WeightWatchers 2004 Annual Report Download - page 37

Credit Facility, the repurchase of all $25.0 million of our outstanding preferred stock and the $1.2 million
cumulative final dividend payment on our preferred stock.
Balance Sheet
On the balance sheet, our cash balance of $18.7 million is $4.7 million lower than at January 3,
2004. Our working capital deficit at January 1, 2005 was $31.7 million compared to $19.6 million at
January 3, 2004. The $12.1 million increase in the working capital deficit was primarily attributable to a
$10.1 million increase in income taxes payable caused by the timing of tax payments, the $4.6 million
increase in current deferred tax liabilities primarily due to loan repayments from WeightWatchers.com,
a $6.2 million decrease in inventory resulting from our efforts to more efficiently manage inventory
levels, the $4.7 million decrease in cash, partially offset by the $12.6 million reduction in the current
portion of our long-term debt resulting from the repurchase and retirement of our remaining Senior
Subordinated Notes.
Capital spending has averaged approximately $4.7 million annually over the last three years and
has consisted primarily of leasehold improvements, furniture and equipment for meeting locations and
information system expenditures.
Long-Term Debt
Our Credit Facility (as defined in Note 6 to the Consolidated Financial Statements), as amended,
consists of Term Loans and a revolving line of credit (the ‘‘Revolver’’). Our total debt outstanding was
similar year-over-year at $469.1 million and $469.9 million at January 1, 2005 and January 3, 2004,
respectively. In January 2004, we refinanced our Credit Facility, moving a large portion of our fixed
Term Loans to the Revolver. This has provided us with a greater degree of flexibility and the ability to
more efficiently manage cash. Under this refinancing, our Term Loans were reduced from
$454.2 million to $150.0 million and our Revolver capacity was increased from $45.0 million to
$350.0 million. To complete the refinancing, we drew down $310.0 million of the Revolver. In
October 2004, we increased our net borrowing capacity by adding an additional Term Loan to our
existing Credit Facility in the amount of $150.0 million, coterminous with the previously existing Credit
Facility. These funds were initially used to reduce borrowings under our Revolver, resulting in no
increase to our net borrowing. Additionally, in October 2004, we repurchased and retired the remaining
balance of our Senior Subordinated Notes. In connection with the refinancing and retirement of debt
described above, we incurred expenses of approximately $4.3 million in the year ended January 1, 2005.
At January 1, 2005, our debt consisted entirely of variable-rate instruments. At January 3, 2004 and
December 28, 2002, fixed-rate debt constituted approximately 3.3% and 56.0% of our total debt,
respectively. The average interest rate on our debt was approximately 4.1%, 3.7% and 9.1% at
January 1, 2005, January 3, 2004 and December 28, 2002, respectively.
The following schedule sets forth our long-term debt obligations (and interest rates) at January 1,
2005:
Long-Term Debt
As of January 1, 2005
Interest
Balance Rate
(in millions)
Revolver due 2009 ................................. $171.0 4.03%
Term Loan B due 2010 .............................. 148.5 4.16%
Additional Term Loan B due 2010 ...................... 149.6 3.77%
Total Debt .................................... 469.1
Less Current Portion .............................. 3.0
Total Long-Term Debt ........................... $466.1
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