WeightWatchers 2002 Annual Report Download - page 30

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For the fiscal year ended December 29, 2001 cash and cash equivalents decreased $21.2 million, as
the $121.6 million of cash flows provided by operations were used primarily for investing activities.
Cash flows used for investing activities totaled $120.1 million and were primarily comprised of
payments for franchise acquisitions of $84.4 million (including acquisition costs) for our Weighco
franchise and $13.5 million for our Oregon franchise, loans totaling $17.3 million made to
WeightWatchers.com and capital expenditures of $3.8 million. Net cash flows used for financing
activities were $21.4 million and consisted primarily of proceeds from borrowings under our senior
credit facility of $60.0 million, offset by the payment of $1.5 million of dividends on our preferred
stock, payments of $1.0 million associated with the cost of the public equity offering, repayments of
$50.8 million principal on our outstanding senior credit facilities and the repurchase of 6,719,254 shares
of our common stock held by Heinz for $27.1 million.
For the eight months ended December 30, 2000, cash and cash equivalents remained flat at
$44.0 million. Cash flows of $28.9 million were provided by operating activities of which $21.6 million
was used for investing activities and $8.0 million was used for financing activities.
Working capital at December 28, 2002 was $22.1 million compared to a deficit of $24.1 million at
December 29, 2001. The change in working capital was primarily attributable to increases in cash
($34.2 million), prepaid expenses ($9.8 million), accounts receivable ($5.5 million) and inventory
($12.4 million). The increase in prepaid expenses was due to prepaid advertising relating to the spring
campaign and prepaid rents and meeting materials for meeting locations. The increase in accounts
receivable was due to an increase in receivables due from franchises and licensees and the increase in
inventory was the result of the anticipated increase in product sales during the winter diet season. This
was offset by an increase in various current liabilities of $15.4 million, including income taxes
($4.8 million) and deferred revenue and other current liabilities ($10.6 million).
Capital spending has averaged approximately $4.0 million annually over the last three years and
has consisted primarily of leasehold improvements, furniture and equipment for meeting locations and
information system expenditures.
Our total debt was $454.7 million, $474.0 million and $470.7 million at December 28, 2002,
December 29, 2001 and December 30, 2000, respectively. We had approximately $45.0 million of
additional borrowing capacity available under our revolving credit facility as of December 28, 2002 and
December 29, 2001, and approximately $30.0 million as of December 30, 2000. On January 16, 2001, we
acquired the franchise territories and certain business assets of Weighco for $83.8 million. We financed
the acquisition with available cash of $23.8 million and additional borrowings of $60.0 million under
our senior credit facilities.
Our debt consists of both fixed and variable-rate instruments. At December 28, 2002,
December 29, 2001 and December 30, 2000, fixed-rate debt constituted approximately 56.0%, 50.3%
and 51.9% of our total debt, respectively. The average interest rate on our debt was approximately
9.1%, 8.6% and 11.6% at December 28, 2002, December 29, 2001 and December 30, 2000, respectively.
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