WeightWatchers 2005 Annual Report Download - page 105

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WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2005 include the income/(expense) resulting from WWI’s activities with WeightWatchers.com that took
place during the first quarter of fiscal 2004 and the Company’s consolidated results for the year ended
January 3, 2004 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 2001 aggregating
$34,500. 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. This loan has been fully repaid as of July 2, 2005.
For the years ended January 1, 2005 and January 3, 2004, the Company recorded interest income
of $949 and $4,219, respectively. Other income recorded by the Company resulting from loan
repayments was $4,917 and $5,000 for the years ended January 1, 2005 and January 3, 2004,
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 and January 3, 2004, the Company recorded
royalty income of $1,954 and $7,080, respectively, which was included in product sales and other, 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 and $1,971 for the years ended
January 1, 2005 and January 3, 2004, respectively, that was included in marketing expenses.
Ancillary Agreements:
In addition to the license agreement and service agreement, WWI and WW.com entered into
various ancillary agreements in the normal course of business related to the sharing of space, financial,
legal and administrative services, and other resources.
WeightWatchers.com Acquisition:
See Note 3 for a description of our acquisition of WW.com and the related transactions with Artal.
Heinz:
At the closing of the Recapitalization, WWI granted to Heinz an exclusive worldwide, royalty-free
license to use certain of our trademarks in connection with Heinz licensed products. Heinz paid WWI
an annual fee of $1,200 for five years in exchange for the Company serving as the custodian of these
trademarks.
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