WeightWatchers 2003 Annual Report Download

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THE WORLD'S TRUSTED NAME IN WEIGHT LOSS
Annual Report 2003

Table of contents

  • Page 1
    T H E W O R L D ' S T R U ST E D N A M E I N W E I G H T L O SS Annual Report 2003

  • Page 2
    ... revenue and operating income growth In 2003 we continued our track record of delivering strong top and bottom line growth. Since 2000, we've grown revenues at a compound annual growth rate of 29%. At the same time, our operating income grew at an even faster rate, increasing at a compound annual...

  • Page 3
    ...facing the world's population and that the demand for a healthy, scientifically based, safe, and effective weight-loss and weight-management program continues to grow. Weight Watchers has a unique business model, with a variable cost structure that is ideally suited to meet seasonal dieting demands...

  • Page 4
    ... categories: One-time-purchase products such as electronic POINTS® calculators or pedometers, once-per-membership-cycle products like our POINTS® and eating out guides or cookbooks, and every-week products such as consumables. Since 2000, product sales have grown at a compound annual rate of 35...

  • Page 5
    ... participation allows members to continuously refocus their energies on International expansion provides another way for us to leverage our brand. Over the past three years, international revenues increased at a compound annual growth rate of 20%. their weight-loss goals. In addition, the meetings...

  • Page 6
    .... performance. On behalf of Weight Watchers, I would like to personally thank our members, employees, directors and shareholders for your continued support in making our organization the world's premiere provider of weight-loss services. Sincerely, Linda Huett President and Chief Executive Of...

  • Page 7
    ... aggregate market value, as determined by the last sale price of $45.49 on the New York Stock Exchange, of the voting stock held by non-affiliates (shareholders holding less than 5% of the outstanding Common Stock, excluding directors and officers), as of June 27, 2003 was $1,908,920,889. The number...

  • Page 8
    ... meetings, which promote weight loss through education and group support in conjunction with a flexible, healthy diet and exercise method. Each week, over 1.5 million people attend approximately 46,000 Weight Watchers meetings around the world, which are run by approximately 15,800 classroom leaders...

  • Page 9
    ...can range from dealing with a holiday office party to making time to exercise. The leader encourages substantial class participation and discusses supporting products and materials as appropriate. At the end of the class, new members are given special instruction in our current weight loss plan. Our...

  • Page 10
    ... members also currently learn ''Tools for Living,'' a set of ten techniques to assist in handling the barriers to long-term weight loss. Our international members learn similar principles and receive similar publications. Healthful Eating Our food plans allow our members to eat regular meals instead...

  • Page 11
    ... products, Weight Watchers Online and Weight Watchers eTools. Weight Watchers Online offers information on FlexPoints, POINTS values, content on various weight-loss subjects, professionally-developed low-POINTS recipes and weekly meal plans for different POINTS ranges. In addition, Weight Watchers...

  • Page 12
    ... a highly recognized global brand, Weight Watchers is a powerful marketing tool for us and for third parties. We currently license our Weight Watchers brand in certain categories of food, books and other products. This year, for example, we partnered with Applebee's International to launch a Weight...

  • Page 13
    ... Watchers Online and Weight Watchers eTools. Weight Watchers Online is a self-help product based on our current Weight Watchers plan designed to attract consumers who choose the Weight Watchers plan but not the Weight Watchers meeting services. We believe that Weight Watchers Online has increased...

  • Page 14
    ...option of committing to consecutive weekly attendance with a lower weekly fee with penalties for missed classes or paying a higher weekly fee without the missed meeting penalties. We also offer discounted prepayment plans. Public Relations and Celebrity Endorsements The focus of our public relations...

  • Page 15
    ... website. The website contributes value to our classroom business by promoting our brand, advertising Weight Watchers classes, providing a meeting locator and keeping members involved with the program outside the classroom through useful offerings, such as low calorie recipes, weight-loss news...

  • Page 16
    ... who focused on meal replacements. These changes forced our classroom leaders to become food sales people and retail managers for food products, detracting from their function as role models and motivators for our members. This caused a significant drop in customer satisfaction and employee...

  • Page 17
    ... 16 reports filed electronically by our officers, directors and 10% shareholders. Usually these are publicly accessible no later than the business day following the filing. Shareholders may request a free copy of these items at: Weight Watchers International Attn: Investor Relations 175 Crossways...

