WeightWatchers 2012 Annual Report Download - page 111

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WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
15. Fair Value Measurements
Accounting guidance on fair value measurements for certain financial assets and liabilities requires that
assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:
• Level 1—Quoted prices in active markets for identical assets or liabilities.
• Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities.
• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant
to the fair value of the assets or liabilities.
When measuring fair value, the Company is required to maximize the use of observable inputs and
minimize the use of unobservable inputs.
Fair Value of Financial Instruments:
The Company’s significant financial instruments include long-term debt and interest rate swap agreements.
The fair value of the Company’s long-term debt is determined by utilizing average bid prices on or near the
end of each fiscal quarter (Level 2 input). As of December 29, 2012, and December 31, 2011, the fair value of
the Company’s long-term debt was approximately $2,410,724 and $1,041,086, respectively.
Derivative Financial Instruments
The fair values for the Company’s derivative financial instruments are determined using observable current
market information such as the prevailing LIBOR interest rate and LIBOR yield curve rates and include
consideration of counterparty credit risk. See Note 16 for disclosures related to derivative financial instruments.
The following table presents the aggregate fair value of the Company’s derivative financial instruments:
Fair Value Measurements Using:
Total
Fair
Value
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Interest rate swap asset at December 29, 2012 ...... $ 0 $0 $ 0 $0
Interest rate swap asset at December 31, 2011 ...... $ 0 $0 $ 0 $0
Interest rate swap liability at December 29, 2012 .... $13,871 $0 $13,871 $0
Interest rate swap liability at December 31, 2011 .... $24,613 $0 $24,613 $0
The Company did not have any transfers into or out of Levels 1 and 2, and did not maintain any assets or
liabilities classified as Level 3, during the fiscal years ended December 29, 2012 and December 31, 2011.
16. Derivative Instruments and Hedging
As of December 29, 2012 and December 31, 2011, the Company had in effect interest rate swaps with
notional amounts totaling $583,250 and $800,000, respectively. In January 2009, the Company entered into a
F-29