GNC 2009 Annual Report Download - page 57

Table of Contents
the borrowed amount and the requested amount reflects Lehman's election to not fund its pro rata share of the borrowing as required under the
facility. As a result, we do not expect that Lehman will fund its pro rata share of any future borrowing requests. If other financial institutions that
have extended credit commitments to us are adversely affected by the condition of the U.S. and international capital markets, they may become
unable to fund borrowings under the Revolving Credit Facility, which could have a material and adverse impact on our financial condition and
our ability to borrow additional funds, if needed, for working capital, capital expenditures, acquisitions, and other corporate purposes.
We expect our primary uses of cash in the near future will be debt service requirements, capital expenditures and working capital
requirements. We currently anticipate that cash generated from operations, together with amounts available under the Revolving Credit Facility
(excluding Lehman's commitment), will be sufficient for the term of the facility, which matures on March 15, 2012, to meet our operating
expenses, capital expenditures and debt service obligations as they become due. However, our ability to make scheduled payments of principal
on, to pay interest on, or to refinance our debt and to satisfy our other debt obligations will depend on our future operating performance, which
will be affected by general economic, financial and other factors beyond our control. We are currently in compliance with our debt covenant
reporting and compliance obligations under the Revolving Credit Facility in all material respects.
Cash Provided by Operating Activities
Cash provided by operating activities was $77.4 million, $41.1 million and $73.6 million during the years ended December 31, 2008, 2007,
and 2006, respectively. The primary reason for the changes in each year was the change in net income between each of the periods and
changes in working capital accounts. Net income increased $87.1 million for the year ended December 31, 2008 compared with the same
period in 2007. Net income decreased $69.7 million for the year ended December 31, 2007 compared with the same period in 2006.
For the year ended December 31, 2008, inventory increased $48.2 million, as a result of increases in our finished goods and work in process
inventories. Accounts payable increased $22.0 million, primarily the result of increases in inventory. Accrued liabilities decreased by $16.1
million, primarily the result of decreases in accrued payroll related to the timing of the pay with year end.
For the year ended December 31, 2007, inventory increased $8.5 million, as a result of increases in our finished goods and a decrease in
our reserves. Franchise notes receivable decreased $3.5 million for the year ended December 31, 2007, 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 88 domestic
franchises in 2007. Accrued liabilities increased by $7.0 million, primarily the result of increases in accrued interest on debt.
Cash Used in Investing Activities
We used cash from investing activities of $60.4 million, $1,677.6 million and $23.4 million for the years ended December 31, 2008, 2007 and
2006, respectively. We used cash of $10.8 million and $1,642.1 million during the years ended December 31, 2008 and 2007, respectively,
related to the Merger transaction. Capital expenditures, which were primarily for improvements to our retail stores and our South Carolina
manufacturing facility and which represent the majority of our remaining cash used in investing activities, were $48.7 million, $34.5 million, and
$23.8 million during the years ended December 31, 2008, 2007, and 2006, respectively. We received $1.4 million in 2006 as a result of the sale
of our Australian manufacturing facility. In 2008, we invested $1.0 million in the purchase of certain intangible assets from a third party.
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