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Delaware | 5499 | 72-1575168 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Proposed Maximum | Proposed Maximum | Amount of | ||||||||||
Title of Each Class of | Amount to be | Offering | Aggregate | Registration | ||||||||
Securities to be Registered | Registered | Price per Note | Offering Price | Fee(1) | ||||||||
Senior Floating Rate Toggle Exchange Notes due 2014 | $300,000,000 | 100% | $300,000,000 | $9,210.00 | ||||||||
10.75% Senior Subordinated Exchange Notes due 2015 | $110,000,000 | 100% | $110,000,000 | $3,377.00 | ||||||||
Guarantees of Senior Floating Rate Toggle Exchange Notes due 2014 | — | — | — | (2) | ||||||||
Guarantees of 10.75% Senior Subordinated Exchange Notes due 2015 | — | — | — | (2) | ||||||||
(1) | Calculated pursuant to Rule 457(f)(2) under the Securities Act based on the book value as of July 5, 2007 of the Exchange Notes to be issued by the registrant in the exchange described herein. | |
(2) | Pursuant to Rule 457(n), no additional registration fee is payable with respect to the Guarantees. |
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Primary Standard | ||||||||||
State or Other | Industrial | I.R.S. Employer | ||||||||
Jurisdiction of | Classification | Identification | ||||||||
Exact Name Specified in Charter* | Organization | Number | Number | |||||||
General Nutrition Investment Company | Arizona | 6794 | 51-0313878 | |||||||
GNC (Canada) Holding Company | Delaware | 5499 | 25-1787452 | |||||||
General Nutrition Distribution Company | Delaware | 5122 | 51-0343436 | |||||||
General Nutrition Government Services, Inc. | Delaware | 5499 | 25-1797015 | |||||||
General Nutrition International, Inc. | Delaware | 6794 | 51-0314976 | |||||||
GN Investment, Inc. | Delaware | 5499 | 52-2081543 | |||||||
GNC US Delaware, Inc. | Delaware | 6794 | 36-4345801 | |||||||
General Nutrition Systems, Inc. | Delaware | 5499 | 51-0393924 | |||||||
Informed Nutrition, Inc. | Florida | 5499 | 52-2005781 | |||||||
General Nutrition Corporation | Pennsylvania | 5499 | 25-1124574 | |||||||
General Nutrition Distribution, L.P. | Pennsylvania | 5122 | 23-2946511 | |||||||
General Nutrition, Incorporated | Pennsylvania | 5499 | 25-1027307 | |||||||
Nutra Manufacturing Inc. | South Carolina | 2834 | 52-1456779 | |||||||
General Nutrition Companies, Inc. | Delaware | 5499 | 04-3056351 | |||||||
GNC Canada Limited | Delaware | 5499 | 25-1787453 | |||||||
GNC Franchising, LLC | Pennsylvania | 6794 | 25-1560212 | |||||||
Nutra Sales Corporation | Arizona | 5499 | 52-2103619 | |||||||
GNC Funding, Inc. | Delaware | 6794 | 20-8577837 | |||||||
GNC Card Services, Inc. | Ohio | 6153 | 20-8488777 |
* | Address and telephone number of principal executive offices are the same as General Nutrition Centers, Inc. |
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The information in this Prospectus is not complete and may be changed. We may not sell these securities until the Registration Statement filed with the Securities and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. |
Senior Floating Rate Toggle Exchange Notes due 2014
for all Outstanding
Senior Floating Rate Toggle Notes due 2014
and
10.75% Senior Subordinated Exchange Notes due 2015
for all Outstanding
10.75% Senior Subordinated Notes due 2015
• | The terms of the Exchange Notes are substantially identical to the Outstanding Notes, except that some of the transfer restrictions and registration rights relating to the Outstanding Notes will not apply to the Exchange Notes. | |
• | The notes will be guaranteed on a senior subordinated unsecured basis by each of our existing and future U.S. Subsidiaries (as defined under “Description of Exchange Senior Notes” and “Description of Exchange Senior Subordinated Notes”). If we fail to make payments on the Exchange Notes, the guarantors must make them instead. | |
• | There is no existing market for the exchange notes and we do not intend to apply for listing on any market or exchange. |
• | Each exchange offer will expire at 5:00 p.m., New York City time, on , 2007, unless extended. | |
• | The exchange offers are not subject to any conditions other than that they not violate applicable law or any applicable interpretation of the staff of the Securities and Exchange Commission, or the SEC. | |
• | Subject to the satisfaction or waiver of specified conditions, we will exchange all notes that are validly tendered and not withdrawn prior to the expiration of the exchange offers. | |
• | Tenders of Outstanding Notes may be withdrawn at any time before the expiration of the exchange offers. |
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS | F-1 | |||||||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | F-7 | |||||||
EX-3.49 | ||||||||
EX-4.9 | ||||||||
EX-4.11 | ||||||||
EX-4.13 | ||||||||
EX-4.14 | ||||||||
EX-23.2 |
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• | significant competition in our industry; | |
• | unfavorable publicity or consumer perception of our products; | |
• | the incurrence of material product liability and product recall costs; | |
• | costs of compliance and our failure to comply with governmental regulations; | |
• | the failure of our franchisees to conduct their operations profitably and limitations on our ability to terminate or replace under-performing franchisees; | |
• | economic, political and other risks associated with our international operations; | |
• | our failure to keep pace with the demands of our customers for new products and services; | |
• | disruptions in our manufacturing system or losses of manufacturing certifications; | |
• | the lack of long-term experience with human consumption of ingredients in some of our products; | |
• | increases in the frequency and severity of insurance claims, particularly claims for which we are self-insured; | |
• | loss or retirement of key members of management; | |
• | increases in the cost of borrowings and limitations on availability of additional debt or equity capital; | |
• | the impact of our substantial debt on our operating income and our ability to grow; | |
• | the failure to adequately protect or enforce our intellectual property rights against competitors; | |
• | changes in applicable laws relating to our franchise operations; and | |
• | our inability to expand our franchise operations or attract new franchisees. |
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• | introduced a single national pricing structure in order to improve our customer value perception; | |
• | developed and executed a national, more diversified marketing program focused on reinforcing GNC’s brand name; | |
• | overhauled our field organization and store programs to improve our customer shopping experience; | |
• | focused our merchandising and marketing initiatives on driving increased traffic to our store locations; | |
• | improved our supply chain and inventory management, resulting in better in-stock levels; | |
• | reinvigorated our proprietary new product development activities; | |
• | revitalized our vendor relationships, including their new product development activities and our exclusive or first-to-market access to new products; | |
• | realigned our franchise system with our corporate strategies and re-acquired or closed unprofitable or non-compliant franchised stores; |
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• | reduced our overhead cost structure; and | |
• | launched www.gnc.com. |
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The Exchange Offers | We are offering to exchange the Exchange Notes, which have been registered under the Securities Act, for the Outstanding Notes, which have not been registered under the Securities Act. We issued the Outstanding Notes on March 16, 2007. | |
In order to exchange your Outstanding Notes, you must promptly tender them before the expiration date (as described herein). All Outstanding Notes that are validly tendered and not validly withdrawn will be exchanged. We will issue the Exchange Notes on or promptly after the expiration date. | ||
You may only exchange Outstanding Notes with a minimum denomination of $2,000 or an integral multiple of $1,000 in excess thereof. | ||
Registration Rights Agreements | We sold the Outstanding Notes on March 16, 2007 to J.P. Morgan Securities Inc., Goldman, Sachs & Co., Lehman Brothers Inc. and other initial purchasers. Simultaneously with that sale, we signed registration rights agreements with the initial purchasers relating to the Outstanding Notes that require us to conduct these exchange offers. | |
You have the right under the registration rights agreements to exchange your Outstanding Notes for Exchange Notes. The exchange offers are intended to satisfy such right. After the exchange offers are complete, you will no longer be entitled to any exchange or registration rights with respect to your Outstanding Notes. | ||
For a description of the procedures for tendering Outstanding Notes, see the section “The Exchange Offers” under the heading “Procedures for Tendering Outstanding Notes.” | ||
Expiration Date | Each exchange offer will expire at 5:00 p.m., New York City time, on , 2007, unless we extend it. In that case, the expiration date will be the latest date and time to which we extend the applicable exchange offer. See the section “The Exchange Offers” under the heading “Expiration Date; Extensions; Amendments.” We do not currently intend to extend the expiration date. | |
Conditions to the Exchange Offers | The exchange offers are subject to conditions that we may waive in our sole discretion. The exchange offers are not conditioned upon any minimum principal amount of Outstanding Notes being tendered for exchange. See the section “The Exchange Offers” under the heading “Conditions to the Exchange Offers.” |
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Procedures for Tendering Outstanding Notes | If you are a record holder of Outstanding Notes and wish to participate in an exchange offer, you must complete, sign and date the applicable accompanying letter of transmittal, or a facsimile of such letter of transmittal, according to the instructions contained in this prospectus and the letter of transmittal. You must then mail or otherwise deliver the applicable letter of transmittal, or a facsimile of such letter of transmittal, together with the Outstanding Notes and any other required documents, to the exchange agent at the address set forth on the cover page of the letter of transmittal. | |
If you hold Outstanding Notes through The Depository Trust Company (“DTC”) and wish to participate in the exchange offers, you must comply with the Automated Tender Offer Program procedures of DTC by which you will agree to be bound by the letter of transmittal. By signing, or agreeing to be bound by, the letter of transmittal, you will represent to us that, among other things: | ||
• you are not our “affiliate” within the meaning of Rule 405 under the Securities Act; | ||
• you do not have an arrangement or understanding with any person or entity to participate in the distribution of the Exchange Notes; and | ||
• if you are a broker-dealer that will receive Exchange Notes for your own account in exchange for Outstanding Notes that were acquired as a result of market-making activities or other trading activities, that you will deliver a prospectus, as required by law, in connection with any resale of such Exchange Notes. | ||
Special Procedures for Beneficial Owners | If you are a beneficial owner of Outstanding Notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to tender those Outstanding Notes in the applicable exchange offer, you should contact the registered holder promptly and instruct the registered holder to tender those Outstanding Notes on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the applicable letter of transmittal and delivering your Outstanding Notes, either make appropriate arrangements to register ownership of the Outstanding Notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the expiration date of the exchange offers. | |
Guaranteed Delivery Procedures | If you wish to tender your Outstanding Notes and your Outstanding Notes are not immediately available or you cannot deliver your Outstanding Notes, the applicable letter of transmittal or any other required documents, or you cannot comply with the procedures under DTC’s Automated Tender Offer Program for transfer of book-entry interests, prior to the expiration date, you must tender your Outstanding Notes according to the guaranteed delivery procedures set forth in this prospectus under “The Exchange Offers — Guaranteed Delivery Procedures.” |
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Withdrawal Rights | You may withdraw the tender of your Outstanding Notes at any time prior to the expiration of the applicable exchange offer. We will return to you any of your Outstanding Notes that are not accepted for any reason for exchange, without expense to you, promptly after the expiration or termination of the applicable exchange offer. See “The Exchange Offers” under the heading “Withdrawal Rights.” | |
Resales of Exchange Notes | Based on an interpretation by the staff of the Securities and Exchange Commission (the “SEC”) set forth in no-action letters issued to third parties, we believe that the Exchange Notes issued pursuant to the exchange offers in exchange for Outstanding Notes may be offered for resale, resold and otherwise transferred by you (unless you are our “affiliate” within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that: | |
• you are acquiring the Exchange Notes in the ordinary course of your business; and | ||
• you have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of the Exchange Notes. | ||
If you are a broker-dealer and receive Exchange Notes for your own account in exchange for Outstanding Notes that you acquired as a result of market-making activities or other trading activities, you must acknowledge that you will deliver this prospectus in connection with any resale of the Exchange Notes. See “Plan of Distribution.” Any holder of Outstanding Notes that: | ||
• is our affiliate; | ||
• does not acquire Exchange Notes in the ordinary course of its business; or | ||
• tenders its Outstanding Notes in the exchange offers with the intention to participate, or for the purpose of participating, in a distribution of Exchange Notes; | ||
cannot rely on the position of the staff of the SEC enunciated inMorgan Stanley & Co. Incorporated(available June 5, 1991) andExxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the SEC’s letter to Shearman & Sterling, dated available July 2, 1993, or similar no-action letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the Exchange Notes. | ||
Effect on Holders of Outstanding Notes | As a result of the making of, and upon acceptance for exchange of all validly tendered Outstanding Notes pursuant to the terms of the exchange offers, we will have fulfilled a covenant under the registration rights agreement, and the payment of Additional Interest will cease. If you do not tender your Outstanding Notes in the applicable exchange offer, you will continue to be entitled to all the rights and limitations applicable to the Outstanding Notes as set forth in the applicable indenture, except that we will not have any further obligation to you to provide for the exchange and registration of the |
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Outstanding Notes under the registration rights agreements. To the extent that Outstanding Notes are tendered and accepted in the exchange offers, the trading market for Outstanding Notes could be adversely affected. | ||
Consequences of Failure to Exchange | If you do not exchange your Outstanding Notes for Exchange Notes in the exchange offers, you will still have the restrictions on transfer provided in the Outstanding Notes and in the indentures that govern both the Outstanding Notes and the Exchange Notes. In general, the Outstanding Notes may not be offered or sold unless registered or exempt from registration under the Securities Act, or in a transaction not subject to the Securities Act and applicable state securities laws. We do not plan to register the Outstanding Notes under the Securities Act. See the section “Risk Factors” under the heading “There are consequences associated with failing to exchange the Outstanding Notes for the Exchange Notes.” | |
Exchange Agent | The exchange agent for the exchange offers is LaSalle Bank National Association. The address, telephone number and facsimile number of the exchange agent are provided in the section “The Exchange Offers” under the heading “Exchange Agent,” as well as in the letter of transmittal. | |
Use of Proceeds | We will not receive any cash proceeds from the issuance of the Exchange Notes. See the section “Use of Proceeds.” | |
United States Federal Income Tax Consequences | Your participation in the exchange offers generally will not be a taxable exchange for U.S. federal income tax purposes. You should not recognize any taxable gain or loss or any interest income as a result of the exchange. See the section “U.S. Federal Income Tax Considerations.” |
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Issuer | General Nutrition Centers, Inc. | |
Securities Offered | We are offering to exchange $300 million aggregate principal amount of Senior Floating Rate Toggle Notes due 2014 and $110 million aggregate principal amount of 10.75% Senior Subordinated Notes due 2015. | |
Maturity | The Exchange Senior Notes will mature on March 15, 2014 and the Exchange Senior Subordinated Notes will mature on March 15, 2015. | |
Interest Payment Dates | March 15 and September 15 of each year, commencing on September 15, 2007. Interest will accrue from March 16, 2007. | |
Interest | We may elect to pay interest on the Exchange Senior Notes entirely in cash, entirely by increasing the principal amount of the Notes or issuing new Notes (“PIK interest”), or on 50% of the outstanding principal amount of the Exchange Senior Notes in cash and on 50% of the outstanding principal amount of the Exchange Senior Notes by increasing the principal amount of the Exchange Senior Notes or by issuing new Notes (“partial PIK interest”). Cash interest on the Exchange Senior Notes will accrue at six-month LIBOR plus 4.5% per annum, and PIK interest, if any, will accrue at six-month LIBOR plus 5.25% per annum. If we elect to pay PIK interest or partial PIK interest, we will increase the principal amount of the Exchange Senior Notes or issue new Exchange Senior Notes in an aggregate principal amount equal to the amount of PIK interest for the applicable interest payment period (rounded up to the nearest $1,000) to holders of the Notes on the relevant record date. | |
The Exchange Senior Notes will be treated as having been issued with original issue discount for U.S. federal income tax purposes. | ||
The Exchange Senior Subordinated Notes will accrue interest at 10.75% per annum. | ||
Interest on the Exchange Notes will be computed on the basis of a360-day year comprised of twelve30-day months. | ||
Guarantees | The Exchange Notes will be guaranteed on an unsecured senior basis by each of our existing and future U.S. Subsidiaries (as defined under “Description of Exchange Senior Notes” and “Description of Exchange Senior Subordinated Notes”). If we fail to make payments on the Exchange Notes, the guarantors must make them instead. |
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Ranking | The Exchange Senior Notes and the guarantees thereof will be our and the guarantors’ unsecured senior obligations and will: | |
• rank senior in right of payment to all of our and the guarantors’ existing and future subordinated indebtedness, including the Exchange Senior Subordinated Notes and the guarantees thereof; | ||
• rank equally in right of payment with all of our and the guarantors’ existing and future senior indebtedness, including the indebtedness and other obligations under our Senior Credit Facility; | ||
• effectively rank junior to all of our and the guarantors’ existing and future secured debt, including borrowings under our Senior Credit Facility to the extent of the value of the assets securing that debt; and | ||
• effectively rank junior to all indebtedness and other liabilities of our non-guarantor subsidiaries, including trade payables. | ||
The Exchange Senior Subordinated Notes and the guarantees thereof will be our and the guarantors’ senior subordinated unsecured obligations and will: | ||
• rank senior in right of payment to all of our and the guarantors’ existing and future subordinated indebtedness; | ||
• rank equally in right of payment with all of our and the guarantors’ existing and future senior subordinated indebtedness; | ||
• rank junior in right of payment to all of our and the guarantors’ existing and future senior debt, including our Senior Credit Facility and Exchange Senior Notes; and | ||
• effectively rank junior to all indebtedness and other liabilities of our non-guarantor subsidiaries, including trade payables. | ||
As of March 31, 2007, we had outstanding on a consolidated basis: | ||
• Approximately $685.7 million of senior secured indebtedness outstanding, and an additional $50.6 million (excluding $9.4 million of letters of credit) available for borrowing on a senior secured basis, under the Senior Credit Facility and mortgages; | ||
• $300.0 million of unsecured senior indebtedness, consisting of the Exchange Senior Notes; and | ||
• $110.0 million of unsecured senior subordinated indebtedness, consisting of the Exchange Senior Subordinated Notes. | ||
Our non-guarantor subsidiaries had $37.7 million of indebtedness and other liabilities outstanding as of that date. | ||
Optional Redemption | We may redeem some or all of the Exchange Notes at any time on and after March 15, 2009, at the redemption prices set forth under “Description of Exchange Senior Notes — Optional Redemption” and “Description of Exchange Senior Subordinated Notes — Optional Redemption,” respectively. | |
In addition, at any time prior to March 15, 2009, we may on one or more occasions redeem up to 35% of the aggregate principal amount of the Exchange Senior Notes with the net proceeds of certain equity offerings if at least 65% of the original aggregate principal amount of |
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the Exchange Senior Notes remain outstanding immediately after such redemption. See “Description of Exchange Senior Notes — Optional Redemption.” | ||
In addition, at any time prior to March 15, 2009, we may on one or more occasions redeem up to 50% of the aggregate principal amount of the Exchange Senior Subordinated Notes with the net proceeds of certain equity offerings if at least 50% of the original aggregate principal amount of the Exchange Senior Subordinated Notes remain outstanding immediately after such redemption. See “Description of Exchange Senior Subordinated Notes — Optional Redemption.” | ||
Change of Control | Upon the occurrence of a change of control, unless we have exercised our right to redeem your Exchange Notes as described above, you will have the right to require us to purchase all or a portion of your Exchange Notes at a purchase price in cash equal to 101% of the principal amount, plus accrued and unpaid interest and special interest, if any, to the date of purchase. See “Description of Exchange Senior Notes — Change of Control” and “Description of Exchange Senior Subordinated Notes — Change of Control.” | |
Asset Sale Offer | If we sell assets and we do not use the excess proceeds for specified purposes, we may be required to use such excess proceeds to offer to repurchase some of the Exchange Notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest, and special interest, if any, to the date of repurchase. See “Description of Exchange Senior Notes — Certain Covenants — Limitation on Asset Sales” and “Description of Exchange Senior Subordinated Notes — Certain Covenants — Limitation on Asset Sales.” | |
Certain Covenants | The indentures governing the Exchange Notes contain certain covenants that, among other things, limit our ability and our domestic subsidiaries’ abilities to: | |
• incur additional debt; | ||
• make restricted payments; | ||
• create liens; | ||
• enter into certain transactions with affiliates; | ||
• consolidate, merge, or sell all or substantially all of our assets; and | ||
• incur restrictions on the ability of certain of our subsidiaries to pay dividends. | ||
These covenants are subject to important and significant exceptions and qualifications. See “Description of Exchange Senior Notes — Certain Covenants” and “Description of Exchange Senior Subordinated Notes — Certain Covenants.” | ||
Original Issue Discount on Exchange Senior Notes | We have the option to pay interest on the Exchange Senior Notes in cash interest or PIK interest. For U.S. federal income tax purposes, the existence of this option means that none of the interest payments on the Exchange Senior Notes will be qualified stated interest even if we never exercise the option to pay PIK interest. Consequently, the Exchange Senior Notes will be treated as issued with original issue |
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discount, and U.S. Holders (as defined in “Material United States Federal Income Tax and Estate Tax Consequences”) of Exchange Senior Notes will be required to include the original issue discount in gross income for U.S. federal income tax purposes on a constant yield to maturity basis, regardless of whether interest is paid currently in cash. For more information, see “Material United States Federal Income Tax and Estate Tax Consequences.” | ||
No Public Market | The Exchange Notes will be freely transferable but will be new securities, for which there is currently no established trading market. The initial purchasers in the offering of the Outstanding Notes have advised us that they presently intend to make a market in the Exchange Notes. However, you should be aware that they are not obligated to make a market and may discontinue their market-making activities at any time without notice. As a result, a liquid market for the Exchange Notes may not be available if you try to sell your Exchange Notes. | |
PORTALsm Trading of Notes | We expect the Exchange Notes to be eligible for trading on the Private Offerings, Resales and Trading through Automated Linkages System of the National Association of Securities Dealers, Inc., or the PORTALsm Market. We do not intend to apply to list the Exchange Notes on any U.S. securities exchange. |
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• | make it more difficult for us to satisfy our obligations with respect to the Exchange Senior Notes and the Exchange Senior Subordinated Notes; | |
• | increase our vulnerability to general adverse economic and industry conditions; | |
• | require us to use all or a large portion of our cash flow from operations to pay principal and interest on our debt, thereby reducing the availability of our cash flow to fund working capital, research and development efforts, capital expenditures, and other business activities; | |
• | increase our vulnerability to general adverse economic and industry conditions; | |
• | limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; | |
• | restrict us from making strategic acquisitions or exploiting business opportunities; | |
• | place us at a competitive disadvantage compared to our competitors that have less debt; and | |
• | limit our ability to borrow additional funds, dispose of assets, or pay cash dividends. |
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• | incurring additional indebtedness and issuing preferred stock; | |
• | granting liens on our assets; | |
• | making investments; | |
• | consolidating or merging with, or acquiring, another business; | |
• | selling or otherwise disposing our assets; | |
• | paying dividends and making other distributions to GNC Parent LLC or GNC Corporation; and | |
• | entering into transactions with our affiliates. |
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• | accurately anticipate customer needs; | |
• | innovate and develop new products; | |
• | successfully commercialize new products in a timely manner; | |
• | price our products competitively; | |
• | manufacture and deliver our products in sufficient volumes and in a timely manner; and | |
• | differentiate our product offerings from those of our competitors. |
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• | political and economic instability of foreign markets; | |
• | foreign governments’ restrictive trade policies; | |
• | inconsistent product regulation or sudden policy changes by foreign agencies or governments; | |
• | the imposition of, or increase in, duties, taxes, government royalties, or non-tariff trade barriers; | |
• | difficulty in collecting international accounts receivable and potentially longer payment cycles; | |
• | increased costs in maintaining international franchise and marketing efforts; | |
• | difficulty in operating our manufacturing facility abroad and procuring supplies from overseas suppliers; | |
• | exchange controls; | |
• | problems entering international markets with different cultural bases and consumer preferences; and | |
• | fluctuations in foreign currency exchange rates. |
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• | if any changes in law, SEC rules or regulations or applicable interpretations thereof by the SEC do not permit us to effect the exchange offers as contemplated by the registration rights agreement; or | |
• | if any holder of the Outstanding Notes notifies us within 30 days after such holder becomes aware of the following restrictions; |
• | such holder is prohibited by applicable law or SEC rules or regulations from participating in any exchange offer; | |
• | such holder may not resell the Exchange Notes acquired by it in the exchange offers to the public without delivering a prospectus and that this prospectus is not appropriate or available for such resales by such holder; or | |
• | such holder is a broker-dealer who elects to exchange the Outstanding Notes acquired for its own account as a result of market-making activities or other trading activities for the Exchange Notes, and holds Outstanding Note acquired directly from us or one of our affiliates. |
• | you are not our affiliate or an affiliate of any guarantor within the meaning of Rule 405 of the Securities Act; | |
• | you have no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of the Exchange Notes in violation of the provisions of the Securities Act; | |
• | you are not engaged in, and do not intend to engage in, a distribution of the Exchange Notes; and | |
• | you are acquiring the Exchange Notes in the ordinary course of your business. |
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• | you are not our affiliate or an affiliate of any guarantor within the meaning of Rule 405 under the Securities Act; | |
• | you do not have an arrangement or understanding with any person to participate in a distribution of the Exchange Notes; | |
• | you are not engaged in, and do not intend to engage in, a distribution of the Exchange Notes; and | |
• | you are acquiring the Exchange Notes in the ordinary course of your business. |
• | you cannot rely on the position of the SEC set forth inMorgan Stanley & Co. Incorporated(available June 5, 1991) andExxon Capital Holdings Corporation(available May 13, 1988), as interpreted in the SEC’s letter to Shearman & Sterling, dated July 2, 1993, or similar no-action letters; and | |
• | in the absence of an exception from the position stated immediately above, you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the Exchange Notes. |
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• | to delay accepting for exchange any Outstanding Notes (if we amend or extend the applicable exchange offer); | |
• | to extend any exchange offer or to terminate either exchange offer if any of the conditions set forth below under “— Conditions to the Exchange Offers” have not been satisfied, by giving oral or written notice of such delay, extension or termination to the exchange agent; | |
• | to extend either exchange offer or to terminate either exchange offer if any of the conditions set forth below under “— Conditions to the Exchange Offers” have not been satisfied, by giving oral or written notice of such delay, extension or termination to the exchange agent; and | |
