UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark one)

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

[ ] 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.

(Exact name of registrant as specified in its charter)

Delaware		72-1575168
(State or other jurisdiction of		(I.R.S. Employer
Incorporation or organization)		Identification No.)

300 Sixth Avenue		15222
Pittsburgh, Pennsylvania		(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code: (412) 288-4600

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [ ] Yes [ X ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer[ X ] Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [ X ] No

As of November 4, 2010, 100 shares of common stock, par value $0.01 per share (the “Common Stock”), of General Nutrition Centers, Inc. were outstanding. All shares of our Common Stock are held by GNC Corporation.

TABLE OF CONTENTS

			PAGE

		PART I - FINANCIAL INFORMATION

Explanatory Note.

Item 1.		Financial Statements.

	Consolidated Balance Sheets as of September 30, 2010 (unaudited) and December 31, 2009.		1

	Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2010 and 2009.		2

	Unaudited Consolidated Statement of Stockholder’s Equity and Comprehensive Income for the nine months ended September 30, 2010 and 2009.		3

	Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2010 and 2009.		4

	Summarized Notes to Unaudited Consolidated Financial Statements.		5

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations.	26

Item 3.		Quantitative and Qualitative Disclosures About Market Risk.	38

Item 4.		Controls and Procedures.	39


		PART II - OTHER INFORMATION

Item 1.		Legal Proceedings.	40

Item 1A.		Risk Factors.	40

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds.	40

Item 3.		Defaults Upon Senior Securities.	40

Item 4.		Removed and Reserved.	40

Item 5.		Other Information.	40

Item 6.		Exhibits.	40

Signatures			41

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share data)

	September 30,			December 31,
	2010			2009 *
Current assets:	(unaudited)
Cash and cash equivalents	$	121,704		$	75,089
Receivables, net	105,781			94,355
Inventories, net (Note 3)	396,788			370,492
Prepaids and other current assets	33,639			42,219
Total current assets	657,912			582,155

Long-term assets:
Goodw ill (Note 4)	624,920			624,753
Brands (Note 4)	720,000			720,000
Other intangible assets, net (Note 4)	148,873			154,370
Property, plant and equipment, net	192,816			199,581
Deferred financing fees, net	15,216			18,411
Other long-term assets	4,781			4,332
Total long-term assets	1,706,606			1,721,447

Total assets	$	2,364,518		$	2,303,602

Current liabilities:
Accounts payable	$	99,380		$	95,904
Accrued payroll and related liabilities	26,918			22,277
Accrued interest (Note 5)	5,576			14,552
Current portion, long-term debt (Note 5)	1,565			1,724
Deferred revenue and other current liabilities	77,905			65,130
Total current liabilities	211,344			199,587

Long-term liabilities:
Long-term debt (Note 5)	1,057,208			1,058,085
Deferred tax liabilities, net	291,798			288,894
Other long-term liabilities	31,425			39,520
Total long-term liabilities	1,380,431			1,386,499

Total liabilities	1,591,775			1,586,086

Stockholder's equity:
Common stock, $0.01 par value, 1,000 shares authorized, 100 shares issued and outstanding
Paid-in-capital	597,308			594,932
Retained earnings	179,744			129,783
Accumulated other comprehensive loss	(4,309		)	(7,199		)
Total stockholder's equity	772,743			717,516

Total liabilities and stockholder's equity	$	2,364,518		$	2,303,602

* Footnotes summarized from the Audited Financial Statements

The accompanying notes are an integral part of the consolidated financial statements.

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(unaudited)

(in thousands)

	Three months ended					Nine months ended
	September 30,			September 30,		September 30,			September 30,
	2010			2009		2010			2009

Revenue	$	465,746		$	430,798	$	1,386,669		$	1,303,111

Cost of sales, including costs of warehousing, distribution and occupancy	302,667			282,606		894,035			849,241
Gross profit	163,079			148,192		492,634			453,870

Compensation and related benefits	69,174			65,470		204,566			196,321
Advertising and promotion	10,643			11,043		40,219			40,177
Other selling, general and administrative	24,115			24,272		74,373			74,006
Foreign currency (gain) loss	(92		)	6		(149		)	(27)
Operating income	59,239			47,401		173,625			143,393

Interest expense, net (Note 5)	16,340			16,874		49,286			53,017

Income before income taxes	42,899			30,527		124,339			90,376

Income tax expense (Note 11)	16,114			11,002		45,994			33,440


Net income	$	26,785		$	19,525	$	78,345		$	56,936

The accompanying notes are an integral part of the consolidated financial statements.

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

Consolidated Statement of Stockholder’s Equity and Comprehensive Income

(in thousands, except share data)

	Common Stock					Retained		Accumulated Other Comprehensive		Total Stockholder’s
	Shares	Dollars		Paid-in-Capital		Earnings		Income/(Loss)		Equity


Balance at December 31, 2009	100	$	-	$	594,932	$	129,783	$	(7,199)	$	717,516

Comprehensive income:
Net income	-	-		-		78,345		-		78,345
Unrealized gain on derivatives designated and qualified as cash flow hedges, net of tax of $1,367	-	-		-		-		2,389		2,389
Foreign currency translation adjustments	-	-		-		-		501		501
Comprehensive income										81,235

Non-cash stock-based compensation	-	-		2,376		-		-		2,376
Dividend payment	-	-		-		(28,384)		-		(28,384)

Balance at September 30, 2010 (unaudited)	100	$	-	$	597,308	$	179,744	$	(4,309)	$	772,743


Balance at December 31, 2008	100	$	-	$	592,355	$	73,764	$	(14,057)	$	652,062

Comprehensive income:
Net income	-	-		-		56,936		-		56,936
Unrealized gain on derivatives designated and qualified as cash flow hedges, net of tax of $753	-	-		-		-		1,316		1,316
Foreign currency translation adjustments	-	-		-		-		3,451		3,451
Comprehensive income										61,703

Return of capital to GNC Corporation	-	-		(278)		-		-		(278)
Non-cash stock-based compensation	-	-		2,062		-		-		2,062
Dividend payment	-	-		-		(13,600)		-		(13,600)

Balance at September 30, 2009 (unaudited)	100	$	-	$	594,139	$	117,100	$	(9,290)	$	701,949

The accompanying notes are an integral part of the consolidated financial statements.

