##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 30, 2005o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to .
 Commission
File Number: 333-114502
 GENERAL NUTRITION CENTERS, INC.
  DELAWARE
    
    72-1575168(State or other jurisdiction of
    
    (I.R.S. EmployerIncorporation or organization)
    
    Identification No.)300 Sixth Avenue
    
    15222Pittsburgh, Pennsylvania
    
    (Zip Code)(Address of principal executive offices)
 (412) 288-4600
 þ o
 o þ




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##### Table of Contents



TABLE OF CONTENTS
  
 PAGEPART I FINANCIAL INFORMATIONItem 1 Financial StatementsConsolidated Balance Sheets as of June 30, 2005 (unaudited) and December 31, 2004
    
    
    3Unaudited Consolidated Statements of Operations and Comprehensive Income for the three and
six months ended June 30, 2005 and 2004
    
    
    4Unaudited Consolidated Statement of Stockholders Equity for the six months ended June 30, 2005
    
    
    5Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2005
and 2004
    
    
    6Summarized Notes to Unaudited Consolidated Financial Statements
    
    
    7Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    30Item 4 Controls and Procedures
    
    
    30PART II OTHER INFORMATIONItem 1 Legal Proceedings
    
    
    31Item 6 Exhibits
    
    
    31Signatures
    
    
    32EX-31.1EX-31.2EX-32.1
 2




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##### Table of Contents



PART I FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 
 Consolidated Balance Sheets
 (in thousands, except share data)
 December 31,
    
    June 30,2004 *
    
    2005(unaudited)Current assets:Cash and cash equivalents
    
    $
    85,161
    
    
    $
    54,900Receivables, net
    
    
    70,013
    
    
    
    73,704Inventories, net (Note 3)
    
    
    272,254
    
    
    
    303,213Deferred tax assets, net
    
    
    14,133
    
    
    
    13,169Other current assets
    
    
    35,775
    
    
    
    31,505Total current assets
    
    
    477,336
    
    
    
    476,491Long-term assets:Goodwill (Note 4)
    
    
    78,585
    
    
    
    78,585Brands (Note 4)
    
    
    212,000
    
    
    
    212,000Other intangible assets, net (Note 4)
    
    
    28,652
    
    
    
    26,731Property, plant and equipment, net
    
    
    195,409
    
    
    
    186,247Deferred financing fees, net
    
    
    18,130
    
    
    
    17,429Deferred tax assets, net
    
    
    1,093
    
    
    
    Other long-term assets
    
    
    21,393
    
    
    
    13,969Total long-term assets
    
    
    555,262
    
    
    
    534,961Total assets
    
    $
    1,032,598
    
    
    $
    1,011,452Current liabilities:Accounts payable
    
    $
    106,557
    
    
    $
    107,065Accrued payroll and related liabilities
    
    
    20,353
    
    
    
    19,470Accrued interest (Note 5)
    
    
    1,863
    
    
    
    7,721Current portion, long-term debt (Note 5)
    
    
    3,901
    
    
    
    2,045Other current liabilities
    
    
    61,162
    
    
    
    60,542Total current liabilities
    
    
    193,836
    
    
    
    196,843Long-term liabilities:Long-term debt (Note 5)
    
    
    506,474
    
    
    
    472,337Deferred tax liabilities, net
    
    
    
    
    
    
    346Other long-term liabilities
    
    
    9,866
    
    
    
    10,502Total long-term liabilities
    
    
    516,340
    
    
    
    483,185Total liabilities
    
    
    710,176
    
    
    
    680,028Stockholders equity:Common stock, $0.01 par value,
1,000 shares authorized, 100 shares issued and outstanding
    
    
    
    
    
    
    Paid-in-capital
    
    
    278,258
    
    
    
    277,842Retained earnings
    
    
    1,163
    
    
    
    52,953Accumulated other comprehensive income
    
    
    43,001
    
    
    
    629Total stockholders equity
    
    
    322,422
    
    
    
    331,424Total liabilities and stockholders equity
    
    $
    1,032,598
    
    
    $
    1,011,452
 
 *
    
    Footnotes summarized from the Audited Financial Statements.  3




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Operations and Comprehensive Income
 (unaudited)
 (in thousands)
 For the three months
    
    For the six monthsended June 30,
    
    ended June 30,2004
    
    2005
    
    2004
    
    2005Revenue
    
    $
    347,728
    
    
    $
    333,347
    
    
    $
    720,283
    
    
    $
    669,782Cost of sales, including costs of warehousing,
distribution and occupancy
    
    
    226,580
    
    
    
    223,724
    
    
    
    473,723
    
    
    
    454,180Gross profit
    
    
    121,148
    
    
    
    109,623
    
    
    
    246,560
    
    
    
    215,602Compensation and related benefits
    
    
    57,825
    
    
    
    56,229
    
    
    
    118,925
    
    
    
    113,543Advertising and promotion
    
    
    12,654
    
    
    
    13,540
    
    
    
    25,210
    
    
    
    28,141Other selling, general and administrative
    
    
    18,833
    
    
    
    18,742
    
    
    
    36,617
    
    
    
    37,564Foreign currency loss (gain)
    
    
    611
    
    
    
    48
    
    
    
    418
    
    
    
    (57
    )Other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,500
    )Operating income
    
    
    31,225
    
    
    
    21,064
    
    
    
    65,390
    
    
    
    38,911Interest expense, net (note 5)
    
    
    8,495
    
    
    
    9,805
    
    
    
    17,148
    
    
    
    23,276Income before income taxes
    
    
    22,730
    
    
    
    11,259
    
    
    
    48,242
    
    
    
    15,635Income tax expense
    
    
    8,298
    
    
    
    4,102
    
    
    
    17,577
    
    
    
    5,683Net income
    
    
    14,432
    
    
    
    7,157
    
    
    
    30,665
    
    
    
    9,952Other comprehensive loss
    
    
    (37
    )
    
    
    (270
    )
    
    
    (455
    )
    
    
    (534
    )Comprehensive income
    
    $
    14,395
    
    
    $
    6,887
    
    
    $
    30,210
    
    
    $
    9,418
  4




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Stockholders Equity
 (in thousands, except share data)
 AccumulatedOther
    
    TotalCommon Stock
    
    Additional
    
    Retained
    
    Comprehensive
    
    StockholdersShares
    
    Dollars
    
    Paid-in-Capital
    
    Earnings
    
    Income
    
    EquityBalance at
December 31, 2004
    
    
    100
    
    
    $
    
    
    
    $
    278,258
    
    
    $
    43,001
    
    
    $
    1,163
    
    
    $
    322,422GNC
Corporation investment in General Nutrition Centers, Inc
    
    
    