• | subject to the terms of the registration rights agreements, to amend the terms of either exchange offer in any manner, provided that in event of a material change in the terms of either exchange offer, including the waiver of a material condition, we will extend the applicable offer period if necessary so that at least five business days remain in the applicable exchange offer following notice of the material change; |
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• | the exchange offers or the making of any exchange by a holder violates any applicable law or interpretation of the SEC; or | |
• | any action or proceeding has been instituted or threatened in any court or by or before any governmental agency with respect to the exchange offers that, in our judgment, would reasonably be expected to impair our ability to proceed with the exchange offers. |
• | the representations described under “— Procedures for Tendering Outstanding Notes” and “Plan of Distribution;” or | |
• | any other representations as may be reasonably necessary under applicable SEC rules, regulations, or interpretations to make available to us an appropriate form for registration of the Exchange Notes under the Securities Act. |
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• | complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal, have the signature(s) on the letter of transmittal guaranteed if required by the letter of transmittal and mail or deliver such letter of transmittal or facsimile thereof to the exchange agent at the address set forth below under “— Exchange Agent” prior to the expiration date; or | |
• | comply with DTC’s Automated Tender Offer Program procedures described below. |
• | the exchange agent must receive certificates for Outstanding Notes along with the applicable letter of transmittal prior to the expiration date; | |
• | the exchange agent must receive a timely confirmation of book-entry transfer of Outstanding Notes into the exchange agent’s account at DTC according to the procedures for book-entry transfer described below or a properly transmitted agent’s message prior to the expiration date; or | |
• | you must comply with the guaranteed delivery procedures described below. |
• | make appropriate arrangements to register ownership of the Outstanding Notes in your name; or | |
• | obtain a properly completed bond power from the registered holder of Outstanding Notes. |
• | by a registered holder of the Outstanding Notes who has not completed the box entitled “Special Registration Instructions” or “Special Delivery Instructions” on the applicable letter of transmittal; or | |
• | for the account of an eligible guarantor institution. |
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• | DTC has received an express acknowledgment from a participant in its Automated Tender Offer Program that is tendering Outstanding Notes that are the subject of the book-entry confirmation; | |
• | the participant has received and agrees to be bound by the terms of the applicable letter of transmittal, or in the case of an agent’s message relating to guaranteed delivery, that such participant has received and agrees to be bound by the applicable notice of guaranteed delivery; and | |
• | we may enforce that agreement against such participant. |
• | Outstanding Notes or a timely book-entry confirmation of such Outstanding Notes into the exchange agent’s account at the book-entry transfer facility; and | |
• | a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted agent’s message. |
• | you are not our affiliate or an affiliate of any guarantor within the meaning of Rule 405 under the Securities Act; | |
• | you do not have an arrangement or understanding with any person or entity to participate in a distribution of the Exchange Notes; and | |
• | you are acquiring the Exchange Notes in the ordinary course of your business |
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• | the tender is made through an eligible guarantor institution; | |
• | prior to the expiration date, the exchange agent receives from such eligible guarantor institution either a properly completed and duly executed notice of guaranteed delivery, by facsimile transmission, mail, or hand delivery or a properly transmitted agent’s message and notice of guaranteed delivery, that (1) sets forth your name and address, the certificate number(s) of such Outstanding Notes and the principal amount of Outstanding Notes tendered; (2) states that the tender is being made thereby; and (3) guarantees that, within three New York Stock Exchange trading days after the expiration date, the letter of transmittal, or facsimile thereof, together with the Outstanding Notes or a book-entry confirmation, and any other documents required by the letter of transmittal, will be deposited by the eligible guarantor institution with the exchange agent; and |
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• | the exchange agent receives the properly completed and executed letter of transmittal or facsimile thereof, as well as certificate(s) representing all tendered Outstanding Notes in proper form for transfer or a book-entry confirmation of transfer of the Outstanding Notes into the exchange agent’s account at DTC all other documents required by the letter of transmittal within three New York Stock Exchange trading days after the expiration date. |
• | the exchange agent must receive a written notice, which may be by telegram, telex, facsimile or letter, of withdrawal at its address set forth below under “— Exchange Agent”; or | |
• | you must comply with the appropriate procedures of DTC’s Automated Tender Offer Program system. |
• | specify the name of the person who tendered the Outstanding Notes to be withdrawn; | |
• | identify the Outstanding Notes to be withdrawn, including the certificate numbers and principal amount of the Outstanding Notes; and | |
• | where certificates for Outstanding Notes have been transmitted, specify the name in which such Outstanding Notes were registered, if different from that of the withdrawing holder. |
• | the serial numbers of the particular certificates to be withdrawn; and | |
• | a signed notice of withdrawal with signatures guaranteed by an eligible institution unless your are an eligible guarantor institution. |
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By Registered Mail or Overnight Carrier: LaSalle Bank National Association, as Exchange Agent 135 S. LaSalle Street, Suite 1560 Chicago, Illinois 60603 Attention: Frank A. Pierson | By Facsimile Transmission: (312) 904-4018 To Confirm by Telephone: (312) 904-5527 For Information Call: (312) 904-5527 | By Hand Delivery: LaSalle Bank National Association, as Exchange Agent 135 S. LaSalle Street, Suite 1560 Chicago, Illinois 60603 Attention: Frank A. Pierson |
• | certificates representing Outstanding Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of Outstanding Notes tendered; | |
• | tendered Outstanding Notes are registered in the name of any person other than the person signing the letter of transmittal; or | |
• | a transfer tax is imposed for any reason other than the exchange of Outstanding Notes under the exchange offers. |
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• | as set forth in the legend printed on the Outstanding Notes as a consequence of the issuance of the Outstanding Notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws; and | |
• | as otherwise set forth in the prospectus distributed in connection with the private offerings of the Outstanding Notes. |
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As of March 31, | ||||
2007 | ||||
(Dollars in millions) | ||||
(Unaudited) | ||||
Cash and cash equivalents | $ | 7.1 | ||
Long-term debt (including current maturities): | ||||
Senior revolving credit facility | $ | — | ||
Senior term loan facility | 675.0 | |||
Senior notes | 297.0 | |||
Senior subordinated notes | 110.0 | |||
Mortgage and capital leases | 10.7 | |||
Total long-term debt | 1,092.7 | |||
Total equity | 590.3 | |||
Total capitalization | $ | 1,683.0 | ||
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Predecessor | Merger | Offering | Pro Forma | |||||||||||||
For the Year Ended December 31, 2006 | Historical | Adjustments | Adjustments | as Adjusted | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
(1) | (2) | |||||||||||||||
Revenues | $ | 1,487,116 | $ | — | $ | — | $ | 1,487,116 | ||||||||
Cost of sales, including costs of warehousing, distribution and occupancy | 983,530 | 840 | (a) | — | 984,370 | |||||||||||
Gross profit | 503,586 | (840 | ) | — | 502,746 | |||||||||||
Compensation and related benefits | 260,825 | — | — | 260,825 | ||||||||||||
Advertising and promotion | 50,745 | — | — | 50,745 | ||||||||||||
Other selling, general and administrative | 92,310 | 4,373 | (b) | — | 96,683 | |||||||||||
Foreign currency (gain) loss | (666 | ) | — | — | (666 | ) | ||||||||||
Other (income) expense | 1,203 | — | — | 1,203 | ||||||||||||
Operating income | 99,169 | (5,213 | ) | — | 93,956 | |||||||||||
Interest expense, net | 39,568 | — | 55,083 | (d) | 94,651 | |||||||||||
Income (loss) before income taxes | 59,601 | (5,213 | ) | (55,083 | ) | (695 | ) | |||||||||
Income tax expense (benefit) | 22,226 | (1,898 | )(c) | (20,050 | )(e) | 278 | ||||||||||
Net income (loss) | $ | 37,375 | $ | (3,315 | ) | $ | (35,033 | ) | $ | (973 | ) | |||||
(1) | Reflects adjustments resulting from the March 2007 Merger. | |
(a) | Reflects an adjustment to depreciation expense to reflect an $8.4 million write up in property, plant, and equipment, depreciated over an average life of 10 years, as a result of the fair valuation adjustments recorded at March 16, 2007. | |
(b) | Represents an adjustment to amortization expense to reflect a $655.0 million write up in intangible assets recorded at March 16, 2007. |
Estimated Life in Years | Cost | Amortization Expense per Year | Pro Forma | |||||||||||||||||||||||||
Intangible Asset | Predecessor | Successor | Predecessor | Successor | Predecessor | Successor | Adjustment | |||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
Brands — Retail | — | — | $ | 67,476 | $ | 500,000 | $ | — | $ | — | $ | — | ||||||||||||||||
Brands — Franchise | — | — | 144,524 | 220,000 | — | — | — | |||||||||||||||||||||
Gold Card — Retail | 3 | 3 | 2,230 | 1,300 | 446 | 433 | (13 | ) | ||||||||||||||||||||
Gold Card — Franchise | 3 | 3 | 340 | 2,000 | 68 | 667 | 599 | |||||||||||||||||||||
Retail Agreements | 5-10 | 25-35 | 8,500 | 54,000 | 1,180 | 1,771 | 591 | |||||||||||||||||||||
Franchise Agreements | 10-15 | 25 | 21,900 | 69,000 | 1,764 | 2,760 | 996 | |||||||||||||||||||||
Manufacturing Agreements | 25 | — | 55,000 | — | 2,200 | 2,200 | ||||||||||||||||||||||
Franchise Rights | 1-5 | 1-5 | 2,995 | 1,661 | 1,137 | 1,137 | — | |||||||||||||||||||||
$ | 247,965 | $ | 902,961 | $ | 4,595 | $ | 8,968 | $ | 4,373 | |||||||||||||||||||
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(c) | Represents pro forma tax effect of the above adjustments at an estimated combined statutory rate of 36.4%. |
Total Pro Forma | ||||
Adjustment | ||||
(Dollars in thousands) | ||||
Total offering adjustments | $ | (5,213 | ) | |
Tax rate | 36.4 | % | ||
Pro forma tax effect | $ | (1,898 | ) | |
(2) | Reflects adjustments attributable to the offering as described under “Use of Proceeds”. | |
(d) | Reflects the difference between the interest expense associated with the pre-acquisition indebtedness and the indebtedness incurred in connection with the offering. The interest rate under the new senior credit facility is based on a variable interest rate estimated at 7.55% (six-month LIBOR plus 2.25%) as set forth in the related credit agreement. Interest on the notes accrues at a variable interest rate estimated at 9.8% (six-month LIBOR plus 4.5%) and interest on the new senior subordinated notes accrues at a stated rate of 10.75%, as set forth in the terms of the respective indentures. A 1/8% change in interest rates would increase or decrease our annual interest cost on the variable debt by $1,230 thousand. |
Total Pro | ||||||||||||
Historical | Pro Forma | Forma | ||||||||||
Amount | Amount | Adjustment | ||||||||||
(Dollars in thousands) | ||||||||||||
Interest expense related to the debt | $ | 39,179 | $ | 92,859 | $ | 53,680 | ||||||
Interest expense related to deferred financing fees(i) | 3,856 | 5,259 | 1,403 | |||||||||
$ | 43,035 | $ | 98,118 | $ | 55,083 | |||||||
(i) | Deferred financing fees and amortization of original issue discount related to the offering are being amortized using the interest method over six years for the senior notes, seven years for the new senior subordinated notes, and six years for the Senior Credit Facility, using a straight line method of amortization. | |
(e) | Reflects the pro forma tax effect of above adjustments at an estimated combined statutory rate of 36.4%. |
Total Pro Forma | ||||
Adjustment | ||||
(Dollars in thousands) | ||||
Total merger adjustments | $ | (55,083 | ) | |
Tax rate | 36.4 | % | ||
Pro forma tax effect | $ | (20,050 | ) | |
(i) | Tax effect calculation assumes that the tax deductible OID interest for the notes amount approximates the book interest expense amount and the interest payments are assumed to be paid in cash, therefore no adjustment is reflected for book versus tax differences. |
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Predecessor | Successor | Merger | Offering | Pro Forma | ||||||||||||||||
For the Three Months Ended March 31, 2007 | Historical | Historical | Adjustments | Adjustments | as Adjusted | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
(1) | (2) | |||||||||||||||||||
Revenues | $ | 329,829 | $ | 62,080 | $ | — | $ | — | $ | 391,909 | ||||||||||
Cost of sales, including costs of warehousing, distribution and occupancy | 212,175 | 42,776 | (1,240 | )(a)(b) | — | 253,711 | ||||||||||||||
Gross profit | 117,654 | 19,304 | 1,240 | — | 138,198 | |||||||||||||||
Compensation and related benefits | 64,311 | 10,059 | (10,053 | )(d) | — | 64,317 | ||||||||||||||
Advertising and promotion | 20,473 | 229 | — | — | 20,702 | |||||||||||||||
Other selling, general and administrative | 17,396 | 3,373 | 1,093 | (c) | — | 21,862 | ||||||||||||||
Foreign currency (gain) loss | (154 | ) | — | — | — | (154 | ) | |||||||||||||
Merger-related costs | 34,603 | — | (34,603 | )(d) | — | — | ||||||||||||||
Operating income | (18,975 | ) | 5,643 | 44,803 | — | 31,471 | ||||||||||||||
Interest expense, net | 43,036 | 4,238 | — | 16,389 | (f) | 63,663 | ||||||||||||||
Income (loss) before income taxes | (62,011 | ) | 1,405 | 44,803 | (16,389 | ) | (32,192 | ) | ||||||||||||
Income tax expense (benefit) | (10,697 | ) | 541 | 16,308 | (e) | (5,966 | )(g) | 186 | ||||||||||||
Net income (loss) | $ | (51,314 | ) | $ | 864 | $ | 28,495 | $ | (10,423 | ) | $ | (32,378 | ) | |||||||
(1) | Reflects adjustments resulting from the March 2007 Merger. | |
(a) | Represents an adjustment to eliminate inventory basis differences resulting from the fair valuation adjustments recorded at March 16, 2007. | |
(b) | Reflects an adjustment to depreciation expense to reflect an $8.4 million write up in property, plant, and equipment, depreciated over an average life of 10 years, as a result of the fair valuation adjustments recorded at March 16, 2007. | |
(c) | Represents an adjustment to amortization expense to reflect a $655.0 million write up in intangible assets recorded at March 16, 2007. |
Amortization Expense | ||||||||||||||||||||||||||||
Estimated Life in Years | Cost | per Three Months | Pro Forma | |||||||||||||||||||||||||
Intangible Asset | Predecessor | Successor | Predecessor | Successor | Predecessor | Successor | Adjustment | |||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
Brands — Retail | — | — | $ | 67,476 | $ | 500,000 | $ | — | $ | — | $ | — | ||||||||||||||||
Brands — Franchise | — | — | 144,524 | 220,000 | — | — | — | |||||||||||||||||||||
Gold Card — Retail | 3 | 3 | 2,230 | 1,300 | 112 | 108 | (4 | ) | ||||||||||||||||||||
Gold Card — Franchise | 3 | 3 | 340 | 2,000 | 17 | 167 | 150 | |||||||||||||||||||||
Retail Agreements | 5-10 | 25-35 | 8,500 | 54,000 | 295 | 443 | 148 | |||||||||||||||||||||
Franchise Agreements | 10-15 | 25 | 21,900 | 69,000 | 441 | 690 | 249 | |||||||||||||||||||||
Manufacturing Agreements | — | 25 | — | 55,000 | — | 550 | 550 | |||||||||||||||||||||
Franchise Rights | 1-5 | 1-5 | 2,995 | 1,661 | 284 | 284 | — | |||||||||||||||||||||
$ | 247,965 | $ | 902,961 | $ | 1,149 | $ | 2,242 | $ | 1,093 | |||||||||||||||||||
(d) | Represents adjustments to eliminate fees and expenses directly related to the March 2007 Merger. |
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(e) | Represents pro forma tax effect of the above adjustments at an estimated combined statutory rate of 36.4%. |
Total Pro Forma | ||||
Adjustment | ||||
(Dollars in thousands) | ||||
Total merger adjustments | $ | 44,803 | ||
Tax rate | 36.4 | % | ||
Pro forma tax effect | $ | 16,308 | ||
(2) | Reflects adjustments attributable to the offering as described under “Use of Proceeds”. | |
(f) | Reflects the difference between the interest expense associated with the pre-acquisition indebtedness and the indebtedness incurred in connection with the Offering. The interest rate under the new senior credit facility is based on a variable interest rate estimated at 7.55% (six-month LIBOR plus 2.25%) as set forth in the related credit agreement. Interest on the notes accrues at a variable interest rate estimated at 9.8% (six-month LIBOR plus 4.5%) and interest on the new senior subordinated notes accrues at a stated rate of 10.75%, as set forth in the terms of the respective indentures. A 1/8% change in interest rates would increase or decrease our annual interest cost on the variable debt by $1,230 thousand. |
Merger | Total Pro | |||||||||||||||
Historical | Transaction | Pro Forma | Forma | |||||||||||||
Amount(i) | Adjustments(i) | Amount | Adjustment | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Interest expense related to the debt | $ | 30,711 | $ | (23,159 | ) | $ | 23,215 | $ | 15,663 | |||||||
Interest expense related to deferred financing fees(ii) | 12,269 | (11,680 | ) | 1,315 | 726 | |||||||||||
$ | 42,980 | $ | (34,839 | ) | $ | 24,530 | $ | 16,389 | ||||||||
(i) | Historical interest includes call premiums of $23.2 million and deferred fee extinguishment of $11.7 million resulting from the extinguishment of the predecessor debt, related to the March 2007 Merger. | |
(ii) | Deferred financing fees and amortization of original issue discount related to the offering are being amortized using the interest method over six years for the senior notes, seven years for the new senior subordinated notes, and six years for the Senior Credit Facility using a straight line method of amortization. |
(g) | Reflects the pro forma tax effect of above adjustments at an estimated combined statutory rate of 36.4%. |
Total Pro Forma | ||||
Adjustment | ||||
(Dollars in thousands) | ||||
Total offering adjustments | $ | (16,389 | ) | |
Tax rate | 36.4 | % | ||
Pro forma tax effect(i) | $ | (5,966 | ) | |
(i) | Tax effect calculation assumes that the tax deductible OID interest for the notes amount approximates the book interest expense amount and the interest payments are assumed to be paid in cash, therefore no adjustment is reflected for book versus tax differences. |
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Successor | Predecessor | Successor | Predecessor | |||||||||||||||||||||||||||||||||||
16 Days | Period | Three Months | 27 Days | Period | Year | |||||||||||||||||||||||||||||||||
Ended | Ended | Ended | Ended | Ended | Ended | |||||||||||||||||||||||||||||||||
March 31, | March 15, | March 31, | Year Ended December 31, | December 31, | December 4, | December 31, | ||||||||||||||||||||||||||||||||
2007 | 2007 | 2006 | 2006 | 2005 | 2004 | 2003 | 2003 | 2002 | ||||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||||||||||||||
Retail | $ | 45.4 | $ | 259.3 | $ | 294.9 | $ | 1,122.7 | $ | 989.4 | $ | 1,001.8 | $ | 66.2 | $ | 993.3 | $ | 1,068.6 | ||||||||||||||||||||
Franchising | 11.6 | 47.2 | 60.3 | 232.3 | 212.8 | 226.5 | 14.2 | 241.3 | 256.1 | |||||||||||||||||||||||||||||
Manufacturing/Wholesale | 5.1 | 23.3 | 31.7 | 132.1 | 115.5 | 116.4 | 8.9 | 105.6 | 100.3 | |||||||||||||||||||||||||||||
Total Revenue | 62.1 | 329.8 | 386.9 | 1,487.1 | 1,317.7 | 1,344.7 | 89.3 | 1,340.2 | 1,425.0 | |||||||||||||||||||||||||||||
Cost of sales, including costs of warehousing, distribution and occupancy | 42.8 | 212.2 | 256.9 | 983.5 | 898.7 | 895.2 | 63.6 | 934.9 | 969.9 | |||||||||||||||||||||||||||||
Gross profit | 19.3 | 117.6 | 130.0 | 503.6 | 419.0 | 449.5 | 25.7 | 405.3 | 455.1 | |||||||||||||||||||||||||||||
Compensation and related benefits | 10.1 | 64.3 | 65.9 | 260.8 | 228.6 | 230.0 | 16.7 | 235.0 | 245.2 | |||||||||||||||||||||||||||||
Advertising and promotion | 0.2 | 20.5 | 15.8 | 50.7 | 44.7 | 44.0 | 0.5 | 38.4 | 52.1 | |||||||||||||||||||||||||||||
Other selling, general and administrative | 3.4 | 17.2 | 21.0 | 92.4 | 76.2 | 73.7 | 5.1 | 70.9 | 86.0 | |||||||||||||||||||||||||||||
Other expense (income)(1) | — | 34.5 | (0.6 | ) | 0.5 | (3.1 | ) | (0.3 | ) | — | (10.1 | ) | (211.3 | ) | ||||||||||||||||||||||||
Impairment of goodwill and intangible assets(2) | — | — | — | — | — | — | — | 709.4 | 222.0 | |||||||||||||||||||||||||||||
Operating income (loss) | 5.6 | (18.9 | ) | 27.9 | 99.2 | 72.6 | 102.1 | 3.4 | (638.3 | ) | 61.1 | |||||||||||||||||||||||||||
Interest expense, net | 4.3 | 43.0 | 9.7 | 39.6 | 43.1 | 34.4 | 2.8 | 121.1 | 136.3 | |||||||||||||||||||||||||||||
Gain on sale of marketable securities | — | — | — | — | — | — | — | — | (5.0 | ) | ||||||||||||||||||||||||||||
Income (loss) before income taxes | 1.3 | (61.9 | ) | 18.2 | 59.6 | 29.5 | 67.7 | 0.6 | (759.4 | ) | (70.2 | ) | ||||||||||||||||||||||||||
Income tax expense (benefit) | 0.5 | (10.7 | ) | 6.8 | 22.2 | 10.9 | 25.1 | 0.2 | (174.5 | ) | 1.0 | |||||||||||||||||||||||||||
Net income (loss) before cumulative effect of accounting change | 0.8 | (51.2 | ) | 11.4 | 37.4 | 18.6 | 42.6 | 0.4 | (584.9 | ) | (71.2 | ) | ||||||||||||||||||||||||||
Loss from cumulative effect of accounting change, net of tax(3) | — | — | — | — | — | — | — | — | (889.7 | ) | ||||||||||||||||||||||||||||
Net income (loss) | $ | 0.8 | $ | (51.2 | ) | $ | 11.4 | $ | 37.4 | $ | 18.6 | $ | 42.6 | $ | 0.4 | $ | (584.9 | ) | $ | (960.9 | ) | |||||||||||||||||
(1) | Other expense (income) includes foreign currency (gain) loss for all of the periods presented. Other expense (income) for the period ended March 15, 2007 included $34.6 million in transaction expenses related to the Merger. Other expense (income) for the year ended December 31, 2006 included a $1.2 million loss on the sale of our Australian manufacturing facility. Other expense (income) for the year ended December 31, 2005 included $2.5 million transaction fee income related to the transfer of our GNC Australian franchise rights to an existing franchisee. Other expense (income) for the period ended December 4, 2003 and the year ended December 31, 2002, includes $7.2 million and $214.4 million, respectively, received from legal settlement proceeds that we collected from a raw material pricing settlement. | |
(2) | On January 1, 2002, we adopted SFAS No. 142, which requires that goodwill and other intangible assets with indefinite lives no longer be subject to amortization, but instead are to be tested at least annually for impairment. For the periods ended December 4, 2003 and December 31, 2002, we recognized impairment charges of $709.4 million (pre-tax), and $222.0 million (pre-tax), respectively, for goodwill and other intangibles as a result of decreases in expectations regarding growth and profitability; additionally in 2003, the impairment resulted from increased competition from the mass market, negative publicity by the media on certain supplements, and increasing pressure from the FDA on the industry as a whole, each of which were identified in connection with a valuation related to the Numico acquisition. |
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(3) | Upon adoption of SFAS No. 142, we recognized a one-time impairment charge in the first quarter of 2002 of $889.7 million, net of tax to reduce the carrying amount of goodwill and other intangibles to their implied fair value. |
Successor | Predecessor | Successor | Predecessor | |||||||||||||||||||||||||||||||||||
16 Days | Period | Three | 27 Days | Period | Year | |||||||||||||||||||||||||||||||||
Ended | Ended | Months | Ended | Ended | Ended | |||||||||||||||||||||||||||||||||
March 31, | March 15, | Ended March 31, | Year Ended December 31, | December 31, | December 4, | December 31, | ||||||||||||||||||||||||||||||||
2007 | 2007 | 2006 | 2006 | 2005 | 2004 | 2003 | 2003 | 2002 | ||||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 7.1 | na | $ | 44.3 | $ | 24.1 | $ | 86.0 | $ | 85.2 | $ | 33.2 | $ | 9.4 | $ | 38.8 | |||||||||||||||||||||
Working capital(4) | 237.1 | na | 266.7 | 249.5 | 298.7 | 283.5 | 200.0 | 96.2 | 153.6 | |||||||||||||||||||||||||||||
Total assets | 2,178.3 | na | 1,024.1 | 968.8 | 1,025.6 | 1,032.6 | 1,018.9 | 1,038.1 | 1,878.3 | |||||||||||||||||||||||||||||
Total current and non-current long-term debt | 1,092.7 | na | 472.8 | 431.4 | 473.4 | 510.4 | 514.2 | 1,747.4 | 1,840.1 | |||||||||||||||||||||||||||||
Stockholder’s equity (deficit) | 590.3 | na | 302.4 | 312.3 | 340.9 | 322.4 | 278.2 | (1,077.1 | ) | (493.8 | ) | |||||||||||||||||||||||||||
Other Data: | ||||||||||||||||||||||||||||||||||||||
Net cash provided by (used in ) operating activities | $ | 2.2 | $ | (46.8 | ) | $ | 12.5 | $ | 74.6 | $ | 64.2 | $ | 83.5 | $ | 4.7 | $ | 92.9 | $ | 111.0 | |||||||||||||||||||
Net cash used in operating activities | $ | (1,616.5 | ) | $ | (6.2 | ) | $ | (3.8 | ) | $ | (23.4 | ) | $ | (21.5 | ) | $ | (27.0 | ) | $ | (740.0 | ) | $ | (31.5 | ) | $ | (44.5 | ) | |||||||||||
Net cash provided by (used in) financing activities | $ | 1,611.7 | $ | 38.6 | $ | (50.4 | ) | $ | (113.1 | ) | $ | (41.7 | ) | $ | (4.5 | ) | $ | 759.2 | $ | (90.8 | ) | $ | (44.3 | ) | ||||||||||||||
EBITDA(5) | $ | 7.4 | $ | (11.5 | ) | $ | 37.5 | $ | 138.4 | $ | 113.7 | $ | 141.0 | $ | 5.7 | $ | (579.2 | ) | $ | (765.5 | ) | |||||||||||||||||
Capital expenditures(6) | $ | 0.6 | $ | 5.7 | $ | 3.7 | $ | 23.8 | $ | 20.8 | $ | 28.3 | $ | 1.8 | $ | 31.0 | $ | 51.9 | ||||||||||||||||||||
Number of stores (at end of period): | ||||||||||||||||||||||||||||||||||||||
Company-owned stores(7) | 2,699 | 2,699 | 2,661 | 2,688 | 2,650 | 2,642 | 2,748 | 2,757 | 2,898 | |||||||||||||||||||||||||||||
Franchised stores(7) | 2,022 | 2,018 | 1,996 | 2,007 | 2,014 | 2,036 | 2,009 | 1,978 | 1,909 | |||||||||||||||||||||||||||||
Store-within-a-store locations(7) | 1,268 | 1,266 | 1,160 | 1,227 | 1,149 | 1,027 | 988 | 988 | 900 | |||||||||||||||||||||||||||||
Same store sales growth:(8) | ||||||||||||||||||||||||||||||||||||||
Domestic Company-owned | 0.5 | % | na | 14.5 | % | 11.1 | % | (1.5 | )% | (4.1 | )% | na | (0.4 | )% | (6.6 | )% | ||||||||||||||||||||||
Domestic franchised | (3.6 | )% | na | 6.8 | % | 5.7 | % | (5.4 | )% | (5.5 | )% | na | (0.6 | )% | (3.7 | )% | ||||||||||||||||||||||
Ratio of Earnings to Fixed Charges(9) | 1.22 | x | — | 1.93 | x | 1.76 | x | 1.38 | x | 1.95 | x | 1.11 | x | — | 0.60x |
(4) | Working capital represents current assets less current liabilities. | |
(5) | We define EBITDA as net income (loss) before interest expense (net), income tax (benefit) expense, depreciation, and amortization. Management uses EBITDA as a tool to measure operating performance of our business. We use EBITDA as one criterion for evaluating our performance relative to our competitors and also as a measurement for the calculation of management incentive compensation. Although we primarily view EBITDA as an operating performance measure, we also consider it to be a useful analytical tool for measuring our liquidity, our leverage capacity, and our ability to service our debt and generate cash for other purposes. We also have historically used EBITDA to determine our compliance with certain covenants in our December 2003 Senior Credit Facility and indentures governing the January 2005 senior notes and the December 2003 senior subordinated notes. For further information regarding the Company’s use of EBITDA to determine compliance with certain financial covenants, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.” The reconciliation of EBITDA as presented below is different than that used for purposes of the covenants under the indentures governing the Senior Notes and Senior Subordinated Notes. Historically, we have highlighted our use of EBITDA as a liquidity measure and for related purposes, because of our focus on the holders of our debt. At the same time, however, management has also internally used EBITDA as a performance measure. EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income, operating income, or any other performance measures derived in accordance with GAAP, or as an alternative to GAAP cash flow from operating activities, as a measure of our profitability or liquidity. | |
Management believes that EBITDA is commonly used by security analysts, lenders, and others; however, EBITDA may not be comparable to other similarly titled measures reported by other companies, limiting its usefulness as a comparative measure. |
• | EBITDA does not reflect cash expenditures, future requirements for capital expenditures, or contractual commitments; |
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• | EBITDA does not reflect changes in, or cash requirements for working capital needs; and | |
• | EBITDA does not reflect interest expense or the cash requirements necessary to service interest or principal payments on debt. |
Successor | Predecessor | Successor | Predecessor | |||||||||||||||||||||||||||||||||||
16 Days | Three | 27 Days | Period | Year | ||||||||||||||||||||||||||||||||||
Ended | Period Ended | Months Ended | Ended | Ended | Ended | |||||||||||||||||||||||||||||||||
March 31, | March 15, | March 31, | Year Ended December 31, | December 31, | December 4, | December 31, | ||||||||||||||||||||||||||||||||
2007 | 2007 | 2006 | 2006 | 2005 | 2004 | 2003 | 2003 | 2002 | ||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||
Net income (loss) | $ | 0.8 | $ | (51.2 | ) | $ | 11.4 | $ | 37.4 | $ | 18.6 | $ | 42.6 | $ | 0.4 | $ | (584.9 | ) | $ | (960.9 | ) | |||||||||||||||||
Interest expense, net | 4.3 | 43.0 | 9.7 | 39.6 | 43.1 | 34.4 | 2.8 | 121.1 | 136.3 | |||||||||||||||||||||||||||||
Income tax expense (benefit) | 0.5 | (10.7 | ) | 6.8 | 22.2 | 10.9 | 25.1 | 0.2 | (174.5 | ) | 1.0 | |||||||||||||||||||||||||||
Depreciation and Amortization | 1.8 | 7.4 | 9.6 | 39.2 | 41.1 | 38.9 | 2.3 | 59.1 | 58.1 | |||||||||||||||||||||||||||||
EBITDA | $ | 7.4 | $ | (11.5 | ) | $ | 37.5 | $ | 138.4 | $ | 113.7 | $ | 141.0 | $ | 5.7 | $ | (579.2 | ) | $ | (765.5 | ) | |||||||||||||||||
Successor | Predecessor | Successor | Predecessor | |||||||||||||||||||||||||||||||||||
16 Days | Period | Three Months | 27 Days | Period | Year | |||||||||||||||||||||||||||||||||
Ended | Ended | Ended | Ended | Ended | Ended | |||||||||||||||||||||||||||||||||
March 31, | March 15, | March 31, | Year Ended December 31, | December 31, | December 4, | December 31, | ||||||||||||||||||||||||||||||||
2007 | 2007 | 2006 | 2006 | 2005 | 2004 | 2003 | 2003 | 2002 | ||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | 2.2 | $ | (46.8 | ) | $ | 12.5 | $ | 74.6 | $ | 64.2 | $ | 83.5 | $ | 4.7 | $ | 92.9 | $ | 111.0 | |||||||||||||||||||
Cash paid for interest (excluding deferred financing fees) | 0.1 | 38.7 | 8.6 | 40.2 | 32.7 | 32.7 | 0.7 | 122.5 | 138.0 | |||||||||||||||||||||||||||||
Cash paid for taxes | 0.1 | 1.2 | 0.2 | 23.2 | 2.9 | 5.1 | — | 2.5 | 30.7 | |||||||||||||||||||||||||||||
Changes in accounts receivable | 3.5 | (1.6 | ) | 7.4 | 4.3 | 4.4 | (3.4 | ) | (2.9 | ) | (59.9 | ) | 127.3 | |||||||||||||||||||||||||
Changes in inventory | (4.5 | ) | (0.1 | ) | 41.3 | 21.4 | 23.9 | 15.1 | (3.8 | ) | (29.0 | ) | (22.2 | ) | ||||||||||||||||||||||||
Changes in accounts payable | (0.7 | ) | (3.7 | ) | (25.8 | ) | (0.8 | ) | 2.9 | (3.9 | ) | 5.3 | 3.3 | (18.8 | ) | |||||||||||||||||||||||
Changes in other assets and liabilities | 6.7 | 0.8 | (6.7 | ) | (24.5 | ) | (17.3 | ) | 11.9 | 1.7 | (2.1 | ) | (24.9 | ) | ||||||||||||||||||||||||
Loss from cumulative effect of accounting change, net of tax | — | — | — | — | — | — | — | — | (889.7 | ) | ||||||||||||||||||||||||||||
Impairment of goodwill and intangible assets | — | — | — | — | — | — | — | (709.4 | ) | (222.0 | ) | |||||||||||||||||||||||||||
Gain on sale of marketable securities | — | — | — | — | — | — | — | — | 5.1 | |||||||||||||||||||||||||||||