  • Page 18
    ... classes in third-party locations (typically meeting rooms in well-located civic or religious organizations) or space leased in retail centers (typically leased spaces in strip malls for short terms, generally less than five years). As of January 3, 2004, there were approximately 4,200 North America...

  • Page 19
    ... public trading market for our common stock. The following table sets forth, for the period indicated, the high and low sales prices per share for our common stock as reported on the New York Stock Exchange consolidated tape (NYSE ticker symbol: ''WTW''). Fiscal Year ended December 28, 2002 High Low...

  • Page 20
    ... FINANCIAL DATA (In millions, except per share amounts) Eight Months Ended Fiscal Y ears Ended January 3, December 28, December 29, 2004 2002 2001 Fiscal Y ears Ended December 30, 2000 April 29, April 24, (35 Weeks) 2000 1999 Revenues, net ...Net income ...Working capital (deficit) Total assets...

  • Page 21
    ...our international operations. We derive our revenues principally from: • Meeting fees. Our members pay us a weekly fee to attend our classes. • Product sales. We sell proprietary products that complement our program, such as snack bars, books, CD -R OMs and POINTS calculators, to our members and...

  • Page 22
    ... programs tailored to the local markets and increasing the number of meetings ahead of anticipated demand. Between fiscal 1999 and fiscal 2003, attendance in our Continental European operations grew at a compound annual rate of 12.8% . • Increased product sales. We have increased our product sales...

  • Page 23
    ... the purchase method of accounting. Accordingly, their results of operations have been included in our consolidated operating results since the dates of the completion of their respective acquisitions. Critical Accounting Policies ''Management's Discussion and Analysis of Financial Condition and...

  • Page 24
    ...exchange for an introductory information session and materials we provide to new members. Revenue from these registration fees is recognized when the service and products are provided, which is generally at the same time payment is received from the customer. Revenue from meeting fees, product sales...

  • Page 25
    ... , which drove an $86.5 million increase in classroom meeting fees. The other components of the $134.3 million increase in net revenues in fiscal 2003 over fiscal 2002 were $39.2 million of product sales, $2.9 million of royalties from our licensee, WeightWatchers.com, $12.2 million attributable to...

  • Page 26
    ... low-carb diet phenomenon had a negative impact on the growth in our North American business. We saw organic attendance declines versus prior year periods of 6.3% in the second quarter, 2.4% in the third quarter and 3.1% in the fourth quarter. International company-owned classroom meeting fees were...

  • Page 27
    ... profit margin percentage for the full year 2003 as compared to 2002 resulted primarily from factors relating to the timing of our Fall 2003 NACO innovation. These included significant expenses in the third quarter 2003 relating to the nationwide innovation training meetings held with our meeting...

  • Page 28
    ... in fiscal 2002. Total attendances grew 31.2% while organic growth, excluding the impact of the three franchise acquisitions completed during 2002, was 22.0% . International company-owned classroom meeting fees were $170.0 million for the fiscal year ended December 28, 2002, an increase of $16...

  • Page 29
    ... member attendances increased 4.3% overall. % Increase in Attendances Fiscal 2002 versus Fiscal 2001 First Half Second Half Full Y ear United Kingdom ...Continental Europe ...Other ...Total International ... (2.3)% 2.3% 5.7% 0.4% 8.6% 11.4% 6.4% 9.3% 2.3% 6.4% 6.1% 4.3% Product sales...

  • Page 30
    ... working capital of $22.1 million at December 28, 2002. The change was primarily attributable to the decrease in cash of $34.1 million, timing related increases in income taxes payable of $10.7 million and accrued expenses of $2.2 million and other activity of $0.8 million. There were 53 weeks...

  • Page 31
    ... in the fourth quarter due to the debt refinancing completed in September 2003. Capital spending has averaged approximately $4.6 million annually over the last three years and has consisted primarily of leasehold improvements, furniture and equipment for meeting locations and information system...

  • Page 32
    ...be satisfied with operating cash flows. We believe that cash flows from operating activities, together with borrowings available under our Revolver, will be sufficient for the next 12 months to fund currently anticipated capital expenditure requirements, debt service requirements and working capital...

  • Page 33
    ... stock. The repurchase program allows for shares to be purchased from time to time in the open market or through privately negotiated transactions. No shares will be purchased from Artal Luxembourg or its affiliates under the program. During the fourth quarter of 2003, we purchased 784,000 shares of...

