10-Q

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 June 30, 2012
[     ]	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:  001-35113

GNC Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-8536244
(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.     [ X ] Yes [    ] 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).  [ X  ] 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 July 26, 2012, there were 106,632,824 outstanding shares of Class A common stock, par value $0.001 per share (the “Class A common stock”), of GNC Holdings, Inc.

TABLE OF CONTENTS

		PAGE
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of June 30, 2012 (unaudited) and December 31, 2011	1
	Unaudited Consolidated Statements of Income for the three and six months ended June 30, 2012 and 2011	2
	Unaudited Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2012 and 2011	2
	Unaudited Consolidated Statement of Stockholders’ Equity for the six months ended June 30, 2012 and 2011	3
	Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011	4
	Summarized Notes to Unaudited Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	27
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	30
Signatures		31

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

GNC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, including share data)

	June 30,			December 31,
	2012			2011
Current assets:	(unaudited)
Cash and cash equivalents	$	160,167		$	128,438
Receivables, net	127,005			114,190
Inventories (Note 3)	509,714			423,610
Prepaids and other current assets	41,263			38,777
Total current assets	838,149			705,015
Long-term assets:
Goodwill (Note 4)	639,755			637,877
Brands (Note 4)	720,000			720,000
Other intangible assets, net (Note 4)	145,750			149,589
Property, plant and equipment, net	199,220			198,171
Other long-term assets	26,311			18,935
Total long-term assets	1,731,036			1,724,572
Total assets	$	2,569,185		$	2,429,587
Current liabilities:
Accounts payable	158,936			124,416
Current portion, long-term debt (Note 5)	1,588			1,592
Deferred revenue and other current liabilities	109,204			104,525
Total current liabilities	269,728			230,533
Long-term liabilities:
Long-term debt (Note 5)	899,301			899,950
Deferred tax liabilities, net	285,268			283,403
Other long-term liabilities	39,983			37,239
Total long-term liabilities	1,224,552			1,220,592
Total liabilities	1,494,280			1,451,125
Stockholders’ equity:
Common stock, $0.001 par value, 150,000 shares authorized:
Class A, 110,987 shares issued and 106,318 shares outstanding and 4,669 shares held in treasury at June 30, 2012 and 105,988 shares issued and 102,985 shares outstanding and 3,004 shares held in treasury at December 31, 2011	110			105
Class B, 0 and 2,060 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively	-			2
Paid-in-capital	791,268			741,848
Retained earnings	404,899			298,831
Treasury stock, at cost	(123,870		)	(65,048		)
Accumulated other comprehensive income	2,498			2,724
Total stockholders’ equity	1,074,905			978,462
Total liabilities and stockholders’ equity	$	2,569,185		$	2,429,587

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

1

GNC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(unaudited)

(in thousands, except per share data)

	Three months ended June 30,					Six months ended June 30,
	2012		2011			2012			2011
Revenue	$	619,081	$	518,535		$	1,243,354		$	1,024,543
Cost of sales, including cost of warehousing, distribution and occupancy	379,644		327,618			763,208			649,779
Gross profit	239,437		190,917			480,146			374,764
Compensation and related benefits	78,376		75,363			158,419			146,636
Advertising and promotion	13,411		13,391			29,630			27,598
Other selling, general and administrative	30,573		29,418			62,358			57,901
Foreign currency gain	17		48			(76		)	(119		)
Transaction related costs	-		-			686			12,362
Operating income	117,060		72,697			229,129			130,386
Interest expense, net (Note 5)	10,495		15,723			20,878			54,099
Income before income taxes	106,565		56,974			208,251			76,287
Income tax expense (Note 10)	39,894		20,970			77,723			30,360
Net income	$	66,671	$	36,004		$	130,528		$	45,927
Income per share - Basic and Diluted:
Net income	$	66,671	$	36,004		$	130,528		$	45,927
Preferred stock dividends	-		(494		)	-			(4,726		)
Net income available to common shareholders	$	66,671	$	35,510		$	130,528		$	41,201
Earnings per share:
Basic	$	0.63	$	0.35		$	1.23		$	0.43
Diluted	$	0.62	$	0.34		$	1.21		$	0.42
Weighted average common shares outstanding:
Basic	106,517		102,723			106,161			95,088
Diluted	107,927		105,908			107,917			97,972
Dividends declared per share:	$	0.11	-			$	0.22		-

Consolidated Statements of Comprehensive Income

(unaudited)

(in thousands)

	Three months ended June 30,					Six months ended June 30,
	2012			2011		2012			2011
Net income.	$	66,671		$	36,004	$	130,528		$	45,927
Other comprehensive income:
Unrealized gains on derivatives and qualified as cash flow hedges, net of tax of $2,718	-			-		-			4,751
Foreign currency translation adjustments	(580		)	290		(226		)	1,120
Other comprehensive income	(580		)	290		(226		)	5,871
Comprehensive income	$	66,091		$	36,294	$	130,302		$	51,798

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

2

GNC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

(unaudited)

(in thousands, including per share data)

	Common Stock																	Other			Total
	Class A				Class B					Treasury			Paid-in-		Retained			Comprehensive			Stockholders’
	Shares		Dollars		Shares		Dollars			Stock			Capital		Earnings			Income/(Loss)			Equity
Balance at December 31, 2011	102,985		$	105	2,060		$	2		$	(65,048	)	$	741,848	$	298,831		$	2,724		$	978,462
Comprehensive Income	-		-		-		-			-			-		130,528			(226		)	130,302
Conversion of stock	2,060		2		(2,060	)	(2		)	-			-		-			-			-
Purchase of treasury stock	(1,665	)	-		-		-			(58,822		)	-		-			-			(58,822		)
Common stock dividends	-		-		-		-			-			-		(23,409		)	-			(23,409		)
Exercise of stock options	2,938		3		-		-			-			47,100		-			-			47,103
Non-cash stock-based compensation	-		-		-		-			-			2,320		-			-			2,320
Other	-		-		-		-			-			-		(1,051		)	-			(1,051		)
Balance at June 30, 2012 (unaudited)	106,318		$	110	-		$	-		$	(123,870	)	$	791,268	$	404,899		$	2,498		$	1,074,905
Balance at December 31, 2010	59,199		$	60	28,169		$	28		$	(2,277	)	$	451,728	$	171,224		$	(1,280	)	$	619,483
Comprehensive Income	-		-		-		-			-			-		45,927			5,871			51,798
Issuance of common stock	16,000		16		-		-			-			237,237		-			-			237,253
Conversion of stock	14,387		14		(14,387	)	(14		)	-			-		-			-			-
Preferred stock dividends	-		-		-		-			-			-		(4,726		)	-			(4,726		)
Exercise of stock options	478		-		-		-			-			4,620		-			-			4,620
Non-cash stock-based compensation	-		-		-		-			-			2,215		-			-			2,215
Balance at June 30, 2011 (unaudited)	90,064		$	90	13,782		$	14		$	(2,277	)	$	695,800	$	212,425		$	4,591		$	910,643

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

3

GNC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

	Six Months Ended June 30,
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	130,528		$	45,927
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on early extinguishment of debt	-			19,855
Depreciation and amortization expense	24,329			22,891
Amortization of debt costs	1,166			1,636
Increase in provision for inventory losses	6,554			8,847
(Increase) decrease in receivables	(15,049		)	611
Increase in inventory	(90,642		)	(40,884		)
Decrease in prepaids and other current assets	1,699			3,219
Increase in accounts payable	34,475			30,158
Increase (decrease) in deferred revenue and other current liabilities	1,384			(12,361		)
Other operating activities	(1,578		)	(382		)
Net cash provided by operating activities	92,866			79,517
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(20,838		)	(16,455		)
Other investing activities	(1,895		)	(1,422		)
Net cash used in investing activities	(22,733		)	(17,877		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt	(833		)	(1,355,165		)
Dividends paid to shareholders	(23,409		)	-
Proceeds from exercised stock options	19,540			3,325
Repurchase of treasury stock	(59,960		)	-
Tax benefit from exercise of stock options	28,903			1,612
Repurchase of Series A preferred stock	-			(223,107		)
Net proceeds from sale of Class A common stock	-			237,253
Proceeds from issuance of long-term debt	-			1,196,200
Deferred financing fees	-			(17,346		)
Other financing activities	(2,500		)	-
Net cash used in financing activities	(38,259		)	(157,228		)
Effect of exchange rate on cash and cash equivalents	(145		)	(344		)
Net increase (decrease) in cash and cash equivalents	31,729			(95,932		)
Beginning balance, cash and cash equivalents	128,438			193,902
Ending balance, cash and cash equivalents	$	160,167		$	97,970

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

4

NOTE 1.  NATURE OF BUSINESS

General Nature of Business. GNC Holdings, Inc., formerly GNC Acquisition Holdings Inc., a Delaware corporation (“Holdings,” and collectively with its subsidiaries and, unless the context requires otherwise, its and their respective predecessors, the “Company”), is a global specialty retailer of health and wellness products, which include: vitamins, minerals and herbal supplements, sports nutrition products, diet products and other wellness products.

The Company is vertically integrated as its operations consist of purchasing raw materials, formulating and manufacturing products and selling the finished products through its three primary 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 GNC.com, www.drugstore.com, and since September 2011, LuckyVitamin.com. Franchise stores are located in the United States and 55 international countries (including distribution centers where retail sales are made). 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 (the “FDA”), Federal Trade Commission, Consumer Product Safety Commission, United States Department of Agriculture and the Environmental Protection Agency. These activities are also regulated by various agencies of the states and localities in which the Company’s products are sold.

Recent Significant Transactions. In March 2011, General Nutrition Centers, Inc. (“Centers”), a wholly owned subsidiary of Holdings, entered into a senior credit facility, consisting of a $1.2 billion term loan facility (the “Term Loan Facility”) and an $80.0 million revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Credit Facility”), and utilized the proceeds to repay all outstanding indebtedness under the 2007 Senior Credit Facility, the Senior Notes, and the Senior Subordinated Notes (the “Refinancing”).

In April 2011, Holdings consummated an initial public offering (the “IPO”) of 25.875 million shares of its Class A common stock, par value $0.001 per share (the “Class A common stock”), at an IPO price of $16.00 per share. The net proceeds from the IPO, together with cash on hand, were used to redeem all outstanding shares of Holdings’ Series A preferred stock, par value $0.001 per share (the “Series A preferred stock”), repay approximately $300.0 million of outstanding borrowings under the Term Loan Facility and pay approximately $11.1 million to satisfy obligations under the Management Services Agreement (as defined in Note 11, “Related Party Transactions”) and Holdings’ Class B common stock, par value $0.001 per share (the “Class B common stock” and, together with the Class A common stock, the “common stock”).

On August 31, 2011, the Company acquired substantially all of the assets and assumed certain liabilities of S&G Properties, LLC d/b/a LuckyVitamin.com and What’s The Big Deal?, Inc. d/b/a Gary’s “World of Wellness” (collectively referred to as “LuckyVitamin.com”), an online retailer of health and wellness products. The aggregate purchase price of LuckyVitamin.com was approximately $19.8 million.

During the first quarter of 2012 and the fourth quarter of 2011, certain of Holdings’ stockholders completed registered offerings of 19.6 million and 23.0 million shares, respectively, of Class A common stock at prices of $33.50 and $24.75 per share, respectively.

During the first six months of 2012, the Company completed an approved share repurchase program for $60.0 million shares of Holdings’ Class A common stock.  On June 19, 2012, the Holdings’ Board of Directors (the “Board”) authorized a share repurchase program pursuant to which the Company may repurchase up to an aggregate of $300.0 million shares of Holdings’ Class A common stock during the following twelve month period ending July 31, 2013.  The Company expects to finance any repurchases with cash, potential financing transactions, or a combination of the foregoing.

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

The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and

5

GNC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s audited financial statements in the Holdings’ Annual Report on Form 10-K filed for the year ended December 31, 2011. There have been no material changes to the application of critical accounting policies and significant judgments and estimates since December 31, 2011.

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, 2012.

Principles of Consolidation. The consolidated financial statements include the accounts of Holdings and all of its subsidiaries. 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 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 and income taxes. 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.

Transaction Related Costs.  The Company recognizes transaction related costs as expenses in the period incurred.  For the six months ended June 30, 2012, the Company recognized $0.7 million of expenses related to the registered offering completed by Holdings’ stockholders during the first quarter of 2012.  For the six months ended June 30, 2011, the Company recognized $12.4 million of expenses related to the IPO.

Recently Adopted Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (the “FASB”) issued updated guidance on current comprehensive income presentation. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of stockholders’ equity. Instead, the Company must report comprehensive income in either a single continuous statement of comprehensive income that contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. This new guidance is effective for the Company for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company adopted this guidance during the first quarter of 2012. The adoption of this guidance had no material impact on the Company’s consolidated financial statements, as it only required a change in the format of presentation.

In May 2011, the FASB issued changes to conform existing guidance regarding fair value measurement and disclosure between GAAP and International Financial Reporting Standards. These changes both clarify the FASB’s intent about the application of existing fair value measurement and disclosure requirements and amend certain principles or requirements for measuring fair value or for disclosing information about fair value measurements. The clarifying changes relate to the application of the highest and best use and valuation premise concepts, measuring the fair value of an instrument classified in a reporting entity’s stockholders’ equity, and disclosure of quantitative information about unobservable inputs used for Level 3 fair value measurements. The amendments relate to measuring the fair value of financial instruments that are managed within a portfolio; application of premiums and discounts in a fair value measurement; and additional disclosures concerning the valuation processes used and sensitivity of the fair value measurement to changes in unobservable inputs for those items categorized as Level 3, a reporting entity’s use of a nonfinancial asset in a way that differs from the asset’s highest and best use, and the categorization by level in the fair value hierarchy for items required to be measured at fair value for disclosure purposes only.  The Company adopted this guidance during the first quarter of 2012, and it had no material impact on the Company’s financial statements.

6

GNC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3.  INVENTORIES

The net carrying value of inventories consisted of the following:

	June 30,		December 31,
	2012		2011
	(unaudited)
	(in thousands)
Finished product ready for sale	$	419,827	$	354,913
Work-in-process, bulk product and raw materials	80,847		61,684
Packaging supplies	9,040		7,013
Total	$	509,714	$	423,610

NOTE 4. GOODWILL AND INTANGIBLE ASSETS, NET

For the six months ended June 30, 2012 and 2011, the Company acquired 17 and 16 franchise stores, respectively. These acquisitions were accounted for as business combinations and the Company recorded the acquired inventory, fixed assets, franchise rights and goodwill, with an applicable reduction to receivables and cash. For the six months ended June 30, 2012 and 2011, the total purchase price associated with these acquisitions was $3.4 million and $1.9 million, respectively, of which $1.6 million and $0.7 million, respectively, was paid in cash.

The following table summarizes the Company’s goodwill activity:

					Manufacturing/
	Retail		Franchising		Wholesale		Total
	(in thousands)
Balance at December 31, 2011	$	317,733	$	117,303	$	202,841	$	637,877
Acquired franchise stores	1,878		-		-		1,878
Balance at June 30, 2012 (unaudited)	$	319,611	$	117,303	$	202,841	$	639,755

Intangible assets other than goodwill consisted of the following:

	Retail		Franchise		Operating			Other
	Brand		Brand		Agreements			Intangibles			Total
	(in thousands)
Balance at December 31, 2011	$	500,000	$	220,000	$	138,970		$	10,619		$	869,589
Acquired franchise stores	-		-		-			440			440
Amortization expense	-		-		(3,326		)	(953		)	(4,279		)
Balance at June 30, 2012 (unaudited)	$	500,000	$	220,000	$	135,644		$	10,106		$	865,750

7

GNC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

	Estimated	June 30, 2012							December 31, 2011
	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
Retail agreements	25-35	31,000		(5,722		)	25,278		31,000		(5,196		)	25,804
Franchise agreements	25	70,000		(14,817		)	55,183		70,000		(13,417		)	56,583
Manufacturing agreements	25	70,000		(14,817		)	55,183		70,000		(13,417		)	56,583
Other intangibles	5-15	10,600		(1,544		)	9,056		10,600		(938		)	9,662
Franchise rights	1-5	4,873		(3,823		)	1,050		4,433		(3,476		)	957
Total		$	906,473	$	(40,723	)	$	865,750	$	906,033	$	(36,444	)	$	869,589

The following table represents future estimated amortization expense of intangible assets with finite lives at June 30, 2012:

	Estimated
	amortization
Years ending December 31,	expense
	(unaudited)
	(in thousands)
2012	$	4,240
2013	8,226
2014	8,086
2015	7,986
2016	7,907
Thereafter	109,305
Total	$	145,750

NOTE 5.  LONG-TERM DEBT / INTEREST EXPENSE

Long-term debt consisted of the following:

	June 30,			December 31,
	2012			2011
	(unaudited)
	(in thousands)
Senior Credit Facility	$	897,572		$	897,387
Mortgage	3,304			4,135
Capital leases	13			20
Total Debt	900,889			901,542
Less: current maturities	(1,588		)	(1,592		)
Long-term Debt	$	899,301		$	899,950

8

GNC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the six months ended June 30, 2012, interest expense of $20.9 million consisted primarily of interest on outstanding borrowings under the Term Loan Facility. Interest under both the Term Loan Facility and the Revolving Credit Facility is based on variable rates. At June 30, 2012 and December 31, 2011, the interest rate under the Term Loan Facility was 4.25%, and the interest rate under the Revolving Credit Facility was 4.00% and 4.25%, respectively. The Revolving Credit Facility was undrawn and had outstanding letters of credit of $1.4 million and $8.0 million at June 30, 2012 and December 31, 2011, respectively.  Interest on the letters of credit was 3.00% and 3.25% at June 30, 2012 and December 31, 2011, respectively.

For the six months ended June 30, 2011, interest expense of $54.1 million consisted primarily of $14.2 million on the Senior Credit Facility, $23.2 million of expenses related to the Refinancing, $4.9 million of original issue discount and deferred financing fees related to the $300.0 million repayment of outstanding borrowings under the Term Loan Facility in connection with the IPO, and $10.3 million of interest expense on former indebtedness prior to the Refinancing. The $23.2 million of expenses related to the Refinancing consisted of $5.8 million in interest rate swap termination costs, write-off of $13.4 million of deferred financing fees of former indebtedness, write-off of $1.6 million in original issue discount related to former indebtedness and $2.4 million to defease former indebtedness.

As of June 30, 2012, the Company believes that it is in compliance with all covenants under the Senior Credit Facility.

NOTE 6.  FINANCIAL INSTRUMENTS

At June 30, 2012 and December 31, 2011, 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 amount of cash and cash equivalents, receivables, accounts payable and accrued liabilities approximates their respective fair values because of the short maturities of these instruments. Based on the interest rates currently available and their underlying risk, the carrying value of the franchise notes receivable approximates their respective fair values. These fair values are reflected net of reserves for uncollectible amounts.  The Company determined the estimated fair values of its debt by using currently available market information. The fair value of debt would be classified as a Level 1 category on the fair value hierarchy, as defined in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. As considerable judgment is required to determine these estimates and assumptions, 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:

	June 30, 2012				December 31, 2011
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(unaudited)
	(in thousands)
Cash and cash equivalents	$	160,167	$	160,167	$	128,438	$	128,438
Receivables, net	127,005		127,005		114,190		114,190
Franchise notes receivable, net	6,558		6,558		6,510		6,510
Accounts payable	158,936		158,936		124,416		124,416
Long-term debt (including current portion)	900,889		894,146		901,542		892,526

NOTE 7.  COMMITMENTS AND CONTINGENCIES

Litigation

The Company is engaged in various legal actions, claims and proceedings resulting from the Company’s business activities arising in the normal course of business, including claims related to breach of contracts, products liabilities, intellectual property matters and employment-related matters. As with most 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. If the Company is required to make a payment in connection with an adverse outcome in these matters, it could have a material impact on its business, financial condition, operating results and cash flows.

