##### 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 1934
 For the quarterly period ended June 30, 2009
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from  to  .
 Commission File Number: 333-144396
 GENERAL NUTRITION CENTERS, INC.
  Delaware
(State or other jurisdiction of 
Incorporation or organization)
    
    72-1575168
(I.R.S. Employer
Identification No.)300 Sixth Avenue 
Pittsburgh, Pennsylvania
(Address of principal executive offices)
    
    15222
(Zip Code)
 (412) 288-4600
 o þ
 o o
  Large accelerated filer oAccelerated filer oNon-accelerated filer þ(Do not check if a smaller reporting company)Smaller reporting company o
 o þ




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##### 



TABLE OF CONTENTS
 PAGEPART I  FINANCIAL INFORMATIONExplanatory Note.Item 1.
    
    Financial Statements.Consolidated Balance Sheets as of June 30, 2009 (unaudited) and December 31, 2008
    
    
    1Unaudited Consolidated Statements of Operations and Comprehensive Income for the
three and six months ended June 30, 2009 and 2008.
    
    
    2Unaudited Consolidated Statement of Stockholders Equity for the six months
ended June 30, 2009
    
    
    3Unaudited Consolidated Statements of Cash Flows for the six months ended June
30, 2009 and 2008.
    
    
    4Summarized Notes to Unaudited Consolidated Financial Statements
    
    
    5Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations.
    
    
    31Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
    
    
    46Item 4.
    
    Controls and Procedures.
    
    
    47PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings.
    
    
    48Item 1A.
    
    Risk Factors.
    
    
    52Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.
    
    
    61Item 3.
    
    Defaults Upon Senior Securities.
    
    
    61Item 4.
    
    Submission of Matters to a Vote of Security Holders.
    
    
    61Item 5.
    
    Other Information.
    
    
    61Item 6.
    
    Exhibits.
    
    
    61Signatures
    
    
    62EX-31.1EX-31.2EX-32.1




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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)
 June 30,
    
    
    December 31,2009
    
    
    2008 *(unaudited)Current assets:Cash and cash equivalents
    
    $
    66,575
    
    
    $
    42,307Receivables, net
    
    
    91,546
    
    
    
    89,413Inventories, net (Note 3)
    
    
    385,721
    
    
    
    363,654Deferred tax assets, net
    
    
    11,455
    
    
    
    11,455Prepaids and other current assets
    
    
    32,875
    
    
    
    47,952Total current assets
    
    
    588,172
    
    
    
    554,781Long-term assets:Goodwill (Note 4)
    
    
    623,698
    
    
    
    622,909Brands (Note 4)
    
    
    720,000
    
    
    
    720,000Other intangible assets, net (Note 4)
    
    
    158,544
    
    
    
    163,176Property, plant and equipment, net
    
    
    199,767
    
    
    
    206,154Deferred financing fees, net
    
    
    20,489
    
    
    
    22,470Other long-term assets
    
    
    3,223
    
    
    
    2,518Total long-term assets
    
    
    1,725,721
    
    
    
    1,737,227Total assets
    
    $
    2,313,893
    
    
    $
    2,292,008Current liabilities:Accounts payable
    
    $
    118,964
    
    
    $
    123,577Accrued payroll and related liabilities
    
    
    26,396
    
    
    
    22,582Accrued interest (Note 5)
    
    
    13,960
    
    
    
    15,745Current portion, long-term debt (Note 5)
    
    
    1,433
    
    
    
    13,509Deferred revenue and other current liabilities
    
    
    77,014
    
    
    
    74,309Total current liabilities
    
    
    237,767
    
    
    
    249,722Long-term liabilities:Long-term debt (Note 5)
    
    
    1,063,873
    
    
    
    1,071,237Deferred tax liabilities, net
    
    
    279,507
    
    
    
    278,003Other long-term liabilities
    
    
    38,455
    
    
    
    40,984Total long-term liabilities
    
    
    1,381,835
    
    
    
    1,390,224Total liabilities
    
    
    1,619,602
    
    
    
    1,639,946Stockholders equity:Common stock, $0.01 par value,
1,000 shares authorized, 100 shares issued and outstanding
    
    
    
    
    
    
    Paid-in-capital
    
    
    593,420
    
    
    
    592,355Retained earnings
    
    
    111,176
    
    
    
    73,764Accumulated
other comprehensive loss
    
    
    (10,305
    )
    
    
    (14,057
    )Total stockholders equity
    
    
    694,291
    
    
    
    652,062Total liabilities and stockholders equity
    
    $
    2,313,893
    
    
    $
    2,292,008
 
 *
    
    Footnotes summarized from the Audited Financial Statements  1




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
(unaudited)
(in thousands)
 Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue
    
    $
    432,416
    
    
    $
    422,662
    
    
    $
    872,313
    
    
    $
    850,795Cost of sales, including costs of warehousing,
distribution and occupancy
    
    
    280,906
    
    
    
    274,277
    
    
    
    566,635
    
    
    
    553,167Gross profit
    
    
    151,510
    
    
    
    148,385
    
    
    
    305,678
    
    
    
    297,628Compensation and related benefits
    
    
    65,526
    
    
    
    62,884
    
    
    
    130,851
    
    
    
    124,455Advertising and promotion
    
    
    14,395
    
    
    
    13,640
    
    
    
    29,134
    
    
    
    31,787Other selling, general and administrative
    
    
    25,881
    
    
    
    24,911
    
    
    
    49,734
    
    
    
    49,836Foreign currency (gain) loss
    
    
    (130
    )
    
    
    (29
    )
    
    
    (33
    )
    
    
    63Operating income
    
    
    45,838
    
    
    
    46,979
    
    
    
    95,992
    
    
    
    91,487Interest expense, net (Note 5)
    
    
    17,081
    
    
    
    19,433
    
    
    
    36,143
    
    
    
    42,504Income before income taxes
    
    
    28,757
    
    
    
    27,546
    
    
    
    59,849
    
    
    
    48,983Income tax expense (Note 11)
    
    
    10,791
    
    
    
    10,538
    
    
    
    22,437
    
    
    
    18,635Net income
    
    
    17,966
    
    
    
    17,008
    
    
    
    37,412
    
    
    
    30,348Other comprehensive income (loss)
    
    
    3,830
    
    
    
    2,343
    
    
    
    3,752
    
    
    
    (2,221
    )Comprehensive income
    
    $
    21,796
    
    
    $
    19,351
    
    
    $
    41,164
    
    
    $
    28,127
  2




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders Equity
(in thousands, except share data)
 AccumulatedOther
    
    
    TotalCommon Stock
    
    
    
    
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Dollars
    
    
    Paid-in-Capital
    
    
    Earnings
    
    
    Loss
    
    
    EquityBalance at December 31, 2008
    
    
    100
    
    
    $
    
    
    
    $
    592,355
    
    
    $
    73,764
    
    
    $
    (14,057
    )
    
    $
    652,062Return of capital to GNC Corporation
    
    
    
    
    
    
    
    
    
    
    (278
    )
    
    
    
    
    
    
    
    
    
    
    (278
    )Non-cash stock-based compensation
    
    
    
    
    
    
    
    
    
    
    1,343
    
    
    
    
    
    
    
    
    
    
    
    1,343Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,412
    
    
    
    
    
    
    
    37,412Unrealized gain on derivatives designated and qualified
as cash flow hedges, net of tax of $1,422
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,485
    
    
    
    2,485Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,267
    
    
    
    1,267Balance at June 30, 2009 (unaudited)
    
    
    100
    
    
    $
    
    
    
    $
    593,420
    
    
    $
    111,176
    
    
    $
    (10,305
    )
    
    $
    694,291
  3




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
 Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    37,412
    
    
    $
    30,348Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation expense
    
    
    18,059
    
    
    
    14,897Amortization of intangible assets
    
    
    4,950
    
    
    
    5,732Amortization of deferred financing fees
    
    
    2,026
    
    
    
    1,923Amortization of original issue discount
    
    
    182
    
    
    
    165Increase in provision for inventory losses
    
    
    5,779
    
    
    
    6,749Non-cash stock-based compensation
    
    
    1,343
    
    
    
    1,452(Decrease) increase in provision for losses on accounts receivable
    
    
    (1,503
    )
    
    
    863Decrease in net deferred taxes
    
    
    82
    
    
    
    Changes in assets and liabilities:(Increase) decrease in receivables
    
    
    (517
    )
    
    
    442Increase in inventory, net
    
    
    (26,988
    )
    