EBITDA | $ | 7.4 | $ | (11.5 | ) | $ | 37.5 | $ | 138.4 | $ | 113.7 | $ | 141.0 | $ | 5.7 | $ | (579.2 | ) | $ | (765.5 | ) | |||||||||||||||||
(6) | Capital expenditures for 2002 included approximately $13.9 million incurred in connection with our store reset and upgrade program. For the full year ended December 31, 2003, capital expenditures were $32.8 million. |
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(7) | The following table summarizes our stores for the periods indicated: |
�� | ||||||||||||||||||||||||||||||||||||||
Successor | Predecessor | Successor | Predecessor | |||||||||||||||||||||||||||||||||||
16 Days | Period | Three | 27 Days | Period | Year | |||||||||||||||||||||||||||||||||
Ended | Ended | Months | Ended | Ended | Ended | |||||||||||||||||||||||||||||||||
March 31, | March 15, | Ended March 31, | Year Ended December 31, | December 31, | December 4, | December 31, | ||||||||||||||||||||||||||||||||
2007 | 2007 | 2006 | 2006 | 2005 | 2004 | 2003 | 2003 | 2002 | ||||||||||||||||||||||||||||||
Company-owned stores | ||||||||||||||||||||||||||||||||||||||
Beginning of period balance | 2,699 | 2,688 | 2,650 | 2,650 | 2,642 | 2,748 | 2,757 | 2,898 | 2,960 | |||||||||||||||||||||||||||||
New store openings | 3 | 15 | 13 | 54 | 35 | 27 | — | 24 | 56 | |||||||||||||||||||||||||||||
Franchise conversions(a) | — | 17 | 27 | 80 | 102 | 55 | 4 | 56 | 61 | |||||||||||||||||||||||||||||
Store closings | (3 | ) | (21 | ) | (29 | ) | (96 | ) | (129 | ) | (188 | ) | (13 | ) | (221 | ) | (179 | ) | ||||||||||||||||||||
End of period balance | 2,699 | 2,699 | 2,661 | 2,688 | 2,650 | 2,642 | 2,748 | 2,757 | 2,898 | |||||||||||||||||||||||||||||
Franchised stores | ||||||||||||||||||||||||||||||||||||||
Domestic | ||||||||||||||||||||||||||||||||||||||
Beginning of period balance | 1,022 | 1,046 | 1,156 | 1,156 | 1,290 | 1,355 | 1,352 | 1,352 | 1,364 | |||||||||||||||||||||||||||||
Store openings | — | 4 | 2 | 5 | 17 | 31 | 5 | 98 | 82 | |||||||||||||||||||||||||||||
Store closings(b) | (1 | ) | (28 | ) | (35 | ) | (115 | ) | (151 | ) | (96 | ) | (2 | ) | (98 | ) | (94 | ) | ||||||||||||||||||||
End of period balance | 1,021 | 1,022 | 1,123 | 1,046 | 1,156 | 1,290 | 1,355 | 1,352 | 1,352 | |||||||||||||||||||||||||||||
International | ||||||||||||||||||||||||||||||||||||||
Beginning of period balance | 996 | 961 | 858 | 858 | 746 | 654 | 626 | 557 | 457 | |||||||||||||||||||||||||||||
Store openings | 10 | 44 | 48 | 169 | 132 | 115 | 28 | 88 | 100 | |||||||||||||||||||||||||||||
Store closings | (5 | ) | (9 | ) | (33 | ) | (66 | ) | (20 | ) | (23 | ) | — | (19 | ) | — | ||||||||||||||||||||||
End of period balance | 1,001 | 996 | 873 | 961 | 858 | 746 | 654 | 626 | 557 | |||||||||||||||||||||||||||||
Store-within-a-store (Rite Aid) | ||||||||||||||||||||||||||||||||||||||
Beginning of period balance | 1,266 | 1,227 | 1,149 | 1,149 | 1,027 | 988 | 988 | 900 | 780 | |||||||||||||||||||||||||||||
Store openings | 2 | 39 | 11 | 80 | 130 | 44 | — | 93 | 131 | |||||||||||||||||||||||||||||
Store closings | — | — | — | (2 | ) | (8 | ) | (5 | ) | — | (5 | ) | (11 | ) | ||||||||||||||||||||||||
End of period balance | 1,268 | 1,266 | 1,160 | 1,227 | 1,149 | 1,027 | 988 | 988 | 900 | |||||||||||||||||||||||||||||
Total Stores | 5,989 | 5,983 | 5,817 | 5,922 | 5,813 | 5,705 | 5,745 | 5,723 | 5,707 | |||||||||||||||||||||||||||||
(a) | Stores that were acquired from franchisees stores and subsequently converted into company-owned stores. | |
(b) | Includes franchised stores closed and acquired by us. | |
(8) | 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. Beginning in the first quarter of 2006, we also included our internet sales, as generated through www.gnc.com and drugstore.com, in our domestic company-owned 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 franchised 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 for the prior year. We exclude from the calculation sales during the period presented from the date of relocation to a different mall or shopping center and from the date of conversion. In the second quarter of 2006, we modified the calculation method for domestic franchised same store sales consistent with this description, which has been the method historically used for domestic company-owned same store sales. Prior to the second quarter of 2006, we had included in domestic franchised same store sales the sales from franchised store after relocation to a different mall or shopping center and from former company-owned stores after conversion to franchised stores. The franchised same store sales growth percentages for all prior periods have been adjusted to be consistent with the modified calculation method. | |
(9) | The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. For purposes of computing this ratio of earnings to fixed charges, “fixed charges” includes interest expense on all indebtedness, whether expensed or capitalized, plus amortization of debt issuance costs and the portion of rental expense that is representative of the interest factor within these rentals. “Earnings” consist of pre-tax income (loss) from continuing operations plus fixed charges and unamortized capitalized debt issuance costs. Earnings were insufficient to cover fixed charges by $61.6 million for the period ended March 15, 2007, and $759.4 million for the period ended December 4, 2003. |
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AND RESULTS OF OPERATION
• | Retail revenues are generated by sales to consumers at our company-owned stores and through www.gnc.com. Although we believe that our retail and franchise businesses are not seasonal in nature, historically we have experienced, and expect to continue to experience, a substantial variation in our net sales and operating results from quarter to quarter, with the first half of the year being stronger than the second half of the year. According to Nutrition Business Journal’s Supplement Business Report 2006, our industry is projected to grow at an average annual rate of 4% for the next five years due in part to favorable demographics, including an aging U.S. population, rising healthcare costs, and the desire by many to live longer, healthier lives. As a leader in our industry, we expect our retail revenues to grow at or above the projected industry growth rate as a result of our disproportionate market share, scale economies in purchasing and advertising, strong brand awareness, and vertical integration. | |
• | Franchise revenues are generated primarily from: |
• | Manufacturing/wholesale revenues are generated through sales of manufactured products to third parties, generally for third-party private label brands, and the sale of our proprietary and third-party products to and through Rite Aid and drugstore.com. While revenues generated through our strategic alliance with Rite Aid do not represent a substantial component of our business, we believe that sales of our products to and through Rite Aid will continue to grow in accordance with our projected retail revenue growth. Our revenues generated by our manufacturing and wholesale operations are subject to our available manufacturing capacity, and we anticipate that these revenues will remain stable over the next five years. |
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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 adding significant incremental costs. We therefore expect our operating expenses to grow at a lesser rate than our revenues, resulting in significant operating leverage in our business. |
• | volatility in the diet category; | |
• | broader consumer awareness of health and wellness issues and rising healthcare costs; | |
• | interest in, and demand for, condition-specific products based on scientific research; | |
• | significant effects of favorable and unfavorable publicity on consumer demand; | |
• | lack of a single product or group of products dominating any one product category; | |
• | rapidly evolving consumer preferences and demand for new products; and | |
• | costs associated with complying with new and existing governmental regulation. |
• | introduced a single national pricing structure in order to simplify our pricing approach and improve our customer value perception; | |
• | developed and executed a national, more diversified marketing program focused on competitive pricing of key items and reinforcing GNC’s well-recognized and dominant brand name among consumers; | |
• | overhauled our field organization and store programs to improve our value-added customer shopping experience; | |
• | focused our merchandising and marketing initiatives on driving increased traffic to our store locations, particularly with promotional events outside of Gold Card week; | |
• | improved supply chain and inventory management, resulting in better in-stock levels of products generally and “never out” levels of top products; | |
• | reinvigorated our proprietary new product development activities; | |
• | revitalized vendor relationships, including their new product development activities and our exclusive or first-to-market access to new products; | |
• | realigned our franchise system with our corporate strategies and re-acquired or closed unprofitable or non-compliant franchised stores in order to improve the financial performance of the franchise system; | |
• | reduced our overhead cost structure; and | |
• | launched internet sales of our products on www.gnc.com. |
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Predecessor | Successor | Combined | Predecessor | ||||||||||||||||||||||
Period | Period | ||||||||||||||||||||||||
January 1, 2007 | March 16, 2007 | ||||||||||||||||||||||||
to | to | Three Months Ended | Three Months Ended | ||||||||||||||||||||||
March 15, 2007 | March 31, 2007 | March 31, 2007 | March 31, 2006 | ||||||||||||||||||||||
(Dollars in millions and percentages expressed as a percentage of total net revenues) | |||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||
Retail | $ | 259.3 | $ | 45.4 | $ | 304.7 | 77.8 | % | $ | 294.9 | 76.2 | % | |||||||||||||
Franchise | 47.2 | 11.6 | 58.8 | 15.0 | % | 60.3 | 15.6 | % | |||||||||||||||||
Manufacturing/Wholesale | 23.3 | 5.1 | 28.4 | 7.2 | % | 31.7 | 8.2 | % | |||||||||||||||||
Total net revenue | 329.8 | 62.1 | 391.9 | 100.0 | % | 386.9 | 100.0 | % | |||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||
Cost of sales, including warehousing, distribution and occupancy costs | 212.2 | 42.8 | 255.0 | 65.1 | % | 256.9 | 66.4 | % | |||||||||||||||||
Compensation and related benefits | 64.3 | 10.1 | 74.4 | 19.0 | % | 65.9 | 17.0 | % | |||||||||||||||||
Advertising and promotion | 20.5 | 0.2 | 20.7 | 5.3 | % | 15.8 | 4.1 | % | |||||||||||||||||
Other selling, general and administrative expenses | 16.4 | 3.0 | 19.4 | 4.9 | % | 20.0 | 5.2 | % | |||||||||||||||||
Amortization expense | 0.8 | 0.4 | 1.2 | 0.3 | % | 1.0 | 0.3 | % | |||||||||||||||||
Foreign currency gain | (0.1 | ) | — | (0.1 | ) | 0.0 | % | (0.6 | ) | (0.2 | )% | ||||||||||||||
Transaction related costs | 34.6 | — | 34.6 | 8.8 | % | — | 0.0 | % | |||||||||||||||||
Total operating expenses | 348.7 | 56.5 | 405.2 | 103.4 | % | 359.0 | 92.8 | % | |||||||||||||||||
Operating (loss) income: | |||||||||||||||||||||||||
Retail | 28.2 | 5.3 | 33.5 | 8.6 | % | 35.3 | 9.1 | % | |||||||||||||||||
Franchise | 14.5 | 2.9 | 17.4 | 4.4 | % | 16.1 | 4.2 | % | |||||||||||||||||
Manufacturing/Wholesale | 10.3 | 2.0 | 12.3 | 3.1 | % | 11.2 | 2.9 | % | |||||||||||||||||
Unallocated corporate and other (costs) income: | |||||||||||||||||||||||||
Warehousing and distribution of costs | (10.7 | ) | (2.0 | ) | (12.7 | ) | (3.2 | )% | (12.8 | ) | (3.3 | )% | |||||||||||||
Corporate costs | (61.2 | ) | (2.6 | ) | (63.8 | ) | (16.3 | )% | (21.9 | ) | (5.7 | )% | |||||||||||||
Subtotal unallocated corporate and other costs net | (71.9 | ) | (4.6 | ) | (76.5 | ) | (19.5 | )% | (34.7 | ) | (9.0 | )% | |||||||||||||
Total operating (loss) income | (18.9 | ) | 5.6 | 13.3 | (3.4 | )% | 27.9 | 7.2 | % | ||||||||||||||||
Interest expense, net | 43.0 | 4.3 | 47.3 | 9.7 | |||||||||||||||||||||
(Loss) income before income taxes | (61.9 | ) | 1.3 | (60.6 | ) | 18.2 | |||||||||||||||||||
Income tax (benefit) expense | (10.7 | ) | 0.5 | (10.2 | ) | 6.8 | |||||||||||||||||||
Net (loss) income | $ | (51.2 | ) | $ | 0.8 | $ | (50.4 | ) | $ | 11.4 | |||||||||||||||
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Year Ended December 31, | ||||||||||||||||||||||||
2006 | 2005 | 2004 | ||||||||||||||||||||||
(Dollars in millions and percentages expressed as a percentage of total net revenues) | ||||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||
Retail | $ | 1,122.7 | 75.5 | % | $ | 989.4 | 75.1 | % | $ | 1,001.8 | 74.5 | % | ||||||||||||
Franchise | 232.3 | 15.6 | % | 212.8 | 16.1 | % | 226.5 | 16.8 | % | |||||||||||||||
Manufacturing/Wholesale | 132.1 | 8.9 | % | 115.5 | 8.8 | % | 116.4 | 8.7 | % | |||||||||||||||
Total net revenue | 1,487.1 | 100.0 | % | 1,317.7 | 100.0 | % | 1,344.7 | 100.0 | % | |||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Cost of sales, including warehousing, distribution and occupancy costs | 983.5 | 66.1 | % | 898.7 | 68.2 | % | 895.2 | 66.5 | % | |||||||||||||||
Compensation and related benefits | 260.8 | 17.5 | % | 228.6 | 17.3 | % | 230.0 | 17.1 | % | |||||||||||||||
Advertising and promotion | 50.7 | 3.4 | % | 44.7 | 3.4 | % | 44.0 | 3.3 | % | |||||||||||||||
Other selling, general and administrative expenses | 87.8 | 6.0 | % | 72.2 | 5.5 | % | 69.7 | 5.2 | % | |||||||||||||||
Amortization expense | 4.6 | 0.3 | % | 4.0 | 0.3 | % | 4.0 | 0.3 | % | |||||||||||||||
Foreign currency gain | (0.7 | ) | 0.0 | % | (0.6 | ) | 0.0 | % | (0.3 | ) | 0.0 | % | ||||||||||||
Other expense (income) | 1.2 | 0.0 | % | (2.5 | ) | (0.2 | )% | — | 0.0 | % | ||||||||||||||
Total operating expenses | 1,387.9 | 93.3 | % | 1,245.1 | 94.5 | % | 1,242.6 | 92.4 | % | |||||||||||||||
Operating income: | ||||||||||||||||||||||||
Retail | 127.4 | 8.6 | % | 77.2 | 5.9 | % | 107.7 | 8.0 | % | |||||||||||||||
Franchise | 64.1 | 4.3 | % | 52.0 | 3.9 | % | 62.4 | 4.6 | % | |||||||||||||||
Manufacturing / Wholesale | 51.0 | 3.4 | % | 46.0 | 3.5 | % | 38.6 | 2.9 | % | |||||||||||||||
Unallocated corporate and other (costs) income: | ||||||||||||||||||||||||
Warehousing and distribution costs | (50.7 | ) | (3.4 | )% | (50.0 | ) | (3.8 | )% | (49.3 | ) | (3.7 | )% | ||||||||||||
Corporate costs | (91.4 | ) | (6.2 | )% | (55.1 | ) | (4.2 | )% | (57.3 | ) | (4.2 | )% | ||||||||||||
Other (expense) income | (1.2 | ) | 0.0 | % | 2.5 | 0.2 | % | — | 0.0 | % | ||||||||||||||
Subtotal unallocated corporate and other costs net | (143.3 | ) | (9.6 | )% | (102.6 | ) | (7.8 | )% | (106.6 | ) | (7.9 | )% | ||||||||||||
Total operating income | 99.2 | 6.7 | % | 72.6 | 5.5 | % | 102.1 | 7.6 | % | |||||||||||||||
Interest expense, net | 39.6 | 43.1 | 34.4 | |||||||||||||||||||||
Income before income taxes | 59.6 | 29.5 | 67.7 | |||||||||||||||||||||
Income tax expense | 22.2 | 10.9 | 25.1 | |||||||||||||||||||||
Net income | $ | 37.4 | $ | 18.6 | $ | 42.6 | ||||||||||||||||||
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Predecessor | Successor | Combined | Predecessor | ||||||||||||||
Period | Sixteen Days | Three Months | Three Months | ||||||||||||||
Ended | Ended | Ended | Ended | ||||||||||||||
March 15, | March 31, | March 31, | March 31, | ||||||||||||||
2007 | 2007 | 2007 | 2006 | ||||||||||||||
(Dollars in millions) | |||||||||||||||||
Cash (used in) provided by operating activities | $ | (46.8 | ) | $ | 2.2 | $ | (44.6 | ) | $ | 12.5 | |||||||
Cash used in investing activities | $ | (6.2 | ) | $ | (1,616.5 | ) | $ | (1,622.7 | ) | $ | (3.8 | ) | |||||
Cash provided by (used in) financing activities | $ | 38.6 | $ | 1,611.7 | $ | 1,650.3 | $ | (50.4 | ) | ||||||||
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Payments Due By Period | ||||||||||||||||||||
Less than | ||||||||||||||||||||
Total | 1 year | 1 - 3 years | 4-5 years | After 5 years | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Long-term debt obligations(1) | $ | 1,095.7 | $ | 8.0 | $ | 16.2 | $ | 16.6 | $ | 1,054.9 | ||||||||||
Scheduled interest payments(2) | 627.0 | 93.5 | 185.3 | 182.8 | 165.4 | |||||||||||||||
Operating lease obligations(3) | 330.6 | 97.1 | 122.9 | 61.2 | 44.4 | |||||||||||||||
Purchase obligations(4)(5) | 16.1 | 4.2 | 4.1 | 3.3 | 4.5 | |||||||||||||||
$ | 2,078.5 | $ | 203.8 | $ | 339.7 | $ | 267.5 | $ | 1,267.6 | |||||||||||
(1) | These balances consist of the following debt obligations: (a) $110.0 million for our 10.75% Senior Subordinated Notes; (b) $300.0 million for our Senior Toggle Notes; (c) $675.0 million for our Senior Credit Facility; and (d) $10.7 million for our mortgage. See the “Long-Term Debt” note to our consolidated financial statements included elsewhere in this prospectus. | |
(2) | These balances represent the interest that will accrue on the long-term obligations, which includes some variable debt interest payments, which are estimated using current interest rates. See the “Long-Term Debt” note to our consolidated financial statements included elsewhere in this prospectus. | |
(3) | These balances consist of the following operating leases: (a) $301.0 million for company-owned retail stores, (b) $80.1 million for franchise retail stores, which is offset by $80.1 million of sublease income from franchisees, and (c) $29.6 million relates to various leases for tractors/trailers, warehouses, automobiles and various equipment at our facilities. See the “Long-Term Lease Obligation” note to our consolidated financial statements included elsewhere in this prospectus. | |
(4) | These balances consist of $3.5 million of advertising and inventory commitments and $12.6 million related to a management services agreement and credit facility administration fees. The management service agreement was made between the Company and its sponsors. In consideration of the sponsors’ services, the Company is obligated to pay an annual fee of $1.5 million for ten years commencing on March 16, 2007. See the “Related Party Transactions” note to our consolidated financial statements included elsewhere in this prospectus. The Company also has a $0.1 million credit facility administration fee due annually. | |
(5) | This balance excludes $21.5 million related to contracts with an advertising vendor, which were terminated by GNC and are currently in litigation. See prospectus, “Business-Legal Proceedings” in this prospectus. |
Payments Due By Period | ||||||||||||||||||||
Less than | ||||||||||||||||||||
Total | 1 year | 1 - 3 years | 4 - 5 years | After 5 years | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Long-term debt obligations(1) | $ | 431.3 | $ | 1.8 | $ | 57.4 | $ | 218.0 | $ | 154.1 | ||||||||||
Scheduled interest payments(2) | 140.1 | 37.0 | 71.7 | 31.0 | 0.4 | |||||||||||||||
Operating lease obligations(3) | 330.6 | 97.1 | 127.9 | 61.2 | 44.4 | |||||||||||||||
Purchase obligations(4)(5) | 16.1 | 4.2 | 4.1 | 3.3 | 4.5 | |||||||||||||||
$ | 918.2 | $ | 140.1 | $ | 261.1 | $ | 313.6 | $ | 203.4 | |||||||||||
(1) | These balances consisted of the following debt obligations: (a) $215.0 million for our 81/2% Senior Subordinated Notes; (b) $150.0 million for our 85/8% Senior Notes; (c) $55.3 million for our senior credit facility; and (d) $11.0 million for our mortgage. See the “Long-Term Debt” note to our consolidated financial statements included elsewhere in this prospectus. |
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(2) | These balances represented the interest accruing on the long-term obligations, which includes some variable debt interest payments, estimated using current interest rates. See the “Long-Term Debt” note to our consolidated financial statements included elsewhere in this prospectus. | |
(3) | These balances consisted of the following operating leases: (a) $301.0 million for company-owned retail stores, (b) $80.1 million for franchise retail stores, which is offset by $80.1 million of sublease income from franchisees, (c) $29.6 million related to various leases for tractors/trailers, warehouses, automobiles and various equipment at our facilities. See the “Long-Term Lease Obligation” note to our consolidated financial statements included elsewhere in this prospectus. | |
(4) | These balances consisted of $3.5 million of advertising and inventory commitments and $12.6 million related to a management services agreement and credit facility administration fees. The management service agreement was made between the Company and Apollo Management V. In consideration of Apollo Management V’s services, the Company was obligated to pay an annual fee of $1.5 million for ten years commencing on December 5, 2003. See the “Related Party Transactions” note to our consolidated financial statements included elsewhere in this prospectus. The Company also had a $0.1 million credit facility administration fee due annually. | |
(5) | This balance excludes $21.5 million related to contracts with an advertising vendor, which were terminated by GNC and are currently subject to litigation. See “Business — Legal Proceedings” in this prospectus. |
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• | the estimate requires management to make assumptions about matters that were uncertain at the time the estimate was made; | |
• | different estimates reasonably could have been used; or | |
• | changes in the estimate that would have a material impact on our financial condition or our results of operations are likely to occur from period to period. |
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• | Increased Focus on Healthy Living: Consumers are leading more active lifestyles and becoming increasingly focused on healthy living, nutrition, and supplementation. According to the Nutrition Business Journal, a study by the Hartman Group found that 85% of the American population today is involved to some degree in health and wellness compared to 70% to 75% a few years ago. We believe that growth in the nutritional supplements industry will continue to be driven by consumers who increasingly embrace health and wellness as a critical part of their lifestyles. | |
• | Aging Population: The average age of the U.S. population is increasing. U.S. Census Bureau data indicates that the number of Americans age 65 or older is expected to increase by approximately 56% from 2000 to 2020. We believe that these consumers are significantly more likely to use nutritional supplements, particularly VMHS products, than younger persons and have higher levels of disposable income to pursue healthy lifestyles. | |
• | Rising Healthcare Costs and Use of Preventive Measures: Healthcare related costs have increased substantially in the United States. A study released by the Kaiser Family Foundation and the Health Research and Educational Trust in 2006 found that between spring of 2005 and spring of 2006, premiums for employer-sponsored health insurance increased by 7.7%, more than twice the rate of general inflation. To reduce medical costs and avoid the complexities of dealing with the healthcare system, and given increasing incidence of medical problems and concern over the use and effects of prescription drugs, many consumers take preventive measures, including alternative medicines and nutritional supplements. |
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• | Increasing Focus on Fitness: In total, U.S. health club memberships increased 4.9% between January 2004 and January 2006 from 39.4 million members to a record 41.3 million and has grown approximately 70% from 24.1 million in 1995, according to the International Health, Racquet & Sportsclub Association. We believe that the growing number of fitness-oriented consumers, at increasingly younger ages, are interested in taking sports nutrition products to increase energy, endurance, and strength during exercise and to aid recovery after exercise. |
• | Broad National Specialty Retail Footprint. Our domestic retail network, which is the largest specialty retail store network in the U.S. nutritional supplements industry according to Nutrition Business Journal’s Supplement Business Report 2006, is approximately ten times larger than that of our next largest U.S. specialty retail competitor. As of March 31, 2007, we also have a worldwide network of over 1,000 locations in 48 international markets. | |
• | Largest Health and Wellness Brand with Strong Credibility. We believe we are uniquely recognized as a leader in the health and wellness retail product sector. According to the GNC 2005 Awareness Tracking Study Final Report commissioned by GNC from Parker Marketing Research, an estimated 90% of the U.S. population recognizes the GNC brand name as a source of health and wellness products. In addition, we currently have over four million customers who are members of our Gold Card loyalty program, which we believe is a significant strength and enhances our targeted marketing efforts. | |
• | Ability to Leverage Existing Retail Infrastructure. Our existing store base, the stable size of our workforce, and our vertically integrated structure can support higher sales volume without adding significant incremental costs, and enable us to convert a high percentage of our net revenue into cash flow from operations. In addition, our stores require only modest capital expenditures, both to establish and maintain, which allows us to generate substantial free cash flow before debt amortization. | |
• | New Product Development. We believe that new products are a key driver of customer traffic and purchases. Our internal development and science team, complemented by relationships with outside medical consultants, is focused on innovation and the continual development of high-potency specialty formulations of blockbuster items and condition-specific supplements. | |
• | Partner of Choice to Leading Industry Vendors. Given our brand credibility, worldwide distribution network and strong vendor relationships, we are often able to negotiate periods of exclusivity for new products and benefit from significant marketing expenditures by our vendors. | |
• | Experienced Management Team. Our senior management, who have been employed with us for an average of over 12 years. |
• | Increasing Store Productivity. We believe there is a significant opportunity to improve the productivity of our existing store base through new product introductions and implementing an enhanced point-of-sale |
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system to track customer buying habits, better service our customers, and focus our merchandising at the store level. |
• | Emphasis on Our Proprietary Products. We will continue to emphasize our proprietary brands, which typically have higher gross margins, by continually developing new products, including those that are focused on specific health concerns, such as joint support, blood pressure, and heart health, and featuring our proprietary brands through our in-store merchandising. | |
• | Marketing Initiatives. We will continue to encourage customer loyalty, facilitate direct marketing, and increase cross-selling and up-selling opportunities by using our extensive customer base, Gold Card member database, and expanded customer information that we are developing ourselves or in cooperation with other retailers. | |
• | Expansion of International and Domestic Store Base. We are committed to expanding our international store network by growing our international franchise presence, which requires minimal capital expenditures on our part. We opened 169 new international franchised locations and closed 66 such locations in 2006. We expect on average to open approximately 80 new international franchised locations each year over the next four to five years. We opened 131 company-owned stores in the United States, including 51 new stores and 80 stores that were acquired from franchisees and subsequently converted into company-owned stores, and closed 94 company-owned stores. We plan to open 50 new company-owned stores in 2007 in order to expand our domestic presence. In addition, Rite Aid has committed to open 300 new store-within-a-store locations by the end of 2006. As of December 31, 2006, Rite Aid had opened 250 of these 300 new locations. We agreed with Rite Aid that the remaining 50 locations will be opened in 2007. As of March 31, 2007, 41 of these remaining locations had been opened. | |
• | Internet Sales. We launched our www.gnc.com website in December 2005. Given our brand recognition, we believe there is significant opportunity to grow our revenue in this channel. In addition, our website acts as another advertising medium for us as well as a resource for consumers to educate themselves about the latest nutritional supplement trends and new product introductions. | |
• | Partnership Opportunities. We are exploring initiatives to partner with healthcare and wellness companies and other third parties to develop programs to market our products to employees of various businesses for wellness and preventive healthcare purposes in an effort to reduce overall healthcare costs. |
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• | 2,560 company-owned stores in the United States (all 50 states, the District of Columbia, and Puerto Rico); | |
• | 139 company-owned stores in Canada; | |
• | 1,021 domestic franchised stores; | |
• | 1,001 international franchised stores in 48 markets; and | |
• | 1,268 GNC “store-within-a-store” locations under our strategic alliance with Rite Aid Corporation. |
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Three Months Ended March 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||
2007 | 2006 | 2006 | 2005 | 2004 | ||||||||||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||||||
U.S. Retail Product Categories: | ||||||||||||||||||||||||||||||||||||||||
VHMS | $ | 112.0 | 40.1 | % | $ | 108.6 | 39.1 | % | $ | 415.3 | 40.0 | % | $ | 377.7 | 40.6 | % | $ | 362.6 | 38.4 | % | ||||||||||||||||||||
Sports Nutrition Products | 100.3 | 35.9 | % | 98.0 | 35.3 | % | 369.7 | 35.6 | % | 330.3 | 35.5 | % | 293.2 | 31.1 | % | |||||||||||||||||||||||||
Diet and Weight Management Products | 42.3 | 15.1 | % | 45.8 | 16.5 | % | 158.7 | 15.3 | % | 135.2 | 14.5 | % | 193.1 | 20.5 | % | |||||||||||||||||||||||||
Other Wellness Products | 24.8 | 8.9 | % | 25.1 | 9.1 | % | 94.0 | 9.1 | % | 87.8 | 9.4 | % | 95.1 | 10.0 | % | |||||||||||||||||||||||||
Total U.S. Retail Revenues | $ | 279.4 | 100.0 | % | $ | 277.5 | 100.0 | % | $ | 1,037.7 | 100.0 | % | $ | 931.0 | 100.0 | % | $ | 944.0 | 100.0 | % | ||||||||||||||||||||
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Successor | Predecessor | ||||||||||||||||||||||||||||||||||||||||||||||||
Sixteen Days | Period | ||||||||||||||||||||||||||||||||||||||||||||||||
Ended | Ended | Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
March 31, | March 15, | March 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||
2007 | 2007 | 2006 | 2006 | 2005 | 2004 | ||||||||||||||||||||||||||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||
Retail | $ | 45.4 | 73.1 | % | $ | 259.3 | 78.6 | % | $ | 294.9 | 76.2 | % | $ | 1,122.7 | 75.5 | % | $ | 989.5 | 75.1 | % | $ | 1,001.8 | 74.5 | % | |||||||||||||||||||||||||
Franchise | 11.6 | 18.7 | % | 47.2 | 14.3 | % | 60.3 | 15.6 | % | 232.3 | 15.6 | % | 212.8 | I6.1 | % | 226.5 | 16.8 | % | |||||||||||||||||||||||||||||||
Manufacturing/Wholesale (Third Party) | 5.1 | 8.2 | % | 23.3 | 7.1 | % | 31.7 | 8.2 | % | 132.1 | 8.9 | % | 115.4 | 8.8 | % | 116.4 | 8.7 | % | |||||||||||||||||||||||||||||||
Total | $ | 62.1 | 100.0 | % | $ | 329.8 | 100.0 | % | $ | 386.9 | 100.0 | % | $ | 1,487.1 | 100.0 | % | $ | 1,317.7 | 100.0 | % | $ | 1,344.7 | 100.0 | % | |||||||||||||||||||||||||
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Company- | ||||||||||||||
United States and Canada | Owned Retail | Franchise | Other International | Franchise | ||||||||||
Alabama | 31 | 13 | Aruba | 2 | ||||||||||
Alaska | 6 | 5 | Australia | 45 | ||||||||||
Arizona | 45 | 10 | Bahamas | 4 | ||||||||||
Arkansas | 18 | 6 | Bahrain | 2 | ||||||||||
California | 210 | 156 | Bolivia | 1 | ||||||||||
Colorado | 58 | 17 | Brazil | 1 | ||||||||||
Connecticut | 38 | 5 | Brunei | 2 | ||||||||||
Delaware | 12 | 5 | Bulgaria | 1 | ||||||||||
District of Columbia | 5 | 2 | Cayman Islands | 3 | ||||||||||
Florida | 207 | 107 | Chile | 115 | ||||||||||
Georgia | 91 | 48 | China | 1 | ||||||||||
Hawaii | 22 | — | Colombia | 7 | ||||||||||
Idaho | 8 | 5 | Costa Rica | 10 | ||||||||||
Illinois | 98 | 52 | Dominican Republic | 12 |
