WeightWatchers 2004 Annual Report Download - page 24

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are a leading provider of weight-loss services, operating in 30 countries around the world. We
conduct our business through a combination of company-owned and franchise operations, with
company-owned operations accounting for 78% of total worldwide attendance for the fiscal year ended
January 1, 2005. 59% of our revenues were generated by our U.S. operations, and the remaining 41%
of our revenues resulted from our international operations. We derive our revenues principally from:
•Meeting fees. Our members pay us a weekly fee to attend our classes.
•Product sales. We sell proprietary products that complement our program, such as snack bars,
books, CD-ROMs and POINTS calculators, to our members and franchisees.
•Franchise royalties. Our franchisees typically pay us a royalty fee of 10% of their meeting fee
revenues.
•Online subscription fees. WeightWatchers.com generates revenue from monthly subscriptions to its
web site.
•Other. We license our brand for certain foods, books and other products. We also generate
revenues from the publishing of books and magazines and third-party advertising.
The following table sets forth our revenues by category for the 2004, 2003, 2002 and 2001 fiscal
years, the eight months ended December 30, 2000 and the 2000 fiscal year.
Revenue Sources
Eight Months Fiscal Year
Fiscal Years Ended Ended Ended
January 1, January 3, December 28, December 29, December 30, April 29,
2005 2004 2002 2001 2000 2000
NACO meetings fees .............. $ 373.1 $392.4 $350.7 $262.5 $ 96.8 $130.8
International company-owned meeting
fees ........................ 256.0 214.8 170.0 153.2 87.3 152.7
Product sales ................... 274.6 276.8 237.6 170.4 66.4 84.2
Franchise royalties ................ 18.8 24.9 31.3 28.3 17.7 25.8
Online subscription fees ............ 65.0 — — — — —
Other ........................ 37.4 35.0 20.0 9.5 5.0 6.0
Total ......................... $1,024.9 $943.9 $809.6 $623.9 $273.2 $399.5
After our acquisition by Artal Luxembourg in 1999, we reorganized our management and
strengthened our strategic focus. Since April 2000, our revenues have increased at a compound annual
growth rate of 22.3% as shown in the chart above. Our operating income margin has grown from
21.9% for the year ended April 29, 2000 to 29.8% in fiscal 2004 (on a stand-alone basis excluding
WeightWatchers.com, WWI’s operating income margin was 30.0%). The increases are principally a
result of:
•Increased NACO classroom attendance. As a result of our decision to re-focus our meetings
exclusively on our group education approach and to introduce into NACO our POINTS-based
program developed in the United Kingdom and to opportunistically acquire our franchises, our
NACO classroom attendance, including the impact of our acquisitions, grew between April 2000
and fiscal 2004 at a compound annual rate of 21.1%. Including acquisitions of our franchises
that were made over this period (WW Group and Weighco and those in Fort Worth,
16