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

	Nine months ended
	September 30, 2010		September 30, 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	78,345	$	56,936

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	27,939		27,327
Amortization of intangible assets	5,914		7,308
Amortization of deferred financing fees	3,195		3,053
Amortization of original issue discount	304		277
Increase in provision for inventory losses	10,877		8,278
Non-cash stock-based compensation	2,376		2,062
Decrease in provision for losses on accounts receivable	(858)		(2,173)
Decrease (increase) in net deferred taxes	(1,381)		10,970

Changes in assets and liabilities:
Increase in receivables	(10,707)		(6,762)
Increase in inventory, net	(36,770)		(19,298)
Increase in franchise note receivables, net	(392)		(31)
Increase in accrued income taxes	11,525		8,928
Decrease in other assets	1,429		7,486
Increase (decrease) in accounts payable	3,398		(21,025)
Decrease in interest payable	(8,976)		(9,475)
Increase in accrued liabilities	11,336		3,987
Net cash provided by operating activities	97,554		77,848

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(20,969)		(20,448)
Franchise store conversions	67		231
Store acquisition costs	(345)		(1,791)
Net cash used in investing activities	(21,247)		(22,008)

CASH FLOWS FROM FINANCING ACTIVITIES:
Return of capital to Parent company	-		(278)
Dividend payment	(28,384)		(13,600)
Debt financing fees	-		(45)
Payments on long-term debt	(1,341)		(19,973)
Net cash used in financing activities	(29,725)		(33,896)

Effect of exchange rate on cash	33		308
Net increase in cash	46,615		22,252
Beginning balance, cash	75,089		42,307
Ending balance, cash	$	121,704	$	64,559

The accompanying notes are an integral part of the consolidated financial statements.

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. NATURE OF BUSINESS

General Nature of Business. General Nutrition Centers, Inc. (“GNC” or the “Company”), a Delaware corporation, is a leading specialty retailer of nutritional supplements, which include: vitamins, minerals and herbal supplements (“VMHS”), sports nutrition products, diet products and other wellness products.

The Company’s organizational structure is vertically integrated as the operations consist of purchasing raw materials, formulating and manufacturing products and selling the finished products through its retail, franchising and manufacturing/wholesale segments. The Company operates primarily in three business segments: Retail, Franchising, and Manufacturing/Wholesale. Corporate retail store operations are located in North America and Puerto Rico and in addition the Company offers products domestically through www.gnc.com. Franchise stores are physically located in the United States and 45 international countries. The Company operates its primary manufacturing facilities in South Carolina and distribution centers in Arizona, Pennsylvania and South Carolina. The Company manufactures the majority of its branded products, but also merchandises various third-party products. Additionally, the Company licenses the use of its trademarks and trade names.

The processing, formulation, packaging, labeling and advertising of the Company’s products are subject to regulation by one or more federal agencies, including the Food and Drug Administration (“FDA”), Federal Trade Commission (“FTC”), Consumer Product Safety Commission, United States Department of Agriculture and Environmental Protection Agency. These activities are also regulated by various agencies of the states and localities in which the Company’s products are sold.

Merger of the Company. On February 8, 2007, GNC Parent Corporation entered into an Agreement and Plan of Merger with GNC Acquisition Inc. and its parent company, GNC Acquisition Holdings Inc. (“Parent”), pursuant to which GNC Acquisition Inc. agreed to merge with and into GNC Parent Corporation, with GNC Parent Corporation as the surviving corporation and a wholly owned subsidiary of Parent (the “Merger”). Immediately following the Merger, GNC Parent Corporation was converted into a Delaware limited liability company and renamed GNC Parent LLC. The purchase equity contribution was made by Ares Corporate Opportunities Fund II, L.P. (“ACOF”) and Ontario Teachers’ Pension Plan Board (“OTPP”) (collectively, the “Sponsors”), together with additional institutional investors and certain management of the Company. The transaction closed on March 16, 2007 and was accounted for under the purchase method of accounting. The transaction occurred between unrelated parties and no common control existed. The Merger consideration (excluding acquisition costs of $13.7 million) totaled $1.65 billion, including the repayment of existing debt and other liabilities, and was funded with a combination of equity contributions and the issuance of new debt. The Merger agreement requires payments to former shareholders and option holders in lieu of income tax payments made for utilizing net operating losses created as a result of the Merger. No such payments were made during the nine months ended September 30, 2010 or September 30, 2009.

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements and footnotes have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and related footnotes that would normally be required by U.S. GAAP for complete financial reporting. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements in the Company’s Annual Report on Form 10-K filed for the year ended December 31, 2009 (the “Form 10-K”). The Company’s reporting period is based on a calendar year.

The accounting policies of the Company are consistent with the policies disclosed in the Company’s audited financial statements for the year ended December 31, 2009. There have been no material changes to the application of critical accounting policies and significant judgments and estimates since December 31, 2009.

The accompanying unaudited consolidated financial statements include all adjustments (consisting of a normal and recurring nature) that management considers necessary for a fair statement of financial information for the interim periods. Interim results are not necessarily indicative of the results that may be expected for the remainder of the year ending December 31, 2010.

