WeightWatchers 2003 Annual Report Download - page 13

Download and view the complete annual report

Please find page 13 of the 2003 WeightWatchers annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 112

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112

royalty-free license to WW Foods to use improvements that Heinz may develop in the course of its use
of our dietary principles or weight-loss program, which WW Foods sublicensed in turn to us.
Third Party Licenses
During the period that Heinz owned our company, it developed a number of food product lines
under the Weight Watchers brand, with hundreds of millions of dollars of retail sales, mostly in the
United States and in the United Kingdom. Heinz, however, did not actively license the Weight Watchers
brand to other food companies. For the period from our acquisition by Artal Luxembourg until
September 29, 2004, we have assigned to Heinz all licenses that we had previously granted to third
parties, and Heinz has retained all existing sublicenses granted by it to third parties for various food
products outside of Heinz core categories. Heinz still continues to receive royalty payments of over
$4 million per year from this existing portfolio of third-party licenses. Since May 3, 2001, we have been
managing these third party licenses on behalf of Heinz for a fee equal to 5% of the royalties from
these licenses. After September 29, 2004, these licenses will revert to us, although we have the right to
acquire them sooner, and the associated royalty payments will be payable to us in their entirety.
WeightWatchers.com License
We granted an exclusive license to WeightWatchers.com, Inc., which is an independent company, to
use our trademarks, copyrights and domain names in electronic media in connection with its online
weight-loss business. The license agreement provides us with control over the use of our intellectual
property. In particular we have the right to approve WeightWatchers.com’s e-commerce activities,
marketing programs, privacy policy and materials publicly displayed on the Internet. These controls are
designed to protect the value of our intellectual property. See ‘‘WeightWatchers.com Intellectual
Property License’’ in Item 13.
As an overview, in the United States during 2001, WeightWatchers.com, as part of its business,
launched two online paid subscription products, Weight 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 and will continue to increase the popularity of
our brand among dieters and strengthen our brand in the entire weight-loss market. Weight Watchers
eTools is designed to supplement and strengthen the Weight Watchers classroom business. Weight
Watchers eTools is a suite of electronic tools available only to Weight Watchers members, designed to
help them achieve greater success by making it even easier to follow FlexPoints and by reinforcing our
weight-loss approach between meetings.
During July 2002 and September 2002, WeightWatchers.com launched an upgrade to the United
Kingdom and Canadian web sites respectively, including the offering of two online paid subscription
products. In January 2004, WeightWatchers.com launched similar subscription products in Germany.
These products have similar functionality to the existing United States products, but are tailored
specifically to the United Kingdom, Canadian and German markets, respectively.
We own 19.9% of WeightWatchers.com, or approximately 37% on a fully diluted basis (including
the exercise of all options and all warrants). In January 2002, we began receiving royalties of 10% of
WeightWatchers.com’s net revenues and during 2003, we earned $7.1 million in royalties from
WeightWatchers.com.
7