WeightWatchers 2005 Annual Report Download - page 92

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Franchise Acquisitions
On March 30, 2003, the Company completed the acquisition of certain assets of eight of the fifteen
franchises of The WW Group, Inc. and its affiliates (the ‘‘WW Group’’) pursuant to the terms of an
Asset Purchase Agreement executed on March 31, 2003 among the WW Group, The WW Group East
L.L.C., The WW Group West L.L.C., Cuida Kilos, S.A. de C.V., Weight Watchers North America, Inc.
and the Company. The purchase price for the acquisition was $180,700 plus assumed liabilities of $448
and acquisition costs of $866. The Company completed the purchase price allocation in the fourth
quarter of 2003 as follows: franchise rights ($177,128), inventory ($2,741), prepaid expenses ($36) and
property and equipment ($2,109). The acquisition was financed through cash from operations and
additional borrowings of $85,000 under a new Term Loan D under WWI’s Credit Facility, as amended
on April 1, 2003 (as described in Note 6).
On November 30, 2003, the Company completed the acquisition of certain assets of two of its
franchisees, Weight Watchers of Dallas, Inc. and Pedebud, Inc. (d/b/a Weight Watchers of Northern
New Mexico), pursuant to the terms of a combined asset purchase agreement with these two entities
(collectively ‘‘Dallas/New Mexico’’) and the Company. The purchase price was $27,200 plus assumed
liabilities of $300, and was allocated to franchise rights ($26,874), property and equipment ($412), and
inventory ($214). The acquisition was financed through cash from operations. Pro forma results of
operations, assuming this acquisition had been completed at the beginning of fiscal 2003, would not
differ materially from the reported results.
During 2003, the Company also completed the acquisition of franchises in Mexico and Hong Kong,
as well as a third party entity, Easy Slim, for a total purchase price of $1,271, which was paid with cash
from operations. As a result of these three acquisitions, the Company recorded goodwill of $395 and
franchise rights of $1,326. Pro forma results of operations, assuming these acquisitions had been
completed at the beginning of fiscal 2003, would not differ materially from the reported results.
On May 9, 2004, the Company completed the acquisition of certain assets of its Washington, D.C.
area franchisee, F-W Family Corporation (d/b/a Weight Watchers of Washington, D.C.) for a purchase
price of $30,500, which was financed through cash from operations, plus assumed liabilities of $348.
The total purchase price has been allocated to franchise rights ($30,286), fixed assets ($300), inventory
($228) and other assets ($52). Pro forma results of operations, assuming this acquisition had been
completed at the beginning of each period presented, would not differ materially from the reported
results.
On August 22, 2004, the Company completed the acquisition of certain assets of its Fort Worth
franchisee, Weight Watchers of Fort Worth, Inc., for a purchase price of $30,000, which was financed
through cash from operations. The purchase price has been allocated to franchise rights ($29,421), fixed
assets ($226), inventory ($286), and other assets ($67). Pro forma results of operations, assuming this
acquisition had been completed at the beginning of each period presented, would not differ materially
from the reported results.
Acquisition of WW.com
On June 13, 2005, WWI entered into an agreement to acquire its affiliate WW.com. As a result
WWI increased its ownership interest in WW.com from approximately 20% to approximately 53% as
follows: on July 1, 2005, WWI exercised its 6,395 warrants to purchase WW.com common stock for a
total price of $45,660; and on July 2, 2005, WWI acquired through a merger of a subsidiary of WWI
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