    
    (15,238
    )(Increase) decrease in franchise note receivables, net
    
    
    (178
    )
    
    
    398Decrease in prepaid income taxes
    
    
    9,783
    
    
    
    12,252Decrease in other assets
    
    
    5,187
    
    
    
    1,442(Decrease) increase in accounts payable
    
    
    (4,754
    )
    
    
    2,708Decrease in interest payable
    
    
    (1,786
    )
    
    
    (2,800
    )Increase (decrease) in accrued liabilities
    
    
    7,265
    
    
    
    (8,572
    )Net cash provided by operating activities
    
    
    56,342
    
    
    
    52,761CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (11,303
    )
    
    
    (21,205
    )Franchise store conversions
    
    
    158
    
    
    
    34Store acquisition costs
    
    
    (1,050
    )
    
    
    (140
    )Net cash used in investing activities
    
    
    (12,195
    )
    
    
    (21,311
    )CASH FLOWS FROM FINANCING ACTIVITIES:Return of capital to Parent company
    
    
    (278
    )
    
    
    (813
    )Debt financing fees
    
    
    (45
    )
    
    
    Payments on long-term debt
    
    
    (19,623
    )
    
    
    (3,943
    )Net cash used in financing activities
    
    
    (19,946
    )
    
    
    (4,756
    )Effect of exchange rate on cash
    
    
    67
    
    
    
    234Net increase in cash
    
    
    24,268
    
    
    
    26,928Beginning balance, cash
    
    
    42,307
    
    
    
    28,854Ending balance, cash
    
    $
    66,575
    
    
    $
    55,782
  4




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 1. NATURE OF BUSINESS
 General Nature of Business .
   Merger of the Company.
 5




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 2. BASIS OF PRESENTATION
    Principles of Consolidation.
  Use of Estimates .
 Cash and Cash Equivalents .
  6




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  Financial Instruments and Derivatives .
   Fair ValueBalance Sheet Location
    
    
    June 30, 2009
    
    
    December 31, 2008(unaudited)(in thousands)Interest Rate Products
    
    Other long-term liabilities
    
    $
    (14,995
    )
    
    $
    (18,902
    )
   7




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  Derivatives in SFAS
    
    Amount of Gain or
    
    
    Location of Gain or
(Loss)
    
    
    Amount of Gain or
(Loss)133 Cash Flow
    
    (Loss) Recognized in
    
    
    Reclassified from
    
    
    Reclassified fromHedging
    
    OCI on Derivative
    
    
    Accumulated OCI into
    
    
    Accumulated OCI intoRelationships
    

(Effective
Portion)
    
    

Income
(Effective Portion)
    
    

Income
(Effective Portion)(in thousands)Interest Rate Products
    
    $
    409
    
    
    Interest income/ (expense)
    
    
    $
    2,650
  Derivatives in SFAS
    
    Amount of Gain or
    
    
    Location of Gain or (Loss)
    
    
    Amount of Gain or (Loss)133 Cash Flow
    
    (Loss) Recognized in
    
    
    Reclassified from
    
    
    Reclassified fromHedging
    
    OCI on Derivative
    
    
    Accumulated OCI into
    
    
    Accumulated OCI intoRelationships
    

(Effective Portion)
    
    

Income (Effective Portion)
    
    

Income
(Effective Portion)Interest Rate Products
    
    $
    (1,796)
    
    
    Interest income/ (expense)
    
    
    $
    5,703
    Recently Issued Accounting Pronouncements
   8




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
       9




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  TM
  NOTE 3. INVENTORIES, NET
  June 30, 2009Net CarryingGross cost
    
    
    Reserves
    
    
    Value(unaudited)(in thousands)Finished product ready for sale
    
    $
    325,093
    
    
    $
    (8,800
    )
    
    $
    316,293Work-in-process, bulk product and raw materials
    
    
    64,816
    
    
    
    (1,300
    )
    
    
    63,516Packaging supplies
    
    
    5,912
    
    
    
    
    
    
    
    5,912$
    395,821
    
    
    $
    (10,100
    )
    
    $
    385,721
 December 31, 2008Net CarryingGross cost
    
    
    Reserves
    
    
    Value(in thousands)Finished product ready for sale
    
    $
    311,218
    
    
    $
    (9,275
    )
    
    $
    301,943Work-in-process, bulk product and raw materials
    
    
    57,995
    
    
    
    (1,111
    )
    
    
    56,884Packaging supplies
    
    
    4,827
    
    
    
    
    
    
    
    4,827$
    374,040
    
    
    $
    (10,386
    )
    
    $
    363,654
 10




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 4. GOODWILL AND INTANGIBLE ASSETS, NET
    Manufacturing/Retail
    
    
    Franchising
    
    
    Wholesale
    
    
    Total(in thousands)Balance at December 31, 2008
    
    $
    302,765
    
    
    $
    117,303
    
    
    $
    202,841
    
    
    $
    622,909Acquired franchise stores
    
    
    789
    
    
    
    
    
    
    
    
    
    
    
    789Balance at June 30, 2009 (unaudited)
    
    $
    303,554
    
    
    $
    117,303
    
    
    $
    202,841
    
    
    $
    623,698
  Retail
    
    
    Franchise
    
    
    Operating
    
    
    FranchiseGold Card
    
    
    Brand
    
    
    Brand
    
    
    Agreements
    
    
    Rights
    
    
    Total(in thousands)Balance at December 31, 2008
    
    $
    2,456
    
    
    $
    500,000
    
    
    $
    220,000
    
    
    $
    160,019
    
    
    $
    701
    
    
    $
    883,176Acquired franchise stores
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    318
    
    
    
    318Amortization expense
    
    
    (1,181
    )
    
    
    
    
    
    
    
    
    
    
    (3,444
    )
    
    
    (325
    )
    
    
    (4,950
    )Balance at June 30, 2009 (unaudited)
    
    $
    1,275
    
    
    $
    500,000
    
    
    $
    220,000
    
    
    $
    156,575
    
    
    $
    694
    
    
    $
    878,544
  Estimated
    
    
    June 30, 2009
    
    
    December 31, 2008Life
    
    
    
    
    
    
    Accumulated
    
    
    Carrying
    
    
    
    
    
    
    Accumulated
    
    
    Carryingin years
    
    
    Cost
    
    
    Amortization
    
    
    Amount
    
    
    Cost
    
    
    Amortization
    
    
    Amount(unaudited)
    
    
    (in thousands)Brands  retail
    
    
    
    
    
    $
    500,000
    
    
    $
    
    
    
    $
    500,000
    
    
    $
    500,000
    
    
    $
    
    
    
    $
    500,000Brands  franchise
    
    
    
    
    
    
    220,000
    
    
    
    
    
    
    
    220,000
    
    
    
    220,000
    
    
    
    
    
    
    
    220,000Gold card  retail
    
    
    3
    
    
    
    3,500
    
    
    
    (3,004
    )
    
    
    496
    
    
    
    3,500
    
    
    
    (2,545
    )
    
    
    955Gold card  franchise
    
    
    3
    
    
    
    5,500
    
    
    
    (4,721
    )
    
    
    779
    
    
    
    5,500
    
    
    
    (3,999
    )
    
    
    1,501Retail agreements
    
    
    25-35
    
    
    
    31,000
    
    
    
    (2,564
    )
    
    
    28,436
    
    
    
    31,000
    
    
    
    (2,038
    )
    
    
    28,962Franchise agreements
    
    
    25
    
    
    
    70,000
    
    
    
    (6,417
    )
    
    
    63,583
    
    
    
    70,000
    
    
    
    (5,016
    )
    
    
    64,984Manufacturing agreements
    
    
    25
    
    
    
    70,000
    
    
    
    (6,417
    )
    
    
    63,583
    
    
    
    70,000
    
    
    
    (5,017
    )
    
    
    64,983Other intangibles
    
    
    5
    
    
    
    1,150
    
    
    
    (177
    )
    
    
    973
    
    
    
    1,150
    
    
    
    (60
    )
    
    
    1,090Franchise rights
    
    
    1-5
    
    
    
    2,426
    
    
    
    (1,732
    )
    
    
    694
    
    
    
    2,108
    
    
    
    (1,407
    )
    
    
    701$
    903,576
    
    
    $
    (25,032
    )
    
    $
    878,544
    
    
    $
    903,258
    
    
    $
    (20,082
    )
    