    
    
    
    
    
    
    
    (416
    )
    
    
    
    
    
    
    
    
    
    
    (416
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,952
    
    
    
    
    
    
    
    9,952Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (534
    )
    
    
    (534
    )Balance
at June 30, 2005 (unaudited)
    
    
    100
    
    
    $
    
    
    
    $
    277,842
    
    
    $
    52,953
    
    
    $
    629
    
    
    $
    331,424
  5




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 
 Consolidated
Statements of Cash Flows
(unaudited)
(in thousands)
 For the six monthsended June 30,2004
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    30,665
    
    
    $
    9,952Depreciation expense
    
    
    16,420
    
    
    
    18,372Deferred fee writedown  early debt
extinguishment
    
    
    
    
    
    
    3,890Amortization of intangible assets
    
    
    2,007
    
    
    
    1,921Amortization of deferred financing fees
    
    
    1,546
    

    
    
    1,384Increase in provision for inventory
losses
    
    
    5,869
    
    
    
    3,504(Decrease) increase in provision for losses
on accounts receivable
    
    
    (1,844
    )
    
    
    2,190Decrease in net deferred
taxes
    
    
    3,783
    
    
    
    2,404Changes in assets and liabilities:Decrease (increase) in receivables
    
    
    870
    
    
    
    (5,883
    )Increase in inventory, net
    
    
    (36,781
    )
    
    
    (34,038
    )Decrease in franchise note receivables,
net
    
    
    5,046
    
    
    
    5,370Decrease in other assets
    
    
    4,197
    
    
    
    6,329Increase (decrease) in accounts payable
    
    
    1,362
    
    
    
    (1,329
    )Increase in accrued taxes
    
    
    8,730
    
    
    
    Increase in interest payable
    
    
    65
    
    
    
    5,858Decrease in accrued liabilities
    
    
    (16,132
    )
    
    
    (1,354
    )Net cash provided by operating activities
    
    
    25,803
    
    
    
    18,570CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (10,165
    )
    
    
    (8,915
    )Franchise store conversions
    
    
    123
    
    
    
    Store acquisition costs
    
    
    (285
    )
    
    
    (1,105
    )Acquisition
of General Nutrition Companies, Inc
    
    
    2,102
    
    
    
    Net cash used in investing activities
    
    
    (8,225
    )
    
    
    (10,020
    )CASH FLOWS FROM FINANCING ACTIVITIES:GNC Corporation investment in (return of capital
from)
General Nutrition Centers, Inc
    
    
    1,581
    
    
    
    (416
    )(Decrease) increase in cash
overdrafts
    
    
    (3,063
    )
    
    
    1,800Payments on long-term debt
    
    
    (1,906
    )
    
    
    (185,994
    )Proceeds from senior notes issuance
    
    
    
    
    
    
    150,000Financing fees
    
    
    (327
    )
    
    
    (4,090
    )Net cash used in financing activities
    
    
    (3,715
    )
    
    
    (38,700
    )Effect of exchange rate on cash
    
    
    529
    
    
    
    (111
    )Net increase (decrease) in cash
    
    
    14,392
    
    
    
    (30,261
    )Beginning balance, cash
    
    
    33,176
    
    
    
    85,161Ending balance, cash
    
    $
    47,568
    
    
    $
    54,900
  6




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 
 SUMMARIZED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 1. NATURE OF BUSINESS
 General Nature of Business .
 Acquisition of the Company.
 NOTE 2. BASIS OF PRESENTATION
    Use of Estimates .
 Cash and Cash Equivalents .
 7




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GENERAL
NUTRITION CENTERS, INC. AND SUBSIDIARIES
 SUMMARIZED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Stock Compensation .
  Three Months ended
    
    Six Months endedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005(unaudited)(in thousands)Net income as reported
    
    $
    14,432
    
    
    $
    7,157
    
    
    $
    30,665
    
    
    $
    9,952Less: total stock-based employee compensation
costs determined using fair value method, net of
related tax effects
    
    
    (211
    )
    
    
    (182
    )
    
    
    (427
    )
    
    
    (360
    )Adjusted net income
    
    $
    14,221
    
    
    $
    6,975
    
    
    $
    30,238
    
    
    $
    9,592
 Recently Issued Accounting Pronouncements
    8




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GENERAL
NUTRITION CENTERS, INC. AND SUBSIDIARIES
 SUMMARIZED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED  CONTINUED)
  NOTE 3. INVENTORIES, NET
  December 31, 2004Net CarryingGross cost
    
    Reserves
    
    Value(in thousands)Finished product ready for sale
    
    $
    242,578
    
    
    $
    (11,542
    )
    
    $
    231,036Unpackaged bulk product and raw materials
    
    
    41,607
    
    
    
    (3,019
    )
    
    
    38,588Packaging supplies
    
    
    2,630
    
    
    
    
    
    
    
    2,630$
    286,815
    
    
    $
    (14,561
    )
    
    $
    272,254
 June 30, 2005Net CarryingGross cost
    
    Reserves
    
    Value(unaudited)(in thousands)Finished product ready for sale
    
    $
    257,304
    
    
    $
    (9,310
    )
    
    $
    247,994Unpackaged bulk product and raw materials
    
    
    54,410
    
    
    
    (2,940
    )
    
    
    51,470Packaging supplies
    
    
    3,749
    
    
    
    
    
    
    
    3,749$
    315,463
    
    
    $
    (12,250
    )
    
    $
    303,213
 NOTE 4. GOODWILL AND INTANGIBLE ASSETS, NET
   Retail
    
    Franchise
    
    OperatingGold Card
    
    Brand
    
    Brand
    
    Agreements
    
    Total(in thousands)Balance at December 31, 2004
    
    $
    1,413
    
    
    $
    49,000
    
    
    $
    163,000
    
    
    $
    27,239
    
    
    $
    240,652Amortization expense
    
    
    (449
    )
    
    
    
    
    
    
    
    
    
    
    (1,472
    )
    
    
    (1,921
    )Balance at June 30, 2005 (unaudited)
    
    $
    964
    
    
    $
    49,000
    
    
    $
    163,000
    
    
    $
    25,767
    
    
    $
    238,731
 9




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GENERAL
NUTRITION CENTERS, INC. AND SUBSIDIARIES
 SUMMARIZED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED  CONTINUED)
  December 31, 2004
    
    June 30, 2005Accumulated
    
    Carrying
    
    
    
    
    
    Accumulated
    
    CarryingCost
    
    Amortization
    
    Amount
    
    Cost
    
    Amortization
    
    Amount(unaudited)(in thousands)Brands  retail
    
    $
    49,000
    
    
    $
    
    
    
