WeightWatchers 2012 Annual Report Download - page 34

regulations affecting our employment practices and our relations with our employees and service providers. If we
are required to comply with new laws or regulations or new interpretations of existing laws and regulations, are
unable to comply with these laws, regulations or interpretations, or are subject to litigation with respect to these
laws, regulations or interpretations, our business and results of operations could be adversely affected.
Laws and regulations directly applicable to communications, operations or commerce over the Internet such
as those governing intellectual property, privacy, libel and taxation, are more prevalent and remain unsettled. If
we are required to comply with new laws or regulations or new interpretations of existing laws or regulations, or
if we are unable to comply with these laws, regulations or interpretations, our business could be adversely
affected.
Future laws or regulations, including laws or regulations affecting our marketing and advertising practices,
consumer pricing and billing arrangements, relations with consumers, employees, service providers, licensees or
franchisees, or our services and products, may have an adverse impact on us.
Our debt service obligations and the restrictions of our debt covenants could impede our operations and
flexibility.
Our financial performance could be affected by our level of debt. As of December 29, 2012, our total debt
was $2,406.4 million. In addition, at December 29, 2012, we had $301.5 million available under our revolving
credit facility. We expect to generate the cash necessary to pay our expenses and to pay the principal and interest
on all of our outstanding debt from our cash flows provided by operating activities and by opportunistically using
other means to repay or refinance our obligations as we determine appropriate. Our ability to pay our expenses
and meet our debt service obligations depends on our future performance, which may be affected by financial,
business, economic, demographic and other factors, such as attitudes toward weight management and pressure
from our competitors. If we do not have enough money to pay our debt service obligations, we may be required
to refinance all or part of our existing debt, sell assets, borrow more money or raise equity. In such an event, we
may not be able to refinance our debt, sell assets, borrow more money or raise equity on terms acceptable to us or
at all. Also, our ability to carry out any of these activities on favorable terms, if at all, may be further impacted by
any financial or credit crisis which may limit access to the credit markets and increase the cost of capital.
Our credit facilities contain 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. Our credit facilities also require us to maintain specified financial ratios and satisfy certain
financial condition tests. Our ability to meet those financial ratios and tests can be affected by events beyond our
control and we cannot assure you that we will meet those ratios and tests. A breach of any of these covenants,
ratios, tests or restrictions could result in an event of default under the credit facilities. If an event of default
exists under the credit facilities, the lenders could elect to cease making loans and declare all amounts
outstanding thereunder to be immediately due and payable. If the lenders under the credit facilities accelerate the
payment of the indebtedness, our assets may not be sufficient to repay in full that indebtedness and our other
indebtedness that would become due as a result of any acceleration.
Artal controls us and may have conflicts of interest with other shareholders in the future.
Artal controls us and is able to control the election and removal of our directors and determine our corporate
and management policies, including potential mergers or acquisitions, payment of dividends, asset sales, the
amendment of our articles of incorporation or bylaws and other significant corporate transactions. This
concentration of our ownership may delay or deter possible changes in control of our company, which may
reduce the value of an investment in our common stock. Even if Artal beneficially owns less than 50% but 10%
or more of our common stock, Artal will have the right pursuant to an agreement with us to nominate directors to
our Board of Directors in proportion to its stock ownership. The interests of Artal may not coincide with the
interests of other holders of our common stock.
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