    $
    883,176
 11




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  EstimatedamortizationYears ending December 31,
    
    expense(in thousands)2009
    
    $
    4,6602010
    
    
    7,5002011
    
    
    6,9582012
    
    
    6,8872013
    
    
    6,865Thereafter
    
    
    125,674Total
    
    $
    158,544
 NOTE 5. LONG-TERM DEBT / INTEREST EXPENSE
  June 30,
    
    
    December 31,2009
    
    
    2008(unaudited)(in thousands)2007 Senior Credit Facility
    
    $
    649,619
    
    
    $
    668,563Senior Toggle Notes
    
    
    297,768
    
    
    
    297,58510.75% Senior Subordinated Notes
    
    
    110,000
    
    
    
    110,000Mortgage
    
    
    7,882
    
    
    
    8,557Capital leases
    
    
    37
    
    
    
    41Less: current maturities
    
    
    (1,433
    )
    
    
    (13,509
    )Total
    
    $
    1,063,873
    
    
    $
    1,071,237
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(unaudited)(in thousands)2007 Senior Credit FacilityTerm Loan
    
    $
    7,943
    
    
    $
    10,046
    
    
    $
    17,148
    
    
    $
    21,942Revolver
    
    
    129
    
    
    
    106
    
    
    
    265
    
    
    
    217Senior Toggle Notes
    
    
    4,803
    
    
    
    5,400
    
    
    
    10,334
    
    
    
    12,53210.75% Senior Subordinated Notes
    
    
    2,956
    
    
    
    2,956
    
    
    
    5,912
    
    
    
    5,912OID amortization
    
    
    93
    
    
    
    84
    
    
    
    182
    
    
    
    165Deferred financing fees
    
    
    1,025
    
    
    
    982
    
    
    
    2,026
    
    
    
    1,923Mortgage
    
    
    141
    
    
    
    162
    
    
    
    288
    
    
    
    324Interest income-other
    
    
    (9
    )
    
    
    (303
    )
    
    
    (12
    )
    
    
    (511
    )Interest expense, net
    
    $
    17,081
    
    
    $
    19,433
    
    
    $
    36,143
    
    
    $
    42,504
 12




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  June 30,
    
    
    December 31,2009
    
    
    2008(unaudited)(in thousands)2007 Senior Credit Facility
    
    $
    4,822
    
    
    $
    5,564Senior Toggle Notes
    
    
    5,657
    
    
    
    6,70010.75% Senior Subordinated Notes
    
    
    3,481
    
    
    
    3,481Total
    
    $
    13,960
    
    
    $
    15,745
  NOTE 6. FINANCIAL INSTRUMENTS
  June 30,
    
    
    December 31,2009
    
    
    2008Carrying
    
    Fair
    
    
    Carrying
    
    FairAmount
    
    Value
    
    
    Amount
    
    Value(unaudited)(in thousands)Cash and cash equivalents
    
    $
    66,575
    
    
    $
    66,575
    
    
    
    $
    42,307
    
    
    $
    42,307Receivables
    
    
    91,546
    
    
    
    91,546
    
    
    
    
    89,413
    
    
    
    89,413Franchise notes receivable
    
    
    1,913
    
    
    
    1,913
    
    
    
    
    1,828
    
    
    
    1,828Accounts payable
    
    
    118,964
    
    
    
    118,964
    
    
    
    
    123,577
    
    
    
    123,577Long term debt
    
    
    1,065,306
    
    
    
    910,064
    
    
    
    
    1,084,746
    
    
    
    702,392
 13




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 7. COMMITMENTS AND CONTINGENCIES
 Litigation
   Pro-Hormone/Androstenedione Cases. Stephens and Pio
  Guzman v. General Nutrition Companies, Inc
  14




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  Guzman
 Stephens and Pio v. General Nutrition
Companies, Inc. (Case No. 08 CH 37097, Circuit Court of Cook County, Illinois, County Department,
Chancery Division).
  California Wage and Break Claim
 California Wage and Break Claim
 Franchise Class Action.
 15




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  Creatine
Claim
 Jackson Claim.
 DiMauro Claim.
 Ciavarra Claim
 Romero Claim
 Hydroxycut Claims. see Ciavarra Claim
 16




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
   
    
    Michael Owens and Donna Owens v. Iovate Health Sciences USA, Inc., et al., Superior
Court of the State of California, County of Los Angeles;
    
    Eva M. Stasiak v. Iovate Health Sciences USA, Inc., et al., Superior Court of the
State of California, County of Los Angeles; and
    
    Jaime Ruben Perez v. Gerald Brandt, individually and d/b/a/ Breakthru Products, et
al., 229th Judicial District, Duval County, Texas.
   
    
    Andrew Dremak, et al. v. Iovate Health Sciences Group, Inc., et al., U.S. District
Court, Southern District of California;
    
    Enjoli Pennier, et al. v. Iovate Health Sciences, et al., U.S. District Court,
Eastern District of Louisiana;
    
    Alejandro M. Jimenez, et al. v. Iovate Health Sciences, Inc., et al., U.S. District
Court, Eastern District of California;
    
    Amy Baker, et al. v. Iovate Health Sciences USA, Inc., et al., U.S. District Court,
Northern District of Alabama; and
    
    Kyle Davis and Sara Carreon, et al. v. Iovate Health Sciences USA, Inc., et al.,
U.S. District Court, Northern District of Alabama.
  Bedell Claim.
 Chen Claim
 California False Labeling and Consumer Fraud Claims.
 
    
    Michael Gonzales and Zia Nawabi, et al. v. Maximum Human Performance, Inc., et al., U.S.
District Court, Central District of California (Musclemeds);
 17




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
    
    Michael Campos and Michael Gonzales, et al. v. LG Sciences, LLC, et al., Superior Court
of California, for the County of Orange (LG Sciences);
    
    Nicole Forlenza and Shaiden Monroe, et al. v. Dynakor Pharmacal, LLC, et al., U.S.
District Court, Central District of California; and
    
    Vance Monroe and Mac Gonzales, et al. v. Biotab Nutraceuticals, Inc., et al.,
U.S. District Court, Southern District of California.
   Commitments
  Environmental Compliance
   18




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Contingencies
  NOTE 8. STOCK-BASED COMPENSATION PLANS
 Stock Options
   Weighted AverageTotal Options
    
    Exercise PriceOutstanding at December 31, 2008
    
    
    8,883,692
    
    
    $
    7.10Granted
    
    
    125,000
    
    
    
    9.63Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (317,667
    )
    
    
    6.25Expired
    
    
    (88,187
    )
    
    
    6.25Outstanding at June 30, 2009
    
    
    8,602,838
    
    
    $
    7.03Exercisable at June 30, 2009
    
    
    3,014,239
    
    
    $
    6.53
    19




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  June 30,2009(unaudited)Dividend yield
    
    
    0.00
    %Expected option life
    
    7.5 yearsVolatility factor percentage of market price
    
    
    42.7
    %Discount rate
    
    
    2.62
    %
  20




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 9. SEGMENTS
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(unaudited)(in thousands)Revenue:Retail
    
    $
    316,942
    
    
    $
    314,506
    
    
    $
    650,654
    
    
    $
    635,801Franchise
    
    
    69,225
    
    
    
    65,107
    
    
    
    133,708
    
    
    
    130,011Manufacturing/Wholesale:Intersegment (1)
    
    
    50,267
    
    
    
    46,212
    
    
    
    98,018
    
    
    
    90,322Third Party
    
    
    46,249
    
    
    
    43,049
    
    
    
    87,951
    
    
    
    84,983Sub total Manufacturing/Wholesale
    
    
    96,516
    
    
    
    89,261
    
    
    
    185,969
    
    
    
    175,305Sub total segment revenues
    
    
    482,683
    
    
    
    468,874
    
    
    
    970,331
    
    
    
    941,117Intersegment elimination (1)
    
    
    (50,267
    )
    
    
    (46,212
    )
    
    
    (98,018
    )
    
    
    (90,322
    )Total revenue
    
    $
    432,416
    
    
    $
    422,662
    
    
    $
    872,313
    
    
    $
    850,795Operating income:Retail
    
    $
    41,583
    
    
    $
    42,233
    
    
    $
    86,026
    
    
    $
    79,050Franchise
    
    
    19,550
    
    
    
    18,699
    
    
    
    38,757
    
    
    
    38,483Manufacturing/Wholesale
    
    
    17,337
    
    
    
    17,325
    
    
    
    35,218
    
    
    
    33,063Unallocated corporate and other costs:Warehousing and distribution costs
    
    
    (13,700
    )
    
    
    (13,837
    )
    
    
    (27,017
    )
    
