WeightWatchers 2002 Annual Report Download - page 62

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WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. Summary of Significant Accounting Policies (Continued)
Company will apply the recognition provisions of Interpretation No. 45 prospectively to guarantee
activities initiated after December 31, 2002. Refer to Note 12 on discussion of WeightWatchers.com
lease guarantee.
The FASB recently issued Interpretation No. 46, ‘‘Consolidation of Variable Interest Entities.’’
Interpretation No. 46 requires that the assets, liabilities and results of the activity of variable interest
entities be consolidated into the financial statements of the company that has the controlling financial
interest. Interpretation No. 46 also provides the framework for determining whether a variable interest
entity should be consolidated based on voting interest or significant financial support provided to it.
Interpretation No. 46 is effective for the Company on February 1, 2003 for variable interest entities
created after January 31, 2003, and on June 29, 2003 for variable interest entities created prior to
February 1, 2003. The Company is currently reviewing Interpretation No. 46 to determine its impact, if
any, on the Company’s consolidated financial position, results of operations, or cash flows.
Reclassification:
Certain prior year amounts have been reclassified to conform to the current year presentation.
3. Acquisitions
During fiscal 2002 and 2001, the Company acquired the assets of five of its franchises as outlined
below.
These acquisitions have been accounted for under the purchase method of accounting and,
accordingly, earnings have been included in the consolidated operating results of the Company since
the date of acquisition.
On September 1, 2002, the Company completed the acquisition of the assets of one of its
franchisees, AZIS Properties of Raleigh Durham, Inc. (d/b/a Weight Watchers of Raleigh Durham),
pursuant to the terms of an Asset Purchase Agreement among Weight Watchers of Raleigh Durham,
the Company and Weight Watchers North America, Inc., a wholly owned subsidiary of the Company.
Substantially all of the purchase price in excess of the net assets acquired has been recorded as
goodwill. The purchase price for the acquisition was $10,600 and was financed through cash from
operations.
On July 2, 2002, the Company completed the acquisition of the assets of one of its franchisees,
Weight Watchers of San Diego and The Inland Empire, Inc., pursuant to the terms of an Asset
Purchase Agreement among Weight Watchers of San Diego, the Company and Weight Watchers North
America, Inc. Substantially all of the purchase price in excess of the net assets acquired has been
recorded as goodwill. The purchase price for the acquisition was $11,000 and was financed through
cash from operations.
On January 18, 2002, the Company completed the acquisition of the assets of one of its
franchisees, Weight Watchers of North Jersey, Inc., pursuant to the terms of an Asset Purchase
Agreement executed on December 31, 2001 among Weight Watchers of North Jersey, Inc., the
Company and Weight Watchers North America, Inc. Substantially all of the purchase price in excess of
the net assets acquired has been recorded as goodwill. The purchase price for the acquisition was
F-13