    $
    49,000
    
    
    $
    49,000
    
    
    $
    
    
    
    $
    49,000Brands  franchise
    
    
    163,000
    
    
    
    
    
    
    
    163,000
    
    
    
    163,000
    
    
    
    
    
    
    
    163,000Gold card  retail
    
    
    2,230
    
    
    
    (1,004
    )
    
    
    1,226
    
    
    
    2,230
    
    
    
    (1,393
    )
    
    
    837Gold card  franchise
    
    
    340
    
    
    
    (153
    )
    
    
    187
    
    
    
    340
    
    
    
    (213
    )
    
    
    127Retail agreements
    
    
    8,500
    
    
    
    (1,267
    )
    
    
    7,233
    
    
    
    8,500
    
    
    
    (1,858
    )
    
    
    6,642Franchise agreements
    
    
    21,900
    
    
    
    (1,894
    )
    
    
    20,006
    
    
    
    21,900
    
    
    
    (2,775
    )
    
    
    19,125$
    244,970
    
    
    $
    (4,318
    )
    
    $
    240,652
    
    
    $
    244,970
    
    
    $
    (6,239
    )
    
    $
    238,731
  EstimatedamortizationYears ending December 31,
    
    expense(unaudited)(in thousands)2005
    
    $
    1,9222006
    
    
    3,4572007
    
    
    2,9432008
    
    
    2,8952009
    
    
    2,283Thereafter
    
    
    13,231Total
    
    $
    26,731
 NOTE 5. LONG-TERM DEBT / INTEREST
    10




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GENERAL
NUTRITION CENTERS, INC. AND SUBSIDIARIES
 SUMMARIZED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED  CONTINUED)
  December 31,
    
    June 30,2004
    
    2005(unaudited)(in thousands)Mortgage
    
    $
    13,190
    
    
    $
    12,691Capital leases
    
    
    35
    
    
    
    32Senior credit facility
    
    
    282,150
    
    
    
    96,6598 5/8% Senior Notes
    
    
    
    
    
    
    150,0008 1/2% Senior Subordinated
Notes
    
    
    215,000
    
    
    
    215,000Less: current maturities
    
    
    (3,901
    )
    
    
    (2,045
    )Total
    
    $
    506,474
    
    
    $
    472,337
  Mortgage
    
    
    
    
    
    
    
    
    
    8 1/2% SeniorLoan/Capital
    
    Senior
    
    8 5/8% Senior
    
    SubordinatedYears Ending December 31,
    
    Leases
    
    Credit Facility
    
    Notes
    
    Notes
    
    Total(unaudited)(in thousands)2005
    
    $
    549
    
    
    $
    491
    
    
    $
    
    
    
    $
    
    
    
    $
    1,0402006
    
    
    1,141
    
    
    
    981
    
    
    
    
    
    
    
    
    
    
    
    2,1222007
    
    
    1,195
    
    
    
    981
    
    
    
    
    
    
    
    
    
    
    
    2,1762008
    
    
    1,281
    
    
    
    981
    
    
    
    
    
    
    
    
    
    
    
    2,2622009
    
    
    1,373
    
    
    
    93,225
    
    
    
    
    
    
    
    
    
    
    
    94,598Thereafter
    
    
    7,184
    
    
    
    
    
    
    
    150,000
    
    
    
    215,000
    
    
    
    372,184$
    12,723
    
    
    $
    96,659
    
    
    $
    150,000
    
    
    $
    215,000
    
    
    $
    474,382
  Three months ended
    
    Six months endedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005(unaudited)(in thousands)Composition of interest expense:Mortgage
    
    $
    241
    
    
    $
    223
    
    
    $
    486
    
    
    $
    455Senior credit facility  Revolver
    
    
    152
    
    
    
    150
    
    
    
    241
    
    
    
    299Senior credit facility  Term Loan
    
    
    3,028
    
    
    
    1,488
    
    
    
    6,067
    
    
    
    3,3228 5/8% Senior Notes
    
    
    
    
    
    
    3,234
    
    
    
    
    
    
    
    5,8588 1/2 % Senior Subordinated Notes
    
    
    4,518
    
    
    
    4,569
    
    
    
    9,087
    
    
    
    9,137Deferred fee writedown  early debt extinguishment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,890Deferred financing fees
    
    
    775
    
    
    
    700
    
    
    
    1,546
    
    
    
    1,384Interest income  other
    
    
    (219
    )
    
    
    (559
    )
    
    
    (279
    )
    
    
    (1,069
    )Interest expense, net
    
    $
    8,495
    
    
    $
    9,805
    
    
    $
    17,148
    
    
    $
    23,276
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GENERAL
NUTRITION CENTERS, INC. AND SUBSIDIARIES
 SUMMARIZED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED  CONTINUED)
  December 31,
    
    June 30,2004
    
    2005(unaudited)(in thousands)Senior credit facility
    
    $
    340
    
    
    $
    3408 5/8% Senior notes
    
    
    
    
    
    
    5,8588 1/2% Senior Subordinated Notes
    
    
    1,523
    
    
    
    1,523Total
    
    $
    1,863
    
    
    $
    7,721
 NOTE 6. COMMITMENTS AND CONTINGENCIES
 Litigation
     
    
    Brown v. General Nutrition Companies, Inc., Case No. 02-14221-AB, Florida Circuit Court
for the 15th Judicial Circuit Court, Palm Beach County;
    
    Rodriguez v. General Nutrition Companies, Inc., Index No. 02/126277, New York Supreme
Court, County of New York, Commercial Division;
    
    Abrams v. General Nutrition Companies, Inc., Docket No. L-3789-02, New Jersey Superior Court, Mercer County;
    
    Toth v. Bodyonics, Ltd., Case No. 003886, Pennsylvania Court of Common Pleas, Philadelphia County; and
    
    Pio v. General Nutrition Companies, Inc., Case No. 2-CH-14122, Illinois Circuit Court, Cook County.
 12




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GENERAL
NUTRITION CENTERS, INC. AND SUBSIDIARIES
 SUMMARIZED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED  CONTINUED)
  NOTE 7. STOCK-BASED COMPENSATION PLANS
 Stock Options
   Weighted
    
    WeightedAverage
    
    Average Black-Total Options
    
    Exercise Price
    
    Scholes ValueOutstanding at December 31, 2004
    
    
    2,435,393
    
    
    $
    6.00Granted March 2005
    
    
    294,573
    
    
    
    6.00
    
    
    $
    0.28Granted June 2005
    
    
    450,000
    
    
    