    
    (27,606
    )Corporate costs
    
    
    (18,932
    )
    
    
    (17,441
    )
    
    
    (36,992
    )
    
    
    (31,503
    )Sub total unallocated corporate and
other costs
    
    
    (32,632
    )
    
    
    (31,278
    )
    
    
    (64,009
    )
    
    
    (59,109
    )Total operating income
    
    $
    45,838
    
    
    $
    46,979
    
    
    $
    95,992
    
    
    $
    91,487
 
 (1)
    
    Intersegment revenues are eliminated from consolidated revenue. 21




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 10. SUPPLEMENTAL GUARANTOR INFORMATION
    22




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Supplemental Condensed Consolidating Balance Sheets
 Combined
    
    
    CombinedParent/
    
    
    Guarantor
    
    
    Non-GuarantorJune 30, 2009
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(unaudited)(in thousands)Current assetsCash and cash equivalents
    
    $
    65,184
    
    
    $
    (1,363
    )
    
    $
    2,754
    
    
    $
    
    
    
    $
    66,575Receivables, net
    
    
    415
    
    
    
    90,938
    
    
    
    193
    
    
    
    
    
    
    
    91,546Intercompany receivables
    
    
    185,405
    
    
    
    
    
    
    
    
    
    
    
    (185,405
    )
    
    
    Inventories, net
    
    
    
    
    
    
    361,587
    
    
    
    24,134
    
    
    
    
    
    
    
    385,721Prepaids and other current assets
    
    
    12,498
    
    
    
    23,166
    
    
    
    8,666
    
    
    
    
    
    
    
    44,330Total current assets
    
    
    263,502
    
    
    
    474,328
    
    
    
    35,747
    
    
    
    (185,405
    )
    
    
    588,172Goodwill
    
    
    
    
    
    
    623,230
    
    
    
    468
    
    
    
    
    
    
    
    623,698Brands
    
    
    
    
    
    
    720,000
    
    
    
    
    
    
    
    
    
    
    
    720,000Property, plant and equipment, net
    
    
    8,836
    
    
    
    164,300
    
    
    
    26,631
    
    
    
    
    
    
    
    199,767Investment in subsidiaries
    
    
    1,512,296
    
    
    
    19,245
    
    
    
    
    
    
    
    (1,531,541
    )
    
    
    Other assets
    
    
    30,855
    
    
    
    160,182
    
    
    
    
    
    
    
    (8,781
    )
    
    
    182,256Total assets
    
    $
    1,815,489
    
    
    $
    2,161,285
    
    
    $
    62,846
    
    
    $
    (1,725,727
    )
    
    $
    2,313,893Current liabilitiesCurrent liabilities
    
    $
    46,696
    
    
    $
    180,411
    
    
    $
    10,660
    
    
    $
    
    
    
    $
    237,767Intercompany payables
    
    
    
    
    
    
    168,022
    
    
    
    17,383
    
    
    
    (185,405
    )
    
    
    Total current liabilities
    
    
    46,696
    
    
    
    348,433
    
    
    
    28,043
    
    
    
    (185,405
    )
    
    
    237,767Long-term debt
    
    
    1,057,386
    
    
    
    27
    
    
    
    15,241
    
    
    
    (8,781
    )
    
    
    1,063,873Deferred tax liabilities
    
    
    (7,251
    )
    
    
    286,758
    
    
    
    
    
    
    
    
    
    
    
    279,507Other long-term liabilities
    
    
    24,367
    
    
    
    13,771
    
    
    
    317
    
    
    
    
    
    
    
    38,455Total liabilities
    
    
    1,121,198
    
    
    
    648,989
    
    
    
    43,601
    
    
    
    (194,186
    )
    
    
    1,619,602Total stockholders equity (deficit)
    
    
    694,291
    
    
    
    1,512,296
    
    
    
    19,245
    
    
    
    (1,531,541
    )
    
    
    694,291Total liabilities and stockholders
equity (deficit)
    
    $
    1,815,489
    
    
    $
    2,161,285
    
    
    $
    62,846
    
    
    $
    (1,725,727
    )
    
    $
    2,313,893
 23




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Supplemental Condensed Consolidating Balance Sheets
 Combined
    
    
    CombinedParent/
    
    
    Guarantor
    
    
    Non-GuarantorDecember 31, 2008
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)Current assetsCash and cash equivalents
    
    $
    
    
    
    $
    40,077
    
    
    $
    2,230
    
    
    $
    
    
    
    $
    42,307Receivables, net
    
    
    369
    
    
    
    88,972
    
    
    
    72
    
    
    
    
    
    
    
    89,413Intercompany receivables
    
    
    
    
    
    
    87,554
    
    
    
    
    
    
    
    (87,554
    )
    
    
    Inventories, net
    
    
    
    
    
    
    342,085
    
    
    
    21,569
    
    
    
    
    
    
    
    363,654Prepaids and other current assets
    
    
    (82
    )
    
    
    55,520
    
    
    
    3,969
    
    
    
    
    
    
    
    59,407Total current assets
    
    
    287
    
    
    
    614,208
    
    
    
    27,840
    
    
    
    (87,554
    )
    
    
    554,781Goodwill
    
    
    
    
    
    
    622,441
    
    
    
    468
    
    
    
    
    
    
    
    622,909Brands
    
    
    
    
    
    
    720,000
    
    
    
    
    
    
    
    
    
    
    
    720,000Property, plant and equipment, net
    
    
    
    
    
    
    180,494
    
    
    
    25,660
    
    
    
    
    
    
    
    206,154Investment in subsidiaries
    
    
    1,797,306
    
    
    
    10,482
    
    
    
    
    
    
    
    (1,807,788
    )
    
    
    Other assets
    
    
    22,470
    
    
    
    174,475
    
    
    
    
    
    
    
    (8,781
    )
    
    
    188,164Total assets
    
    $
    1,820,063
    
    
    $
    2,322,100
    
    
    $
    53,968
    
    
    $
    (1,904,123
    )
    
    $
    2,292,008Current liabilitiesCurrent liabilities
    
    $
    20,644
    
    
    $
    220,120
    
    
    $
    8,958
    
    
    $
    
    
    
    $
    249,722Intercompany payables
    
    
    69,244
    
    
    
    
    
    
    
    18,310
    
    
    
    (87,554
    )
    
    
    Total current liabilities
    
    
    89,888
    
    
    
    220,120
    
    
    
    27,268
    
    
    
    (87,554
    )
    
    
    249,722Long-term debt
    
    
    1,064,024
    
    
    
    30
    
    
    
    15,964
    
    
    
    (8,781
    )
    
    
    1,071,237Deferred tax liabilities
    
    
    (4,813
    )
    
    
    282,816
    
    
    
    
    
    
    
    
    
    
    
    278,003Other long-term liabilities
    
    
    18,902
    
    
    
    21,828
    
    
    
    254
    
    
    
    
    
    
    
    40,984Total liabilities
    
    
    1,168,001
    
    
    
    524,794
    
    
    
    43,486
    
    
    
    (96,335
    )
    
    
    1,639,946Total stockholders equity (deficit)
    
    
    652,062
    
    
    
    1,797,306
    
    
    
    10,482
    
    
    
    (1,807,788
    )
    
    
    652,062Total liabilities and stockholders
equity (deficit)
    
    $
    1,820,063
    
    
    $
    2,322,100
    
    
    $
    53,968
    
    
    $
    (1,904,123
    )
    
    $
    2,292,008
 24




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Supplemental Condensed Consolidating Statements of Operations
 Combined
    
    
    CombinedParent/
    
    
    Guarantor
    
    
    Non-GuarantorThree months ended June 30, 2009
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(unaudited)(in thousands)Revenue
    
    $
    
    
    
    $
    410,575
    
    
    $
    25,029
    
    
    $
    (3,188
    )
    
    $
    432,416Cost of sales, including costs of warehousing,
distribution and occupancy
    
    
    
    
    
    
    266,292
    
    
    
    17,802
    
    
    
    (3,188
    )
    
    
    280,906Gross profit
    
    
    
    
    
    
    144,283
    
    
    
    7,227
    
    
    
    
    
    
    
    151,510Compensation and related benefits
    
    
    10,658
    
    
    
    50,841
    
    
    
    4,027
    
    
    
    
    
    
    
    65,526Advertising and promotion
    
    
    
    
    
    
    14,173
    
    
    
    222
    
    
    
    
    
    
    
    14,395Other selling, general and administrative
    
    
    8,910
    
    
    
    17,049
    
    
    