Principles of Consolidation. The consolidated financial statements include the accounts of the Company, all of its subsidiaries and a variable interest entity. All material intercompany transactions have been eliminated in consolidation.

The Company has no relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off balance sheet arrangements, or other contractually narrow or limited purposes.

Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. Accordingly, these estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Some of the most significant estimates pertaining to the Company include the valuation of inventories, the allowance for doubtful accounts, income tax valuation allowances and the recoverability of long-lived assets. On a regular basis, management reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.

Cash and Cash Equivalents. The Company considers cash and cash equivalents to include all cash and liquid deposits and investments with a maturity of three months or less. The majority of payments due from banks for third-party credit cards process within 24-48 hours, except for transactions occurring on a Friday, which are generally processed the following Monday. All credit card transactions are classified as cash, and the amounts due from these transactions totaled $2.1 million at both September 30, 2010 and December 31, 2009.

Book overdrafts of $9.8 million and $0.7 million as of September 30, 2010 and December 31, 2009, respectively, represent checks issued that had not been presented for payment to the banks and are classified as accounts payable in the Company’s consolidated balance sheet. The Company typically funds these overdrafts through normal collections of funds or transfers from bank balances at other financial institutions. Under the terms of the Company’s facilities with its banks, the respective financial institutions are not obligated to honor the book overdraft balances as of September 30, 2010 and December 31, 2009, or any balance on any given date.

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Financial Instruments and Derivatives. As part of the Company’s financial risk management program, it uses certain derivative financial instruments. The Company does not enter into derivative transactions for speculative purposes and holds no derivative instruments for trading purposes. The Company uses derivative financial instruments to reduce its exposure to market risk for changes in interest rates primarily in respect to its long term debt obligations. The Company tries to manage its interest rate risk in order to balance its exposure to both fixed and floating rates while minimizing its borrowing costs. Floating-to-fixed interest rate swap agreements, designated as cash flow hedges of interest rate risk, are entered into from time to time to hedge the Company’s exposure to interest rate changes on a portion of the Company’s floating rate debt. These interest rate swap agreements convert a portion of its floating rate debt to fixed rate debt. Interest rate floors designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates fall below the strike rate on the contract in exchange for an upfront premium. The Company records the fair value of these contracts as an asset or a liability, as applicable, in the balance sheet. The effective portions of changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income, net of tax. The ineffective portions, if any, are recorded in interest expense in the current period. As of September 30, 2010, the Company has not recorded any hedge ineffectiveness in earnings related to its cash flow hedges.

Derivatives designated as hedging instruments have been recorded in the consolidated balance sheet at fair value as follows:

		Fair Value
	Balance Sheet Location	September 30, 2010		December 31, 2009
		(unaudited)
		(in thousands)
Interest Rate Products	Other current liabilities	$	(7,232)	$	-
Interest Rate Products	Other long-term liabilities	$	(3,691)	$	(14,679)

The Company has interest rate swap agreements outstanding that effectively convert an aggregate $550.0 million of debt from floating to fixed interest rates. One of these agreements includes an embedded derivative contract with a purchased interest rate floor that effectively converts $150.0 million of the Senior Toggle Notes from a floating to a fixed rate. The floor is intended to replicate the optionality present in the original debt agreement, providing an equivalent offset in the interest payments. The Company did not enter into any new swap agreements during the first nine months of 2010. Each of the four outstanding agreements matures between April 2011 and September 2012.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next twelve months, the Company estimates that an additional $9.6 million will be reclassified as an increase to interest expense.

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Components of gains and losses for the three months ended September 30, 2010 and 2009 are as follows:

Derivatives in Cash Flow Hedging Relationships	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)		Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	(unaudited) (in thousands)

2010

Interest Rate Products	$	(1,988)	Interest income (expense)	$	(3,344)

2009

Interest Rate Products	$	(5,219)	Interest income (expense)	$	(3,381)

Components of gains and losses for the nine months ended September 30, 2010 and 2009 are as follows:

Derivatives in Cash Flow Hedging Relationships	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)		Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	(unaudited) (in thousands)

2010

Interest Rate Products	$	(7,262)	Interest income (expense)	$	(11,018)

2009

Interest Rate Products	$	(6,307)	Interest income (expense)	$	(8,376)

Under the Company’s agreements with its derivative counterparty, if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.

As of September 30, 2010, the settlement value of derivatives in a net liability position related to these agreements was $13.5 million, including accrued interest of $2.2 million but excluding adjustments for nonperformance risk.

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Recently Issued Accounting Pronouncements

As of September 30, 2010, there were no developments related to recently issued accounting standards, including the expected dates of adoption and estimated effects on the Company’s consolidated financial statements, in addition to those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

NOTE 3. INVENTORIES, NET

Inventories at each respective period consisted of the following:

	September 30, 2010
					Net Carrying
	Gross cost		Reserves (a)		Value
			(unaudited)
			(in thousands)
Finished product ready for sale	$	331,179	$	(8,293)	$	322,886
Work-in-process, bulk product and raw materials	68,827		(1,471)		67,356
Packaging supplies	6,546		-		6,546
	$	406,552	$	(9,764)	$	396,788


	December 31, 2009
					Net Carrying
	Gross cost		Reserves (a)		Value
			(in thousands)
Finished product ready for sale	$	319,688	$	(8,266)	$	311,422
Work-in-process, bulk product and raw materials	54,803		(1,288)		53,515
Packaging supplies	5,555		-		5,555
	$	380,046	$	(9,554)	$	370,492

(a) Reserves primarily consist of amounts recorded for obsolescence.

NOTE 4. GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill represents the excess of purchase price over the fair value of identifiable net assets of acquired entities. In accordance with the standard on intangibles and goodwill, goodwill and intangible assets with indefinite useful lives are not amortized, but instead are tested for impairment at least annually. Other intangible assets with finite lives are amortized on a straight-line or declining balance basis over periods not exceeding 35 years.

