WeightWatchers 2013 Annual Report Download - page 31

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. Although we seek to manage our
exposure to interest rates through interest rate swaps, our debt consists entirely of variable-rate instruments, so
we are subject to the risk of higher interest rates. 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.
While there is no net debt to EBITDAS (earnings before interest, taxes, depreciation and amortization, and
stock-based compensation) leverage ratio maintenance requirement on our $2,388.0 million of debt outstanding,
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 Revolving Facility (as defined hereafter) also requires us, in certain circumstances, to not
exceed a specified financial ratio. Our ability to meet this financial ratio requirement can be affected by events
beyond our control and we cannot assure you that we will meet this financial ratio requirement in any future
period. A breach of any of these covenants or this ratio, if applicable, could result in an event of default under the
credit facilities. Compliance with this ratio may effectively limit our ability to borrow funds in excess of $50.0
million under our Revolving Facility. 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 such
acceleration.
Any failure of our technology or systems to perform satisfactorily could result in an adverse impact on our
business.
We rely on software, hardware, network systems and similar technology that is either developed by us or
licensed from or maintained by third parties to operate our websites, subscription offerings and other products
and services such as the recurring billing system associated with certain of our commitment plans, and to support
our business operations. As much of this technology is complex, there may be future errors, defects or
performance problems, including when we update our technology or integrate new technology to expand and
enhance our capabilities. Our technology may malfunction or suffer from defects that become apparent only after
extended use. In addition, our operations depend on our ability to protect our information technology systems
against damage from fire, power loss, water, earthquakes, telecommunications failures, vandalism and other
malicious acts and similar unexpected adverse events. Interruptions in our websites, products and services or
network systems could result from unknown technical defects, insufficient capacity or the failure of our third
party providers to provide continuous and uninterrupted service. While we maintain disaster recovery capabilities
to return to normal operation in a timely manner, we do not have a fully redundant system that includes an
instantaneous recovery capability.
As a result of such possible defects, failures or other problems, our products and services could be rendered
unreliable or be perceived as unreliable by customers, which could result in harm to our reputation and brand.
Any failure of our technology or systems could result in an adverse impact on our business.
We may be required to recognize asset impairment charges for franchise rights acquired, goodwill and
other indefinite-lived assets.
In accordance with GAAP (as defined hereafter), we perform an annual impairment review of our
indefinite-lived assets, which include franchise rights acquired and goodwill, during the fourth quarter of each
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