    6.00
    
    
    
    0.27Forfeited
    
    
    (380,979
    )Outstanding at June 30, 2005 (unaudited)
    
    
    2,798,987
    
    
    
    6.00
    
    
    
    1.69
   December 31,
    
    June 30,2004
    
    2005(unaudited)Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %Expected option life
    
    5 years
    
    5 yearsVolatility factor percentage of market price
    
    
    40.00
    %
    
    
    24.00
    %Discount rate
    
    
    3.63
    %
    
    
    3.84
    %
  13




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##### Table of Contents



GENERAL
NUTRITION CENTERS, INC. AND SUBSIDIARIES
 SUMMARIZED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED  CONTINUED)
 NOTE 8. SEGMENTS
  Three months ended June 30,
    
    Six months ended June 30,2004
    
    2005
    
    2004
    
    2005(unaudited)(in thousands)Revenues:Retail
    
    $
    261,355
    
    
    $
    250,277
    
    
    $
    540,996
    
    
    $
    505,529Franchise
    
    
    58,890
    
    
    
    57,754
    
    
    
    123,028
    
    
    
    110,381Manufacturing/Wholesale:Intersegment(1)
    
    
    51,732
    
    
    
    49,223
    
    
    
    99,278
    
    
    
    104,718Third Party
    
    
    27,483
    
    
    
    25,316
    
    
    
    56,259
    
    
    
    53,872Sub total Manufacturing/Wholesale
    
    
    79,215
    
    
    
    74,539
    
    
    
    155,537
    
    
    
    158,590Sub total segment revenues
    
    
    399,460
    
    
    
    382,570
    
    
    
    819,561
    
    
    
    774,500Intersegment
elimination(1)
    
    
    (51,732
    )
    
    
    (49,223
    )
    
    
    (99,278
    )
    
    
    (104,718
    )Total revenues
    
    
    347,728
    
    
    
    333,347
    
    
    
    720,283
    
    
    
    669,782Operating income:Retail
    
    
    30,588
    
    
    
    21,200
    
    
    
    65,983
    
    
    
    39,106Franchise(2)
    
    
    16,485
    
    
    
    12,124
    
    
    
    33,607
    
    
    
    25,467Manufacturing/Wholesale
    
    
    9,867
    
    
    
    12,551
    
    
    
    18,053
    
    
    
    24,610Unallocated corporate and other costs:Warehousing & distribution costs
    
    
    (12,322
    )
    
    
    (12,211
    )
    
    
    (25,027
    )
    
    
    (24,870
    )Corporate costs
    
    
    (13,393
    )
    
    
    (12,600
    )
    
    
    (27,226
    )
    
    
    (25,402
    )Sub total unallocated corporate and
other costs
    
    
    (25,715
    )
    
    
    (24,811
    )
    
    
    (52,253
    )
    
    
    (50,272
    )Total operating income
    
    
    31,225
    
    
    
    21,064
    
    
    
    65,390
    
    
    
    38,911Interest expense, net
    
    
    8,495
    
    
    
    9,805
    
    
    
    17,148
    
    
    
    23,276Income before income taxes
    
    
    22,730
    
    
    
    11,259
    
    
    
    48,242
    
    
    
    15,635Income tax expense
    
    
    8,298
    
    
    
    4,102
    
    
    
    17,577
    
    
    
    5,683Net income
    
    $
    14,432
    
    
    $
    7,157
    
    
    $
    30,665
    
    
    $
    9,952
 December 31,
    
    June 30,2004
    
    2005Total assets:Retail
    
    $
    418,136
    
    
    $
    425,645Franchise
    
    
    314,836
    
    
    
    314,545Manufacturing / Wholesale
    
    
    143,151
    
    
    
    150,452Corporate / Other
    
    
    156,475
    
    
    
    120,810Total assets
    
    $
    1,032,598
    
    
    $
    1,011,452
 
 (1)
    
    Intersegment revenues are eliminated from consolidated revenue.(2)
    
    Franchise operating income for the six months ended June 30, 2005 includes $2.5 million
of transaction fee income related to the transfer of our Australian franchise. 14




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 SUMMARIZED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED  CONTINUED)
 NOTE 9. SUPPLEMENTAL GUARANTOR INFORMATION
   Supplemental Condensed Consolidating Balance Sheets
 Combined
    
    CombinedParent/
    
    Guarantor
    
    Non-GuarantorJune 30, 2005
    
    Issuer
    
    Subsidiaries
    
    Subsidiaries
    
    Eliminations
    
    Consolidated(unaudited)(in thousands)Current assetsCash and cash equivalents
    
    $
    
    
    
    $
    52,076
    
    
    $
    2,824
    
    
    $
    
    
    
    $
    54,900Receivables, net
    
    
    1,570
    
    
    
    71,183
    
    
    
    951
    
    
    
    
    
    
    
    73,704Intercompany receivables
    
    
    
    
    
    
    33,580
    
    
    
    
    
    
    
    (33,580
    )
    
    
    Inventories, net
    
    
    
    
    
    
    288,951
    
    
    
    14,262
    
    
    
    
    
    
    
    303,213Other current assets
    
    
    2,554
    
    
    
    37,867
    
    
    
    4,253
    
    
    
    
    
    
    
    44,674Total current assets
    
    
    4,124
    
    
    
    483,657
    
    
    
    22,290
    
    
    
    (33,580
    )
    
    
    476,491Goodwill, net
    
    
    
    
    
    
    77,643
    
    
    
    942
    
    
    
    
    
    
    
    78,585Brands, net
    
    
    
    
    
    
    209,000
    
    
    
    3,000
    
    
    
    
    
    
    
    212,000Property, plant and equipment, net
    
    
    
    
    
    
    164,954
    
    
    
    21,293
    
    
    
    
    
    
    
    186,247Investment in subsidiaries
    
    
    797,737
    
    
    
    5,012
    
    
    
    
    
    
    
    (802,749
    )
    
    
    Other assets
    
    
    17,635
    
    
    
    49,199
    
    
    
    75
    
    
    
    (8,780
    )
    
    
    58,129Total assets
    
    $
    819,496
    
    
    $
    989,465
    
    
    $
    47,600
    
    
    $
    (845,109
    )
    
    $
    1,011,452Current liabilitiesCurrent liabilities
    
    $
    9,185
    
    
    $
    180,880
    
    
    $
    6,778
    
    
    $
    
    
    
    $
    196,843Intercompany payables
    
    
    18,209
    
    
    
    
    
    
    
    15,371
    
    
    
    (33,580
    )
    
    
    Total current liabilities
    
    
    27,394
    
    
    