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Company- | ||||||||||||||
United States and Canada | Owned Retail | Franchise | Other International | Franchise | ||||||||||
Indiana | 49 | 25 | Ecuador | 17 | ||||||||||
Iowa | 26 | 7 | Egypt | 1 | ||||||||||
Kansas | 20 | 11 | El Salvador | 9 | ||||||||||
Kentucky | 39 | 8 | Guam | 3 | ||||||||||
Louisiana | 36 | 9 | Guatemala | 22 | ||||||||||
Maine | 8 | — | Honduras | 3 | ||||||||||
Maryland | 51 | 25 | Hong Kong | 30 | ||||||||||
Massachusetts | 52 | 8 | India | 9 | ||||||||||
Michigan | 81 | 40 | Indonesia | 28 | ||||||||||
Minnesota | 60 | 11 | Israel | 16 | ||||||||||
Mississippi | 20 | 9 | Japan | 8 | ||||||||||
Missouri | 43 | 20 | Lebanon | 5 | ||||||||||
Montana | 4 | 3 | Malaysia | 29 | ||||||||||
Nebraska | 8 | 14 | Mexico | 206 | ||||||||||
Nevada | 14 | 9 | Nicaragua | 1 | ||||||||||
New Hampshire | 15 | 5 | Nigeria | 1 | ||||||||||
New Jersey | 73 | 39 | Oman | 1 | ||||||||||
New Mexico | 18 | 2 | Pakistan | 4 | ||||||||||
New York | 161 | 35 | Panama | 6 | ||||||||||
North Carolina | 96 | 28 | Paraguay | 1 | ||||||||||
North Dakota | 6 | — | Peru | 32 | ||||||||||
Ohio | 101 | 54 | Philippines | 41 | ||||||||||
Oklahoma | 29 | 7 | Qatar | 2 | ||||||||||
Oregon | 23 | 5 | Saudi Arabia | 35 | ||||||||||
Pennsylvania | 130 | 41 | Singapore | 56 | ||||||||||
Puerto Rico | 23 | — | South Korea | 88 | ||||||||||
Rhode Island | 12 | 1 | Spain | 1 | ||||||||||
South Carolina | 28 | 23 | Taiwan | 23 | ||||||||||
South Dakota | 5 | — | Thailand | 29 | ||||||||||
Tennessee | 44 | 27 | Turkey | 39 | ||||||||||
Texas | 207 | 73 | UAE | 6 | ||||||||||
Utah | 19 | 7 | Ukraine | 4 | ||||||||||
Vermont | 4 | — | Venezuela | 35 | ||||||||||
Virginia | 79 | 23 | ||||||||||||
Washington | 47 | 15 | ||||||||||||
West Virginia | 22 | 2 | ||||||||||||
Wisconsin | 54 | 3 | ||||||||||||
Wyoming | 4 | 1 | ||||||||||||
Canada | 139 | 4 | ||||||||||||
Total | 2,699 | 1,025 | Total | 997 | ||||||||||
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• | Harry Rodriguez v. General Nutrition Companies, Inc.(previously pending in the Supreme Court of the State of New York, New York County, New York, Index No. 02/126277). Plaintiffs filed this putative class action on or about July 25, 2002. The Second Amended Complaint, filed thereafter on or about December 6, 2002, alleged claims for unjust enrichment, violation of General Business Law Section 349 (misleading and deceptive trade practices), and violation of General Business Law Section 350 (false advertising). On July 2, 2003, the court granted part of our motion to dismiss and dismissed the unjust enrichment cause of action. On January 4, 2006, the court conducted a hearing on our motion for summary judgment and plaintiffs’ motion for class certification, both of which remain pending. | |
• | Everett Abrams v. General Nutrition Companies, Inc.(previously pending in the Superior Court of New Jersey, Mercer County, New Jersey, DocketNo. L-3789-02). Plaintiffs filed this putative class action on or about July 25, 2002. The Second Amended Complaint, filed thereafter on or about December 20, 2002, alleged claims for false and deceptive marketing and omissions and violations of the New Jersey Consumer Fraud Act. On November 18, 2003, the court signed an order dismissing plaintiff’s claims for affirmative misrepresentation and sponsorship with prejudice. The claim for knowing omissions remains pending. | |
• | Shawn Brown, Ozan Cirak, Thomas Hannon, and Luke Smith v. General Nutrition Companies, Inc.(previously pending in the 15th Judicial Circuit Court, Palm Beach County, Florida, Index.No. CA-02-14221AB). Plaintiffs filed this putative class action on or about July 25, 2002. The Second Amended Complaint, filed thereafter on or about November 27, 2002, alleged claims for violations of the Florida Deceptive and Unfair Trade Practices Act, unjust enrichment, and violation of Florida Civil Remedies for Criminal Practices Act. These claims remain pending. | |
• | Andrew Toth v. General Nutrition Companies, Inc., et al. (previously pending in the Common Pleas Court of Philadelphia County, Philadelphia, Class ActionNo. 02-703886). Plaintiffs filed this putative class action on |
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or about July 25, 2002. The Amended Complaint, filed thereafter on or about April 8, 2003, alleged claims for violations of the Unfair Trade Practices and Consumer Protection Law, and unjust enrichment. The court denied the plaintiffs’ motion for class certification, and that order has been affirmed on appeal. Plaintiffs thereafter filed a petition in the Pennsylvania Supreme Court asking that the court consider an appeal of the order denying class certification. The Pennsylvania Supreme Court denied the petition after the case against GNC was removed as described below. |
• | David Pio and Ty Stephens, individually and on behalf of all others similarly situated v. General Nutrition Companies, Inc.(previously pending in the Circuit Court of Cook County, Illinois, County Department, Chancery Division, CaseNo. 02-CH-14122). Plaintiffs filed this putative class action on or about July 25, 2002. The Amended Complaint, filed thereafter on or about April 4, 2004, alleged claims for violations of the Illinois Consumer Fraud Act, and unjust enrichment. The motion for class certification was stricken, but the court afforded leave to the plaintiffs to file another motion. Plaintiffs have not yet filed another motion. | |
• | Santiago Guzman, individually, on behalf of all others similarly situated, and on behalf of the general public v. General Nutrition Companies, Inc.(previously pending on the California Judicial Counsel Coordination Proceeding No. 4363, Los Angeles County Superior Court). Plaintiffs filed this putative class action on or about February 17, 2004. The Second Amended Complaint, filed on or about November 27, 2006, alleged claims for violations of the Consumers Legal Remedies Act, violation of the Unfair Competition Act, and unjust enrichment. These claims remain pending. |
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• | terminate or not renew a franchise without good cause; | |
• | interfere with the right of free association among franchisees; | |
• | disapprove the transfer of a franchise; | |
• | discriminate among franchisees with regard to franchise terms and charges, royalties, and other fees; and | |
• | place new stores near existing franchises. |
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Name | Age | Position | ||||
Joseph Fortunato | 54 | Director, President, and Chief Executive Officer | ||||
Curtis J. Larrimer | 52 | Executive Vice President and Chief Financial Officer | ||||
Tom Dowd | 44 | Executive Vice President of Store Operations and Development | ||||
Mark L. Weintrub | 46 | Senior Vice President, Chief Legal Officer, and Secretary | ||||
J. Kenneth Fox | 56 | Senior Vice President and Treasurer | ||||
Darryl Green | 46 | Senior Vice President of Domestic Franchising | ||||
Lee Karayusuf | 56 | Senior Vice President of Distribution and Transportation | ||||
Michael Locke | 61 | Senior Vice President of Manufacturing | ||||
Anthony Phillips | 39 | Senior Vice President of Business Analysis | ||||
Reginald N. Steele | 61 | Senior Vice President of International Franchising | ||||
Guru Ramanthan | 44 | Senior Vice President of Scientific Affairs | ||||
Joseph J. Weiss | 41 | Senior Vice President of Merchandising | ||||
Norman Axelrod | 54 | Chairman of the Board of Directors | ||||
David B. Kaplan | 39 | Director | ||||
Jeffrey B. Schwartz | 32 | Director | ||||
Lee Sienna | 55 | Director | ||||
Josef Prosperi | 37 | Director | ||||
Michele J. Buchignani | 43 | Director |
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• | Base salary. The compensation committee uses base salary to attract and retain a strong motivated leadership team at levels that are commensurate with other specialty retailers of comparable size to us. | |
• | Annual incentive compensation. Annual incentive compensation is included to reward executives for our growth and financial performance based on achievement of criteria approved by our compensation committee or the compensation committee of our Parent. The compensation committee receives input from our Human Resources Department and our Chief Executive Officer. As additional cash compensation that is contingent on our annual financial performance, it augments the base salary component while being tied directly to financial performance. Annual incentive compensation is documented in an annual plan, which is adopted by the compensation committee prior to the beginning of the applicable year. | |
• | Stock options. Stock options, which are discussed in more detail under “ — Stock Awards,” are granted to recognize and incentivize performance. Stock options provide a non-cash compensation component to drive performance, but with a long-term horizon, since value to the executive officer is dependent on continued employment and appreciation in our overall value. | |
• | Fringe benefits. Our executive officers participate in employee benefits generally available to all employees, as well as any benefits generally made available to our executive officers. In addition, the executive |
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officers receive certain perquisites, which are primarily based on level of position, which are usually set forth in a written employment agreement. These fringe benefits provide our executive officers with certain items, such as insurance and parking, or additional cash compensation to meet specific goals, such as car allowance and professional assistance, which we believe are a necessary component for a competitive compensation package. |
• | Severance compensation. Executive officers with an employment agreement are entitled to continued payments of base salary upon termination because of death or disability, termination by us without cause, or termination by the executive for good reason. Cause and good reason are defined in each employment agreement. Severance compensation may include a prorated payment of annual incentive compensation for the year in which employment is terminated if a bonus would have been payable had the executive been employed at the end of the year. These executives are also entitled to reimbursement of the cost of continuation coverage under COBRA to the extent it exceeds the amount they were paying for health insurance premiums while employed. This right continues for the greater of the remaining employment period under that employment agreement or the period base salary is continuing to be paid. |
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2006 Incentive Plan | 2007 Incentive Plan | |||||||||||||||
Target | Maximum | Target | Maximum | |||||||||||||
Level | Amount | Amount | Amount | Amount | ||||||||||||
Executive Chairman | 50 | % | 120 | % | — | — | ||||||||||
CEO | 50 | % | 120 | % | 75 | % | 125 | % | ||||||||
Executive Vice President | 40 | % | 100 | % | 45 | % | 100 | % | ||||||||
Senior Vice President | 35 | % | 55 | % | 40 | % | 75 | % |
2006 Incentive Plan | ||||||||||||||||
Budgeted | ||||||||||||||||
Budgeted | Budgeted | Cash | 2007 Incentive Plan | |||||||||||||
Thresholds | Revenue | EBITDA | Generation | Budgeted EBITDA | ||||||||||||
First threshold — 33% of target | 100 | % | 100.0 | % | 100 | % | 95 | % | ||||||||
Second threshold — 66% of target | 100 | % | 101.6 | % | 100 | % | 97 | % | ||||||||
Target | 100 | % | 103.1 | % | 100 | % | 100 | % | ||||||||
Maximum | 100 | % | 104.7 | % | 100 | % | 108 | % |
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• | health insurance in accordance with our health insurance plan or program in effect from time to time; | |
• | prescription drug coverage in accordance with our health insurance plan or program, or separate prescription drug coverage plan or program, in effect from time to time; | |
• | dental insurance in accordance with our dental insurance plan or program in effect from time to time; | |
• | long-term disability insurance in accordance with our long-term disability insurance plan or program in effect from time to time; | |
• | short-term disability insurance in accordance with our short-term disability insurance plan or program in effect from time to time; | |
• | life insurance coverage in accordance with our life insurance program in effect from time to time; | |
• | an automobile allowance in an annual amount equal to $5,000; | |
• | an allowance for professional assistance in an annual amount equal to $5,000; | |
• | a supplemental retirement allowance in an annual amount equal to $10,000; | |
• | a financial planning and tax preparation allowance in an annual amount equal to $3,000; and | |
• | for senior vice presidents located at our headquarters in Pittsburgh, Pennsylvania, a downtown Pittsburgh parking lease with an annual value in an amount equal to $2,640. |
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Change in | ||||||||||||||||||||||||||||||||||||
Pension | ||||||||||||||||||||||||||||||||||||
Value and | ||||||||||||||||||||||||||||||||||||
Non-Equity | Non-Qualified | |||||||||||||||||||||||||||||||||||
Incentive | Deferred | |||||||||||||||||||||||||||||||||||
Stock | Option | Plan | Compensation | All Other | ||||||||||||||||||||||||||||||||
Salary | Bonus | Awards | Awards | Compensation | Earnings | Compensation | Total | |||||||||||||||||||||||||||||
Name and Principal Position | Year | ($) | ($)(1) | ($) | ($) | ($)(2) | ($) | ($)(3),(4) | ($) | |||||||||||||||||||||||||||
Joseph Fortunato | 2006 | $ | 565,384 | $ | 2,967,386 | $ | — | $ | — | $ | 678,461 | $ | — | $ | 837,111 | $ | 5,048,342 | |||||||||||||||||||
President and Chief | ||||||||||||||||||||||||||||||||||||
Executive Officer | ||||||||||||||||||||||||||||||||||||
Curis J. Larimer | 2006 | $ | 301,923 | $ | 646,209 | $ | — | $ | — | $ | 301,923 | $ | — | $ | 368,771 | $ | 1,618,826 | |||||||||||||||||||
Executive Vice | ||||||||||||||||||||||||||||||||||||
President and Chief | ||||||||||||||||||||||||||||||||||||
Financial Officer | ||||||||||||||||||||||||||||||||||||
Tom Dowd | 2006 | $ | 251,346 | $ | 425,093 | $ | — | $ | — | $ | 138,240 | $ | — | $ | 347,819 | $ | 1,162,498 | |||||||||||||||||||
Senior Vice President | ||||||||||||||||||||||||||||||||||||
and General Manager | ||||||||||||||||||||||||||||||||||||
of Retail Operations(5) | ||||||||||||||||||||||||||||||||||||
J. Kenneth Fox | 2006 | $ | 176,301 | $ | 385,060 | $ | — | $ | — | $ | 80,086 | $ | — | $ | 427,333 | $ | 1,068,780 | |||||||||||||||||||
Senior Vice President | ||||||||||||||||||||||||||||||||||||
and Treasurer | ||||||||||||||||||||||||||||||||||||
Lee Karayusuf | 2006 | $ | 194,628 | $ | 385,060 | $ | — | $ | — | $ | 107,045 | $ | — | $ | 503,654 | $ | 1,190,387 | |||||||||||||||||||
Senior Vice President | ||||||||||||||||||||||||||||||||||||
of Distribution and | ||||||||||||||||||||||||||||||||||||
Transportation | ||||||||||||||||||||||||||||||||||||
Robert J. DiNicola | 2006 | $ | 741,731 | $ | 5,470,965 | $ | — | $ | — | $ | 890,077 | $ | — | $ | 767,963 | $ | 7,870,736 | |||||||||||||||||||
Former Executive | ||||||||||||||||||||||||||||||||||||
Chairman of the | ||||||||||||||||||||||||||||||||||||
Board(6) | ||||||||||||||||||||||||||||||||||||
Robert Homler | 2006 | $ | 148,077 | $ | 1,000,744 | $ | — | $ | — | $ | 350,000 | $ | — | $ | 47,449 | $ | 1,546,270 | |||||||||||||||||||
Former Executive Vice | ||||||||||||||||||||||||||||||||||||
President and Chief | ||||||||||||||||||||||||||||||||||||
Operating Officer(7) |
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(1) | Reflects (a) discretionary payments we made in March 2006 to each of our parent company’s optionholders following a March 2006 distribution to the parent company’s common stockholders in the amount of $0.99 per share, and which were determined based on the per share amount of the distribution and the number of outstanding option shares held by each optionholder, and (b) discretionary payments we made in December 2006 to each of our indirect parent company’s optionholders with vested option shares following a November 2006 dividend to the indirect parent company’s common stockholders in the amount of $5.42 per share, and which were determined based on the per share amount of the dividend and the number of outstanding vested option shares held by each optionholder as of December 15, 2006. | |
(2) | Reflects annual incentive compensation paid in February 2007 with respect to performance in 2006 pursuant to our 2006 incentive plan. Our results of operations for 2006 met or exceeded each of the goals for the maximum bonus payable to each named executive officer under the 2006 incentive plan. See “Management — Compensation Discussion and Analysis.” | |
(3) | The components of all other compensation for the named executive officers are set forth in the following table: |
Imputed Value | Common | Payment on | ||||||||||||||||||
for Life | Stockholder | Exercise of | ||||||||||||||||||
Insurance | Distributions or | Numico | ||||||||||||||||||
Named Executive Officer | Perquisites | Premiums | Dividends(a) | SARs(b) | Director Fees | |||||||||||||||
Fortunato | $ | 56,840 | $ | 552 | $ | 683,869 | $ | 95,850 | $ | — | ||||||||||
Larimer | $ | 46,840 | $ | 552 | $ | 246,191 | $ | 75,188 | $ | — | ||||||||||
Dowd | $ | 39,840 | $ | 239 | $ | 307,740 | $ | — | $ | — | ||||||||||
Fox | $ | 21,784 | $ | 1,032 | $ | 364,726 | $ | 39,791 | $ | — | ||||||||||
Karayusuf | $ | 39,000 | $ | 747 | $ | 410,320 | $ | 53,587 | $ | — | ||||||||||
DiNicola | $ | — | $ | — | $ | 729,463 | $ | — | $ | 38,500 | ||||||||||
Homler | $ | 46,840 | $ | 609 | $ | — | $ | — | $ | — |
(a) | Reflects common stockholder distributions or dividends paid in 2006, which were not factored into the grant date fair value of stock awards. | |
(b) | Reflects exercise of stock appreciation rights, or SARs, granted by our predecessor, Royal Numico NV, all of which were fully vested and exercisable. The remaining SARs were exercised in full in 2006 by the following named executive officers in the amounts indicated: Fortunato, 15,000 SARs; Larrimer, 10,000 SARs; Fox, 5,000 SARs; and Karayusuf, 10,000 SARs. | |
(4) | Perquisites include cash amounts received by the named executive officers for, or in reimbursement of, supplemental medical, supplemental retirement, parking, professional assistance, car allowance, financial services assistance, and, with respect to our Chief Executive Officer, reimbursement of country club dues. No perquisite received by a named executive officer in 2006 exceeded the greater of $25,000 or 10% of the named executive officer’s total perquisites. | |
(5) | Effective April 2007, Mr. Dowd was appointed Executive Vice President of Store Operations and Development. | |
(6) | Mr. DiNicola ceased serving as our Executive Chairman of the Board on March 16, 2007, the closing date of the March 2007 Merger. | |
(7) | Mr. Homler ceased serving as our Executive Vice President and Chief Operating Officer in April 2006, but continued to serve in a non-executive capacity as our Merchandising Counselor until his resignation effective on March 31, 2007. |
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Stock Awards | ||||||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||
Equity | Incentive | |||||||||||||||||||||||||||||||||||
Incentive | Plan | |||||||||||||||||||||||||||||||||||
Plan | Awards: | |||||||||||||||||||||||||||||||||||
Option Awards | Awards: | Market or | ||||||||||||||||||||||||||||||||||
Equity | Number | Payout | ||||||||||||||||||||||||||||||||||
Incentive | of | Value of | ||||||||||||||||||||||||||||||||||
Plan | Market | Unearned | Unearned | |||||||||||||||||||||||||||||||||
Awards: | Number | Value of | Shares, | Shares, | ||||||||||||||||||||||||||||||||
Number of | of Shares | Shares or | Units or | Units or | ||||||||||||||||||||||||||||||||
Number of | Number of | Securities of | or Units | Units of | Other | Other | ||||||||||||||||||||||||||||||
Securities | Securities | Underlying | of Stock | Stock | Rights | Rights | ||||||||||||||||||||||||||||||
Underlying | Underlying | Unexercised | Option | that have | that have | that have | that have | |||||||||||||||||||||||||||||
Unexercised | Unexercised | Unearned | Exercise | Option | not | not | not | not | ||||||||||||||||||||||||||||
Options (#) | Options (#) | Options | Price | Expiration | Vested | Vested | Vested | Vested | ||||||||||||||||||||||||||||
Name | Exercisable | Unexercisable | (#) | ($) | Date | (#) | ($) | (#) | ($) | |||||||||||||||||||||||||||
Joseph Fortunato | 378,099 | 126,034 | — | $ | 3.52 | 12/5/2010 | — | — | — | — | ||||||||||||||||||||||||||
21,337 | 64,013 | $ | 3.52 | 6/22/2012 | ||||||||||||||||||||||||||||||||
23,329 | 69,987 | $ | 3.52 | 11/21/2012 | ||||||||||||||||||||||||||||||||
Curtis J. Larimer | 68,058 | 22,686 | — | $ | 3.52 | 12/5/2010 | — | — | — | — | ||||||||||||||||||||||||||
19,988 | 59,967 | $ | 3.52 | 3/16/2012 | ||||||||||||||||||||||||||||||||
Tom Dowd | 56,715 | 18,905 | — | $ | 3.52 | 12/5/2010 | — | — | — | — | ||||||||||||||||||||||||||
4,566 | 13,698 | $ | 3.52 | 12/15/2012 | ||||||||||||||||||||||||||||||||
J. Kenneth Fox | 56,715 | 18,905 | — | $ | 3.52 | 12/5/2010 | — | — | — | — | ||||||||||||||||||||||||||
298 | 896 | $ | 3.52 | 12/15/2012 | ||||||||||||||||||||||||||||||||
Lee Karayusuf | 56,715 | 18,905 | — | $ | 3.52 | 12/5/2010 | — | — | — | — | ||||||||||||||||||||||||||
298 | 896 | $ | 3.52 | 12/15/2012 | ||||||||||||||||||||||||||||||||
Robert J. DiNicola | 85,350 | — | — | $ | 3.52 | 12/5/2010 | — | — | — | — | ||||||||||||||||||||||||||
512,100 | — | $ | 3.52 | 12/1/2011 | ||||||||||||||||||||||||||||||||
28,448 | — | $ | 3.52 | 12/15/2012 | ||||||||||||||||||||||||||||||||
227,601 | — | $ | 3.52 | 12/15/2012 | ||||||||||||||||||||||||||||||||
Robert Homler | 42,675 | 128,025 | $ | 3.52 | 3/16/2012 | — | — | — | — | |||||||||||||||||||||||||||
64,012 | �� | 192,038 | $ | 3.52 | 12/15/2012 |
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Aggregate | Aggregate | |||||||||||||||||||
Executive | Registrant | Earnings in | Aggregate | Balance at | ||||||||||||||||
Contributions | Contributions | Last Fiscal | Withdrawals/ | Last Fiscal | ||||||||||||||||
in Last Fiscal | in Last Fiscal | Year | Distributions | Year-End | ||||||||||||||||
Name | Year ($) | Year ($) | ($) | ($) | ($) | |||||||||||||||
Joseph Fortunato | — | — | — | — | — | |||||||||||||||
Curtis J. Larimer | $ | 18,115 | — | $ | 25,366 | — | $ | 196,794 | ||||||||||||
Tom Dowd | $ | 20,256 | — | $ | 873 | — | $ | 25,737 | ||||||||||||
J. Kenneth Fox | — | — | — | — | — | |||||||||||||||
Lee Karayusuf | $ | 112,045 | — | $ | 17,449 | — | $ | 250,278 | ||||||||||||
Robert J. DiNicola | — | — | — | — | — | |||||||||||||||
Robert Homler | — | — | — | — | — |
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Change in | ||||||||||||||||||||||||||||
Pension | ||||||||||||||||||||||||||||
Value and | ||||||||||||||||||||||||||||
Nonqualified | ||||||||||||||||||||||||||||
Fees Earned | Non-Equity | Deferred | ||||||||||||||||||||||||||
or Paid in | Stock | Option | Incentive Plan | Compensation | All other | |||||||||||||||||||||||
Cash | Awards | Awards ($) | Compensation | Earnings | Compensation | Total | ||||||||||||||||||||||
Name | ($) | ($) | (2)(1),(2) | ($) | ($) | ($)(3) | ($) | |||||||||||||||||||||
Laurence M. Berg | $ | 38,500 | — | — | — | — | $ | 273,549 | $ | 312,049 | ||||||||||||||||||
Michael S. Cohen(4) | $ | 38,500 | — | $ | 73,828 | — | — | $ | 328,259 | $ | 440,587 | |||||||||||||||||
Peter P. Copses | $ | 39,500 | — | — | — | — | $ | 273,549 | $ | 313,049 | ||||||||||||||||||
George G. Golleher | $ | 38,500 | — | — | — | — | $ | 1,148,904 | $ | 1,187,404 | ||||||||||||||||||
Joseph W. Harch | $ | 39,000 | — | — | — | — | $ | 273,549 | $ | 312,549 | ||||||||||||||||||
Andrew S. Jhawar | $ | 39,500 | — | — | — | — | $ | 765,936 | $ | 805,436 | ||||||||||||||||||
Edgardo A. Mercadante | $ | 41,500 | — | — | — | — | $ | 857,113 | $ | 898,613 | ||||||||||||||||||
John R. Ranelli(5) | $ | 14,000 | — | $ | 155,337 | — | — | $ | 231,299 | $ | 400,636 |
(1) | The grant date fair value of each option award is the same as the dollar amount recognized for financial statement reporting purposes with respect to 2006 in accordance with SFAS 123R and reflected in the table above. | |
(2) | The table below sets forth information regarding exercisable and unexercisable stock options granted to the listed directors and held as of the end of 2006. No other stock awards were made to the directors, and no stock options were exercised by the directors in 2006. Because the March 2007 Merger was a change in control of us, each of the outstanding stock options became fully vested and exercisable upon the change in control. Pursuant to the terms of the March 2007 Merger, at the effective time of the acquisition on March 16, 2007, each of the outstanding options was canceled and each optionholder, including the named executive officers, received an amount equal to the excess, if any, of the per share merger consideration paid in the March 2007 Merger over the exercise price per share of the option, multiplied by the number of shares of GNC Parent Corporation common stock subject to the option and subject to reduction for required withholding tax. |
Total | Total | |||||||
Distributions or | Discretionary | |||||||
Name(1) | Dividends | Payments | ||||||
Laurence M. Berg | $ | — | $ | 273,549 | ||||
Michael S. Cohen | $ | 54,710 | $ | 273,549 | ||||
Peter P. Copses | $ | — | $ | 273,549 | ||||
George G. Golleher | $ | 547,097 | $ | 601,807 | ||||
Joseph W. Harch | $ | — | $ | 273,549 | ||||
Andrew S. Jhawar | $ | 492,387 | $ | 273,549 | ||||
Edgardo A. Mercadante | $ | 364,726 | $ | 492,387 | ||||
John R. Ranelli | $ | — | $ | 231,299 |
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(3) | All other compensation for the listed directors includes the distribution paid to common stockholders of our parent company in March 2006, the discretionary payments made to all optionholders in March 2006, the dividend paid to common stockholders of our indirect parent company in November 2006, and the discretionary payments made to all optionholders with vested options in December 2006. See note (1) to “Management — Summary Compensation Table.” The total common stockholder distribution or dividend and total discretionary payments to each listed director are set forth in the following table: |
Total | Total | |||||||
Distributions or | Discretionary | |||||||
Name(1) | Dividends | Payments | ||||||
Laurence M. Berg | $ | — | $ | 273,549 | ||||
Michael S. Cohen | $ | 54,710 | $ | 273,549 | ||||
Peter P. Copses | $ | — | $ | 273,549 | ||||
George G. Golleher | $ | 547,097 | $ | 601,807 | ||||
Joseph W. Harch | $ | — | $ | 273,549 | ||||
Andrew S. Jhawar | $ | 492,387 | $ | 273,549 | ||||
Edgardo A. Mercadante | $ | 364,726 | $ | 492,387 | ||||
John R. Ranelli | $ | — | $ | 231,299 |
(4) | Elected as a director effective March 13, 2006. | |
(5) | Elected as a director effective July 6, 2006. |
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Before | After | |||||||||||||||||||||||
Change in | Change in | |||||||||||||||||||||||
Control | Control | |||||||||||||||||||||||
Termination | Termination | |||||||||||||||||||||||
w/o Cause or | w/o Cause | |||||||||||||||||||||||
for Good | or for Good | Voluntary | Change in | |||||||||||||||||||||
Benefit | Reason | Reason | Termination | Death | Disability | Control | ||||||||||||||||||
Continued base salary | $ | 1,500,000 | $ | 1,500,000 | $ | — | $ | 1,500,000 | $ | 1,500,000 | $ | — | ||||||||||||
Annual incentive compensation for 2006 | $ | 678,461 | $ | 678,461 | $ | 678,461 | $ | 678,461 | $ | 678,461 | $ | — | ||||||||||||
Continued fringe benefits | $ | 79,763 | $ | 79,763 | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Acceleration of vesting of stock options | $ | — | $ | 2,380,237 | $ | — | $ | — | $ | — | $ | 2,380,237 | ||||||||||||
Success bonus | $ | — | $ | 500,000 | $ | — | $ | — | $ | — | $ | 500,000 | ||||||||||||
Payment reduction amount | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Net value | $ | 2,258,224 | $ | 5,138,461 | $ | 678,461 | $ | 2,178,461 | $ | 2,178,461 | $ | 2,880,237 |
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Before | After | |||||||||||||||||||||||
Change in | Change in | |||||||||||||||||||||||
Control | Control | |||||||||||||||||||||||
Termination | Termination | |||||||||||||||||||||||
w/o Cause or | w/o Cause | |||||||||||||||||||||||
for Good | or for Good | Voluntary | Change in | |||||||||||||||||||||
Benefit | Reason | Reason | Termination | Death | Disability | Control | ||||||||||||||||||
Continued base salary | $ | 700,000 | $ | 700,000 | $ | — | $ | 700,000 | $ | 700,000 | $ | — | ||||||||||||
Annual incentive compensation for 2006 | $ | 301,923 | $ | 301,923 | $ | 301,923 | $ | 301,923 | $ | 301,923 | $ | — | ||||||||||||
Continued fringe benefits | $ | 19,763 | $ | 19,763 | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Acceleration of vesting of stock options | $ | — | $ | 759,298 | $ | — | $ | — | $ | — | $ | 759,298 | ||||||||||||
Success bonus | $ | — | $ | 200,000 | $ | — | $ | — | $ | — | $ | 200,000 | ||||||||||||
Payment reduction amount | $ | — | $ | (1,105,090 | ) | $ | — | $ | — | $ | — | $ | (353,714 | ) | ||||||||||
Net value | $ | 1,021,686 | $ | 875,894 | $ | 301,923 | $ | 1,001,923 | $ | 1,001,923 | $ | 605,584 |
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Before | After | |||||||||||||||||||||||
Change in | Change in | |||||||||||||||||||||||
Control | Control | |||||||||||||||||||||||
Termination | Termination | |||||||||||||||||||||||
w/o Cause or | w/o Cause | |||||||||||||||||||||||
for Good | or for Good | Voluntary | Change in | |||||||||||||||||||||
Benefit | Reason | Reason | Termination | Death | Disability | Control | ||||||||||||||||||
Continued base salary | $ | 510,000 | $ | 510,000 | $ | — | $ | 510,000 | $ | 510,000 | $ | — | ||||||||||||
Annual incentive compensation for 2006 | $ | 138,240 | $ | 138,240 | $ | 138,240 | $ | 138,240 | $ | 138,240 | $ | — | ||||||||||||
Continued fringe benefits | $ | 19,763 | $ | 19,763 | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Acceleration of vesting of stock options | $ | — | $ | 298,439 | $ | — | $ | — | $ | — | $ | 298,439 | ||||||||||||
Success bonus | $ | — | $ | 50,000 | $ | — | $ | — | $ | — | $ | 50,000 | ||||||||||||
Payment reduction amount | $ | — | $ | (258,612 | ) | $ | — | $ | — | $ | — | $ | — | |||||||||||
Net value | $ | 668,003 | $ | 757,830 | $ | 138,240 | $ | 648,240 | $ | 648,240 | $ | 348,439 |
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Before | After | |||||||||||||||||||||||
Change in | Change in | |||||||||||||||||||||||
Control | Control | |||||||||||||||||||||||
Termination | Termination | |||||||||||||||||||||||
w/o Cause or | w/o Cause | |||||||||||||||||||||||
for Good | or for Good | Voluntary | Change in | |||||||||||||||||||||
Benefit | Reason | Reason | Termination | Death | Disability | Control | ||||||||||||||||||
Continued base salary | $ | 48,750 | $ | 48,750 | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Annual incentive compensation for 2006 | $ | 80,086 | $ | 80,086 | $ | 80,086 | $ | 80,086 | $ | 80,086 | $ | — | ||||||||||||
Continued fringe benefits | $ | 2,470 | $ | 2,470 | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Acceleration of vesting of stock options | $ | — | $ | 179,121 | $ | — | $ | — | $ | — | $ | 179,121 | ||||||||||||
Success bonus | $ | — | $ | 10,000 | $ | — | $ | — | $ | — | $ | 10,000 | ||||||||||||
Payment reduction amount | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Net value | $ | 131,306 | $ | 320,427 | $ | 80,086 | $ | 80,086 | $ | 80,086 | $ | 189,121 |
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After | ||||||||||||||||||||||||
Before Change | Change in | |||||||||||||||||||||||
in Control | Control | |||||||||||||||||||||||
Termination | Termination | |||||||||||||||||||||||
w/o Cause or | w/o Cause | |||||||||||||||||||||||
for Good | or for Good | Voluntary | Change in | |||||||||||||||||||||
Benefit | Reason | Reason | Termination | Death | Disability | Control | ||||||||||||||||||
Continued base salary | $ | 49,500 | $ | 49,500 | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Annual incentive compensation for 2006 | $ | 107,045 | $ | 107,045 | $ | 107,045 | $ | 107,045 | $ | 107,045 | $ | — | ||||||||||||
Continued fringe benefits | $ | 2,470 | $ | 2,470 | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Acceleration of vesting of stock options | $ | — | $ | 179,121 | $ | — | $ | — | $ | — | $ | 179,121 | ||||||||||||
