WeightWatchers 2004 Annual Report Download - page 28

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RESULTS OF OPERATIONS
Figures are rounded to the nearest one hundred thousand; percentage changes are based on
rounded figures. Attendance percentage changes are based on rounded figures to the nearest thousand.
Impact of FIN 46R
As a result of our adoption of FIN 46R, we began consolidating the results of our affiliate and
licensee, WeightWatchers.com, at the beginning of the second quarter 2004. The table below shows the
impact this adoption had on our consolidated income statement for the fiscal year ended January 1,
2005.
Impact of
WWI Adopting Consolidated
Results FIN 46R Results
Revenues ...................................... $966.1 $ 58.8 $1,024.9
Cost of revenues ................................. 468.2 18.9 487.1
Gross profit ................................... 497.9 39.9 537.8
Marketing expenses ............................... 120.2 14.6 134.8
Selling, general and administrative expenses ............. 87.8 9.3 97.1
Operating income ............................... 289.9 16.0 305.9
Interest expense, net .............................. 14.6 2.2 16.8
Other (income)/expense, net ......................... (9.3) 4.6 (4.7)
Early extinguishment of debt ........................ 4.3 — 4.3
Income before taxes and cumulative effect of accounting
change ..................................... 280.3 9.2 289.5
Provision for income taxes .......................... 101.1 (6.6) 94.5
Income before cumulative effect of accounting change .... 179.2 15.8 195.0
Cumulative effect of accounting change ................. — (11.9) (11.9)
Net income ..................................... $179.2 $ 3.9 $ 183.1
Weighted average diluted common shares outstanding ...... 106.9 106.9 106.9
Diluted EPS .................................... $ 1.68 $ 0.03 $ 1.71
Because the requirement to consolidate WeightWatchers.com’s income statement with ours began
in the second quarter 2004, the impact on the year ended January 1, 2005 includes
WeightWatchers.com’s results of operations, net of intercompany eliminations, for only the nine months
ended January 1, 2005.
The impact of the consolidation on the year ended January 1, 2005 is to add $58.8 million in
revenues and $39.9 million of gross profit. Operating income for the year increases by $16.0 million
after incremental marketing expenses of $14.6 million and selling, general and administrative expenses
of $9.3 million. A scheduled loan repayment of $4.9 million and interest income of $2.2 million, which
Weight Watchers International earned from WeightWatchers.com, is eliminated in the consolidation of
intercompany activity.
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