  • Page 34
    .... For the year ended December 31, 2003, WeightWatchers.com had net income of $5.4 million. Forward-Looking Statements Certain statements in this Item 7, ''Management's Discussion and Analysis of Financial Condition and Results of Operations,'' contain not only historical information, but also...

  • Page 35
    ... rate debt. Changes in the fair value of these derivatives will be recorded each period in earnings for non-qualifying derivatives or accumulated other comprehensive income (loss) for qualifying derivatives. Fluctuations in currency exchange rates may also impact our shareholders' equity. The assets...

  • Page 36
    ...Chief Financial Officer Vice President, General Counsel and Secretary Vice President of Operations, United Kingdom Vice President of Strategy & Operations, Continental Europe Chairman of the Board Director Director Director Director Director Director Director Member of our compensation and benefits...

  • Page 37
    ... 2003. Mr. Kelly has more than 20 years experience in operations management and strategic business development spanning a number of consumer-oriented businesses. Prior to joining us, Mr. Kelly was Chief Executive of Esporta plc, an operator of luxury health and fitness clubs located in the UK, Spain...

  • Page 38
    ... Sobecki is a director of WeightWatchers.com, Inc., Financial Technologies International, Inc. and iLife, Inc. He also served as a director of Keebler Foods Company from 1996 to 1998. Sam K. Reed. Mr. Reed has been a director of our company since February 2002. Mr. Reed has 27 years of experience in...

  • Page 39
    ... Our Board of Directors is currently comprised of nine directors. Classes and Terms of Directors Our Board of Directors is divided into three classes, as nearly equal in number as possible, with each director serving a three-year term and one class being elected at each year's annual meeting of...

  • Page 40
    ... our Chief Executive Officer and other executive officers. It is the responsibility of the Board of Directors to review, recommend and approve changes to our compensation policies and benefits programs, to administer our stock plans, including approving stock option grants to executive officers and...

  • Page 41
    ..., and is delivered through a combination of cash and equity-based awards. This approach results in overall compensation levels that follow our financial performance. Our Board of Directors reviews each senior executive officer's base salary annually. In determining appropriate base salary levels...

  • Page 42
    ...highly compensated executive officers whose total annual salary and bonus was in excess of $100,000. Summary Compensation Table Long-term Compensation Awards, Securities Underlying Options (No. Awarded) Weight Watchers Int'l Twelve Month Period Compensation Name and principal position Twelve Months...

  • Page 43
    ... over one to five years and are not subject to performance targets. In any event, the options become fully vested upon the occurrence of a change in control of our company. In April 2000, our Board of Directors adopted the WeightWatchers.com Stock Incentive Plan pursuant to which selected employees...

  • Page 44
    ...- - - - - - (*) The value of WeightWatchers.com options are not currently calculable as the underlying securities are not publicly traded. Director Compensation Our executive director and our directors who are associated with The Invus Group do not receive compensation. Mr. Reed, Ms. Evans and Mr...

  • Page 45
    ... following payments and benefits: • Ms. Huett, Ms. Sardini and Mr. Hollweg are entitled to receive the following: (i) A lump sum cash payment equal to three times the sum of (x) the executive's annual base salary on the date of the change in control (or, if higher, the annual base salary in effect...

  • Page 46
    ... pro rata portion in either case calculated from January 1 of such year through the date of termination) (the ''pro rata bonus''), and (z) any other compensation previously deferred (excluding qualified plan deferrals by the executive under or into our benefit plans); (iii) Continued medical, dental...

  • Page 47
    ... information regarding the beneficial ownership of our common stock by (1) all persons known by us to own beneficially more than 5% of our common stock, (2) our chief executive officer and each of the named executive officers, (3) each director and (4) all directors and executive officers as a group...

  • Page 48
    .... The address of Artal Services is Woluwedal, 28 B-1932 St. Stevens-Woluwe Belgium. (2) Our executive officers and directors may be contacted c /o Weight Watchers International, Inc., 175 Crossways Park West, Woodbury, New York, 11797. (3) Includes shares subject to purchase upon exercise of options...

  • Page 49
    ... Plan Information Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise price of outstanding options, warrants and rights Plan category Number of securities remaining available for future issuance Equity compensation security holders...

