WeightWatchers 2015 Annual Report Download - page 109

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WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
16. 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 borrowings under the Revolving Facility approximates a carrying value of
$48,000 due to the nature of the debt.
The fair value of the Company’s Term Facilities is determined by utilizing average bid prices on or near the
end of each fiscal quarter (Level 2 input). As of January 2, 2016 and January 3, 2015, the fair value of the
Company’s long-term debt was approximately $1,682,778 and $1,888,051, respectively, as compared to carrying
value of $2,186,573 and $2,358,000, 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 17 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 liability at January 2, 2016 ....... $44,170 $0 $44,170 $0
Interest rate swap liability at January 3, 2015 ....... $42,423 $0 $42,423 $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 January 2, 2016 and January 3, 2015.
17. Derivative Instruments and Hedging
As of January 2, 2016 and January 3, 2015, the Company had in effect an interest rate swap with a notional
amount totaling $1,500,000.
F-34