For the nine months ended September 30, 2010, the Company acquired 17 franchise stores. These acquisitions were accounted for utilizing the acquisition method of accounting and the Company recorded the acquired inventory, fixed assets, franchise rights and goodwill, with an applicable reduction to receivables and cash. The total purchase price associated with these acquisitions was $1.4 million, of which $0.3 million was paid in cash.

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes the Company’s goodwill activity from December 31, 2009 to September 30, 2010:

	Retail		Franchising		Manufacturing/ Wholesale		Total
			(in thousands)
Balance at December 31, 2009	$	304,609	$	117,303	$	202,841	$	624,753
Acquired franchise stores	167		-		-		167
Balance at September 30, 2010 (unaudited)	$	304,776	$	117,303	$	202,841	$	624,920

The following table summarizes the Company’s intangible asset activity from December 31, 2009 to September 30, 2010:

			Retail		Franchise		Operating		Franchise
	Gold Card		Brand		Brand		Agreements		Rights		Total
	(in thousands)
Balance at December 31, 2009	$	375	$	500,000	$	220,000	$	153,076	$	919	$	874,370
Acquired franchise stores	-		-		-		-		417		417
Amortization expense	(375)		-		-		(5,140)		(399)		(5,914)
Balance at September 30, 2010 (unaudited)	$	-	$	500,000	$	220,000	$	147,936	$	937	$	868,873

The following table reflects the gross carrying amount and accumulated amortization for each major intangible asset:

	Estimated	September 30, 2010						December 31, 2009
	Life			Accumulated		Carrying				Accumulated		Carrying
	in years	Cost		Amortization		Amount		Cost		Amortization		Amount

				(unaudited)
						(in thousands)
Brands - retail	-	$	500,000	$	-	$	500,000	$	500,000	$	-	$	500,000
Brands - franchise	-	220,000		-		220,000		220,000		-		220,000
Gold card - retail	3	3,500		(3,500)		-		3,500		(3,354)		146
Gold card - franchise	3	5,500		(5,500)		-		5,500		(5,271)		229
Retail agreements	25-35	31,000		(3,880)		27,120		31,000		(3,090)		27,910
Franchise agreements	25	70,000		(9,917)		60,083		70,000		(7,817)		62,183
Manufacturing agreements	25	70,000		(9,917)		60,083		70,000		(7,817)		62,183
Other intangibles	5	1,150		(500)		650		1,150		(350)		800
Franchise rights	1-5	3,478		(2,541)		937		3,061		(2,142)		919
		$	904,628	$	(35,755)	$	868,873	$	904,211	$	(29,841)	$	874,370

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table represents future estimated amortization expense of other intangible assets, net, with definite lives at September 30, 2010:

	Estimated
	amortization
Years ending December 31,	expense
	(unaudited)
	(in thousands)
2010	1,846
2011	7,266
2012	7,081
2013	6,973
2014	6,690
Thereafter	119,017
Total	$	148,873

NOTE 5. LONG-TERM DEBT / INTEREST EXPENSE

Long-term debt at each respective period consisted of the following:

	September 30,			December 31,
	2010			2009
	(unaudited)
	(in thousands)

2007 Senior Credit Facility	$	644,382		$	644,619
Senior Toggle Notes	298,264			297,959
10.75% Senior Subordinated Notes	110,000			110,000
Mortgage	6,089			7,184
Capital leases	38			47
Less: current maturities	(1,565		)	(1,724		)
Total	$	1,057,208		$	1,058,085

The Company’s net interest expense for each respective period is as follows:

	Three months ended					Nine months ended
	September 30,			September 30,		September 30,			September 30,
	2010			2009		2010			2009
	(unaudited)
	(in thousands)

2007 Senior Credit Facility
Term Loan	$	7,241		$	7,823	$	22,024		$	24,971
Revolver	111			113		335			378
Senior Toggle Notes	4,874			4,716		14,583			15,050
10.75% Senior Subordinated Notes	2,957			2,956		8,869			8,868
Deferred financing fees	1,071			1,026		3,195			3,053
Mortgage	110			135		341			423
OID amortization	103			95		304			277
Interest expense (income) - other	(127		)	10		(365		)	(3			)
Interest expense, net	$	16,340		$	16,874	$	49,286		$		53,017

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Accrued interest at each respective period consisted of the following:

	September 30,		December 31,
	2010		2009

	(unaudited)

	(in thousands)

2007 Senior Credit Facility	$	4,189	$	5,350
Senior Toggle Notes	862		5,720
10.75% Senior Subordinated Notes	525		3,482
Total	$	5,576	$	14,552

Interest on the 2007 Senior Credit Facility and the Senior Toggle Notes is based on variable rates. At both September 30, 2010 and December 31, 2009 the interest rate for the 2007 Senior Credit Facility was 2.5%. At September 30, 2010 and December 31, 2009 the interest rate for the Senior Toggle Notes was 5.8%.

