WeightWatchers 2007 Annual Report Download - page 55

The Term Loan A, Additional Term Loan A and the Revolver bear interest at an initial rate equal to LIBOR
plus 1.25% per annum or, at our option, the alternate base rate (as defined in the WWI Credit Facility
agreements). The Term Loan B bears interest at an initial rate equal to LIBOR plus 1.5% per annum or, at our
option, the alternate base rate (as defined in the WWI Credit Facility agreements). In addition to paying interest
on outstanding principal under the WWI Credit Facility, we are required to pay a commitment fee to the lenders
under the Revolver with respect to the unused commitments at an initial rate equal to 0.25% per year.
As a result of our achievement of certain financial ratios, we anticipate a 0.25% reduction in our interest rate
spread over LIBOR for the Term Loan A, Additional Term Loan A and the Revolver in fiscal 2008, which we
expect will reduce our interest expense in fiscal 2008.
The WWI Credit Facility contains customary covenants, including covenants that, in certain circumstances,
restrict our ability to incur additional indebtedness, pay dividends on and redeem capital stock, make other
payments, including investments, sell our assets and enter into consolidations, mergers and transfers of all or
substantially all of our assets. The WWI Credit Facility also requires us to maintain specified financial ratios and
satisfy certain financial condition tests. At December 29, 2007, we were in compliance with all of the required
financial ratios and also met all of the financial condition tests and we are expected to continue to do so for the
foreseeable future. The WWI Credit Facility contains customary events of default. Upon the occurrence of an
event of default under the WWI Credit Facility, the lenders thereunder may cease making loans and declare
amounts outstanding to be immediately due and payable. The WWI Credit Facility is guaranteed by certain of
our existing and future subsidiaries. Substantially all of our assets collateralize the WWI Credit Facility.
On June 7, 2007, Standard & Poor’s raised its rating on our Term Loan A, Additional Term Loan A, Term
Loan B and Revolver from “BB” to “BB+”. On January 4, 2007, Moody’s affirmed its “Ba1” rating for our Term
Loan A and Revolver and assigned a “Ba1” rating to our Additional Term Loan A and Term Loan B.
Dividends
We have issued a quarterly cash dividend of $0.175 per share every quarter beginning with the first quarter
of fiscal 2006.
Any decision to declare and pay dividends in the future will be made at the discretion of our Board of
Directors, after taking into account our financial results, capital requirements and other factors they may deem
relevant. Our Board of Directors may decide at any time to decrease the amount of dividends or discontinue the
payment of dividends based on these factors. The WWI Credit Facility also contains restrictions on our ability to
pay dividends on our common stock. See “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Liquidity and Capital Resources—Long-Term Debt” for a description of
the WWI Credit Facility and these restrictions.
The WWI Credit Facility provides that we are permitted to pay dividends and extraordinary dividends so
long as we are not in default under our credit agreement. However, payment of extraordinary dividends shall not
exceed $150 million in any fiscal year if net debt to EBITDA is greater than 2.5:1 and investment grade rating
date (as defined in the WWI Credit Facility agreements) has not occurred. We do not expect this restriction to
impair our ability to pay dividends, but it could do so.
Contractual Obligations
We are obligated under non-cancelable operating leases primarily for office and rent facilities. Consolidated
rent expense charged to operations under all our leases for fiscal 2007 was approximately $33.0 million.
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