WeightWatchers 2003 Annual Report Download - page 77

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WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. Income Taxes (Continued)
The components of income before income taxes consist of the following:
January 3, December 28, December 29,
2002 2002 2001
Domestic ............................ $170,196 $185,610 $ 88,244
Foreign ............................. 62,033 49,891 33,961
$232,229 $235,501 $122,205
The difference between the U.S. federal statutory tax rate and the Company’s consolidated
effective tax rate are as follows:
January 3, December 28, December 29,
2004 2002 2001
U.S. federal statutory rate ................ 35.0% 35.0% 35.0%
Foreign income taxes ................... (0.2) (0.2) (4.3)
States income taxes (net of federal benefit) . . . 4.0 4.0 0.9
Goodwill amortization .................. — — 0.2
Other .............................. (0.8) 0.2 3.5
Valuation allowance .................... — — (55.7)
Effective tax rate ................. 38.0% 39.0% (20.4)%
The deferred tax assets (liabilities) recorded on the balance sheet are as follows:
January 3, December 28,
2004 2002
Depreciation/amortization ......................... $ 10 $ 446
Provision for estimated expenses ..................... 1,442 1,187
Operating loss carryforwards ....................... 3,814 3,708
WeightWatchers.com loan .......................... 11,505 13,455
Other ........................................ 2,057 722
Amortization ................................... 96,615 116,437
Total deferred tax assets ........................... $115,443 $135,955
Deferred income ................................ $ (65) $ (637)
Other ........................................ (1,775) (2,865)
Total deferred tax liabilities ........................ $ (1,840) $ (3,502)
Net deferred tax assets ............................ $113,603 $132,453
On September 29, 1999, the Company effected a recapitalization and stock purchase agreement
with its former parent, Heinz. For U.S. tax purposes, the Transaction was treated as a taxable sale
under IRC section 338(h)(10), resulting in a step-up in the tax basis of net assets and, recognition of a
deferred tax asset in the amount of $144,200. At the time of the Transaction, the Company determined
that it was more likely than not that a portion of the deferred tax asset would not be utilized.
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