WeightWatchers 2007 Annual Report Download - page 29

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, benefits and tax 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, operations or commerce over the Internet such
as those governing intellectual property, privacy, libel and taxation, are becoming more prevalent and remain
unsettled. 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.
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 29, 2007, our total debt
was $1,648.1 million and we had additional availability under our revolving credit facility of $383.4 million. 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.
Our credit facilities contain 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 facilities also require us to maintain specified financial ratios and satisfy
financial condition tests. Our ability to meet those financial ratios and tests can be affected by events beyond our
control and we cannot assure you that we will meet those ratios and tests. A breach of any of these covenants,
ratios, tests or restrictions could result in an event of default under the credit facilities. If an event of default
exists under the credit facilities, the lenders could elect to cease making loans and declare all amounts
outstanding thereunder to be immediately due and payable. If the lenders under the credit facilities accelerate the
payment of the indebtedness, our assets may not be sufficient to repay in full that indebtedness and our other
indebtedness that would become due as a result of any acceleration.
Artal controls us and may have conflicts of interest with other shareholders in the future.
Artal controls us and is able to control the election and removal of our directors and determine our corporate
and management policies, including potential mergers or acquisitions, payment of dividends, asset sales, the
amendment of our articles of incorporation or bylaws and other significant corporate transactions. This
concentration of our ownership may delay or deter possible changes in control of our company, which may
reduce the value of an investment in our common stock. Even if Artal beneficially owns less than 50% but 10%
or more of our common stock, Artal will have the right pursuant to an agreement with us to nominate directors to
our Board of Directors in proportion to its stock ownership. The interests of Artal may not coincide with the
interests of other holders of our common stock.
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