GNC 2008 Annual Report Download - page 104

Table of Contents
GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
settlement contemplates a maximum total payment by the Company of $1.9 million if all potential claimants opt in. Based on the number of
actual opt-ins, the total amount paid in the third quarter of 2007 to the class is approximately $0.1 million. In addition, the Company paid the
plaintiffs counsel and agreed amount of $0.7 million for attorney's fees following approval by the court of the settlement. On July 23, 2007, the
court approved the settlement of claims as fair, reasonable, and adequate and entered its Order of Approval. The total amount paid to the class
approximated $0.1 million. Final Judgment was entered by the Court on December 18, 2007 disposing of the claims of the opt-in plaintiffs.
California Wage and Break Claim. On April 24, 2007, Kristin Casarez and Tyler Goodell filed a lawsuit against the Company in the Superior
Court of the State of California for the County of Orange. The Company removed the lawsuit to the United States District Court for the Central
district of California. Plaintiffs purport to bring the action on their own behalf, on behalf of a class of all current and former non-exempt
employees of GNC throughout the State of California employed on or after August 24, 2004, and as private attorney general on behalf of the
general public. Plaintiffs allege that they and members of the putative class were not provided all of the rest periods and meal periods to which
they were entitled under California law, and further allege that GNC failed to pay them split shift and overtime compensation to which they were
entitled to under California law. We intend to vigorously oppose class certification. Based on the information available to the Company at the
present time, they believe that this matter will not have a material adverse effect upon their business or financial condition.
Commitments
The Company maintains certain purchase commitments with various vendors to ensure its operational needs are fulfilled of approximately
$35.8 million. The future purchase commitments consisted of $10.0 million of advertising and inventory commitments, $13.8 million
management services agreement and bank fees and $12.0 million related to future litigation costs. Other commitments related to the
Company's business operations cover varying periods of time and are not significant. All of these commitments are expected to be fulfilled with
no adverse consequences to the Company's operations or financial condition.
Contingencies
Due to the nature of the Company's business operations having a presence in multiple taxing jurisdictions, the Company periodically
receives inquiries and/or audits from various state and local taxing authorities. Any probable and reasonably estimated liabilities that may arise
from these inquiries have been accrued and reflected in the accompanying financial statements. In conjunction with the Acquisition by Apollo
Funds V, certain other contingencies will be indemnified by Numico. These indemnifications include certain legal costs associated with certain
identified cases as well as any tax costs, including audit settlements, that would be for liabilities incurred prior to December 5, 2003.
NOTE 18. STOCKHOLDER'S EQUITY
At December 31, 2007 there were 100 shares of Common Stock, par value $.01 per share, outstanding. All of our outstanding stock was
owned by our Parent at December 31, 2007.
NOTE 19. STOCK-BASED COMPENSATION PLANS
Stock Options
The Company adopted SFAS No. 123(R), effective January 1, 2006. The Company selected the modified prospective method, which does
not require adjustment to prior period financial statements and measures expected future compensation cost for stock-based awards at fair
value on grant date. The Company utilizes the Black-Scholes model to calculate the fair value of options under SFAS 123(R), which is
consistent with disclosures previously included in prior year financial statements under SFAS 123. The resulting compensation cost is
recognized in the Company's financial statements over the option vesting period. As of the date of adoption of SFAS 123(R), the net
unrecognized compensation 100