9

GNC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

As a manufacturer and retailer of health and wellness products 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, financial condition, operating results or cash flows. 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 a former owner of the Company 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.

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. Following the recall, the Company was named, among other defendants, in approximately 93 lawsuits related to Hydroxycut-branded products in 14 states.  Iovate previously accepted the Company’s tender request for defense and indemnification under its purchasing agreement with the Company and, as such, Iovate has accepted the Company’s request for defense and indemnification in the Hydroxycut matters.  The Company’s ability to obtain full recovery 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 the Company is not fully compensated by Iovate’s insurer, it can seek recovery directly from Iovate.  The Company’s ability to fully recover such amounts may be limited by the creditworthiness of Iovate.

Currently, there are 74 pending lawsuits related to Hydroxycut in which the Company has been named: 68 individual, largely personal injury claims and six putative class action cases, generally inclusive of claims of consumer fraud, misrepresentation, strict liability and breach of warranty.  As any liabilities that may arise from these matters are not probable or reasonably estimable at this time, no liability has been accrued in the accompanying financial statements.

By court order dated October 6, 2009, the United States Judicial Panel on Multidistrict Litigation consolidated pretrial proceedings of many of the pending actions in the Southern District of California (In re: Hydroxycut Marketing and Sales Practices Litigation, MDL No. 2087).

Pro-Hormone/Androstenedione Cases. The Company is currently defending two lawsuits (the “Andro Actions”) in New Jersey and New York relating to the sale by the Company of certain nutritional products between 1999 and 2004, alleged to contain the ingredients commonly known as Androstenedione, Androstenediol, Norandrostenedione, and Norandrostenediol (collectively, “Andro Products”). In each of the Andro Actions, 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.  As any liabilities that may arise from these other Andro Actions are not probable or reasonably estimable at this time, no liability has been accrued in the accompanying financial statements.

Commitments

The Company maintains certain purchase commitments with various vendors to ensure its operational needs are fulfilled.  As of June 30, 2012, such future purchase commitments consisted of $3.0 million of advertising commitments. Other commitments related to the Company’s business operations cover varying periods of time and are not significant. All of these commitments are expected to be fulfilled with no adverse consequences to the Company’s operations or financial condition.

Environmental Compliance

In March 2008, the South Carolina Department of Health and Environmental Control (the “DHEC”) requested that the Company investigate contamination associated with historical activities at its South Carolina facility. These investigations have identified chlorinated solvent impacts in soils and groundwater that extend offsite

10

GNC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

from its facility. The Company is awaiting DHEC approval of the scope of additional investigations in order to understand the extent of these impacts and develop appropriate remedial measures for DHEC approval. At this stage of the investigation, however, it is not 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 operation 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 and that any liabilities for noncompliance will not have a material adverse effect on its business, financial performance, or cash flows. However, it is difficult to predict future liabilities and obligations, which could be material.

NOTE 8.  STOCK-BASED COMPENSATION PLANS

The Company has outstanding stock-based compensation awards that were granted by the Compensation Committee of the Board (the “Compensation Committee”) under the following two stock-based employee compensation plans:

·the GNC Holdings, Inc. 2011 Stock and Incentive Plan (the “2011 Stock Plan”) adopted in March 2011; and

·the GNC Acquisition Holdings Inc. 2007 Stock Incentive Plan (as amended, the “2007 Stock Plan”) adopted in March 2007.

Both plans have provisions that allow for the granting of stock options, restricted stock and other stock based awards and are available to certain eligible employees, directors, consultants or advisors as determined by the Compensation Committee.  Stock options under the plans were granted with exercise prices at or above fair market value on the date of grant, typically vest in equal installments over a four- or five-year period and expire seven or ten years from the date of grant.

Up to 8.5 million shares of Class A common stock may be issued under the 2011 Stock Plan (subject to adjustment to reflect certain transactions and events specified in the 2011 Stock Plan for any award grant). If any award granted under the 2011 Stock Plan expires, terminates or is cancelled without having been exercised in full, the number of shares underlying such unexercised award will again become available for awards under the 2011 Stock Plan. The total number of shares of Class A common stock available for awards under the 2011 Stock Plan will be reduced by (i) the total number of stock options or stock appreciation rights exercised, regardless of whether any of the shares of Class A common stock underlying such awards are not actually issued to the participant as the result of a net settlement, and (ii) any shares of Class A common stock used to pay any exercise price or tax withholding obligation. In addition, the number of shares of Class A common stock that are subject to restricted stock, performance shares or other stock-based awards that are not subject to the appreciation of the value of a share of Class A common stock (“Full Share Awards”) that may be granted under the 2011 Stock Plan is limited by counting shares granted pursuant to such awards against the aggregate share reserve as 1.8 shares for every share granted. If any stock option, stock appreciation right or other stock-based award that is not a Full Share Award is cancelled, expires or terminates unexercised for any reason, the shares covered by such awards will again be available for the grant of awards under the 2011 Stock Plan. If any shares of Class A common stock that

11

GNC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

are subject to restricted stock, performance shares or other stock-based awards that are full Share Awards are forfeited for any reason, 1.8 shares of Class A common stock for each full share award forfeited will again be available for the grant of awards under the 2011 Stock Plan.

Upon adoption of the 2011 Stock Plan, the Company determined it will not grant any additional awards under the 2007 Stock Plan.  No stock appreciation rights, restricted stock, deferred stock or performance shares were granted under the 2007 Stock Plan.

The Company utilizes the Black Scholes model to calculate the fair value of options under both the 2011 Stock Plan and the 2007 Stock Plan. The grant-date fair value of the Company’s restricted stock awards is based on the stock price on the grant date. The resulting compensation cost is recognized in the Company’s financial statements over the option vesting period. The Company recognized $2.3 million and $2.2 million of non-cash stock-based compensation expense for the six months ended June 30, 2012 and 2011, respectively. At June 30, 2012, there was approximately $13.8 million of total unrecognized compensation cost related to non-vested stock-based compensation for all awards previously made that are expected to be recognized over a weighted average period of approximately 2.0 years.

During the six months ended June 30, 2012, the total intrinsic value of awards exercised was $78.5 million and the total amount received by Holdings from the exercise of options was $19.5 million. The tax impact associated with the exercise of awards for the six months ended June 30, 2012 was a benefit of $27.0 million and was recorded to paid in capital.

The following table sets forth a summary of stock options under all plans for the six months ended June 30, 2012:

	Total Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value (in Thousands)
Outstanding at December 31, 2011	6,673,054		$	11.46
Granted	44,667		32.46
Exercised	(2,938,829	)	6.83
Forfeited	(30,456	)	17.24
Expired	-		-
Outstanding at June 30, 2012	3,748,436		$	15.30	6.2	$	89,605
Exercisable at June 30, 2012	1,614,566		$	9.24	5.3	$	48,372

The Black Scholes model utilizes the following assumptions in determining a fair value: price of underlying stock, award exercise price, expected term, risk-free interest rate, expected dividend yield and expected stock price volatility over the award’s expected term. Due to the utilization of these assumptions, the existing models do not necessarily represent the definitive fair value of awards for future periods. As the IPO occurred during the second quarter of 2011, the option term has been estimated by considering both the vesting period, which typically for both plans has been five or four years, and the contractual term, which historically has been either seven or ten years. Prior to the IPO, the fair value of the Class A common stock was estimated based upon the net enterprise value of the Company, discounted to reflect the lack of liquidity and control associated with the stock.  Since the consummation of the IPO, the fair value of the Class A common stock has been based upon the closing price of the Class A common stock as reported on the New York Stock Exchange. Volatility is estimated based upon the Company utilizing its current peer group average to estimate the expected volatility.

12

GNC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The assumptions used in the Company’s Black Scholes valuation related to stock option grants made during the six months ended June 30, 2012 were as follows:

Dividend yield	1.3%-1.4%
Expected option life	5.0 years
Volatility factor percentage of market price	40.70%
Discount rate	0.9%

The following table sets forth a summary of restricted stock granted under the 2011 Stock Plan and related information for the six months ended June 30, 2012:

	Restricted Stock		Weighted Average Fair Value
Outstanding at December 31, 2011	138,119		$	22.35
Granted	13,179		37.10
Forfeited	(2,044	)	20.43
Outstanding at June 30, 2012	149,254		$	23.68

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, Puerto Rico and its GNC.com and LuckyVitamin.com businesses. 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 and Corporate costs represent the Company’s administrative expenses. The accounting policies of the segments are the same as those described in the “Basis of Presentation and Summary of Significant Accounting Policies.”

13

GNC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table represents key financial information of the Company’s segments:

	Three months ended						Six months ended
	June 30,			June 30,			June 30,			June 30,
	2012			2011			2012			2011
	(unaudited)
	(in thousands)
Revenue:
Retail	$	458,632		$	384,304		$	928,453		$	768,007
Franchise	103,539			82,827			205,024			160,211
Manufacturing/Wholesale:
Intersegment (1)	70,609			57,032			137,118			107,731
Third Party	56,910			51,404			109,877			96,325
Sub total Manufacturing/Wholesale	127,519			108,436			246,995			204,056
Sub total segment revenues	689,690			575,567			1,380,472			1,132,274
Intersegment elimination (1)	(70,609		)	(57,032		)	(137,118		)	(107,731		)
Total revenue	$	619,081		$	518,535		$	1,243,354		$	1,024,543
Operating income:
Retail	$	97,617		$	63,409		$	190,792		$	127,006
Franchise	32,290			25,938			66,719			51,294
Manufacturing/Wholesale	23,858			21,043			46,695			37,597
Unallocated corporate and other costs:
Warehousing and distribution costs	(15,625		)	(15,239		)	(31,420		)	(30,387		)
Corporate costs	(21,080		)	(22,454		)	(42,971		)	(42,762		)
Transaction related costs	-			-			(686		)	(12,362		)
Sub total unallocated corporate and other costs	(36,705		)	(37,693		)	(75,077		)	(85,511		)
Total operating income	$	117,060		$	72,697		$	229,129		$	130,386

(1)  Intersegment revenues are eliminated from consolidated revenue.

NOTE 10.  INCOME TAXES

The Company recognized $77.7 million of income tax expense (or 37.3% of pretax income) during the six months ended June 30, 2012 compared to $30.4 million (or 39.8% of pretax income) for the same period in 2011. For the six months ended June 30, 2011, income tax expense included $2.3 million (3.0% of pretax income) related to non deductible costs incurred in connection with the IPO.

The Company files a consolidated U.S. federal tax return and various consolidated and separate tax returns as prescribed by the tax laws of the state, local and international jurisdictions in which it operates. The Company has been audited by the Internal Revenue Service (the “IRS”) through its March 15, 2007 tax year and the Company has been informed that its federal income tax return for 2010 will be audited.  The Company has various state, local and international jurisdiction tax years open to examination (the earliest open period is 2003), and is also currently under audit in certain state and local jurisdictions. As of June 30, 2012, the Company believes that it has appropriately reserved for any potential federal, state, local and international income tax exposures.

At each of June 30, 2012 and December 31, 2011, the Company had $12.3 million and $10.5 million, respectively, of unrecognized tax benefits.  As of June 30, 2012, the Company is not aware of any tax positions for which it is reasonably possible that the amounts of unrecognized tax benefits will significantly increase or decrease within the next 12 months. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is approximately $12.3 million. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company had accrued approximately $6.2 million and $3.5 million for June 30, 2012 and December 31, 2011, respectively, in potential interest and penalties associated with uncertain tax positions.  To the extent interest and penalties are not assessed with respect to the ultimate settlement of uncertain tax positions, amounts previously accrued will be reduced and reflected as a reduction of the overall income tax provision.

14

GNC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 11. RELATED PARTY TRANSACTIONS

Management Services AgreementOn March 16, 2007, the Company entered into a Management Services Agreement (the “Management Services Agreement”) with ACOF Operating Manager II, L.P. (“ACOF Operating Manager”), an affiliate of Ares Corporate Opportunities Fund II, L.P., which was terminated upon the consummation of the IPO. The Management Services Agreement provided for an annual management fee of $0.8 million, payable quarterly and in advance to ACOF Operating Manager, on a pro rata basis, until the tenth anniversary from March 16, 2007 plus any one-year extensions (which extensions occurred automatically on each anniversary date of March 16, 2007), as well as reimbursements for ACOF Operating Manager’s, and its affiliates’, out-of-pocket expenses in connection with the management services provided under the Management Services Agreement. For the six months ended June 30, 2011, $0.2 million was paid to ACOF Operating Manager in accordance with the terms of the Management Services Agreement.

Upon the consummation of the IPO, the Management Services Agreement was terminated and ACOF Operating Manager received, in lieu of quarterly payments of the annual management fee, an automatic fee equal to the net present value of the aggregate annual management fee that would have been payable to ACOF Operating Manager during the remainder of the term of the Management Services Agreement. The amount of such payment was $5.6 million, and this amount was accrued and expensed in transaction related costs during the period ended March 31, 2011. No further payments will be made pursuant to the Management Services Agreement.

Special Dividend   Prior to the consummation of the IPO, Ontario Teachers’ Pension Plan Board (“OTPP”), as the holder of Class B common stock, was entitled to receive ratably an annual special dividend payment equal to an aggregate amount of $0.8 million per year when, as and if declared by the Board, for a period of ten years commencing on March 16, 2007 (the “Special Dividend Period”). The special dividend was payable in equal quarterly installments on the first day of each quarter commencing on April 1, 2007. For the six months ended June 30, 2011, $0.2 million was paid to OTPP as a special dividend pursuant to the obligations under the Class B common stock.

Upon the consummation of the IPO, OTPP’s right to receive the special dividend payments was terminated and OTPP received, in lieu of quarterly payments of the special dividend payments, an automatic payment equal to the net present value of the aggregate amount of the special dividend payments that would have been payable to OTPP during the remainder of the Special Dividend Period, calculated in good faith by the Board. The amount of such payment was $5.6 million, and this amount was accrued and expensed in transaction related costs during the period ended March 31, 2011. No further special dividend payments will be made.

Lease Agreements At June 30, 2012, General Nutrition Centres Company, the Company’s wholly owned subsidiary, was party, as lessee, to 16 lease agreements with Cadillac Fairview Corporation (“Cadillac Fairview”), as lessor, and 1 lease agreement with Ontrea, Inc. (“Ontrea”), as lessor, with respect to properties located in Canada.  Each of Cadillac Fairview and Ontrea is a direct wholly owned subsidiary of OTPP. For the six months ended June 30, 2012 and 2011, the Company paid $1.2 million and $1.3 million, respectively, under the lease agreements with Cadillac Fairview, and an immaterial amount for the six months ended June 30, 2012 under the lease agreement with Ontrea. Each lease was negotiated in the ordinary course of business on an arm’s length basis.

NOTE 12. SUBSEQUENT EVENTS

On July 26, 2012, the Board authorized and declared a cash dividend for the third quarter of 2012 of $0.11 per share of Class A common stock, payable on or about September 28, 2012 to stockholders of record as of the close of business on September 14, 2012.

15

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with Item 1, “Financial Statements” in Part I of this Quarterly Report on Form 10-Q.

Forward-Looking Statements

This Quarterly Report on Form 10-Q and any documents incorporated by reference herein or therein include forward-looking statements within the meaning of federal securities laws.  Forward-looking statements include statements that may relate to our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs and other information that is not historical information.  Forward-looking statements can often be identified by the use of terminology such as “subject to,” “believe,” “anticipate,” “plan,” “potential,” “predict,” “expect,” “intend,” “estimate,” “project,” “may,” “will,” “should,” “would,” “continue,” “seek,” “could,” “can,” “think,” the negatives thereof, variations thereon and similar expressions, or by discussions of strategy.

All forward-looking statements, including, without limitation, our examination of historical operating trends, are based upon our current expectations and various assumptions. We believe there is a reasonable basis for our expectations and beliefs, but they are inherently uncertain. We may not realize our expectations, and our beliefs may not prove correct. Actual results could differ materially from those described or implied by such forward-looking statements. The following uncertainties and factors, among others (including, but not limited to, those we describe under the caption “Risk Factors” in our filings with the Securities and Exchange Commission pursuant to Sections 13(a), 14 or 15(d) of the Securities Exchange Act of 1934), could affect future performance and cause actual results to differ materially from those matters expressed in or implied by forward-looking statements:

·significant competition in our industry;

·unfavorable publicity or consumer perception of our products;

·increases in the cost of borrowings and limitations on availability of additional debt or equity capital;

·our debt levels and restrictions in our debt agreements;

·incurrence of material product liability and product recall costs;

·loss or retirement of directors or key members of management;

·costs of compliance and our failure to comply with new and existing governmental regulations including, but not limited to, tax regulations;

·costs of litigation and the failure to successfully defend lawsuits and other claims against us;

·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;

·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;

·disruptions in our distribution network;

·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;

·failure to adequately protect or enforce our intellectual property rights against competitors;

·changes in raw material costs and pricing of our products;

16

·failure to successfully execute our growth strategy, including any delays in our planned future growth, any inability to expand our franchise operations or attract new franchisees, or any inability to expand our company-owned retail operations;

·changes in applicable laws relating to our franchise operations;

·damage or interruption to our information systems;

·impact of current economic conditions on our business;

·natural disasters, unusually adverse weather conditions, pandemic outbreaks, boycotts and geo-political events; and

·failure to maintain effective internal controls.

Consequently, forward-looking statements should be regarded solely as our current plans, estimates and beliefs. You should not place undue reliance on forward-looking statements. We cannot guarantee future results, events, levels of activity, performance or achievements. We do not undertake and specifically decline any obligation to update, republish or revise forward-looking statements to reflect future events or circumstances or to reflect the occurrences of unanticipated events.

Business Overview

We are a global specialty retailer of health and wellness products. We derive our revenues principally from product sales through our company-owned stores and online through GNC.com and LuckyVitamin.com, domestic and international franchise activities and sales of products manufactured in our facilities to third parties.  We sell products through a worldwide network of more than 7,800 locations operating under the GNC brand name.

On March 4, 2011, General Nutrition Centers Inc. (“Centers”), a wholly owned subsidiary of GNC Holdings, Inc. (“Holdings”),entered into a $1.2 billion term loan facility with a term of seven years (the “Term Loan Facility”) and an $80.0 million revolving credit facility with a term of five years (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Credit Facility”).  Centers used a portion of the proceeds from the Term Loan Facility to refinance its former indebtedness, including all outstanding indebtedness under its 2007 Senior Credit Facility, consisting of a $675.0 million term loan facility (the “2007 Term Loan Facility”) and a $60.0 million senior revolving credit facility (together with the 2007 Term Loan Facility, the “2007 Senior Credit Facility”), the Senior Notes and the Senior Subordinated Notes, and to pay related fees and expenses. As of the date hereof, the Revolving Credit Facility remains undrawn.  We refer to these transactions and the use of proceeds therefrom collectively as the “Refinancing”.

On April 6, 2011, we completed our initial public offering (“IPO”) pursuant to which 25.875 million shares of Class A common stock were sold at a price of $16.00 per share. We issued and sold 16 million shares and certain of our stockholders sold 9.875 million shares in the IPO. We used the net proceeds from the IPO, together with cash on hand (including additional funds from the Refinancing), to redeem all of our outstanding Series A preferred stock, repay $300.0 million of outstanding borrowings under the Term Loan Facility and pay sponsor-related obligations of approximately $11.1 million.

During the first quarter of 2012, certain of Holdings’ stockholders completed a registered offering of 19.6 million shares of Class A common stock at a price of $33.50 per share (the “Q1 Secondary Offering”).