    180,880
    
    
    
    22,149
    
    
    
    (33,580
    )
    
    
    196,843Long-term debt
    
    
    460,678
    
    
    
    
    
    
    
    20,439
    
    
    
    (8,780
    )
    
    
    472,337Other long-term liabilities
    
    
    
    
    
    
    10,848
    
    
    
    
    
    
    
    
    
    
    
    10,848Total liabilities
    
    
    488,072
    
    
    
    191,728
    
    
    
    42,588
    
    
    
    (42,360

    )
    
    
    680,028Total stockholders equity (deficit)
    
    
    331,424
    
    
    
    797,737
    
    
    
    5,012
    
    
    
    (802,749
    )
    
    
    331,424Total liabilities and stockholders
equity (deficit)
    
    $
    819,496
    
    
    $
    989,465
    
    
    $
    47,600
    
    
    $
    (845,109
    )
    
    $
    1,011,452
 15




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 SUMMARIZED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED  CONTINUED)
 Supplemental Condensed Consolidating Balance Sheets
 Combined
    
    CombinedParent/
    
    Guarantor
    
    Non-GuarantorDecember 31, 2004
    
    Issuer
    
    Subsidiaries
    
    Subsidiaries
    
    Eliminations
    
    Consolidated(in thousands)Current assetsCash and cash equivalents
    
    $
    
    
    
    $
    82,722
    
    
    $
    2,439
    
    
    $
    
    
    
    $
    85,161Receivables, net
    
    
    1,865
    
    
    
    66,821
    
    
    
    1,327
    
    
    
    
    
    
    
    70,013Intercompany receivables
    
    
    15,887
    
    
    
    16,848
    
    
    
    
    
    
    
    (32,735
    )
    
    
    Inventories, net
    
    
    
    
    
    
    258,085
    
    
    
    14,169
    
    
    
    
    
    
    
    272,254Other current assets
    
    
    257
    
    
    
    45,731
    
    
    
    3,920
    
    
    
    
    
    
    
    49,908Total current assets
    
    
    18,009
    
    
    
    470,207
    
    
    
    21,855
    
    
    
    (32,735
    )
    
    
    477,336Goodwill, net
    
    
    
    
    
    
    77,643
    
    
    
    942
    
    
    
    
    
    
    
    78,585Brands, net
    
    
    
    
    
    
    209,000
    
    
    
    3,000
    
    
    
    
    
    
    
    212,000Property, plant and equipment, net
    
    
    
    
    
    
    172,813
    
    
    
    22,596
    
    
    
    
    
    
    
    195,409Investment in subsidiaries
    
    
    784,710
    
    
    
    3,951
    
    
    
    
    
    
    
    (788,661
    )
    
    
    Other assets
    
    
    18,336
    
    
    
    59,339
    
    
    
    373
    
    
    
    (8,780
    )
    
    
    69,268Total assets
    
    $
    821,055
    
    
    $
    992,953
    
    
    $
    48,766
    
    
    $
    (830,176
    )
    
    $
    1,032,598Current liabilitiesCurrent liabilities
    
    $
    4,333
    
    
    $
    182,490
    
    
    $
    7,013
    
    
    $
    
    
    
    $
    193,836Intercompany payables
    
    
    
    
    
    
    15,887
    
    
    
    16,848
    
    
    
    (32,735
    )
    
    
    Total current liabilities
    
    
    4,333
    
    
    
    198,377
    
    
    
    23,861
    
    
    
    (32,735
    )
    
    
    193,836Long-term debt
    
    
    494,300
    
    
    
    
    
    
    
    20,954
    
    
    
    (8,780
    )
    
    
    506,474Other long-term liabilities
    
    
    
    
    
    
    9,866
    
    
    
    
    
    
    
    
    
    
    
    9,866Total liabilities
    
    
    498,633
    
    
    
    208,243
    
    
    
    44,815
    
    
    
    (41,515
    )
    
    
    710,176Total stockholders equity (deficit)
    
    
    322,422
    
    
    
    784,710
    
    
    
    3,951
    
    
    
    (788,661
    )
    
    
    322,422Total liabilities and stockholders
equity (deficit)
    
    $
    821,055
    
    
    $
    992,953
    
    
    $
    48,766
    
    
    $
    (830,176
    )
    
    $
    1,032,598
 16




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 SUMMARIZED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED  CONTINUED)
 Supplemental Condensed Consolidating Statements of Operations
 Combined
    
    CombinedParent/
    
    
    
    
    
    Guarantor
    
    Non-GuarantorThree months ended June 30, 2005
    
    Issuer
    
    
    
    
    
    Subsidiaries
    
    Subsidiaries
    
    Eliminations
    
    Consolidated(unaudited)(in thousands)Revenue
    
    $
    
    
    
    
    
    
    
    $
    318,147
    
    
    $
    17,815
    
    
    $
    (2,615
    )
    
    $
    333,347Cost of sales, including costs of warehousing,
distribution and occupancy
    
    
    
    
    
    
    
    
    
    
    213,461
    
    
    
    12,878
    
    
    
    (2,615
    )
    
    
    223,724Gross profit
    
    
    
    
    
    
    
    
    
    
    104,686
    
    
    
    4,937
    
    
    
    
    
    
    
    109,623Compensation and related benefits
    
    
    
    
    
    
    
    
    
    
    53,318
    
    
    
    2,911
    
    
    
    
    
    
    
    56,229Advertising and promotion
    
    
    
    
    
    
    
    
    
    
    13,381
    
    
    
    159
    
    
    
    
    
    
    
    13,540Other selling, general and administrative
    
    
    536
    
    
    
    
    
    
    
    17,509
    
    
    
    697
    
    
    
    
    
    
    
    18,742Subsidiary (income) expense
    
    
    (7,955
    )
    
    
    
    
    
    
    (744
    )
    
    
    
    
    
    
    8,699
    
    
    
    Other expense
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    8
    
    
    
    
    
    
    
    48Operating income (loss)
    
    
    7,419
    
    
    
    
    
    
    
    21,182
    
    
    
    1,162
    
    
    
    (8,699
    )
    
    
    21,064Interest expense, net
    
    
    700
    
    
    
    
    
    
    
    8,730
    
    
    
    375
    
    
    
    
    
    
    
    9,805Income (loss) before income taxes
    
    
    6,719
    
    
    
    
    
    
    
    12,452
    
    
    
    787
    
    
    
    (8,699
    )
    
    
    11,259Income tax (benefit) expense
    
    
    (438
    )
    
    
    
    
    
    
    4,497
    
    
    
    43
    
    
    
    
    
    
    
