WeightWatchers 2006 Annual Report Download

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ANNUAL REPORT
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Table of contents

  • Page 1
    AN N U AL R EPOR T 06

  • Page 2
    " For me, it's all about empowerment. I can make the changes that I need to make and live the life that I want and it's all within my control. It's my choice to do things. And it's not just about food." - Liz LIZ | Meetings Member From Age Before After Lost United States 38 162.6 lbs 141.2 lbs 21.4...

  • Page 3
    ...proven food and activity plans. Our approach is designed to help our members achieve long term, sustained weight loss. Today, We generated over $1.23 billion in total revenue in 2006, up 7.1 percent over 2005. In addition, we posted $265.8 million in cash from operating activities and net income our...

  • Page 4
    ... increase our average revenue per cycle through pricing, growth in product sales, and more recently through the successful implementation of commitment plans in the United States. Through our 50,000 meetings conducted around the globe each week, our members this, we have been developing new payment...

  • Page 5
    ... our in-meeting product offerings, including cookbooks and snacks. These products provide added assistance in helping our members and subscribers to achieve and maintain their weight loss goals. We are also utilizing the WeightWatchers.com Web site to provide our online subscribers with access to...

  • Page 6
    ... is a critical need for our services and products. At the center of our enduring success is our unique approach that combines long-term behavior modification with scientifically proven food and activity plans. Our approach is designed to help our members achieve long term, sustained weight loss."

  • Page 7
    ... its online subscription products. In 2006, our online revenues increased 18 percent to $130 million, and our Weight Watchers Online subscriber base expanded by 15 percent to 460,000. The WeightWatchers.com business now has profit margins comparable to those of our traditional meetings business...

  • Page 8
    ...subscription products, but also from powerful online brand exposure. With a monthly average of 5 million unique visitors and 188 million page views in the U.S. alone, the WeightWatchers.com Web site helps to efficiently drive our meetings business by promoting our brand, advertising Weight Watchers...

  • Page 9
    CHRISTOPHER | Meetings Member From Age Before After Lost United States 33 240.5 lbs 194.5 lbs 46 lbs "With the birth of my daughter I decided I had to lose the weight just to keep up with her. However I had not been able to lose the weight until my mom introduced me to Weight Watchers. She had ...

  • Page 10
    ... to thank all of our members, service providers, employees, directors, and shareholders for their dedication and support during the past year. I look forward to reporting to all of you in the year ahead on our efforts to further capitalize on our position as the world's most recognized and trusted...

  • Page 11
    ... held by non-affiliates as of July 1, 2006, (based upon the average bid and asked price of $41.19 per share of common stock as of June 30, 2006, the last business day of the registrant's second fiscal quarter of 2006, as quoted on the New York Stock Exchange), was $1,818,401,049. For purposes of...

  • Page 12
    ... With Accountants on Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ... 22 24 27 47 47 47 47 48 Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 13
    ...to our fiscal year ended December 30, 2006; and "fiscal 2007" refers to our fiscal year ended December 29, 2007. The following terms used in this Annual Report on Form 10-K are our trademarks: Weight Watchers®, WeightWatchers.com®, POINTS®, TurnAround®, Core Plan® and Weight Watchers On-the-Go...

  • Page 14
    ... times the market share of its next largest Internet competitor. Currently, we provide two Internet subscription offerings: Weight Watchers Online and Weight Watchers eTools. Weight Watchers Online provides interactive and personalized resources that allow users to follow our weight management plans...

  • Page 15
    ...to eat non-core foods within an allotted weekly POINTS allowance. Meetings Clinical studies have shown that consumers who attend Weight Watchers meetings are likely to lose more weight than those who diet on their own. Our group support system remains the cornerstone of our meetings. Members provide...

  • Page 16
    ...traditional payment structure in our meeting business is a "pay-as-you-go" arrangement. A new member pays an initial registration fee and then a weekly fee for each meeting attended, although free registration is offered as a promotion during certain times of the year. We also offer prepayment plans...