Executive Overview

In 2012, we have continued to focus on achieving our five principal corporate goals: growing company-owned domestic retail earnings, growing company-owned domestic retail square footage, growing our international footprint, expanding our e-commerce business and further leveraging the GNC brand. These goals are designed to drive both short-term and long-term financial results. Our efforts led to the following results for the three months ended June 30, 2012 compared to the same period in 2011:

·Our company-owned domestic same store sales increased 12.9%, which included a 27.9% increase in our GNC.com business.

·We increased our company-owned domestic store count by 36 net new stores.

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·     Our retail segment sales increased 19.3%, and operating income increased 53.9%.

·Total franchising revenue grew 25.0%, and operating income increased 24.5%.

·Domestic franchising revenue grew 16.8%, and we added 5 net new domestic franchise stores.

·International franchise revenue grew 40.3%, as we added 27 net new international franchise stores.

·We increased sales in our wholesale/manufacturing segment by 10.7% through our new wholesale distribution channels and increased third-party sales.

·Consistent with our focus on communicating our core “Live Well” theme in both magazine and print, we expanded our marketing campaign to include a “best in class” theme. The campaign’s branding images reflect our core customer — youthful, athletic, aspirational and goal oriented.

·We generated 19.4% of total revenue growth which drove a 61.0% increase in total operating income. However, excluding certain expenses associated with executive severance in 2011, total operating income increased by 53.7% in the three months ended June 30, 2012 compared to the same period in 2011.

Revenues and Operating Performance from our Segments

We measure our operating performance primarily through revenues and operating income from our three segments, Retail, Franchise and Manufacturing/Wholesale, and through the management of unallocated costs from our warehousing, distribution and corporate segments, as follows:

·Retail: Retail revenues are generated by sales to consumers at our company-owned stores and online through our websites GNC.com and LuckyVitamin.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 variation in our net sales and operating results from quarter to quarter. According to the Nutrition Business Journal’s Supplement Business Report 2011, our industry is expected to grow at an annual average rate of approximately 3.7% through 2017. As a leader in our industry, we expect our organic retail revenue to grow faster than the projected industry growth as a result of our disproportionate market share, scale economies in purchasing and advertising, strong brand awareness and vertical integration.

·Franchise: Franchise revenues are generated primarily by:

(1)product sales to our franchisees;

(2)royalties on franchise retail sales; and

(3)franchise fees, which we charge for initial franchise awards, renewals and transfers of franchises.

Although we do not anticipate the number of our domestic franchise stores to grow substantially, we expect to achieve domestic franchise store revenue growth consistent with projected industry growth, which we expect to generate from royalties on franchise retail sales and product sales to our existing franchisees. As a result of our efforts to expand our international presence and provisions in our international franchising agreements requiring franchisees to open additional stores, we have increased our international store base in recent periods and expect to continue to increase the number of our international franchise stores over the next five years. We believe this will result in additional franchise fees associated with new store openings and increased revenues from product sales to, and royalties from, new franchisees. As our existing international franchisees continue to open additional stores, we also anticipate that franchise revenue from international operations will be driven by increased product sales to, and royalties from, our franchisees. Since our international franchisees pay royalties to us in U.S. dollars, any strengthening of the U.S. dollar relative to our franchisees’ local currency may offset some of the growth in royalty revenue.

·Manufacturing/Wholesale: Manufacturing/Wholesale revenues are generated by sales of manufactured products to third parties, generally for third-party private label brands; the sale of our proprietary and third-party products to and through Rite Aid and www.drugstore.com; and the sale of our proprietary products to and through PetSmart and Sam’s Club. We also record license fee revenue from the opening of franchise store-within-a-store locations within Rite Aid stores in this segment. Our revenues generated by our manufacturing and wholesale operations are subject to our available manufacturing capacity.

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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 positive operating leverage.

The following trends and uncertainties in our industry could affect our operating performance as follows:

·broader consumer awareness of health and wellness issues and rising healthcare costs may increase the use of the products we offer and positively affect our operating performance;

·interest in, and demand for, condition-specific products based on scientific research may positively affect our operating performance if we can timely develop and offer such condition-specific products;

·the effects of favorable and unfavorable publicity on consumer demand with respect to the products we offer may have similarly favorable or unfavorable effects on our operating performance;

·a lack of long-term experience with human consumption of ingredients in some of our products could create uncertainties with respect to the health risks, if any, related to the consumption of such ingredients and negatively affect our operating performance;

·increased costs associated with complying with new and existing governmental regulation may negatively affect our operating performance; and

·a decline in disposable income available to consumers may lead to a reduction in consumer spending and negatively affect our operating performance.

Results of Operations

The following information presented for the three and six months ended June 30, 2012 and 2011 was prepared by management, is unaudited and was derived from our unaudited consolidated financial statements and accompanying notes. In the opinion of management, all adjustments necessary for a fair statement of our financial position and operating results for such periods and as of such dates have been included.

As discussed in Note 9, “Segments,” to our unaudited consolidated financial statements, we evaluate segment operating results based on several indicators. The primary key performance indicators are revenues and operating income or loss for each segment. Revenues and operating income or loss, as evaluated by management, exclude certain items that are managed at the consolidated level, such as warehousing and transportation costs, impairments and other corporate costs. The following discussion compares the revenues and the operating income or loss by segment, as well as those items excluded from the segment totals.

Same store sales growth reflects the percentage change in same store sales in the period presented compared to the prior year period. Same store sales are calculated on a daily basis for each store and exclude the net sales of a store for any period if the store was not open during the same period of the prior year. We also include internet sales, as generated through GNC.com and www.drugstore.com, in our domestic retail company-owned domestic same store sales calculation. When a store’s square footage has been changed as a result of reconfiguration or relocation in the same mall or shopping center, the store continues to be treated as a same store. If, during the period presented, a store was closed, relocated to a different mall or shopping center, or converted to a franchise store or a company-owned store, sales from that store up to and including the closing day or the day immediately preceding the relocation or conversion are included as same store sales as long as the store was open during the same period of the prior year. We exclude from the calculation sales during the period presented that occurred on or after the date of relocation to a different mall or shopping center or the date of a conversion.

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Results of Operations

(Dollars in millions and percentages expressed as a percentage of total net revenue)

	Three Months Ended June 30,										Six Months Ended June 30,
	2012					2011					2012					2011
	(unaudited)
Revenues:
Retail	$	458.7		74.1	%	$	384.3		74.1	%	$	928.5		74.7	%	$	768.0		75.0	%
Franchise	103.5			16.7	%	82.8			16.0	%	205.0			16.5	%	160.2			15.6	%
Manufacturing / Wholesale	56.9			9.2	%	51.4			9.9	%	109.9			8.8	%	96.3			9.4	%
Total net revenues	619.1			100.0	%	518.5			100.0	%	1,243.4			100.0	%	1,024.5			100.0	%
Operating expenses:
Cost of sales, including warehousing, distribution and occupancy costs	379.6			61.3	%	327.6			63.2	%	763.2			61.4	%	649.8			63.4	%
Compensation and related benefits	78.4			12.7	%	75.4			14.5	%	158.4			12.7	%	146.6			14.3	%
Advertising and promotion	13.4			2.2	%	13.4			2.6	%	29.6			2.4	%	27.6			2.7	%
Other selling, general and administrative expenses	28.5			4.6	%	27.5			5.3	%	58.2			4.7	%	54.1			5.3	%
Transaction related costs	-			0.0	%	-			0.0	%	0.7			0.1	%	12.4			1.2	%
Amortization expense	2.1			0.3	%	1.9			0.4	%	4.3			0.3	%	3.8			0.4	%
Foreign currency gain	-			0.0	%	-			0.0	%	(0.1		)	0.0	%	(0.2		)	0.0	%
Total operating expenses	502.0			81.1	%	445.8			86.0	%	1,014.3			81.6	%	894.1			87.3	%
Operating income:
Retail	97.6			15.8	%	63.4			12.2	%	190.8			15.3	%	127.0			12.4	%
Franchise	32.3			5.2	%	25.9			5.0	%	66.7			5.4	%	51.3			5.0	%
Manufacturing / Wholesale	23.9			3.9	%	21.0			4.1	%	46.7			3.8	%	37.6			3.7	%
Unallocated corporate and other costs:
Warehousing and distribution costs	(15.6		)	-2.6	%	(15.2		)	-3.0	%	(31.4		)	-2.5	%	(30.4		)	-3.0	%
Corporate costs	(21.1		)	-3.4	%	(22.4		)	-4.3	%	(43.0		)	-3.5	%	(42.7		)	-4.2	%
Transaction related costs	-			0.0	%	-			0.0	%	(0.7		)	-0.1	%	(12.4		)	-1.2	%
Subtotal unallocated corporate and other costs, net	(36.7		)	-6.0	%	(37.6		)	-7.3	%	(75.1		)	-6.1	%	(85.5		)	-8.4	%
Total operating income	117.1			18.9	%	72.7			14.0	%	229.1			18.4	%	130.4			12.7	%
Interest expense, net	10.5					15.7					20.9					54.1
Income before income taxes	106.6					57.0					208.2					76.3
Income tax expense	39.9					21.0					77.7					30.4
Net income	$	66.7				$	36.0				$	130.5				$	45.9

Note: The numbers in the above table have been rounded to millions.  All calculations related to the Results of Operations for the year-over-year comparisons were derived from unrounded data and could occasionally differ immaterially if you were to use the table above for these calculations.

Comparison of the Three Months Ended June 30, 2012 and 2011

Revenues

Our consolidated net revenues increased $100.6 million, or 19.4%, to $619.1 million for the three months ended June 30, 2012 compared to $518.5 million for the same period in 2011. The increase was the result of increased sales in each of our segments.

Retail.  Revenue in our Retail segment increased $74.4 million, or 19.3%, to $458.7 million for the three months ended June 30, 2012 compared to $384.3 million for the same period in 2011.  Domestic retail revenue increased $58.3 million due to a 12.9% increase in our same store sales and the opening of new stores.  The increase in domestic retail revenue was primarily due to sales increases in the sports nutrition, vitamin and diet categories, and also included an increase in sales from GNC.com of $5.4 million, or 27.9%, to $24.9 million for the three months ended June 30, 2012, compared to $19.4 million for the same period in 2011.  Sales from LuckyVitamin.com, acquired on August 31, 2011, contributed $14.1 million to the increase in revenue. Our company-owned store base increased by 159 domestic stores to 2,950 at June 30, 2012 compared to 2,791 at June 30, 2011, due to new store openings and franchise store acquisitions.  Our Canadian store base decreased by four stores to 164 at June 30, 2012 compared to 168 at June 30, 2011.

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Franchise. Revenues in our Franchise segment increased $20.7 million, or 25.0%, to $103.5 million for the three months ended June 30, 2012 compared to $82.8 million for the same period in 2011. Domestic franchise revenue increased $9.0 million primarily due to increases in product sales and royalty income. Our domestic franchisees’ same store retail sales increased by 15.8% for the three months ended June 30, 2012 compared to the same period in 2011. There were 933 domestic franchise stores at June 30, 2012 compared to 906 stores at June 30, 2011.  International franchise revenue, including China operations, increased $11.7 million, primarily due to increases in product sales and royalty income.  Our international franchise store base increased by 150 stores to 1,651 at June 30, 2012 compared to 1,501 at June 30, 2011.

Manufacturing/Wholesale. Revenues in our Manufacturing/Wholesale segment, which includes third party sales from our manufacturing facilities in South Carolina, as well as wholesale sales to Rite Aid, www.drugstore.com, Sam’s Club and PetSmart increased $5.5 million, or 10.7%, to $56.9 million for the three months ended June 30, 2012 compared to $51.4 million for the same period in 2011. For the three months ended June 30, 2012, third party contract manufacturing sales from our South Carolina manufacturing plant increased by $7.2 million, or 29.7%, compared to the same period in 2011.  This increase was offset by a decrease in wholesale revenue due to timing of purchase orders and shipments with key wholesale customers.

Cost of Sales

Cost of sales, which includes product costs, costs of warehousing and distribution and occupancy costs, increased $52.0 million, or 15.9%, to $379.6 million for the three months ended June 30, 2012 compared to $327.6 million for the same period in 2011. The increase was primarily due to higher sales volumes and store counts.  Cost of sales, as a percentage of net revenue, was 61.3% and 63.2% for the three months ended June 30, 2012 and 2011, respectively.

Selling, General and Administrative (“SG&A”) Expenses

SG&A expenses, including compensation and related benefits, advertising and promotion expense, other SG&A expenses and amortization expense increased $4.2 million, or 3.5%, to $122.4 million for the three months ended June 30, 2012 compared to $118.2 million for the same period in 2011. These expenses, as a percentage of net revenue, were 19.8% for the three months ended June 30, 2012 compared to 22.8% for the three months ended June 30, 2011.

Compensation and related benefits. Compensation and related benefits increased $3.0 million, or 4.0%, to $78.4 million for the three months ended June 30, 2012 compared to $75.4 million for the same period in 2011.  The increase was primarily due to support for our increased store base and sales volume and payroll tax expense related to the exercise of stock options. The three months ended June 30, 2011 included $3.5 million of executive severance.

Advertising and promotion. Advertising and promotion expenses were $13.4 million for the three months ended June 30, 2012 and 2011.

Other SG&A. Other SG&A expenses, including amortization expense, increased $1.2 million, or 3.9%, to $30.6 million for the three months ended June 30, 2012 compared to $29.4 million for the same period in 2011. This increase was due to increased sales in each of our segments.

Operating Income

As a result of the foregoing, consolidated operating income increased $44.4 million, or 61.0%, to $117.1 million for the three months ended June 30, 2012 compared to $72.7 million for the same period in 2011. Operating income, as a percentage of net revenue, was 18.9% and 14.0% for the three months ended June 30, 2012 and 2011, respectively.

Retail. Operating income increased $34.2 million, or 53.9%, to $97.6 million for the three months ended June 30, 2012 compared to $63.4 million for the same period in 2011. The increase was driven by higher gross margin and expense leverage on the same store sales increase in occupancy, payroll and marketing.

Franchise. Operating income increased $6.4 million, or 24.5%, to $32.3 million for the three months ended June 30, 2012 compared to $25.9 million for the same period in 2011. The increase was due to higher gross product margin on wholesale sales and franchise royalty income.

Manufacturing/Wholesale. Operating income increased $2.9 million, or 13.4%, to $23.9 million for the three months ended June 30, 2012 compared to $21.0 million for the same period in 2011.  The increase was driven by a higher gross product margin rate resulting from improved wholesale margins and increased shipments of proprietary products.

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Warehousing and distribution costs. Unallocated warehousing and distribution costs increased $0.4 million, or 2.5%, to $15.6 million for the three months ended June 30, 2012 compared to $15.2 million for the three months ended June 30, 2011.  The increase was primarily due to higher fuel costs and increased wages to support higher sales volume.

Corporate costs. Corporate overhead costs decreased $1.3 million, or 6.1%, to $21.1 million for the three months ended June 30, 2012 compared to $22.4 million for the same period in 2011 primarily due to $3.5 million of executive severance for the three months ended June 30, 2011.

Interest Expense

Interest expense decreased $5.2 million, or 33.2%, to $10.5 million for the three months ended June 30, 2012 compared to $15.7 million for the same period in 2011.  This decrease was primarily due to a $4.9 million write off of deferred financing fees and original issue discount related to the $300.0 million repayment of outstanding borrowings under the Term Loan Facility in connection with the IPO.

Income Tax Expense

We recognized $39.9 million of income tax expense (or 37.4% of pre-tax income) during the three months ended June 30, 2012 compared to $21.0 million (or 36.8% of pre-tax income) for the same period in 2011.

Net Income

As a result of the foregoing, consolidated net income increased $30.7 million to $66.7 million for the three months ended June 30, 2012 compared to $36.0 million for the same period in 2011.  For the three months ended June 30, 2011, net income includes $5.3 million, net of tax effect, related to the executive severance and write off of deferred financing fees and original issue discount related to the $300.0 million repayment of outstanding borrowings under the Term Loan Facility in connection with the IPO.  For the three months ended June 30, 2012, net income excluding these related costs increased $25.4 million, or 61.5%, from $41.3 million for the same period in 2011.

Comparison of the Six Months Ended June 30, 2012 and 2011

Revenues

Our consolidated net revenues increased $218.9 million, or 21.4%, to $1,243.4 million for the six months ended June 30, 2012 compared to $1,024.5 million for the same period in 2011. The increase was the result of increased sales in each of our segments.

Retail.  Revenue in our Retail segment increased $160.5 million, or 20.9%, to $928.5 million for the six months ended June 30, 2012 compared to $768.0 million for the same period in 2011.  Domestic retail revenue increased $127.8 million due to a 14.4% increase in our same store sales and the opening of new stores.  The increase in domestic retail revenue was primarily due to sales increases in the sports nutrition, vitamin and diet categories, and also included an increase in sales from GNC.com of $12.3 million, or 31.1%, to $51.9 million for the six months ended June 30, 2012 compared to $39.6 million for the same period in 2011.  Sales from LuckyVitamin.com, acquired on August 31, 2011, contributed $28.6 million to the increase in revenue. Our company-owned store base increased by 159 domestic stores to 2,950 at June 30, 2012 compared to 2,791 at June 30, 2011, due to new store openings and franchise store acquisitions.  Our Canadian store base decreased by four stores to 164 at June 30, 2012 compared to 168 at June 30, 2011.

Franchise. Revenues in our Franchise segment increased $44.8 million, or 28.0%, to $205.0 million for the six months ended June 30, 2012 compared to $160.2 million for the same period in 2011. Domestic franchise revenue increased $23.6 million primarily due to increases in product sales and royalty income. Our domestic franchisees’ same store retail sales increased by 17.1% for the six months ended June 30, 2012 compared to the same period in 2011. There were 933 domestic franchise stores at June 30, 2012 compared to 906 stores at June 30, 2011.  International franchise revenue, including China operations, increased $21.2 million, primarily due to increases in product sales and royalty income.  Our international franchise store base increased by 150 stores to 1,651 at June 30, 2012 compared to 1,501 at June 30, 2011.

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Manufacturing/Wholesale. Revenues in our Manufacturing/Wholesale segment, which includes third-party sales from our manufacturing facilities in South Carolina, as well as wholesale sales to Rite Aid, www.drugstore.com, Sam’s Club and PetSmart increased $13.6 million, or 14.1%, to $109.9 million for the six months ended June 30, 2012 compared to $96.3 million for the same period in 2011. For the six months ended June 30, 2012, third party contract manufacturing sales from our South Carolina manufacturing plant increased by $10.7 million, or 20.7%, compared to the same period in 2011.

Cost of Sales

Cost of sales, which includes product costs, costs of warehousing and distribution and occupancy costs, increased $113.4 million, or 17.5%, to $763.2 million for the six months ended June 30, 2012 compared to $649.8 million for the same period in 2011. The increase was primarily due to higher sales volumes and store counts.  Cost of sales, as a percentage of net revenue, was 61.4% and 63.4% for the six months ended June 30, 2012 and 2011, respectively.

Selling, General and Administrative (“SG&A”) Expenses

SG&A expenses, including compensation and related benefits, advertising and promotion expense, other SG&A expenses, amortization expense and transaction related costs increased $6.7 million, or 2.7%, to $251.2 million, for the six months ended June 30, 2012 compared to $244.5 million for the same period in 2011. These expenses, as a percentage of net revenue, were 20.2% for the six months ended June 30, 2012 compared to 23.9% for the six months ended June 30, 2011.

Compensation and related benefits. Compensation and related benefits increased $11.8 million, or 8.0%, to $158.4 million for the six months ended June 30, 2012 compared to $146.6 million for the same period in 2011.  The increase was due primarily to support our increased store base and sales volume and payroll tax expense related to the exercise of stock options offset by decrease in executive severance.  The six months ended June 30, 2011 included $3.5 million of executive severance.

