WeightWatchers 2005 Annual Report Download - page 38

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• the number of WeightWatchers.com subscribers; and
• operating expenses as a percentage of revenue, which is an indicator of the efficiency of our
business and our ability to manage our business to budget.
We believe that our revenues and profitability can be sensitive to major trends in the weight
management industry. In particular, we believe that our business could be adversely impacted by:
• the development of more favorably perceived or more effective weight management methods,
including pharmaceuticals;
• the temporary emergence of fad diets;
• a failure to develop innovative new products and services;
• a decrease in the effectiveness of our marketing and advertising programs; and
• an impairment of the Weight Watchers brand and other intellectual property.
Acquisitions
Acquisition of WeightWatchers.com
On June 13, 2005, we entered into an agreement to acquire control of our licensee and affiliate,
WeightWatchers.com. On July 1 and 2, 2005, we increased our ownership interest in
WeightWatchers.com from approximately 20% to approximately 53% by (i) exercising warrants to
purchase WeightWatchers.com common stock for a total purchase price of approximately $45.7 million,
(ii) acquiring shares of WeightWatchers.com common stock owned by the employees of
WeightWatchers.com and other parties not related to Artal through a merger of a subsidiary of ours
with WeightWatchers.com for a total purchase price of approximately $28.4 million and (iii) acquiring
additional shares of WeightWatchers.com common stock, representing outstanding stock options then
held by WeightWatchers.com employees, for a total purchase price of approximately $62.3 million.
On June 13, 2005, WeightWatchers.com also entered into a redemption agreement with Artal to
purchase all of the shares of WeightWatchers.com owned by Artal at the same price per share as we
paid in the merger. Subsequently, on December 16, 2005, WeightWatchers.com redeemed all of its
outstanding common stock held by Artal for a total price of approximately $304.8 million as provided
in the redemption agreement. WeightWatchers.com used cash on hand and the proceeds of the
WW.com Credit Facilities in the aggregate amount of $215.0 million to finance this redemption, as well
as pay related fees and expenses. As a result of this redemption, we now own 100% of
WeightWatchers.com.
The transactions described above relating to WeightWatchers.com were evaluated, negotiated and
recommended by a Special Committee of Weight Watchers International’s Board of Directors consisting
of its independent directors.
Franchise Acquisitions
From time to time, we repurchase franchise territories. Since the beginning of fiscal 2001, we have
acquired nine franchise operations for a total of approximately $433.8 million. These acquisitions are
typically accretive to our earnings per share. For fiscal 2005, the attendance of our remaining franchise
operations accounted for approximately 21% of total worldwide attendance at Weight Watchers
meetings.
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