GNC 2011 Annual Report Download - page 71

Table of Contents
the first year the disclosures are required. The adoption of this standard did not have any impact on our financial statements.
Other
In December 2009, the FASB issued ASU No. 2009-17, "Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities",
which incorporates into the FASB Codification amendments to FASB Interpretation No. 46(R), "Consolidation of Variable Interest Entities", made by
Statement of Financial Accounting Standard No. 167, "Accounting for Variable Interest Entities", to require that a comprehensive qualitative analysis be
performed to determine whether a holder of variable interests in a variable interest entity also has a controlling financial interest in that entity. In addition, the
amendments require that the same type of analysis be applied to entities that were previously designated as qualified special-purpose entities. The
amendments were effective as of January 1, 2010. The adoption of ASU No. 2009-17 did not have a material impact on our consolidated financial position,
results of operations, and cash flows.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Market risk represents the risk of changes in the value of market risk sensitive instruments caused by fluctuations in interest rates, foreign exchange
rates and commodity prices. Changes in these factors could cause fluctuations in the results of our operations and cash flows. In the ordinary course of
business, we are primarily exposed to foreign currency and interest rate risks. We do not use derivative financial instruments in connection with these
commodity market risks.
We are exposed to market risks from interest rate changes on our variable rate debt. Although changes in interest rates do not impact our operating
income, the changes could affect the fair value of our interest rate swaps and interest payments. As of December 31, 2010 we had fixed rate debt of
$115.7 million and variable rate debt of $942.8 million. In conjunction with the Merger, we entered into interest rate swaps, effective April 2, 2007, which
effectively convert a portion of the variable LIBOR component of the effective interest rate on two $150.0 million notional portions of our debt under the
Term Loan Facility to a fixed rate over a specified term. Each of these $150.0 million notional amounts has a three month LIBOR tranche conforming to the
interest payment dates on the Term Loan Facility. During September 2008, we entered into two new forward agreements with start dates of the expiration
dates of the pre-existing interest rate swap agreements (April 2009 and April 2010). In September 2008, we also entered into a new interest rate swap
agreement with an effective date of September 30, 2008 that effectively converted an additional notional amount of $100.0 million of debt from a floating to a
fixed interest rate. The $100.0 million notional amount has a three month LIBOR tranche conforming to the interest payment dates on the Term Loan Facility.
In June 2009, we entered into a new swap agreement with an effective date of September 15, 2009. The $150.0 million notional amount has a six month
LIBOR tranche conforming to the interest payment dates on the Senior Notes.
These agreements are summarized in the following table:
Derivative Total Notional Amount Term Counterparty Pays Company Pays
Interest Rate
Swap $150.0 million
April 2009-
April 2011 3 month LIBOR 3.07%
Interest Rate
Swap $150.0 million
April 2010-
April 2011 3 month LIBOR 3.41%
Interest Rate
Swap $100.0 million
September 2008-
September 2011 3 month LIBOR 3.31%
Interest Rate
Swap $150.0 million
September 2009-
September 2012 6 month LIBOR 2.68%
Interest Rate Market Risk
A portion of our debt is subject to changing interest rates. Although changes in interest rates do not impact our operating income, the changes could
affect the fair value of such debt and
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