Advertising and promotion. Advertising and promotion expenses increased $2.0 million, or 7.4%, to $29.6 million for the six months ended June 30, 2012 compared to $27.6 million during the same period in 2011. Advertising expense increased primarily as a result of an increase in media expense.

Other SG&A. Other SG&A expenses, including amortization expense, increased $4.6 million, or 7.9%, to $62.5 million for the six months ended June 30, 2012 compared to $57.9 million for the same period in 2011. This increase was due to increased sales in each of our segments.

Transaction related costs. For the six months ended June 30, 2012, we incurred $0.7 million of expenses related to the Q1 Secondary Offering.  For the six months ended June 30, 2011, we incurred $12.4 million of expenses principally related to the IPO.  These primarily consisted of a payment of $11.1 million for the termination of sponsor-related obligations and other costs of $1.3 million.

Operating Income

As a result of the foregoing, consolidated operating income increased $98.7 million, or 75.7%, to $229.1 million for the six months ended June 30, 2012 compared to $130.4 million for the same period in 2011. Operating income, as a percentage of net revenue, was 18.4% and 12.7% for the six months ended June 30, 2012 and 2011, respectively. Excluding transaction related expenses and executive severance, operating income was $229.8 million and $146.6 million for the six months ended June 30, 2012 and 2011, respectively.

Retail. Operating income increased $63.8 million, or 50.2%, to $190.8 million for the six months ended June 30, 2012 compared to $127.0 million for the same period in 2011. The increase was driven by expense leverage on the same store sales increase in occupancy, payroll and marketing.

Franchise. Operating income increased $15.4 million, or 30.1%, to $66.7 million for the six months ended June 30, 2012 compared to $51.3 million for the same period in 2011. The increase was due to higher gross product margin on wholesale sales and franchise royalty income.

Manufacturing/Wholesale. Operating income increased $9.1 million, or 24.2%, to $46.7 million for the six months ended June 30, 2012 compared to $37.6 million for the same period in 2011.  The increase was driven by a higher gross product margin rate resulting from improved wholesale margins and increased shipments of proprietary products.

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Warehousing and distribution costs. Unallocated warehousing and distribution costs increased $1.0 million, or 3.4%, to $31.4 million for the six months ended June 30, 2012 compared to $30.4 million for the six months ended June 30, 2011.  The increase was primarily due to higher fuel costs and increased wages to support higher sales volume.

Corporate costs. Corporate overhead costs increased $0.3 million, or 0.5%, to $43.0 million for the six months ended June 30, 2012 compared to $42.7 million for the same period in 2011.

Transaction related costs. For the six months ended June 30, 2012, we incurred $0.7 million of expenses related to the Q1 Secondary Offering. For the six months ended June 30, 2011, we incurred $12.4 million of expenses principally related to the IPO.  These primarily consisted of a payment of $11.1 million for the termination of sponsor-related obligations and other costs of $1.3 million.

Interest Expense

Interest expense decreased $33.2 million, or 61.4%, to $20.9 million for the six months ended June 30, 2012 compared to $54.1 million for the same period in 2011.  This decrease was primarily due to $23.2 million of expenses related to the Refinancing, which consisted of: $5.8 million in interest rate swap termination costs, $13.4 million of deferred financing fees related to former indebtedness, $1.6 million in original issue discount related to former indebtedness, and $2.4 million to defease the former Senior Notes and Senior Toggle Notes.  Additionally, $4.9 million of original issue discount and deferred financing fees were expensed related to the $300.0 million repayment of outstanding borrowings under the Term Loan Facility in connection with the IPO.

Income Tax Expense

We recognized $77.7 million of income tax expense (or 37.3% of pre-tax income) during the six months ended June 30, 2012 compared to $30.4 million (or 39.8% of pre-tax income) for the same period in 2011. The 2011 income tax expense includes $2.3 million, or 3.0%, of pre-tax income related to non-deductible costs incurred relating to the transaction related costs.

Net Income

As a result of the foregoing, consolidated net income increased $84.6 million to $130.5 million for the six months ended June 30, 2012 compared to $45.9 million for the same period in 2011.  Net income for the six months ended June 30, 2012 includes $0.7 million related to the Q1 Secondary Offering.  For the six months ended June 30, 2011, net income includes $30.3 million of transaction related costs and executive severance, net of tax effect.  For the six months ended June 30, 2012 and 2011, net income excluding such transaction related costs, net of tax effect, increased $55.0 million, or 72.2%, to $131.2 million from $76.2 million for the same period in 2011.

Liquidity and Capital Resources

At June 30, 2012, we had $160.2 million in cash and cash equivalents and $568.4 million in working capital, compared with $128.4 million in cash and cash equivalents and $474.5 million in working capital at December 31, 2011.  The $93.9 million increase in our working capital was primarily driven by an increase in our cash and inventory levels due to an increase in volume, partially offset by an increase in accounts payable due to timing of payments.

We expect to fund our operations through internally generated cash and, if necessary, from borrowings under the Revolving Credit Facility.  At June 30, 2012, we had $78.6 million available under the Revolving Credit Facility, after giving effect to $1.4 million utilized to secure letters of credit.

We expect our primary uses of cash in the near future will be for capital expenditures, working capital requirements, repurchases of additional shares of Class A common stock under repurchase programs and funding any quarterly dividends to stockholders that are approved by the Board.

On June 19, 2012, the Board authorized a share repurchase program pursuant to which we may repurchase up to an aggregate of $300.0 million shares of Class A common stock during the following twelve month period ending July 31, 2013.  We expect to finance repurchases with cash, potential financing transactions, or a combination of the foregoing.

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On July 26, 2012, the Board authorized and declared a cash dividend for the third quarter of 2012 of $0.11 per share of Class A common stock, payable on or about September 28, 2012 to stockholders of record as of the close of business on September 14, 2012.

We currently anticipate that cash generated from operations, together with amounts available under the Revolving Credit Facility, will be sufficient for the term of the Revolving Credit Facility, which matures on March 15, 2016, to meet our operating expenses and fund capital expenditures. As a result of the repayment of $300.0 million of indebtedness under the Term Loan Facility in 2011 with a portion of the proceeds from the IPO, no payments are due under the Term Loan Facility until 2018. Our ability to make scheduled payments of principal on, to pay interest on or to refinance our debt and to satisfy our other debt obligations will depend on our future operating performance, which will be affected by general economic, financial and other factors beyond our control.  We are currently in compliance with our debt covenant reporting and compliance obligations under the 2011 Senior Credit Facility.

Cash Provided by Operating Activities

Cash provided by operating activities was $92.9 million and $79.5 million for the six months ended June 30, 2012 and 2011, respectively.  The increase was due primarily to an increase in net income of $84.6 million offset by an increase in inventory as a result of increases in finished goods to support increased sales.

Cash Used in Investing Activities

We used cash for investing activities of $22.7 million and $17.9 million for the six months ended June 30, 2012 and 2011, respectively.  Capital expenditures, which were primarily for new stores, improvements to our company-owned stores and our South Carolina manufacturing facility and corporate information systems, were $20.8 million and $16.5 million for the six months ended June 30, 2012 and 2011, respectively.

Our capital expenditures typically consist of new stores, certain periodic updates in our company-owned stores and ongoing upgrades and improvements to our manufacturing facilities and information technology systems.

We expect capital expenditures to be approximately $50 million in 2012, which includes costs associated with growing our domestic square footage.  We anticipate funding our 2012 capital requirements with cash flows from operations and, if necessary, borrowings under the Revolving Credit Facility.

Cash Used in Financing Activities

For the six months ended June 30, 2012, cash used in financing activities was $38.3 million, primarily due to dividends paid to Holdings’ stockholders of $23.4 million and the repurchase of an aggregate of $60.0 million shares of Class A common stock under a repurchase program, offset partially by $48.4 million of proceeds from exercised stock options, including the associated tax benefit.

For the six months ended June 30, 2011, we borrowed $1,196.2 million under the Senior Credit Facility, and utilized a portion of the funds to repay $644.4 million under the 2007 Senior Credit Facility, $300.0 million for the redemption of the Senior Notes, and $110.0 million for the redemption of the Senior Subordinated Notes.  We received net proceeds from the IPO of $237.3 million and used these proceeds, together with cash on hand, to redeem all of the outstanding Series A preferred stock and repay $300.0 million of the Senior Credit Facility.  Additionally, we paid $17.4 million for fees associated with the Refinancing.

Contractual Obligations

There are no material changes in our contractual obligations as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011.

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Off Balance Sheet Arrangements

As of June 30, 2012, we had 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. We are, therefore, not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Critical Accounting Estimates

Our significant accounting policies are described in the notes to our unaudited consolidated financial statements under Note 2, “Basis of Presentation and Summary of Significant Accounting Policies”. There have been no material changes to the application of critical accounting policies and significant judgments and estimates since those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011.

Recently Adopted Accounting Pronouncements

In June 2011, the FASB issued updated guidance on current comprehensive income presentation, which eliminates the option to present the components of other comprehensive income as part of the statement of stockholders’ equity. Instead, we must report comprehensive income in either a single continuous statement of comprehensive income that contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. This new guidance is effective for us for fiscal years beginning after December 15, 2011, with early adoption permitted. We adopted this guidance during the first quarter of 2012. The adoption of this guidance had no material impact on our unaudited consolidated financial statements, as it only required a change in the format of presentation.

In May 2011, the FASB issued changes to conform existing guidance regarding fair value measurement and disclosure between accounting principles generally accepted in the United States (“GAAP”) and International Financial Reporting Standards. These changes both clarify the FASB’s intent about the application of existing fair value measurement and disclosure requirements and amend certain principles or requirements for measuring fair value or for disclosing information about fair value measurements. The clarifying changes relate to the application of the highest and best use and valuation premise concepts, measuring the fair value of an instrument classified in a reporting entity’s stockholders’ equity, and disclosure of quantitative information about unobservable inputs used for Level 3 fair value measurements. The amendments relate to measuring the fair value of financial instruments that are managed within a portfolio; application of premiums and discounts in a fair value measurement; and additional disclosures concerning the valuation processes used and sensitivity of the fair value measurement to changes in unobservable inputs for those items categorized as Level 3, a reporting entity’s use of a nonfinancial asset in a way that differs from the asset’s highest and best use, and the categorization by level in the fair value hierarchy for items required to be measured at fair value for disclosure purposes only.  We adopted this guidance during the first quarter of 2012, and it had no material impact on our financial statements.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Market risk represents the risk of changes in the value of market risk sensitive instruments caused by fluctuations in interest rates, foreign exchange rates and commodity prices. Changes in these factors could cause fluctuations in the results of our operations and cash flows. In the ordinary course of business, we are primarily exposed to foreign currency and interest rate risks. We do not use derivative financial instruments in connection with these commodity market risks.

Foreign Currency Exchange Rate Market Risk

We are subject to the risk of foreign currency exchange rate changes in the conversion from local currencies to the U.S. dollar of the reported financial position and operating results of our non-U.S. based subsidiaries. We are also subject to foreign currency exchange rate changes for purchases of goods and services that are denominated in currencies other than the U.S. dollar. The primary currencies to which we are exposed to fluctuations are the Canadian Dollar and the Chinese Renminbi. The fair value of our net foreign investments and our foreign denominated payables would not be materially affected by a 10% adverse change in foreign currency exchange rates for the six months ended June 30, 2012 and 2011.

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Interest Rate Market Risk

All of Centers’ long-term debt is subject to changing interest rates.  Although changes in interest rates do not impact our operating income, the changes could affect the fair value of such debt and related interest payments.  Based on our variable rate debt balance as of June 30, 2012, a 1% change in interest rates would have no impact on interest expense due to an interest rate floor that exists on the Senior Credit Facility.

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report.  Disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act has been appropriately recorded, processed, summarized and reported on a timely basis and are effective in ensuring that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.  Based on such evaluation, our CEO and CFO have concluded that, as of June 30, 2012, our disclosure controls and procedures are effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have not been any changes in our internal controls over financial reporting that occurred during the last fiscal quarter, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II - OTHER INFORMATION

Item 1.   Legal Proceedings

We are engaged in various legal actions, claims and proceedings resulting from our business activities arising in the normal course of business, including claims related to breach of contracts, products liabilities, intellectual property matters and employment-related matters. As with most actions such as these, an estimation of any possible and/or ultimate liability cannot always be determined. We continue to assess the requirement to account for additional contingencies in accordance with the standard on contingencies. If we are required to make a payment in connection with an adverse outcome in these matters, it could have a material impact on our business, financial condition, operating results and cash flows.

As a manufacturer and retailer of health and wellness products and other consumer products that are ingested by consumers or applied to their bodies, we have been and are currently subjected to various product liability claims. Although the effects of these claims to date have not been material to us, it is possible that current and future product liability claims could have a material adverse impact on our business, financial condition, operating results or cash flows. We currently maintain product liability insurance with a deductible/retention of $3.0 million per claim with an aggregate cap on retained loss of $10.0 million. We typically seek and have obtained contractual indemnification from most parties that supply raw materials for our products or that manufacture or market products we sell. We also typically seek to be added, and have been added, as an additional insured under most of such parties’ insurance policies. We are 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 by the creditworthiness of the indemnifying party and its insurer, and the absence of significant defenses by the insurers.

Hydroxycut Claims. On May 1, 2009, the Food and Drug Administration (“FDA”) issued a warning on several Hydroxycut-branded products manufactured by 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. Following the recall, we were named, among other defendants, in approximately 93 lawsuits related to Hydroxycut-branded products in 14 states. Iovate previously accepted our tender request for defense and indemnification under its purchasing agreement with us and, as such, Iovate has accepted our request for defense and indemnification in the Hydroxycut matters. Our ability to obtain full recovery 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 we are not fully compensated by Iovate’s insurer, we can seek recovery directly from Iovate. Our ability to fully recover such amounts may be limited by the creditworthiness of Iovate.

During 2012, we were named in eight new personal injury lawsuits related to Hydroxycut, generally inclusive of claims of consumer fraud, misrepresentation, strict liability and breach of warranty. None of the plaintiffs in these lawsuits asserted specific damages claims. Any liabilities that may arise from these matters are not probable or reasonably estimable at this time.

The following eight personal injury matters were filed during 2012 by individuals claiming injuries from the use and consumption of Hydroxycut-branded products:

·Michael Nunes, et al. v. General Nutrition Centers, Inc., et al., U.S. District Court, Southern District of California,12CV00915 (filed April 13, 2012);

·Mark Aguilar, et al. v. General Nutrition Centers, Inc., et al., U.S. District Court, Eastern District of California, 12CV00513 (filed April 13, 2012);

·Clarissa Birdshead, et al. v. General Nutrition Centers, Inc., et al., U.S. District Court, Southern District of California, 12CV00913 (filed April 13, 2012);

·Deloris Blaylock, et al. v. General Nutrition Centers, Inc., et al., U.S. District Court, Eastern District of California, 12CV00988 (filed April 13, 2012);

·Gerard Dure, et al. v. General Nutrition Centers, Inc., et al., U.S. District Court, Eastern District of California, 12CV00987 (filed April 13, 2012);

·Mark Flemings, et al. v. General Nutrition Centers, Inc., et al., U.S. District Court, Eastern District of California, 12CV00982 (filed April 13, 2012);

·Darryl Ingram, et al. v. General Nutrition Centers, Inc., et al., U.S. District Court, Eastern District of California, 12CV00983 (filed April 13, 2012); and,

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·Darrell Jones, et al. v. General Nutrition Centers, Inc., et al., U.S. District Court, Western District of Oklahoma, 12CV00408 (filed April 13, 2012).

The following eight personal injury matters related to the use and consumption of Hydroxycut-branded products were settled during 2012:

·Kerry and Nadia Donald v. Iovate Health Sciences Group, et al., Court of Common Pleas, Philadelphia County, 11-0502384 (filed May 20, 2011);

·Phillip Sims v. GNC Corporation, et al., U.S. District Court, District of New Jersey, 10CV1728 (filed April 5, 2010);

·Donna Natali v. GNC Corporation, et al., Superior Court of New Jersey, Atlantic County, ATL-L-001499-10 (filed April 5, 2010);

·Matthew Carhart v. GNC Corporation, et al., Court of Common Pleas Philadelphia County, 10-0402210 (filed April 15, 2010);

·Michael Brown v. GNC Corporation, et al., Court of Common Pleas Philadelphia County, 10-0402217 (filed April 15, 2010);

·Alan D’Alessio, Jr. v. GNC Corporation, et al., Court of Common Pleas Philadelphia County, 10-0402214 (filed April 15, 2010);

·Carla M. Benson GNC Corporation, et al., Court of Common Pleas Philadelphia County, 10-1104602 (filed December 3, 2010); and,

·Alexander Torres and Jessica Lee Pizarro v. GNC Corporation, et al., Court of Common Pleas Philadelphia County, 11-0403330 (filed May 2, 2011).

These settlements did not result in any material payment by us.

Item 1A.   Risk Factors

There have been no material changes to the disclosures relating to this item from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2011 except with respect to the risk factor below, which is amended and restated in its entirety as follows:

We may experience product recalls, which could reduce our sales and margin and adversely affect our results of operations.

We may be subject to product recalls, withdrawals or seizures if any of the products we formulate, manufacture or sell are believed to cause injury or illness or if we are alleged to have violated governmental regulations in the manufacturing, labeling, promotion, sale or distribution of such products. For example, in May 2009, the FDA warned consumers to stop using Hydroxycut diet products, which are produced by Iovate and were sold in our stores. Iovate issued a voluntary recall, with which we fully complied. Sales of the recalled Hydroxycut products amounted to approximately $57.8 million, or 4.7% of our retail sales in 2008, and $18.8 million, or 4.2% of our retail sales in the first four months of 2009. We provided refunds or gift cards to consumers who returned these products to our stores. In the second quarter of 2009, we experienced a reduction in sales and margin due to this recall as a result of accepting returns of products from customers and a loss of sales as a replacement product was not available. Through December 31, 2011, we estimate that we have refunded approximately $3.5 million to our retail customers and approximately $1.6 million to our wholesale customers for Hydroxycut product returns. Our results of operations may continue to be affected by the Hydroxycut recall. Any additional recall, withdrawal or seizure of any of the products we formulate, manufacture or sell would require significant management attention, would likely result in substantial and unexpected expenditures and could materially and adversely affect our business, financial condition or results of operations. Furthermore, a recall, withdrawal or seizure of any of our products could materially and adversely affect consumer confidence in our brands and decrease demand for our products and the market price of the Class A common stock.

