13. Professional Fees and Other Expenses

In late 2012, a hedge fund manager publicly raised allegations regarding the legality of the Company’s network marketing program and announced that the hedge fund manager had taken a significant short position regarding the Company’s common shares, leading to intense public scrutiny and significant stock price volatility. The Company believes that the hedge fund manager’s allegations are inaccurate and misleading. The Company has engaged legal and advisory firms to assist with responding to the allegations and to perform other related services in connection to these events. The Company recognizes the related expenses as a part of selling, general & administrative expenses within its consolidated statement of income. For the three months ended September 30, 2014 and 2013, the Company recorded $6.0 million and $6.3 million, respectively, and for the nine months ended September 30, 2014 and 2013, the Company recorded $18.3 million and $23.8 million, respectively, of professional fees and other expenses related to this matter.

Of the $6.0 million and $6.3 million in expenses incurred during the three months ended September 30, 2014 and 2013, respectively, discussed above, $1.3 million and $1.5 million, respectively, were recognized for advisory retainer fees. Of the $18.3 million and $23.8 million in expenses incurred during the nine months ended September 30, 2014 and 2013, respectively, discussed above, $3.9 million and $4.5 million, respectively, were recognized for advisory retainer fees. The minimum guaranteed retainer fees were $1.0 million as of September 30, 2014 and the expense recognition of these fees could accelerate based on certain conditions.

The Company also had a cash settlement liability award, or the Liability Award, outstanding as of September 30, 2014 and December 31, 2013, which is tied to the Company’s stock price and which only vests if certain conditions are met relating to the above matter. The fair value of the Liability Award will be revalued each quarter until settlement and the Company will recognize and adjust the expense over the expected requisite service period. During the three months ended September 30, 2014 and 2013, the Company recognized a benefit of $1.6 million and an expense of $1.0 million, respectively, relating to the Liability Award, which are included in the $6.0 million and $6.3 million expense amounts described above. During the nine months ended September 30, 2014 and 2013, the Company recognized a benefit of $1.8 million and an expense of $2.3 million, respectively, relating to the Liability Award, which are included in the $18.3 million and $23.8 million expense amounts described above. The remaining unrecognized expense relating to the Liability Award was $0.8 million as of September 30, 2014, based on the fair value of the Liability Award as of that date. The recognition of the unrecognized expense relating to the Liability Award could accelerate and change based on certain conditions.