    (78
    )
    
    
    
    
    
    
    25,881Subsidiary (income) expense
    
    
    (19,207
    )
    
    
    (1,509
    )
    
    
    
    
    
    
    20,716
    
    
    
    Other (income) expense
    
    
    (18,547
    )
    
    
    17,543
    
    
    
    874
    
    
    
    
    
    
    
    (130
    )Operating income (loss)
    
    
    18,186
    
    
    
    46,186
    
    
    
    2,182
    
    
    
    (20,716
    )
    
    
    45,838Interest expense, net
    
    
    889
    
    
    
    15,894
    
    
    
    298
    
    
    
    
    
    
    
    17,081Income (loss) before income taxes
    
    
    17,297
    
    
    
    30,292
    
    
    
    1,884
    
    
    
    (20,716
    )
    
    
    28,757Income tax (benefit) expense
    
    
    (669
    )
    
    
    11,085
    
    
    
    375
    
    
    
    
    
    
    
    10,791Net income (loss)
    
    $
    17,966
    
    
    $
    19,207
    
    
    $
    1,509
    
    
    $
    (20,716
    )
    
    $
    17,966
 Supplemental Condensed Consolidating Statements of Operations
 Combined
    
    
    CombinedParent/
    
    
    Guarantor
    
    
    Non-GuarantorSix months ended June 30, 2009
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(unaudited)(in thousands)Revenue
    
    $
    
    
    
    $
    829,157
    
    
    $
    49,441
    
    
    $
    (6,285
    )
    
    $
    872,313Cost of sales, including costs of warehousing,
distribution and occupancy
    
    
    
    
    
    
    538,469
    
    
    
    34,451
    
    
    
    (6,285
    )
    
    
    566,635Gross profit
    
    
    
    
    
    
    290,688
    
    
    
    14,990
    
    
    
    
    
    
    
    305,678Compensation and related benefits
    
    
    20,742
    
    
    
    102,376
    
    
    
    7,733
    
    
    
    
    
    
    
    130,851Advertising and promotion
    
    
    
    
    
    
    28,646
    
    
    
    488
    
    
    
    
    
    
    
    29,134Other selling, general and administrative
    
    
    17,134
    
    
    
    32,460
    
    
    
    140
    
    
    
    
    
    
    
    49,734Subsidiary (income) expense
    
    
    (39,645
    )
    
    
    (2,954
    )
    
    
    
    
    
    
    42,599
    
    
    
    Other (income) expense
    
    
    (36,139
    )
    
    
    34,250
    
    
    
    1,856
    
    
    
    
    
    
    
    (33
    )Operating income (loss)
    
    
    37,908
    
    
    
    95,910
    
    
    
    4,773
    
    
    
    (42,599
    )
    
    
    95,992Interest expense, net
    
    
    1,764
    
    
    
    33,789
    
    
    
    590
    
    
    
    
    
    
    
    36,143Income (loss) before income taxes
    
    
    36,144
    
    
    
    62,121
    
    
    
    4,183
    
    
    
    (42,599
    )
    
    
    59,849Income tax (benefit) expense
    
    
    (1,268
    )
    
    
    22,476
    
    
    
    1,229
    
    
    
    
    
    
    
    22,437Net income (loss)
    
    $
    37,412
    
    
    $
    39,645
    
    
    $
    2,954
    
    
    $
    (42,599
    )
    
    $
    37,412
 25




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Supplemental Condensed Consolidating Statements of Operations
 Combined
    
    
    CombinedParent/
    
    
    Guarantor
    
    
    Non-GuarantorThree months ended June 30, 2008
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(unaudited)(in thousands)Revenue
    
    $
    
    
    
    $
    398,482
    
    
    $
    26,966
    
    
    $
    (2,786
    )
    
    $
    422,662Cost of sales, including costs of warehousing,
distribution and occupancy
    
    
    
    
    
    
    257,243
    
    
    
    19,820
    
    
    
    (2,786
    )
    
    
    274,277Gross profit
    
    
    
    
    
    
    141,239
    
    
    
    7,146
    
    
    
    
    
    
    
    148,385Compensation and related benefits
    
    
    
    
    
    
    58,936
    
    
    
    3,948
    
    
    
    
    
    
    
    62,884Advertising and promotion
    
    
    
    
    
    
    13,452
    
    
    
    188
    
    
    
    
    
    
    
    13,640Other selling, general and administrative
    
    
    493
    
    
    
    23,556
    
    
    
    862
    
    
    
    
    
    
    
    24,911Subsidiary (income) expense
    
    
    (17,985
    )
    
    
    (1,352
    )
    
    
    
    
    
    
    19,337
    
    
    
    Other (income) expense
    
    
    
    
    
    
    (23
    )
    
    
    (6
    )
    
    
    
    
    
    
    (29
    )Operating income (loss)
    
    
    17,492
    
    
    
    46,670
    
    
    
    2,154
    
    
    
    (19,337
    )
    
    
    46,979Interest expense, net
    
    
    1,067
    
    
    
    18,046
    
    
    
    320
    
    
    
    
    
    
    
    19,433Income (loss) before income taxes
    
    
    16,425
    
    
    
    28,624
    
    
    
    1,834
    
    
    
    (19,337
    )
    
    
    27,546Income tax (benefit) expense
    
    
    (583
    )
    
    
    10,639
    
    
    
    482
    
    
    
    
    
    
    
    10,538Net income (loss)
    
    $
    17,008
    
    
    $
    17,985
    
    
    $
    1,352
    
    
    $
    (19,337
    )
    
    $
    17,008
 Supplemental Condensed Consolidating Statements of Operations
 Combined
    
    
    CombinedParent/
    
    
    Guarantor
    
    
    Non-GuarantorSix months ended June 30, 2008
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(unaudited)(in thousands)Revenue
    
    $
    
    
    
    $
    803,003
    
    
    $
    53,524
    
    
    $
    (5,732
    )
    
    $
    850,795Cost of sales, including costs of warehousing,
distribution and occupancy
    
    
    
    
    
    
    519,948
    
    
    
    38,951
    
    
    
    (5,732
    )
    
    
    553,167Gross profit
    
    
    
    
    
    
    283,055
    
    
    
    14,573
    
    
    
    
    
    
    
    297,628Compensation and related benefits
    
    
    
    
    
    
    116,666
    
    
    
    7,789
    
    
    
    
    
    
    
    124,455Advertising and promotion
    
    
    
    
    
    
    31,486
    
    
    
    301
    
    
    
    
    
    
    
    31,787Other selling, general and administrative
    
    
    1,014
    
    
    
    47,091
    
    
    
    1,731
    
    
    
    
    
    
    
    49,836Subsidiary (income) expense
    
    
    (32,283
    )
    
    
    (2,275
    )
    
    
    
    
    
    
    34,558
    
    
    
    Other (income) expense
    
    
    
    
    
    
    (38
    )
    
    
    101
    
    
    
    
    
    
    
    63Operating income (loss)
    
    
    31,269
    
    
    
    90,125
    
    
    
    4,651
    
    
    
    (34,558
    )
    
    
    91,487Interest expense, net
    
    
    2,086
    
    
    
    39,826
    
    
    
    592
    
    
    
    
    
    
    
    42,504Income (loss) before income taxes
    
    
    29,183
    
    
    
    50,299
    
    
    
    4,059
    
    
    
    (34,558
    )
    
    
    48,983Income tax (benefit) expense
    
    
    (1,165
    )
    
    
    18,016
    
    
    
    1,784
    
    
    
    
    
    
    
    18,635Net income (loss)
    
    $
    30,348
    
    
    $
    32,283
    
    
    $
    2,275
    
    
    $
    (34,558
    )
    
    $
    30,348
 26




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Supplemental Condensed Consolidating Statements of Cash Flows
 Combined
    
    
    CombinedParent/
    
    
    Guarantor
    
    
    Non-GuarantorSix months ended June 30, 2009
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Consolidated(unaudited)(in thousands)NET CASH PROVIDED BY OPERATING ACTIVITIES:
    
    $
    
    
    
    $
    53,496
    
    
    $
    2,846
    
    
    $
    56,342CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (1,359
    )
    
    
    (8,230
    )
    
    
    (1,714
    )
    
    
    (11,303
    )Investment/distribution
    
    
    85,810
    
    
    
    (85,810
    )
    
    
    
    
    
    
    Other investing
    
    
    
    
    
    
    (892
    )
    
    
    
    
    
    
    (892
    )Net cash provided by (used in) investing activities
    
    
    84,451
    
    
    
    (94,932
    )
    
    
    (1,714
    )
    
    
    (12,195
    )CASH FLOWS FROM FINANCING ACTIVITIES:GNC Corporation investment in
General Nutrition Centers, Inc.
    
