WeightWatchers 2007 Annual Report Download - page 58

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Seasonality
Our business is seasonal, with revenues generally decreasing at year end and during the summer months.
Our advertising schedule supports the three key enrollment-generating seasons of the year: winter, spring and
fall, with winter having the highest concentration of advertising spending. The timing of certain holidays,
particularly Easter, which precedes the spring marketing campaign and occurs between March 22 and April 25,
may affect our results of operations and the year-to-year comparability of our results. For example, in fiscal
2007, Easter fell on April 8, which means that the pre-summer marketing campaign began earlier than it did in
fiscal 2006. Our operating income for the first half of the year is generally the strongest. While
WeightWatchers.com experiences similar seasonality in terms of new subscriber signups, its revenue tends to be
less seasonal because it amortizes subscription revenue over the related subscription period.
Recently Issued Accounting Standards
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (Revised 2007),
“Business Combinations”. This Statement established principles and requirements for how the acquirer
(a) recognizes and measures the identifiable assets acquired, liabilities assumed and any non-controlling interest
in the acquiree; (b) recognizes and measures the goodwill acquired and (c) determines what information to
disclose. This Statement is effective for business combinations for which the acquisition date is on or after
January 4, 2009, the first day of our 2009 fiscal year. The impact on WWI of adopting this standard will depend
on the nature, terms and size of any business combinations completed after the effective date.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160,
“Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51.” This
Statement establishes accounting and reporting standards for noncontrolling interests, sometimes referred to as
minority interests. This statement is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. We do not expect the adoption of this standard to have a material
impact on our financial position, results of operations or on-going cash flows.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to foreign currency fluctuations and interest rate changes. Our exposure to market risk for
changes in interest rates relates to interest expense of variable rate debt. Since 100% of our debt is now variable
rate based, any changes in market interest rates will cause an equal change in our net interest expense.
Other than inter-company transactions between our domestic and foreign entities, we generally do not have
significant transactions that are denominated in a currency other than the functional currency applicable to each
entity. From time to time we may enter into forward and swap contracts to hedge transactions denominated in
foreign currencies to reduce the currency risk associated with fluctuating exchange rates. Realized and unrealized
gains and losses from any of these transactions may be included in net income for the period.
In addition, we have entered into interest rate swaps with notional amounts totaling $1,050 million as of
December 29, 2007 to hedge a substantial portion of our variable rate debt. Changes in the fair value of these
derivatives will be recorded each period in earnings for non-qualifying derivatives or accumulated other
comprehensive income (loss) for qualifying derivatives.
Fluctuations in currency exchange rates may impact our shareholders’ equity. The assets and liabilities of
our non-U.S. subsidiaries are translated into U.S. dollars at the exchange rates in effect at the balance sheet date.
Revenues and expenses are translated into U.S. dollars at the weighted average exchange rate for the period. The
resulting translation adjustments are recorded in shareholders’ equity as a component of accumulated other
comprehensive income (loss). In addition, fluctuations in the value of the euro will cause the U.S. dollar
translated amounts to change in comparison to prior periods.
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