WeightWatchers 2015 Annual Report Download - page 19

financial data, email addresses and home addresses. These privacy concerns could keep customers from using our
websites or purchasing our services or products, and third parties from partnering with us.
In addition, the transmission of computer viruses, or similar malware, could adversely affect our
information technology systems and harm our business operations. As a result, it may become necessary to
expend significant additional amounts of capital and other resources to protect against, or to alleviate, problems
caused by security breaches. These expenditures, however, may not prove to be a sufficient remedy.
We may be required to recognize asset impairment charges for indefinite- and definite-lived assets.
In accordance with GAAP (as defined hereafter), we perform impairment reviews of our indefinite-lived
assets, which include franchise rights acquired and goodwill, on at least an annual basis or more often if events
so require. We also continually evaluate whether current factors or indicators, such as the deterioration in
relevant, country macroeconomic conditions, an increased competitive environment, a decline in our financial
performance, and/or other prevailing conditions in the capital markets, require the performance of an interim
impairment assessment of those assets. The process of testing franchise rights acquired, goodwill and other
indefinite-lived assets for impairment involves numerous judgments, assumptions and estimates made by
management which inherently reflect a high degree of uncertainty. Certain factors, including the future
profitability of our businesses, the price of our stock and macroeconomic conditions (both at the global and local
levels), might have a negative impact on the fair value of these assets. In fiscal 2013, we recorded impairment
charges in the aggregate of approximately $1.2 million related to franchise rights acquired in connection with our
Mexico and Hong Kong operations. We may incur additional impairment charges in the future, which would
have an adverse impact on our financial condition and results of operations.
Additionally, we evaluate definite-lived assets, both tangible, which includes our physical plant and
equipment, and intangible, which includes both internally developed and purchased software, for impairment by
comparing the net realizable value of the asset to the carrying value of the capitalized cost. If the value of those
assets is not deemed to be recoverable, an assessment of the fair value of those assets is performed and to the
extent the carrying value exceeds the fair value an impairment charge is recognized. Should our investment in
capitalized definite-lived assets become impaired, there would also be an adverse impact on our reported
financial results.
Loss of key personnel or consultants or failure to effectively manage and motivate our workforce could
negatively impact our sales of services and products, business, financial condition and results of
operations.
We depend on senior management and other key personnel and consultants, and the loss of certain personnel
or consultants could result in the loss of management continuity and institutional knowledge and negatively
affect our brand image and goodwill. In October 2015, Ms. Winfrey and the Company entered into a long-term,
strategic partnership, which included her making a substantial equity investment in the Company, joining our
Board of Directors, providing certain consulting services and granting us the right to use her name and marks.
Our ability to maintain our brand image and leverage the goodwill associated with Ms. Winfrey’s name may be
damaged if we were to lose her services or if the nature of our partnership changes. The loss of Ms. Winfrey’s
services or partnership with us for any reason (including as a result of her death or disability), any negative
market or industry perception with respect to her or her participation in the Company’s programs, or the failure
by Ms. Winfrey to provide services in her discretion to promote the Company, our programs, services and
products or to consult with us and participate in developing, planning, executing and enhancing our programs and
related initiatives, all in accordance with our strategic partnership arrangements with her, could have an adverse
effect on our business, financial condition and results of operations.
We also depend heavily upon our service providers to support our members and Personal Coaching
subscribers in their weight management efforts. If we fail to appropriately manage and motivate our service
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