As is common in our industry, we rely on our third-party vendors to ensure that the products they manufacture and sell to us comply with all applicable regulatory and legislative requirements. In general, we seek representations and warranties, indemnification and/or insurance from our vendors. However, even with adequate insurance and indemnification, any claims of non-compliance could significantly damage our reputation and consumer confidence in our products, and materially and adversely affect the market price of the Class A common stock. In addition, the failure of such products to comply with applicable regulatory and legislative requirements could prevent us from marketing the products or require us to recall or remove such products from the market, which in certain cases could materially and adversely affect our business, financial condition and results of operation. For example, products manufactured by third

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parties that contain derivatives from geranium, known as 1.3-dimethylpentylamine/dimethylamylamine/13-dimethylamylamine (“DMAA”) are popular with our consumers. Although we have received representations from our third-party vendors that these products comply with applicable regulatory and legislative requirements, recent media articles have suggested that DMAA may not comply with the Dietary Supplement Health and Education Act of 1994. In December 2011, the U.S. military asked us to temporarily remove products containing DMAA from our stores on its bases pending the outcome of a precautionary review. That review is still pending. On April 27, 2012, the FDA announced that it had issued warning letters to ten manufacturers and distributors of dietary supplements containing DMAA for allegedly marketing products for which evidence of the safety of the product had not been submitted to FDA.  The FDA also indicated that the warning letters advised the companies that the FDA is not aware of evidence or history of use to indicate that DMAA is safe.  We expect that the companies will oppose the FDA position.  If it is determined that DMAA does not comply with applicable regulatory and legislative requirements, we could be required to recall or remove from the market all products containing DMAA and we could become subject to lawsuits related to any alleged non-compliance, any of which recalls, removals or lawsuits could materially and adversely affect our business, financial condition and results of operations. In the past, due to frequently changing consumer preferences in the dietary supplement space, we have offset losses related to recalls and removals with reformulated or alternative products, which is the strategy we would seek to employ if we were required to remove or recall products containing DMAA; however, there can be no assurance that we would be able to offset all or any portion of losses related to any future removal or recall.  As a result of the indeterminable level of product substitution and reformulated product sales, we cannot reliably determine the potential impact of any such recall or removal on our business, financial condition or results of operation.

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

Issuer Purchases of Equity Securities

The following table sets forth information regarding Holdings’ purchases of shares of Class A common stock during the quarter ended June 30, 2012:

	Total Number of Shares Purchased (1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans		Maximum Number(or Approximate Dollar Value) of Shares that May Yet Be Purchased under the Plans or Programs
April 1 to April 30, 2012		1,000,000		$35.11		1,000,000		500,000 shares
May 1 to May 31, 2012		-		-		-		500,000 shares
June 1 to June 30, 2012		500,000		$37.86		500,000		$300,000,000 (2)
Total		1,500,000		$36.03		1,500,000

(1)On February 16, 2012, we announced the approval of a share repurchase program pursuant to which we were authorized to purchase 1.0 million shares of Class A common stock (the “Repurchase Program”). On April 25, 2012, we announced the extension of the Repurchase Program, pursuant to which we were authorized to purchase an additional 500,000 shares of Class A common stock. We concluded the Repurchase Program in June 2012. Other than purchases in connection with the Repurchase Program as set forth in the table above, we made no purchases of shares of Class A common stock for the quarter ended June 30, 2012.

(2)   On June 19, 2012, we announced the approval of a new share repurchase program pursuant to which we may repurchase up to an aggregate of $300.0 million shares of Class A common stock during the following twelve month period ending July 31, 2013.

Item 3.   Defaults Upon Senior Securities

None.

Item 4.   Mine Safety Disclosures

Item 4 is not applicable.

Item 5.  Other Information

None.

Item 6.   Exhibits

Exhibit
No.	Description
10.1	Form of Indemnification Agreement between Holdings and each of its Directors and schedule
31.1	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.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the persons undersigned thereunto duly authorized.

	GNC HOLDINGS, INC.
	(Registrant)
Date: August 1, 2012	/s/ Joseph M. Fortunato
	Joseph M. Fortunato
	Director, President, and Chief Executive Officer
	(Principal Executive Officer)
Date: August 1, 2012	/s/ Michael M. Nuzzo
	Michael M. Nuzzo
	Chief Financial Officer
	(Principal Financial Officer)
Date: August 1, 2012	/s/ Andrew S. Drexler
	Andrew S. Drexler
	Corporate Controller
	(Principal Accounting Officer)

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EX-10.1

Exhibit 10.1

FORM OF

INDEMNIFICATION AGREEMENT(1)

AGREEMENT, executed this [Note 2], among GNC Acquisition Holdings Inc., a Delaware corporation (the “Company”), and [Note 1] (the “Indemnitee”), and, with respect to its guarantee set forth on the signature pages hereto only, General Nutrition Centers, Inc. a Delaware corporation (“Centers”) and wholly owned subsidiary of the Company.

WHEREAS, it is essential to the Company to retain and attract the most capable persons available as directors and officers of the Company and its subsidiaries (including Centers);

WHEREAS, Indemnitee is a director of the Company and Centers;

WHEREAS, in recognition of Indemnitee’s need for substantial protection against personal liability to enhance Indemnitee’s continued service to the Company and its subsidiaries in an effective manner, the increasing difficulty in obtaining satisfactory director and officer liability insurance coverage, and in part to provide Indemnitee with specific contractual assurance that indemnification will be available to Indemnitee (regardless of, among other things, any change in the composition of the Board or acquisition transaction relating to the Company), the Company and Centers wish to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the fullest extent (whether partial or complete) permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained, for the continued coverage of Indemnitee under the Company’s directors’ and officers’ liability insurance policies,

NOW, THEREFORE, in consideration of the premises and of Indemnitee continuing to serve the Company and its subsidiaries (including Centers) directly or, at its request, another enterprise, and intending to be legally bound hereby, the parties hereto agree as follows:

1.Certain Definitions.

(a)Affiliate:  as to any person, any other person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified person.  For the purposes of this definition, “control” when used with respect to any person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting Securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

(b)beneficial owner:  as defined in Rules 13d-3 and 13d-5 under Securities Exchange Act of 1934, as amended (the “Exchange Act”), except that a person shall be deemed to have beneficial ownership of all shares that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time.  The term “beneficially own” shall have a correlative meaning.

(c)Board:  The Board of Directors of the Company.

(d)Change of Control:  the occurrence of any of the following events:

(i)any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner, directly or indirectly, of more than 35% of the total voting power of the then outstanding Voting Securities of the Company; provided, that no Change of Control shall be deemed to have occurred under this paragraph (i) if the Permitted Holders either (a) beneficially own (as defined above), directly or indirectly, (x) in the aggregate more than 40% of the total voting power of the then outstanding Voting Securities of the Company and (y) a greater percentage of the total voting power of the then outstanding Voting Securities of the Company than any other person or (b) have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board;

(1)  This Form of Indemnification Agreement is supplemented by the individual information referenced in the Schedule at the end of this Exhibit.

(ii)during any period of two consecutive years, individuals who at the beginning of such period constituted the Board (together with any new members of the Board whose election by such Board or whose nomination for election by the equityholders of the Company was approved by a vote of the majority of the members of the Board then still in office who were either members of the Board at the beginning of such period or whose election or nomination for election was previously so approved including new members of the Board designated in or provided for in an agreement regarding the merger, consolidation or sale, transfer or other conveyance, of all or substantially all of the assets of the Company, if such agreement was approved by a vote of such majority of members of the Board) cease for any reason to constitute a majority of the Board then in office;

(iii)the adoption by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company by way of merger, consolidation or otherwise; or

(iv)the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company and its subsidiaries, taken as a whole, to another Person (other than to a subsidiary of the Company or to one or more Permitted Holders or any entity controlled by one or more Permitted Holders), in which, in the case of any such merger, consolidation or sale, the securities of the Company that are outstanding immediately prior to such transaction and that represent 100% of the aggregate Voting Securities of the Company are changed into or exchanged for cash, securities or property; provided, that no Change of Control shall be deemed to have occurred under this paragraph (iv) if pursuant to such transaction the securities of the Company are changed into or exchanged for, in addition to any other consideration, securities of the surviving Person that represent immediately after such transaction, (a) at least 30% of the aggregate voting power of the Voting Securities of the surviving Person and (b) a greater percentage of the Voting Securities of the surviving Person than the percentage of such Voting Securities beneficially owned by any other person.

(e)Claim:  any threatened, pending or completed action, suit or proceeding, or any inquiry or investigation, whether instituted by the Company or any other party, that Indemnitee in good faith believes might lead to the institution of any such action, suit or proceeding, whether civil, criminal, administrative, investigative or other.

(f)Expenses:  include attorneys’ fees and all other costs, expenses and obligations paid or incurred m connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in, any Claim relating to any Indemnifiable Event.

(g)Indemnifiable Event:  any event or occurrence related to the fact that Indemnitee is or was a director, officer, employee, agent or fiduciary of the Company, or is or was serving at the request of the Company as a director, officer, employee, trustee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, or by reason of anything done or not done by Indemnitee in any such capacity.

(h)Independent Legal Counsel:  an attorney or firm of attorneys, selected in accordance with the provisions of Section 3, who shall not have otherwise performed services for the Company or Indemnitee within the last five years (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnity agreements).

(i)Permitted Holders:  Ares Corporate Opportunities Fund II, L.P., Ares Management, Inc., Ares Management LLC and Ontario Teachers’ Pension Plan Board.

(j)Potential Change in Control:  shall be deemed to have occurred if (i) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; (ii) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control; or (iii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

(k)Reviewing Party:  any person or body consisting of a member or members of the Board or any other person or body appointed by the Board who is not a party to the particular Claim for which Indemnitee is seeking indemnification, or Independent Legal Counsel.

(l)Voting Securities:  any securities of the Company, the holders of which vote generally in the election of directors.

2.Basic Indemnification Arrangement.  (a) In the event Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Claim by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest extent permitted by law as soon as practicable but to any event no later than thirty days after written demand is presented to the Company, against any and all Expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of such Claim.  If so requested by Indemnitee, the

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Company shall advance to the fullest extent permitted by law (within two business days of such request) any and all Expenses to Indemnitee (an “Expense Advance”).  Notwithstanding anything in this Agreement to the contrary, prior to a Change in Control Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Claim initiated by Indemnitee unless the Board has authorized or consented to the initiation of such Claim.

(b)Notwithstanding the foregoing, (i) the obligations of the Company under Section 2(a) shall be subject to the condition that the Reviewing Party shall not have determined (in a written opinion, in any case in which the Independent Legal Counsel referred to in Section 2 hereof is involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Section 2(a) shall be subject to the condition that, if, when and to the extent that the Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed).  If there has not been a Change in Control, the Reviewing Party shall be selected by the Board, and if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Board who were directors immediately prior to such Change in Control), the Reviewing Party shall be the Independent Legal Counsel referred to in Section 2 hereof.  If there has been no determination by the Reviewing Party or if the Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation in any court in the State of Delaware having subject matter jurisdiction thereof and in which venue is proper seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and the Company hereby consents to service of process and to appear in any such proceeding.  Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee.

3.Change in Control.  If there is a Change in Control (other than a Change in Control which has been approved by a majority of the Board who were directors immediately prior to such Change in Control) then with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement or Company By-Law now or hereafter in effect relating to Claims for Indemnifiable Events, the Company shall seek legal advice only from Independent Legal Counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld).  Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent the Indemnitee would be permitted to be indemnified under applicable law.  The Company agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to indemnify fully such counsel against any and all expenses (including attorneys’ fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

4.Establishment of Trust.  In the event of a Potential Change in Control, the Company shall, upon written request by Indemnitee, create a trust for the benefit of Indemnitee and from time to time upon written request of Indemnitee shall fund such trust in an amount sufficient to satisfy any and all Expenses reasonably anticipated at the time of each such request to be incurred in connection with investigating, preparing for and defending any Claim relating to an Indemnifiable Event, and any and all judgments, fines, penalties and settlement amounts of any and all Claims relating to an Indemnifiable Event from time to time actually paid or claimed, reasonably anticipated or proposed to be paid, provided that in no event shall more than $250,000 be required to be deposited in any trust created hereunder (and no more than $1,000,000 in the aggregate with respect to any such trusts created under this Agreement and all Indemnification Agreements with directors and officers) in excess of amounts deposited in respect of reasonably anticipated Expenses.  The amount or amounts to be deposited in the trust pursuant to the foregoing funding obligation shall be determined by the Reviewing Party, in any case in which the Independent Legal Counsel referred to above is involved.  The terms of the trust shall provide that upon a Change in Control (i) the trust shall not be revoked or the principal thereof invaded, without the written consent of the Indemnitee, (ii) the trustee shall advance, within two business days of a request by the Indemnitee, any and all Expenses to the Indemnitee (and the Indemnitee hereby agrees to reimburse the trust under the circumstances under which the Indemnitee would be required to reimburse the Company under Section 2(b) of this Agreement), (iii) the trust shall continue to be funded by the Company in accordance with the funding obligation set forth above, (iv) the trustee shall promptly pay to Indemnitee all amounts for which Indemnitee shall be entitled to indemnification pursuant to this Agreement or otherwise, and (v) all unexpended funds in such trust shall revert to the Company upon a final determination by the Reviewing Party or a court of competent jurisdiction, as the case may be, that Indemnitee has been fully indemnified under the terms of this Agreement.  The trustee shall be chosen by Indemnitee.  Nothing in this Section 4 shall relieve the Company of any of its obligations under this Agreement.

3

5.Indemnification for Additional Expenses.  The Company shall indemnify Indemnitee against any and all expenses (including attorneys’ fees and retainers) and, if requested by Indemnitee, shall (within two business days of such request) advance such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement or Company By-Law now or hereafter in effect relating to Claims for Indemnifiable Events and/or (ii) recovery under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment or insurance recovery, as the case may be.

6.Partial Indemnity, Etc.  If Indemnitee is entitled under any provision of this Agreement to Indemnification by the Company for some or a portion of the Expenses, judgments, fines, penalties and amounts paid in settlement of a Claim but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.  Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection therewith.

7.Contribution.

(a)Contribution Payment.  To the extent the indemnification provided for under any provision of this Agreement is determined (in the manner hereinabove provided) not to be permitted under applicable law, the Company, in lieu of indemnifying Indemnitee, shall, to the extent permitted by law, contribute to the amount of any and all Expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of a Claim by reason of (or arising in part out of) an Indemnifiable Event incurred or paid by Indemnitee for which such Indemnification is not permitted.  The amount the Company contributes shall be in such proportion as is appropriate to reflect the relative fault of Indemnitee, on the one hand, and of the Company and any and all other parties (including officers and directors of the Company other than Indemnitee) who may be at fault (collectively, including the Company, the “Third Parties”), on the other hand.

(b)Relative Fault.  The relative fault of the Third Parties and the Indemnitee shall be determined (i) by reference to the relative fault of Indemnitee as determined by the court or other governmental agency or (ii) to the extent such court or other governmental agency does not apportion relative fault, by the Reviewing Party after giving effect to, among other things, the relative intent, knowledge, access to information, and opportunity to prevent or correct the relevant events, of each party, and other relevant equitable considerations.  The Company and Indemnitee agree that it would not be just and equitable if contribution were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in this Section 7(b).

8.Burden of Proof.  In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified or to contribution hereunder the burden of proof shall be on the Company to establish that Indemnitee is not so entitled.

9.No Presumptions.  For purposes of this Agreement, the termination or conclusion of any claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law.  In addition, neither the failure of the Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under applicable law shall be a defense to Indemnitee’s claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief.

10.Nonexclusivity, Etc. The rights of the Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Company’s By-Laws or the Delaware General Corporation Law or otherwise.  To the extent that a change in the Delaware General Corporation Law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Company’s By-Laws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.

11.Liability Insurance.  To the extent the Company maintains an insurance policy or policies providing directors’ and officers’ liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any Company director or officer.

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12.Period of Limitations.  No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against Indemnitee, Indemnitee’s spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of the occurrence of the events leading to such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern.

13.Amendments, Etc.  No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

14.Subrogation.  In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.

15.No Duplication of Payments.  The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, By-Law or otherwise) of the amounts otherwise indemnifiable hereunder.

16.Binding Effect, Etc. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, executors and personal and legal representatives.  This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer or director of the Company or of any other enterprise at the Company’s request.

17.Severability.  The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable in any respect, and the validity and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired and shall remain enforceable to the fullest extent permitted by law.

18.Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such state without giving effect to the principles of conflicts of laws.

5

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date set forth above.

GNC HOLDINGS, INC.

By:

Its:

INDEMNITEE

[Note 1]

General Nutrition Centers, Inc. hereby unconditionally guarantees the due and punctual payment and performance of all obligations of the Company under this Agreement in accordance with the terms set forth herein.

GENERAL NUTRITION CENTERS, INC.
By:
	Name:
	Title:

SCHEDULE

Schedule to Notes in Form of Indemnification Agreement

Name (Note 1)	Effective Date (Note 2)
Jeffrey P. Berger	March 28, 2011
Andrew Claerhout	May 14, 2009
Joseph Fortunato	March 16, 2007
Michael Hines	October 21, 2009
David B. Kaplan	March 16, 2007
Brian Klos	June 7, 2010
Johann O. Koss	March 25, 2011
Amy B. Lane	June 20, 2011
Romeo Leemrijse	May 14, 2009
Philip E. Mallott	July 19, 2012
Richard Wallace	July 14, 2010

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Joseph M. Fortunato, certify that:

1.I have reviewed this Form 10-Q of GNC Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 1, 2012	/s/ Joseph M. Fortunato
	Joseph M. Fortunato
	Director, President, and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Michael M. Nuzzo, certify that:

1.I have reviewed this Form 10-Q of GNC Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 1, 2012	/s/ Michael M. Nuzzo
	Michael M. Nuzzo
	Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 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

In connection with the Quarterly Report on Form 10-Q of GNC Holdings, Inc. (the “Company”), for the quarterly period ended June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Joseph M. Fortunato, as Chief Executive Officer of the Company, and Michael M. Nuzzo, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Joseph M. Fortunato
Name:	Joseph M. Fortunato
Title:	Chief Executive Officer
	(Principal Executive Officer)
Date:	August 1, 2012
/s/ Michael M. Nuzzo
Name:	Michael M. Nuzzo
Title:	Chief Financial Officer
	(Principal Financial Officer)
Date:	August 1, 2012

This certification accompanies the Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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SEGMENTS (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012 segment	Jun. 30, 2011
SEGMENTS
Number of reportable segments			3
Revenue:
Total revenue	$ 619,081	$ 518,535	$ 1,243,354	$ 1,024,543
Sub total segment revenues	689,690	575,567	1,380,472	1,132,274
Operating income:
Total operating income	117,060	72,697	229,129	130,386
Transaction related costs			(686)	(12,362)
Retail
Revenue:
Total revenue	458,632	384,304	928,453	768,007
Operating income:
Total operating income	97,617	63,409	190,792	127,006
Franchise
Revenue:
Total revenue	103,539	82,827	205,024	160,211
Operating income:
Total operating income	32,290	25,938	66,719	51,294
Manufacturing/Wholesale
Revenue:
Intersegment	70,609	57,032	137,118	107,731
Third Party	56,910	51,404	109,877	96,325
Sub total segment revenues	127,519	108,436	246,995	204,056
Operating income:
Total operating income	23,858	21,043	46,695	37,597
Intersegment elimination
Revenue:
Intersegment	(70,609)	(57,032)	(137,118)	(107,731)
Unallocated corporate and other costs:
Operating income:
Warehousing and distribution costs	(15,625)	(15,239)	(31,420)	(30,387)
Corporate costs	(21,080)	(22,454)	(42,971)	(42,762)
Transaction related costs			(686)	(12,362)
Sub total unallocated corporate and other costs	$ (36,705)	$ (37,693)	$ (75,077)	$ (85,511)