  • Page 50
    ... in any of these activities. Under the corporate agreement, if one of our officers or directors who also serves as an officer, director or advisor of Artal Luxembourg becomes aware of a potential transaction related primarily to the group education-based weight-loss business that may represent...

  • Page 51
    ... works. All rights granted to WeightWatchers.com must be used solely in connection with the conduct of its online weight-loss business. Beginning in January 2002, WeightWatchers.com began paying us a royalty of 10% of the net revenues it earns through its online activities. For fiscal 2003 and 2002...

  • Page 52
    We are required to pay for all expenses incurred by WeightWatchers.com directly attributable to the services it performs under this agreement, plus a fee of 10% of those expenses. In fiscal 2003 and 2002, service fees incurred by us to WeightWatchers.com were $2.0 million and $1.9 million, ...

  • Page 53
    ... year, the appropriate ratio between the total amount of fees for Audit, Audit-related and Tax services and the total amount of fees for certain permissible non-audit services classified as All Other services. The policy authorizes the Committee to delegate to one or more of its members pre...

  • Page 54
    ... to the results of its third fiscal quarter ended September 27, 2003. Under the Form 8-K, the Company furnished (not filed) pursuant to Item 12 under Item 7 the press release entitled ''Weight Watchers Reports 2003 Third Quarter and Nine Month Results'' related to the results of its third fiscal...

  • Page 55
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE COVERED BY REPORT OF INDEPENDENT AUDITORS ITEMS 15(a) 1&2 Pages Consolidated Balance Sheets at January 3, 2004 and December 28, 2002 ...Consolidated Statements of Operations for the ...

  • Page 56
    ...,384 2,353 128,231 7,851 1,842 $606,350 TOTAL ASSETS ...LIABILITIES AND SHAR EHOLDER S' EQUITY CUR R ENT LIABILITIES Portion of long-term debt due within one year . . Accounts payable ...Salaries and wages ...Accrued interest ...Other accrued liabilities ...Income taxes payable ...Deferred revenue...

  • Page 57
    ...) January 3, 2004 (53 Weeks) December 28, 2002 (52 Weeks) December 29, 2001 (52 Weeks) Meeting fees, net ...Product sales and other, net ...Revenues, net ...Cost of revenues ...Gross profit ...Marketing expenses ...Selling, general and administrative expenses ...Operating income ...Interest expense...

  • Page 58
    ...: Net income ...Translation adjustment ...Changes in fair value of derivatives accounted for as hedges, net of taxes of $2,303 ...Total Comprehensive Income ...Preferred stock dividend ...Purchase of treasury stock . . Stock options exercised ...Sale of common stock ...Cost of public equity offering...

  • Page 59
    ...cost ...Purchase of treasury stock ...Cost of public equity offering ...Proceeds from sale of common stock ...Proceeds from stock options exercised ...Cash used for financing activities ...Effect of exchange rate changes on cash and cash equivalents and other Net (decrease) increase in cash and cash...

  • Page 60
    ... Weight Watchers International, Inc. and subsidiaries (the ''Company'') operates and franchises territories offering weight loss and control programs through the operation of classroom type meetings to the general public in the United States, Canada, Mexico, the United Kingdom, Continental Europe...

  • Page 61
    ... currency. Assets and liabilities of these operations are translated at the exchange rate in effect at each year-end. Income statement accounts are translated at the average rate of exchange prevailing during the year. Translation adjustments arising from the use of differing exchange rates from...

  • Page 62
    ...-line method over their estimated useful lives of three to 20 years. The Company accounts for software costs under the American Institute of Certified Public Accountants Statement of Position No. 98-1, '' Accounting for the Costs of Computer Software Developed or Obtained for Internal Use,'' which...

  • Page 63
    ... its magazine. The Company charges non-refundable registration fees in exchange for an introductory information session and materials it provides to new members. Revenue from these registration fees is recognized when the service and products are provided, which is generally at the same time payment...

  • Page 64
    ... and financial policies of the investee, the investment is accounted for under the equity method. Deferred Financing Costs: Deferred financing costs consist of fees paid by the Company as part of the establishment, exchange and/or modification of the Company's long-term debt. During the fiscal year...

  • Page 65
    ... fiscal year: January 3, 2004 December 28, 2002 December 29, 2001 Net income, as reported ...Deduct: Total stock-based employee compensation expense determined under the fair value method for all stock options awards, net of related tax effect ...Pro forma net income ...Earnings per share: Basic-as...

