WeightWatchers 2005 Annual Report Download - page 45

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Comparison of Fiscal 2004 (52 weeks) to Fiscal 2003 (53 weeks)
Impact of FIN 46R
As a result of our adoption of FIN 46R, we began consolidating the results of our affiliate and
licensee, WeightWatchers.com, at the beginning of the second quarter of fiscal 2004. The table below
shows the impact this adoption had on our consolidated income statement for fiscal 2004.
Fiscal 2004
WWI Impact of
Stand-Alone Adopting Consolidated
Results FIN 46R Results
(in millions, except per share data)
Revenues ................................... $966.1 $58.8 $1,024.9
Cost of revenues .............................. 468.2 18.9 487.1
Gross profit ................................ 497.9 39.9 537.8
Marketing expenses ............................ 120.2 14.6 134.8
Selling, general and administrative expenses .......... 87.8 9.3 97.1
Operating income ........................... 289.9 16.0 305.9
Interest expense, net ........................... 14.6 2.2 16.8
Other (income)/expense, net ..................... (9.3) 4.6 (4.7)
Early extinguishment of debt ..................... 4.3 — 4.3
Income before taxes and cumulative effect of
accounting change ......................... 280.3 9.2 289.5
Provision for income taxes ....................... 101.1 (6.6) 94.5
Income before cumulative effect of accounting change . 179.2 15.8 195.0
Cumulative effect of accounting change ............. — (11.9) (11.9)
Net income .................................. $179.2 $ 3.9 $ 183.1
Weighted average diluted common shares outstanding . . . 106.9 106.9 106.9
Diluted EPS ................................. $ 1.68 $0.03 $ 1.71
Because the requirement to consolidate WeightWatchers.com’s income statement with ours began
in the second quarter of fiscal 2004, the impact on fiscal 2004 included WeightWatchers.com’s results of
operations, net of intercompany eliminations, for only the nine months ended January 1, 2005.
The impact of the consolidation on fiscal 2004 was to add $58.8 million in revenues and
$39.9 million of gross profit. Operating income for the year increased by $16.0 million after incremental
marketing expenses of $14.6 million and selling, general and administrative expenses of $9.3 million. A
scheduled loan repayment of $4.9 million and interest income of $2.2 million, which Weight Watchers
International earned from WeightWatchers.com, was eliminated in the consolidation of intercompany
activity.
In accordance with the provisions of FIN 46R, we recorded a charge of $11.9 million, including
taxes, in the first quarter of fiscal 2004. This charge reflects the cumulative impact to our results of
operations had WeightWatchers.com been consolidated since its inception in September 1999.
For fiscal 2004, the consolidation combined with the first quarter of fiscal 2004 cumulative effect of
accounting change, including taxes, related to the adoption of FIN 46R, resulted in an increase to
diluted earnings per share of $0.03.
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