    
    (278
    )
    
    
    
    
    
    
    
    
    
    
    (278
    )Financing fees
    
    
    (45
    )
    
    
    
    
    
    
    
    
    
    
    (45
    )Other financing
    
    
    (18,944
    )
    
    
    (4
    )
    
    
    (675
    )
    
    
    (19,623
    )Net cash used in financing activities
    
    
    (19,267
    )
    
    
    (4
    )
    
    
    (675
    )
    
    
    (19,946
    )Effect of exchange rate on cash
    
    
    
    
    
    
    
    
    
    
    67
    
    
    
    67Net increase (decrease) in cash
    
    
    65,184
    
    
    
    (41,440
    )
    
    
    524
    
    
    
    24,268Beginning balance, cash
    
    
    
    
    
    
    40,077
    
    
    
    2,230
    
    
    
    42,307Ending balance, cash
    
    $
    65,184
    
    
    $
    (1,363
    )
    
    $
    2,754
    
    
    $
    66,575
 Supplemental Condensed Consolidating Statements of Cash Flows
 Combined
    
    
    CombinedParent/
    
    
    Guarantor
    
    
    Non-GuarantorSix months ended June 30, 2008
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Consolidated(unaudited)(in thousands)NET CASH PROVIDED BY OPERATING ACTIVITIES:
    
    $
    
    
    
    $
    51,676
    
    
    $
    1,085
    
    
    $
    52,014CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    
    
    
    
    (19,894
    )
    
    
    (1,311
    )
    
    
    (21,205
    )Investment/distribution
    
    
    4,188
    
    
    
    (4,188
    )
    
    
    
    
    
    
    Other investing
    
    
    
    
    
    
    (106
    )
    
    
    
    
    
    
    (106
    )Net cash provided by (used in) investing activities
    
    
    4,188
    
    
    
    (24,188
    )
    
    
    (1,311
    )
    
    
    (21,311
    )CASH FLOWS FROM FINANCING ACTIVITIES:GNC Corporation investment in
General Nutrition Centers, Inc.
    
    
    (813
    )
    
    
    
    
    
    
    
    
    
    
    (813
    )Other financing
    
    
    (3,375
    )
    
    
    
    
    
    
    (568
    )
    
    
    (3,196
    )Net cash provided by (used in) financing activities
    
    
    (4,188
    )
    
    
    
    
    
    
    (568
    )
    
    
    (4,009
    )Effect of exchange rate on cash
    
    
    
    
    
    
    
    
    
    
    234
    
    
    
    234Net increase (decrease) in cash
    
    
    
    
    
    
    27,488
    
    
    
    (560
    )
    
    
    26,928Beginning balance, cash
    
    
    
    
    
    
    26,090
    
    
    
    2,764
    
    
    
    28,854Ending balance, cash
    
    $
    
    
    
    $
    53,578
    
    
    $
    2,204
    
    
    $
    55,782
 27




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 11. INCOME TAXES
   NOTE 12. FAIR VALUE MEASUREMENT
  Level 1 
    
    observable inputs such as quoted prices in active markets for identical
assets and liabilities;Level 2 
    
    observable inputs such as quoted prices for similar assets or liabilities
in active markets, quoted prices for identical or similar assets or liabilities in
markets that are not active, other inputs that are observable, or can be corroborated
by observable market data; andLevel 3 
    
    unobservable inputs for which there are little or no market data, which
require the reporting entity to develop its own assumptions.
  Fair Value Measurements UsingLevel 1
    
    Level 2
    
    Level 3(in thousands)Other long-term liabilities
    
    $
    1,930
    
    
    $
    14,995
    
    
    $
    
 28




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GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  Fair Value Measurements UsingLevel 1
    
    Level 2
    
    Level 3(in thousands)Other long-term liabilities
    
    $
    1,496
    
    
    $
    18,902
    
    
    $
    
  Other long-term liabilities
  NOTE 13. RELATED PARTY TRANSACTIONS
 Management Services Agreement.
 Credit Facility.
 Lease Agreements.
 29




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##### Table of Contents



GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 14. SUBSEQUENT EVENTS
   30




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Forward-Looking Statements
   
    
    uncertainty of continuing weakening of the economy and its impact on us and our partners;
    
    significant competition in our industry;
    
    unfavorable publicity or consumer perception of our products;
    
    the incurrence of material product liability and product recall costs;
    
    costs of compliance and our failure to comply with new and existing governmental regulations;
    
    costs of litigation and the failure to successfully defend lawsuits and other claims against the Company;
    
    the failure of our franchisees to conduct their operations profitably and limitations on our ability to
terminate or replace under-performing franchisees;
    
    economic, political, and other risks associated with our international operations;
    
    our failure to keep pace with the demands of our customers for new products and services;
    
    disruptions in our manufacturing system or losses of manufacturing certifications;
    
    the lack of long-term experience with human consumption of ingredients in some of our products;
    
    increases in the frequency and severity of insurance claims, particularly claims for which we are self-insured;
    
    loss or retirement of key members of management;
    
    increases in the cost of borrowings and limitations on availability of additional debt or equity capital;
    
    the impact of our substantial debt on our operating income and our ability to grow;
    
    the failure to adequately protect or enforce our intellectual property rights against competitors;
    
    changes in applicable laws relating to our franchise operations; and
    
    our inability to expand our franchise operations or attract new franchisees.
  31




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##### Table of Contents



Business Overview
  Revenues and Operating Performance from our Business Segments
  
    
    Retail revenues are generated by sales to consumers at our company-owned stores and
online through www.gnc.com. Although we believe that our retail and franchise businesses
are not seasonal in nature, historically we have experienced, and expect to continue to
experience, a substantial variation in our net sales and operating results from quarter
to quarter, with the first half of the year being stronger than the second half of the
year. As a leader in our
industry, we expect our retail revenue growth to be consistent with projected
industry growth as a result of our disproportionate market share, scale economies in
purchasing and advertising, strong brand awareness, and vertical integration.
    
    Franchise revenues are generated primarily from:
 (1)
    
    product sales to our franchisees;(2)
    
    royalties on franchise retail sales; and(3)
    
    franchise fees, which are charged for initial franchise awards, renewals, and
transfers of franchises.
  
    
    Manufacturing/wholesale revenues are generated through sales of manufactured
products to third parties, generally for third-party private label brands, and the sale
of our proprietary and third-party products to and through Rite Aid and
www.drugstore.com. License fee revenue from the opening of GNC franchised
store-within-a-store locations within Rite Aid stores is also recorded in this segment.
Our revenues generated by our manufacturing and wholesale operations are subject to our
available manufacturing capacity, and we anticipate that these revenues will remain
stable over the next five years.
 32




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##### Table of Contents




    
    A significant portion of our business infrastructure is comprised of fixed
operating costs. Our vertically integrated distribution network and manufacturing
capacity can support higher sales volume without significant incremental costs. We
therefore expect our operating expenses to grow at a lesser rate than our revenues,
resulting in significant operating leverage in our business.
  
    
    broader consumer awareness of health and wellness issues and rising healthcare
costs;
    
    interest in, and demand for, condition-specific products based on scientific
research;
    
    significant effects of favorable and unfavorable publicity on consumer demand;
    
    lack of a single product or group of products dominating any one product
category;
    
    lack of long-term experience with human consumption of ingredients of some of
our products;
    
    volatility in the diet category;
    
    rapidly evolving consumer preferences and demand for new products;
    
    costs associated with complying with new and existing governmental regulation;
and
    
    a change in disposable income available to consumers, as a result of current
economic conditions.
 Executive Overview
      33




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##### Table of Contents




    
    retail sales at our company stores could decline;
    
    demand for our branded products produced at our manufacturing plant could
decline;
    
    demand for products produced for distributors and other retailers / wholesalers
could diminish;
    
    our domestic franchisees may opt not to renew their franchise licenses, which
in turn would lower our franchise product revenue; and
    
    our international franchisees may experience decreased revenue resulting in
lower royalties and product revenue to us.
    