  • Page 66
    ... after June 30, 2003 and hedging relationships designated after June 30, 2003. The Company has applied the provisions of SFAS No. 149 and its adoption has not had a material impact on the Company's consolidated financial position, results of operations or cash flows. In May 2003, the Emerging Issue...

  • Page 67
    ... Cuida Kilos, S.A. de C.V., Weight Watchers North America, Inc. and the Company. The purchase price for the acquisition was $180,700 plus assumed liabilities of $448 and acquisition costs of $866. The Company completed the purchase price allocation in the fourth quarter of 2003 as follows: franchise...

  • Page 68
    ... 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...

  • Page 69
    ... to acquisitions of the Company's franchised territories. Prior to fiscal 2002, goodwill and other indefinitelived intangible assets were being amortized on a straight-line basis over periods ranging from 3 to 40 years. Amortization of goodwill and other indefinite-lived intangibles for the fiscal...

  • Page 70
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 4. Goodwill and Other Intangible Assets (Continued) fiscal year 2001, is presented below for the fiscal years ended January 3, 2004, December 28, ...

  • Page 71
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 6. Long-Term Debt The components of long-term debt are as follows: January 3, 2004 Balance Effective rate December 28, 2002 Balance Effective rate ...

  • Page 72
    ...semi-annually on April 1 and October 1 of each year. The Company uses interest rate swaps and foreign currency forward contracts in association with its debt. As of January 3, 2004, 100% of the Company's euro denominated Senior Subordinated Notes are effectively hedged through the use of a cash flow...

  • Page 73
    ... or its affiliates under the program. In the fourth quarter of 2003, the Company purchased 784 shares of stock in the open market at a total cost of $28,815. 9. Earnings Per Share Basic earnings per share (''EPS'') computations are calculated utilizing the weighed average number of common shares...

  • Page 74
    ... the Board of Directors adopted the 1999 Stock Purchase and Option Plan of Weight Watchers International, Inc. and Subsidiaries (the ''Plan''). The Plan is designed to promote the long-term financial interests and growth of the Company and its subsidiaries by attracting and retaining management with...

  • Page 75
    ..., the Board of Directors adopted the WeightWatchers.com Stock Incentive Plan of Weight Watchers International, Inc. and Subsidiaries, pursuant to which selected employees were granted options to purchase shares of common stock of WeightWatchers.com, Inc. that are owned by the Company. The number of...

  • Page 76
    ... the stock option activity under the WeightWatchers.com Stock Incentive Plan is as follows: January 3, 2004 December 28, 2002 December 29, 2001 Weighted Weighted Weighted Number of average Number of average Number of average Shares exercise price Shares exercise price Shares exercise price Options...

  • Page 77
    ... 0.9 0.2 3.5 (55.7) (20.4)% Effective tax rate ... The deferred tax assets (liabilities) recorded on the balance sheet are as follows: January 3, 2004 December 28, 2002 Depreciation/amortization ...Provision for estimated expenses . Operating loss carryforwards ...WeightWatchers.com loan ...Other...

  • Page 78
    ... media in connection with its online weight-loss business. The license agreement provides the Company with control of how its intellectual property is used. In particular, the Company has the right to approve WeightWatchers.com's e-commerce activities, marketing programs, privacy policy and...

  • Page 79
    ... to pay for all expenses incurred by WeightWatchers.com directly attributable to the services it performs under this agreement, plus a fee of 10% of those expenses. The Company recorded service expense of $1,971, $1,862 and $554 for the years ended January 3, 2004, December 28, 2002 and December...

  • Page 80
    ... 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...

  • Page 81
    ... the Weight Watchers Executive Profit Sharing Plan. Under the Internal Revenue Service (''IR S'') definition, this plan is considered a Nonqualified Deferred Compensation Plan. There is a promise of payment by the Company made on the employees' behalf instead of an individual account with a cash...

  • Page 82
    ... sales price times the increase in the consumer price index since the date of the sale. If the Company repurchases the minority interest after five years from the original sale, the repurchase price is based on a multiple of the average operating income during the last three years. In December 2003...

  • Page 83
    ...and cash equivalents, short and long-term debt, current and noncurrent notes receivable, currency exchange agreements and guarantees. In evaluating the fair value of significant financial instruments, the Company generally uses quoted market prices of the same or similar instruments or calculates an...

