WeightWatchers 2005 Annual Report Download - page 27

among prospective and existing customers regarding our use of personal information collected on our
websites or through our products and services, such as weight management information, financial data,
e-mail addresses and home addresses, could keep them from using our websites or purchasing our
products or services. Industry-wide events or events with respect to our websites, including
misappropriation of third-party information, security breaches or changes in industry standards,
regulations or laws could deter people from using our websites or purchasing our offerings, which could
harm our business.
Our businesses are subject to legislative and regulatory restrictions.
A number of laws and regulations govern our advertising, franchise operations and relations with
consumers, employees and other service providers in the countries in which we operate. The FTC and
certain states and foreign jurisdictions regulate advertising, disclosures to consumers, privacy, consumer
pricing or billing arrangements, and other consumer matters.
During the mid-1990s, the FTC filed complaints against a number of commercial weight
management providers alleging violations of federal law in connection with the use of advertisements
that featured testimonials, claims for program success and program costs. In 1997, we entered into a
consent order with the FTC settling all contested issues raised in the complaint filed against us. The
consent order requires us to comply with certain procedures and disclosures in connection with our
advertisements of products and services.
Since we operate our meetings business both in the United States and internationally, we are
subject to many distinct employment, labor and benefits laws in each country in which we operate,
including regulations affecting our employment practices and our relations with our employees and
service providers. If we are required to comply with new regulations or new interpretations of existing
regulations, or if we are unable to comply with these regulations or interpretations, our business could
be adversely affected.
Laws and regulations directly applicable to communications or commerce over the Internet such as
those governing intellectual property, privacy, libel and taxation, are becoming more prevalent and
remain unsettled.
Future legislation or regulations, including legislation or regulations affecting our marketing and
advertising practices, relations with consumers or franchisees or our food and weight management
products and services, may have an adverse impact on us.
Our debt service obligations and the restrictions of our debt covenants could impede our operations
and flexibility.
Our financial performance could be affected by our level of debt. As of December 31, 2005, our
total debt was $746.1 million. Weight Watchers International had, as of December 31, 2005, total debt
of $531.1 million and additional availability under its revolving credit facility of $112.2 million. As of
December 31, 2005, WeightWatchers.com had total debt of $215.0 million which was incurred to
finance its redemption of its shares held by Artal in December 2005.
We expect to generate the cash necessary to pay our expenses and to pay the principal and interest
on all of our outstanding debt primarily from our operations. Our ability to meet our expenses and
debt service obligations thus depends on our future performance, which may be affected by financial,
business, economic, demographic and other factors, such as attitudes toward weight management and
pressure from our competitors. If we do not have enough money to pay our debt service obligations,
we may be required to refinance all or part of our existing debt, sell assets, borrow more money or
raise equity. In such an event, we may not be able to refinance our debt, sell assets, borrow more
money or raise equity on terms acceptable to us or at all. In fiscal 2006, our interest expense will
increase as a result of the increase in our amount of debt.
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