WeightWatchers 2004 Annual Report Download - page 38

The Term Loan B and the Revolver bear interest at a rate equal to LIBOR plus 1.75% or, at our
option, the alternate base rate (as defined in the Credit Facility) plus 0.75%. The Additional Term
Loan B bears interest at a rate equal to LIBOR plus 1.50%, or, at our option, the alternative base rate
(as defined in the Credit Facility) plus 0.50%. In addition to paying interest on outstanding principal
under the Credit Facility, we are required to pay a commitment fee to the lenders under the Revolver
with respect to the unused commitments at a rate equal to 0.375% per year.
Our Credit Facility contains customary covenants, including covenants that in certain circumstances
restrict our ability to incur additional indebtedness, pay dividends on and redeem capital stock, make
other restricted payments, including investments, sell our assets and enter into consolidations, mergers
and transfers of all or substantially all of our assets. Our Credit Facility also requires us to maintain
specified financial ratios and satisfy financial condition tests. The Credit Facility contains customary
events of default. Upon occurrence of an event of default under the Credit Facility, the lenders may
cease making loans and declare amounts outstanding to be immediately due and payable.
On January 9, 2004, Standard & Poor’s confirmed its ‘‘BB’’ rating for our corporate credit and our
Credit Facility. On March 11, 2005, Moody’s assigned a ‘‘Ba1’’ rating for our Term Loan B and
Additional Term Loan B and confirmed its ‘‘Ba1’’ rating for the Credit Facility.
Contractual Obligations
We are obligated under non-cancelable operating leases primarily for office and rent facilities.
Consolidated rent expense charged to operations under all our leases for the fiscal year ended
January 1, 2005 was approximately $27.2 million.
The impact that our contractual obligations as of January 1, 2005 are expected to have on our
consolidated liquidity and cash flow in future periods is as follows:
Payment Due by Period
Less than More than
Total 1 Year 1-3 Years 3-5 Years 5 Years
(in millions)
Long-Term Debt(1) ........... $469.1 $ 3.0 $ 6.0 $388.8 $71.3
Operating Leases ............. 97.9 25.8 35.1 13.5 23.5
Total .................... $567.0 $28.8 $41.1 $402.3 $94.8
(1) Due to the fact that all of our debt is variable rate based and that a significant portion of our debt
is under a revolving line of credit, the amount of future interest payments could not be reasonably
estimated and is therefore not included in the amounts shown. See above for a description of our
interest rates.
Debt obligations due to be repaid in the 12 months following January 1, 2005 are expected to be
satisfied with operating cash flows. We believe that cash flows from operating activities, together with
borrowings available under our Revolver, will be sufficient for the next 12 months to fund currently
anticipated capital expenditure requirements, debt service requirements and working capital
requirements.
Acquisitions
On May 9, 2004, we completed the acquisition of certain assets of our Washington, D.C. area
franchise for a purchase price of $30.5 million that was financed through cash from operations.
On August 22, 2004, we completed the acquisition of certain assets of our Fort Worth franchise for
a purchase price of $30.0 million that was financed through cash from operations.
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