WeightWatchers 2003 Annual Report Download - page 65

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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)
Stock Based Compensation:
In December 2002, the Financial Accounting Standards Board, (‘‘FASB’’) issued SFAS No. 148,
‘‘Accounting for Stock-Based Compensation—Transition and Disclosure,’’—an amendment of SFAS
No. 123. SFAS No. 148 provides two additional alternative transition methods for recognizing an
entity’s voluntary decision to change its method of accounting for stock-based employee compensation
to the fair value method. In addition, SFAS No. 148 amends the disclosure requirements of SFAS
No. 123 so that entities following the intrinsic value method of Accounting Principles Board Opinion
No. 25, ‘‘Accounting for Stock Issued to Employees,’’ (‘‘APB 25’’) will be required to disclose the pro
forma effect of using the fair value method for any period for which an income statement is presented.
The disclosures are required to be made in annual financial statements and in quarterly information
provided to shareholders without regard to whether the entity has adopted the fair value recognition
provisions of SFAS No. 123. The Company adopted the disclosure provisions of SFAS No. 148
beginning in the first quarter of 2003.
At January 3, 2004, the Company had stock-based employee compensation plans, which are
described more fully in Note 10. As permitted by SFAS No. 123, the Company applies the recognition
and measurement principles of APB 25 and related Interpretations in accounting for those plans. No
compensation expense for employee stock options is reflected in earnings, as all options granted under
the plans had an exercise price equal to the market value of the common stock on the date of grant.
The following table illustrates the effect on net income and earnings per share if the Company had
applied the fair value recognition provisions of SFAS No. 123 in each fiscal year:
January 3, December 28, December 29,
2004 2002 2001
Net income, as reported .............................. $143,941 $143,694 $147,187
Deduct:
Total stock-based employee compensation expense determined
under the fair value method for all stock options awards, net
of related tax effect .............................. 2,036 696 558
Pro forma net income ................................ $141,905 $142,998 $146,629
Earnings per share:
Basic—as reported ................................ $ 1.35 $ 1.35 $ 1.34
Basic—pro forma ................................. $ 1.33 $ 1.35 $ 1.34
Diluted—as reported ............................... $ 1.31 $ 1.31 $ 1.31
Diluted—pro forma ................................ $ 1.29 $ 1.30 $ 1.31
F-11