WeightWatchers 2005 Annual Report Download - page 89

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WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Investments:
The Company uses the cost method to account for investments in which it holds 20% or less of
the investee’s voting stock and over which it does not have significant influence. When the Company
holds 50% or less of the investee’s voting stock and has the ability to exercise significant influence over
operating and financial policies of the investee, the investment is accounted for under the equity
method, unless the provisions of FIN 46R apply, as was the case with WeightWatchers.com.
Deferred Financing Costs:
Deferred financing costs consist of fees paid by the Company as part of the establishment,
exchange and/or modification of the Company’s long-term debt. During the fiscal years ended
December 31, 2005 and January 1, 2005, the Company incurred additional deferred financing costs of
$3,758 and $2,896, respectively, associated with the establishment of the WW.com Credit Facilities (as
defined in Note 6) and the refinancing of WWI’s Credit Facility (as defined in Note 6). Such costs are
being amortized using the interest rate method over the term of the related debt. Amortization expense
for the fiscal years ended December 31, 2005, January 1, 2005 and January 3, 2004 was $879, $1,308
and $1,248, respectively. In connection with the early extinguishment of over 90% of its Senior
Subordinated Notes, the Company wrote off $4,387 of deferred financing costs in the fiscal year ended
January 3, 2004. Additionally, in connection with the refinancing of WWI’s Credit Facility, the
Company wrote off deferred financing costs of $2,933 in the fiscal year ended January 1, 2005. These
amounts have been recorded as components of early extinguishment of debt. See Note 6 for details of
the early extinguishment and refinancing.
Comprehensive Income (Loss):
Comprehensive income (loss) represents the change in shareholders’ equity (deficit) resulting from
transactions other than shareholder investments and distributions. The Company’s comprehensive
income (loss) includes net income, changes in the fair value of derivative instruments and the effects of
foreign currency translations. At December 31, 2005 and January 1, 2005, the cumulative balance of
changes in fair value of derivative instruments, net of taxes, is $1,402 and ($70), respectively. As of
December 31, 2005 and January 1, 2005, the cumulative balance of the effects of foreign currency
translations, net of taxes, is $4,592 and $5,864, respectively.
F-13