  • Page 17
    ... Watchers eTools is an Internet weight management offering available only to consumers who are Weight Watchers meetings members. Weight Watchers eTools allows users to interactively manage the day-to-day aspects of their weight management plan online, discover different food options, stay informed...

  • Page 18
    ...Internet subscription products. For example, in December 2005 we launched in the United States an online store that sells our products (such as bars, snacks and POINTS calculators) to our Weight Watchers Online subscribers. We are also exploring options to increase our Internet advertising sales. 5

  • Page 19
    ... excel at new product development and have strong marketing and sales expertise, manufacturing and distribution capabilities, financial strength, prior performance in previous licensing deals and senior management commitment to building the Weight Watchers brand. In addition, in connection with our...

  • Page 20
    ... subscription products, the website contributes value to our meeting business by promoting our brand, advertising Weight Watchers meetings and keeping members involved with Weight Watchers outside of meetings through useful offerings, such as a meeting locator, low calorie recipes, weight management...

  • Page 21
    ... local At Work meeting efforts to target the corporate market. Public Relations The focus of our public relations efforts is through our current and former members who have successfully lost weight on our program. Leaders and successful members engage in local promotions, information presentations...

  • Page 22
    ... with several other companies in the commercial weight management industry, although we believe that the businesses are not comparable. For example, many of these competitors' businesses are based on the sale of pre-packaged meals and meal replacements. Our meetings use group support, education and...

  • Page 23
    ...by our officers, directors and 10 percent shareholders. Usually these are publicly accessible no later than the business day following the filing. Shareholders may request a free copy of our Code of Business Conduct and Ethics and our Corporate Governance Guidelines at: Weight Watchers International...

  • Page 24
    ... and meal replacement products, and other weight management brands, diets, programs and products; risks associated with the relative success of our marketing and advertising; risks associated with the continued attractiveness of our plans; risks associated with general economic conditions and...

  • Page 25
    ...to our financial performance. If our marketing and advertising campaigns do not generate a sufficient number of members and subscribers, our results of operations will be adversely affected. If we do not continue to develop innovative new products and services or if our products and services are not...

  • Page 26
    ...do not currently hedge, and have not historically hedged, our operational exposure to foreign currency fluctuations. Our consolidated financial results are denominated in U.S. dollars and therefore, during times of a strengthening U.S. dollar, our reported international revenues and earnings will be...

  • Page 27
    ... are subject to local conditions beyond our control, including weather, natural disasters and other extraordinary events, that may prevent current or prospective members from attending or joining meetings. For example, our NACO attendance was adversely affected in the third quarter of fiscal 2005 by...

  • Page 28
    ... customers regarding our use of personal information collected on our websites or through our products and services, such as weight management information, financial data, email addresses and home addresses, could keep them from using our websites or purchasing our products or services. Industry...

  • Page 29
    ...The consent order requires us to comply with certain procedures and disclosures in connection with our advertisements of products and services. Since we operate our meetings business both in the United States and internationally, we are subject to many distinct employment, labor and benefits laws in...

  • Page 30
    ...' rights plan adopted by our Board of Directors. These provisions could limit the price that certain investors might be willing to pay in the future for shares of our common stock. Item 1B. Unresolved Staff Comments None. Item 2. Properties We are currently headquartered in New York, New York in...

  • Page 31
    ... 97% in third-party locations. Item 3. Legal Proceedings On July 7, 2006, we filed an amended notice of appeal with the U.K. VAT and Duties Tribunal appealing a ruling by Her Majesty's Revenue and Customs, or HMRC, that from April 1, 2005 Weight Watchers meetings fees in the U.K. should be...

  • Page 32
    ... this Annual Report on Form 10-K. Set forth below are the names, ages as of December 30, 2006 and current positions with us and our subsidiaries of our executive officers and directors. Directors are elected at the annual meeting of shareholders. Executive officers are appointed by, and hold office...

  • Page 33
    ... in financial management. He subsequently was Group Vice President and Chief Financial Officer and a director of The Clorox Company and later President and a director of Tambrands, Inc., prior to joining Wrigley. Mr. Bard holds a B.S. in business from Northwestern University and an M.B.A. in Finance...