    4,102Net income (loss)
    
    $
    7,157
    
    
    
    
    
    
    $
    7,955
    
    
    $
    744
    
    
    $
    (8,699
    )
    
    $
    7,157
 Supplemental Condensed Consolidating Statements of Operations
 Combined
    
    CombinedParent/
    
    Guarantor
    
    Non-GuarantorSix months ended June 30, 2005
    
    Issuer
    
    Subsidiaries
    
    Subsidiaries
    
    Eliminations
    
    Consolidated(unaudited)(in thousands)Revenue
    
    $
    
    
    
    $
    640,493
    
    
    $
    35,500
    
    
    $
    (6,211
    )
    
    $
    669,782Cost of sales, including costs of warehousing,
distribution and occupancy
    
    
    
    
    
    
    434,388
    
    
    
    26,003
    
    
    
    (6,211
    )
    
    
    454,180Gross profit
    
    
    
    
    
    
    206,105
    
    
    
    9,497
    
    
    
    
    
    
    
    215,602Compensation and related benefits
    
    
    
    
    
    
    107,639
    
    
    
    5,904
    
    
    
    
    
    
    
    113,543Advertising and promotion
    
    
    
    
    
    
    27,864
    
    
    
    277
    
    
    
    
    
    
    
    28,141Other selling, general and administrative
    
    
    1,014
    
    
    
    35,439
    
    
    
    1,111
    
    
    
    
    
    
    
    37,564Subsidiary (income) expense
    
    
    (13,977
    )
    
    
    (1,554
    )
    
    
    
    
    
    
    15,531
    
    
    
    Other income
    
    
    
    
    
    
    (2,470
    )
    
    
    (87
    )
    
    
    
    
    
    
    (2,557
    )Operating income (loss)
    
    
    12,963
    
    
    
    39,187
    
    
    
    2,292
    
    
    
    (15,531
    )
    
    
    38,911Interest expense, net
    
    
    5,274
    
    
    
    17,301
    
    
    
    701
    
    
    
    
    
    
    
    23,276Income (loss) before income taxes
    
    
    7,689
    
    
    
    21,886
    
    
    
    1,591
    
    
    
    (15,531
    )
    
    
    15,635Income tax (benefit) expense
    
    
    (2,263
    )
    
    
    7,909
    
    
    
    37
    
    
    
    
    
    
    
    5,683Net income (loss)
    
    $
    9,952
    
    
    $
    13,977
    
    
    $
    1,554
    
    
    $
    (15,531
    )
    
    $
    9,952
 17




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 SUMMARIZED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED  CONTINUED)
 Supplemental Condensed Consolidating Statements of Operations
 Combined
    
    CombinedParent/
    
    Guarantor
    
    Non-GuarantorThree months ended June 30, 2004
    
    Issuer
    
    Subsidiaries
    
    Subsidiaries
    
    Eliminations
    
    Consolidated(unaudited)(in thousands)Revenue
    
    $
    
    
    
    $
    332,027
    
    
    $
    18,263
    
    
    $
    (2,562
    )
    
    $
    347,728Cost of sales, including costs of warehousing,
distribution and occupancy
    
    
    
    
    
    
    215,969
    
    
    
    13,173
    
    
    
    (2,562
    )
    
    
    226,580Gross profit
    
    
    
    
    
    
    116,058
    
    
    
    5,090
    
    
    
    
    
    
    
    121,148Compensation and related benefits
    
    
    
    
    
    
    54,910
    
    
    
    2,915
    
    
    
    
    
    
    
    57,825Advertising and promotion
    
    
    
    
    
    
    12,605
    
    
    
    49
    
    
    
    
    
    
    
    12,654Other selling, general and administrative
    
    
    465
    
    
    
    18,201
    
    
    
    167
    
    
    
    
    
    
    
    18,833Subsidiary (income) expense
    
    
    (14,728
    )
    
    
    (1,029
    )
    
    
    
    
    
    
    15,757
    
    
    
    Other income
    
    
    
    
    
    
    96
    
    
    
    515
    
    
    
    
    
    
    
    611Operating income (loss)
    
    
    14,263
    
    
    
    31,275
    
    
    
    1,444
    
    
    
    (15,757
    )
    
    
    31,225Interest expense, net
    
    
    
    
    
    
    8,109
    
    
    
    386
    
    
    
    
    
    
    
    8,495Income (loss) before income taxes
    
    
    14,263
    
    
    
    23,166
    
    
    
    1,058
    
    
    
    (15,757
    )
    
    
    22,730Income tax (benefit) expense
    
    
    (169
    )
    
    
    8,438
    
    
    
    29
    
    
    
    
    
    
    
    8,298Net income (loss)
    
    $
    14,432
    
    
    $
    14,728
    
    
    $
    1,029
    
    
    $
    (15,757
    )
    
    $
    14,432
 Supplemental Condensed Consolidating Statements of Operations
 Combined
    
    CombinedParent/
    
    Guarantor
    
    Non-GuarantorSix months ended June 30, 2004
    
    Issuer
    
    Subsidiaries
    
    Subsidiaries
    
    Eliminations
    
    Consolidated(unaudited)(in thousands)Revenue
    
    $
    
    
    
    $
    687,517
    
    
    $
    37,607
    
    
    $
    (4,841
    )
    
    $
    720,283Cost of sales, including costs of warehousing,
distribution and occupancy
    
    
    
    
    
    
    451,411
    
    
    
    27,153
    
    
    
    (4,841
    )
    
    
    473,723Gross profit
    
    
    
    
    
    
    236,106
    
    
    
    10,454
    
    
    
    
    
    
    
    246,560Compensation and related benefits
    
    
    
    
    
    
    112,918
    
    
    
    6,007
    
    
    
    
    
    
    
    118,925Advertising and promotion
    
    
    
    
    
    
    25,057
    
    
    
    153
    
    
    
    
    
    
    
    25,210Other selling, general and administrative
    
    
    859
    
    
    
    34,956
    
    
    
    802
    
    
    
    
    
    
    
    36,617Subsidiary (income) expense
    
    
    (31,211
    )
    
    
    (2,320
    )
    
    
    
    
    
    
    33,531
    
    
    
    Other income
    
    
    
    
    
    
    65
    
    
    
    353
    
    
    
    
    
    
    
    418Operating income (loss)
    
    
    30,352
    
    
    
    65,430
    
    
    
    3,139
    
    
    
    (33,531
    )
    
    
    65,390Interest expense, net
    
    
    
    
    
    
    16,358
    
    
    
    790
    
    
    
    
    
    
    
    17,148Income (loss) before income taxes
    
    
    30,352
    
    
    
