WeightWatchers 2003 Annual Report Download - page 28

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Net interest charges in 2003 were down 20.3% from $42.3 million in 2002 to $33.7 million. The
repurchase and retirement in the third quarter of 2003 of most of our 13% Senior Subordinated Notes
and the associated refinancing of our debt, (which will be explained in more detail below) lowered our
interest expense for the remainder of 2003 and beyond.
Other expenses, net were $2.8 million for the fiscal year ended January 3, 2004 as compared to
$19.0 million for the fiscal year ended December 28, 2002. Primarily as a result of the aforementioned
retirement of the euro denominated portion of our 13% Senior Subordinated Notes, we saw a
reduction in unrealized currency gains/losses net of hedges from a loss of $17.1 million in 2002 to a loss
of $9.1 million in 2003. Additionally, in 2003 we received a $5.0 million loan repayment from our
licensee, WeightWatchers.com, which we recorded as a component of other income in 2003 since the
loan balance had been entirely written off by the end of fiscal 2001.
As was mentioned above, in the third quarter of 2003, we successfully completed a tender offer
and consent solicitation to purchase 96.6% of our $150.0 million USD denominated ($144.9 million)
and 91.6% of our A100.0 million euro denominated (A91.6 million) 13% Senior Subordinated Notes.
The consideration for the tender offer and consent solicitation was funded from cash on hand and
additional borrowings under our Credit Facility, which was refinanced concurrently. We recognized
expense for early extinguishment of debt of $47.4 million in the third quarter of 2003 that included
tender premiums of $42.6 million, the write-off of unamortized debt issuance costs of $4.4 million and
$0.4 million of fees associated with the transaction. The average interest rate on our debt declined from
9.1% at December 28, 2002 to approximately 3.7% at January 3, 2004 as a result of the refinancing.
Comparison of the fiscal year ended December 28, 2002 (52 weeks) to the fiscal year ended December 29,
2001 (52 weeks).
Net revenues were $809.6 million for the fiscal year ended December 28, 2002, an increase of
$185.7 million, or 29.8%, from $623.9 million for the fiscal year ended December 29, 2001. The 29.8%
increase in net revenues was partially the result of worldwide attendance growth of 17.7% driving a
$105.0 million increase in classroom meeting fees. The other components of the $185.7 million increase
in net revenues in fiscal 2002 over fiscal 2001 were $67.2 million of product sales, $3.0 million of
franchise revenues, $4.2 million of royalties from our licensee, WeightWatchers.com, and $6.3 million
attributable to our publications and other licensing sources. On a geographical basis, meeting fees and
product sales increased 37.4% in North America and 16.5% internationally, with 5.1% of the
international increase resulting from currency fluctuations.
Classroom meeting fees were $520.7 million for the fiscal year ended December 28, 2002 as
compared to $415.7 million for the fiscal year ended December 29, 2001. In NACO, classroom meeting
fees rose 33.6%, or $88.2 million, from $262.5 million in fiscal 2001 to $350.7 million 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 $16.8 million, or 11.0%, from $153.2 million for the fiscal year
ended December 29, 2001. The 11.0% growth in meeting fees included a 5.0% favorable impact from
foreign currency exchange rates for the full year. As shown in the chart below, attendance growth was
22