Success bonus | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Payment reduction amount | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Net value | $ | 159,015 | $ | 338,136 | $ | 107,045 | $ | 107,045 | $ | 107,045 | $ | 179,121 |
After | ||||||||||||||||||||||||
Before Change | Change in | |||||||||||||||||||||||
in Control | Control | |||||||||||||||||||||||
Termination | Termination | |||||||||||||||||||||||
w/o Cause or | w/o Cause | |||||||||||||||||||||||
for Good | or for Good | Voluntary | Change in | |||||||||||||||||||||
Benefit | Reason | Reason | Termination | Death | Disability | Control | ||||||||||||||||||
Continued base salary | $ | 1,500,000 | $ | 1,500,000 | $ | — | $ | 1,500,000 | $ | 1,500,000 | $ | — | ||||||||||||
Annual incentive compensation for 2006 | $ | 890,077 | $ | 890,077 | $ | 890,077 | $ | 890,077 | $ | 890,077 | $ | — | ||||||||||||
Continued fringe benefits | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Acceleration of vesting of stock options | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Success bonus | $ | — | $ | 1,000,000 | $ | — | $ | — | $ | — | $ | 1,000,000 | ||||||||||||
Payment reduction amount | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Net value | $ | 2,390,077 | $ | 3,390,077 | $ | 890,077 | $ | 2,390,077 | $ | 2,390,077 | $ | 1,000,000 |
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After | ||||||||||||||||||||||||
Before Change | Change in | |||||||||||||||||||||||
in Control | Control | |||||||||||||||||||||||
Termination | Termination | |||||||||||||||||||||||
w/o Cause or | w/o Cause | |||||||||||||||||||||||
for Good | or for Good | Voluntary | Change in | |||||||||||||||||||||
Benefit | Reason | Reason | Termination | Death | Disability | Control | ||||||||||||||||||
Continued base salary | $ | 100,000 | $ | 100,000 | $ | — | $ | 50,000 | $ | 50,000 | $ | — | ||||||||||||
Annual incentive compensation for 2006 | $ | 350,000 | $ | 350,000 | $ | 350,000 | $ | 350,000 | $ | 350,000 | $ | — | ||||||||||||
Continued fringe benefits | $ | 111,763 | $ | 111,763 | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Acceleration of vesting of stock options | $ | — | $ | 2,973,386 | $ | — | $ | — | $ | — | $ | 2,973,386 | ||||||||||||
Success bonus | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Payment reduction amount | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Net value | $ | 561,763 | $ | 3,535,149 | $ | 350,000 | $ | 400,000 | $ | 400,000 | $ | 2,973,386 |
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Beneficial Ownership | ||||||||||||
Class A | Class B | |||||||||||
Common | Common | |||||||||||
Name of Beneficial Owner | Shares | Shares | Percentage | |||||||||
Directors and Named Executive Officers(1),(2): | ||||||||||||
Norman Axelrod | 59,626 | — | * | |||||||||
Michele Buchignani(3) | — | — | — | |||||||||
Tom Dowd | 51,726 | — | * | |||||||||
Joseph Fortunato | 248,493 | — | * | |||||||||
J. Kenneth Fox | 41,440 | — | * | |||||||||
David B. Kaplan(4) | — | — | — | |||||||||
Lee Karayusuf | 33,093 | — | * | |||||||||
Curtis J. Larrimer | 74,533 | — | * | |||||||||
Robert Homler(5) | — | — | — | |||||||||
Josef Prosperi(3) | — | — | — | |||||||||
Jeffrey B. Schwartz(6) | — | — | — | |||||||||
Lee Sienna(3) | — | — | — | |||||||||
All directors and executive officers as a group (19 persons) | 727,888 | — | * | |||||||||
Beneficial Owners of 5% or More of Outstanding Parent’s Common Stock: | ||||||||||||
Ares Corporate Opportunities Fund II, L.P(7) | 33,539,898 | — | 38.2 | % | ||||||||
KL Holdings LLC(8) | 4,605,028 | — | 5.2 | % | ||||||||
Ontario Teachers’ Pension Plan Board(9) | 14,581,393 | 28,168,561 | 48.7 | % |
* | Less than 1% of the outstanding shares. | |
(1) | Except as otherwise noted, the address of each director isc/o Ares Corporate Opportunities Fund II, L.P., 1999 Avenue of the Stars, Los Angeles, California 90067 and the address of each current executive officer isc/o General Nutrition Centers, Inc., 300 Sixth Avenue, Pittsburgh, Pennsylvania 15222. | |
(2) | On March 16, 2007, in connection with the March 2007 Merger, our Parent entered into a stockholders agreement with each of our stockholders. Pursuant to the stockholders agreement, our Parent’s principal stockholders each have the right to designate three members of our Parent’s board of directors (or, at the sole option of each, four members of the board of directors, one of which shall be independent, for so long as they or their respective affiliates each own at least 10% of the outstanding common stock of our Parent. As a result, each of Ares Corporate Opportunities Fund II, L.P. and Ontario Teachers’ Pension Plan Board may be deemed |
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to be the beneficial owner of the shares of our Parent’s common stock held by the other parties to the stockholders’ agreement. Ares Corporate Opportunities Fund II, L.P. and Ontario Teachers’ Pension Plan Board each expressly disclaims beneficial ownership of such shares of our Parent’s common stock. |
(3) | Ms. Buchignani and Mr. Prosperi are directors of the private equity group of Ontario Teachers’ Pension Plan Board. Mr Sienna is a Vice President, Private Capital of Ontario Teachers’ Pension Plan Board. Each of Ms. Buchignani, Mr. Prosperi and Mr. Sienna disclaims beneficial ownership of the shares of our Parent’s common stock owned by Ontario Teachers’ Pension Plan Board. The address for each of Ms. Buchignani, Mr. Prosperi and Mr. Sienna isc/o Ontario Teachers’ Pension Plan Board, 5650 Yonge Street, Toronto, Ontario M2M 4H5. | |
(4) | Mr. Kaplan is a Senior Partner in the Private Equity Group of Ares Management, Inc. and a member of Ares Partners Management Company, LLC, which are affiliates of ACOF II. Mr. Kaplan disclaims beneficial ownership of the shares owned by ACOF II, except to the extent of any pecuniary interest therein. | |
(5) | Mr. Homler’s address is 6 Brighton Road, Clifton, New Jersey 07015. | |
(6) | Mr. Schwartz is a Vice President in the Private Equity Group of Ares Management, Inc., an affiliate of ACOF II. Mr. Schwartz disclaims beneficial ownership of the shares owned by ACOF II, except to the extent of any pecuniary interest therein. | |
(7) | Reflects shares owned by Ares Corporate Opportunities Fund II, L.P. (“ACOFII”). The general partner of ACOF II is ACOF Management II, L.P. (“ACOF Management II”) and the general partner of ACOF Management II, and day-to-day manager of ACOF II, is ACOF Operating Manager II, L/P. (“ACOF Operating Manager II”). ACOF Operating Manager II, in turn, is owned by Ares Management LLC and Ares Management, Inc., each of which is directly and indirectly owned by Ares Partners Management Company, LLC. Each of the foregoing entities (collectively, the “Ares Entities”) and the partners, members and managers thereof, other than ACOF II, disclaims beneficial ownership of the shares owned by ACOF II, except to the extent of any pecuniary interest therein. The address of each Ares Entity is 1999 Avenue of the Stars, Suite 1900, Los Angeles, CA 90067. | |
(8) | The address of KL Holdings LLC is 1250 Fourth Street, Santa Monica, California 90401. | |
(9) | The address of Ontario Teachers’ Pension Plan Board is 5650 Yonge Street, Toronto, Ontario M2M 4H5. |
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• | will be general unsecured obligations of GNC; | |
• | will be guaranteed on a senior unsecured basis by each of GNC’s current and future Domestic Subsidiaries, other than Immaterial Subsidiaries; | |
• | will bepari passuin right of payment with any existing and future senior Indebtedness of GNC, including the indebtedness and other obligations under our Senior Credit Facility; | |
• | will be senior in right of payment to all existing and future subordinated Indebtedness of GNC, including our Senior Subordinated Notes; and | |
• | will be structurally subordinated to all indebtedness and other obligations (including trade payables) of our non-guarantor Subsidiaries. |
• | will be a general unsecured obligation of that Guarantor; | |
• | will bepari passuin right of payment with all existing and future senior Indebtedness of that Guarantor, including its guarantee of our Senior Credit Facility; and | |
• | will be senior in right of payment to all existing and future subordinated indebtedness of that Guarantor, including guarantees of our Senior Subordinated Notes. |
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Redemption | ||||
Period | Price | |||
2009 | 102.000 | % | ||
2010 | 101.000 | % | ||
2011 and thereafter | 100.000 | % |
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• | will be general unsecured obligations of GNC; | |
• | will be guaranteed on a senior subordinated basis by each of GNC’s current and future Domestic Subsidiaries, other than Immaterial Subsidiaries; | |
• | will be subordinated in right of payment to all existing and future Senior Indebtedness of GNC and the Guarantors, including all indebtedness and other obligations under our Senior Credit Facility and our new Senior Notes; | |
• | will be pari passu in right of payment with any future Senior Subordinated Indebtedness of GNC; and | |
• | will be structurally subordinated to all indebtedness and other obligations (including trade payables) of our non-guarantor Subsidiaries. |
• | will be a general unsecured obligation of that Guarantor; | |
• | will be subordinated in right of payment to all existing and future Senior Indebtedness of that Guarantor, including its guarantee of our Senior Credit Facility and our new Senior Notes; and | |
• | will be pari passu in right of payment with all existing and future Senior Subordinated Indebtedness of that Guarantor. |
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Redemption | ||||
Period | Price | |||
2009 | 105.000 | % | ||
2010 | 103.000 | % | ||
2011 and thereafter | 100.000 | % |
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ESTATE TAX CONSEQUENCES
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F-3 | ||||
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General Nutrition Centers, Inc.:
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December 31, | December 31, | |||||||
2006 | 2005 | |||||||
(In thousands, except share data) | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 24,080 | $ | 86,013 | ||||
Receivables, net (Note 3) | 74,827 | 72,439 | ||||||
Inventories, net (Note 4) | 319,382 | 298,166 | ||||||
Deferred tax assets, net | 16,738 | 13,861 | ||||||
Other current assets | 29,898 | 30,826 | ||||||
Total current assets | 464,925 | 501,305 | ||||||
Long-term assets: | ||||||||
Goodwill (Note 7) | 81,022 | 80,109 | ||||||
Brands (Note 7) | 212,000 | 212,000 | ||||||
Other intangible assets, net (Note 7) | 23,062 | 26,460 | ||||||
Property, plant and equipment, net | 168,708 | 179,482 | ||||||
Deferred financing fees, net | 12,269 | 16,125 | ||||||
Deferred tax assets, net | 675 | 45 | ||||||
Other long-term assets | 6,124 | 10,114 | ||||||
Total long-term assets | 503,860 | 524,335 | ||||||
Total assets | $ | 968,785 | $ | 1,025,640 | ||||
Current liabilities: | ||||||||
Accounts payable, including cash overdraft | $ | 104,121 | $ | 104,595 | ||||
Accrued payroll and related liabilities | 30,988 | 20,812 | ||||||
Accrued income taxes | 4,968 | 2,431 | ||||||
Accrued interest | 7,531 | 7,877 | ||||||
Current portion, long-term debt | 1,765 | 2,117 | ||||||
Other current liabilities | 65,977 | 64,793 | ||||||
Total current liabilities | 215,350 | 202,625 | ||||||
Long-term liabilities: | ||||||||
Long-term debt | 429,590 | 471,244 | ||||||
Other long-term liabilities | 11,514 | 10,891 | ||||||
Total long-term liabilities | 441,104 | 482,135 | ||||||
Total liabilities | 656,454 | 684,760 | ||||||
Stockholder’s equity: | ||||||||
Common stock, $0.01 par value, 1,000 shares authorized, 100 shares issued and outstanding | — | — | ||||||
Paid-in-capital | 261,899 | 277,989 | ||||||
Retained earnings | 49,108 | 61,667 | ||||||
Accumulated other comprehensive income | 1,324 | 1,224 | ||||||
Total stockholder’s equity | 312,331 | 340,880 | ||||||
Total liabilities and stockholder’s equity | $ | 968,785 | $ | 1,025,640 | ||||
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Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Revenue | $ | 1,487,116 | $ | 1,317,708 | $ | 1,344,742 | ||||||
Cost of sales, including costs of warehousing, distribution and occupancy | 983,530 | 898,740 | 895,235 | |||||||||
Gross profit | 503,586 | 418,968 | 449,507 | |||||||||
Compensation and related benefits | 260,825 | 228,626 | 229,957 | |||||||||
Advertising and promotion | 50,745 | 44,661 | 43,955 | |||||||||
Other selling, general and administrative | 92,310 | 76,111 | 73,728 | |||||||||
Foreign currency gain | (666 | ) | (555 | ) | (290 | ) | ||||||
Other expense (income) | 1,203 | (2,500 | ) | — | ||||||||
�� | ||||||||||||
Operating income | 99,169 | 72,625 | 102,157 | |||||||||
Interest expense, net (Note 13) | 39,568 | 43,078 | 34,432 | |||||||||
Income before income taxes | 59,601 | 29,547 | 67,725 | |||||||||
Income tax expense (Note 5) | 22,226 | 10,881 | 25,078 | |||||||||
Net income | 37,375 | 18,666 | 42,647 | |||||||||
Other comprehensive income | 100 | 61 | 861 | |||||||||
Comprehensive income | $ | 37,475 | $ | 18,727 | $ | 43,508 | ||||||
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Accumulated | ||||||||||||||||||||||||
Other | Total | |||||||||||||||||||||||
Common Stock | Retained | Comprehensive | Stockholder’s | |||||||||||||||||||||
Shares | Dollars | Paid-in-Capital | Earnings | Income | Equity | |||||||||||||||||||
(In thousands, except share data) | ||||||||||||||||||||||||
Balance at December 31, 2003 | 100 | — | 277,500 | 354 | 302 | 278,156 | ||||||||||||||||||
GNC Corporation investment in General Nutrition Centers, Inc. | — | — | 758 | — | — | 758 | ||||||||||||||||||
Net income | — | — | — | 42,647 | — | 42,647 | ||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | 861 | 861 | ||||||||||||||||||
Balance at December 31, 2004 | 100 | — | 278,258 | 43,001 | 1,163 | 322,422 | ||||||||||||||||||
GNC Corporation investment in General Nutrition Centers, Inc. | — | — | (901 | ) | — | — | (901 | ) | ||||||||||||||||
Non-cash stock-based compensation | — | — | 632 | — | — | 632 | ||||||||||||||||||
Net income | — | — | — | 18,666 | — | 18,666 | ||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | 61 | 61 | ||||||||||||||||||
Balance at December 31, 2005 | 100 | $ | — | $ | 277,989 | $ | 61,667 | $ | 1,224 | $ | 340,880 | |||||||||||||
GNC Corporation investment in General Nutrition Centers, Inc. | — | — | (18,618 | ) | — | — | (18,618 | ) | ||||||||||||||||
Non-cash stock-based compensation | — | — | 2,528 | — | — | 2,528 | ||||||||||||||||||
Net income | — | — | — | 37,375 | — | 37,375 | ||||||||||||||||||
Restricted payment made by General Nutrition Centers, Inc. to GNC Corporation Common Stockholders | — | — | — | (49,934 | ) | — | (49,934 | ) | ||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | 100 | 100 | ||||||||||||||||||
Balance at December 31, 2006 | 100 | $ | — | $ | 261,899 | $ | 49,108 | $ | 1,324 | $ | 312,331 | |||||||||||||
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Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net income | $ | 37,375 | $ | 18,666 | $ | 42,647 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation expense | 34,583 | 37,045 | 34,778 | |||||||||
Fixed asset write-off | 220 | 665 | — | |||||||||
Loss on sale of subsidiary | 1,203 | — | — | |||||||||
Deferred fee writedown — early debt extinguishment | 890 | 3,890 | — | |||||||||
Amortization of intangible assets | 4,595 | 3,990 | 4,015 | |||||||||
Amortization of deferred financing fees | 2,966 | 2,825 | 2,772 | |||||||||
Increase in provision for inventory losses | 9,816 | 9,353 | 9,588 | |||||||||
Non-cash stock-based compensation | 2,528 | 632 | — | |||||||||
(Decrease) increase in provision for losses on accounts receivable | (1,982 | ) | 1,784 | 1,828 | ||||||||
(Increase) decrease in net deferred taxes | (3,588 | ) | 1,321 | 24,154 | ||||||||
Changes in assets and liabilities: | ||||||||||||
(Increase) decrease in receivables | (2,334 | ) | (6,142 | ) | 1,590 | |||||||
Increase in inventory | (31,261 | ) | (33,259 | ) | (24,658 | ) | ||||||
Decrease in franchise note receivables | 4,649 | 6,650 | 11,572 | |||||||||
(Increase) decrease in other assets | (471 | ) | 6,078 | (5,740 | ) | |||||||
Increase (decrease) in accounts payable | 787 | (2,853 | ) | 3,855 | ||||||||
Increase (decrease) in accrued taxes | 2,601 | 2,431 | (438 | ) | ||||||||
(Decrease) increase in interest payable | (346 | ) | 6,014 | 64 | ||||||||
Increase (decrease) in accrued liabilities | 12,342 | 5,096 | (22,559 | ) | ||||||||
Net cash provided by operating activities | 74,573 | 64,186 | 83,468 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Capital expenditures | (23,846 | ) | (20,825 | ) | (28,329 | ) | ||||||
Proceeds from sale of subsidiary | 1,356 | — | — | |||||||||
Sales of corporate stores to franchisees | 21 | 23 | 169 | |||||||||
Store acquisition costs | (965 | ) | (733 | ) | (979 | ) | ||||||
Acquisition of General Nutrition Companies, Inc. | — | — | 2,102 | |||||||||
Net cash used in investing activities | (23,434 | ) | (21,535 | ) | (27,037 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Decrease in GNC Corporation investment in General Nutrition Centers, Inc. | (18,618 | ) | (901 | ) | 758 | |||||||
Restricted payment made by General Nutrition Centers, Inc to GNC Corporation Common Stockholders | (49,934 | ) | — | — | ||||||||
(Decrease) increase in cash overdrafts | (927 | ) | 919 | (347 | ) | |||||||
Proceeds from senior notes issuance | — | 150,000 | — | |||||||||
Payments on long-term debt | (41,974 | ) | (187,014 | ) | (3,828 | ) | ||||||
Financing fees | (1,674 | ) | (4,710 | ) | (1,106 | ) | ||||||
Net cash used in financing activities | (113,127 | ) | (41,706 | ) | (4,523 | ) | ||||||
Effect of exchange rate on cash | 55 | (93 | ) | 77 | ||||||||
Net increase (decrease) in cash | (61,933 | ) | 852 | 51,985 | ||||||||
Beginning balance, cash | 86,013 | 85,161 | 33,176 | |||||||||
Ending balance, cash | $ | 24,080 | $ | 86,013 | $ | 85,161 | ||||||
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NOTE 1. | NATURE OF BUSINESS |
NOTE 2. | BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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NOTE 3. | RECEIVABLES |
December 31, | December 31, | |||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Trade receivables | $ | 68,992 | $ | 69,880 | ||||
Other | 5,666 | 9,648 | ||||||
Allowance for doubtful accounts | (3,466 | ) | (8,898 | ) | ||||
Related party | 3,635 | 1,809 | ||||||
$ | 74,827 | $ | 72,439 | |||||
NOTE 4. | INVENTORIES |
December 31, 2006 | ||||||||||||
Net Carrying | ||||||||||||
Gross Cost | Reserves | Value | ||||||||||
(In thousands) | ||||||||||||
Finished product ready for sale | $ | 280,722 | $ | (8,677 | ) | $ | 272,045 | |||||
Work-in-process, bulk product and raw materials | 44,630 | (2,119 | ) | 42,511 | ||||||||
Packaging supplies | 4,826 | — | 4,826 | |||||||||
$ | 330,178 | $ | (10,796 | ) | $ | 319,382 | ||||||
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December 31, 2005 | ||||||||||||
Net Carrying | ||||||||||||
Gross Cost | Reserves | Value | ||||||||||
(In thousands) | ||||||||||||
Finished product ready for sale | $ | 257,525 | $ | (10,025 | ) | $ | 247,500 | |||||
Work-in-process, bulk product and raw materials | 48,513 | (2,128 | ) | 46,385 | ||||||||
Packaging supplies | 4,281 | — | 4,281 | |||||||||
$ | 310,319 | $ | (12,153 | ) | $ | 298,166 | ||||||
NOTE 5. | INCOME TAXES |
December 31, 2006 | December 31, 2005 | |||||||||||||||||||||||
Assets | Liabilities | Net | Assets | Liabilities | Net | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Deferred tax: | ||||||||||||||||||||||||
Current assets (liabilities): | ||||||||||||||||||||||||
Operating reserves | $ | 3,956 | $ | — | $ | 3,956 | $ | 6,303 | $ | — | $ | 6,303 | ||||||||||||
Inventory capitalization | 4,191 | — | 4,191 | — | (595 | ) | (595 | ) | ||||||||||||||||
Deferred revenue | 11,804 | — | 11,804 | 10,394 | — | 10,394 | ||||||||||||||||||
Prepaid expenses | — | (8,289 | ) | (8,289 | ) | — | (8,060 | ) | (8,060 | ) | ||||||||||||||
Accrued worker compensation | 2,774 | — | 2,774 | 3,481 | — | 3,481 | ||||||||||||||||||
Stock compensation | 1,061 | — | 1,061 | 230 | — | 230 | ||||||||||||||||||
Other | 1,811 | (570 | ) | 1,241 | 2,116 | (8 | ) | 2,108 | ||||||||||||||||
Total current | $ | 25,597 | $ | (8,859 | ) | $ | 16,738 | $ | 22,524 | $ | (8,663 | ) | $ | 13,861 | ||||||||||
Non-current assets (liabilities): | ||||||||||||||||||||||||
Intangibles | $ | — | $ | (14,282 | ) | $ | (14,282 | ) | $ | — | $ | (9,777 | ) | $ | (9,777 | ) | ||||||||
Fixed assets | 14,709 | — | 14,709 | 9,370 | — | 9,370 | ||||||||||||||||||
Other: | 3,407 | (3,159 | ) | 248 | 3,766 | (3,314 | ) | 452 | ||||||||||||||||
Total non-current | $ | 18,116 | $ | (17,441 | ) | $ | 675 | $ | 13,136 | $ | (13,091 | ) | $ | 45 | ||||||||||
Total net deferred taxes | $ | 43,713 | $ | (26,300 | ) | $ | 17,413 | $ | 35,660 | $ | (21,754 | ) | $ | 13,906 | ||||||||||
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Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Domestic | $ | 56,453 | $ | 26,435 | $ | 64,227 | ||||||
Foreign | 3,148 | 3,112 | 3,498 | |||||||||
Total income before income taxes | $ | 59,601 | $ | 29,547 | $ | 67,725 | ||||||
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Current: | ||||||||||||
Federal | $ | 21,675 | $ | 7,024 | $ | 558 | ||||||
State | 2,299 | 1,255 | 258 | |||||||||
Foreign | 1,840 | 1,281 | 108 | |||||||||
25,814 | 9,560 | 924 | ||||||||||
Deferred: | ||||||||||||
Federal | $ | (3,695 | ) | $ | 1,172 | $ | 22,365 | |||||
State | 107 | 149 | 1,852 | |||||||||
Foreign | — | — | (63 | ) | ||||||||
(3,588 | ) | 1,321 | 24,154 | |||||||||
Income tax expense | $ | 22,226 | $ | 10,881 | $ | 25,078 | ||||||
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Percent of pretax earnings: | ||||||||||||
Statutory federal tax rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
Increase/(decrease): | ||||||||||||
Other permanent differences | (1.1 | )% | (2.4 | )% | (0.4 | )% | ||||||
State income tax, net of federal tax benefit | 3.5 | % | 3.9 | % | 2.4 | % | ||||||
Other | (0.1 | )% | 0.3 | % | — | |||||||
Effective income tax rate | 37.3 | % | 36.8 | % | 37.0 | % | ||||||
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NOTE 6. | OTHER CURRENT ASSETS |
December 31, | December 31, | |||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Current portion of franchise note receivables | $ | 2,905 | $ | 3,727 | ||||
Less: allowance for doubtful accounts | (22 | ) | (105 | ) | ||||
Prepaid Rent | 12,009 | 11,696 | ||||||
Prepaid insurance | 5,406 | 6,538 | ||||||
Other current assets | 9,600 | 8,970 | ||||||
$ | 29,898 | $ | 30,826 | |||||
NOTE 7. | GOODWILL, BRANDS, AND OTHER INTANGIBLE ASSETS |
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Manufacturing/ | ||||||||||||||||
Retail | Franchising | Wholesale | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Goodwill balance at December 31, 2004 | $ | 17,634 | $ | 60,505 | $ | 446 | $ | 78,585 | ||||||||
Additions: Acquired franchise stores | 1,524 | — | — | 1,524 | ||||||||||||
Reclassification: Due to franchise store acquisitions | 3,812 | (3,812 | ) | — | — | |||||||||||
Balance at December 31, 2005 | 22,970 | 56,693 | 446 | 80,109 | ||||||||||||
Additions: Acquired franchise stores | 913 | — | — | 913 | ||||||||||||
Reclassification: Due to franchise store acquisitions | 2,795 | (2,795 | ) | — | — | |||||||||||
Balance at December 31, 2006 | $ | 26,678 | $ | 53,898 | $ | 446 | $ | 81,022 | ||||||||
Gold | Retail | Franchise | Operating | Franchise | ||||||||||||||||||||
Card | Brand | Brand | Agreements | Rights | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Balance at December 31, 2004 | 1,413 | 49,000 | 163,000 | 27,239 | — | 240,652 | ||||||||||||||||||
Additions: Acquired franchise stores | — | — | — | — | 1,798 | 1,798 | ||||||||||||||||||
Reclassification: Due to franchise store acquisitions | — | 10,659 | (10,659 | ) | — | — | ||||||||||||||||||
Amortization expense | (899 | ) | — | — | (2,943 | ) | (148 | ) | (3,990 | ) | ||||||||||||||
Balance at December 31, 2005 | $ | 514 | $ | 59,659 | $ | 152,341 | $ | 24,296 | $ | 1,650 | $ | 238,460 | ||||||||||||
Additions: Acquired franchise stores | — | — | — | — | 1,197 | 1,197 | ||||||||||||||||||
Reclassification: Due to franchise store acquisitions | — | 7,817 | (7,817 | ) | — | — | — | |||||||||||||||||
Amortization expense | (514 | ) | — | — | (2,944 | ) | (1,137 | ) | (4,595 | ) | ||||||||||||||
Balance at December 31, 2006 | $ | — | $ | 67,476 | $ | 144,524 | $ | 21,352 | $ | 1,710 | $ | 235,062 | ||||||||||||
Estimated | December 31, 2006 | December 31, 2005 | ||||||||||||||||||||||||
Life in | Accumulated | Carrying | Accumulated | Carrying | ||||||||||||||||||||||
Years | Cost | Amortization | Amount | Cost | Amortization | Amount | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Brands — retail | — | $ | 67,476 | $ | — | $ | 67,476 | $ | 59,659 | $ | — | $ | 59,659 | |||||||||||||
Brands — franchise | — | 144,524 | — | 144,524 | 152,341 | — | 152,341 | |||||||||||||||||||
Gold card — retail | 3 | 2,230 | (2,230 | ) | — | 2,230 | (1,784 | ) | 446 | |||||||||||||||||
Gold card — franchise | 3 | 340 | (340 | ) | — | 340 | (272 | ) | 68 | |||||||||||||||||
Retail agreements | 5-10 | 8,500 | (3,627 | ) | 4,873 | 8,500 | (2,447 | ) | 6,053 | |||||||||||||||||
Franchise agreements | 10-15 | 21,900 | (5,421 | ) | 16,479 | 21,900 | (3,657 | ) | 18,243 | |||||||||||||||||
Franchise rights | 1-5 | 2,995 | (1,285 | ) | 1,710 | 1,798 | (148 | ) | 1,650 | |||||||||||||||||
$ | 247,965 | $ | (12,903 | ) | $ | 235,062 | $ | 246,768 | $ | (8,308 | ) | $ | 238,460 | |||||||||||||
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Estimated | ||||
Amortization | ||||
Years Ending December 31, | Expense | |||
(In thousands) | ||||
2007 | 3,773 | |||
2008 | 3,381 | |||
2009 | 2,514 | |||
2010 | 2,416 | |||
2011 | 2,314 | |||
Thereafter | 8,664 | |||
Total | $ | 23,062 | ||
NOTE 8. | PROPERTY, PLANT AND EQUIPMENT |
December 31, | December 31, | |||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Land, buildings and improvements | $ | 60,283 | $ | 60,198 | ||||
Machinery and equipment | 79,488 | 71,575 | ||||||
Leasehold improvements | 52,859 | 47,314 | ||||||
Furniture and fixtures | 59,741 | 54,514 | ||||||
Software | 15,075 | 13,428 | ||||||
Construction in progress | 1,262 | 1,967 | ||||||
Total property, plant and equipment | $ | 268,708 | $ | 248,996 | ||||
Less: accumulated depreciation | (100,000 | ) | (69,514 | ) | ||||
Net property, plant and equipment | $ | 168,708 | $ | 179,482 | ||||
NOTE 9. | OTHER LONG-TERM ASSETS |
December 31, | December 31, | |||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Long-term franchise notes receivables | $ | 3,912 | $ | 9,028 | ||||
Long-term deposit | 3,105 | 2,702 | ||||||
Allowance for doubtful accounts | (893 | ) | (1,616 | ) | ||||
$ | 6,124 | $ | 10,114 | |||||
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Years Ending December 31, | Receivables | |||
(In thousands) | ||||
2007 | $ | 2,891 | ||
2008 | 2,058 | |||
2009 | 804 | |||
2010 | 198 | |||
2011 | 68 | |||
Thereafter | 637 | |||
Total | $ | 6,656 | ||
NOTE 10. | ACCOUNTS PAYABLE |
December 31, | December 31, | |||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Trade payables | $ | 99,984 | $ | 99,532 | ||||
Cash overdrafts | 4,137 | 5,063 | ||||||
Total | $ | 104,121 | $ | 104,595 | ||||
NOTE 11. | ACCRUED PAYROLL AND RELATED LIABILITIES |
December 31, | December 31, | |||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Accrued payroll | $ | 23,871 | $ | 15,274 | ||||
Accrued taxes & benefits | 7,117 | 5,538 | ||||||
Total | $ | 30,988 | $ | 20,812 | ||||
NOTE 12. | OTHER CURRENT LIABILITIES |
December 31, | December 31, | |||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Deferred revenue | $ | 32,821 | $ | 28,555 | ||||
Accrued occupancy | 4,428 | 4,127 | ||||||
Accrued worker compensation | 7,806 | 9,725 | ||||||
Accrued taxes | 7,887 | 7,691 | ||||||
Other current liabilities | 13,035 | 14,695 | ||||||
Total | $ | 65,977 | $ | 64,793 | ||||
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NOTE 13. | LONG-TERM DEBT / INTEREST |
December 31, | December 31, | |||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Senior credit facility | $ | 55,290 | $ | 96,168 | ||||
85/8% Senior Notes | 150,000 | 150,000 | ||||||
81/2% Senior Subordinated Notes | 215,000 | 215,000 | ||||||
Mortgage | 11,065 | 12,167 | ||||||
Capital leases | — | 26 | ||||||
Less: current maturities | (1,765 | ) | (2,117 | ) | ||||
Total | $ | 429,590 | $ | 471,244 | ||||
Senior | 85/8% | 81/2% Senior | Mortgage | |||||||||||||||||
Credit | Senior | Subordinated | Loan/Capital | |||||||||||||||||
Years Ending December 31, | Facility | Notes | Notes | Leases | Total | |||||||||||||||
(In thousands) | ||||||||||||||||||||
2007 | $ | 570 | $ | — | $ | — | $ | 1,195 | $ | 1,765 | ||||||||||
2008 | 570 | — | — | 1,281 | 1,851 | |||||||||||||||
2009 | 54,150 | — | — | 1,373 | 55,523 | |||||||||||||||
2010 | — | — | — | 1,472 | 1,472 | |||||||||||||||
2011 | — | — | 215,000 | 1,577 | 216,577 | |||||||||||||||
Thereafter | — | 150,000 | — | 4,167 | 154,167 | |||||||||||||||
$ | 55,290 | $ | 150,000 | $ | 215,000 | $ | 11,065 | $ | 431,355 | |||||||||||
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Senior credit facility | ||||||||||||
Term Loan | $ | 7,327 | $ | 6,646 | $ | 12,932 | ||||||
Revolver | 639 | 613 | 553 | |||||||||
85/8% Senior Notes | 12,938 | 12,327 | — | |||||||||
81/2% Senior Subordinated Notes | 18,275 | 18,275 | 18,224 | |||||||||
Deferred financing fees | 3,856 | 2,825 | 2,772 | |||||||||
Deferred fee writedown — early extinguishment | — | 3,890 | — | |||||||||
Mortgage | 628 | 890 | 955 | |||||||||
Interest income — other | (4,095 | ) | (2,388 | ) | (1,004 | ) | ||||||
Interest expense, net | $ | 39,568 | $ | 43,078 | $ | 34,432 | ||||||
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December 31, | December 31, | |||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Senior credit facility | $ | 43 | $ | 389 | ||||
85/8% Senior Notes | 5,965 | 5,965 | ||||||
81/2% Senior subordinated Notes | 1,523 | 1,523 | ||||||
Total | $ | 7,531 | $ | 7,877 | ||||
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Redemption | ||||
Period | Price | |||
2008 | 104.313 | % | ||
2009 | 102.156 | % | ||
2010 and after | 100.000 | % |
Redemption | ||||
Period | Price | |||
2007 | 104.250 | % | ||
2008 | 102.125 | % | ||
2009 and after | 100.000 | % |
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NOTE 14. | FINANCIAL INSTRUMENTS |
December 31, 2006 | December 31, 2005 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Amount | Value | Amount | Value | |||||||||||||
(In thousands) | ||||||||||||||||
Cash and cash equivalents | $ | 24,080 | $ | 24,080 | $ | 86,013 | $ | 86,013 | ||||||||
Receivables | 74,827 | 74,827 | 72,439 | 72,439 | ||||||||||||
Franchise notes receivable | 5,902 | 5,902 | 11,034 | 11,034 | ||||||||||||
Accounts payable | 104,121 | 104,121 | 104,595 | 104,595 | ||||||||||||
Long term debt | 431,355 | 445,143 | 473,361 | 433,611 |
NOTE 15. | LONG-TERM LEASE OBLIGATIONS |
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Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Retail stores: | ||||||||||||
Rent on long-term operating leases, net of sublease income | $ | 99,194 | $ | 96,952 | $ | 94,998 | ||||||
Landlord related taxes | 14,920 | 13,678 | 12,951 | |||||||||
Common operating expenses | 28,143 | 26,619 | 27,097 | |||||||||
Percent rent | 12,035 | 9,571 | 8,943 | |||||||||
154,292 | 146,820 | 143,989 | ||||||||||
Truck fleet | 4,295 | 4,413 | 4,943 | |||||||||
Other | 10,505 | 10,131 | 10,107 | |||||||||
$ | 169,092 | $ | 161,364 | $ | 159,039 | |||||||
Company | Franchise | |||||||||||||||||||
Retail | Retail | Sublease | ||||||||||||||||||
Stores | Stores | Other | Income | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
2007 | 89,849 | 31,893 | 7,299 | (31,893 | ) | 97,148 | ||||||||||||||
2008 | 68,620 | 22,913 | 5,968 | (22,913 | ) | 74,588 | ||||||||||||||
2009 | 48,681 | 13,016 | 4,679 | (13,016 | ) | 53,360 | ||||||||||||||
2010 | 34,271 | 6,782 | 4,145 | (6,782 | ) | 38,416 | ||||||||||||||
2011 | 22,804 | 2,972 | 3,257 | (2,972 | ) | 26,061 | ||||||||||||||
Thereafter | 36,831 | 2,522 | 4,337 | (2,522 | ) | 41,168 | ||||||||||||||