    49,072
    
    
    
    2,349
    
    
    
    (33,531
    )
    
    
    48,242Income tax (benefit) expense
    
    
    (313
    )
    
    
    17,861
    
    
    
    29
    
    
    
    
    
    
    
    17,577Net income (loss)
    
    $
    30,665
    
    
    $
    31,211
    
    
    $
    2,320
    
    
    $
    (33,531
    )
    
    $
    30,665
 18




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 SUMMARIZED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED  CONTINUED)
 Supplemental Condensed Consolidating Statements of Cash Flows
 Combined
    
    CombinedParent/
    
    Guarantor
    
    Non-GuarantorSix months ended June 30, 2005
    
    Issuer
    
    Subsidiaries
    
    Subsidiaries
    
    Consolidated(unaudited)(in thousands)Net cash provided by operating activities
    
    $
    4,506
    
    
    $
    12,960
    
    
    $
    1,104
    
    
    $
    18,570CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    
    
    
    
    (8,811
    )
    
    
    (104
    )
    
    
    (8,915
    )Investment/distribution
    
    
    35,490
    
    
    
    (35,490
    )
    
    
    
    
    
    
    Other investing
    
    
    
    
    
    
    (1,105
    )
    
    
    
    
    
    
    (1,105
    )Net cash provided by (used in) investing activities
    
    
    35,490
    
    
    
    (45,406
    )
    
    
    (104
    )
    
    
    (10,020
    )CASH FLOWS FROM FINANCING ACTIVITIES:GNC Corporation return of capital
from General Nutrition Centers, Inc
    
    
    (416
    )
    
    
    
    
    
    
    
    
    
    
    (416
    )Payments on long-term debt  third parties
    
    
    (185,490
    )
    
    
    
    
    
    
    (504
    )
    
    
    (185,994
    )Proceeds from senior notes issuance
    
    
    150,000
    
    
    
    
    
    
    
    
    
    
    
    150,000Other financing
    
    
    (4,090
    )
    
    
    1,800
    
    
    
    
    
    
    
    (2,290
    )Net cash (used in) provided by financing activities
    
    
    (39,996
    )
    
    
    1,800
    
    
    
    (504
    )
    
    
    (38,700
    )Effect of exchange rate on cash
    
    
    
    
    
    
    
    
    
    
    (111
    )
    
    
    (111
    )Net (decrease) increase in cash
    
    
    
    
    
    
    (30,646
    )
    
    
    385
    
    
    
    (30,261
    )Beginning balance, cash
    
    
    
    
    
    
    82,722
    
    
    
    2,439
    
    
    
    85,161Ending balance, cash
    
    $
    
    
    
    $
    52,076
    
    
    $
    2,824
    
    
    $
    54,900
 19




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 SUMMARIZED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED  CONTINUED)
 Supplemental Condensed Consolidating Statements of Cash Flows
 Combined
    
    CombinedParent/
    
    Guarantor
    
    Non-GuarantorIssuer
    
    Subsidiaries
    
    Subsidiaries
    
    Consolidated(unaudited)Six months ended June 30, 2004
    
    
    
    
    
    (in thousands)Net cash (used in) provided by operating activities
    
    $
    (3,356
    )
    
    $
    28,811
    
    
    $
    348
    
    
    $
    25,803CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    
    
    
    
    (9,794
    )
    
    
    (371
    )
    
    
    (10,165
    )Acquisition of General Nutrition Companies, Inc
    
    
    2,102
    
    
    
    
    
    
    
    
    
    
    
    2,102Investment/distribution
    
    
    1,425
    
    
    
    (1,425
    )
    
    
    
    
    
    
    Other investing
    
    
    
    
    
    
    (162
    )
    
    
    
    
    
    
    (162
    )Net cash provided by (used in) investing activities
    
    
    3,527
    
    
    
    (11,381
    )
    
    
    (371
    )
    
    
    (8,225
    )CASH FLOWS FROM FINANCING ACTIVITIES:GNC Corporation
investment in General Nutrition Centers, Inc
    
    
    1,581
    
    
    
    
    
    
    
    
    
    
    
    1,581Other financing
    
    
    (1,752
    )
    
    
    (3,063
    )
    
    
    (481
    )
    
    
    (5,296
    )Net cash used in financing activities
    
    
    (171
    )
    
    
    (3,063
    )
    
    
    (481
    )
    
    
    (3,715
    )Effect of exchange rate on cash
    
    
    
    
    
    
    
    
    
    
    529
    
    
    
    529Net increase in cash
    
    
    
    
    
    
    14,367
    
    
    
    25
    
    
    
    14,392Beginning balance, cash
    
    
    
    
    
    
    30,642
    
    
    
    2,534
    
    
    
    33,176Ending balance, cash
    
    $
    
    
    
    $
    45,009
    
    
    $
    2,559
    
    
    $
    47,568
 20




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 
 Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
  Forward-Looking Statements
  Overview
  Trends and Other Factors Affecting Our Business
  Results of Operations
     21




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 Results of Operations and Comprehensive Income
  Three Months Ended June 30,
    
    Six Months Ended June 30,2004
    
    2005
    
    2004
    
    2005Revenues:Retail
    
    $
    261.3
    
    
    
    75.2
    %
    
    $
    250.3
    
    
    
    75.1
    %
    
    $
    541.0
    
    
    
    75.1
    %
    
    $
    505.5
    
    
    
    75.5
    %Franchise
    
    
    58.9
    
    
    
    16.9
    %
    
    
    57.7
    
    
    
    17.3
    %
    
    
    123.0
    
    
    
    17.1
    %
    
    
    110.4
    
    
    
    16.5
    %Manufacturing / Wholesale
    
    
    27.5
    
    
    
    7.9
    %
    
    
    25.3
    
    
    
    7.6
    %
    
    
    56.3
    
    
    
    7.8
    %
    
    
    53.9
    
    
    
    8.0
    %Total net revenues
    
    
    347.7
    
    
    
    100.0
    %
    
    
    333.3
    
    
    
    100.0
    %
    
    
    720.3
    
    
    
    100.0
    %
    
    
    669.8
    
    
    
    100.0
    %Operating expenses:Cost of sales, including costs of
warehousing, distribution and
occupancy
    
    
    226.6
    
    
    
    65.1
    %
    
    
    223.7
    
    
    
    67.0
    %
    
    
    473.7
    
    
    
    65.7
    %
    
    
    454.2
    
    
    
    67.9
    %Compensation and related benefits
    
    
    57.8
    
    
    
    16.6
    %
    
    
    56.2
    
    
    