  • Page 84
    ... to the extinguishment the Company is currently 100% hedged. As such, to offset gains or losses from changes in foreign exchange rates related to the euro Notes for the fiscal years ended January 3, 2004 and December 28, 2002, the Company reclassified $310 ($508 before taxes) and $2,258 ($3,702...

  • Page 85
    ..., Inc.; Weight Watchers Direct, Inc.; W/W Twentyfirst Corporation; W.W. Weight Reduction Services, Inc.; W.W.I. European Services Ltd.; W.W. Inventory Service Corp.; Weight Watchers North America, Inc.; Weight Watchers U.K. Holdings Ltd.; Weight Watchers International Holdings Ltd.; Weight Watchers...

  • Page 86
    ... under its guarantee of the new senior credit facility. Presented below is condensed consolidating financial information for Weight Watchers International, Inc. (''Parent Company''), the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries (primarily companies incorporated in European countries...

  • Page 87
    ... 701,897) TOTAL ASSETS ... LIABILITIES AND SHAREHOLDERS' EQUITY CUR R ENT LIABILITIES Portion of long-term debt due within one year ...Accounts payable ...Salaries and wages ...Accrued interest ...Other accrued liabilities ...Income taxes (receivable) payable . . Deferred revenue ... ... ... $ 15...

  • Page 88
    ...556,952 556,952) TOTAL ASSETS ...$ 444,362 LIABILITIES AND SHAREHOLDERS' EQUITY CUR R ENT LIABILITIES Portion of long-term debt year ...Accounts payable ...Salaries and wages ...Accrued interest ...Other accrued liabilities . Income taxes payable ...Deferred revenue ... due within one ...$ 17,632...

  • Page 89
    ... FOR THE FISCAL YEAR ENDED JANUARY 3, 2004 (IN THOUSANDS) NonGuarantor Subsidiaries Parent Company Guarantor Subsidiaries Eliminations Consolidated Revenues, net ...Cost of revenues ...Gross profit ...Marketing expenses ...Selling, general and administrative expenses ...Operating (loss) income...

  • Page 90
    ...WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS FOR THE FISCAL YEAR ENDED DECEMBER 28, 2002 (IN THOUSANDS) NonGuarantor Subsidiaries Parent Company Guarantor Subsidiaries Eliminations Consolidated Revenues, net ...Cost of revenues ...Gross profit...

  • Page 91
    ...FOR THE FISCAL YEAR ENDED DECEMBER 29, 2001 (IN THOUSANDS) NonGuarantor Subsidiaries Parent Company Guarantor Subsidiaries Eliminations Consolidated Revenues, net ...Cost of revenues ...Gross profit ...Marketing expenses ...Selling, general and administrative expenses ...Operating (loss) income...

  • Page 92
    ...of high-yield loan ...Proceeds from settlement of hedge ...Premium paid on extinguishment of debt and costs ...Deferred financing cost ...Purchase of treasury stock ...Proceeds from stock options exercised ...other ... Cash used for financing activities ...Effect of exchange rate changes on cash and...

  • Page 93
    ......Financing activities: Net (decrease) increase in short-term borrowings ...Parent company investment in subsidiaries . Payment of dividends ...Payments on long-term debt ...Redemption of redeemable preferred stock Net Parent advances ...Cost of public equity offering ...Proceeds from stock options...

  • Page 94
    ...Financing activities: Net increase in short-term borrowings ...Proceeds from borrowings ...Parent company investment in subsidiaries Payment of dividends ...Payments on long-term debt ...Deferred financing costs ...Net Parent advances ...Purchase of treasury stock ...Cost of public equity offering...

  • Page 95
    ..., the financial position of Weight Watchers International, Inc. and its subsidiaries at January 3, 2004 and December 28, 2002, and the results of their operations and their cash flows for each of the years ended January 3, 2004, December 28, 2002 and December 29, 2001, in conformity with accounting...

  • Page 96
    ... Charged to Costs and Expenses Balance at End of Period Deductions(1) FISCAL YEAR ENDED JANAURY 3, 2004 Allowance for doubtful accounts ...Inventory reserves, other ...FISCAL YEAR ENDED DECEMBER 28, 2002 Allowance for doubtful accounts ...Inventory reserves, other ...FISCAL YEAR ENDED DECEMBER...

