GNC 2008 Annual Report Download - page 6

Table of Contents
The merger consideration totaled $1.65 billion. The merger consideration was subject to certain post-closing adjustments, including an
adjustment for the aggregate amount of certain differences of working capital from an agreed upon working capital target. In addition, as a
result of the Merger, our Parent will obtain certain tax benefits. Pursuant to the merger agreement, our parent has agreed to make post-closing
payments to GNC Parent Corporation's former stockholders for any tax refunds that it receives as a result of these tax benefits and as and to
the extent its future tax obligations are reduced by these tax benefits. We will not benefit from these tax assets and will continue to make
payments to our parent in respect of taxes without regard to these tax benefits. The merger was funded with a combination of equity
contributions and our issuance of new debt. The new debt, which was entered into or issued on the closing, consisted of a new senior credit
facility comprised of a $675.0 million term loan facility and a $60.0 million revolving credit facility (the "New Senior Credit Facility"),
$300.0 million aggregate principal amount of Senior Floating Rate Toggle Notes due 2014 (the "New Senior Notes"), and $110.0 million
aggregate principal amount of 10.75% Senior Subordinated Notes due 2015 (the "New Senior Subordinated Notes"). We utilized proceeds from
the new debt to repay our December 2003 senior credit facility, our 8 5/8% senior notes issued in January 2005, and our 8 1/2% senior
subordinated notes issued in December 2003. We contributed the remainder of the debt proceeds, after payment of fees and expenses, to a
newly formed, wholly owned subsidiary, which then loaned such net proceeds to GNC Parent Corporation. GNC Parent Corporation used those
proceeds, together with the equity contributions, to repay GNC Parent Corporation's outstanding floating rate senior PIK notes issued in
November 2006, pay the merger consideration, and pay fees and expenses related to the merger transactions.
As a result of the Merger, GNC Acquisition Holdings Inc. became the sole equity holder of GNC Parent LLC and the ultimate parent
company of both GNC Corporation, our direct parent company, and us. The outstanding capital stock of GNC Acquisition Holdings Inc. is
beneficially owned by affiliates of Ares Management LLC and Teachers' Private Capital (a division of Ontario Teachers' Pension Plan Board),
certain institutional investors, certain of our directors, and certain former stockholders of GNC Parent Corporation, including members of our
management. Refer to Note 1, "Nature of Business," to our consolidated financial statements included in this report for additional information.
GNC Parent Corporation was formed in November 2006 to acquire all the outstanding common stock of GNC Corporation.
We were formed in October 2003 and GNC Corporation was formed as a Delaware corporation in November 2003 by Apollo
Management V, L.P. "Apollo", an affiliate of Apollo Management V, L.P. and members of our management to acquire General Nutrition
Companies, Inc. from Numico USA, Inc., a wholly owned subsidiary of Koninklijke (Royal) Numico N.V. (collectively, "Numico"). In December
2003, we purchased all of the outstanding equity interests of General Nutrition Companies, Inc.
General Nutrition Companies, Inc. was founded in 1935 by David Shakarian who opened its first health food store in Pittsburgh,
Pennsylvania. Since that time, the number of stores has continued to grow, and General Nutrition Companies, Inc. began producing its own
vitamin and mineral supplements as well as foods, beverages, and cosmetics. General Nutrition Companies, Inc. was acquired in August 1999
by Numico Investment Corp. and, prior to its acquisition, was a publicly traded company listed on the Nasdaq National Market.
Industry Overview
We operate within the large and growing U.S. nutritional supplements retail industry. According to Nutrition Business Journal's
Supplement Business Report 2007, our industry generated an estimated $22.5 billion in sales in 2006 and an estimated $23.4 billion in 2007,
and is projected to grow at an average annual rate of approximately 4% per year for at least the next five years. Our industry is also highly
fragmented, and we believe this fragmentation provides large operators, like us, the ability to compete more effectively due to scale
advantages. 2