NOTE 6. FINANCIAL INSTRUMENTS

At September 30, 2010 and December 31, 2009, the Company’s financial instruments consisted of cash and cash equivalents, receivables, franchise notes receivable, accounts payable, certain accrued liabilities and long-term debt. The carrying amounts of cash and cash equivalents, receivables, accounts payable and accrued liabilities approximate their fair value because of the short maturity of these instruments. Based on current interest rates and their underlying risk, the carrying value of the franchise notes receivable approximate their fair value. These fair values are reflected net of reserves, which are recognized according to Company policy. The Company determined the estimated fair values of its debt by using currently available market information and estimates and assumptions where appropriate. Accordingly, as considerable judgment is required to determine these estimates, changes in the assumptions or methodologies may have an effect on these estimates. The actual and estimated fair values of the Company’s financial instruments are as follows:

	September 30,				December 31,
	2010				2009
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value

	(unaudited)
	(in thousands)
Cash and cash equivalents	$	121,704	$	121,704	$	75,089	$	75,089
Receivables	105,781		105,781		94,355		94,355
Franchise notes receivable	3,624		3,624		3,364		3,364
Accounts payable	99,380		99,380		95,904		95,904
Long term debt (including current portion)	1,058,773		1,003,307		1,059,809		977,718

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 7. COMMITMENTS AND CONTINGENCIES

Litigation

The Company is engaged in various legal actions, claims and proceedings arising in the normal course of business, including claims related to breach of contracts, product liabilities, intellectual property matters and employment-related matters resulting from the Company’s business activities. As with many actions such as these, an estimation of any possible and/or ultimate liability cannot always be determined. The Company continues to assess the requirement to account for additional contingencies in accordance with the standard on contingencies. An adverse outcome in these matters could have a material impact on the Company’s financial condition and operating results.

As a manufacturer and retailer of nutritional supplements and other consumer products that are ingested by consumers or applied to their bodies, the Company has been and is currently subjected to various product liability claims. Although the effects of these claims to date have not been material to the Company, it is possible that current and future product liability claims could have a material adverse impact on its business or financial condition. The Company currently maintains product liability insurance with a deductible/retention of $3.0 million per claim with an aggregate cap on retained loss of $10.0 million. The Company typically seeks and has obtained contractual indemnification from most parties that supply raw materials for its products or that manufacture or market products it sells. The Company also typically seeks to be added, and has been added, as an additional insured under most of such parties’ insurance policies. The Company is also entitled to indemnification by Numico for certain losses arising from claims related to products containing ephedra or Kava Kava sold prior to December 5, 2003. However, any such indemnification or insurance is limited by its terms and any such indemnification, as a practical matter, is limited to the creditworthiness of the indemnifying party and its insurer, and the absence of significant defenses by the insurers. The Company may incur material products liability claims, which could increase its costs and adversely affect its reputation, revenues and operating income.

Hydroxycut Claims. On May 1, 2009, the FDA issued a warning on several Hydroxycut-branded products manufactured by Iovate Health Sciences U.S.A., Inc. (“Iovate”). The FDA warning was based on 23 reports of liver injuries from consumers who claimed to have used the products between 2002 and 2009. As a result, Iovate voluntarily recalled 14 Hydroxycut-branded products. As described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, following the recall, GNC was named, among other defendants, in several lawsuits related to Hydroxycut (note that prior to May 1, 2009, GNC was a co-defendant in one Hydroxycut case (see the “Ciavarra Claim” described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009)). Iovate previously accepted GNC’s tender request for defense and indemnification under its purchasing agreement with GNC and, as such, Iovate has accepted GNC’s request for defense and indemnification in the new Hydroxycut matters. GNC’s ability to obtain full recovery in respect of any claims against GNC in connection with products manufactured by Iovate under the indemnity is dependent on Iovate’s insurance coverage, the creditworthiness of its insurer, and the absence of significant defenses by such insurer. To the extent GNC is not fully compensated by Iovate’s insurer, it can seek recovery directly from Iovate. GNC’s ability to fully recover such amounts may be limited by the creditworthiness of Iovate.

As of October 21, 2010, GNC has been named in approximately 43 personal injury actions in 13 states claiming injuries from use and consumption of Hydroxycut-branded products. During the third quarter of 2010, 6 such personal injury actions naming GNC were filed. In addition, as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, GNC has been named in six active putative class actions that generally include claims of consumer fraud, misrepresentation, strict liability, and breach of warranty related to Hydroxycut-branded products. By court order dated October 6, 2009, the United States Judicial Panel on Multidistrict Litigation consolidated pretrial proceedings of many of the pending actions (including the GNC class actions). Any liabilities that may arise from these matters are not probable or reasonably estimable at this time.

Pro-Hormone/Androstenedione Cases. As described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, the Company is currently defending six lawsuits relating to the sale by GNC of certain nutritional products alleged to contain the ingredients commonly known as Androstenedione, Androstenediol, Norandrostenedione, and Norandrostenediol (collectively, “Andro Products”). In each of the six

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

cases, plaintiffs sought, or are seeking, to certify a class and obtain damages on behalf of the class representatives and all those similarly-situated who purchased from the Company certain nutritional supplements alleged to contain one or more Andro Products. Any liabilities that may arise from these matters are not probable or reasonably estimable at this time.

California Wage and Break Claim. As described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, on November 4, 2008, 98 plaintiffs filed individual claims against the Company. Each of the plaintiffs had previously been a member of a purported class in a lawsuit filed against the Company in 2007 and resolved in September 2009. The plaintiffs allege that they were not provided all of the rest and meal periods to which they were entitled under California law, and further allege that the Company failed to pay them split shift and overtime compensation to which they were entitled under California law. Discovery in this case is ongoing and the Company is vigorously defending these matters. Any liabilities that may arise from these matters are not probable or reasonably estimable at this time.

Other cases. The Company is currently defending other lawsuits relating to personal injury claims, product labeling and employee-related matters. Any liabilities that may arise from these matters are not probable or reasonably estimable at this time.

Environmental Compliance

In March 2008, the South Carolina Department of Health and Environmental Control (“DHEC”) requested that the Company investigate its South Carolina facility for a possible source or sources of contamination detected on an adjoining property. The Company has commenced the investigation at the facility as requested by DHEC. After several phases of the investigation the possible source or sources of contamination have not been sufficiently identified. The Company is continuing such investigation. The proceedings in this matter have not yet progressed to a stage where it is possible to estimate the timing and extent of any remedial action that may be required, the ultimate cost of remediation, or the amount of the Company’s potential liability.

