WeightWatchers 2004 Annual Report Download - page 32

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America and 11.2% internationally. The impact of currency fluctuations on worldwide revenues was an
increase of 5.5%.
Classroom meeting fees were $607.2 million for the fiscal year ended January 3, 2004 as compared
to $520.7 million for the fiscal year ended December 28, 2002, an increase of 16.6%. In NACO,
classroom meeting fees rose 11.9%, or $41.7 million, from $350.7 million in fiscal 2002 to
$392.4 million in fiscal 2003. Total attendances grew 12.4%. Excluding the impact of the two franchise
acquisitions completed during 2003 and the impact of the additional week in the 2003 fiscal year,
NACO’s organic attendances decreased 2.1% from the prior year. In the first half of the year,
attendance was negatively affected by bad winter weather, the war in Iraq, a late Easter and the
nine-month delay (until fall) of the NACO innovation. Escalating over the course of the year, the
low-carb diet phenomenon had a negative impact on the growth in our North American business. We
saw organic attendance declines versus prior year periods of 6.3% in the second quarter, 2.4% in the
third quarter and 3.1% in the fourth quarter.
International company-owned classroom meeting fees were $214.8 million for the fiscal year ended
January 3, 2004, an increase of $44.8 million, or 26.4%, from $170.0 million for the fiscal year ended
December 28, 2002. The 26.4% growth in meeting fees was driven by attendance increases of 8.2% in
the UK and 9.1% in Continental Europe, coupled with a 16.4% favorable impact from foreign currency
exchange rates.
Product sales were $276.8 million for the fiscal year ended January 3, 2004, an increase of
$39.2 million, or 16.5%, from $237.6 million for the fiscal year ended December 28, 2002. Product sales
increased 7.8% to $158.2 million domestically and 30.6% to $118.6 million internationally. The increase
in international product sales was fueled by attendance growth, higher sales per individual attendance
and the favorable impact of foreign currency fluctuations. The increase in domestic product sales
resulted from additional attendances and a price increase taken early in 2003 on certain of our
consumable products in some of our NACO markets. Product sales per attendance without the impact
of the WW Group acquisition decreased 12.3% in the fourth quarter of fiscal 2003 as compared to the
same quarter last year, but increased 3.8% for the full year as compared to 2002.
For the fiscal year ended January 3, 2004, franchise royalties were $18.6 million domestically and
$6.3 million internationally. In total, franchise royalties were $24.9 million in fiscal 2003, a decrease of
$6.4 million, or 20.4%, from $31.3 million for the fiscal year ended December 28, 2002. The decline
was mainly the result of our acquisition of certain franchise territories in 2003. As we continue to
acquire franchises, revenue from the associated commissions will continue to decline, but the overall
net impact on the business of making franchise acquisitions is accretive.
Revenues from publications, licensing and other royalties increased 75.0%, or $15.0 million, to
$35.0 million for the fiscal year ended January 3, 2004 from $20.0 million for the fiscal year ended
December 28, 2002. The main components of this gain were an $8.0 million rise in magazine
advertising revenues and publishing royalties, a $4.2 million increase in licensing revenue and
$2.9 million higher royalties earned from our WeightWatchers.com license.
Cost of revenues was $440.4 million for the fiscal year ended January 3, 2004, an increase of
$70.1 million, or 18.9%, from $370.3 million for the fiscal year ended December 28, 2002, outpacing
the 16.6% revenue growth for fiscal 2003. The resultant gross profit margin was 53.3% of sales in fiscal
2003, which was a one percentage point decrease from the 54.3% level of fiscal 2002.
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