WeightWatchers 2015 Annual Report Download - page 17

our program or not maintaining our quality and safety standards, could harm our brand. Also, Weight Watchers
products may be subject to product recalls, litigation or other deficiencies. Any negative publicity associated with
these actions or these third parties would adversely affect our brand and may result in decreased meeting
attendance, Online product subscriptions and product sales and, as a result, lower revenues and profits.
Our debt service obligations could adversely affect our financial condition, and the restrictions of our debt
covenants could impede our operations and flexibility.
As of January 2, 2016, our total debt was $2,235.0 million. In addition, at January 2, 2016, we had
$0.2 million available under our revolving credit facility. Our debt consists entirely of variable-rate instruments
so we are subject to the risk of higher interest rates. We seek to manage our exposure to interest rates through
interest rate swaps. At the end of fiscal 2015, we had in effect an interest rate swap with a notional amount of
$1.5 billion.
While there is no net debt to EBITDA (earnings before interest, taxes, depreciation and amortization)
leverage ratio maintenance requirement on our $2,235.0 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. A breach of any
of these covenants could result in an event of default under the credit facilities. Under the terms of our credit
facilities, depending on our leverage ratio, we are obligated to offer to prepay our term loan facilities in an
aggregate amount determined by our excess cash flow. 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, we may not be
able to refinance such indebtedness, and 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.
We may not be able to refinance our debt on favorable terms or at all depending on the condition of the
capital markets and our financial condition at such time.
Our ability to make scheduled payments on or to refinance our debt obligations and to fund our planned
capital expenditures and other ongoing liquidity needs 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. We have a term loan credit facility with a $144.3 million debt
maturity obligation due April 2016. We expect to satisfy our debt obligations with respect to this April 2016
maturity with cash on hand.
We also have a term loan credit facility in an aggregate principal amount of $2.1 billion that will mature in
April 2020. We expect to pay the principal and interest due in April 2020 from a combination of our cash flows
provided by operating activities and by opportunistically using other means to repay or refinance our obligations
as we determine appropriate. There can be no assurance that we will maintain a level of cash flows provided by
operating activities in an amount sufficient to permit us to pay the principal and interest on all of our outstanding
debt. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be
forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or
restructure or refinance our indebtedness. Our ability, if any, to restructure or refinance our debt will depend on
the condition of the capital markets and our financial condition at such time. We also may not be able to secure
future borrowings under our WWI Credit Facility (as defined below) or otherwise to fund our planned capital
expenditures and other ongoing liquidity needs.
Any refinancing, if available on acceptable terms or at all, of our debt could be at higher interest rates and
may require us to comply with more onerous covenants, which could further restrict our business operations. The
terms of existing or future debt instruments may restrict us from adopting some of these alternatives. In addition,
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