In addition to the foregoing, the Company is subject to numerous federal, state, local, and foreign environmental and health and safety laws and regulations governing its operations, including the handling, transportation, and disposal of the Company’s non-hazardous and hazardous substances and wastes, as well as emissions and discharges from its operations into the environment, including discharges to air, surface water, and groundwater. Failure to comply with such laws and regulations could result in costs for remedial actions, penalties, or the imposition of other liabilities. New laws, changes in existing laws or the interpretation thereof, or the development of new facts or changes in their processes could also cause the Company to incur additional capital and operating expenditures to maintain compliance with environmental laws and regulations and environmental permits. The Company also is subject to laws and regulations that impose liability and cleanup responsibility for releases of hazardous substances into the environment without regard to fault or knowledge about the condition or action causing the liability. Under certain of these laws and regulations, such liabilities can be imposed for cleanup of previously owned or operated properties, or for properties to which substances or wastes that were sent in connection with current or former operations at its facilities. The presence of contamination from such substances or wastes could also adversely affect the Company’s ability to sell or lease its properties, or to use them as collateral for financing. From time to time, the Company has incurred costs and obligations for correcting environmental and health and safety noncompliance matters and for remediation at or relating to certain of its properties or properties at which its waste has been disposed. The Company believes it has complied with, and is currently complying with, its environmental obligations pursuant to environmental and health and safety laws and regulations in all material respects, and that any liabilities for noncompliance will not have a material adverse effect on its business or financial performance. However, it is difficult to predict future liabilities and obligations, which could be material.

Contingencies

Due to the nature of the Company’s business operations having a presence in multiple taxing jurisdictions, the Company periodically receives inquiries and/or audits from various taxing authorities. Any probable and reasonably estimable liabilities that may arise from these inquiries have been accrued and reflected in the accompanying financial statements.

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 8. STOCK-BASED COMPENSATION PLANS

Stock Options

In 2007, the Board of Directors of Parent (the “Board”) and Parent’s stockholders approved and adopted the GNC Acquisition Holdings Inc. 2007 Stock Incentive Plan (the “Plan”). The purpose of the Plan is to enable Parent to attract and retain highly qualified personnel who will contribute to the success of the Company. The Plan provides for the granting of stock options, restricted stock, and other stock-based awards. The Plan is available to certain eligible employees, directors, consultants or advisors as determined by the Compensation Committee of the Board (the “Compensation Committee”). The total number of shares of Parent’s Class A common stock reserved and available for the Plan is 10.4 million shares. Stock options under the Plan generally are granted with exercise prices at or above fair market value, typically vest over a four or five-year period and expire ten years from the date of grant. The Compensation Committee has used a valuation methodology in which the fair market value of the common stock is based on the Company’s business enterprise value and, in situations deemed appropriate by the Compensation Committee, may be discounted to reflect the lack of marketability associated with the common stock. No stock appreciation rights, restricted stock, deferred stock or performance shares have been granted under the Plan.

The Company utilizes the Black-Scholes model to calculate the fair value of options under the standard on stock compensation. The resulting compensation cost is recognized in the Company’s financial statements over the option vesting period. At September 30, 2010, the net unrecognized compensation cost was $7.1 million and is expected to be recognized over a weighted average period of approximately 2.2 years.

The following table outlines the Parent’s stock option activity:

		Weighted
		Average
	Total Options	Exercise Price

Outstanding at December 31, 2009	9,263,640	$	7.27
Granted	680,000	12.58
Exercised	(13,876)	7.91
Forfeited	(433,325)	7.87
Expired	(33,251)	6.49
Outstanding at September 30, 2010	9,463,188	$	7.63

Exercisable at September 30, 2010	4,843,811	$	6.71

The standard on stock compensation requires that the cost resulting from all share-based payment transactions be recognized in the financial statements. Stock-based compensation expense for the nine months ended September 30, 2010 and 2009 was $2.4 million and $2.1 million, respectively.

At September 30, 2010, the weighted average remaining contractual life of outstanding options was 6.8 years. At September 30, 2010, the weighted average remaining contractual life of exercisable options was 6.2 years. The weighted average fair value of options granted during 2010 was $2.64.

The Black-Scholes model utilizes the following assumptions in determining a fair value: price of underlying stock, option exercise price, expected option term, risk-free interest rate, expected dividend yield, and expected stock price volatility over the option’s expected term. As the Company has had minimal exercises of stock options since the inception of the Plan, the option term has been estimated by considering both the vesting period, which is typically four or five years, and the contractual term of ten years. As the Company’s underlying stock is not publicly traded on an open market, the Company utilized its current peer group average to estimate the expected volatility. The assumptions used in the Company’s Black-Scholes valuation related to stock option grants made during the nine months ended September 30, 2010 were as follows:

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		September 30,
		2010
		(unaudited)
Dividend yield		0.00%
Expected option life		7.5 years
Volatility factor percentage of market price		31.5% -33.0%
Discount rate		2.49% - 3.28%

As the Black-Scholes model utilizes certain estimates and assumptions, the existing models do not necessarily represent the definitive fair value of options for future periods.

NOTE 9. SEGMENTS

The Company has three reportable segments, each of which represents an identifiable component of the Company for which separate financial information is available. This information is utilized by management to assess performance and allocate assets accordingly. The Company’s management evaluates segment operating results based on several indicators. The primary key performance indicators are sales and operating income or loss for each segment. Operating income or loss, as evaluated by management, excludes certain items that are managed at the consolidated level, such as distribution and warehousing, impairments and other corporate costs. The following table represents key financial information for each of the Company’s reportable segments, identifiable by the distinct operations and management of each: Retail, Franchising, and Manufacturing/Wholesale. The Retail reportable segment includes the Company’s corporate store operations in the United States, Canada and its www.gnc.com business. The Franchise reportable segment represents the Company’s franchise operations, both domestically and internationally. The Manufacturing/Wholesale reportable segment represents the Company’s manufacturing operations in South Carolina and the Wholesale sales business. This segment supplies the Retail and Franchise segments, along with various third parties, with finished products for sale. The Warehousing and Distribution Costs, Corporate Costs, and Other Unallocated Costs represent the Company’s administrative expenses. The accounting policies of the segments are the same as those described in Note 2, “Basis of Presentation and Summary of Significant Accounting Policies”.

