value associated with the goodwill and indefinite-lived intangible assets is less than the recorded value, we write
down the value of the asset. The valuation of the goodwill and indefinite-lived intangible assets is affected by, among other things, our business
plan for the future, and estimated results of future operations. Changes in the business plan or operating results that are different than the
estimates used to develop the valuation of the assets may result in an impact on their valuation.
Historically, we have recognized impairments to our goodwill and intangible assets based on declining financial results and market
conditions. The most recent valuation was performed at October 1, 2009, and no impairment was found. There was also no impairment found
during 2009 or 2008. See the "Goodwill and Intangible Assets" note to our consolidated financial statements included elsewhere in this report.
Based upon our improved capitalization of our financial statements subsequent to the Numico acquisition, the stabilization of our financial
condition, our anticipated future results based on current estimates and current market conditions, we do not currently expect to incur additional
impairment charges in the near future, however, recent global events could have a negative effect on our business and operating results which
could affect the valuation of our intangibles.
Leases
We have various operating leases for company-owned and franchised store locations and equipment. Store leases generally include
amounts relating to base rental, percent rent and other charges such as common area maintenance fees and real estate taxes. Periodically, we
receive varying amounts of reimbursements from landlords to compensate us for costs incurred in the construction of stores. We amortize these
reimbursements as an offset to rent expense over the life of the related lease. We determine the period used for the straight-line rent expense
for leases with option periods and conform it to the term used for amortizing improvements.
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