WeightWatchers 2004 Annual Report Download - page 89

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WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
12. Related Party Transactions (Continued)
December 28, 2002 include all the income/(expense) resulting from WWI’s activities with
WeightWatchers.com that took place during each respective period.
Loan Agreement:
Pursuant to the amended loan agreement dated September 10, 2001 between WWI and
WeightWatchers.com, WWI provided loans to WeightWatchers.com through fiscal year 2001 aggregating
$34,500. WWI has no further obligation to provide funding to WeightWatchers.com. By the end of
2001, having reviewed the loan balances quarterly for impairment, WWI recorded a full valuation
allowance against the balances. Beginning on January 1, 2002, the loan bears interest at 13% per year
and beginning March 31, 2002, interest has been and shall be paid to WWI semi-annually. All principal
outstanding under the agreement is payable in six semi-annual installments that commenced on
March 31, 2004.
For the years ended January 1, 2005, January 3, 2004 and December 28, 2002, the Company
recorded interest income on the loan of $949, $4,219 and $4,454, respectively. As of January 3, 2004
and December 28, 2002, the interest receivable balance was $1,009 and $1,106, respectively, and is
included within receivables, net. Other income recorded by the Company resulting from loan
repayments was $4,917, $5,000 and $0 for the years ended January 1, 2005, January 3, 2004 and
December 28, 2002, respectively.
Intellectual Property License:
WWI entered into an amended and restated intellectual property license agreement dated
September 29, 2001 with WeightWatchers.com. In fiscal 2002, WWI began earning royalties pursuant to
the agreement. For the years ended January 1, 2005, January 3, 2004 and December 28, 2002, the
Company recorded royalty income of $1,954, $7,080 and $4,175, respectively, which was included in
product sales and other, net. As of January 3, 2004 and December 28, 2002, the receivable balance was
$1,758 and $1,280, respectively, and is included within receivables, net.
Service Agreement:
Simultaneous with the signing of the amended and restated intellectual property license agreement,
WWI entered into a service agreement with WeightWatchers.com, under which WeightWatchers.com
provides certain types of services. WWI is required to pay for all expenses incurred by
WeightWatchers.com directly attributable to the services it performs under this agreement, plus a fee of
10% of those expenses. The Company recorded service expense of $558, $1,971, and $1,862 for the
years ended January 1, 2005, January 3, 2004 and December 28, 2002, respectively, that was included in
marketing expenses. The accrued service payable at January 3, 2004 and December 28, 2002 was $1,223
and $484, respectively, and is netted against receivables, net.
Nellson Agreement:
On November 30, 1999, WWI entered into an agreement with Nellson Neutraceutical, Inc.
(‘‘Nellson’’), which until October 4, 2002 was a wholly-owned subsidiary of Artal, to purchase nutrition
bar products manufactured by Nellson for sale at the Company’s meetings. Upon sale by Artal, Nellson
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