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

	Three months ended				Nine months ended
	September 30,		September		September 30,		September 30,
	2010		2009		2010		2009
	(unaudited)
	(in thousands)
Revenue:
Retail	$	338,231	$	311,933	$	1,031,899	$	962,587
Franchise	76,980		67,355		222,625		201,063
Manufacturing/Wholesale:
Intersegment (1)	55,821		51,452		154,428		149,470
Third Party	50,535		51,510		132,145		139,461
Sub total Manufacturing/Wholesale	106,356		102,962		286,573		288,931
Sub total segment revenues	521,567		482,250		1,541,097		1,452,581
Intersegment elimination (1)	(55,821)		(51,452)		(154,428)		(149,470)
Total revenue	$	465,746	$	430,798	$	1,386,669	$	1,303,111

Operating income:
Retail	$	47,670	$	37,251	$	147,248	$	123,277
Franchise	26,329		22,486		71,660		61,243
Manufacturing/Wholesale	17,901		18,854		51,140		54,072
Unallocated corporate and other costs:
Warehousing and distribution costs	(13,784)		(13,441)		(41,450)		(40,458)
Corporate costs	(18,877)		(17,749)		(54,973)		(54,741)
Sub total unallocated corporate and other costs	(32,661)		(31,190)		(96,423)		(95,199)
Total operating income	$	59,239	$	47,401	$	173,625	$	143,393

(1) Intersegment revenues are eliminated from consolidated revenue.

NOTE 10. SUPPLEMENTAL GUARANTOR INFORMATION

As of September 30, 2010 the Company’s debt included its 2007 Senior Credit Facility, Senior Toggle Notes and 10.75% Senior Subordinated Notes. The 2007 Senior Credit Facility has been guaranteed by the Company’s direct parent, GNC Corporation, and the Company’s existing and future direct and indirect material domestic subsidiaries. The Senior Toggle Notes are general non collateralized obligations of the Company, are effectively subordinated to the Company’s 2007 Senior Credit Facility to the extent of the value of the collateral securing the 2007 Senior Credit Facility and are senior in right of payment to all existing and future subordinated obligations of the Company, including its 10.75% Senior Subordinated Notes. The Senior Toggle Notes are unconditionally guaranteed on a non collateralized basis by all of the Company’s existing and future direct and indirect material domestic subsidiaries. The 10.75% Senior Subordinated Notes are general non collateralized obligations and are guaranteed on a senior subordinated basis by the Company’s existing and future direct and indirect material domestic subsidiaries and rank junior in right of payment to the Company’s 2007 Senior Credit Facility and Senior Toggle Notes. The guarantors are the same for the 2007 Senior Credit Facility, Senior Toggle Notes and 10.75% Senior Subordinated Notes. Non-guarantor subsidiaries include the Company’s direct and indirect foreign subsidiaries. Each subsidiary guarantor is 100% owned, directly or indirectly, by the Company. The guarantees are full and unconditional and joint and several. Investments in subsidiaries are accounted for under the equity method of accounting.

Presented below are condensed consolidating financial statements of the Company as the parent/issuer, and the combined guarantor and non-guarantor subsidiaries as of September 30, 2010, December 31, 2009, and the three and nine months ended September 30, 2010 and 2009. Intercompany balances and transactions have been eliminated.

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Supplemental Condensed Consolidating Balance Sheets

			Combined		Combined
	Parent/		Guarantor		Non-Guarantor
September 30, 2010	Issuer		Subsidiaries		Subsidiaries		Eliminations		Consolidated
	(unaudited)
	(in thousands)

Current assets
Cash and cash equivalents	$	114,554	$	3,953	$	3,197	$	-	$	121,704
Receivables, net	1,827		103,318		636		-		105,781
Intercompany receivables	83,740		-		-		(83,740)		-
Inventories, net	-		366,494		30,294		-		396,788
Prepaids and other current assets	13,464		13,656		6,519		-		33,639
Total current assets	213,585		487,421		40,646		(83,740)		657,912

Goodwill	-		624,452		468		-		624,920
Brands	-		720,000		-		-		720,000
Property, plant and equipment, net	6,899		157,706		28,211		-		192,816
Investment in subsidiaries	1,633,003		(8,011)		-		(1,624,992)		-
Other assets	25,952		151,699		-		(8,781)		168,870
Total assets	$	1,879,439	$	2,133,267	$	69,325	$	(1,717,513)	$	2,364,518

Current liabilities
Current liabilities	$	38,876	$	159,853	$	12,615	$	-	$	211,344
Intercompany payables	-		64,244		19,496		(83,740)		-
Total current liabilities	38,876		224,097		32,111		(83,740)		211,344

Long-term debt	1,052,646		23		13,320		(8,781)		1,057,208
Deferred tax liabilities	(370)		292,533		(365)		-		291,798
Other long-term liabilities	15,544		13,974		1,907		-		31,425
Total liabilities	1,106,696		530,627		46,973		(92,521)		1,591,775
Total stockholder's equity (deficit)	772,743		1,602,640		22,352		(1,624,992)		772,743
Total liabilities and stockholder's equity (deficit)	$	1,879,439	$	2,133,267	$	69,325	$	(1,717,513)	$	2,364,518

