WeightWatchers 2013 Annual Report Download - page 43

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UK Self-Employment Matter
We received an adverse tax ruling in the United Kingdom that our UK leaders should have been classified
as employees for UK tax purposes and, as such, we should have withheld tax from our leaders pursuant to the
“Pay As You Earn” and national insurance contributions collection rules and remitted such amounts to Her
Majesty’s Revenue and Customs, or HMRC. In connection with this ruling, we recorded a charge of
approximately $36.7 million, of which approximately $4.2 million was with respect to fiscal 2009 and
approximately $32.5 million was with respect to fiscal years 2001 through 2008, to cost of revenues in the fourth
quarter of fiscal 2009. We subsequently recorded a charge of approximately $4.1 million and $3.0 million in
fiscal 2010 and fiscal 2011, respectively. In December 2012, we reached an agreement with HMRC to settle the
matter in its entirety for approximately $36.8 million. Based upon the settlement amount, we determined that
$14.5 million of the reserved amount represented an over-accrual and as such was reversed to cost of revenues.
As part of the settlement amount, the settlement agreement provided for an amount of interest to be paid which
resulted in a $7.1 million increase to interest expense. The net benefit associated with the settlement was an
increase of $7.4 million to income before income taxes. The reserve for this matter at the end of the fourth
quarter of fiscal 2012 equaled approximately $7.3 million in the aggregate based on the exchange rates at the end
of the fourth quarter of fiscal 2012. In January 2013, $6.8 million was paid to HMRC, representing the balance
due over the approximately $30.0 million paid to HMRC in February 2012, and the balance of the reserve was
used to pay associated costs.
UK VAT Matter
In fiscal 2010, we determined that there was an over-accrual of $2.0 million, which was reversed to revenue,
with respect to the previously disclosed adverse ruling in the United Kingdom related to the imposition of UK
value added tax, or UK VAT, on meeting fees earned in the United Kingdom.
Restructuring Charges
In fiscal 2009, we recorded $5.5 million of restructuring charges associated with our cost savings initiatives
previously announced in the first quarter of fiscal 2009.
Long-Term Debt
On June 26, 2009, we amended our then-existing credit facilities, or collectively, the Prior WWI Credit
Facility, to allow us to make loan modification offers to all lenders of any tranche of term loans or revolving
loans to extend the maturity date of such loans and/or reduce or eliminate the scheduled amortization. Any such
loan modifications would be effective only with respect to such tranche of term loans or revolving loans and only
with respect to those lenders that accepted our offer. Loan modification offers could be accompanied by
increased pricing and/or fees payable to accepting lenders. This amendment also provided for up to an additional
$200.0 million of incremental term loan financing through the creation of a new tranche of term loans, provided
that the aggregate principal amount of such new term loans could not exceed the amount then outstanding under
our then-existing revolving credit facility. In addition, the proceeds from such new tranche of term loans could
only be used to repay certain outstanding revolving loans and to reduce the commitments of certain revolving
lenders. In connection with this amendment, we incurred fees of approximately $4.1 million during fiscal 2009.
On April 8, 2010, we amended the Prior WWI Credit Facility pursuant to a loan modification offer to all
lenders of all tranches of term loans and revolving loans to, among other things, extend the maturity date of such
loans. In connection with this amendment, certain lenders converted a total of $454.5 million of their outstanding
term loans under a tranche A loan ($151.8 million) and additional tranche A loan ($302.7 million) into term loans
under the new Term C Loan due 2015 (or 2013, upon the occurrence of certain events described in the Prior
WWI Credit Facility agreement), and a total of $241.9 million of their outstanding term loans under the Term B
Loan into term loans under the new Term D Loan due 2016 (each as defined hereafter). In addition, certain
lenders converted a total of $332.6 million of their outstanding Revolver A-1 commitments into commitments
29