WeightWatchers 2006 Annual Report Download - page 95

Download and view the complete annual report

Please find page 95 of the 2006 WeightWatchers annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 112

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
16. Financial Instruments
Fair Value of Financial Instruments:
The Company’s significant financial instruments include cash and cash equivalents, short and long-term
debt, and interest rate swap agreements.
In evaluating the fair value of significant financial instruments, the Company generally uses quoted market
prices of the same or similar instruments or calculates an estimated fair value on a discounted cash flow basis
using the rates available for instruments with the same remaining maturities. As of December 30, 2006, the fair
value of financial instruments held by the Company approximated the recorded value.
Derivative Instruments and Hedging:
Prior to the extinguishment of the Euro Notes (as described in Note 6), the Company entered into forward and
swap contracts to hedge certain foreign currency cash flows and for payments arising from those foreign currency
denominated debt obligations. The Company currently enters into interest rate swaps to hedge a substantial portion
of its variable rate debt. As of December 30, 2006 and December 31, 2005, the Company held contracts for interest
rate swaps with notional amounts totaling $257,500 and $257,500, respectively. The Company is hedging
forecasted transactions for periods not exceeding the next twelve months. At December 30, 2006, given the current
configuration of its debt, the Company estimates that no derivative gains or losses reported in accumulated other
comprehensive income (loss) will be reclassified to the Statement of Operations within the next twelve months.
As of December 30, 2006 and December 31, 2005, cumulative losses for qualifying hedges were reported
as a component of accumulated other comprehensive income (loss) in the amount of $955 ($1,566 before taxes)
and $1,402 ($2,300 before taxes), respectively. Prior to the extinguishment of the euro denominated Notes, the
Company hedged 24% of the outstanding principal of the euro Notes via forward contracts. Subsequent to the
extinguishment, but prior to the repurchase of the remaining Notes, the Company was 100% hedged. As such, to
offset gains or losses from changes in foreign exchange rates related to the euro denominated Notes for the fiscal
year ended January 1, 2005, the Company reclassified $6 ($9 before taxes) from accumulated other
comprehensive income (loss) to other expense, net.
For the fiscal year ended January 1, 2005 fair value adjustments for non-qualifying hedges resulted in a
reduction to net income of $798 ($1,309 before taxes), included within other expense, net. For the fiscal years
ended December 30, 2006 and December 31, 2005, there were no fair value adjustments recorded in the
statement of operations since all hedges were considered qualifying.
F-32