GNC 2012 Annual Report Download - page 62

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Table of Contents
Other SG&A. Other SG&A expenses, including amortization expense, increased $12.8 million, or 12.9%, to $113.5 million for the year ended
December 31, 2011 compared to $100.7 million in 2010. This increase was due to increases in credit card fees, third-party sales commissions, bad debt
expense, legal expenses, settlement expenses and other SG&A expenses.
Transaction and strategic alternative related costs. For the year ended December 31, 2011, we incurred $13.5 million of expenses principally related to
the IPO and the Secondary Offering. These primarily consisted of a payment of $11.1 million for the termination of Sponsor-related obligations and other
costs of $2.4 million. In 2010, we incurred $4.0 million of expenses principally related to the exploration of strategic alternatives.
Foreign Currency (Gain) Loss
Foreign currency (gain) loss for the years ended December 31, 2011 and 2010 resulted primarily from accounts payable activity with our Canadian
subsidiary.
Operating Income
As a result of the foregoing, consolidated operating income increased $70.1 million, or 33.0%, to $282.5 million for the year ended December 31, 2011
compared to $212.4 million in 2010. Operating income, as a percentage of net revenue, was 13.6% and 11.7% for the years ended December 31, 2011 and
2010, respectively. Excluding transaction related expenses and executive severance expense, operating income was $299.5 million, or 14.5% of revenue, for
the year ended December 31, 2011.
Retail. Operating income increased $61.6 million, or 33.9%, to $243.5 million for the year ended December 31, 2011 compared to $181.9 million in
2010. The increase was due to higher margin on increased sales, partially offset by increases in wages and other selling expenses.
Franchise. Operating income increased $17.5 million, or 18.6%, to $111.3 million for the year ended December 31, 2011 compared to $93.8 million in
2010. The increase was due to increased wholesale product sales and royalty income.
Manufacturing/Wholesale. Operating income increased $12.8 million, or 18.4%, to $82.2 million for the year ended December 31, 2011 compared to
$69.4 million in 2010. This was primarily due to higher revenue from third party manufacturing contracts and contributions from new wholesale customers.
Warehousing and distribution costs. Unallocated warehousing and distribution costs increased $5.6 million, or 10.1%, to $60.6 million for the year
ended December 31, 2011 compared to $55.0 million in 2010. This increase was primarily due to higher fuel costs and increased wages to support higher
sales volumes.
Corporate costs. Corporate overhead costs increased $6.7 million, or 9.1%, to $80.4 million for the year ended December 31, 2011 compared to
$73.7 million in 2010. This increase was due to increases in executive severance expense of $3.5 million and other SG&A expenses.
Transaction and strategic alternative related costs. Transaction and strategic alternative related costs were $13.5 million for the year ended
December 31, 2011. These primarily consisted of a payment of $11.1 million for termination of Sponsor-related obligations and other costs of $2.4 million. In
2010, we incurred $4.0 million of expenses principally related to the exploration of strategic alternatives.
Interest Expense
Interest expense increased $9.5 million, or 14.6%, to $74.9 million for the year ended December 31, 2011 compared to $65.4 million in 2010. This
increase included $23.2 million related to the Refinancing: $5.8 million related to the termination of interest rate swaps, $13.4 million of deferred financing
fees
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