  • Page 34
    ... Foods Holdings, Inc. Formerly, Mr. Reed was Vice Chairman and a director of Kellogg Company, the world's leading producer of cereal and a leading producer of convenience foods. From 1996 to 2001, Mr. Reed was Chief Executive Officer, President and a director of Keebler Foods Company. Previously...

  • Page 35
    ...is listed on the New York Stock Exchange, or the NYSE. Our common stock trades on the NYSE under the symbol "WTW." The following table sets forth, for the period indicated, the high and low sales prices per share for our common stock as reported on the NYSE consolidated tape. Fiscal 2006 (Year ended...

  • Page 36
    ...On February 16, 2006, our Board of Directors authorized the initiation of a quarterly cash dividend of $0.175 per share of our outstanding common stock, which corresponds to an annual dividend rate of $0.70 per share. The initial quarterly dividend was paid on April 7, 2006 to shareholders of record...

  • Page 37
    ... years. SELECTED FINANCIAL DATA (in millions, except per share amounts) Fiscal 2006 (52 weeks) Fiscal 2005 (52 weeks) Fiscal 2004 (52 weeks) Fiscal 2003 (53 weeks) Fiscal 2002 (52 weeks) Revenues, net ...Net income ...Working capital (deficit) ...Total assets ...Long-term obligations ...Earnings...

  • Page 38
    ... were initially used to reduce borrowings under our Revolver, resulting in no increase in our net borrowing. On June 24, 2005, Weight Watchers International amended certain provisions of the WWI Credit Facility to allow for the December 16, 2005 redemption by WeightWatchers.com of its shares held by...

  • Page 39
    ...fully realize the benefit of its deferred tax assets. As such, WeightWatchers.com reversed all but $0.6 million of its remaining valuation allowance relating to its foreign operations. This amount was subsequently reversed in fiscal 2006 due to the utilization of the net operating loss carryforwards...

  • Page 40
    ... 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...

  • Page 41
    The following table sets forth our revenues by category for the past five fiscal years. Revenue Sources (in millions) Fiscal 2006 (52 weeks) Fiscal 2005 (52 weeks) Fiscal 2004 (52 weeks) Fiscal 2003 (53 weeks) Fiscal 2002 (52 weeks) Meetings fees ...Product sales ...Online revenues ...Licensing, ...

  • Page 42
    ... 2006, the operating income margin dipped slightly below, to 29.2%, as a result of costs associated with the ramp up of our new Monthly Pass commitment plan in NACO. Performance Indicators and Market Trends Our management reviews and analyzes several key performance indicators in order to manage...

  • Page 43
    ... 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...

  • Page 44
    ...meeting fees, such as Monthly Pass and Season Pass, and magazine subscription revenue, is amortized into income over the period earned. Discounts to customers, including free registration offers, are recorded as a deduction from gross revenue in the period such revenue was recognized. WeightWatchers...

  • Page 45
    ...-owned subsidiary of Weight Watchers International. Therefore, we consolidate 100% of the results of WeightWatchers.com under the traditional rules of consolidation rather than under the provisions of FIN 46R. Since we adopted FIN 46R on the last day of the first quarter of fiscal 2004, commencing...

  • Page 46
    ... financial statements. Capitalized Software Development We follow the provisions of AICPA Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use", or SOP 98-1, which requires the capitalization of certain costs incurred in connection with...

  • Page 47
    ... of Fiscal 2006 (52 weeks) to Fiscal 2005 (52 weeks) The table below shows the consolidated income statements for the years ended December 30, 2006 and December 31, 2005. As a result of the July 2, 2005 transaction, which increased Weight Watchers International's ownership in WeightWatchers.com from...

  • Page 48
    ...year. The increase in meeting fee per attendee resulted from the positive impact of our two new commitment plans, Season Pass and Monthly Pass, and from a one dollar price rise in approximately 40% of our markets. With Season Pass, a pricing plan which was first launched throughout NACO for our 2006...

