GNC 2010 Annual Report Download - page 61

Table of Contents
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.
Cash Provided by Operating Activities
Cash provided by operating activities was $114.0 million, $77.4 million, $92.0 million and ($50.9) million during the years ended
December 31, 2009 and 2008, the 2007 Successor Period, and the period from January 1, 2007 to March 15, 2007, 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 $14.8 million for the year ended December 31, 2009 compared with the same period in 2008. Net income increased
$35.8 million for the year ended December 31, 2008 compared with the 2007 Successor Period; however, inventory increases during 2008
offset the increase in net income.
For the year ended December 31, 2009, inventory increased $15.7 million, as a result of increases in our finished goods and a decrease
in our reserves. Accounts payable decreased $28.1 million, primarily due to the timing of disbursements. Accrued liabilities increased by $0.8
million, primarily the result of increased deferred revenue.
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 2007 Successor Period, inventory decreased $4.0 million, as a result of increases in our finished goods and a decrease in our
reserves. Franchise notes receivable decreased $2.6 million for the 2007 Successor Period, as a result of payments on existing notes, a
reduction in our receivable portfolio, fewer company-financed franchise store openings and more store closings. Accrued liabilities increased by
$29.0 million, primarily the result of increases in accrued interest on debt and increases in accrued payroll.
Cash Used in Investing Activities
We used cash from investing activities of $42.2 million, $60.4 million, $1,671.3 million, and $6.2 million for the years ended December 31,
2009 and 2008, the 2007 Successor Period, and the period from January 1, 2007 to March 15, 2007, respectively. We used cash of
$11.3 million, $10.8 million and $1,642.1 million during the years ended December 31, 2009 and 2008, and the 2007 Successor Period,
respectively, related to the Merger. 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 $28.7 million, $48.7 million,
$28.8 million and $5.7 million, during the years ended December 31, 2009 and 2008, the 2007 Successor Period, and the period from
January 1, 2007 to March 15, 2007, respectively. In 2008, we invested $1.0 million in the purchase of certain intangible assets from a third
party.
Cash Used in Financing Activities
We used cash of $39.3 million in 2009 for payments on long-term debt, including $3.8 million for an excess cash payment in March 2009
under the requirements of the 2007 Senior Credit Facility. This payment was calculated based on 2008 financial results as defined by the 2007
Senior Credit Facility. In addition, we repaid the outstanding $5.4 million balance on the Revolving Credit Facility in May 2009 and made
$14.0 million in optional repayments on the 2007 Senior Credit facility ($9.0 million in June 2009 and $5.0 million in December 2009). A
$13.6 million dividend declared in July 2009 was paid in August 2009 to GNC Corporation, our direct parent.
We used cash from financing activities of $8.0 million in 2008 for required payments on long term debt and received $5.4 million from
borrowings on the Revolving Credit Facility. 55