GNC 2012 Annual Report Download - page 63

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Table of Contents
related to former indebtedness, $1.6 million in original issue discount related to the Senior Subordinated Notes and $2.4 million related to the defeasance of
the Senior Notes and Senior Subordinated Notes. Additionally, we recognized $4.9 million of original issue discount and deferred financing fees expense
related to the $300.0 million pay down of debt in connection with the IPO. The increase was partially offset by a decrease in overall interest rates and
outstanding indebtedness.
Income Tax Expense
We recognized $75.3 million (or 36.3% of pre-tax income) of income tax expense for the year ended December 31, 2011 compared to $50.4 million (or
34.3% of pre-tax income) in 2010. The 2011 income tax expense includes $2.3 million, or 1.5% of pretax income, related to non-deductible costs. Income tax
expense for the years ended December 31, 2011 and 2010 was reduced by valuation allowance adjustments of $1.5 million and $3.1 million, respectively.
These valuation allowance adjustments reflected a change in circumstances that caused a change in judgment about the realizability of certain deferred tax
assets related to state net operating losses. Also, for 2011, income tax expense was favorably impacted by $2.6 million related to non-recurring tax credits.
Net Income
As a result of the foregoing, consolidated net income increased $35.7 million, or 37.0%, to $132.3 million for the year ended December 31, 2011
compared to $96.6 million in 2010. Net income for the year ended December 31, 2011 includes $31.2 million of transaction related expense, net of tax effect,
related to the Refinancing, the IPO, the Secondary Offering and executive severance. For the year ended December 31, 2011, excluding transaction related
expenses related to the Refinancing, the IPO, the Secondary Offering, and executive severance, net income, net of tax effect, was $163.5 million.
Comparison of the Years Ended December 31, 2010 and 2009
Revenues
Our consolidated net revenues increased $115.2 million, or 6.7%, to $1,822.2 million for the year ended December 31, 2010 compared to
$1,707.0 million in 2009. The increase was the result of increased sales in our Retail and Franchise segments, partially offset by a decline in our
Manufacturing/Wholesale segment.
Retail. Revenues in our Retail segment increased $88.1 million, or 7.0%, to $1,344.4 million for the year ended December 31, 2010 compared to
$1,256.3 million in 2009. Domestic retail revenue increased $64.8 million as a result of an increase in our same store sales and $17.1 million in our non-same
store sales. The same store sales increase includes GNC.com revenue, which increased $12.2 million, or 26.2%, to $59.0 million, compared to $46.8 million
in 2009. Sales increases occurred primarily in the vitamin and sports nutrition categories. Our company-owned domestic same store sales, including our
internet sales, improved by 5.6% in 2010 compared to 2009. Canadian retail revenue increased by $6.1 million in U.S. dollars. In local currency, Canadian
retail revenue declined by CAD $3.3 million. This decline was primarily a result of a CAD $5.6 million, or 5.7%, decline in company-owned same store sales,
partially offset by an increase of CAD $2.3 million in non-same store sales. Our company-owned store base increased by 83 domestic stores to 2,748
compared to 2,665 at December 31, 2009, primarily due to new store openings and franchise store acquisitions, and by two Canadian stores to 169 at
December 31, 2010 compared to 167 at December 31, 2009.
Franchise. Revenues in our Franchise segment increased $29.4 million, or 11.1%, to $293.6 million for the year ended December 31, 2010 compared
to $264.2 million in 2009. Domestic franchise revenue increased by $7.2 million, or 4.0%, to $185.9 million in 2010, compared to $178.7 million in 2009,
primarily due to higher wholesale revenues and fees. There were 903 stores at December 31, 2010 compared to 909 stores at December 31, 2009.
International franchise revenue increased by $22.2 million, or 25.8%, to
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