GNC 2012 Annual Report Download - page 98

Table of Contents
NOTE 8. LONG-TERM DEBT/INTEREST EXPENSE (Continued)
Senior Notes. Together with Holdings' wholly owned subsidiary GNC Acquisition Inc. ("GNC Acquisition"), Holdings entered into an Agreement and
Plan of Merger (the "Merger Agreement") with GNC Parent Corporation on February 8, 2007. Pursuant to the Merger Agreement, and on March 16, 2007,
GNC Acquisition was merged with and into GNC Parent Corporation, with GNC Parent Corporation as the surviving corporation and Holdings' direct wholly
owned subsidiary (the "Merger"). In connection with the Merger, Centers completed a private offering of $300.0 million of its Senior Notes. Interest on the
Senior Notes was payable semi-annually in arrears on March 15 and September 15 of each year. Interest on the Senior Notes accrued at a variable rate and
was 5.8% at December 31, 2010. The Senior Notes were Centers' senior non-collateralized obligations and were effectively subordinated to all of Centers'
existing collateralized debt, including the Old Senior Credit Facility, to the extent of the assets securing such debt, ranked equally with all of Centers' existing
non-collateralized senior debt and ranked senior to all Centers' existing senior subordinated debt, including the Senior Subordinated Notes. The Senior Notes
were guaranteed on a senior non-collateralized basis by each of Centers' then existing domestic subsidiaries (as defined in the Senior Notes indenture).
Senior Subordinated Notes. In connection with the Merger, Centers completed a private offering of $110.0 million of Centers' Senior Subordinated
Notes. The Senior Subordinated Notes were Centers' senior subordinated non-collateralized obligations and were subordinated to all its existing senior debt,
including the Old Senior Credit Facility and the Senior Notes, and ranked equally with all of Centers' existing senior subordinated debt and ranked senior to
all Centers' existing subordinated debt. The Senior Subordinated Notes were guaranteed on a senior subordinated non-collateralized basis by each of Centers'
then existing domestic subsidiaries (as defined in the Senior Subordinated Notes indenture). Interest on the Senior Subordinated Notes accrued at the rate of
10.75% per year from March 16, 2007 and was payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15,
2007.
NOTE 9. FINANCIAL INSTRUMENTS
At December 31, 2011 and 2010, the Company's financial instruments consisted of cash and cash equivalents, receivables, franchise notes receivable,
accounts payable, certain accrued liabilities and long-term debt. The carrying amount of cash and cash equivalents, receivables, accounts payable and accrued
liabilities approximates their respective fair values because of the short maturities of these instruments. Based on the interest rates currently available and their
underlying risk, the carrying value of the franchise notes receivable approximates their fair value. These fair values are reflected net of reserves, which are
recognized according to Company policy. The Company determined the estimated fair values of its debt by using currently available market information and
estimates and assumptions, where appropriate. Accordingly, as considerable judgment is required to determine these estimates, changes in the assumptions or
methodologies may have an effect on these estimates. The actual and estimated fair values of the Company's financial instruments are as follows:
Year Ended December 31,
2011 2010
Carrying
Amount Fair Value Carrying Amount Fair Value
(in thousands)
Cash and cash equivalents $ 128,438 $ 128,438 $ 193,902 $ 193,902
Receivables, net 114,190 114,190 102,874 102,874
Franchise notes receivable, net 6,510 6,510 4,496 4,496
Accounts payable 124,416 124,416 98,662 98,662
Long-term debt (including current portion) 901,542 892,526 1,058,499 1,007,070
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