WeightWatchers 2004 Annual Report Download - page 68

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WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. Basis of Presentation
Consolidation:
The accompanying consolidated financial statements include the accounts of Weight Watchers
International, Inc., its majority-owned subsidiaries and WeightWatchers.com, Inc.
(‘‘WeightWatchers.com’’), the entity required to be consolidated pursuant to Financial Accounting
Standards Board Interpretation No. 46R, ‘‘Consolidation of Variable Interest Entities’’ (‘‘FIN 46R.’’)
The term ‘‘WWI’’ as used throughout these notes is used to indicate Weight Watchers International
and its majority-owned subsidiaries. The term ‘‘the Company’’ as used throughout these notes is used
to indicate WWI as well as WeightWatchers.com.
WWI operates and franchises territories offering weight loss and control programs through the
operation of classroom type meetings to the general public in the United States, Canada, Mexico, the
United Kingdom, Continental Europe, Australasia, South Africa, Israel and Brazil.
WeightWatchers.com develops and markets safe, sensible online weight management products on
the Internet through access to specified areas of its web site on a monthly subscription basis.
Recapitalization:
On September 29, 1999, WWI entered into a recapitalization and stock purchase agreement (the
‘‘Recapitalization’’) with its former parent, H.J. Heinz Company (‘‘Heinz’’). In connection with the
Recapitalization, WWI effectuated a stock split of 58,747.6 shares for each share outstanding and then
redeemed 164,442 shares of common stock from Heinz. After the redemption, Artal Luxembourg S.A.
(‘‘Artal’’) purchased 94% of WWI’s remaining common stock from Heinz. For U.S. Federal and State
tax purposes, the Recapitalization was treated as a taxable sale under Section 338(h)(10) of the Internal
Revenue Code of 1986, as amended. As a result, for tax purposes, WWI recorded a step-up in the tax
basis of net assets. For financial reporting purposes, a valuation allowance of approximately $72,100,
which has subsequently been reversed, was established against the corresponding deferred tax asset of
$144,200.
Common Stock Offering:
On November 15, 2001, WWI traded 17,400 shares of its common stock on the New York Stock
Exchange at an initial price to the public of $24.00 per share. The Company did not receive any of the
proceeds from the sale of shares pursuant to the IPO.
Simultaneous with the Recapitalization, WWI entered into a Registration Rights Agreement with
Artal, under which WWI is obligated, at the request of Artal, to register its common stock with the
Securities and Exchange Commission and pay all costs associated with such registration. As a result, all
costs incurred in connection with WWI’s common stock offering have been recorded in shareholders’
equity (deficit).
Secondary Stock Offering:
On September 23, 2002, WWI completed the secondary offering of 15,000 shares of common stock
at an initial price of $42.00 per share. The Company did not receive any of the proceeds from the sale
of shares pursuant to this secondary offering.
F-6