GNC 2011 Annual Report Download - page 95

Table of Contents
NOTE 7. GOODWILL, BRANDS, AND OTHER INTANGIBLE ASSETS, NET
Management utilized various resources in arriving at its final fair value adjustments that were made to the Company's financial statements as of
March 16, 2007. In connection with the Merger, final fair values were assigned to various other intangible assets. The Company's brands were assigned a final
fair value representing the longevity of the Company name and general recognition of the product lines. The Gold Card program was assigned a final fair
value representing the underlying customer listing, for both the Retail and Franchise segments. The retail agreements were assigned a final fair value
reflecting the opportunity to expand the Company stores within a major drug store chain and on military facilities. A final fair value was assigned to the
agreements with the Company's franchisees, both domestic and international, to operate stores for a contractual period. Final fair values were assigned to the
Company's manufacturing and wholesale segments for production and continued sales to certain customers.
For the years ended December 31, 2010 and 2009, the Company acquired 24 and 53 franchise stores, respectively. These acquisitions are accounted for
utilizing the purchase method of accounting and the Company records the acquired inventory, fixed assets, franchise rights and goodwill, with an applicable
reduction to receivables and cash. For the years ended December 31, 2010 and 2009, the total purchase prices associated with these acquisitions was
$2.5 million and $9.3 million, respectively, of which $0.6 million and $2.5 million, respectively, was paid in cash.
The following table summarizes the Company's goodwill activity:
Retail Franchising Manufacturing/
Wholesale Total
(in thousands)
Balance at December 31, 2008 $ 302,765 $ 117,303 $ 202,841 $ 622,909
Acquired franchise stores 1,844 — — 1,844
Balance at December 31, 2009 $ 304,609 $ 117,303 $ 202,841 $ 624,753
Acquired franchise stores 488 — — 488
Balance at December 31, 2010 $ 305,097 $ 117,303 $ 202,841 $ 625,241
Intangible assets other than goodwill consisted of the following at each respective period:
Gold Card Retail
Brand Franchise Brand Operating Agreements Franchise Rights Total
(in thousands)
Balance at
December 31,
2008 $ 2,456 $500,000 $ 220,000 $ 160,019 $ 701 $883,176
Acquired
franchise
stores — — — — 953 953
Amortization
expense (2,081) — — (6,943) (735) (9,759)
Balance at
December 31,
2009 $ 375 $500,000 $ 220,000 $ 153,076 $ 919 $874,370
Acquired
franchise
stores — — — 641 641
Amortization
expense (375) — — (6,853) (559) (7,787)
Balance at
December 31,
2010 $ — $500,000 $ 220,000 $ 146,223 $ 1,001 $867,224
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