GNC 2008 Annual Report Download - page 55

Table of Contents
portfolio, fewer company-financed franchise store openings than in prior years and the closing of 88 domestic franchises in 2007. Accrued
liabilities increased by $7.0 million, primarily the result of increases in accrued interest on debt.
For the year ended December 31, 2006, inventory increased $31.3 million, as a result of increases in our finished goods and a decrease
in our reserves. Franchise notes receivable decreased $4.6 million for the year ended December 31, 2006, as a result of payments on existing
notes; reduction in our receivable portfolio, fewer company-financed franchise store openings than in prior years and the closing of 115
domestic franchises in 2006. Accrued liabilities increased by $12.3 million, primarily the result of increases in deferred revenue from our Gold
Card program and increases in incentive accruals for our corporate incentive compensation program.
For the year ended December 31, 2005, inventory increased $33.3 million, as a result of increases in our finished goods, bulk inventory
and packaging supplies and a decrease in our reserves. Franchise notes receivable decreased $6.7 million for the year ended December 31,
2005, as a result of payments on existing notes, fewer company-financed franchise store openings than in prior years and the closing of 151
domestic franchises in 2005. Accrued interest for the year ended December 31, 2005 increased $6.0 million due to the 2005 issuance of the
$150.0 million senior notes, which had interest payable semi-annually on January 15 and July 15 each year. Other assets decreased
$6.7 million for the year ended December 31, 2005, primarily a result of a reduction in prepaids and long-term deposits.
Cash Used in Investing Activities
We used cash from investing activities of $1,677.6 million, $23.4 million and $21.5 million for the years ended December 31, 2007, 2006
and 2005, respectively. Capital expenditures, which were primarily for improvements to our retail stores and our South Carolina manufacturing
facility and which represent the majority of our cash used in investing activities, were $34.5 million, $23.8 million, and $20.8 million during the
years ended December 31, 2007, 2006, and 2005, respectively. We received $1.4 million in 2006 as a result of the sale of our Australian
manufacturing facility.
Cash Used in Financing Activities
We received cash from financing activities of $1,641.4 million in 2007. The primary sources of this cash were: (1) proceeds from the
issuance of the new debt, (2) borrowings from new credit facilities, and (3) issuance of new equity.
We used cash in financing activities of $113.1 million for the year ended December 31, 2006. The primary uses of this cash were a
restricted payment of $49.9 million to the holders of GNC common stock, $20.3 million returned to GNC Corporation to fund $1.7 million in
deferred IPO costs and a $19.0 million payment by GNC Corporation related to the redemption of its 12% Series A Exchangeable Preferred
Stock offset by $0.4 million in proceeds contributed to us from GNC Corporation's common stock activity, and $42.0 million in debt payments,
which included a $40.0 million payment in November 2006 under our December 2003 term loan facility.
In January 2005, we issued $150.0 million aggregate principal amount of senior notes and used the net proceeds from this issuance,
along with $39.4 million cash on hand, to pay down $185.0 million of our indebtedness under our term loan facility. For the year ended
December 31, 2005, we also paid $4.7 million in fees related to the January 2005 senior notes offering and paid down an additional $2.0 million
of debt.
December 2003 Senior Credit Facility. In connection with the Numico acquisition, in December 2003 we entered into a senior credit
facility with a syndicate of lenders. We borrowed the entire $285.0 million under the original term loan facility to fund part of the Numico
acquisition, with none of the $75.0 million revolving credit facility being utilized to fund the Numico acquisition. This facility was subsequently
amended in December 2004 and we repaid a portion of the term loan facility in January 2005. Interest on the term loan facility was payable
quarterly in arrears and at December 31, 2006 carried an average interest rate of 8.1%. The December 2003 senior credit facility was repaid in
full in connection with the Merger. 51