GNC 2011 Annual Report Download - page 59

Table of Contents
CAD $0.7 million, or 0.8%, in company-owned same store sales, and an increase of CAD $5.6 million in our non-same store sales. Our company-owned store
base increased by 51 domestic stores to 2,665 compared to 2,614 at December 31, 2008, primarily due to new store openings and franchise store acquisitions,
and by seven Canadian stores to 167 at December 31, 2009 compared to 160 at December 31, 2008, primarily due to new store openings.
Franchise. Revenues in our Franchise segment increased $6.2 million, or 2.4%, to $264.2 million for the year ended December 31, 2009 compared to
$258.0 million for the same period in 2008. Domestic franchise revenue decreased by $1.4 million, to $178.7 million in 2010, compared to $180.1 million in
2009, as increased product sales were more than offset by lower franchise fee revenue. Domestic royalty income was flat despite operating 45 fewer stores
during 2009 compared to 2008. There were 909 stores at December 31, 2009 compared to 954 stores at December 31, 2008. International franchise revenue
increased by $7.6 million, to $85.5 million in 2010, compared to $77.9 million in 2009, as a result of increases in product sales, partially offset by lower
franchise fee revenue. International royalty income increased $0.5 million for the 2009 period compared to the 2008 period as sales increases in our
franchisees' respective local currencies were impacted by the strengthening of the U.S. dollar from 2008 to 2009. Our international franchise store base
increased by 117 stores to 1,307 at December 31, 2009 compared to 1,190 at December 31, 2008.
Manufacturing/Wholesale. Revenues in our Manufacturing/Wholesale segment, which includes third-party sales from our manufacturing facility in
South Carolina, as well as wholesale sales to Rite Aid and www.drugstore.com, increased $7.1 million, or 4.0%, to $186.5 million for the year ended
December 31, 2009 compared to $179.4 million for the same period in 2008. Sales increased in the South Carolina plant by $4.4 million, and revenues
associated with Rite Aid increased by $1.4 million. This increase was due to increases in wholesale and consignment sales to Rite Aid of $4.6 million,
partially offset by lower initial and renewal license fee revenue of $3.2 million as a result of Rite Aid opening 197 fewer franchise store-within-a-stores in
2009 compared to 2008. In addition, sales to www.drugstore.com increased by $1.3 million in 2009 compared to 2008.
Cost of Sales
Consolidated cost of sales, which includes product costs, costs of warehousing and distribution and occupancy costs, increased $33.8 million, or 3.1%,
to $1,116.4 million for the year ended December 31, 2009 compared to $1,082.6 million for the same period in 2008. Consolidated cost of sales, as a
percentage of net revenue, was 65.4% for the year ended December 31, 2009 compared to 65.3% for the year ended December 31, 2008. The increase in cost
of sales was due primarily to increased products costs resulting from higher sales volumes and raw material costs and increased occupancy costs resulting
from higher depreciation expense and lease-related costs.
Selling, General and Administrative Expenses
Our consolidated SG&A expenses, including compensation and related benefits, advertising and promotion expense, other SG&A 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 costs; (3) $1.2 million in
commissions and
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