GNC 2009 Annual Report Download - page 116
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Table of Contents
GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Level 2
—
observable inputs such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active, other inputs that are observable, or can be corroborated by observable market
data; and
Level 3
—
unobservable inputs for which there are little or no market data, which require the reporting entity to develop its own assumptions.
The following table presents our financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31,
2008 by level within the fair value hierarchy:
Fair Value Measurements Using
Level 1 Level 2 Level 3
(in thousands)
Other long-term liabilities $ 1,496 $ 18,902 $ —
The following is a description of the valuation methodologies used for these items, as well as the general classification of such items
pursuant to the fair value hierarchy of SFAS 157:
Other long-term liabilities — Other long-term liabilities classified as Level 1 consist of liabilities related to the Company's non-qualified
deferred compensation plan. The liabilities related to these plans are adjusted based on changes in the fair value of the underlying employee-
directed investment choices. Since the employee-directed investment choices are exchange traded equity indexes with quoted prices in active
markets, the liabilities are classified as within Level 1 on the fair value hierarchy. Other long-term liabilities classified as Level 2 consist of the
Company's interest rate swaps. The derivatives are a pay-variable, receive-fixed interest rate swap based on a LIBOR rate. Fair value is based
on a model-derived valuation using the LIBOR rate, which is an observable input in an active market. Therefore, the Company's derivative is
classified as Level 2 on the fair value hierarchy.
In addition to the above table, the Company's financial instruments also consist of cash and cash equivalents, accounts receivable, accounts
payable and long-term debt. The Company did not elect to value its long-term debt with the fair value option in accordance with SFAS 159. The
Company believes that the recorded values of all of its other financial instruments approximate their fair values because of their nature and
respective durations. 110