$ | 301,056 | $ | 80,098 | $ | 29,685 | $ | (80,098 | ) | $ | 330,741 | ||||||||||
NOTE 16. | COMMITMENTS AND CONTINGENCIES |
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• | Harry Rodriguez v. General Nutrition Companies, Inc. (previously pending in the Supreme Court of the State of New York, New York County, New York, Index No. 02/126277). Plaintiffs filed this putative class action on or about July 25, 2002. The Second Amended Complaint, filed thereafter on or about December 6, 2002, alleged claims for unjust enrichment, violation of General Business Law Section 349 (misleading and deceptive trade practices), and violation of General Business Law Section 350 (false advertising). On July 2, 2003, the court granted part of the GNC motion to dismiss and dismissed the unjust enrichment cause of action. On January 4, 2006, the court conducted a hearing on the GNC motion for summary judgment and plaintiffs’ motion for class certification, both of which remain pending. |
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• | Everett Abrams v. General Nutrition Companies, Inc. (previously pending in the Superior Court of New Jersey, Mercer County, New Jersey, DocketNo. L-3789-02). Plaintiffs filed this putative class action on or about July 25, 2002. The Second Amended Complaint, filed thereafter on or about December 20, 2002, alleged claims for false and deceptive marketing and omissions and violations of the New Jersey Consumer Fraud Act. On November 18, 2003, the court signed an order dismissing plaintiff’s claims for affirmative misrepresentation and sponsorship with prejudice. The claim for knowing omissions remains pending. | |
�� | Shawn Brown, Ozan Cirak, Thomas Hannon, and Luke Smith v. General Nutrition Companies, Inc.(previously pending in the 15th Judicial Circuit Court, Palm Beach County, Florida, Index.No. CA-02-14221AB). Plaintiffs filed this putative class action on or about July 25, 2002. The Second Amended Complaint, filed thereafter on or about November 27, 2002, alleged claims for violations of the Florida Deceptive and Unfair Trade Practices Act, unjust enrichment, and violation of Florida Civil Remedies for Criminal Practices Act. These claims remain pending. | |
• | Andrew Toth v. General Nutrition Companies, Inc., et al. (previously pending in the Common Pleas Court of Philadelphia County, Philadelphia, Class ActionNo. 02-703886). Plaintiffs filed this putative class action on or about July 25, 2002. The Amended Complaint, filed thereafter on or about April 8, 2003, alleged claims for violations of the Unfair Trade Practices and Consumer Protection Law, and unjust enrichment. The court denied the plaintiffs’ motion for class certification, and that order has been affirmed on appeal. Plaintiffs thereafter filed a petition in the Pennsylvania Supreme Court asking that the court consider an appeal of the order denying class certification. The Pennsylvania Supreme Court denied the petition after the case against GNC was removed as described below. | |
• | David Pio and Ty Stephens, individually and on behalf of all others similarly situated v. General Nutrition Companies, Inc. (previously pending in the Circuit Court of Cook County, Illinois, County Department, Chancery Division, CaseNo. 02-CH-14122). Plaintiffs filed this putative class action on or about July 25, 2002. The Amended Complaint, filed thereafter on or about April 4, 2004, alleged claims for violations of the Illinois Consumer Fraud Act, and unjust enrichment. The motion for class certification was stricken, but the court afforded leave to the plaintiffs to file another motion. Plaintiffs have not yet filed another motion. | |
• | Santiago Guzman, individually, on behalf of all others similarly situated, and on behalf of the general public v. General Nutrition Companies, Inc.(previously pending on the California Judicial Counsel Coordination Proceeding No. 4363, Los Angeles County Superior Court). Plaintiffs filed this putative class action on or about February 17, 2004. The Second Amended Complaint, filed on or about November 27, 2006, alleged claims for violations of the Consumers Legal Remedies Act, violation of the Unfair Competition Act, and unjust enrichment. These claims remain pending. |
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NOTE 17. | STOCKHOLDER’S EQUITY |
NOTE 18. | STOCK-BASED COMPENSATION PLANS |
Weighted | ||||||||||||
Average | Aggregate | |||||||||||
Total | Exercise | Intrinsic | ||||||||||
Options | Price | Value | ||||||||||
(In thousands) | ||||||||||||
Outstanding at December 31, 2003 | 4,446,679 | $ | 3.52 | |||||||||
Granted | 617,968 | 3.52 | ||||||||||
Forfeited | (907,442 | ) | 3.52 | |||||||||
Outstanding at December 31, 2004 | 4,157,205 | 3.52 | ||||||||||
Granted | 2,177,247 | 3.52 | ||||||||||
Forfeited | (1,628,049 | ) | 3.52 | |||||||||
Outstanding at December 31, 2005 | 4,706,403 | 3.52 | ||||||||||
Granted | 562,456 | 6.56 | ||||||||||
Exercised | (170,700 | ) | 3.52 | |||||||||
Forfeited | (285,323 | ) | 5.04 | |||||||||
Outstanding at December 31, 2006 | 4,812,836 | $ | 3.65 | $ | 41,123 | |||||||
Exercisable at December 31, 2006 | 3,124,605 | $ | 3.67 | $ | 27,057 | |||||||
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December 31, | ||||
2006 | 2005 | |||
Dividend yield | 0.00% | 0.00% | ||
Expected option life | 5 years | 5 years | ||
Volatility factor percentage of market price | 22.00% | 24.00% | ||
Discount rate | 4.47% - 5.10% | 3.84% - 4.35% |
Year Ended | ||||||||
December 31, | December 31, | |||||||
2005 | 2004 | |||||||
(In thousands) | ||||||||
Net income as reported | $ | 18,396 | $ | 41,667 | ||||
Add: total stock-based employee compensation costs determined using intrinsic value method, net of tax | 399 | — | ||||||
Less: total stock-based employee compensation costs determined using fair value method, net of tax | (1,294 | ) | (873 | ) | ||||
Adjusted net income | $ | 17,501 | $ | 40,794 | ||||
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NOTE 19. | SEGMENTS |
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Revenue: | ||||||||||||
Retail | $ | 1,122,670 | $ | 989,493 | $ | 1,001,836 | ||||||
Franchise | 232,289 | 212,750 | 226,506 | |||||||||
Manufacturing/Wholesale: | ||||||||||||
Intersegment(1) | 170,310 | 163,847 | 150,254 | |||||||||
Third Party | 132,157 | 115,465 | 116,400 | |||||||||
Sub total Manufacturing/Wholesale | 302,467 | 279,312 | 266,654 | |||||||||
Sub total segment revenues | 1,657,426 | 1,481,555 | 1,494,996 | |||||||||
Intersegment elimination(1) | (170,310 | ) | (163,847 | ) | (150,254 | ) | ||||||
Total revenue | 1,487,116 | 1,317,708 | 1,344,742 | |||||||||
Operating income: | ||||||||||||
Retail | 127,444 | 77,191 | 107,696 | |||||||||
Franchise | 64,060 | 51,976 | 62,432 | |||||||||
Manufacturing/Wholesale | 51,040 | 45,960 | 38,640 | |||||||||
Unallocated corporate and other (costs) income: | ||||||||||||
Warehousing and distribution costs | (50,706 | ) | (49,986 | ) | (49,322 | ) | ||||||
Corporate costs | (91,466 | ) | (55,016 | ) | (57,289 | ) | ||||||
Other (expense) income | (1,203 | ) | 2,500 | — | ||||||||
Sub total unallocated corporate and other (costs) income | (143,375 | ) | (102,502 | ) | (106,611 | ) | ||||||
Total operating income | 99,169 | 72,625 | 102,157 | |||||||||
Interest expense, net | 39,568 | 43,078 | 34,432 | |||||||||
Income before income taxes | 59,601 | 29,547 | 67,725 | |||||||||
Income tax expense | 22,226 | 10,881 | 25,078 | |||||||||
Net income | $ | 37,375 | $ | 18,666 | $ | 42,647 | ||||||
(1) | Intersegment revenues are eliminated from consolidated revenue. |
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Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Depreciation and amortization | ||||||||||||
Retail | $ | 22,143 | $ | 24,313 | $ | 19,347 | ||||||
Franchise | 1,837 | 1,889 | 1,922 | |||||||||
Manufacturing/Wholesale | 8,364 | 8,414 | 8,877 | |||||||||
Corporate/Other | 6,834 | 6,420 | 8,647 | |||||||||
Total depreciation and amortization | $ | 39,178 | $ | 41,036 | $ | 38,793 | ||||||
Capital expenditures | ||||||||||||
Retail | $ | 15,439 | $ | 11,657 | $ | 18,267 | ||||||
Franchise | — | — | — | |||||||||
Manufacturing/Wholesale | 5,933 | 6,033 | 6,939 | |||||||||
Corporate/Other | 2,473 | 3,135 | 3,123 | |||||||||
Total capital expenditures | $ | 23,845 | $ | 20,825 | $ | 28,329 | ||||||
Total assets Retail | $ | 485,153 | $ | 441,364 | $ | 418,136 | ||||||
Franchise | 275,530 | 290,092 | 314,836 | |||||||||
Manufacturing/Wholesale | 133,899 | 148,445 | 143,151 | |||||||||
Corporate/Other | 74,203 | 145,739 | 156,475 | |||||||||
Total assets | $ | 968,785 | $ | 1,025,640 | $ | 1,032,598 | ||||||
Geographic areas | ||||||||||||
Total revenues: | ||||||||||||
United States | $ | 1,413,650 | $ | 1,255,468 | $ | 1,283,041 | ||||||
Foreign | 73,466 | 62,240 | 61,701 | |||||||||
Total revenues | $ | 1,487,116 | $ | 1,317,708 | $ | 1,344,742 | ||||||
Long-lived assets: | ||||||||||||
United States | $ | 487,548 | $ | 503,452 | $ | 529,756 | ||||||
Foreign | 3,369 | 4,713 | 6,284 | |||||||||
Total long-lived assets | $ | 490,917 | $ | 508,165 | $ | 536,040 | ||||||
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Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
U.S. Retail Product Categories: | ||||||||||||
VMHS | $ | 415,344 | $ | 377,699 | $ | 362,592 | ||||||
Sports Nutrition Products | 369,731 | 330,308 | 293,156 | |||||||||
Diet and Weight Management Products | 158,693 | 135,219 | 193,068 | |||||||||
Other | 111,140 | 90,800 | 98,619 | |||||||||
Total U.S. Retail revenues | 1,054,908 | 934,026 | 947,435 | |||||||||
Canada retail revenues(1) | 67,762 | 55,467 | 54,401 | |||||||||
Total Retail revenue | $ | 1,122,670 | $ | 989,493 | $ | 1,001,836 | ||||||
(1) | Product sales for Canada are managed in local currency, therefore total results are reflected in this table |
NOTE 20. | FRANCHISE REVENUE |
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Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Product sales | $ | 191,707 | $ | 173,427 | $ | 184,485 | ||||||
Royalties | 32,641 | 31,380 | 32,452 | |||||||||
Franchise fees | 3,532 | 3,565 | 3,514 | |||||||||
Other | 4,409 | 4,378 | 6,055 | |||||||||
Total franchise revenue | $ | 232,289 | $ | 212,750 | $ | 226,506 | ||||||
NOTE 21. | SUPPLEMENTAL CASH FLOW INFORMATION |
NOTE 22. | RETIREMENT PLANS |
Percent | ||||
Years of Service | Vested | |||
0-1 | 0 | % | ||
1-2 | 33 | % | ||
2-3 | 66 | % | ||
3+ | 100 | % |
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Table of Contents
NOTE 23. | RELATED PARTY TRANSACTIONS |
NOTE 24. | SUPPLEMENTAL GUARANTOR INFORMATION |
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Combined | ||||||||||||||||||||
Combined | Non- | |||||||||||||||||||
Parent/ | Guarantor | Guarantor | ||||||||||||||||||
December 31, 2006 | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Current assets | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 20,469 | $ | 3,611 | $ | — | $ | 24,080 | ||||||||||
Receivables, net | 3,636 | 71,053 | 138 | — | 74,827 | |||||||||||||||
Intercompany receivables | — | 71,584 | — | (71,584 | ) | — | ||||||||||||||
Inventories, net | — | 304,340 | 15,042 | — | 319,382 | |||||||||||||||
Other current assets | 213 | 42,231 | 4,192 | — | 46,636 | |||||||||||||||
Total current assets | 3,849 | 509,677 | 22,983 | (71,584 | ) | 464,925 | ||||||||||||||
Goodwill | — | 80,592 | 430 | — | 81,022 | |||||||||||||||
Brands | — | 209,000 | 3,000 | — | 212,000 | |||||||||||||||
Property, plant and equipment, net | — | 148,948 | 19,760 | — | 168,708 | |||||||||||||||
Investment in subsidiaries | 784,757 | 7,525 | — | (792,282 | ) | — | ||||||||||||||
Other assets | 12,475 | 38,435 | — | (8,780 | ) | 42,130 | ||||||||||||||
Total assets | $ | 801,081 | $ | 994,177 | $ | 46,173 | $ | (872,646 | ) | $ | 968,785 | |||||||||
Current liabilities | ||||||||||||||||||||
Current liabilities | $ | 4,421 | $ | 198,044 | $ | 12,885 | $ | — | $ | 215,350 | ||||||||||
Intercompany payables | 64,609 | — | 6,976 | (71,585 | ) | — | ||||||||||||||
Total current liabilities | 69,030 | 198,044 | 19,861 | (71,585 | ) | 215,350 | ||||||||||||||
Long-term debt | 419,720 | — | 18,650 | (8,780 | ) | 429,590 | ||||||||||||||
Other long-term liabilities | — | 11,377 | 137 | — | 11,514 | |||||||||||||||
Total liabilities | 488,750 | 209,421 | 38,648 | (80,365 | ) | 656,454 | ||||||||||||||
Total stockholder’s equity (deficit) | 312,331 | 784,757 | 7,525 | (792,282 | ) | 312,331 | ||||||||||||||
Total liabilities and stockholder’s equity (deficit) | $ | 801,081 | $ | 994,178 | $ | 46,173 | $ | (872,647 | ) | $ | 968,785 | |||||||||
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Combined | ||||||||||||||||||||
Combined | Non- | |||||||||||||||||||
Parent/ | Guarantor | Guarantor | ||||||||||||||||||
December 31, 2005 | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Current assets | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 83,143 | $ | 2,870 | $ | — | $ | 86,013 | ||||||||||
Receivables, net | 1,809 | 69,518 | 1,112 | — | 72,439 | |||||||||||||||
Intercompany receivables | — | 33,079 | — | (33,079 | ) | — | ||||||||||||||
Inventories, net | — | 283,511 | 14,655 | — | 298,166 | |||||||||||||||
Other current assets | 97 | 39,825 | 4,765 | — | 44,687 | |||||||||||||||
Total current assets | 1,906 | 509,076 | 23,402 | (33,079 | ) | 501,305 | ||||||||||||||
Goodwill, net | — | 79,167 | 942 | — | 80,109 | |||||||||||||||
Brands, net | — | 209,000 | 3,000 | — | 212,000 | |||||||||||||||
Property, plant and equipment, net | — | 158,877 | 20,605 | — | 179,482 | |||||||||||||||
Investment in subsidiaries | 809,105 | 7,081 | — | (816,186 | ) | — | ||||||||||||||
Other assets | 16,331 | 45,120 | 73 | (8,780 | ) | 52,744 | ||||||||||||||
Total assets | $ | 827,342 | $ | 1,008,321 | $ | 48,022 | $ | (858,045 | ) | $ | 1,025,640 | |||||||||
Current liabilities | ||||||||||||||||||||
Current liabilities | $ | 5,801 | $ | 188,362 | $ | 8,462 | $ | — | $ | 202,625 | ||||||||||
Intercompany payables | 20,474 | — | 12,605 | (33,079 | ) | — | ||||||||||||||
Total current liabilities | 26,275 | 188,362 | 21,067 | (33,079 | ) | 202,625 | ||||||||||||||
Long-term debt | 460,187 | — | 19,837 | (8,780 | ) | 471,244 | ||||||||||||||
Other long-term liabilities | — | 10,854 | 37 | — | 10,891 | |||||||||||||||
Total liabilities | 486,462 | 199,216 | 40,941 | (41,859 | ) | 684,760 | ||||||||||||||
Total stockholder’s equity (deficit) | 340,880 | 809,105 | 7,081 | (816,186 | ) | 340,880 | ||||||||||||||
Total liabilities and stockholder’s equity (deficit) | $ | 827,342 | $ | 1,008,321 | $ | 48,022 | $ | (858,045 | ) | $ | 1,025,640 | |||||||||
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Combined | ||||||||||||||||||||
Combined | Non- | |||||||||||||||||||
Parent/ | Guarantor | Guarantor | ||||||||||||||||||
Year Ended December 31, 2006 | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Revenue | $ | — | $ | 1,413,308 | $ | 84,405 | $ | (10,597 | ) | $ | 1,487,116 | |||||||||
Cost of sales, including costs of warehousing, distribution and occupancy | — | 932,705 | 61,422 | (10,597 | ) | 983,530 | ||||||||||||||
Gross profit | — | 480,603 | 22,983 | — | 503,586 | |||||||||||||||
Compensation and related benefits | — | 247,314 | 13,511 | — | 260,825 | |||||||||||||||
Advertising and promotion | — | 50,078 | 667 | — | 50,745 | |||||||||||||||
Other selling, general and administrative | 5,142 | 83,854 | 3,314 | — | 92,310 | |||||||||||||||
Subsidiary (income) expense | (43,224 | ) | (1,807 | ) | — | 45,031 | — | |||||||||||||
Other (income) expense | — | (52 | ) | 589 | — | 537 | ||||||||||||||
Operating income (loss) | 38,082 | 101,216 | 4,902 | (45,031 | ) | 99,169 | ||||||||||||||
Interest expense, net | 3,856 | 34,457 | 1,255 | — | 39,568 | |||||||||||||||
Income (loss) before income taxes | 34,226 | 66,759 | 3,647 | (45,031 | ) | 59,601 | ||||||||||||||
Income tax (benefit) expense | (3,149 | ) | 23,535 | 1,840 | — | 22,226 | ||||||||||||||
Net income (loss) | $ | 37,375 | $ | 43,224 | $ | 1,807 | $ | (45,031 | ) | $ | 37,375 | |||||||||
Combined | ||||||||||||||||||||
Combined | Non- | |||||||||||||||||||
Parent/ | Guarantor | Guarantor | ||||||||||||||||||
Year Ended December 31, 2005 | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Revenue | $ | — | $ | 1,255,357 | $ | 72,898 | $ | (10,547 | ) | $ | 1,317,708 | |||||||||
Cost of sales, including costs of warehousing, distribution and occupancy | — | 855,900 | 53,387 | (10,547 | ) | 898,740 | ||||||||||||||
Gross profit | — | 399,457 | 19,511 | — | 418,968 | |||||||||||||||
Compensation and related benefits | — | 216,437 | 12,189 | — | 228,626 | |||||||||||||||
Advertising and promotion | — | 44,179 | 482 | — | 44,661 | |||||||||||||||
Other selling, general and administrative | 1,923 | 72,657 | 1,531 | — | 76,111 | |||||||||||||||
Subsidiary (income) expense | (24,185 | ) | (3,067 | ) | — | 27,252 | — | |||||||||||||
Other income | — | (2,441 | ) | (614 | ) | — | (3,055 | ) | ||||||||||||
Operating income (loss) | 22,262 | 71,692 | 5,923 | (27,252 | ) | 72,625 | ||||||||||||||
Interest expense, net | 6,715 | 34,788 | 1,575 | — | 43,078 | |||||||||||||||
Income (loss) before income taxes | 15,547 | 36,904 | 4,348 | (27,252 | ) | 29,547 | ||||||||||||||
Income tax (benefit) expense | (3,119 | ) | 12,719 | 1,281 | — | 10,881 | ||||||||||||||
Net income (loss) | $ | 18,666 | $ | 24,185 | $ | 3,067 | $ | (27,252 | ) | $ | 18,666 | |||||||||
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Combined | ||||||||||||||||||||
Combined | Non- | |||||||||||||||||||
Parent/ | Guarantor | Guarantor | ||||||||||||||||||
Year Ended December 31, 2004 | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Revenue | $ | — | $ | 1,281,774 | $ | 72,611 | $ | (9,643 | ) | $ | 1,344,742 | |||||||||
Cost of sales, including costs of warehousing, distribution and occupancy | — | 852,190 | 52,688 | (9,643 | ) | 895,235 | ||||||||||||||
Gross profit | — | 429,584 | 19,923 | — | 449,507 | |||||||||||||||
Compensation and related benefits | — | 217,959 | 11,998 | — | 229,957 | |||||||||||||||
Advertising and promotion | — | 43,620 | 335 | — | 43,955 | |||||||||||||||
Other selling, general and administrative | 1,745 | 66,104 | 5,879 | — | 73,728 | |||||||||||||||
Subsidiary (income) expense | (43,918 | ) | (325 | ) | — | 44,243 | — | |||||||||||||
Other income | — | (52 | ) | (238 | ) | — | (290 | ) | ||||||||||||
Operating income (loss) | 42,173 | 102,278 | 1,949 | (44,243 | ) | 102,157 | ||||||||||||||
Interest expense, net | — | 32,853 | 1,579 | — | 34,432 | |||||||||||||||
Income (loss) before income taxes | 42,173 | 69,425 | 370 | (44,243 | ) | 67,725 | ||||||||||||||
Income tax (benefit) expense : | (474 | ) | 25,507 | 45 | — | 25,078 | ||||||||||||||
Net income (loss) | $ | 42,647 | $ | 43,918 | $ | 325 | $ | (44,243 | ) | $ | 42,647 | |||||||||
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Combined | ||||||||||||||||
Combined | Non- | |||||||||||||||
Parent/ | Guarantor | Guarantor | ||||||||||||||
Year Ended December 31, 2006 | Issuer | Subsidiaries | Subsidiaries | Consolidated | ||||||||||||
(In thousands) | ||||||||||||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES: | $ | — | $ | 71,117 | $ | 3,456 | $ | 74,573 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
Capital expenditures | — | (22,171 | ) | (1,675 | ) | (23,846 | ) | |||||||||
Investment/distribution | 111,105 | (111,105 | ) | — | — | |||||||||||
Other investing | — | 412 | — | 412 | ||||||||||||
Net cash provided by (used in) investing activities | 111,105 | (132,864 | ) | (1,675 | ) | (23,434 | ) | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
Decrease in GNC Corporation investment in General Nutrition Centers, Inc. | (20,292 | ) | — | — | (20,292 | ) | ||||||||||
Restricted payment made to GNC Corporation shareholders | (49,934 | ) | — | — | (49,934 | ) | ||||||||||
Payments on long-term debt | (40,879 | ) | — | (1,095 | ) | (41,974 | ) | |||||||||
Other financing | — | (927 | ) | — | (927 | ) | ||||||||||
Net cash (used in) provided by financing activities | (111,105 | ) | (927 | ) | (1,095 | ) | (113,127 | ) | ||||||||
Effect of exchange rate on cash | — | — | 55 | 55 | ||||||||||||
Net (decrease) increase in cash | — | (62,674 | ) | 741 | (61,933 | ) | ||||||||||
Beginning balance, cash | — | 83,143 | 2,870 | 86,013 | ||||||||||||
Ending balance, cash | $ | — | $ | 20,469 | $ | 3,611 | $ | 24,080 | ||||||||
Combined | ||||||||||||||||
Combined | Non- | |||||||||||||||
Parent/ | Guarantor | Guarantor | ||||||||||||||
Year Ended December 31, 2005 | Issuer | Subsidiaries | Subsidiaries | Consolidated | ||||||||||||
(In thousands) | ||||||||||||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES: | $ | 4,710 | $ | 57,720 | $ | 1,756 | $ | 64,186 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
Capital expenditures | — | (20,626 | ) | (199 | ) | (20,825 | ) | |||||||||
Investment/distribution | 36,882 | (36,882 | ) | — | — | |||||||||||
Other investing | — | (710 | ) | — | (710 | ) | ||||||||||
Net cash provided by (used in) investing activities | 36,882 | (58,218 | ) | (199 | ) | (21,535 | ) | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
GNC Corporation return of capital from General Nutrition Centers, Inc. | (901 | ) | — | — | (901 | ) | ||||||||||
Payments on long-term debt — third parties | (185,981 | ) | — | (1,033 | ) | (187,014 | ) | |||||||||
Proceeds from senior notes issuance | 150,000 | — | — | 150,000 | ||||||||||||
Other financing | (4,710 | ) | 919 | — | (3,791 | ) | ||||||||||
Net cash (used in) provided by financing activities | (41,592 | ) | 919 | (1,033 | ) | (41,706 | ) | |||||||||
Effect of exchange rate on cash | — | — | (93 | ) | (93 | ) | ||||||||||
Net increase in cash | — | 421 | 431 | 852 | ||||||||||||
Beginning balance, cash | — | 82,722 | 2,439 | 85,161 | ||||||||||||
Ending balance, cash | $ | — | $ | 83,143 | $ | 2,870 | $ | 86,013 | ||||||||
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Combined | ||||||||||||||||
Combined | Non- | |||||||||||||||
Parent/ | Guarantor | Guarantor | ||||||||||||||
Year Ended December 31, 2004 | Issuer | Subsidiaries | Subsidiaries | Consolidated | ||||||||||||
(In thousands) | ||||||||||||||||
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES: | $ | (1,754 | ) | $ | 83,675 | $ | 1,547 | $ | 83,468 | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
Capital expenditures | — | (27,588 | ) | (741 | ) | (28,329 | ) | |||||||||
Acquisition of General Nutrition Companies, Inc. | 2,102 | — | — | 2,102 | ||||||||||||
Investment/distribution | 2,850 | (2,850 | ) | — | — | |||||||||||
Other investing | — | (810 | ) | — | (810 | ) | ||||||||||
Net cash provided by (used in) investing activities | 4,952 | (31,248 | ) | (741 | ) | (27,037 | ) | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
GNC Corporation investment in General Nutrition Centers, Inc. | 758 | — | — | 758 | ||||||||||||
Payments on long-term debt — third parties | (2,850 | ) | — | (978 | ) | (3,828 | ) | |||||||||
Other financing | (1,106 | ) | (347 | ) | — | (1,453 | ) | |||||||||
Net cash used in financing activities | (3,198 | ) | (347 | ) | (978 | ) | (4,523 | ) | ||||||||
Effect of exchange rate on cash | — | — | 77 | 77 | ||||||||||||
Net increase (decrease) in cash | — | 52,080 | (95 | ) | 51,985 | |||||||||||
Beginning balance, cash | — | 30,642 | 2,534 | 33,176 | ||||||||||||
Ending balance, cash | $ | — | $ | 82,722 | $ | 2,439 | $ | 85,161 | ||||||||
NOTE 25. | SUBSEQUENT EVENTS |
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Successor | Predecessor | |||||||||||
March 31, | December 31, | |||||||||||
2007 | 2006* | |||||||||||
(Unaudited) | ||||||||||||
(In thousands, except | ||||||||||||
share data) | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 7,085 | $ | 24,080 | ||||||||
Receivables, net | 76,338 | 74,827 | ||||||||||
Inventories, net (Note 3) | 329,119 | 319,382 | ||||||||||
Deferred tax assets, net | 22,868 | 16,738 | ||||||||||
Other current assets | 41,981 | 29,898 | ||||||||||
Total current assets | 477,391 | 464,925 | ||||||||||
Long-term assets: | ||||||||||||
Goodwill (Note 4) | 574,623 | 81,022 | ||||||||||
Brands (Note 4) | 720,000 | 212,000 | ||||||||||
Other intangible assets, net (Note 4) | 182,579 | 23,062 | ||||||||||
Property, plant and equipment, net | 177,423 | 168,708 | ||||||||||
Deferred financing fees, net | 28,708 | 12,269 | ||||||||||
Deferred tax assets, net | — | 675 | ||||||||||
Other long-term assets | 17,563 | 6,124 | ||||||||||
Total long-term assets | 1,700,896 | 503,860 | ||||||||||
Total assets | $ | 2,178,287 | $ | 968,785 | ||||||||
Current liabilities: | ||||||||||||
Accounts payable, includes cash overdraft of $5,381 and $4,136 respectively | $ | 109,843 | $ | 104,121 | ||||||||
Accrued payroll and related liabilities | 18,562 | 30,988 | ||||||||||
Accrued income taxes | — | 4,967 | ||||||||||
Accrued interest (Note 5) | 4,007 | 7,531 | ||||||||||
Current portion, long-term debt (Note 5) | 7,945 | 1,765 | ||||||||||
Other current liabilities | 99,887 | 65,977 | ||||||||||
Total current liabilities | 240,244 | 215,349 | ||||||||||
Long-term liabilities: | ||||||||||||
Long-term debt (Note 5) | 1,084,752 | 429,591 | ||||||||||
Deferred tax liabilities, net | 239,222 | — | ||||||||||
Other long-term liabilities | 23,815 | 11,514 | ||||||||||
Total long-term liabilities | 1,347,789 | 441,105 | ||||||||||
Total liabilities | 1,588,033 | 656,454 | ||||||||||
Stockholder’s equity | ||||||||||||
Common stock, $0.01 par value, 1,000 shares authorized, 100 shares issued and outstanding | — | — | ||||||||||
Paid-in-capital | 589,099 | 261,899 | ||||||||||
Retained earnings | 864 | 49,108 | ||||||||||
Accumulated other comprehensive income | 291 | 1,324 | ||||||||||
Total stockholder’s equity | 590,254 | 312,331 | ||||||||||
Total liabilities and stockholder’s equity | $ | 2,178,287 | $ | 968,785 | ||||||||
* | Footnotes summarized from the Audited Financial Statements. |
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Successor | Predecessor | ||||||||||||
Sixteen Days | Three Months | ||||||||||||
Ended | Period Ended | Ended | |||||||||||
March 31, | March 15, | March 31, | |||||||||||
2007 | 2007 | 2006 | |||||||||||
(Unaudited) | |||||||||||||
(In thousands) | |||||||||||||
Revenue | $ | 62,080 | $ | 329,829 | $ | 386,892 | |||||||
Cost of sales, including costs of warehousing, distribution and occupancy | 42,776 | 212,175 | 256,872 | ||||||||||
Gross profit | 19,304 | 117,654 | 130,020 | ||||||||||
Compensation and related benefits | 10,059 | 64,311 | 65,852 | ||||||||||
Advertising and promotion | 229 | 20,473 | 15,839 | ||||||||||
Other selling, general and administrative | 3,373 | 17,396 | 20,971 | ||||||||||
Foreign currency gain | — | (154 | ) | (588 | ) | ||||||||
Merger-related costs (Note 1) | — | 34,603 | — | ||||||||||
Operating income (loss) | 5,643 | (18,975 | ) | 27,946 | |||||||||
Interest expense, net (Note 5) | 4,238 | 43,036 | 9,676 | ||||||||||
Income (loss) before income taxes | 1,405 | (62,011 | ) | 18,270 | |||||||||
Income tax expense (benefit) (Note 10) | 541 | (10,697 | ) | 6,777 | |||||||||
Net income (loss) | 864 | (51,314 | ) | 11,493 | |||||||||
Other comprehensive income (loss) | 291 | (283 | ) | (620 | ) | ||||||||
Comprehensive income (loss) | $ | 1,155 | $ | (51,597 | ) | $ | 10,873 | ||||||
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Accumulated | ||||||||||||||||||||||||
Other | Total | |||||||||||||||||||||||
Common Stock | Paid-in- | Retained | Comprehensive | Stockholder’s | ||||||||||||||||||||
Shares | Dollars | Capital | Earnings | Income/(Loss) | Equity | |||||||||||||||||||
(In thousands, except share data) | ||||||||||||||||||||||||
Predecessor | ||||||||||||||||||||||||
Balance at December 31, 2006 | 100 | $ | — | $ | 261,899 | $ | 49,108 | $ | 1,324 | $ | 312,331 | |||||||||||||
Adoption of FIN 48 | — | — | — | (418 | ) | — | (418 | ) | ||||||||||||||||
Cancellation of stock options | — | — | (47,018 | ) | — | — | (47,018 | ) | ||||||||||||||||
Non-cash stock based compensation | — | — | 4,124 | — | — | 4,124 | ||||||||||||||||||
Net loss | — | — | — | (51,314 | ) | — | (51,314 | ) | ||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | (283 | ) | (283 | ) | ||||||||||||||||
Capital contribution from selling shareholder | — | — | 463,393 | — | — | 463,393 | ||||||||||||||||||
Balance at March 15, 2007 (unaudited) | $ | 100 | $ | — | $ | 682,398 | $ | (2,624 | ) | $ | 1,041 | $ | 680,815 | |||||||||||
Successor | ||||||||||||||||||||||||
Parent company investment in General Nutrition Centers, Inc. | 100 | — | 589,000 | — | — | 589,000 | ||||||||||||||||||
Non-cash stock based compensation | — | — | 99 | — | — | 99 | ||||||||||||||||||
Net loss | — | — | — | 864 | — | 864 | ||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | 291 | 291 | ||||||||||||||||||
Balance at March 31, 2007 (unaudited) | $ | 100 | $ | — | $ | 589,099 | $ | 864 | $ | 291 | $ | 590,254 | ||||||||||||
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Successor | Predecessor | ||||||||||||
Three | |||||||||||||
Sixteen Days | Period | Months | |||||||||||
Ended | Ended | Ended | |||||||||||
March 31, | March 15, | March 31, | |||||||||||
2007 | 2007 | 2006 | |||||||||||
(Unaudited) | |||||||||||||
(In thousands) | |||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||
Net (loss) income | $ | 864 | $ | (51,314 | ) | $ | 11,493 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||
Depreciation expense | 1,419 | 6,510 | 8,656 | ||||||||||
Deferred fee writedown — early debt extinguishment | — | 11,680 | — | ||||||||||
Amortization of intangible assets | 382 | 866 | 978 | ||||||||||
Amortization of deferred financing fees | 148 | 589 | 735 | ||||||||||
Amortization of original issue discount | 13 | — | — | ||||||||||
Increase in provision for inventory losses | 186 | 2,247 | 909 | ||||||||||
Non-cash stock-based compensation | 99 | 4,124 | 676 | ||||||||||
Decrease in provision for losses on accounts receivable | — | (39 | ) | (395 | ) | ||||||||
Decrease in net deferred taxes | — | (3,874 | ) | — | |||||||||
Changes in assets and liabilities: | |||||||||||||
(Increase) decrease in receivables | (3,514 | ) | 1,676 | (7,061 | ) | ||||||||
Decrease (increase) in inventory, net | 4,270 | (2,128 | ) | (42,217 | ) | ||||||||
Decrease in franchise note receivables, net | 233 | 912 | 1,109 | ||||||||||
(Increase) decrease in other assets | (8,000 | ) | 3,394 | 348 | |||||||||
Increase in accounts payable | 727 | 3,749 | 25,846 | ||||||||||
(Increase) decrease in accrued taxes | — | (4,967 | ) | 6,584 | |||||||||
Increase (decrease) in interest payable | 4,006 | (7,531 | ) | 1,303 | |||||||||
Increase (decrease) in accrued liabilities | 1,368 | (12,682 | ) | 3,509 | |||||||||
Net cash provided by (used in) operating activities | 2,201 | (46,788 | ) | 12,473 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||
Capital expenditures | (642 | ) | (5,693 | ) | (3,692 | ) | |||||||
Acquisition of the Company | (1,615,843 | ) | |||||||||||
Store acquisition costs | (10 | ) | (555 | ) | (131 | ) | |||||||
Net cash used in investing activities | (1,616,495 | ) | (6,248 | ) | (3,823 | ) | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||
Issuance of new equity | 552,291 | — | (68 | ) | |||||||||
Restricted payment made by General Nutrition Centers, Inc. to GNC Corporation Common Stockholders | — | — | (49,934 | ) | |||||||||
Contribution from selling shareholders | — | 463,393 | — | ||||||||||
Increase (decrease) in cash overdrafts | 5,381 | (4,136 | ) | 156 | |||||||||
Borrowings from new revolving credit facility | 10,500 | — | — | ||||||||||
Payments on new revolving credit facility | (10,500 | ) | — | — | |||||||||
Borrowings from new senior credit facility | 675,000 | — | — | ||||||||||
Proceeds from issuance of new senior sub notes | 110,000 | — | — | ||||||||||
Proceeds from issuance of new senior notes | 297,000 | — | — | ||||||||||
Redemption of 85/8% senior notes | — | (150,000 | ) | — | |||||||||
Redemption of 81/2% senior notes | — | (215,000 | ) | — | |||||||||
Payment of 2003 senior credit facility | — | (55,290 | ) | — | |||||||||
Payments on long-term debt | (47 | ) | (334 | ) | (517 | ) | |||||||
Financing fees | (27,877 | ) | — | — | |||||||||
Net cash provided by (used in) financing activities | 1,611,748 | 38,633 | (50,363 | ) | |||||||||
Effect of exchange rate on cash | 119 | (165 | ) | (10 | ) | ||||||||
Net decrease in cash | (2,427 | ) | (14,568 | ) | (41,723 | ) | |||||||
Beginning balance, cash | 9,512 | 24,080 | 86,013 | ||||||||||
Ending balance, cash | $ | 7,085 | $ | 9,512 | $ | 44,290 | |||||||
