GNC 2010 Annual Report Download - page 105

Table of Contents
GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Company's existing and future senior subordinated debt, and rank senior to all the Company's existing and future subordinated debt. The
10.75% Senior Subordinated Notes are guaranteed on a senior subordinated non collateralized basis by each of the Company's existing and
future domestic subsidiaries (as defined in the 10.75% Senior Subordinated Notes indenture). If the Company fails to make payments on the
10.75% Senior Subordinated Notes, the notes guarantors must make them instead. Interest on the 10.75% Senior Subordinated Notes accrues
at the rate of 10.75% per year from March 16, 2007 and is payable semi-annually in arrears on March 15 and September 15 of each year.
The Company may redeem some or all of the 10.75% Senior Subordinated Notes at any time at specified redemption prices. If the
Company experiences certain kinds of changes in control, it must offer to purchase the 10.75% Senior Subordinated Notes at 101% of par plus
accrued interest to the purchase date.
The 10.75% Senior Subordinated Notes indenture contains certain limitations and restrictions on the Company's and its restricted
subsidiaries' ability to incur additional debt beyond certain levels, pay dividends, redeem or repurchase the Company's stock or subordinated
indebtedness or make other distributions, dispose of assets, grant liens on assets, make investments or acquisitions, engage in mergers or
consolidations, enter into arrangements that restrict the Company's ability to pay dividends or grant liens, and engage in transactions with
affiliates. In addition, the 10.75% Senior Subordinated Notes indenture restricts the Company's and certain of the Company's subsidiaries'
ability to declare or pay dividends to the Company's stockholders.
In accordance with the terms of the 10.75% Senior Subordinate Notes purchase agreement and the offering memorandum, these notes
were required to be exchanged for publicly registered exchange notes within 210 days after the sale of these notes. As required, these notes
were registered and the exchange offer was completed on September 28, 2007.
The Company expects to fund its operations through internally generated cash and, if necessary, from borrowings under the amount
remaining available under the Company's $60.0 million revolving credit facility. The Company expects its primary uses of cash in the near future
will be debt service requirements, capital expenditures and working capital requirements. The Company anticipates that cash generated from
operations, together with amounts available under the Company's revolving credit facility, will be sufficient to meet its future operating
expenses, capital expenditures and debt service obligations as they become due. However, the Company's ability to make scheduled payments
of principal on, to pay interest on, or to refinance the Company's indebtedness and to satisfy the Company's other debt obligations will depend
on the Company's future operating performance, which will be affected by general economic, financial and other factors beyond the Company's
control. The Company believes that it has complied with the Company's covenant reporting and compliance in all material respects for the year
ended December 31, 2009.
Predecessor Debt:
Senior Credit Facility. In 2003, the Company entered into a senior credit facility with a syndicate of lenders. Our then-parent and our
domestic subsidiaries guaranteed our obligations under the senior credit facility. The senior credit facility at December 31, 2004 consisted of a
$285.0 million term loan facility and a $75.0 million revolving credit facility. This facility was subsequently amended in December 2004. In
January 2005, as a stipulation of the December 2004 amendment, the Company used the net proceeds of its Senior Notes (as described
below) offering of $145.6 million, together with $39.4 million of cash on hand, to repay a portion of the indebtedness under the prior
$285.0 million term loan facility. In conjunction with the Merger, the Company repaid certain of its existing debt, and issued new debt. The
Company utilized proceeds from the new debt to repay its December 2003 senior credit facility.
The Company issues letters of credit as a guarantee of payment to third-party vendors in accordance with specified terms and conditions. It
also issues letters of credit for various insurance contracts. The revolving credit facility allows for $50.0 million of the $75 million revolving credit
facility to be used as collateral for outstanding letters of credit. As of December 31, 2006, $9.3 million of the revolving credit facility was utilized
to secure letters of credit. 99