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GOODWILL AND INTANGIBLE ASSETS, NET (Details 2) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
Changes in amount of indefinite lived intangible assets during the period
Balance at the beginning of the period	$ 720,000		$ 720,000
Balance at the end of the period	720,000		720,000
Changes in amount of finite lived intangible assets during the period
Amortization expense	(4,279)
Balance at the end of the period	145,750
Changes in amount of intangible assets other than goodwill during the period
Total at the beginning of the period	869,589
Acquired franchise stores	440
Amortization expense	(4,279)
Total at the end of the period	865,750
Intangible assets, net
Brands (Note 4)	720,000		720,000
Accumulated Amortization	(40,723)	(36,444)
Carrying Amount	145,750
Total Cost	906,473	906,033
Total Carrying Amount	865,750
Future estimated amortization expense of intangible assets with finite lives
2012	4,240
2013	8,226
2014	8,086
2015	7,986
2016	7,907
Thereafter	109,305
Total	145,750
Operating Agreements
Changes in amount of finite lived intangible assets during the period
Balance at the beginning of the period	138,970
Amortization expense	(3,326)
Balance at the end of the period	135,644
Changes in amount of intangible assets other than goodwill during the period
Amortization expense	(3,326)
Intangible assets, net
Carrying Amount	135,644
Future estimated amortization expense of intangible assets with finite lives
Total	135,644
Retail agreements
Changes in amount of finite lived intangible assets during the period
Balance at the beginning of the period		25,804
Balance at the end of the period	25,278	25,804
Intangible assets, net
Cost	31,000	31,000
Accumulated Amortization	(5,722)	(5,196)
Carrying Amount	25,278	25,804
Future estimated amortization expense of intangible assets with finite lives
Total	25,278	25,804
Retail agreements | Minimum
Intangible assets, net
Estimated Life	25 years
Retail agreements | Maximum
Intangible assets, net
Estimated Life	35 years
Franchise agreements
Changes in amount of finite lived intangible assets during the period
Balance at the beginning of the period	56,583
Balance at the end of the period	55,183
Intangible assets, net
Estimated Life	25 years
Cost	70,000	70,000
Accumulated Amortization	(14,817)	(13,417)
Carrying Amount	55,183
Future estimated amortization expense of intangible assets with finite lives
Total	55,183
Manufacturing agreements
Changes in amount of finite lived intangible assets during the period
Balance at the beginning of the period	56,583
Balance at the end of the period	55,183
Intangible assets, net
Estimated Life	25 years
Cost	70,000	70,000
Accumulated Amortization	(14,817)	(13,417)
Carrying Amount	55,183
Future estimated amortization expense of intangible assets with finite lives
Total	55,183
Other Intangibles
Changes in amount of finite lived intangible assets during the period
Balance at the beginning of the period	10,619
Amortization expense	(953)
Balance at the end of the period	10,106
Changes in amount of intangible assets other than goodwill during the period
Acquired franchise stores	440
Amortization expense	(953)
Intangible assets, net
Carrying Amount	10,106
Future estimated amortization expense of intangible assets with finite lives
Total	10,106
Franchise Rights
Changes in amount of finite lived intangible assets during the period
Balance at the beginning of the period		957
Balance at the end of the period	1,050	957
Intangible assets, net
Cost	4,873	4,433
Accumulated Amortization	(3,823)	(3,476)
Carrying Amount	1,050	957
Future estimated amortization expense of intangible assets with finite lives
Total	1,050	957
Franchise Rights | Minimum
Intangible assets, net
Estimated Life	1 year
Franchise Rights | Maximum
Intangible assets, net
Estimated Life	5 years
Other intangibles
Changes in amount of finite lived intangible assets during the period
Balance at the beginning of the period		9,662
Balance at the end of the period	9,056	9,662
Intangible assets, net
Cost	10,600	10,600
Accumulated Amortization	(1,544)	(938)
Carrying Amount	9,056	9,662
Future estimated amortization expense of intangible assets with finite lives
Total	9,056	9,662
Other intangibles | Minimum
Intangible assets, net
Estimated Life	5 years
Other intangibles | Maximum
Intangible assets, net
Estimated Life	15 years
Retail Brand
Changes in amount of indefinite lived intangible assets during the period
Balance at the beginning of the period		500,000
Balance at the end of the period	500,000	500,000
Intangible assets, net
Brands (Note 4)	500,000	500,000
Franchise Brand
Changes in amount of indefinite lived intangible assets during the period
Balance at the beginning of the period		220,000
Balance at the end of the period	220,000	220,000
Intangible assets, net
Brands (Note 4)	$ 220,000	$ 220,000

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FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2012

FINANCIAL INSTRUMENTS

Schedule of carrying amount and estimated fair values of the financial instruments

	June 30, 2012				December 31, 2011
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(unaudited)
	(in thousands)
Cash and cash equivalents	$	160,167	$	160,167	$	128,438	$	128,438
Receivables, net	127,005		127,005		114,190		114,190
Franchise notes receivable, net	6,558		6,558		6,510		6,510
Accounts payable	158,936		158,936		124,416		124,416
Long-term debt (including current portion)	900,889		894,146		901,542		892,526

XML

SUBSEQUENT EVENTS (Details) (USD $)	3 Months Ended	4 Months Ended	6 Months Ended	1 Months Ended
	Jun. 30, 2012	Oct. 30, 2012	Jun. 30, 2012	Jul. 30, 2012 Subsequent event Dividend declared Class A Common Stock
Subsequent events
Dividends declared per share: (in dollars per share)	$ 0.11	$ 0.11	$ 0.22	$ 0.11

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STOCK-BASED COMPENSATION PLANS (Details) (USD $)	6 Months Ended
	Jun. 30, 2012 plan	Jun. 30, 2011
Stock-based compensation plans
Number of stock-based employee compensation plans	2
Stock-based compensation expense	$ 2,300,000	$ 2,200,000
Total unrecognized compensation cost related to non-vested stock awards	13,800,000
Weighted-average period over which compensation cost is expected to be recognized	2 years
Stock option
Stock-based compensation plans
Total intrinsic value of awards exercised	78,500,000
Total amount received from the exercise of options	19,500,000
Tax benefit associated with the exercise of awards recorded to additional capital	27,000,000
Total Options
Outstanding at the beginning of the period (in shares)	6,673,054
Granted (in shares)	44,667
Exercised (in shares)	(2,938,829)
Forfeited (in shares)	(30,456)
Outstanding at the end of the period (in shares)	3,748,436
Exercisable at the end of the period (in shares)	1,614,566
Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 11.46
Granted (in dollars per share)	$ 32.46
Exercised (in dollars per share)	$ 6.83
Forfeited (in dollars per share)	$ 17.24
Outstanding at the end of the period (in dollars per share)	$ 15.30
Exercisable at the end of the period (in dollars per share)	$ 9.24
Weighted Average Remaining Contractual Term (In Years)
Outstanding at the end of the period	6 years 2 months 12 days
Exercisable at the end of the period	5 years 3 months 18 days
Aggregate Intrinsic Value (in Thousands)
Outstanding at the end of the period	89,605,000
Exercisable at the end of the period	$ 48,372,000
Stock option | Minimum
Stock-based compensation plans
Vesting period	4 years
Expiration period	7 years
Stock option | Maximum
Stock-based compensation plans
Vesting period	5 years
Expiration period	10 years
2011 Stock Plan | Class A Common Stock
Stock-based compensation plans
Number of shares authorized for issuance	8,500,000
Number of shares reserved for every share granted that are Full Share Awards	1.8
Number of shares available for grant for every share forfeited that are Full Share Awards	1.8

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NATURE OF BUSINESS

6 Months Ended

Jun. 30, 2012

NATURE OF BUSINESS

NATURE OF BUSINESS

NOTE 1.  NATURE OF BUSINESS

General Nature of Business. GNC Holdings, Inc., formerly GNC Acquisition Holdings Inc., a Delaware corporation (“Holdings,” and collectively with its subsidiaries and, unless the context requires otherwise, its and their respective predecessors, the “Company”), is a global specialty retailer of health and wellness products, which include: vitamins, minerals and herbal supplements, sports nutrition products, diet products and other wellness products.

The Company is vertically integrated as its operations consist of purchasing raw materials, formulating and manufacturing products and selling the finished products through its three primary 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 GNC.com, www.drugstore.com, and since September 2011, LuckyVitamin.com. Franchise stores are located in the United States and 55 international countries (including distribution centers where retail sales are made). 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 (the “FDA”), Federal Trade Commission, Consumer Product Safety Commission, United States Department of Agriculture and the Environmental Protection Agency. These activities are also regulated by various agencies of the states and localities in which the Company’s products are sold.

Recent Significant Transactions. In March 2011, General Nutrition Centers, Inc. (“Centers”), a wholly owned subsidiary of Holdings, entered into a senior credit facility, consisting of a $1.2 billion term loan facility (the “Term Loan Facility”) and an $80.0 million revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Credit Facility”), and utilized the proceeds to repay all outstanding indebtedness under the 2007 Senior Credit Facility, the Senior Notes, and the Senior Subordinated Notes (the “Refinancing”).

In April 2011, Holdings consummated an initial public offering (the “IPO”) of 25.875 million shares of its Class A common stock, par value $0.001 per share (the “Class A common stock”), at an IPO price of $16.00 per share. The net proceeds from the IPO, together with cash on hand, were used to redeem all outstanding shares of Holdings’ Series A preferred stock, par value $0.001 per share (the “Series A preferred stock”), repay approximately $300.0 million of outstanding borrowings under the Term Loan Facility and pay approximately $11.1 million to satisfy obligations under the Management Services Agreement (as defined in Note 11, “Related Party Transactions”) and Holdings’ Class B common stock, par value $0.001 per share (the “Class B common stock” and, together with the Class A common stock, the “common stock”).

On August 31, 2011, the Company acquired substantially all of the assets and assumed certain liabilities of S&G Properties, LLC d/b/a LuckyVitamin.com and What’s The Big Deal?, Inc. d/b/a Gary’s “World of Wellness” (collectively referred to as “LuckyVitamin.com”), an online retailer of health and wellness products. The aggregate purchase price of LuckyVitamin.com was approximately $19.8 million.

During the first quarter of 2012 and the fourth quarter of 2011, certain of Holdings’ stockholders completed registered offerings of 19.6 million and 23.0 million shares, respectively, of Class A common stock at prices of $33.50 and $24.75 per share, respectively.

During the first six months of 2012, the Company completed an approved share repurchase program for $60.0 million shares of the Holdings’ Class A common stock.  On June 19, 2012, the Company’s Board of Directors (the “Board”) authorized a share repurchase program pursuant to which the Company may repurchase up to an aggregate $300.0 million shares of the Holdings’ Class A common stock during the following twelve month period ending July 31, 2013.  The Company expects to finance any repurchases with cash, potential financing transactions, or a combination of the foregoing.

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NATURE OF BUSINESS (Details 2) (LuckyVitamin.com, USD $) In Millions, unless otherwise specified	Aug. 31, 2011
LuckyVitamin.com
Recent Significant Transactions
Aggregate purchase price of acquisition	$ 19.8

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NATURE OF BUSINESS (Details) (USD $) In Millions, except Share data, unless otherwise specified	1 Months Ended	6 Months Ended		1 Months Ended		3 Months Ended		6 Months Ended
	Apr. 30, 2011	Jun. 30, 2012 segment country	Dec. 31, 2011	Jun. 30, 2012 Class A Common Stock	Apr. 30, 2011 Class A Common Stock	Mar. 31, 2012 Class A Common Stock	Dec. 31, 2011 Class A Common Stock	Jun. 30, 2012 Class A Common Stock	Apr. 30, 2011 Class B Common Stock	Apr. 30, 2011 Series A	Mar. 31, 2011 Term Loan Facility Centers	Mar. 31, 2011 Revolving Credit Facility Centers
NATURE OF BUSINESS
Number of primary segments		3
Number of international countries in which franchise stores are located		55
Recent Significant Transactions
Maximum borrowing capacity											$ 80.0	$ 1,200.0
Information related to public offering
Issuance of common stock (in shares)					25,875,000
Common stock, par value (in dollars per share)		$ 0.001	$ 0.001		$ 0.001				$ 0.001
IPO price of share (In dollars per share)					$ 16.00
Preferred stock, par value (in dollars per share)										$ 0.001
Repayment of outstanding borrowings from the net proceeds of the IPO	300.0
Payment made to satisfy obligations under the Management Services Agreement	11.1
Number of shares offered by stockholders						19,600,000	23,000,000
Price of shares offered by stockholders (in dollars per share)						$ 33.50	$ 24.75
Amount of shares repurchased								60.0
Amount of shares authorized to repurchase				$ 300.0

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Transaction related costs	$ 686	$ 12,362

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INVENTORIES (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
INVENTORIES
Finished product ready for sale	$ 419,827	$ 354,913
Work-in-process, bulk product and raw materials	80,847	61,684
Packaging supplies	9,040	7,013
Total inventory	$ 509,714	$ 423,610

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 130,528	$ 45,927
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on early extinguishment of debt		19,855
Depreciation and amortization expense	24,329	22,891
Amortization of debt costs	1,166	1,636
Increase in provision for inventory losses	6,554	8,847
(Increase) decrease in receivables	(15,049)	611
Increase in inventory	(90,642)	(40,884)
Decrease in prepaids and other current assets	1,699	3,219
Increase in accounts payable	34,475	30,158
Increase (decrease) in deferred revenue and other current liabilities	1,384	(12,361)
Other operating activities	(1,578)	(382)
Net cash provided by operating activities	92,866	79,517
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(20,838)	(16,455)
Other investing activities	(1,895)	(1,422)
Net cash used in investing activities	(22,733)	(17,877)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt	(833)	(1,355,165)
Dividends paid to shareholders	(23,409)
Proceeds from exercised stock options	19,540	3,325
Repurchase of treasury stock	(59,960)
Tax benefit from exercise of stock options	28,903	1,612
Repurchase of Series A preferred stock		(223,107)
Net proceeds from sale of Class A common stock		237,253
Proceeds from issuance of long-term debt		1,196,200
Deferred financing fees		(17,346)
Other financing activities	(2,500)
Net cash used in financing activities	(38,259)	(157,228)
Effect of exchange rate on cash and cash equivalents	(145)	(344)
Net increase (decrease) in cash and cash equivalents	31,729	(95,932)
Beginning balance, cash and cash equivalents	128,438	193,902
Ending balance, cash and cash equivalents	$ 160,167	$ 97,970

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GOODWILL AND INTANGIBLE ASSETS, NET (Details) (USD $)	6 Months Ended
	Jun. 30, 2012 store	Jun. 30, 2011 store	Jun. 30, 2012 Retail	Jun. 30, 2012 Franchising	Dec. 31, 2011 Franchising	Jun. 30, 2012 Manufacturing/Wholesale	Dec. 31, 2011 Manufacturing/Wholesale
GOODWILL AND INTANGIBLE ASSETS, NET
Number of franchise stores acquired	17	16
Total purchase price of acquisition of franchise stores	$ 3,400,000	$ 1,900,000
Total purchase price of acquisition of franchise stores paid in cash	1,600,000	700,000
Changes in amount of goodwill during the period
Balance at the beginning of the period	637,877,000		317,733,000	117,303,000	117,303,000	202,841,000	202,841,000
Acquired franchise stores	1,878,000		1,878,000
Balance at the end of the period (unaudited)	$ 639,755,000	$ 639,755,000	$ 319,611,000	$ 117,303,000	$ 117,303,000	$ 202,841,000	$ 202,841,000

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INCOME TAXES (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
INCOME TAXES
Income tax expense (Note 10)	$ 39,894,000	$ 20,970,000	$ 77,723,000	$ 30,360,000
Effective tax rate as a percentage of pretax income			37.30%	39.80%
Non deductible costs incurred on IPO included in income tax expenses				2,300,000
Non deductible costs incurred on IPO as a percentage of pretax income				3.00%
Unrecognized tax benefits	12,300,000		12,300,000		10,500,000
Reasonably estimated period in which unrecognized tax benefits could increase or decrease, maximum			12 months
Unrecognized tax benefits, if recognized, would affect the effective tax rate	12,300,000		12,300,000
Accrued interest and penalties relating to uncertain tax positions	$ 6,200,000		$ 6,200,000		$ 3,500,000

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 160,167	$ 128,438
Receivables, net	127,005	114,190
Inventories (Note 3)	509,714	423,610
Prepaids and other current assets	41,263	38,777
Total current assets	838,149	705,015
Long-term assets:
Goodwill (Note 4)	639,755	637,877
Brands (Note 4)	720,000	720,000
Other intangible assets, net (Note 4)	145,750	149,589
Property, plant and equipment, net	199,220	198,171
Other long-term assets	26,311	18,935
Total long-term assets	1,731,036	1,724,572
Total assets	2,569,185	2,429,587
Current liabilities:
Accounts payable	158,936	124,416
Current portion, long-term debt (Note 5)	1,588	1,592
Deferred revenue and other current liabilities	109,204	104,525
Total current liabilities	269,728	230,533
Long-term liabilities:
Long-term debt (Note 5)	899,301	899,950
Deferred tax liabilities, net	285,268	283,403
Other long-term liabilities	39,983	37,239
Total long-term liabilities	1,224,552	1,220,592
Total liabilities	1,494,280	1,451,125
Common stock, $0.001 par value, 150,000 shares authorized:
Paid-in-capital	791,268	741,848
Retained earnings	404,899	298,831
Treasury stock, at cost	(123,870)	(65,048)
Accumulated other comprehensive income	2,498	2,724
Total stockholders' equity	1,074,905	978,462
Total liabilities and stockholders' equity	2,569,185	2,429,587
Class A Common Stock
Common stock, $0.001 par value, 150,000 shares authorized:
Common stock	110	105
Class B Common Stock
Common stock, $0.001 par value, 150,000 shares authorized:
Common stock		$ 2

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Consolidated Statements of Comprehensive Income (Parenthetical) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2011
Consolidated Statements of Comprehensive Income
Unrealized gains on derivatives and qualified as cash flow hedges, tax	$ 2,718

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FINANCIAL INSTRUMENTS (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Carrying Amount
Actual and estimated fair values of the financial instruments
Cash and cash equivalents	$ 160,167	$ 128,438
Receivables, net	127,005	114,190
Franchise notes receivable, net	6,558	6,510
Accounts payable	158,936	124,416
Long-term debt (including current portion)	900,889	901,542
Fair Value
Actual and estimated fair values of the financial instruments
Cash and cash equivalents	160,167	128,438
Receivables, net	127,005	114,190
Franchise notes receivable, net	6,558	6,510
Accounts payable	158,936	124,416
Fair Value | Level 1
Actual and estimated fair values of the financial instruments
Long-term debt (including current portion)	$ 894,146	$ 892,526

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INVENTORIES (Tables)

6 Months Ended

Jun. 30, 2012

INVENTORIES

Schedule of net carrying value of inventories

	June 30,		December 31,
	2012		2011
	(unaudited)
	(in thousands)
Finished product ready for sale	$	419,827	$	354,913
Work-in-process, bulk product and raw materials	80,847		61,684
Packaging supplies	9,040		7,013
Total	$	509,714	$	423,610

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COMMITMENTS AND CONTINGENCIES (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Commitments and contingencies
Amount of advertising commitments related to certain purchase commitments	$ 3.0
Product liability
Commitments and contingencies
Deductible/retention per claim out of total product liability insurance	3.0
Aggregate cap on retained loss for deductible/retention per claim out of total product liability insurance	$ 10.0
Product liability | Hydroxycut Claims
Commitments and contingencies
Number of reports of liver injuries	23
Number of Hydroxycut-branded products recalled	14
Number of lawsuits filed against the company	93
Number of states in which lawsuits against the company are filed	14
Number of pending lawsuits in which company is named	74
Number of individual, largely personal injury claims pending	68
Number of putative class action cases pending against the company	6
Product liability | Pro-Hormone/Androstenedione Cases
Commitments and contingencies
Number of pending lawsuits in which company is named	2

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LONG-TERM DEBT / INTEREST EXPENSE (Tables)

6 Months Ended

Jun. 30, 2012

LONG-TERM DEBT / INTEREST EXPENSE

Schedule of long-term debt

	June 30,			December 31,
	2012			2011
	(unaudited)
	(in thousands)
Senior Credit Facility	$	897,572		$	897,387
Mortgage	3,304			4,135
Capital leases	13			20
Total Debt	900,889			901,542
Less: current maturities	(1,588		)	(1,592		)
Long-term Debt	$	899,301		$	899,950