    16.9
    %
    
    
    118.9
    
    
    
    16.5
    %
    
    
    113.5
    
    
    
    16.9
    %Advertising and promotion
    
    
    12.7
    
    
    
    3.7
    %
    
    
    13.5
    
    
    
    4.1
    %
    
    
    25.2
    
    
    
    3.5
    %
    
    
    28.1
    
    
    
    4.2
    %Other selling, general and
administrative expenses
    
    
    17.8
    
    
    
    5.1
    %
    
    
    17.8
    
    
    
    5.3
    %
    
    
    34.7
    
    
    
    4.8
    %
    
    
    35.6
    
    
    
    5.3
    %Amortization expense
    
    
    1.0
    
    
    
    0.3
    %
    
    
    0.9
    
    
    
    0.3
    %
    
    
    2.0
    
    
    
    0.3
    %
    
    
    1.9
    
    
    
    0.3
    %Foreign currency loss (gain)
    
    
    0.6
    
    
    
    0.2
    %
    
    
    
    
    
    
    0.0
    %
    
    
    0.4
    
    
    
    0.1
    %
    
    
    (0.1
    )
    
    
    0.0
    %Other income
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    (2.5
    )
    
    
    -0.4
    %Total operating expenses
    
    
    316.5
    
    
    
    91.0
    %
    
    
    312.1
    
    
    
    93.6
    %
    
    
    654.9
    
    
    
    90.9
    %
    
    
    630.7
    
    
    
    94.2
    %Operating income:Retail
    
    
    30.6
    
    
    
    8.9
    %
    
    
    21.2
    
    
    
    6.3
    %
    
    
    66.0
    
    
    
    9.1
    %
    
    
    39.1
    
    
    
    5.8
    %Franchise
    
    
    16.5
    
    
    
    4.7
    %
    
    
    12.2
    
    
    
    3.6
    %
    
    
    33.6
    
    
    
    4.7
    %
    
    
    23.0
    
    
    
    3.4
    %Manufacturing / Wholesale
    
    
    9.8
    
    
    
    2.8
    %
    
    
    12.5
    
    
    
    3.8
    %
    
    
    18.0
    
    
    
    2.5
    %
    
    
    24.6
    
    
    
    3.7
    %Unallocated corporate and other costs:Warehousing & distribution costs
    
    
    (12.3
    )
    
    
    -3.5
    %
    
    
    (12.2
    )
    
    
    -3.7
    %
    
    
    (25.0
    )
    
    
    -3.5
    %
    
    
    (24.9
    )
    
    
    -3.7
    %Corporate costs
    
    
    (13.4
    )
    
    
    -3.9
    %
    
    
    (12.6
    )
    
    
    -3.7
    %
    
    
    (27.2
    )
    
    
    -3.7
    %
    
    
    (25.4
    )
    
    
    -3.8
    %Other income
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    2.5
    
    
    
    0.4
    %Subtotal unallocated corporate
and other costs
    
    
    (25.7
    )
    
    
    -7.4
    %
    
    
    (24.8
    )
    
    
    -7.4
    %
    
    
    (52.2
    )
    
    
    -7.2
    %
    
    
    (47.8
    )
    
    
    -7.1
    %Total operating income
    
    
    31.2
    
    
    
    9.0
    %
    
    
    21.1
    
    
    
    6.3
    %
    
    
    65.4
    
    
    
    9.1
    %
    
    
    38.9
    
    
    
    5.8
    %Interest expense, net
    
    
    8.5
    
    
    
    
    
    
    
    9.8
    
    
    
    
    
    
    
    17.2
    
    
    
    
    
    
    
    23.3Income before income taxes
    
    
    22.7
    
    
    
    
    
    
    
    11.3
    
    
    
    
    
    
    
    48.2
    
    
    
    
    
    
    
    15.6Income tax expense
    
    
    8.3
    
    
    
    
    
    
    
    4.0
    
    
    
    
    
    
    
    17.5
    
    
    
    
    
    
    
    5.6Net income
    
    
    14.4
    
    
    
    
    
    
    
    7.3
    
    
    
    
    
    
    
    30.7
    
    
    
    
    
    
    
    10.0Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    (0.4
    )
    
    
    
    
    
    
    (0.5
    )
    
    
    
    
    
    
    (0.6
    )Comprehensive income
    
    $
    14.4
    
    
    
    
    
    
    $
    6.9
    
    
    
    
    
    
    $
    30.2
    
    
    
    
    
    
    $
    9.4
 22




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 Comparison of the Three Months Ended June 30, 2005 and June 30, 2004
 Revenues
 Consolidated.
 Retail.
 Franchise.
 Manufacturing/Wholesale.
 Cost of Sales
     Selling, General and Administrative Expenses
  23




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
    Foreign Currency Loss
  Operating Income
 Consolidated.
 Retail.
 Franchise.
 Manufacturing/Wholesale.
 Warehousing & Distribution Costs.
 Corporate Costs.
 Interest Expense
  Income Tax Expense
  Net Income
  24




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 Other Comprehensive Loss
  Comparison of the Six Months Ended June 30, 2005 and June 30, 2004
 Revenues
 Consolidated.
 Retail.
 Franchise.
 Manufacturing/Wholesale.
 Cost of Sales
     25




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 Selling, General and Administrative Expenses
     Foreign Currency Gain / Loss
  Other Income
  Operating Income
 Consolidated.
 Retail.
 Franchise.
 Manufacturing/Wholesale.
 Warehousing & Distribution Costs.
 Corporate Costs.
 26




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 Interest Expense
  Income Tax Expense
  Net Income
  Other Comprehensive Loss
  27




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 Liquidity and Capital Resources
  Cash Provided by Operating Activities
  Cash Used in Investing Activities
  Cash Used in Financing Activities
   Contractual Obligations
  Off Balance Sheet Arrangements
  28




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
  Effect of Inflation
  Recently Issued Accounting Pronouncements
     29




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 
 Item 3 Quantitative and Qualitative Disclosures about Market Risk
  Foreign Exchange Rate Market Risk.
 Interest Rate Market Risk.
  
 Item 4 Controls and Procedures
  30




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 
 PART II OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 6. Exhibits
 Exhibit 31.1 
    
    Certification of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.Exhibit 31.2 
    
    Certification of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.Exhibit 32.1 
    
    Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
 31




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
 
 SIGNATURES
  General Nutrition Centers, Inc.(Registrant)August 5, 2005
    
    /s/ Bruce E. BarkusBruce
E. BarkusChief Executive OfficerAugust 5, 2005
    
    /s/ Curtis J. LarrimerCurtis
J. LarrimerChief Financial Officer
 32