  • Page 97
    ...Service Corp., Weight Watchers North America, Inc., Weight Watchers U.K. Holdings Ltd., Weight Watchers International Holdings, Ltd., Weight Watchers U.K. Limited, Weight Watchers (Accessories & Publications) Ltd., Weight Watchers (Food Products) Limited, Weight Watchers New Z ealand Limited, Weight...

  • Page 98
    ...Service Corp., Weight Watchers North America, Inc., Weight Watchers U.K. Holdings Ltd., Weight Watchers International Holdings, Ltd., Weight Watchers U.K. Limited, Weight Watchers (Accessories & Publications) Ltd., Weight Watchers (Food Products) Limited, Weight Watchers New Z ealand Limited, Weight...

  • Page 99
    ... Watchers Executive Profit Sharing Plan, dated as of October 4, 1999 is incorporated herein by reference to Exhibit 10.18 filed with the Registrant's Annual Report on Form 10-K for the fiscal year ended April 29, 2000. **10.20 - 1999 Stock Purchase and Option Plan of Weight Watchers International...

  • Page 100
    Exhibit Number Description **10.21 - WeightWatchers.com Stock Incentive Plan of Weight Watchers International, Inc. and Subsidiaries is incorporated herein by reference to Exhibit 10.20 filed with the Registrant's Annual Report on Form 10-K for the fiscal year ended April 29, 2000. **10.22 - ...

  • Page 101
    ... as of October 10, 2003, between Weight Watchers International, Inc. and certain key executives (Chief Executive Officer, Chief Financial Officer and General Counsel). *10.39 - Form of Continuity Agreement, dated as of October 10, 2003, between Weight Watchers International, Inc. and certain key...

  • Page 102
    ...1934, the registrant has duly caused this report to be signed on his behalf by the undersigned, thereunto duly authorized. W EIGHT W ATCHER S I NTER NATIONAL, I NC . Date: March 18, 2004 By: /s/ L INDA H UETT Linda Huett President, Chief Executive Officer and Director (Principal Executive Officer)

  • Page 103
    ... Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: March 18, 2004 By: /s/ L INDA H UETT Linda Huett President, Chief Executive Officer and Director (Principal Executive Officer) Date...

  • Page 104
    ... on Form S-8 (No. 333-74066) of Weight Watchers International, Inc. and subsidiaries of our report dated February 16, 2004, relating to the financial statements and financial statement schedule, which appears in this Form 10-K. Date: March 18, 2004 PricewaterhouseCoopers LLP New York, New York

  • Page 105
    ....1 CERTIFICATIONS I, Linda Huett, President and Chief Executive Officer of Weight Watchers International, Inc., certify that: 1. 2. I have reviewed this annual report on Form 10-K of Weight Watchers International, Inc.; Based on my knowledge, this annual report does not contain any untrue statement...

  • Page 106
    ... I, Ann M. Sardini, Vice President and Chief Financial Officer of Weight Watchers International, Inc., certify that: 1. 2. I have reviewed this annual report on Form 10-K of Weight Watchers International, Inc.; Based on my knowledge, this annual report does not contain any untrue statement of...

  • Page 107
    ...; and The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. Signature: /s/ L INDA H UETT Linda Huett President, Chief Executive Officer and Director (Principal Executive Officer) Date: March 18, 2004

  • Page 108
    ... ACT OF 2002 In connection with the Annual Report of Weight Watchers International, Inc. (the ''Company'') on Form 10-K for the period ended January 3, 2004 as filed with the Securities and Exchange Commission on the date hereof (the ''Report''), I, Ann M. Sardini, Chief Financial Officer of the...

  • Page 109
    ..., Garden City, NY 11530 on Wednesday, May 12, 2004, at 10 a.m. eastern time. Corporate Headquarters Weight Watchers International, Inc. 175 Crossways Park West Woodbury, NY 11797-2055 www.weightwatchersinternational.com Common Stock New York Stock Exchange Symbol: WTW Shareholder Relations Robert...

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    ... link betw een obesity and the risk of serious diseases such as cancer. Weight Watchers is a founding board member of the National Business Group on Health's Institute on the Costs and Health Effects of Obesity, an organization that strives to help corporate America tackle obesity in the w orkplace.

  • Page 112
    Weight Watchers M agazine is published in many countries around the w orld. Above are some examples. The United States version is in the center. Also featured are Spain, Germany, Denmark, Brazil, France and Israel. WWA-AR-04