WeightWatchers 2010 Annual Report Download - page 62

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I
nterest ex
p
ense was
$
76.2 million for fiscal 2010, an increase of
$
9.5 million, or 14.2%, from
$
66.7 million
in fiscal 2009. Higher interest expense was driven by increases in our credit spread resulting from our recent deb
t
extension and by increases in the average notional value of our interest rate swaps, as well as by highe
r
amortization of transaction fees. The impact of these factors was partially offset by lower LIBOR and a decrease
in the average debt outstanding in fiscal 2010 versus fiscal 2009. The average credit spread increased from 1.1
6%
in fiscal 2009 to 1.
6
4% in fiscal 2010. The average notional value of our interest rate swaps increased from
$
900.0 million in fiscal 2009 to
$
1,244.0 million in fiscal 2010. The resultant effective interest rate increased by
8
4 basis points from 4.17% in fiscal 2009 to
5
.01% in fiscal 2010. The average value of debt outstandin
g
decreased from
$
1,547.9 million in fiscal 2009 to
$
1,414.7 million in fiscal 2010
.
We re
p
orted other ex
p
ense of
$
0.9 million in fiscal 2010 as com
p
ared to
$
0.2 million of income in fiscal
2009. Other expense (income) primarily resulted from the impact of foreign currency exchange rates o
n
intercompany transactions
.
The effective tax rate was 38.
5
% on our results for fiscal 2010 and 3
9
.8% on our results for fiscal 200
9
.Th
e
tax rate in fiscal 2009 was inflated due to charges associated with the UK self-employment tax ruling which
r
esulted in a change in the geographic mix of our taxable income toward higher taxing jurisdictions, notably th
e
U
nited States. Excluding the impact of the UK self-employment tax ruling, the effective tax rate was 38.7% i
n
f
iscal 200
9.
R
ESULTS OF OPERATIONS FOR FISCAL 2009
(
52 weeks
)
COMPARED TO FISCAL 2008
(
53 weeks
)
Two adverse UK tax rulings caused the Company to record prior period adjustments that negativel
y
impacted certain key metrics in both fiscal 2009 and fiscal 2008. We discuss these UK rulings in further detail in
“Item 3. Legal Proceedings—UK Self-Employment Matter and—UK VAT Matter” in Part I of this Annua
l
R
e
p
ort on Form 10-K. The table below shows our consolidated results for fiscal 2009 versus fiscal 2008 on bot
h
a GAAP basis and on an adjusted basis to show the impact of these rulings on both years and to exclude the
r
estructuring charges associated with our cost savings initiatives in fiscal 2009
.
4
6