    
    Driving top-line performance in each of our business segments by attracting new
customers through product innovation, improved assortment, effective marketing and
price competitiveness;
    
    Investing in key infrastructure areas for future growth, including e-commerce,
international development, and manufacturing; and
    
    Generating efficiencies and cost savings in the everyday operations of the
business that will allow us to leverage profit margins on modest revenue growth.
  Related Parties
  34




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##### Table of Contents



Results of Operations
   Results of Operations
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Six Months EndedJune 30,
    
    
    
    
    
    
    
    
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues:Retail
    
    $
    316.9
    
    
    
    73.3
    %
    
    $
    314.5
    
    
    
    74.4
    %
    
    $
    650.6
    
    
    
    74.6
    %
    
    $
    635.8
    
    
    
    74.7
    %Franchise
    
    
    69.2
    
    
    
    16.0
    %
    
    
    65.1
    
    
    
    15.4
    %
    
    
    133.7
    
    
    
    15.3
    %
    
    
    130.0
    
    
    
    15.3
    %Manufacturing / Wholesale
    
    
    46.3
    
    
    
    10.7
    %
    
    
    43.1
    
    
    
    10.2
    %
    
    
    88.0
    
    
    
    10.1
    %
    
    
    85.0
    
    
    
    10.0
    %Total net revenues
    
    
    432.4
    
    
    
    100.0
    %
    
    
    422.7
    
    
    
    100.0
    %
    
    
    872.3
    
    
    
    100.0
    %
    
    
    850.8
    
    
    
    100.0
    %Operating expenses:Cost of sales, including warehousing,
distribution and occupancy costs
    
    
    280.9
    
    
    
    65.0
    %
    
    
    274.3
    
    
    
    64.9
    %
    
    
    566.6
    
    
    
    65.0
    %
    
    
    553.2
    
    
    
    65.0
    %Compensation and related benefits
    
    
    65.5
    
    
    
    15.2
    %
    
    
    62.9
    
    
    
    14.9
    %
    
    
    130.8
    
    
    
    15.0
    %
    
    
    124.5
    
    
    
    14.6
    %Advertising and promotion
    
    
    14.4
    
    
    
    3.3
    %
    
    
    13.6
    
    
    
    3.2
    %
    
    
    29.1
    
    
    
    3.3
    %
    
    
    31.7
    
    
    
    3.7
    %Other selling, general and administrative
expenses
    
    
    23.6
    
    
    
    5.5
    %
    
    
    22.3
    
    
    
    5.3
    %
    
    
    44.9
    
    
    
    5.1
    %
    
    
    44.1
    
    
    
    5.2
    %Amortization expense
    
    
    2.3
    
    
    
    0.4
    %
    
    
    2.6
    
    
    
    0.6
    %
    
    
    4.9
    
    
    
    0.6
    %
    
    
    5.7
    
    
    
    0.7
    %Foreign currency (gain) loss
    
    
    (0.1
    )
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    0.1
    
    
    
    0.0
    %Total operating expenses
    
    
    386.6
    
    
    
    89.4
    %
    
    
    375.7
    
    
    
    88.9
    %
    
    
    776.3
    
    
    
    89.0
    %
    
    
    759.3
    
    
    
    89.2
    %Operating income:Retail
    
    
    41.6
    
    
    
    9.6
    %
    
    
    42.2
    
    
    
    10.0
    %
    
    
    86.0
    
    
    
    9.9
    %
    
    
    79.0
    
    
    
    9.3
    %Franchise
    
    
    19.5
    
    
    
    4.6
    %
    
    
    18.7
    
    
    
    4.4
    %
    
    
    38.7
    
    
    
    4.4
    %
    
    
    38.5
    
    
    
    4.5
    %Manufacturing / Wholesale
    
    
    17.3
    
    
    
    4.0
    %
    
    
    17.3
    
    
    
    4.1
    %
    
    
    35.2
    
    
    
    4.0
    %
    
    
    33.1
    
    
    
    3.9
    %Unallocated corporate and other
costs:Warehousing and distribution costs
    
    
    (13.7
    )
    
    
    -3.2
    %
    
    
    (13.8
    )
    
    
    -3.3
    %
    
    
    (27.0
    )
    
    
    -3.1
    %
    
    
    (27.6
    )
    
    
    -3.2
    %Corporate costs
    
    
    (18.9
    )
    
    
    -4.4
    %
    
    
    (17.4
    )
    
    
    -4.1
    %
    
    
    (36.9
    )
    
    
    -4.2
    %
    
    
    (31.5
    )
    
    
    -3.7
    %Subtotal unallocated corporate and
other costs, net
    
    
    (32.6
    )
    
    
    -7.6
    %
    
    
    (31.2
    )
    
    
    -7.4
    %
    
    
    (63.9
    )
    
    
    -7.3
    %
    
    
    (59.1
    )
    
    
    -6.9
    %Total operating income
    
    
    45.8
    
    
    
    10.6
    %
    
    
    47.0
    
    
    
    11.1
    %
    
    
    96.0
    
    
    
    11.0
    %
    
    
    91.5
    
    
    
    10.8
    %Interest expense, net
    
    
    17.1
    
    
    
    
    
    
    
    19.4
    
    
    
    
    
    
    
    36.2
    
    
    
    
    
    
    
    42.5Income before income taxes
    
    
    28.7
    
    
    
    
    
    
    
    27.6
    
    
    
    
    
    
    
    59.8
    
    
    
    
    
    
    
    49.0Income tax expense
    
    
    10.7
    
    
    
    
    
    
    
    10.6
    
    
    
    
    
    
    
    22.4
    
    
    
    
    
    
    
    18.7Net income
    
    $
    18.0
    
    
    
    
    
    
    $
    17.0
    
    
    
    
    
    
    $
    37.4
    
    
    
    
    
    
    $
    30.3
 Note:
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Comparison of the Three Months Ended June 30, 2009 and 2008
 Revenues
  Retail.
 Franchise.
 Manufacturing/Wholesale.
 Cost of Sales
  Product costs.
 36




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Warehousing and distribution costs.
 Occupancy costs.
 Selling, General and Administrative (SG&A) Expenses
  Compensation and related benefits.
 Advertising and promotion.
 Other SG&A.
 Foreign Currency (Loss) Gain
  Operating Income
  Retail.
 Franchise.
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Manufacturing/Wholesale.
 Warehousing and Distribution Costs.
 Corporate Costs.
 Interest Expense
  Income Tax Expense
  Net Income
  Comparison of the Six Months Ended June 30, 2009 and 2008
 Revenues
  Retail.
 Franchise.
 38




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Manufacturing/Wholesale.
 Cost of Sales
  Product costs.
 Warehousing and distribution costs.
 Occupancy costs.
 Selling, General and Administrative (SG&A) Expenses
  Compensation and related benefits.
 Advertising and promotion.
 Other SG&A.
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Foreign Currency (Loss) Gain
  Operating Income
  Retail.
 Franchise.
 Manufacturing/Wholesale.
 Warehousing and Distribution Costs.
 Corporate Costs.
 Interest Expense
  Income Tax Expense
  Net Income
  40




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Liquidity and Capital Resources
      Six months
    
    Six monthsended June 30,
    
    ended June 30,(Dollars in millions)
    
    2009
    
    2008Cash provided by operating activities
    
    $
    56.3
    
    
    $
    52.8Cash used in investing activities
    
    
    (12.2
    )
    
    
    (21.3
    )Cash used in financing activities
    
    
    (19.9
    )
    
    
    (4.8
    )
 Cash Provided by Operating Activities
  41




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Cash Used in Investing Activities
    Cash Used in Financing Activities
  $735.0 Million 2007 Senior Credit Facility
 Senior Toggle Notes
 10.75% Senior Subordinated Notes
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Contractual Obligations
  Off Balance Sheet Arrangements
   Effect of Inflation
  Critical Accounting Estimates
  Recently Issued Accounting Pronouncements
   43




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TM
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45




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Item 3. Quantitative and Qualitative Disclosures about Market Risk.
    Derivative
    
    Total Notional Amount
    
    Term
    
    Counterparty Pays
    
    Company PaysInterest Rate Swap
    
    $150.0 million
    
    April 2007-April 2010
    
    LIBOR
    
    4.90%Interest Rate Swap
    
    $150.0 million
    
    April 2009-April 2011
    
    LIBOR
    
    3.07%Forward Interest Rate Swap
    
    $150.0 million
    
    April 2010-April 2011
    
    LIBOR
    
    3.41%Interest Rate Swap
    
    $100.0 million
    
    September 2008-September 2011
    
    LIBOR
    
    3.31%Forward Interest Rate Swap
    
    $150.0 million
    
    September 2009-September 2012
    
    LIBOR
    
    2.69%
  46




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Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  47




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Part II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
   Pro-Hormone/Androstenedione Cases. Stephens and Pio
  Guzman v. General Nutrition Companies, Inc
   48




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Guzman
 Stephens and Pio v. General Nutrition
Companies, Inc. (Case No. 08 CH 37097, Circuit Court of Cook County, Illinois, County Department,
Chancery Division).
  California Wage and Break Claim
 California Wage and Break Claim
 Franchise Class Action.
 Creatine
Claim
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##### Table of Contents



Jackson Claim.
 DiMauro Claim.
 Ciavarra Claim
 Romero Claim
 50




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Hydroxycut Claims. see Ciavarra Claim
  
    
    Michael Owens and Donna Owens v. Iovate Health Sciences USA, Inc., et al., Superior
Court of the State of California, County of Los Angeles;
    
    Eva M. Stasiak v. Iovate Health Sciences USA, Inc., et al., Superior Court of the
State of California, County of Los Angeles; and
    
    Jaime Ruben Perez v. Gerald Brandt, individually and d/b/a/ Breakthru Products, et
al., 229th Judicial District, Duval County, Texas.
   