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NOTE 1. | NATURE OF BUSINESS |
March 16, | ||||
2007 | ||||
(In thousands) | ||||
Merger consideration | $ | 1,650,000 | ||
Acquisition costs | 13,325 | |||
Debt assumed by buyer | (10,773 | ) | ||
Non-cash rollover of shares | (36,709 | ) | ||
Cash paid at Acquisition | $ | 1,615,843 | ||
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March 16, 2007 | ||||
(In thousands) | ||||
Assets | ||||
Current assets | $ | 457,900 | ||
Goodwill | 574,623 | |||
Other intangible assets | 902,961 | |||
Property, plant and equipment | 178,136 | |||
Other assets | 20,946 | |||
Total assets | $ | 2,134,566 | ||
Liabilities: | ||||
Current liabilities | 204,857 | |||
Long-term debt | 10,773 | |||
Deferred tax liability | 243,355 | |||
Other liabilities | 23,029 | |||
Total liabilities | $ | 482,014 | ||
Preliminary fair value of net assets acquired | $ | 1,652,552 | ||
Total equity contribution | $ | 589,000 | ||
Debt issued in connection with Merger | 1,092,500 | |||
Deferred financing fees | (28,948 | ) | ||
Preliminary fair value of net assets acquired | $ | 1,652,552 | ||
NOTE 2. | BASIS OF PRESENTATION |
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NOTE 3. | INVENTORIES, NET |
Successor | ||||||||||||
March 31, 2007 | ||||||||||||
Net Carrying | ||||||||||||
Gross cost | Reserves | Value | ||||||||||
(Unaudited) | ||||||||||||
(In thousands) | ||||||||||||
Finished product ready for sale | $ | 276,061 | $ | (8,356 | ) | $ | 267,705 | |||||
Work-in-process, bulk product and raw minerals | 46,224 | (1,905 | ) | 44,319 | ||||||||
Packaging supplies | 4,583 | — | 4,583 | |||||||||
Preliminary fair value adjustment | 12,512 | — | 12,512 | |||||||||
$ | 339,380 | $ | (10,261 | ) | $ | 329,119 |
Predecessor | ||||||||||||
December 31, 2006 | ||||||||||||
Net Carrying | ||||||||||||
Gross cost | Reserves | Value | ||||||||||
(In thousands) | ||||||||||||
Finished product ready for sale | $ | 280,722 | $ | (8,677 | ) | $ | 272,045 | |||||
Work-in process, bulk product and raw materials | 44,630 | (2,119 | ) | 42,511 | ||||||||
Packaging supplies | 4,826 | — | 4,826 | |||||||||
$ | 330,178 | $ | (10,796 | ) | $ | 319,382 |
NOTE 4. | GOODWILL AND INTANGIBLE ASSETS, NET |
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Manufacturing/ | ||||||||||||||||
Retail | Franchising | Wholesale | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Predecessor | ||||||||||||||||
Balance at December 31, 2006 | $ | 26,678 | $ | 53,898 | $ | 446 | $ | 81,022 | ||||||||
Additions: acquired franchise stores | $ | 161 | $ | — | $ | — | $ | 161 | ||||||||
Balance at March 15, 2007 (unaudited) | $ | 26,839 | $ | 53,898 | $ | 446 | $ | 81,183 | ||||||||
Successor | ||||||||||||||||
Balance at March 31, 2007 (unaudited) | $ | 238,296 | $ | 126,971 | $ | 209,356 | $ | 574,623 | ||||||||
Gold | Retail | Franchise | Operating | Franchise | ||||||||||||||||||||
Card | Brand | Brand | Agreements | Rights | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Predecessor | ||||||||||||||||||||||||
Balance at December 31, 2006 | $ | — | $ | 67,476 | $ | 144,524 | $ | 21,352 | $ | 1,710 | $ | 235,062 | ||||||||||||
Additions: Acquired franchise stores | — | — | — | — | 207 | 207 | ||||||||||||||||||
Amortization expense | — | — | — | (609 | ) | (256 | ) | (865 | ) | |||||||||||||||
Balance at March 15, 2007 (unaudited) | $ | — | $ | 67,476 | $ | 144,524 | $ | 20,743 | $ | 1,661 | $ | 234,404 | ||||||||||||
Successor | ||||||||||||||||||||||||
Balance at March 16, 2007 (unaudited) | $ | 3,300 | $ | 500,000 | $ | 220,000 | $ | 178,000 | $ | 1,661 | $ | 902,961 | ||||||||||||
Amortization expense | (46 | ) | — | — | (280 | ) | (56 | ) | (382 | ) | ||||||||||||||
Balance at March 31, 2007 (unaudited) | $ | 3,254 | $ | 500,000 | $ | 220,000 | $ | 177,720 | $ | 1,605 | $ | 902,579 | ||||||||||||
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Successor | Predecessor | ||||||||||||||||||||||||||
Estimated | March 31, 2007 | December 31, 2006 | |||||||||||||||||||||||||
Life in | Accumulated | Carrying | Accumulated | Carrying | |||||||||||||||||||||||
Years | Cost | Amortization | Amount | Cost | Amortization | Amount | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||
Brands — retail | — | $ | 500,000 | $ | — | $ | 500,000 | $ | 67,476 | $ | — | $ | 67,476 | ||||||||||||||
Brands — franchise | — | 220,000 | — | 220,000 | 144,524 | — | 144,524 | ||||||||||||||||||||
Gold card — retail | 3 | 1,300 | (18 | ) | 1,282 | 2,230 | (2,230 | ) | — | ||||||||||||||||||
Gold card — franchise | 3 | 2,000 | (28 | ) | 1,972 | 340 | (340 | ) | — | ||||||||||||||||||
Retail agreements | 25-35 | 54,000 | (74 | ) | 53,926 | 8,500 | (3,627 | ) | 4,873 | ||||||||||||||||||
Franchise agreements | 25 | 69,000 | (114 | ) | 68,886 | 21,900 | (5,421 | ) | 16,479 | ||||||||||||||||||
Manufacturing agreements | 25 | 55,000 | (92 | ) | 54,908 | — | — | — | |||||||||||||||||||
Franchise rights | 1-5 | 1,661 | (56 | ) | 1,605 | 2,995 | (1,285 | ) | 1,710 | ||||||||||||||||||
$ | 902,961 | $ | (382 | ) | $ | 902,579 | $ | 247,965 | $ | (12,903 | ) | $ | 235,062 | ||||||||||||||
Estimated | ||||
Amortization | ||||
Years Ending December 31, | Expense | |||
(In thousands) | ||||
2007 | 6,275 | |||
2008 | 8,366 | |||
2009 | 8,366 | |||
2010 | 7,072 | |||
2011 | 6,731 | |||
Thereafter | 145,769 | |||
Total | $ | 182,579 | ||
NOTE 5. | LONG TERM DEBT / INTEREST EXPENSE |
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Successor | Predecessor | ||||||||
March 31, | December 31, | ||||||||
2007 | 2006 | ||||||||
(Unaudited) | |||||||||
(In thousands) | |||||||||
2007 Senior credit facility | $ | 675,000 | $ | — | |||||
Senior Toggle Notes | 297,013 | — | |||||||
10.75% Senior Subordinated Notes | 110,000 | — | |||||||
2003 Senior credit facility | — | 55,290 | |||||||
85/8% Senior Notes | — | 150,000 | |||||||
81/2% Senior Subordinated Notes | — | 215,000 | |||||||
Mortgage | 10,684 | 11,065 | |||||||
Less: current maturities | (7,945 | ) | (1,764 | ) | |||||
Total | $ | 1,084,752 | $ | 429,591 | |||||
10.75% | ||||||||||||||||||||
Senior | Senior | |||||||||||||||||||
2007 Senior | Toggle | Subordinated | Mortgage | |||||||||||||||||
Years Ending December 31, | Credit Facility | Notes | Notes | Loan | Total | |||||||||||||||
2007 | $ | 5,063 | $ | — | $ | — | $ | 904 | $ | 5,967 | ||||||||||
2008 | 6,750 | — | — | 1,281 | 8,031 | |||||||||||||||
2009 | 6,750 | — | — | 1,373 | 8,123 | |||||||||||||||
2010 | 6,750 | — | — | 1,472 | 8,222 | |||||||||||||||
2011 | 6,750 | — | — | 1,577 | 8,327 | |||||||||||||||
Thereafter | 642,937 | 300,000 | 110,000 | 4,077 | 1,057,014 | |||||||||||||||
$ | 675,000 | $ | 300,000 | $ | 110,000 | $ | 10,684 | $ | 1,095,684 | |||||||||||
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Successor | Predecessor | ||||||||||||
Sixteen Days | Three Months | ||||||||||||
Ended | Period Ended | Ended | |||||||||||
March 31, | March 15, | March 31, | |||||||||||
2007 | 2007 | 2006 | |||||||||||
(Unaudited) | |||||||||||||
(In thousands) | |||||||||||||
2003 Senior credit facility | |||||||||||||
Term Loan | $ | — | $ | 918 | $ | 1,812 | |||||||
Revolver | — | 132 | 159 | ||||||||||
85/8% Senior Notes | — | 3,807 | 3,234 | ||||||||||
81/2% Senior Subordinated Notes | — | 2,695 | 4,569 | ||||||||||
Call premiums | 23,159 | — | |||||||||||
Deferred financing fees | — | 589 | 736 | ||||||||||
Deferred fee writedown — early extinguishment | 11,680 | — | |||||||||||
2007 Senior credit facility | |||||||||||||
Term Loan | 2,268 | — | — | ||||||||||
Revolver | 21 | — | — | ||||||||||
Senior Toggle Notes | 1,225 | — | — | ||||||||||
10.75% Senior Subordinated Notes | 493 | — | — | ||||||||||
Deferred financing fees | 148 | — | — | ||||||||||
OID amortization | 13 | — | |||||||||||
Mortgage | 33 | 392 | 152 | ||||||||||
Interest income — other | 37 | (336 | ) | (986 | ) | ||||||||
Interest expense, net | $ | 4,238 | $ | 43,036 | $ | 9,676 | |||||||
Successor | Predecessor | ||||||||
March 31, | December 31, | ||||||||
2007 | 2006 | ||||||||
(Unaudited) | |||||||||
(In thousands) | |||||||||
2003 Senior credit facility | $ | — | $ | 43 | |||||
85/8% Senior Notes | — | 5,965 | |||||||
81/2% Senior Subordinated Notes | — | 1,523 | |||||||
2007 Senior credit facility | 2,289 | — | |||||||
Senior Toggle Notes | 1,225 | — | |||||||
10.75% Senior Subordinated Notes | 493 | — | |||||||
Total | $ | 4,007 | $ | 7,531 | |||||
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NOTE 6. | COMMITMENTS AND CONTINGENCIES |
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• | Harry Rodriguez v. General Nutrition Companies, Inc.(previously pending in the Supreme Court of the State of New York, New York County, New York, Index No. 02/126277). Plaintiffs filed this putative class action on or about July 25, 2002. The Second Amended Complaint, filed thereafter on or about December 6, 2002, alleged claims for unjust enrichment, violation of General Business Law Section 349 (misleading and deceptive trade practices), and violation of General Business Law Section 350 (false advertising). On July 2, 2003, the court granted part of the GNC motion to dismiss and dismissed the unjust enrichment cause of action. On January 4, 2006, the court conducted a hearing on the GNC motion for summary judgment and plaintiffs’ motion for class certification, both of which remain pending. | |
• | Everett Abrams v. General Nutrition Companies, Inc.(previously pending in the Superior Court of New Jersey, Mercer County, New Jersey, DocketNo. L-3789-02). Plaintiffs filed this putative class action on or about July 25, 2002. The Second Amended Complaint, filed thereafter on or about December 20, 2002, alleged claims for false and deceptive marketing and omissions and violations of the New Jersey Consumer Fraud Act. On November 18, 2003, the court signed an order dismissing plaintiff’s claims for affirmative misrepresentation and sponsorship with prejudice. The claim for knowing omissions remains pending. | |
• | Shawn Brown, Ozan Cirak, Thomas Hannon, and Luke Smith v. General Nutrition Companies, Inc.(previously pending in the 15th Judicial Circuit Court, Palm Beach County, Florida, Index.No. CA-02-14221AB). Plaintiffs filed this putative class action on or about July 25, 2002. The Second Amended Complaint, filed thereafter on or about November 27, 2002, alleged claims for violations of the Florida Deceptive and Unfair Trade Practices Act, unjust enrichment, and violation of Florida Civil Remedies for Criminal Practices Act. These claims remain pending. | |
• | Andrew Toth v. General Nutrition Companies, Inc., et al. (previously pending in the Common Pleas Court of Philadelphia County, Philadelphia, Class ActionNo. 02-703886). Plaintiffs filed this putative class action on or about July 25, 2002. The Amended Complaint, filed thereafter on or about April 8, 2003, alleged claims for violations of the Unfair Trade Practices and Consumer Protection Law, and unjust enrichment. The court denied the plaintiffs’ motion for class certification, and that order has been affirmed on appeal. Plaintiffs thereafter filed a petition in the Pennsylvania Supreme Court asking that the court consider an appeal of the order denying class certification. The Pennsylvania Supreme Court denied the petition after the case against GNC was removed as described below. | |
• | David Pio and Ty Stephens, individually and on behalf of all others similarly situated v. General Nutrition Companies, Inc.(previously pending in the Circuit Court of Cook County, Illinois, County Department, Chancery Division, CaseNo. 02-CH-14122). Plaintiffs filed this putative class action on or about July 25, 2002. The Amended Complaint, filed thereafter on or about April 4, 2004, alleged claims for violations of |
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the Illinois Consumer Fraud Act, and unjust enrichment. The motion for class certification was stricken, but the court afforded leave to the plaintiffs to file another motion. Plaintiffs have not yet filed another motion. |
• | Santiago Guzman, individually, on behalf of all others similarly situated, and on behalf of the general public v. General Nutrition Companies, Inc.(previously pending on the California Judicial Counsel Coordination Proceeding No. 4363, Los Angeles County Superior Court). Plaintiffs filed this putative class action on or about February 17, 2004. The Second Amended Complaint, filed on or about November 27, 2006, alleged claims for violations of the Consumers Legal Remedies Act, violation of the Unfair Competition Act, and unjust enrichment. These claims remain pending. |
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NOTE 7. | STOCK-BASED COMPENSATION PLANS |
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Weighted | ||||||||
Average | ||||||||
Total Options | Exercise Price | |||||||
Predecessor | ||||||||
Outstanding at December 31, 2006 | 4,812,836 | $ | 3.65 | |||||
Cancellation at March 15, 2007 | (4,812,836 | ) | ||||||
Outstanding at March 15, 2007 (unaudited) | — | |||||||
Successor | ||||||||
Granted | 6,717,808 | $ | 6.25 | |||||
Outstanding at March 31, 2007 (unaudited) | 6,717,808 | $ | 6.25 | |||||
Exercisable at March 31, 2007 (unaudited) | — | $ | — | |||||
March 31, | ||||
2007 | ||||
(Unaudited) | ||||
Dividend yield | 0.00 | % | ||
Expected option life | 7 years | |||
Volatility factor percentage of market price | 25.00 | % | ||
Discount rate | 4.58 | % |
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NOTE 8. | SEGMENTS |
Successor | Predecessor | ||||||||||||
Sixteen Days | Three Months | ||||||||||||
Ended | Period Ended | Ended | |||||||||||
March 31, | March 15, | March 31, | |||||||||||
in thousands | 2007 | 2007 | 2006 | ||||||||||
(Unaudited) | |||||||||||||
Revenues: | |||||||||||||
Retail | $ | 45,350 | $ | 259,313 | $ | 294,890 | |||||||
Franchise | 11,558 | 47,237 | 60,337 | ||||||||||
Manufacturing/Wholesale: | |||||||||||||
Intersegment(1) | 8,739 | 35,477 | 43,931 | ||||||||||
Third Party | 5,172 | 23,279 | 31,665 | ||||||||||
Sub total Manufacturing/Wholesale | 13,911 | 58,756 | 75,596 | ||||||||||
Sub total segment revenues | 70,819 | 365,306 | 430,823 | ||||||||||
Intersegment elimination(1) | (8,739 | ) | (35,477 | ) | (43,931 | ) | |||||||
Total revenue | $ | 62,080 | $ | 329,829 | $ | 386,892 | |||||||
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(1) | Intersegment revenues are eliminated from consolidated revenue. |
Operating income: | |||||||||||||
Retail | $ | 5,289 | $ | 28,249 | $ | 35,263 | |||||||
Franchise | 2,949 | 14,518 | 16,088 | ||||||||||
Manufacturing/Wholesale | 1,990 | 10,267 | 11,159 | ||||||||||
Unallocated corporate and other (costs) income: | |||||||||||||
Warehousing and distribution costs | (2,036 | ) | (10,667 | ) | (12,846 | ) | |||||||
Corporate costs | (2,549 | ) | (61,342 | ) | (21,718 | ) | |||||||
Subtotal unallocated corporate and other costs net | (4,585 | ) | (72,009 | ) | (34,564 | ) | |||||||
Total operating income (loss) | $ | 5,643 | $ | (18,975 | ) | $ | 27,946 | ||||||
March 31, | December 31, | ||||||||
2007 | 2006 | ||||||||
(In thousands) | |||||||||
(Unaudited) | |||||||||
Total assets Retail | $ | 1,177,549 | $ | 485,153 | |||||
Franchise | 479,535 | 275,530 | |||||||
Manufacturing/Wholesale | 405,423 | 133,899 | |||||||
Corporate/Other | 115,780 | 74,203 | |||||||
Total assets | $ | 2,178,287 | $ | 968,785 | |||||
NOTE 9. | SUPPLEMENTAL GUARANTOR INFORMATION |
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Combined | Combined | |||||||||||||||||||
Successor | Parent/ | Guarantor | Non-Guarantor | |||||||||||||||||
March 31, 2007 | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
(Unaudited) | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
Current assets | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 6,224 | $ | 861 | $ | — | $ | 7,085 | ||||||||||
Receivables, net | 3,942 | 72,270 | 126 | — | 76,338 | |||||||||||||||
Intercompany receivables | — | 123,445 | — | (123,445 | ) | — | ||||||||||||||
Inventories, net | — | 311,903 | 17,216 | — | 329,119 | |||||||||||||||
Other current assets | 18,614 | 43,394 | 2,841 | — | 64,849 | |||||||||||||||
Total current assets | 22,556 | 557,236 | 21,044 | (123,445 | ) | 477,391 | ||||||||||||||
Goodwill | — | 574,193 | 430 | — | 574,623 | |||||||||||||||
Brands | — | 720,000 | — | — | 720,000 | |||||||||||||||
Property, plant and equipment, net | — | 156,370 | 21,053 | — | 177,423 | |||||||||||||||
Investment in subsidiaries | 1,740,905 | 4,821 | — | (1,745,726 | ) | — | ||||||||||||||
Other assets | 28,914 | 208,717 | — | (8,781 | ) | 228,850 | ||||||||||||||
Total assets | $ | 1,792,375 | $ | 2,221,337 | $ | 42,527 | $ | (1,877,952 | ) | $ | 2,178,287 | |||||||||
Current liabilities | ||||||||||||||||||||
Current liabilities | $ | 11,939 | $ | 217,437 | $ | 10,868 | $ | — | $ | 240,244 | ||||||||||
Intercompany payables | 114,919 | — | 8,526 | (123,445 | ) | — | ||||||||||||||
Total current liabilities | 126,858 | 217,437 | 19,394 | (123,445 | ) | 240,244 | ||||||||||||||
Long-term debt | 1,075,263 | — | 18,270 | (8,781 | ) | 1,084,752 | ||||||||||||||
Other long-term liabilities | — | 262,995 | 42 | — | 263,037 | |||||||||||||||
Total liabilities | 1,202,121 | 480,432 | 37,706 | (132,226 | ) | 1,588,033 | ||||||||||||||
Total stockholder’s equity (deficit) | 590,254 | 1,740,905 | 4,821 | (1,745,726 | ) | 590,254 | ||||||||||||||
Total liabilities and stockholder’s equity (deficit) | $ | 1,792,375 | $ | 2,221,337 | $ | 42,527 | $ | (1,877,952 | ) | $ | 2,178,287 | |||||||||
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Combined | Combined | |||||||||||||||||||
Predecessor | Guarantor | Non-Guarantor | ||||||||||||||||||
December 31, 2006 | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Current assets | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 20,469 | $ | 3,611 | $ | — | $ | 24,080 | ||||||||||
Receivables, net | 3,636 | 71,053 | 138 | — | 74,827 | |||||||||||||||
Intercompany receivables | — | 71,585 | — | (71,585 | ) | — | ||||||||||||||
Inventories, net | — | 304,340 | 15,042 | — | 319,382 | |||||||||||||||
Other current assets | 213 | 42,231 | 4,192 | — | 46,636 | |||||||||||||||
Total current assets | 3,849 | 509,678 | 22,983 | (71,585 | ) | 464,925 | ||||||||||||||
Goodwill | — | 80,592 | 430 | — | 81,022 | |||||||||||||||
Brands | — | 209,000 | 3,000 | — | 212,000 | |||||||||||||||
Property, plant and equipment, net | — | 148,948 | 19,760 | — | 168,708 | |||||||||||||||
Investment in subsidiaries | 784,757 | 7,525 | — | (792,282 | ) | — | ||||||||||||||
Other assets | 12,475 | 38,435 | — | (8,780 | ) | 42,130 | ||||||||||||||
Total assets | $ | 801,081 | $ | 994,178 | $ | 46,173 | $ | (872,647 | ) | $ | 968,785 | |||||||||
Current liabilities | ||||||||||||||||||||
Current liabilities | $ | 4,421 | $ | 198,044 | $ | 12,885 | $ | — | $ | 215,350 | ||||||||||
Intercompany payables | 64,609 | — | 6,976 | (71,585 | ) | — | ||||||||||||||
Total current liabilities | 69,030 | 198,044 | 19,861 | (71,585 | ) | 215,350 | ||||||||||||||
Long-term debt | 419,720 | — | 18,650 | (8,780 | ) | 429,590 | ||||||||||||||
Other long-term liabilities | — | 11,377 | 137 | — | 11,514 | |||||||||||||||
Total liabilities | 488,750 | 209,421 | 38,648 | (80,365 | ) | 656,454 | ||||||||||||||
Total stockholder’s equity (deficit) | 312,331 | 784,757 | 7,525 | (792,282 | ) | 312,331 | ||||||||||||||
Total liabilities and stockholder’s equity (deficit) | $ | 801,081 | $ | 994,178 | $ | 46,173 | $ | (872,647 | ) | $ | 968,785 | |||||||||
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Combined | Combined | |||||||||||||||||||
Successor | Parent/ | Guarantor | Non-Guarantor | |||||||||||||||||
Sixteen Days Ended March 31, 2007 | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
(Unaudited) | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
Revenue | $ | — | $ | 58,807 | $ | 3,856 | $ | (583 | ) | $ | 62,080 | |||||||||
Cost of sales, including costs of warehousing, distribution and occupancy | — | 40,762 | 2,597 | (583 | ) | 42,776 | ||||||||||||||
Gross profit | — | 18,045 | 1,259 | — | 19,304 | |||||||||||||||
Compensation and related benefits | — | 9,524 | 535 | — | 10,059 | |||||||||||||||
Advertising and promotion | — | 177 | 52 | — | 229 | |||||||||||||||
Other selling, general and administrative | — | 3,207 | 166 | — | 3,373 | |||||||||||||||
Subsidiary (income) expense | (3,511 | ) | (192 | ) | — | 3,703 | — | |||||||||||||
Other (income) expense | — | — | — | — | — | |||||||||||||||
Operating income (loss) | 3,511 | 5,329 | 506 | (3,703 | ) | 5,643 | ||||||||||||||
Interest expense, net | 4,167 | (46 | ) | 117 | — | 4,238 | ||||||||||||||
Income (loss) before income taxes | (656 | ) | 5,375 | 389 | (3,703 | ) | 1,405 | |||||||||||||
Income tax (benefit) expense | (1,520 | ) | 1,864 | 197 | — | 541 | ||||||||||||||
Net income (loss) | $ | 864 | $ | 3,511 | $ | 192 | $ | (3,703 | ) | $ | 864 | |||||||||
Combined | Combined | |||||||||||||||||||
Predecessor | Guarantor | Non-Guarantor | ||||||||||||||||||
Period Ended March 15, 2007 | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
(Unaudited) | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
Revenue | $ | — | $ | 314,632 | $ | 17,489 | $ | (2,292 | ) | $ | 329,829 | |||||||||
Cost of sales, including costs of warehousing, distribution and occupancy | — | 201,973 | 12,494 | (2,292 | ) | 212,175 | ||||||||||||||
Gross profit | — | 112,659 | 4,995 | — | 117,654 | |||||||||||||||
Compensation and related benefits | — | 61,615 | 2,696 | — | 64,311 | |||||||||||||||
Advertising and promotion | — | 20,435 | 38 | — | 20,473 | |||||||||||||||
Other selling, general and administrative | 34,689 | 17,514 | (204 | ) | — | 51,999 | ||||||||||||||
Subsidiary (income) expense | (12,958 | ) | (1,581 | ) | — | 14,539 | — | |||||||||||||
Other (income) expense | — | — | (154 | ) | — | (154 | ) | |||||||||||||
Operating income (loss) | (21,731 | ) | 14,676 | 2,619 | (14,539 | ) | (18,975 | ) | ||||||||||||
Interest expense, net | 42,981 | (539 | ) | 594 | — | 43,036 | ||||||||||||||
Income (loss) before income taxes | (64,712 | ) | 15,215 | 2,025 | (14,539 | ) | (62,011 | ) | ||||||||||||
Income tax (benefit) expense | (13,398 | ) | 2,257 | 444 | — | (10,697 | ) | |||||||||||||
Net income (loss) | $ | (51,314 | ) | $ | 12,958 | $ | 1,581 | $ | (14,539 | ) | $ | (51,314 | ) | |||||||
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Combined | Combined | |||||||||||||||||||
Predecessor | Guarantor | Non-Guarantor | ||||||||||||||||||
Three Months Ended March 31, 2006 | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
(Unaudited) | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
Revenue | $ | — | $ | 369,164 | $ | 20,896 | $ | (3,168 | ) | $ | 386,892 | |||||||||
Cost of sales, including costs of warehousing, distribution and occupancy | — | 245,126 | 14,914 | (3,168 | ) | 256,872 | ||||||||||||||
Gross profit | — | 124,038 | 5,982 | — | 130,020 | |||||||||||||||
Compensation and related benefits | — | 62,600 | 3,252 | — | 65,852 | |||||||||||||||
Advertising and promotion | — | 15,745 | 94 | — | 15,839 | |||||||||||||||
Other selling, general and administrative | 1,029 | 19,414 | 528 | — | 20,971 | |||||||||||||||
Subsidiary (income) expense | (12,603 | ) | (1,596 | ) | — | 14,199 | — | |||||||||||||
Other income | — | 26 | (614 | ) | — | (588 | ) | |||||||||||||
Operating income (loss) | 11,574 | 27,849 | 2,722 | (14,199 | ) | 27,946 | ||||||||||||||
Interest expense, net | 735 | 8,558 | 383 | — | 9,676 | |||||||||||||||
Income (loss) before income taxes | 10,839 | 19,291 | 2,339 | (14,199 | ) | 18,270 | ||||||||||||||
Income tax (benefit) expense | (654 | ) | 6,688 | 743 | — | 6,777 | ||||||||||||||
Net income (loss) | $ | 11,493 | $ | 12,603 | $ | 1,596 | $ | (14,199 | ) | $ | 11,493 | |||||||||
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Combined | Combined | |||||||||||||||
Successor | Parent/ | Guarantor | Non-Guarantor | |||||||||||||
Sixteen Days Ended March 31, 2007 | Issuer | Subsidiaries | Subsidiaries | Consolidated | ||||||||||||
(Unaudited) | ||||||||||||||||
(In thousands) | ||||||||||||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES: | $ | — | $ | 3,364 | $ | (1,163 | ) | $ | 2,201 | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
Capital expenditures | — | (641 | ) | (1 | ) | (642 | ) | |||||||||
Investment/distribution | 9,429 | (9,429 | ) | — | — | |||||||||||
Acquisition of the Company | (1,615,843 | ) | — | — | (1,615,843 | ) | ||||||||||
Other investing | — | (10 | ) | — | (10 | ) | ||||||||||
Net cash provided by (used in) investing activities | (1,606,414 | ) | (10,080 | ) | (1 | ) | (1,616,495 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
Issuance of new equity | 552,291 | — | — | 552,291 | ||||||||||||
Borrowings from new senior credit facility | 675,000 | — | — | 675,000 | ||||||||||||
Proceeds from issuance of new senior sub notes | 110,000 | — | — | 110,000 | ||||||||||||
Proceeds from issuance of new senior notes | 297,000 | — | — | 297,000 | ||||||||||||
Financing fees | (27,877 | ) | — | — | (27,877 | ) | ||||||||||
Other financing | — | 5,381 | (47 | ) | 5,334 | |||||||||||
Net cash provided by (used in) financing activities | 1,606,414 | 5,381 | (47 | ) | 1,611,748 | |||||||||||
Effect of exchange rate on cash | — | — | 119 | 119 | ||||||||||||
Net decrease in cash | — | (1,335 | ) | (1,092 | ) | (2,427 | ) | |||||||||
Beginning balance, cash | — | 7,559 | 1,953 | 9,512 | ||||||||||||
Ending balance, cash | $ | — | $ | 6,224 | $ | 861 | $ | 7,085 | ||||||||
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Combined | Combined | |||||||||||||||
Predecessor | Guarantor | Non-Guarantor | ||||||||||||||
Period Ended March 15, 2007 | Issuer | Subsidiaries | Subsidiaries | Consolidated | ||||||||||||
(Unaudited) | ||||||||||||||||
(In thousands) | ||||||||||||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES: | $ | (43,103 | ) | $ | (3,102 | ) | $ | (583 | ) | $ | (46,788 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||||||
Capital expenditures | — | (5,117 | ) | (576 | ) | (5,693 | ) | |||||||||
Investment/distribution | — | — | — | — | ||||||||||||
Other investing | — | (555 | ) | — | (555 | ) | ||||||||||
Net cash provided by (used in) investing activities | — | (5,672 | ) | (576 | ) | (6,248 | ) | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||||||
Contribution from selling shareholders | 463,393 | — | 463,393 | |||||||||||||
Redemption of 85/8% senior notes | (150,000 | ) | — | (150,000 | ) | |||||||||||
Redemption of 81/2% senior notes | (215,000 | ) | — | (215,000 | ) | |||||||||||
Payment of 2003 senior credit facility | (55,290 | ) | — | (55,290 | ) | |||||||||||
Other financing | — | (4,136 | ) | (334 | ) | (4,470 | ) | |||||||||
Net cash provided by (used in) financing activities | 43,103 | (4,136 | ) | (334 | ) | 38,633 | ||||||||||
Effect of exchange rate on cash | — | — | (165 | ) | (165 | ) | ||||||||||
Net increase (decrease) in cash | — | (12,910 | ) | (1,658 | ) | (14,568 | ) | |||||||||
Beginning balance, cash | — | 20,469 | 3,611 | 24,080 | ||||||||||||
Ending balance, cash | $ | — | $ | 7,559 | $ | 1,953 | $ | 9,512 | ||||||||
Combined | Combined | |||||||||||||||
Predecessor | Guarantor | Non-Guarantor | ||||||||||||||
Three Months Ended March 31, 2006 | Issuer | Subsidiaries | Subsidiaries | Consolidated | ||||||||||||
(Unaudited) | ||||||||||||||||
(In thousands) | ||||||||||||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES: | $ | — | $ | 10,778 | $ | 1,695 | $ | 12,473 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||||||
Capital expenditures | — | (3,357 | ) | (335 | ) | (3,692 | ) | |||||||||
Investment/distribution | 50,247 | (50,247 | ) | — | — | |||||||||||
Other investing | — | (131 | ) | — | (131 | ) | ||||||||||
Net cash provided by (used in) investing activities | 50,247 | (53,735 | ) | (335 | ) | (3,823 | ) | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||||||
GNC Corporation return of capital from | ||||||||||||||||
General Nutrition Centers, Inc. | (68 | ) | — | — | (68 | ) | ||||||||||
Restricted payment made to GNC Corporation shareholders | (49,934 | ) | — | — | (49,934 | ) | ||||||||||
Payments on long-term debt | (245 | ) | — | (272 | ) | (517 | ) | |||||||||
Other financing | — | 156 | — | 156 | ||||||||||||
Net cash (used in) provided by financing activities | (50,247 | ) | 156 | (272 | ) | (50,363 | ) | |||||||||
Effect of exchange rate on cash | — | — | (10 | ) | (10 | ) | ||||||||||
Net (decrease) increase in cash | — | (42,801 | ) | 1,078 | (41,723 | ) | ||||||||||
Beginning balance, cash | — | 83,143 | 2,870 | 86,013 | ||||||||||||
Ending balance, cash | $ | — | $ | 40,342 | $ | 3,948 | $ | 44,290 | ||||||||
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NOTE 10. | INCOME TAXES |
NOTE 11. | RELATED PARTY TRANSACTIONS |
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Senior Floating Rate Toggle Exchange Notes due 2014
for all Outstanding
Senior Floating Rate Toggle Notes due 2014
and
10.75% Senior Subordinated Exchange Notes due 2015
for all Outstanding
10.75% Senior Subordinated Notes due 2015
Table of Contents
Item 20. | Indemnification of Directors and Officers. |
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Item 21. | Exhibits and Financial Statement Schedules. |
December 31, | December 31, | |||||||
2006 | 2005 | |||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | — | $ | — | ||||
Receivables, net | 3,636 | 1,809 | ||||||
Intercompany receivables | — | — | ||||||
Inventories, net | — | — | ||||||
Other current assets | 213 | 97 | ||||||
Total current assets | 3,849 | 1,906 | ||||||
Goodwill, net | — | — | ||||||
Brands, net | — | — | ||||||
Property, plant and equipment, net | — | — | ||||||
Investment in subsidiaries | 784,757 | 809,105 | ||||||
Other assets | 12,475 | 16,331 | ||||||
Total assets | $ | 801,081 | $ | 827,342 | ||||
Current liabilities: | ||||||||
Current liabilities | $ | 4,421 | $ | 5,801 | ||||
Intercompany payables | 64,609 | 20,474 | ||||||
Total current liabilities | 69,030 | 26,275 | ||||||
Long-term liabilities: | ||||||||
Long-term debt | 419,720 | 460,187 | ||||||
Other long-term liabilities | — | — | ||||||
Total liabilities | $ | 488,750 | $ | 486,462 | ||||
Total Stockholder’s equity: | 312,331 | 340,880 | ||||||
Total liabilities and stockholder’s equity | $ | 801,081 | $ | 827,342 | ||||
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Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
In thousands | ||||||||||||
Revenue: | $ | — | $ | — | $ | — | ||||||
Cost of sales, including warehousing, distribution and occupancy costs | — | — | — | |||||||||
Gross profit | — | — | — | |||||||||
Compensation and related benefits | — | — | — | |||||||||
Advertising and promotion | — | — | — | |||||||||
Other selling, general and administrative expenses | 5,142 | 1,923 | 1,745 | |||||||||
Subsidiary income | (43,224 | ) | (24,185 | ) | (43,918 | ) | ||||||
Other expense | — | — | — | |||||||||
Operating income | 38,082 | 22,262 | 42,173 | |||||||||
Interest expense, net | 3,856 | 6,715 | — | |||||||||
Income before income taxes | 34,226 | 15,547 | 42,173 | |||||||||
Income tax benefit | (3,149 | ) | (3,119 | ) | (474 | ) | ||||||
Net income | $ | 37,375 | $ | 18,666 | $ | 42,647 | ||||||
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
In thousands | ||||||||||||
Net cash provided by Operating Activities: | $ | — | $ | 4,710 | $ | (1,754 | ) | |||||
Cash Flows from Investing Activities: | ||||||||||||
Investment/distributions | 111,105 | 36,882 | 2,850 | |||||||||
Capital expenditures | — | — | — | |||||||||
Acquisition of General Nutrition Companies, Inc. | — | — | 2,102 | |||||||||
Net cash used in investing activities | 111,105 | 36,882 | 4,952 | |||||||||
Cash Flow from Financing Activities | ||||||||||||
Decrease in GNC Corporation investment in General Nutrition Centers, Inc. | (20,292 | ) | (901 | ) | 758 | |||||||
Restricted payment made to GNC Corporation shareholders | (49,934 | ) | — | — | ||||||||
Payments on long term debt | (40,879 | ) | (185,981 | ) | (2,850 | ) | ||||||
Proceeds from senior notes issuance | — | 150,000 | — | |||||||||
Other Financing | — | (4,710 | ) | (1,106 | ) | |||||||
Net cash provided by financing activities | (111,105 | ) | (41,592 | ) | (3,198 | ) | ||||||
Effect of exchange rate on cash | — | — | — | |||||||||
Net increase in cash | — | — | — | |||||||||
Beginning balance, cash | — | — | — | |||||||||
Ending balance, cash | $ | — | $ | — | $ | — | ||||||
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Other | Total | |||||||||||||||||||||||
Common Stock | Additional | Retained | Comprehensive | Stockholder | ||||||||||||||||||||
