WeightWatchers 2005 Annual Report Download - page 102

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WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
were granted options to purchase shares of common stock of WeightWatchers.com that are owned by
WWI. The number of shares available for grant under this plan is 400 shares of authorized common
stock of WeightWatchers.com. In connection with the acquisition of WW.com (See Note 3), the
Company purchased and canceled all 103 outstanding WW.com options granted under the plan in the
second quarter of 2005. Effective July 2, 2005, the Board of Directors of the Company terminated the
plan.
WeightWatchers.com Stock Option Plan
Prior to WWI’s acquisition of WW.com (See Note 3), WeightWatchers.com granted incentive stock
options and/or nonqualified stock options on its common stock to its employees, consultants and/or
certain non-employees under the terms of its stock option plans. In connection with the acquisition,
WWI acquired 2,759 shares of WW.com stock which represented vested and unvested options under the
plan. The 2,293 shares of vested options were acquired based upon the difference between the purchase
price per share and the exercise price per share. The 466 shares of unvested options were exchanged
for 134 restricted stock units of WWI.
Due to the adoption of FIN 46R (see Note 1), the fair value of stock options granted by
WeightWatchers.com are included in the pro forma footnote disclosures showing the impact to the
Company’s results had it adopted the fair value provisions of SFAS No. 123 (see Note 2). The fair
value of options granted by WeightWatchers.com during fiscal 2004 were estimated on their date of
grant using the Black-Scholes option pricing model with the following weighted average assumptions:
(a) dividend yield of 0%, (b) volatility of 64%, (c) risk-free interest rate of 3.0%—3.9% and
(d) expected term of 5 years.
10. Income Taxes
Prior to December 16, 2005 WWI and WeightWatchers.com were separate tax paying entities.
Effective with the completion of the Redemption (see Note 3) WW.com will be included with WWI’s
consolidated federal tax return. The following tables summarize the consolidated provision for U.S.
federal, state and foreign taxes on income:
December 31, January 1, January 3,
2005 2005 2004
Current:
U.S federal ................................. $ 61,871 $41,043 $40,527
State ...................................... 8,811 5,075 10,740
Foreign .................................... 23,047 26,381 20,344
$ 93,729 $72,499 $71,611
Deferred:
U.S federal ................................. $ 10,380 $20,705 $15,173
State ...................................... 1,642 1,900 1,734
Foreign .................................... (838) (582) (230)
11,184 22,023 16,677
Total tax provision ............................ $104,913 $94,522 $88,288
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