WeightWatchers 2003 Annual Report Download - page 74

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. Earnings Per Share (Continued)
For the fiscal 2003, 2002 and 2001 computations 391, 10 and 0 stock options, respectively, were
excluded from the calculation of weighted average shares for diluted EPS because their effects were
anti-dilutive.
10. Stock Plans
Weight Watchers Incentive Compensation Plans:
On December 16, 1999, 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 the ability to contribute to the success of the business. The Board of
Directors or a committee thereof administers the Plan.
Under the stock purchase component of the plan discussed above, 1,639 shares of common stock
were sold to 45 members of the Company’s management group at a price of $2.13 to $4.04 per share.
Under the option component of the Plan, grants may take the following forms at the committee’s
sole discretion: Incentive Stock Options, Other Stock Options (other than incentive options), Stock
Appreciation Rights, Restricted Stock, Purchase Stock, Dividend Equivalent Rights, Performance Units,
Performance Shares and Other Stock—Based Grants. The maximum number of shares available for
grant under this plan was 5,647 shares of authorized common stock as of the effective date of the Plan.
In 2001, the number of shares available for grant was increased to 7,058 shares.
Pursuant to the restricted stock component of the Plan, the Company granted 7 shares of
restricted stock to certain employees during 2003. The weighted average fair value of these shares on
the date of the grant was $39.35. These shares vest over a period of three years and resulted in
compensation expense of $53 for the fiscal year ended January 3, 2004.
Pursuant to the option component of the Plan, the Board of Directors authorized the Company to
enter into agreements under which certain members of management received Non-Qualified Time and
Performance Stock Options providing them the opportunity to purchase shares of the Company’s
common stock at an exercise price of $2.13 to $45.50. The options are exercisable based on the terms
outlined in the agreement. The exercise price was equivalent to the fair market value at the date of
grant.
The fair value of each option is estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions:
January 3, December 28, December 29,
2004 2002 2001
Dividend yield ...................... 0% 0% 0%
Volatility .......................... 36.5% 34.5% 34.6%
Risk-free interest rate ................. 2.6%-3.7% 3.5%-5.2% 5.1%-5.4%
Expected term (years) ................. 5.6 7.0 7.5
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