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Consolidated Statements of Stockholders' Equity (USD $) In Thousands, except Share data, unless otherwise specified	Total USD ($)	Treasury Stock USD ($)	Paid-in-Capital USD ($)	Retained Earnings USD ($)	Other Comprehensive Income/(Loss) USD ($)	Class A Common Stock	Class A Common Stock Common Stock USD ($)	Class B Common Stock	Class B Common Stock Common Stock USD ($)
Balance at Dec. 31, 2010	$ 619,483	$ (2,277)	$ 451,728	$ 171,224	$ (1,280)		$ 60		$ 28
Balance (in shares) at Dec. 31, 2010							59,199,000		28,169,000
Increase (Decrease) in Stockholders' Equity
Comprehensive Income	51,798			45,927	5,871
Issuance of common stock	237,253		237,237				16
Issuance of common stock (in shares)							16,000,000
Conversion of stock							14		(14)
Conversion of stock (in shares)							14,387,000		(14,387,000)
Preferred stock dividends	(4,726)			(4,726)
Exercise of stock options	4,620		4,620
Exercise of stock options (in shares)							478,000
Non-cash stock-based compensation	2,215		2,215
Balance at Jun. 30, 2011	910,643	(2,277)	695,800	212,425	4,591		90		14
Balance (in shares) at Jun. 30, 2011							90,064,000		13,782,000
Balance at Dec. 31, 2011	978,462	(65,048)	741,848	298,831	2,724		105		2
Balance (in shares) at Dec. 31, 2011						102,985,000	102,985,000	2,060,000	2,060,000
Increase (Decrease) in Stockholders' Equity
Comprehensive Income	130,302			130,528	(226)
Conversion of stock							2		(2)
Conversion of stock (in shares)							2,060,000		(2,060,000)
Purchase of treasury stock	(58,822)	(58,822)
Purchase of treasury stock (in shares)							(1,665,000)
Common stock dividends	(23,409)			(23,409)
Exercise of stock options	47,103		47,100				3
Exercise of stock options (in shares)							2,938,000
Non-cash stock-based compensation	2,320		2,320
Other	(1,051)			(1,051)
Balance at Jun. 30, 2012	$ 1,074,905	$ (123,870)	$ 791,268	$ 404,899	$ 2,498		$ 110
Balance (in shares) at Jun. 30, 2012						106,318,000	106,318,000

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Common stock, par value (in dollars per share)	0.001	0.001
Common stock, shares authorized	150,000	150,000
Class A Common Stock
Common stock, shares issued	110,987	105,988
Common stock, shares outstanding	106,318	102,985
Common stock, shares held in treasury	4,669	3,004
Class B Common Stock
Common stock, shares issued		2,060
Common stock, shares outstanding		2,060

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SEGMENTS

6 Months Ended

Jun. 30, 2012

SEGMENTS

SEGMENTS

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, Puerto Rico and its GNC.com and LuckyVitamin.com businesses. 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 and Corporate costs represent the Company’s administrative expenses. The accounting policies of the segments are the same as those described in the “Basis of Presentation and Summary of Significant Accounting Policies.”

The following table represents key financial information of the Company’s segments:

	Three months ended						Six months ended
	June 30,			June 30,			June 30,			June 30,
	2012			2011			2012			2011
	(unaudited)
	(in thousands)
Revenue:
Retail	$	458,632		$	384,304		$	928,453		$	768,007
Franchise	103,539			82,827			205,024			160,211
Manufacturing/Wholesale:
Intersegment (1)	70,609			57,032			137,118			107,731
Third Party	56,910			51,404			109,877			96,325
Sub total Manufacturing/Wholesale	127,519			108,436			246,995			204,056
Sub total segment revenues	689,690			575,567			1,380,472			1,132,274
Intersegment elimination (1)	(70,609		)	(57,032		)	(137,118		)	(107,731		)
Total revenue	$	619,081		$	518,535		$	1,243,354		$	1,024,543
Operating income:
Retail	$	97,617		$	63,409		$	190,792		$	127,006
Franchise	32,290			25,938			66,719			51,294
Manufacturing/Wholesale	23,858			21,043			46,695			37,597
Unallocated corporate and other costs:
Warehousing and distribution costs	(15,625		)	(15,239		)	(31,420		)	(30,387		)
Corporate costs	(21,080		)	(22,454		)	(42,971		)	(42,762		)
Transaction related costs	-			-			(686		)	(12,362		)
Sub total unallocated corporate and other costs	(36,705		)	(37,693		)	(75,077		)	(85,511		)
Total operating income	$	117,060		$	72,697		$	229,129		$	130,386

(1)  Intersegment revenues are eliminated from consolidated revenue.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Jul. 26, 2012
Document and Entity Information
Entity Registrant Name	GNC HOLDINGS, INC.
Entity Central Index Key	0001502034
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		106,632,824
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2

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INCOME TAXES

6 Months Ended

Jun. 30, 2012

INCOME TAXES

INCOME TAXES

NOTE 10.  INCOME TAXES

The Company recognized $77.7 million of income tax expense (or 37.3% of pretax income) during the six months ended June 30, 2012 compared to $30.4 million (or 39.8% of pretax income) for the same period in 2011. For the six months ended June 30, 2011, income tax expense included $2.3 million (3.0% of pretax income) related to non deductible costs incurred in connection with the IPO.

The Company files a consolidated U.S. federal tax return and various consolidated and separate tax returns as prescribed by the tax laws of the state, local and international jurisdictions in which it operates. The Company has been audited by the Internal Revenue Service (the “IRS”) through its March 15, 2007 tax year and the Company has been informed that its federal income tax return for 2010 will be audited.  The Company has various state, local and international jurisdiction tax years open to examination (the earliest open period is 2003), and is also currently under audit in certain state and local jurisdictions. As of June 30, 2012, the Company believes that it has appropriately reserved for any potential federal, state, local and international income tax exposures.

At each of June 30, 2012 and December 31, 2011, the Company had $12.3 million and $10.5 million, respectively, of unrecognized tax benefits.  As of June 30, 2012, the Company is not aware of any tax positions for which it is reasonably possible that the amounts of unrecognized tax benefits will significantly increase or decrease within the next 12 months. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is approximately $12.3 million. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company had accrued approximately $6.2 million and $3.5 million for June 30, 2012 and December 31, 2011, respectively, in potential interest and penalties associated with uncertain tax positions.  To the extent interest and penalties are not assessed with respect to the ultimate settlement of uncertain tax positions, amounts previously accrued will be reduced and reflected as a reduction of the overall income tax provision.

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Consolidated Statements of Income (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Revenue	$ 619,081	$ 518,535	$ 1,243,354	$ 1,024,543
Cost of sales, including cost of warehousing, distribution and occupancy	379,644	327,618	763,208	649,779
Gross profit	239,437	190,917	480,146	374,764
Compensation and related benefits	78,376	75,363	158,419	146,636
Advertising and promotion	13,411	13,391	29,630	27,598
Other selling, general and administrative	30,573	29,418	62,358	57,901
Foreign currency gain	17	48	(76)	(119)
Transaction related costs			686	12,362
Operating income	117,060	72,697	229,129	130,386
Interest expense, net (Note 5)	10,495	15,723	20,878	54,099
Income before income taxes	106,565	56,974	208,251	76,287
Income tax expense (Note 10)	39,894	20,970	77,723	30,360
Net income	66,671	36,004	130,528	45,927
Income per share - Basic and Diluted:
Net income	66,671	36,004	130,528	45,927
Preferred stock dividends		(494)		(4,726)
Net income available to common shareholders	$ 66,671	$ 35,510	$ 130,528	$ 41,201
Earnings per share:
Basic (in dollars per share)	$ 0.63	$ 0.35	$ 1.23	$ 0.43
Diluted (in dollars per share)	$ 0.62	$ 0.34	$ 1.21	$ 0.42
Weighted average common shares outstanding:
Basic (in shares)	106,517	102,723	106,161	95,088
Diluted (in shares)	107,927	105,908	107,917	97,972
Dividends declared per share: (in dollars per share)	$ 0.11		$ 0.22

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GOODWILL AND INTANGIBLE ASSETS, NET

6 Months Ended

Jun. 30, 2012

GOODWILL AND INTANGIBLE ASSETS, NET

GOODWILL AND INTANGIBLE ASSETS, NET

NOTE 4. GOODWILL AND INTANGIBLE ASSETS, NET

For the six months ended June 30, 2012 and 2011, the Company acquired 17 and 16 franchise stores, respectively. These acquisitions were accounted for as business combinations and the Company recorded the acquired inventory, fixed assets, franchise rights and goodwill, with an applicable reduction to receivables and cash. For the six months ended June 30, 2012 and 2011, the total purchase price associated with these acquisitions was $3.4 million and $1.9 million, respectively, of which $1.6 million and $0.7 million, respectively, was paid in cash.

The following table summarizes the Company’s goodwill activity:

					Manufacturing/
	Retail		Franchising		Wholesale		Total
	(in thousands)
Balance at December 31, 2011	$	317,733	$	117,303	$	202,841	$	637,877
Acquired franchise stores	1,878		-		-		1,878
Balance at June 30, 2012 (unaudited)	$	319,611	$	117,303	$	202,841	$	639,755

Intangible assets other than goodwill consisted of the following:

	Retail		Franchise		Operating			Other
	Brand		Brand		Agreements			Intangibles			Total
	(in thousands)
Balance at December 31, 2011	$	500,000	$	220,000	$	138,970		$	10,619		$	869,589
Acquired franchise stores	-		-		-			440			440
Amortization expense	-		-		(3,326		)	(953		)	(4,279		)
Balance at June 30, 2012 (unaudited)	$	500,000	$	220,000	$	135,644		$	10,106		$	865,750

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

	Estimated	June 30, 2012							December 31, 2011
	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
Retail agreements	25-35	31,000		(5,722		)	25,278		31,000		(5,196		)	25,804
Franchise agreements	25	70,000		(14,817		)	55,183		70,000		(13,417		)	56,583
Manufacturing agreements	25	70,000		(14,817		)	55,183		70,000		(13,417		)	56,583
Other intangibles	5-15	10,600		(1,544		)	9,056		10,600		(938		)	9,662
Franchise rights	1-5	4,873		(3,823		)	1,050		4,433		(3,476		)	957
Total		$	906,473	$	(40,723	)	$	865,750	$	906,033	$	(36,444	)	$	869,589

The following table represents future estimated amortization expense of intangible assets with finite lives at June 30, 2012:

	Estimated
	amortization
Years ending December 31,	expense
	(unaudited)
	(in thousands)
2012	$	4,240
2013	8,226
2014	8,086
2015	7,986
2016	7,907
Thereafter	109,305
Total	$	145,750

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INVENTORIES

6 Months Ended

Jun. 30, 2012

INVENTORIES

INVENTORIES

NOTE 3.  INVENTORIES

The net carrying value of inventories consisted of the following:

	June 30,		December 31,
	2012		2011
	(unaudited)
	(in thousands)
Finished product ready for sale	$	419,827	$	354,913
Work-in-process, bulk product and raw materials	80,847		61,684
Packaging supplies	9,040		7,013
Total	$	509,714	$	423,610

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GOODWILL AND INTANGIBLE ASSETS, NET (Tables)

6 Months Ended

Jun. 30, 2012

GOODWILL AND INTANGIBLE ASSETS, NET

Summary of goodwill activity

					Manufacturing/
	Retail		Franchising		Wholesale		Total
	(in thousands)
Balance at December 31, 2011	$	317,733	$	117,303	$	202,841	$	637,877
Acquired franchise stores	1,878		-		-		1,878
Balance at June 30, 2012 (unaudited)	$	319,611	$	117,303	$	202,841	$	639,755

Schedule of intangible assets other than goodwill

	Retail		Franchise		Operating			Other
	Brand		Brand		Agreements			Intangibles			Total
	(in thousands)
Balance at December 31, 2011	$	500,000	$	220,000	$	138,970		$	10,619		$	869,589
Acquired franchise stores	-		-		-			440			440
Amortization expense	-		-		(3,326		)	(953		)	(4,279		)
Balance at June 30, 2012 (unaudited)	$	500,000	$	220,000	$	135,644		$	10,106		$	865,750

Schedule of the gross carrying amount and accumulated amortization for each major intangible asset

	Estimated	June 30, 2012							December 31, 2011
	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
Retail agreements	25-35	31,000		(5,722		)	25,278		31,000		(5,196		)	25,804
Franchise agreements	25	70,000		(14,817		)	55,183		70,000		(13,417		)	56,583
Manufacturing agreements	25	70,000		(14,817		)	55,183		70,000		(13,417		)	56,583
Other intangibles	5-15	10,600		(1,544		)	9,056		10,600		(938		)	9,662
Franchise rights	1-5	4,873		(3,823		)	1,050		4,433		(3,476		)	957
Total		$	906,473	$	(40,723	)	$	865,750	$	906,033	$	(36,444	)	$	869,589

Schedule of future estimated amortization expense of intangible assets with finite lives

	Estimated
	amortization
Years ending December 31,	expense
	(unaudited)
	(in thousands)
2012	$	4,240
2013	8,226
2014	8,086
2015	7,986
2016	7,907
Thereafter	109,305
Total	$	145,750

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RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2012

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

NOTE 11. RELATED PARTY TRANSACTIONS

Management Services AgreementOn March 16, 2007, the Company entered into a Management Services Agreement (the “Management Services Agreement”) with ACOF Operating Manager II, L.P. (“ACOF Operating Manager”), an affiliate of Ares Corporate Opportunities Fund II, L.P., which was terminated upon the consummation of the IPO. The Management Services Agreement provided for an annual management fee of $0.8 million, payable quarterly and in advance to ACOF Operating Manager, on a pro rata basis, until the tenth anniversary from March 16, 2007 plus any one-year extensions (which extensions occurred automatically on each anniversary date of March 16, 2007), as well as reimbursements for ACOF Operating Manager’s, and its affiliates’, out-of-pocket expenses in connection with the management services provided under the Management Services Agreement. For the six months ended June 30, 2011, $0.2 million was paid to ACOF Operating Manager in accordance with the terms of the Management Services Agreement.

Upon the consummation of the IPO, the Management Services Agreement was terminated and ACOF Operating Manager received, in lieu of quarterly payments of the annual management fee, an automatic fee equal to the net present value of the aggregate annual management fee that would have been payable to ACOF Operating Manager during the remainder of the term of the Management Services Agreement. The amount of such payment was $5.6 million, and this amount was accrued and expensed in transaction related costs during the period ended March 31, 2011. No further payments will be made pursuant to the Management Services Agreement.

Special Dividend   Prior to the consummation of the IPO, Ontario Teachers’ Pension Plan Board (“OTPP”), as the holder of Class B common stock, was entitled to receive ratably an annual special dividend payment equal to an aggregate amount of $0.8 million per year when, as and if declared by the Board, for a period of ten years commencing on March 16, 2007 (the “Special Dividend Period”). The special dividend was payable in equal quarterly installments on the first day of each quarter commencing on April 1, 2007. For the six months ended June 30, 2011, $0.2 million was paid to OTPP as a special dividend pursuant to the obligations under the Class B common stock.

Upon the consummation of the IPO, OTPP’s right to receive the special dividend payments was terminated and OTPP received, in lieu of quarterly payments of the special dividend payments, an automatic payment equal to the net present value of the aggregate amount of the special dividend payments that would have been payable to OTPP during the remainder of the Special Dividend Period, calculated in good faith by the Board. The amount of such payment was $5.6 million, and this amount was accrued and expensed in transaction related costs during the period ended March 31, 2011. No further special dividend payments will be made.

Lease Agreements At June 30, 2012, General Nutrition Centres Company, the Company’s wholly owned subsidiary, was party, as lessee, to 16 lease agreements with Cadillac Fairview Corporation (“Cadillac Fairview”), as lessor, and 1 lease agreement with Ontrea, Inc. (“Ontrea”), as lessor, with respect to properties located in Canada.  Each of Cadillac Fairview and Ontrea is a direct wholly owned subsidiary of OTPP. For the six months ended June 30, 2012 and 2011, the Company paid $1.2 million and $1.3 million, respectively, under the lease agreements with Cadillac Fairview, and an immaterial amount for the six months ended June 30, 2012 under the lease agreement with Ontrea. Each lease was negotiated in the ordinary course of business on an arm’s length basis.

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2012

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

NOTE 7.  COMMITMENTS AND CONTINGENCIES

Litigation

The Company is engaged in various legal actions, claims and proceedings resulting from the Company’s business activities arising in the normal course of business, including claims related to breach of contracts, products liabilities, intellectual property matters and employment-related matters. As with most 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. If the Company is required to make a payment in connection with an adverse outcome in these matters, it could have a material impact on its business, financial condition, operating results and cash flows.

As a manufacturer and retailer of health and wellness products 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, financial condition, operating results or cash flows. 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 a former owner of the Company 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.

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. Following the recall, the Company was named, among other defendants, in approximately 93 lawsuits related to Hydroxycut-branded products in 14 states.  Iovate previously accepted the Company’s tender request for defense and indemnification under its purchasing agreement with the Company and, as such, Iovate has accepted the Company’s request for defense and indemnification in the Hydroxycut matters.  The Company’s ability to obtain full recovery 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 the Company is not fully compensated by Iovate’s insurer, it can seek recovery directly from Iovate.  The Company’s ability to fully recover such amounts may be limited by the creditworthiness of Iovate.

Currently, there are 74 pending lawsuits related to Hydroxycut in which the Company has been named: 68 individual, largely personal injury claims and six putative class action cases, generally inclusive of claims of consumer fraud, misrepresentation, strict liability and breach of warranty.  As any liabilities that may arise from these matters are not probable or reasonably estimable at this time, no liability has been accrued in the accompanying financial statements.

By court order dated October 6, 2009, the United States Judicial Panel on Multidistrict Litigation consolidated pretrial proceedings of many of the pending actions in the Southern District of California (In re: Hydroxycut Marketing and Sales Practices Litigation, MDL No. 2087).

Pro-Hormone/Androstenedione Cases. The Company is currently defending two lawsuits (the “Andro Actions”) in New Jersey and New York relating to the sale by the Company of certain nutritional products between 1999 and 2004, alleged to contain the ingredients commonly known as Androstenedione, Androstenediol, Norandrostenedione, and Norandrostenediol (collectively, “Andro Products”). In each of the Andro Actions, 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.  As any liabilities that may arise from these other Andro Actions are not probable or reasonably estimable at this time, no liability has been accrued in the accompanying financial statements.

Commitments

The Company maintains certain purchase commitments with various vendors to ensure its operational needs are fulfilled.  As of June 30, 2012, such future purchase commitments consisted of $3.0 million of advertising commitments. Other commitments related to the Company’s business operations cover varying periods of time and are not significant. All of these commitments are expected to be fulfilled with no adverse consequences to the Company’s operations or financial condition.

Environmental Compliance

In March 2008, the South Carolina Department of Health and Environmental Control (the “DHEC”) requested that the Company investigate contamination associated with historical activities at its South Carolina facility. These investigations have identified chlorinated solvent impacts in soils and groundwater that extend offsite from its facility. The Company is awaiting DHEC approval of the scope of additional investigations in order to understand the extent of these impacts and develop appropriate remedial measures for DHEC approval. At this stage of the investigation, however, it is not 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 operation 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 and that any liabilities for noncompliance will not have a material adverse effect on its business, financial performance, or cash flows. However, it is difficult to predict future liabilities and obligations, which could be material.