Shares | Dollars | Paid-in-Capital | Earnings | Income | Equity (Deficit) | |||||||||||||||||||
(In thousands, except share data) | ||||||||||||||||||||||||
Balance at December 31, 2004 | 100 | $ | — | $ | 278,258 | $ | 43,001 | $ | 1,163 | $ | 322,422 | |||||||||||||
GNC Corporation investment in General Nutrition Centers, Inc. | — | (901 | ) | — | — | (901 | ) | |||||||||||||||||
Non-cash stock compensation | — | 632 | — | — | 632 | |||||||||||||||||||
Net income | — | — | 18,666 | — | 18,666 | |||||||||||||||||||
Foreign currency translation adjustments | — | — | — | 61 | 61 | |||||||||||||||||||
Balance at December 31, 2005 | 100 | $ | — | $ | 277,989 | $ | 61,667 | $ | 1,224 | $ | 340,880 | |||||||||||||
GNC Corp investment in Centers, Inc. | — | (18,618 | ) | — | — | (18,618 | ) | |||||||||||||||||
Net income | — | — | 37,375 | — | 37,375 | |||||||||||||||||||
Non-cash stock compensation | — | 2,528 | — | — | 2,528 | |||||||||||||||||||
Payments to GNC Corporation shareholders | — | — | (49,934 | ) | — | (49,934 | ) | |||||||||||||||||
Foreign currency translation | — | — | — | 100 | 100 | |||||||||||||||||||
Balance at December 31, 2006 | 100 | $ | — | $ | 261,899 | $ | 49,108 | $ | 1,324 | $ | 312,331 | |||||||||||||
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Additions | ||||||||||||||||
Balance at | Charged to | Balance at | ||||||||||||||
Beginning of | Costs and | End of | ||||||||||||||
Period | Expense | Deductions | Period | |||||||||||||
(In thousands) | ||||||||||||||||
Allowance for doubtful accounts(1) | ||||||||||||||||
Twelve months ended December 31, 2004 | $ | 14,990 | $ | 8,431 | $ | (11,163 | ) | $ | 12,258 | |||||||
Twelve months ended December 31, 2005 | $ | 12,258 | $ | 9,736 | $ | (11,375 | ) | $ | 10,619 | |||||||
Twelve months ended December 31, 2006 | $ | 10,619 | $ | 4,693 | $ | (10,930 | ) | $ | 4,382 | |||||||
Inventory reserves | ||||||||||||||||
Twelve months ended December 31, 2004 | $ | 19,251 | $ | 17,344 | $ | (22,034 | ) | $ | 14,561 | |||||||
Twelve months ended December 31, 2005 | $ | 14,561 | $ | 3,864 | $ | (6,272 | ) | $ | 12,153 | |||||||
Twelve months ended December 31, 2006 | $ | 12,153 | $ | 3,755 | $ | (5,112 | ) | $ | 10,796 |
(1) | These balances are the total allowances for doubtful accounts for trade accounts receivable and the current and long-term franchise note receivable. |
Item 22. | Undertakings. |
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By: | /s/ Curtis J. Larrimer |
Title: | Executive Vice President and Chief |
Signature | Title | |||
By: | /s/ Joseph Fortunato Joseph Fortunato | Director, President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | ||
By: | /s/ Norman Axelrod Norman Axelrod | Chairman of the Board of Directors | ||
By: | /s/ David B. Kaplan David B. Kaplan | Director | ||
By: | /s/ Jeffrey B. Schwartz Jeffrey B. Schwartz | Director |
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Signature | Title | |||
By: | /s/ Lee Sienna Lee Sienna | Director | ||
By: | /s/ Josef Prosperi Josef Prosperi | Director | ||
By: | /s/ Michele J. Buchignani Michele J. Buchignani | Director |
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By: | /s/ Curtis J. Larrimer |
Title: | Executive Vice President and Chief |
Signature | Title | |||
By: | /s/ Joseph Fortunato Joseph Fortunato | President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | ||
By: | /s/ Joseph Fortunato Joseph Fortunato | Director | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Director |
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By: | /s/ Curtis J. Larrimer |
Title: | Executive Vice President and Chief |
Signature | Title | |||
By: | /s/ Joseph Fortunato Joseph Fortunato | President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | ||
By: | /s/ Joseph Fortunato Joseph Fortunato | Director | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Director |
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By: | /s/ Curtis J. Larrimer |
Title: | Executive Vice President and Chief |
Signature | Title | |||
By: | /s/ Joseph Fortunato Joseph Fortunato | President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | ||
By: | /s/ Joseph Fortunato Joseph Fortunato | Director | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Director |
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By: | /s/ Curtis J. Larrimer |
Title: | Executive Vice President and Chief |
Signature | Title | |||
By: | /s/ Joseph Fortunato Joseph Fortunato | President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | ||
By: | /s/ Joseph Fortunato Joseph Fortunato | Director | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Director |
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By: | /s/ Curtis J. Larrimer |
Title: | Executive Vice President and Chief |
Signature | Title | |||
By: | /s/ Joseph Fortunato Joseph Fortunato | President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | ||
By: | /s/ Joseph Fortunato Joseph Fortunato | Director | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Director |
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By: | /s/ Curtis J. Larrimer |
Title: | Executive Vice President and Chief |
Signature | Title | |||
By: | /s/ Joseph Fortunato Joseph Fortunato | President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | ||
By: | /s/ Joseph Fortunato Joseph Fortunato | Director | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Director |
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By: | /s/ Curtis J. Larrimer |
Title: | Executive Vice President and Chief |
Signature | Title | |||
By: | /s/ Joseph Fortunato Joseph Fortunato | President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | ||
By: | /s/ Joseph Fortunato Joseph Fortunato | Director | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Director |
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By: | /s/ Curtis J. Larrimer |
Title: | Executive Vice President and Chief |
Signature | Title | |||
By: | /s/ Joseph Fortunato Joseph Fortunato | President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | ||
By: | /s/ Joseph Fortunato Joseph Fortunato | Director | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Director |
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By: | /s/ Curtis J. Larrimer |
Title: | Executive Vice President and Chief |
Signature | Title | |||
By: | /s/ Joseph Fortunato Joseph Fortunato | President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | ||
By: | /s/ Joseph Fortunato Joseph Fortunato | Director | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Director |
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By: | /s/ Curtis J. Larrimer |
Title: | Executive Vice President and Chief |
Signature | Title | |||
By: | /s/ Joseph Fortunato Joseph Fortunato | President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | ||
By: | /s/ Joseph Fortunato Joseph Fortunato | Director | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Director |
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By: | /s/ Curtis J. Larrimer |
Title: | Executive Vice President and Chief |
Signature | Title | |||
By: | /s/ Joseph Fortunato Joseph Fortunato | President and Chief Executive Officer of General Nutrition, Incorporated (Principal Executive Officer) | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Executive Vice President and Chief Financial Officer of General Nutrition, Incorporated (Principal Financial and Accounting Officer) | ||
By: | /s/ Joseph Fortunato Joseph Fortunato | Director of General Nutrition, Incorporated | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Director of General Nutrition, Incorporated |
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By: | /s/ Curtis J. Larrimer |
Title: | Executive Vice President and Chief |
Signature | Title | |||
By: | /s/ Joseph Fortunato Joseph Fortunato | President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | ||
By: | /s/ Joseph Fortunato Joseph Fortunato | Director | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Director |
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Table of Contents
By: | /s/ Curtis J. Larrimer |
Title: | Executive Vice President and Chief |
Signature | Title | |||
By: | /s/ Joseph Fortunato Joseph Fortunato | President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | ||
By: | /s/ Joseph Fortunato Joseph Fortunato | Director | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Director |
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Table of Contents
By: | /s/ Curtis J. Larrimer |
Title: | Executive Vice President and Chief |
Signature | Title | |||
By: | /s/ Joseph Fortunato Joseph Fortunato | President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | ||
By: | /s/ Joseph Fortunato Joseph Fortunato | Director | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Director |
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Table of Contents
By: | /s/ Curtis J. Larrimer |
Title: | Executive Vice President and Chief |
Signature | Title | |||
By: | /s/ Joseph Fortunato Joseph Fortunato | President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | ||
By: | /s/ Joseph Fortunato Joseph Fortunato | Director | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Director |
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Table of Contents
By: | /s/ Curtis J. Larrimer |
Title: | Executive Vice President and Chief |
Signature | Title | |||
By: | /s/ Joseph Fortunato Joseph Fortunato | President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | ||
By: | /s/ Joseph Fortunato Joseph Fortunato | Manager | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Manager |
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Table of Contents
By: | /s/ Curtis J. Larrimer |
Title: | Executive Vice President and Chief |
Signature | Title | |||
By: | /s/ Joseph Fortunato Joseph Fortunato | President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | ||
By: | /s/ Joseph Fortunato Joseph Fortunato | Director | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Director |
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Table of Contents
By: | /s/ Curtis J. Larrimer |
Title: | Executive Vice President and Chief |
Signature | Title | |||
By: | /s/ Joseph Fortunato Joseph Fortunato | President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | ||
By: | /s/ Joseph Fortunato Joseph Fortunato | Director | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Director |
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Table of Contents
By: | /s/ Curtis J. Larrimer |
Title: | Executive Vice President and Chief |
Signature | Title | |||
By: | /s/ Joseph Fortunato Joseph Fortunato | President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | ||
By: | /s/ Joseph Fortunato Joseph Fortunato | Director | ||
By: | /s/ Curtis J. Larrimer Curtis J. Larrimer | Director |
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3 | .1 | Certificate of Incorporation of General Nutrition Centers, Inc. (the “Company”) (f/k/a Apollo GNC Holding, Inc.). (Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement onForm S-4 (File No. 333-114502) (the “Form S-4”), filed April 15, 2004.) | ||
3 | .2 | Certificate of Amendment of Certificate of Incorporation of the Company. (Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .3 | By-Laws of the Company. (Incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .4 | Articles of Incorporation of General Nutrition, Incorporated, filed October 28, 2003. (Incorporated by reference to Exhibit 3.6 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .5 | By-laws of General Nutrition, Incorporated. (Incorporated by reference to Exhibit 3.5 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .6 | Articles of Incorporation of General Nutrition Corporation, filed October 28, 2003. (Incorporated by reference to Exhibit 3.6 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .7 | By-laws of General Nutrition Corporation. (Incorporated by reference to Exhibit 3.7 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .8 | Articles of Incorporation of Nutra Manufacturing, Inc. (f/k/a Nutricia Manufacturing USA, Inc.), filed October 31, 2003. (Incorporated by reference to Exhibit 3.8 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .9 | Amendment to Articles of Incorporation of Nutricia Manufacturing USA, Inc. (changing name to Nutra Manufacturing, Inc.), filed March 25, 2004. (Incorporated by reference to Exhibit 3.9 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .10 | By-laws of Nutra Manufacturing, Inc. (Incorporated by reference to Exhibit 3.10 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .11 | Certificate of Organization of GNC Franchising, LLC, filed December 31, 2003. (Incorporated by reference to Exhibit 3.11 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .12 | Limited Liability Company Operating Agreement of GNC Franchising, LLC, dated January 1, 2004. (Incorporated by reference to Exhibit 3.12 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .13 | Certificate of Incorporation of General Nutrition International, Inc. (f/k/a GND Investment Company), filed March 1, 1989. (Incorporated by reference to Exhibit 3.13 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .14 | Certificate of Amendment to Certificate of Incorporation of GND Investment Company (changing name to General Nutrition International, Inc.), filed April 12, 1990. (Incorporated by reference to Exhibit 3.14 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .15 | By-Laws of General Nutrition International, Inc. (Incorporated by reference to Exhibit 3.15 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .16 | Articles of Incorporation of General Nutrition Investment Company, filed October 28, 2003. (Incorporated by reference to Exhibit 3.16 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .17 | By-Laws of General Nutrition Investment Company. (Incorporated by reference to Exhibit 3.17 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .18 | Certificate of Incorporation of General Nutrition Systems, Inc., dated September 21, 1999. (Incorporated by reference to Exhibit 3.18 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .19 | By-Laws of General Nutrition Systems, Inc. (Incorporated by reference to Exhibit 3.19 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .20 | Certificate of Incorporation of General Nutrition Distribution Company, filed September 29, 1992. (Incorporated by reference to Exhibit 3.20 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .21 | Certificate of Amendment to Certificate of Incorporation of General Nutrition Distribution Company (changing name to General Nutrition Services, Inc.), filed January 13, 1993. (Incorporated by reference to Exhibit 3.21 to the Company’s Registration Statement onForm S-4, April 15, 2004.) |
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3 | .22 | Certificate of Amendment to Certificate of Incorporation of General Nutrition Services, Inc. (changing name to General Nutrition Distribution Company), filed February 1, 1998. (Incorporated by reference to Exhibit 3.22 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .23 | By-Laws of General Nutrition Distribution Company. (Incorporated by reference to Exhibit 3.23 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .24 | Certificate of Incorporation of GNC, Limited (n/k/a GNC Canada Limited), filed April 3, 1996. (Incorporated by reference to Exhibit 3.24 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .25 | Certificate of Amendment to Certificate of Incorporation of GNC, Limited (changing name to GNC Canada Limited), filed May 27, 2004. (Incorporated by reference to Exhibit 3.25 to the Company’s Registration Statement onForm S-4, [April 15, 2004].) | ||
3 | .26 | By-Laws of GNC Canada Limited. (Incorporated by reference to Exhibit 3.26 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .27 | Certificate of Incorporation of GNC (Canada) Holding Company, filed April 3, 1996. (Incorporated by reference to Exhibit 3.27 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .28 | By-Laws of GNC (Canada) Holding Company. (Incorporated by reference to Exhibit 3.28 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .29 | Articles of Incorporation of Informed Nutrition, Inc., filed November 16, 1995. (Incorporated by reference to Exhibit 3.29 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .30 | By-Laws of Informed Nutrition, Inc. (Incorporated by reference to Exhibit 3.30 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .31 | Certificate of Incorporation of General Nutrition Government Services, Inc., filed August 14, 1996. (Incorporated by reference to Exhibit 3.31 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .32 | Certificate of Amendment to Certificate of Incorporation of General Nutrition Government Services, Inc. (changing name to GN Government Oldco Services, Inc.), filed October 29, 2003. (Incorporated by reference to Exhibit 3.32 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .33 | Certificate of Amendment to Certificate of Incorporation of GN Government Oldco Services, Inc. (changing name to General Nutrition Government Services, Inc.), filed November 7, 2003. (Incorporated by reference to Exhibit 3.33 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .34 | By-Laws of General Nutrition Government Services, Inc. (Incorporated by reference to Exhibit 3.34 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .35 | Certificate of Incorporation of GN Investment, Inc., filed October 29, 2003. (Incorporated by reference to Exhibit 3.35 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .36 | By-Laws of GN Investment, Inc. (Incorporated by reference to Exhibit 3.36 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .37 | Articles of Incorporation of Nutra Sales Corporation (f/k/a General Nutrition Sales Corporation), filed October 28, 2003. (Incorporated by reference to Exhibit 3.37 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .38 | Amendment to Articles of Incorporation of General Nutrition Sales Corporation (changing name to Nutra Sales Corporation) filed September 20, 2004. (Incorporated by reference to Exhibit 3.38 to the Company’s Registration Statement onForm S-4, [April 15, 2004].) | ||
3 | .39 | By-Laws of Nutra Sales Corporation. (Incorporated by reference to Exhibit 3.39 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .40 | Certificate of Incorporation of GNC US Delaware, Inc., filed October 29, 2003. (Incorporated by reference to Exhibit 3.40 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .41 | By-Laws of GNC US Delaware, Inc. (Incorporated by reference to Exhibit 3.41 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .42 | Certificate of Limited Partnership of General Nutrition Distribution, L.P., filed January 28, 1998. (Incorporated by reference to Exhibit 3.42 to the Company’s Registration Statement onForm S-4, April 15, 2004.) |
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3 | .43 | Agreement of Limited Partnership of General Nutrition Distribution, L.P., dated January 27, 1998. (Incorporated by reference to Exhibit 3.43 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .44 | Certificate of Incorporation of General Nutrition Companies, Inc., dated October 29, 2003. (Incorporated by reference to Exhibit 3.44 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .45 | By-Laws of General Nutrition Companies, Inc. (Incorporated by reference to Exhibit 3.45 to the Company’s Registration Statement onForm S-4, April 15, 2004.) | ||
3 | .46 | Certificate of Incorporation of GNC Funding, Inc.** | ||
3 | .47 | By-Laws of GNC Funding, Inc.** | ||
3 | .48 | Articles of Incorporation of GNC Card Services, Inc.** | ||
3 | .49 | Regulations of GNC Card Services, Inc.* | ||
4 | .1 | Stockholders’ Agreement, dated November 10, 2006, by and among GNC Parent Corporation and certain stockholders.** | ||
4 | .2 | Supplemental Indenture, dated as of April 6, 2004, by and among GNC Franchising, LLC, the Company, the other Guarantors (as defined in the Indenture referred to therein) and U.S. Bank National Association, as trustee relating to the Company’s 81/2% Senior Subordinated Notes due 2010. (Incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement onForm S-4, filed April 15, 2004.) | ||
4 | .3 | Form of 81/2% Senior Subordinated Note due 2010. (Incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement onForm S-4, filed April 15, 2004.) | ||
4 | .4 | Indenture, dated as of January 18, 2005, by and among the Company, each of the Guarantors party thereto and U.S. Bank National Association, as trustee relating to the Company’s 85/8% Senior Notes due 2011. (Incorporated by reference to Exhibit 4.1 to the Company’sForm 8-K, filed January 19, 2005.) | ||
4 | .5 | Form of 85/8% Senior Note due 2011. (Incorporated by reference to Exhibit 4.2 to the Company’sForm 8-K, filed January 19, 2005.) | ||
4 | .6 | Supplemental Indenture, dated as of April 6, 2004, by and among GNC Franchising, LLC, the Company, the other Guarantors (as defined in the Indenture referred to therein) and U.S. Bank National Association, as trustee relating to the Company’s 81/2% Senior Subordinated Notes due 2010. (Incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement onForm S-4, filed April 15, 2004.) | ||
4 | .7 | Second Supplemental Indenture, dated as of March 5, 2007, by and among the Company, the Guarantors (as defined therein) and U.S. Bank National Association, as trustee relating to the Company’s 81/2% Senior Subordinated Notes due 2010.** | ||
4 | .8 | Supplemental Indenture, dated as of March 5, 2007, by and among the Company, the Guarantors (as defined therein) and U.S. Bank National Association, as trustee relating to the Company’s 85/8% Senior Notes due 2011.** | ||
4 | .9 | Indenture, dated as of March 16, 2007, among General Nutrition Centers, Inc., the Guarantors named therein and LaSalle Bank National Association, as trustee, governing the Senior Floating Rate Toggle Notes due 2014.* | ||
4 | .10 | Form of Senior Floating Rate Toggle Note due 2014 (Incorporated by reference to Exhibit 4.9 above) | ||
4 | .11 | Indenture, dated as of March 16, 2007, among General Nutrition Centers, Inc., the Guarantors named therein and LaSalle Bank National Association, as trustee, governing the 10.75% Senior Subordinated Notes due 2015.* | ||
4 | .12 | Form of 10.75% Senior Subordinated Note due 2015 (Incorporated by reference to Exhibit 4.11 above) | ||
4 | .13 | Registration Rights Agreement, dated as of March 16, 2007, by and among General Nutrition Centers, Inc. and J.P. Morgan Securities Inc., Goldman, Sachs & Co. and Lehman Brothers Inc. with respect to the Senior Floating Rate Toggle Notes due 2014.* | ||
4 | .14 | Registration Rights Agreement, dated as of March 16, 2007, by and among General Nutrition Centers, Inc. and J.P. Morgan Securities Inc., Goldman, Sachs & Co. and Lehman Brothers Inc. with respect to the 10.75% Senior Subordinated Notes due 2014.* | ||
5 | .1 | Opinion of Proskauer Rose LLP (including the consent of such firm) regarding legality of securities being offered.** |
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10 | .1 | Mortgage, Assignment of Leases, Rents and Contracts, Security Agreement and Fixture Filing, dated March 23, 1999, from Gustine Sixth Avenue Associates, Ltd., as Mortgagor, to Allstate Life Insurance Company, as Mortgagee. (Incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement onForm S-4, filed April 15, 2004.) | ||
10 | .2 | Patent License Agreement, dated December 5, 2003, by and between N.V. Nutricia and General Nutrition Corporation. (Incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement onForm S-4, filed April 15, 2004.) | ||
10 | .3 | Patent License Agreement, dated December 5, 2003, by and between N.V. Nutricia and General Nutrition Investment Company. (Incorporated by reference to Exhibit 10.7 to the Company’s Registration Statement onForm S-4, filed April 15, 2004.) | ||
10 | .4 | Patent License Agreement, dated December 5, 2003, by and between N.V. Nutricia and General Nutrition Investment Company. (Incorporated by reference to Exhibit 10.8 to the Company’s Registration Statement onForm S-4, filed April 15, 2004.) | ||
10 | .5 | Patent License Agreement, dated December 5, 2003, by and between N.V. Nutricia and General Nutrition Corporation. (Incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement onForm S-4, filed April 15, 2004.) | ||
10 | .6 | Know-How License Agreement, dated December 5, 2003, by and between N.V. Nutricia and General Nutrition Corporation. (Incorporated by reference to Exhibit 10.10 to the Company’s Registration Statement onForm S-4, filed April 15, 2004.) | ||
10 | .7 | Know-How License Agreement, dated December 5, 2003, by and between Numico Research B.V. and General Nutrition Investment Company. (Incorporated by reference to Exhibit 10.11 to the Company’s Registration Statement onForm S-4, filed April 15, 2004.) | ||
10 | .8 | Know-How License Agreement, dated December 5, 2003, by and between General Nutrition Corporation and N.V. Nutricia. (Incorporated by reference to Exhibit 10.12 to the Company’s Registration Statement onForm S-4, filed April 15, 2004.) | ||
10 | .9 | Patent License Agreement, dated December 5, 2003, by and between General Nutrition Investment Company and Numico Research B.V. (Incorporated by reference to Exhibit 10.13 to the Company’s Registration Statement onForm S-4, filed April 15, 2004.) | ||
10 | .9 | GNC Live Well Later Non-Qualified Deferred Compensation Plan. (Incorporated by reference to Exhibit 10.14 to the Company’s Registration Statement onForm S-4, filed April 15, 2004.) | ||
10 | .10 | GNC Corporation 2006 Stock Incentive Plan. (Incorporated by reference to Exhibit 10.21 to GNC Corp’s Registration Statement onForm S-1/A, filed July 28, 2006.) | ||
10 | .11 | GNC Parent Corporation 2006 Stock Incentive Plan.** | ||
10 | .12 | Form of GNC Parent Corporation 2006 Stock Incentive Plan Stock Option Agreement.** | ||
10 | .13 | GNC Parent Corporation 2007 Stock Incentive Plan.** | ||
10 | .14 | Form of GNC Parent Corporation 2007 Stock Incentive Plan Stock Option Agreement.** | ||
10 | .15 | Employment Agreement, dated as of December 22, 2005, by and among Centers, GNC and Robert J. DiNicola. (Incorporated by reference to Exhibit 10.1 to the Company’sForm 8-K, filed December 22, 2005.) | ||
10 | .16 | Amended and Restated Employment Agreement, dated as of December 8, 2006, by and between the Company and Joseph Fortunato. (Incorporated by reference to Exhibit 10.1 to the Company’sForm 8-K, filed December 8, 2006). | ||
10 | .17 | Employment Agreement, dated as of December 14, 2004, amended and restated as of March 14, 2005, by and between General Nutrition Centers, Inc., and Curtis Larrimer. (Incorporated by reference to Exhibit 10.1 the Company’sForm 8-K, filed March 14, 2005.) | ||
10 | .18 | Employment Agreement, dated as of December [ ], 2004, by and between the Company and Tom Dowd.** | ||
10 | .19 | GNC/Rite Aid Retail Agreement, dated as of December 8, 1998, by and between General Nutrition Sales Corporation and Rite Aid Corporation.*** (Incorporated by reference to Exhibit 10.24 to the Company’s Registration Statement onForm S-4, filed August 9, 2004.) |
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10 | .20 | Amendment to the GNC/Rite Aid Retail Agreement, dated as of November 20, 2000, by and between General Nutrition Sales Corporation and Rite Aid Hdqtrs Corp.*** (Incorporated by reference to Exhibit 10.25 to the Company’s Registration Statement onForm S-4, filed August 9, 2004.) | ||
10 | .21 | Amendment to the GNC/Rite Aid Retail Agreement dated as of May 1, 2004, between General Nutrition Sales Corporation and Rite Aid Hdqtrs Corp. (Incorporated by reference to Exhibit 10.26 to the Company’s Registration Statement onForm S-4, filed August 9, 2004.) | ||
10 | .22 | Form of indemnification agreement for directors and executive officers. ** | ||
10 | .23 | Amended and Restated Stock Purchase Agreement, dated as of November 21, 2006, by and among GNC Parent and GNC Corp. (Incorporated by reference to Exhibit 10.1 to the Company’sForm 8-K, filed November 28, 2006). | ||
10 | .24 | Management Services Agreement, dated as of December 5, 2003, by and among the Company, General Nutrition Centers Holding Company (n/k/a GNC Corp) and Apollo Management V, L.P. (Incorporated by reference to Exhibit 10.4 to the Company’s Registration Statement onForm S-4, filed April 15, 2004.) | ||
10 | .25 | Management Services Agreement, dated as of March 16, 2007, by and between GNC Acquisition Holdings Inc. and the Company.** | ||
10 | .26 | Credit Agreement, dated as of December 5, 2003, by and among General Nutrition Centers Holding Company (n/k/a GNC Corporation (“GNC Corp”)), the Company, as borrower, the several other banks and other financial institutions or entities from time to time party thereto, Lehman Brothers Inc. and J.P. Morgan Securities Inc., as joint lead arrangers and joint book runners, JPMorgan Chase Bank, as syndication agent, and Lehman Commercial Paper Inc., as administrative agent. (Incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement onForm S-4, filed April 15, 2004.) | ||
10 | .27 | First Amendment to the Credit Agreement, dated as of December 14, 2004, by and among GNC Corp, the Company, as borrower, the several banks and other financial institutions or entities from time to time party to the Credit Agreement referred to therein and Lehman Commercial Paper Inc. (Incorporated by reference to Exhibit 10.1 to the Company’sForm 8-K, filed December 16, 2004.) | ||
10 | .28 | Second Amendment to the Credit Agreement, dated as of May 25, 2006, by and among GNC Corp, the Company, as borrower, the several banks and other financial institutions or entities from time to time party to the Credit Agreement referred to therein and Lehman Commercial Paper Inc. (Incorporated by reference to Exhibit 10.1 to the Company’sForm 8-K, filed May 31, 2006.) | ||
10 | .29 | Guarantee and Collateral Agreement, dated as of December 5, 2003, made by General Nutrition Centers Holding Company (n/k/a GNC Corp), the Company and certain of its subsidiaries in favor of Lehman Commercial Paper Inc., as administrative agent. (Incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement onForm S-4, filed April 15, 2004.) | ||
10 | .30 | Form of Intellectual Property Security Agreement, dated as of December 5, 2003, made in favor of Lehman Commercial Paper Inc., as administrative agent. (Incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement onForm S-4, filed April 15, 2004.) | ||
10 | .31 | Credit Agreement, dated as of March 16, 2007, among GNC Corp., the Company, the lenders party thereto, J.P. Morgan Securities Inc. and Goldman Sachs Credit Partners L.P., as joint lead arrangers, Goldman Sachs Credit Partners L.P., as syndication agent, Merrill Lynch Capital Corporation and Lehman Commercial Paper Inc., as documentation agents and JPMorgan Chase Bank, N.A., as administrative agent.** | ||
10 | .32 | Guarantee and Collateral Agreement, dated as of March 16, 2007, by GNC Corp, the Company and the guarantors party thereto in favor of JPMorgan Chase Bank, N.A., as administrative agent.** | ||
10 | .33 | Form of Intellectual Property Security Agreement, dated as of March 16, 2007, by GNC Corp, the Company and the guarantors party thereto in favor of JPMorgan Chase Bank, N.A., as administrative agent.** | ||
12 | .1 | Statement re: Computation of Ratio of Earnings to Fixed Charges** | ||
21 | .1 | Subsidiaries of the Company.** | ||
23 | .1 | Consent of Proskauer Rose LLP (included as part of its opinion filed as Exhibit 5 hereto) | ||
23 | .2 | Consent of PricewaterhouseCoopers LLP, independent registered public accountants for the Company | ||
24 | .1 | Powers of Attorney (included on signature pages) | ||
25 | .1 | Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of LaSalle Bank National Association with respect to the Indenture governing the Senior Floating Rate Toggle Notes due 2014.** |
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25 | .2 | Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of LaSalle Bank National Association with respect to the Indenture governing the 10.75% Senior Subordinated Notes due 2015.** | ||
99 | .1 | Form of Letter of Transmittal** | ||
99 | .2 | Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees** | ||
99 | .3 | Form of Letter to Clients** | ||
99 | .4 | Form of Notice of Guaranteed Delivery** |
* | Filed herewith. | |
** | To be filed by amendment | |
*** | Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions have been separately filed with the SEC. |
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