WeightWatchers 2005 Annual Report Download - page 35

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion in conjunction with the ‘‘Selected Financial Data’’ included in
Item 6 of this Annual Report on Form 10-K and our consolidated financial statements and related notes
included in Item 15 of this Annual Report on Form 10-K. This discussion contains forward-looking
statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and
intentions. The cautionary statements discussed in ‘‘Cautionary Notice Regarding Forward-Looking
Statements’’ and elsewhere in this Annual Report on Form 10-K should be read as applying to all related
forward-looking statements wherever they appear in this Annual Report on Form 10-K. Our actual results
could differ materially from those discussed here. Factors that could cause or contribute to these differences
include, without limitation, those discussed in ‘‘Risk Factors’’ included in Item 1A of this Annual Report on
Form 10-K.
Overview
We are a leading global branded consumer company and the leading global provider of weight
management services, with a presence in 30 countries around the world. With over four decades of
weight management experience, expertise and know-how, we have established Weight Watchers as one
of the most recognized and trusted brand names among weight conscious consumers. In 2005,
consumers spent over $3.0 billion on Weight Watchers branded products and services, including
meetings conducted by us and our franchisees, products sold at meetings, Internet subscription products
sold by WeightWatchers.com, licensed products sold in retail channels and magazine subscriptions and
other publications. On a consolidated basis, from fiscal 2001 through fiscal 2005, our revenues and
operating income have grown at a compound annual growth rate of 17% and 12%, respectively.
We currently have two operating segments: Weight Watchers International and
WeightWatchers.com. Since April 3, 2004, we have consolidated WeightWatchers.com, initially pursuant
to FASB Interpretation No. 46R, ‘‘Variable Interest Entities,’’ or, FIN 46R and beginning with the
second quarter of fiscal 2005, pursuant to Accounting Research Bulletin No. 51, ‘‘Consolidated
Financial Statements’’, as a result of increasing our ownership interest in WeightWatchers.com to a
controlling interest as of July 2, 2005 and to a 100% interest as of December 16, 2005.
We derive our revenues principally from:
•Meeting fees. Members pay us a weekly fee to attend our meetings.
•Product sales. We sell proprietary products that complement our weight management plans, such
as bars, snacks, cookbooks, POINTS value guides, Weight Watchers magazines and POINTS
calculators, primarily to members in our meetings and to our franchisees.
•Online revenues. We generate revenue from our Internet subscription products and from the sale
of Internet advertising.
•Licensing, franchise royalties and other. We license the Weight Watchers brand and other
intellectual property for certain foods and other products. In addition, our franchisees typically
pay us a royalty fee of 10% of their meeting fee revenues. We also generate revenues from our
magazines and third-party advertising in our publications.
Other than online revenues, all of the foregoing sources of revenue are included in our Weight
Watchers International operating segment.
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