WeightWatchers 2010 Annual Report Download - page 75

f
luctuate during the term of that swap to a maximum of
$
755.0 million. Changes in the fair value of these
derivatives will be recorded each period in earnings for non-qualifying derivatives or accumulated othe
r
comprehensive income (loss) for qualifying derivatives.
Based on the amount of our variable rate debt and interest rate swap agreements as of the end of fiscal 2010
,
a hypothetical
5
0 basis point increase or decrease in interest rates on our variable rate debt would increase or
decrease our annual interest expense by approximately
$
1.3 million
.
F
oreign Currency Risk
Other than inter-company transactions between our domestic and foreign entities, we generally do not hav
e
significant transactions that are denominated in a currency other than the functional currency applicable to each
entity. As a result, substantially all of our revenues and expenses, other than those of WeightWatchers.com, in
each jurisdiction in which we operate are in the same functional currency. In general, we are a net receiver o
f
currencies other than the US dollar. Accordingly, changes in exchange rates may negatively affect our revenue
s
and gross margins as expressed in US dollars. In the future, 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
p
eriod.
F
luctuations in currency exchange rates, particularly with respect to the euro and pound sterling, may
impact our shareholders’ equity. The assets and liabilities of our non-US subsidiaries are translated into U
S
dollars at the exchange rates in effect at the balance sheet date. Revenues and expenses are translated into US
dollars at the average exchange rate for the period. The resulting translation adjustments are recorded i
n
shareholders’ equity as a component of accumulated other comprehensive income (loss). In addition, exchang
e
r
ate fluctuations will cause the US dollar translated amounts to change in comparison to prior periods.
I
tem 8. Financial Statements and Su
pp
lementar
y
Dat
a
This information is incorporated by reference to our consolidated financial statements on pages F-1 throug
h
F-27 and our financial statement schedule on page S-1, including the report thereon of PricewaterhouseCooper
s
LLP on page F-
2.
I
tem 9.
C
hanges
i
n and D
i
sagreements w
i
th Accountants on Account
i
ng and F
i
nanc
i
al D
i
sclosur
e
N
one.
I
tem 9A.
C
ontrols and Procedures
Di
sclosure
C
ontrols and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be
disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the tim
e
p
eriods specified in the Securities and Exchange Commission’s rules and forms, and that such information is
accumulated and communicated to our management, including our principal executive officer and principa
l
f
inancial officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and
p
rocedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the
desired control objectives. Our management, with the participation of our principal executive officer and
p
rincipal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls
and procedures as of the end of the period covered by this report. Based upon that evaluation and subject to the
f
oregoing, our principal executive officer and principal financial officer concluded that the design and operatio
n
o
f our disclosure controls are effective at the reasonable assurance level
.
59