WeightWatchers 2004 Annual Report Download - page 75

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WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. Summary of Significant Accounting Policies (Continued)
The American Jobs Creation Act of 2004 (the ‘‘AJCA’’) was enacted on October 22, 2004 and
includes a special one-time deduction of 85% of certain foreign earnings repatriated to the U.S. In
December 2004, the FASB issued FSP FAS 109-2, Accounting and Disclosure Guidance for the Foreign
Earnings Repatriation Provision within the AJCA, allowing companies additional time to evaluate the
effect of the AJCA on plans for reinvestment or repatriation of foreign earnings. The Company is in
the process of evaluating the effects of the repatriation provision; however, the Company does not
expect to complete this evaluation until after Congress or the U.S. Treasury Department provides
further clarification on key elements of the provision. As such, the Company has not concluded its
analysis to determine whether, and to what extent, it might repatriate foreign earnings. The Company
expects to be in a position to finalize the assessment within a reasonable amount of time after the
issuance of clarifying U.S. Treasury or Congressional guidance.
Reclassification:
Certain prior year amounts have been reclassified to conform to the current year presentation.
3. Acquisitions
All acquisitions have been accounted for under the purchase method of accounting and,
accordingly, earnings have been included in the consolidated operating results of the Company since
the date of acquisition. During fiscal 2004 and 2003, the Company acquired certain assets of its
franchises as outlined below.
On August 22, 2004, the Company completed the acquisition of certain assets of its Fort Worth
franchisee, Weight Watchers of Fort Worth, Inc., for a purchase price of $30,000 that was financed
through cash from operations. The purchase price has been allocated to franchise rights ($29,421), fixed
assets ($226), inventory ($286) and other assets ($67). Pro forma results of operations, assuming this
acquisition had been completed at the beginning of fiscal 2004 and 2003, would not differ materially
from the reported results.
On May 9, 2004, the Company completed the acquisition of certain assets of its Washington, D.C.
area franchisee, F-W Family Corporation (d/b/a Weight Watchers of Washington, D.C.), for a purchase
price of $30,500, which was financed through cash from operations, plus assumed liabilities of $348.
The total purchase price has been allocated to franchise rights ($30,268), fixed assets ($300), inventory
($228) and other assets ($52). Pro forma results of operations, assuming this acquisition had been
completed at the beginning of fiscal 2004 and 2003, would not differ materially from the reported
results.
On November 30, 2003, the Company completed the acquisition of certain assets of two of its
franchisees, Weight Watchers of Dallas, Inc. and Pedebud, Inc. (d/b/a Weight Watchers of Northern
New Mexico), pursuant to the terms of a combined asset purchase agreement with these two entities
(collectively ‘‘Dallas/New Mexico’’) and the Company. The purchase price was $27,200 plus assumed
liabilities of $300, and was allocated to franchise rights ($26,874), property and equipment ($412), and
inventory ($214). The acquisition was financed through cash from operations. Pro forma results of
operations, assuming this acquisition had been completed at the beginning of fiscal 2003 and 2002
would not differ materially from the reported results.
F-13