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LONG-TERM DEBT / INTEREST EXPENSE

6 Months Ended

Jun. 30, 2012

LONG-TERM DEBT / INTEREST EXPENSE

LONG-TERM DEBT / INTEREST EXPENSE

NOTE 5.  LONG-TERM DEBT / INTEREST EXPENSE

Long-term debt consisted of the following:

	June 30,			December 31,
	2012			2011
	(unaudited)
	(in thousands)
Senior Credit Facility	$	897,572		$	897,387
Mortgage	3,304			4,135
Capital leases	13			20
Total Debt	900,889			901,542
Less: current maturities	(1,588		)	(1,592		)
Long-term Debt	$	899,301		$	899,950

For the six months ended June 30, 2012, interest expense of $20.9 million consisted primarily of interest on outstanding borrowings under the Term Loan Facility. Interest under both the Term Loan Facility and the Revolving Credit Facility is based on variable rates. At June 30, 2012 and December 31, 2011, the interest rate under the Term Loan Facility was 4.25%, and the interest rate under the Revolving Credit Facility was 4.00% and 4.25%, respectively. The Revolving Credit Facility was undrawn and had outstanding letters of credit of $1.4 million and $8.0 million at June 30, 2012 and December 31, 2011, respectively.  Interest on the letters of credit was 3.00% and 3.25% at June 30, 2012 and December 31, 2011, respectively.

For the six months ended June 30, 2011, interest expense of $54.1 million consisted primarily of $14.2 million on the Senior Credit Facility, $23.2 million of expenses related to the Refinancing, $4.9 million of original issue discount and deferred financing fees related to the $300.0 million repayment of outstanding borrowings under the Term Loan Facility in connection with the IPO, and $10.3 million of interest expense on former indebtedness prior to the Refinancing. The $23.2 million of expenses related to the Refinancing consisted of $5.8 million in interest rate swap termination costs, write-off of $13.4 million of deferred financing fees of former indebtedness, write-off of $1.6 million in original issue discount related to former indebtedness and $2.4 million to defease former indebtedness.

As of June 30, 2012, the Company believes that it is in compliance with all covenants under the Senior Credit Facility.

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FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2012

FINANCIAL INSTRUMENTS

FINANCIAL INSTRUMENTS

NOTE 6.  FINANCIAL INSTRUMENTS

At June 30, 2012 and December 31, 2011, 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 amount of cash and cash equivalents, receivables, accounts payable and accrued liabilities approximates their respective fair values because of the short maturities of these instruments. Based on the interest rates currently available and their underlying risk, the carrying value of the franchise notes receivable approximates their respective fair values. These fair values are reflected net of reserves for uncollectible amounts.  The Company determined the estimated fair values of its debt by using currently available market information. The fair value of debt would be classified as a Level 1 category on the fair value hierarchy, as defined in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. As considerable judgment is required to determine these estimates and assumptions, 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:

	June 30, 2012				December 31, 2011
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(unaudited)
	(in thousands)
Cash and cash equivalents	$	160,167	$	160,167	$	128,438	$	128,438
Receivables, net	127,005		127,005		114,190		114,190
Franchise notes receivable, net	6,558		6,558		6,510		6,510
Accounts payable	158,936		158,936		124,416		124,416
Long-term debt (including current portion)	900,889		894,146		901,542		892,526

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STOCK-BASED COMPENSATION PLANS

6 Months Ended

Jun. 30, 2012

STOCK-BASED COMPENSATION PLANS

STOCK-BASED COMPENSATION PLANS

NOTE 8.  STOCK-BASED COMPENSATION PLANS

The Company has outstanding stock-based compensation awards that were granted by the Compensation Committee of the Board (the “Compensation Committee”) under the following two stock-based employee compensation plans:

·the GNC Holdings, Inc. 2011 Stock and Incentive Plan (the “2011 Stock Plan”) adopted in March 2011; and

·the GNC Acquisition Holdings Inc. 2007 Stock Incentive Plan (as amended, the “2007 Stock Plan”) adopted in March 2007.

Both plans have provisions that allow for the granting of stock options, restricted stock and other stock based awards and are available to certain eligible employees, directors, consultants or advisors as determined by the Compensation Committee.  Stock options under the plans were granted with exercise prices at or above fair market value on the date of grant, typically vest in equal installments over a four- or five-year period and expire seven or ten years from the date of grant.

Up to 8.5 million shares of Class A common stock may be issued under the 2011 Stock Plan (subject to adjustment to reflect certain transactions and events specified in the 2011 Stock Plan for any award grant). If any award granted under the 2011 Stock Plan expires, terminates or is cancelled without having been exercised in full, the number of shares underlying such unexercised award will again become available for awards under the 2011 Stock Plan. The total number of shares of Class A common stock available for awards under the 2011 Stock Plan will be reduced by (i) the total number of stock options or stock appreciation rights exercised, regardless of whether any of the shares of Class A common stock underlying such awards are not actually issued to the participant as the result of a net settlement, and (ii) any shares of Class A common stock used to pay any exercise price or tax withholding obligation. In addition, the number of shares of Class A common stock that are subject to restricted stock, performance shares or other stock-based awards that are not subject to the appreciation of the value of a share of Class A common stock (“Full Share Awards”) that may be granted under the 2011 Stock Plan is limited by counting shares granted pursuant to such awards against the aggregate share reserve as 1.8 shares for every share granted. If any stock option, stock appreciation right or other stock-based award that is not a Full Share Award is cancelled, expires or terminates unexercised for any reason, the shares covered by such awards will again be available for the grant of awards under the 2011 Stock Plan. If any shares of Class A common stock that are subject to restricted stock, performance shares or other stock-based awards that are full Share Awards are forfeited for any reason, 1.8 shares of Class A common stock for each full share award forfeited will again be available for the grant of awards under the 2011 Stock Plan.

Upon adoption of the 2011 Stock Plan, the Company determined it will not grant any additional awards under the 2007 Stock Plan.  No stock appreciation rights, restricted stock, deferred stock or performance shares were granted under the 2007 Stock Plan.

The Company utilizes the Black Scholes model to calculate the fair value of options under both the 2011 Stock Plan and the 2007 Stock Plan. The grant-date fair value of the Company’s restricted stock awards is based on the stock price on the grant date. The resulting compensation cost is recognized in the Company’s financial statements over the option vesting period. The Company recognized $2.3 million and $2.2 million of non-cash stock-based compensation expense for the six months ended June 30, 2012 and 2011, respectively. At June 30, 2012, there was approximately $13.8 million of total unrecognized compensation cost related to non-vested stock-based compensation for all awards previously made that are expected to be recognized over a weighted average period of approximately 2.0 years.

During the six months ended June 30, 2012, the total intrinsic value of awards exercised was $78.5 million and the total amount received by Holdings from the exercise of options was $19.5 million. The tax impact associated with the exercise of awards for the six months ended June 30, 2012 was a benefit of $27.0 million and was recorded to paid in capital.

The following table sets forth a summary of stock options under all plans for the six months ended June 30, 2012:

	Total Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value (in Thousands)
Outstanding at December 31, 2011	6,673,054		$	11.46
Granted	44,667		32.46
Exercised	(2,938,829	)	6.83
Forfeited	(30,456	)	17.24
Expired	-		-
Outstanding at June 30, 2012	3,748,436		$	15.30	6.2	$	89,605
Exercisable at June 30, 2012	1,614,566		$	9.24	5.3	$	48,372

The Black Scholes model utilizes the following assumptions in determining a fair value: price of underlying stock, award exercise price, expected term, risk-free interest rate, expected dividend yield and expected stock price volatility over the award’s expected term. Due to the utilization of these assumptions, the existing models do not necessarily represent the definitive fair value of awards for future periods. As the IPO occurred during the second quarter of 2011, the option term has been estimated by considering both the vesting period, which typically for both plans has been five or four years, and the contractual term, which historically has been either seven or ten years. Prior to the IPO, the fair value of the Class A common stock was estimated based upon the net enterprise value of the Company, discounted to reflect the lack of liquidity and control associated with the stock.  Since the consummation of the IPO, the fair value of the Class A common stock has been based upon the closing price of the Class A common stock as reported on the New York Stock Exchange. Volatility is estimated based upon the Company utilizing 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 six months ended June 30, 2012 were as follows:

Dividend yield	1.3%-1.4%
Expected option life	5.0 years
Volatility factor percentage of market price	40.70%
Discount rate	0.9%

The following table sets forth a summary of restricted stock granted under the 2011 Stock Plan and related information for the six months ended June 30, 2012:

	Restricted Stock		Weighted Average Fair Value
Outstanding at December 31, 2011	138,119		$	22.35
Granted	13,179		37.10
Forfeited	(2,044	)	20.43
Outstanding at June 30, 2012	149,254		$	23.68

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LONG-TERM DEBT / INTEREST EXPENSE (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Long-term Debt
Total Debt	$ 900,889,000		$ 900,889,000		$ 901,542,000
Less: current maturities	(1,588,000)	(1,588,000)	(1,588,000)	(1,588,000)	(1,592,000)
Long-term debt	899,301,000	899,301,000	899,301,000	899,301,000	899,950,000
Interest expense
Interest expense				23,200,000
Interest expense	10,495,000	15,723,000	20,878,000	54,099,000
Repayment of outstanding borrowings			833,000	1,355,165,000
Cost to defease former indebtedness				19,855,000
Refinancing
Interest expense
Interest rate swap termination costs				5,800,000
Write-off of deferred financing fees of former indebtedness				13,400,000
Write-off of original issue discount related to former indebtedness				1,600,000
Cost to defease former indebtedness				2,400,000
2011 Senior Credit Facility
Long-term Debt
Total Debt	897,572,000		897,572,000		897,387,000
Interest expense
Interest expense				14,200,000
Term Loan Facility
Interest expense
Interest expense			20,900,000
Interest rate (as a percent)	4.25%		4.25%		4.25%
Original issue discount and deferred financing fees		4,900,000		4,900,000
Repayment of outstanding borrowings				300,000,000
Revolving Credit Facility
Interest expense
Interest rate (as a percent)	4.00%		4.00%		4.25%
Letter of credit
Interest expense
Interest rate (as a percent)	3.00%		3.00%		3.25%
Outstanding letters of credit	1,400,000		1,400,000		8,000,000
Mortgage
Long-term Debt
Total Debt	3,304,000		3,304,000		4,135,000
Capital leases
Long-term Debt
Total Debt	13,000		13,000		20,000
Old debt
Interest expense
Interest expense				$ 10,300,000

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2012

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

Principles of Consolidation. The consolidated financial statements include the accounts of Holdings and all of its subsidiaries. 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

Use of Estimates.  The preparation of financial statements in conformity with 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 and income taxes. 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.

Transaction Related Cost

Transaction Related Costs.  The Company recognizes transaction related costs as expenses in the period incurred.  For the six months ended June 30, 2012, the Company recognized $0.7 million of expenses related to the registered offering completed by Holdings’ stockholders during the first quarter of 2012.  For the six months ended June 30, 2011, the Company recognized $12.4 million of expenses related to the IPO.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (the “FASB”) issued updated guidance on current comprehensive income presentation. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of stockholders’ equity. Instead, the Company must report comprehensive income in either a single continuous statement of comprehensive income that contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. This new guidance is effective for the Company for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company adopted this guidance during the first quarter of 2012. The adoption of this guidance had no material impact on the Company’s consolidated financial statements, as it only required a change in the format of presentation.

In May 2011, the FASB issued changes to conform existing guidance regarding fair value measurement and disclosure between GAAP and International Financial Reporting Standards. These changes both clarify the FASB’s intent about the application of existing fair value measurement and disclosure requirements and amend certain principles or requirements for measuring fair value or for disclosing information about fair value measurements. The clarifying changes relate to the application of the highest and best use and valuation premise concepts, measuring the fair value of an instrument classified in a reporting entity’s stockholders’ equity, and disclosure of quantitative information about unobservable inputs used for Level 3 fair value measurements. The amendments relate to measuring the fair value of financial instruments that are managed within a portfolio; application of premiums and discounts in a fair value measurement; and additional disclosures concerning the valuation processes used and sensitivity of the fair value measurement to changes in unobservable inputs for those items categorized as Level 3, a reporting entity’s use of a nonfinancial asset in a way that differs from the asset’s highest and best use, and the categorization by level in the fair value hierarchy for items required to be measured at fair value for disclosure purposes only.  The Company adopted this guidance during the first quarter of 2012, and it had no material impact on the Company’s financial statements.

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STOCK-BASED COMPENSATION PLANS (Tables)

6 Months Ended

Jun. 30, 2012

STOCK-BASED COMPENSATION PLANS

Summary of stock options under all plans

	Total Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value (in Thousands)
Outstanding at December 31, 2011	6,673,054		$	11.46
Granted	44,667		32.46
Exercised	(2,938,829	)	6.83
Forfeited	(30,456	)	17.24
Expired	-		-
Outstanding at June 30, 2012	3,748,436		$	15.30	6.2	$	89,605
Exercisable at June 30, 2012	1,614,566		$	9.24	5.3	$	48,372

Schedule of assumptions used in valuation related to stock option grants made during the period

Dividend yield	1.3%-1.4%
Expected option life	5.0 years
Volatility factor percentage of market price	40.70%
Discount rate	0.9%

Summary of restricted stock granted under the 2011 Stock Plan and related information

	Restricted Stock		Weighted Average Fair Value
Outstanding at December 31, 2011	138,119		$	22.35
Granted	13,179		37.10
Forfeited	(2,044	)	20.43
Outstanding at June 30, 2012	149,254		$	23.68

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RELATED PARTY TRANSACTIONS (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	6 Months Ended
	Mar. 31, 2011	Jun. 30, 2012	Jun. 30, 2011
ACOF Operating Manager
Related party transaction
Amount of annual management fee, payable on a quarterly basis		$ 0.8
Period up to which quarterly payment of annual management fee to be made from the date of merger		10 years
Period of extension for payment of management fee after tenth anniversary from date of merger		1 year
Amount of management fee paid			0.2
Net present value of management fee paid on consummation of IPO	5.6
Ontario Teachers' Pension Plan Board
Related party transaction
Net present value of special dividend paid on consummation of IPO	5.6
Ontario Teachers' Pension Plan Board | Class B Common Stock
Related party transaction
Amount of annual special dividend payable		0.8
Special Dividend Period		10 years
Amount of special dividend paid			0.2
Cadillac Fairview Corporation
Related party transaction
Number of lease agreements entered into by the company		16
Amount paid under lease agreements		$ 1.2	$ 1.3
Ontrea, Inc
Related party transaction
Number of lease agreements entered into by the company		1

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Net income	$ 66,671	$ 36,004	$ 130,528	$ 45,927
Other comprehensive income:
Unrealized gains on derivatives and qualified as cash flow hedges, net of tax of $2,718				4,751
Foreign currency translation adjustments	(580)	290	(226)	1,120
Other comprehensive income	(580)	290	(226)	5,871
Comprehensive income	$ 66,091	$ 36,294	$ 130,302	$ 51,798

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2012

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s audited financial statements in the Holdings’ Annual Report on Form 10-K filed for the year ended December 31, 2011. There have been no material changes to the application of critical accounting policies and significant judgments and estimates since December 31, 2011.

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, 2012.

Principles of Consolidation. The consolidated financial statements include the accounts of Holdings and all of its subsidiaries. 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 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 and income taxes. 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.

Transaction Related Costs.  The Company recognizes transaction related costs as expenses in the period incurred.  For the six months ended June 30, 2012, the Company recognized $0.7 million of expenses related to the registered offering completed by Holdings’ stockholders during the first quarter of 2012.  For the six months ended June 30, 2011, the Company recognized $12.4 million of expenses related to the IPO.

Recently Adopted Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (the “FASB”) issued updated guidance on current comprehensive income presentation. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of stockholders’ equity. Instead, the Company must report comprehensive income in either a single continuous statement of comprehensive income that contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. This new guidance is effective for the Company for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company adopted this guidance during the first quarter of 2012. The adoption of this guidance had no material impact on the Company’s consolidated financial statements, as it only required a change in the format of presentation.

In May 2011, the FASB issued changes to conform existing guidance regarding fair value measurement and disclosure between GAAP and International Financial Reporting Standards. These changes both clarify the FASB’s intent about the application of existing fair value measurement and disclosure requirements and amend certain principles or requirements for measuring fair value or for disclosing information about fair value measurements. The clarifying changes relate to the application of the highest and best use and valuation premise concepts, measuring the fair value of an instrument classified in a reporting entity’s stockholders’ equity, and disclosure of quantitative information about unobservable inputs used for Level 3 fair value measurements. The amendments relate to measuring the fair value of financial instruments that are managed within a portfolio; application of premiums and discounts in a fair value measurement; and additional disclosures concerning the valuation processes used and sensitivity of the fair value measurement to changes in unobservable inputs for those items categorized as Level 3, a reporting entity’s use of a nonfinancial asset in a way that differs from the asset’s highest and best use, and the categorization by level in the fair value hierarchy for items required to be measured at fair value for disclosure purposes only.  The Company adopted this guidance during the first quarter of 2012, and it had no material impact on the Company’s financial statements.

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SEGMENTS (Tables)

6 Months Ended

Jun. 30, 2012

SEGMENTS

Schedule of key financial information of the segments

	Three months ended						Six months ended
	June 30,			June 30,			June 30,			June 30,
	2012			2011			2012			2011
	(unaudited)
	(in thousands)
Revenue:
Retail	$	458,632		$	384,304		$	928,453		$	768,007
Franchise	103,539			82,827			205,024			160,211
Manufacturing/Wholesale:
Intersegment (1)	70,609			57,032			137,118			107,731
Third Party	56,910			51,404			109,877			96,325
Sub total Manufacturing/Wholesale	127,519			108,436			246,995			204,056
Sub total segment revenues	689,690			575,567			1,380,472			1,132,274
Intersegment elimination (1)	(70,609		)	(57,032		)	(137,118		)	(107,731		)
Total revenue	$	619,081		$	518,535		$	1,243,354		$	1,024,543
Operating income:
Retail	$	97,617		$	63,409		$	190,792		$	127,006
Franchise	32,290			25,938			66,719			51,294
Manufacturing/Wholesale	23,858			21,043			46,695			37,597
Unallocated corporate and other costs:
Warehousing and distribution costs	(15,625		)	(15,239		)	(31,420		)	(30,387		)
Corporate costs	(21,080		)	(22,454		)	(42,971		)	(42,762		)
Transaction related costs	-			-			(686		)	(12,362		)
Sub total unallocated corporate and other costs	(36,705		)	(37,693		)	(75,077		)	(85,511		)
Total operating income	$	117,060		$	72,697		$	229,129		$	130,386

(1)  Intersegment revenues are eliminated from consolidated revenue.

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STOCK-BASED COMPENSATION PLANS (Details 2) (USD $)	6 Months Ended
	Jun. 30, 2012
Stock option
Assumptions used in valuation related to stock option grants
Expected option life	5 years
Volatility factor percentage of market price	40.70%
Discount rate (as a percent)	0.90%
Stock option | Minimum
Assumptions used in valuation related to stock option grants
Dividend yield (as a percent)	1.30%
Stock option | Maximum
Assumptions used in valuation related to stock option grants
Dividend yield (as a percent)	1.40%
Restricted Stock
Restricted Stock Units
Outstanding at the beginning of the period (in shares)	138,119
Granted (in shares)	13,179
Forfeited (in shares)	(2,044)
Outstanding at the end of the period (in shares)	149,254
Weighted Average Fair Value
Outstanding at the beginning of the period (in dollars per share)	22.35
Granted (in dollars per share)	37.10
Forfeited (in dollars per share)	20.43
Outstanding at the end of the period (in dollars per share)	23.68

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2012

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

NOTE 12. SUBSEQUENT EVENTS

On July 26, 2012, the Board authorized and declared a cash dividend for the third quarter of 2012 of $0.11 per share of Class A common stock, payable on or about September 28, 2012 to stockholders of record as of the close of business on September 14, 2012.