WeightWatchers 2002 Annual Report Download - page 76

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WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
12. Related Party Transactions (Continued)
nutrition bar products. The term of the agreement runs through December 31, 2004, and the Company
has the option to renew the agreement for successive one-year periods by providing written notice to
Nellson. Management believes the provisions of the agreement are comparable to those the Company
would receive from a third party. Total purchases from Nellson for the fiscal years ended December 28,
2002 and December 29, 2001, the eight months ended December 30, 2000, and the fiscal year ended
April 29, 2000 were $24,351, $18,706, $4,936 and $4,301, respectively. These purchases represent
approximately 21%, 22%, 13% and 12% of total inventory purchases for the fiscal years ended
December 28, 2002 and December 29, 2001, the eight months ended December 30, 2000, and the fiscal
year ended April 29, 2000, respectively.
Management Agreement:
Simultaneously with the closing of the Company’s acquisition by Artal, the Company entered into
a management agreement with The Invus Group, Ltd. (‘‘Invus’’), the independent investment advisor to
Artal. Under this agreement, Invus provides the Company with management, consulting and other
services in exchange for an annual fee equal to the greater of $1,000 or one percent of the Company’s
EBITDA (as defined in the indentures relating to the Company’s senior subordinated notes), plus any
related out-of-pocket expenses. This agreement has been terminated effective December 28, 2002.
These management fees, recorded in other expenses (income), net for the fiscal years ended
December 28, 2002 and December 29, 2001, the eight months ended December 30, 2000, and the fiscal
year ended April 29, 2000 were $2,838, $1,926, $683 and $583, respectively.
Heinz:
At the closing of the Transaction, the Company granted to Heinz an exclusive worldwide,
royalty-free license to use the Custodial Trademarks (or any portion covering food and beverage
products) in connection with Heinz licensed products. Heinz will pay the Company an annual fee of
$1,200 for five years in exchange for the Company serving as the custodian of the Custodial
Trademarks.
As of December 29, 2001, other accrued liabilities includes $2,888 primarily consisting of food
royalties received on behalf of Heinz.
Certain of Heinz’ general and administrative expenses were allocated to the Company. Total costs
allocated include charges for salaries of corporate officers and staff and other Heinz corporate
overhead. Total costs charged to the Company for these services were $1,000 for the fiscal year ended
April 29, 2000.
In addition, Heinz charged the Company for its share of group health insurance costs for eligible
Company employees based upon location specific costs, overall insurance costs and loss experience
incurred during a calendar year. In addition, various other insurance coverages were also provided to
the Company through Heinz’ consolidated programs. Workers compensation, auto, property, product
liability and other insurance coverages are charged directly based on the Company’s loss experience.
Amounts charged to the Company for insurance costs were $3,800 for the fiscal year ended April 29,
2000 and are recorded in selling, general and administrative expenses in the accompanying statements
of operations. Pension costs and postretirement costs were also charged to the Company based upon
eligible employees participating in the Plans.
F-27