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Supplemental Condensed Consolidating Balance Sheets

				Combined			Combined
	Parent/			Guarantor			Non-Guarantor
December 31, 2009	Issuer			Subsidiaries			Subsidiaries			Eliminations			Consolidated

							(in thousands)

Current assets
Cash and cash equivalents	$	77,797		$	(4,801	)	$	2,093		$	-		$	75,089
Receivables, net	895			92,273			1,187			-			94,355
Intercompany receivables	139,168			-			-			(139,168		)	-
Inventories, net	-			339,975			30,517			-			370,492
Prepaids and other current assets	19,308			14,409			8,502			-			42,219
Total current assets	237,168			441,856			42,299			(139,168		)	582,155

Goodwill	-			624,285			468			-			624,753
Brands	-			720,000			-			-			720,000
Property, plant and equipment, net	7,409			163,882			28,290			-			199,581
Investment in subsidiaries	1,550,708			(7,687		)	-			(1,543,021		)	-
Other assets	28,876			157,018			-			(8,781		)	177,113
Total assets	$	1,824,161		$	2,099,354		$	71,057		$	(1,690,970	)	$	2,303,602

Current liabilities
Current liabilities	$	34,129		$	154,435		$	11,023		$	-		$	199,587
Intercompany payables	-			113,359			25,809			(139,168		)	-
Total current liabilities	34,129			267,794			36,832			(139,168		)	199,587

Long-term debt	1,052,341			32			14,493			(8,781		)	1,058,085
Deferred tax liabilities	(4,754		)	294,087			(439		)	-			288,894
Other long-term liabilities	24,929			14,129			462			-			39,520
Total liabilities	1,106,645			576,042			51,348			(147,949		)	1,586,086
Total stockholder's equity (deficit)	717,516			1,523,312			19,709			(1,543,021		)	717,516
Total liabilities and stockholder's equity (deficit)	$	1,824,161		$	2,099,354		$	71,057		$	(1,690,970	)	$	2,303,602

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Supplemental Condensed Consolidating Statements of Operations

				Combined		Combined
	Parent/			Guarantor		Non-Guarantor
Three months ended September 30, 2010	Issuer			Subsidiaries		Subsidiaries			Eliminations			Consolidated

						(unaudited)
						(in thousands)
Revenue	$	-		$	442,734	$	26,450		$	(3,438	)	$	465,746

Cost of sales, including costs of warehousing, distribution and occupancy	-			286,088		20,017			(3,438		)	302,667
Gross profit	-			156,646		6,433			-			163,079

Compensation and related benefits	11,930			52,877		4,367			-			69,174
Advertising and promotion	-			10,488		155			-			10,643
Other selling, general and administrative	7,544			16,578		(7		)	-			24,115
Subsidiary (income) expense	(27,196		)	107		-			27,089			-
Other (income) expense	(18,649		)	17,750		807			-			(92		)
Operating income (loss)	26,371			58,846		1,111			(27,089		)	59,239

Interest expense, net	883			15,182		275			-			16,340
Income (loss) before income taxes	25,488			43,664		836			(27,089		)	42,899

Income tax (benefit) expense	(1,297		)	17,239		172			-			16,114

Net income (loss)	$	26,785		$	26,425	$	664		$	(27,089	)	$	26,785

Supplemental Condensed Consolidating Statements of Operations

				Combined		Combined
	Parent/			Guarantor		Non-Guarantor
Nine months ended September 30, 2010	Issuer			Subsidiaries		Subsidiaries		Eliminations			Consolidated

						(unaudited)
						(in thousands)
Revenue	$	-		$	1,314,091	$	82,767	$	(10,189	)	$	1,386,669

Cost of sales, including costs of warehousing, distribution and occupancy	-			843,217		61,007		(10,189		)	894,035
Gross profit	-			470,874		21,760		-			492,634

Compensation and related benefits	33,030			158,485		13,051		-			204,566
Advertising and promotion	-			39,436		783		-			40,219
Other selling, general and administrative	23,443			50,545		385		-			74,373
Subsidiary (income) expense	(81,794		)	324		-		81,470			-
Other (income) expense	(53,677		)	49,749		3,779		-			(149		)
Operating income (loss)	78,998			172,335		3,762		(81,470		)	173,625

Interest expense, net	2,622			45,840		824		-			49,286
Income (loss) before income taxes	76,376			126,495		2,938		(81,470		)	124,339

Income tax (benefit) expense	(1,969		)	47,167		796		-			45,994

Net income (loss)	$	78,345		$	79,328	$	2,142	$	(81,470	)	$	78,345

GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Supplemental Condensed Consolidating Statements of Operations


				Combined		Combined
	Parent/			Guarantor		Non-Guarantor
Three months ended September 30, 2009	Issuer			Subsidiaries		Subsidiaries		Eliminations			Consolidated

						(unaudited)
						(in thousands)
Revenue	$	-		$	409,634	$	26,343	$	(5,179	)	$	430,798

Cost of sales, including costs of warehousing,
distribution and occupancy	-			268,609		19,176		(5,179		)	282,606
Gross profit	-			141,025		7,167		-			148,192

Compensation and related benefits	9,897			51,442		4,131		-			65,470
Advertising and promotion	-			10,925		118		-			11,043
Other selling, general and administrative	8,382			15,885		5		-			24,272
Subsidiary (income) expense	(20,789		)	236		-		20,553			-
Other (income) expense	(17,407		)	16,452		961		-			6
Operating income (loss)	19,917			46,085		1,952		(20,553		)	47,401

Interest expense, net	982			15,595		297		-			16,874
Income (loss) before income taxes	18,935			30,490		1,655		(20,553		)	30,527

GENERAL NUTRITION CENTERS, INC. 10-Q