    
    Andrew Dremak, et al. v. Iovate Health Sciences Group, Inc., et al., U.S. District
Court, Southern District of California;
    
    Enjoli Pennier, et al. v. Iovate Health Sciences, et al., U.S. District Court,
Eastern District of Louisiana;
    
    Alejandro M. Jimenez, et al. v. Iovate Health Sciences, Inc., et al., U.S. District
Court, Eastern District of California;
    
    Amy Baker, et al. v. Iovate Health Sciences USA, Inc., et al., U.S. District Court,
Northern District of Alabama; and
    
    Kyle Davis and Sara Carreon, et al. v. Iovate Health Sciences USA, Inc., et al.,
U.S. District Court, Northern District of Alabama.
  Bedell Claim.
 Chen Claim
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California False Labeling and Consumer Fraud Claims.
 
    
    Michael Gonzales and Zia Nawabi, et al. v. Maximum Human Performance, Inc., et al., U.S.
District Court, Central District of California (Musclemeds);
    
    Michael Campos and Michael Gonzales, et al. v. LG Sciences, LLC, et al., Superior Court
of California for the County of Orange (LG Sciences);
    
    Nicole Forlenza and Shaiden Monroe, et al. v. Dynakor Pharmacal, LLC, et al., U.S.
District Court, Central District of California; and
    
    Vance Monroe and Mac Gonzales, et al. v. Biotab Nutraceuticals, Inc., et al.,
U.S. District Court, Southern District of California.
   
 Item 1A. Risk Factors.
  Risks Relating to Our Business and Industry
 General economic conditions, including continued weakening of the economy, may affect consumer
purchases, which could adversely affect our sales and the sales of our business partners.
  We operate in a highly competitive industry. Our failure to compete effectively could adversely
affect our market share, revenues, and growth prospects.
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Unfavorable publicity or consumer perception of our products and any similar products distributed
by other companies could cause fluctuations in our operating results and could have a material
adverse effect on our reputation, the demand for our products, and our ability to generate
revenues.
  Our failure to appropriately respond to changing consumer preferences and demand for new products
could significantly harm our customer relationships and product sales.
   
    
    accurately anticipate customer needs;
    
    innovate and develop new products;
    
    successfully commercialize new products in a timely manner;
    
    price our products competitively;
    
    manufacture and deliver our products in sufficient volumes and in a timely manner; and
    
    differentiate our product offerings from those of our competitors.
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We depend on the services of key executives and changes in our management team could affect our
business strategy and adversely impact our performance and results of operations.
  Compliance with new and existing governmental regulations could increase our costs significantly
and adversely affect our results of operations.
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Our failure to comply with FTC regulations and existing consent decrees imposed on us by the FTC
could result in substantial monetary penalties and could adversely affect our operating results.
  We may incur material product liability claims, which could increase our costs and adversely affect
our reputation, revenues, and operating income.
   Compliance with the Iovate Hydroxycut recall has reduced our sales and margin and may adversely
affect our results of operations.
  Our operations are subject to environmental and health and safety laws and regulations that may
increase our cost of operations or expose us to environmental liabilities.
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Because we rely on our manufacturing operations to produce nearly all of the proprietary products
we sell, disruptions in our manufacturing system or losses of manufacturing certifications could
adversely affect our sales and customer relationships.
  If we fail to protect our brand name, competitors may adopt trade names that dilute the value of
our brand name.
  Intellectual property litigation and infringement claims against us could cause us to incur
significant expenses or prevent us from manufacturing, selling, or using some aspect of our
products, which could adversely affect our revenues and market share.
  A substantial amount of our revenues are generated from our franchisees, and our revenues could
decrease significantly if our franchisees do not conduct their operations profitably or if we fail
to attract new franchisees.
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Our operating results and financial condition could be adversely affected by the financial and
operational performance of Rite Aid.
  Economic, political, and other risks associated with our international operations could adversely
affect our revenues and international growth prospects.
  
    
    political and economic instability of foreign markets;
    
    foreign governments restrictive trade policies;
    
    inconsistent product regulation or sudden policy changes by foreign agencies or governments;
    
    the imposition of, or increase in, duties, taxes, government royalties, or non-tariff trade
barriers;
    
    difficulty in collecting international accounts receivable and potentially longer payment
cycles;
    
    increased costs in maintaining international franchise and marketing efforts;
    
    difficulty in operating our manufacturing facility abroad and procuring supplies from
overseas suppliers;
    
    exchange controls;
    
    problems entering international markets with different cultural bases and consumer
preferences; and
    
    fluctuations in foreign currency exchange rates.
  Franchise regulations could limit our ability to terminate or replace under-performing franchises,
which could adversely impact franchise revenues.
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We are not insured for a significant portion of our claims exposure, which could materially and
adversely affect our operating income and profitability.
  The controlling stockholders of our Parent may take actions that conflict with the interests of
other stockholders and investors. This control may have the effect of delaying or preventing
changes of control or changes in management.
  Risks Related to Our Substantial Debt
 Our substantial debt could adversely affect our results of operations and financial condition and
otherwise adversely impact our operating income and growth prospects.
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
    
    make it more difficult for us to satisfy our obligations with respect to the Senior
Toggle Notes and the 10.75% Senior Subordinated Notes;
    
    increase our vulnerability to general adverse economic and industry conditions;
    
    require us to use all or a large portion of our cash flow from operations to pay
principal and interest on our debt, thereby reducing the availability of our cash flow to
fund working capital, research and development efforts, capital expenditures, and other
business activities;
    
    increase our vulnerability to general adverse economic and industry conditions;
    
    limit our flexibility in planning for, or reacting to, changes in our business and
the industry in which we operate;
    
    restrict us from making strategic acquisitions or exploiting business
opportunities;
    
    place us at a competitive disadvantage compared to our competitors that have less
debt; and
    
    limit our ability to borrow additional funds, dispose of assets, or pay cash
dividends.
  Despite our current significant level of debt, we may still be able to incur additional debt, which
could increase the risks described above, adversely affect our financial health, or prevent us from
fulfilling our obligations under the Senior Toggle Notes and the 10.75% Senior Subordinated Notes.
  We require a significant amount of cash to service our debt. Our ability to generate cash depends
on many factors beyond our control and, as a result, we may not be able to make payments on our
debt obligations.
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We may not have the ability to raise the funds necessary to finance the change of control
offer required by the indentures, which could cause us to default on our debt obligations,
including the Senior Toggle Notes and the 10.75% Senior Subordinated Notes.
  Restrictions in the agreements governing our existing indebtedness may prevent us from taking
actions that we believe would be in the best interest of our business.
  
    
    incurring additional indebtedness and issuing preferred stock;
    
    granting liens on our assets;
    
    making investments;
    
    consolidating or merging with, or acquiring, another business;
    
    selling or otherwise disposing our assets;
    
    paying dividends and making other distributions to our parent entities;
    
    entering into transactions with our affiliates; and
    
    incurring capital expenditures in excess of limitations set within the agreement.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  
 Item 6. Exhibits.
 ExhibitNo.
    
    Description31.1
    
    Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
  GENERAL NUTRITION CENTERS, INC.
(Registrant)August 13, 2009
    /s/ Joseph M. FortunatoJoseph M. FortunatoChief Executive Officer
(Principal Executive Officer)August 13, 2009
    /s/ Michael M. NuzzoMichael M. NuzzoChief Financial Officer
(Principal Financial Officer) 62