WeightWatchers 2004 Annual Report Download - page 41

Due to the repurchase and retirement of the remaining balance of our Senior Subordinated Notes,
we no longer have any fixed rate borrowings outstanding at January 1, 2005. Therefore, market interest
rates no longer affect the fair value of our long-term debt balances. Since 100% of our debt is now
variable rate based, any changes in market interest rates will cause an equal change in our net interest
expense.
Other than inter-company transactions between our domestic and foreign entities, we generally do
not have significant transactions that are denominated in a currency other than the functional currency
applicable to each entity.
We enter into forward and swap contracts to hedge transactions denominated in foreign currencies
to reduce the currency risk associated with fluctuating exchange rates. These contracts are used
primarily to hedge payments arising from some of our foreign currency denominated obligations.
Realized and unrealized gains and losses from these transactions are included in net income for the
period. In addition, we enter into interest rate swaps to hedge a substantial portion of our variable rate
debt. Changes in the fair value of these derivatives will be recorded each period in earnings for
non-qualifying derivatives or accumulated other comprehensive income (loss) for qualifying derivatives.
Fluctuations in currency exchange rates may also impact our shareholders’ equity. The assets and
liabilities of our non-U.S. subsidiaries are translated into U.S. dollars at the exchange rates in effect at
the balance sheet date. Revenues and expenses are translated into U.S. dollars at the weighted average
exchange rate for the period. The resulting translation adjustments are recorded in shareholders’ equity
as accumulated other comprehensive income (loss). In addition, fluctuations in the value of the euro
will cause the U.S. dollar translated amounts to change in comparison to prior periods.
Each of our subsidiaries derives revenues and incurs expenses primarily within a single country
and, consequently, does not generally incur currency risks in connection with the conduct of normal
business operations.
Item 8. Financial Statements and Supplementary Data
This information is incorporated by reference to the ‘‘Consolidated Financial Statements and
Notes’’ on pages F-1 through F-34, together with the report thereon of PricewaterhouseCoopers LLP
on page F-35.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the
‘‘Exchange Act’’) is recorded, processed, summarized and reported within the time periods specified in
the Securities and Exchange Commission’s rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives. Our management, with the participation of our Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and
operation of our disclosure controls and procedures as of January 1, 2005. Based upon that evaluation
and subject to the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that
the design and operation of our disclosure controls and procedures provided reasonable assurance that
the disclosure controls and procedures are effective to accomplish their objectives.
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