  • Page 49
    ... the timing of Easter, as mentioned above, and in support of the newly acquired territories coupled with increased offline advertising to support the WeightWatchers.com business. Marketing, as a percentage of revenues declined to 12.9% for fiscal 2006, as compared to 13.7% in the prior year. Selling...

  • Page 50
    ...Weight Watchers International's ownership in WeightWatchers.com from approximately 20% to approximately 53%, our consolidated results for fiscal 2005 include certain transaction-related expenses. The table below shows the consolidated income statements for fiscal 2005 and fiscal 2004 on a comparable...

  • Page 51
    ... refreshing our in-meeting consumables and adding new offerings which have been well received. Internationally, product sales increased 3.5%, or $4.8 million, to $141.1 million, also on the strength of new product introductions. Online revenues were $109.7 million for fiscal 2005 as compared to $65...

  • Page 52
    ....com employees in exchange for unvested WeightWatchers.com stock options. During fiscal 2005, we recorded $2.5 million for these expenses. Excluding non-recurring transaction-related expenses, our selling, general and administrative expense increased $26.3 million, or 27.1%, over the comparable...

  • Page 53
    ... increase in the current portion of our long-term debt, and $9.2 million of utilization of WeightWatchers.com's net operating loss carryforwards, which reduced our deferred taxes. Capital spending has averaged approximately $19.3 million annually over the three fiscal years ended December 30, 2006...

  • Page 54
    ....5 million cash paid for the acquisitions of our Fort Worth and Washington D.C. area franchises. Cash used for financing activities totaled $180.4 million, including $177.1 million used to repurchase 4.7 million of our shares pursuant to our stock repurchase plan. Our pay-down of debt which included...

  • Page 55
    ... ...Total Debt ...Less Current Portion ...Total Long-Term Debt ... $313,375 350,000 140,784 45,000 849,159 18,922 $830,237 6.51% 6.27% 7.62% 10.36% The WWI Term Loan A and the WWI Revolver bear interest at an annual rate equal to LIBOR plus 0.875% or, at Weight Watchers International's option, the...

  • Page 56
    ... covenants that, in certain circumstances, restrict Weight Watchers International's ability to incur additional indebtedness, pay dividends on and redeem capital stock, make other restricted payments, including investments, sell its assets and enter into consolidations, mergers and transfers...

  • Page 57
    ... rate on all of our debt as of December 30, 2006 remains constant for all periods presented. The following schedule sets forth our pro forma long-term debt obligations, assuming our January 2007 refinancing had been completed as of December 30, 2006. Payment Due by Period Total Less than 1 Year...

  • Page 58
    ...to a merger agreement effective July 2, 2005, the last day of our second quarter of fiscal 2005, Weight Watchers International increased its ownership interest in WeightWatchers.com from approximately 20% to approximately 53% for a total cash outlay of $136.4 million including $107.9 million paid to...

  • Page 59
    ... WeightWatchers.com experiences similar seasonality in terms of new subscriber signups, its revenue tends to be less seasonal because it amortizes subscription revenue over the related subscription period. Recently Issued Accounting Standards In June 2006, the Financial Accounting Standards Board...

  • Page 60
    ... at the weighted average exchange rate for the period. The resulting translation adjustments are recorded in shareholders' equity as accumulated other comprehensive income (loss). In addition, fluctuations in the value of the euro will cause the U.S. dollar translated amounts to change in comparison...

  • Page 61
    ...management's assessment of the effectiveness of the Company's internal control over financial reporting as of December 30, 2006 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein. Item 9B. Other Information...

  • Page 62
    ... officer and controller, and our employees and directors. Our Code of Business Conduct and Ethics is available on our website at www.weightwatchersinternational.com. In addition shareholders may request a free copy of the Code of Business Conduct and Ethics from Weight Watchers International...

  • Page 63
    ... and Financial Statement Schedules 1. Financial Statements The financial statements listed in the Index to Financial Statements and Financial Statement Schedule on page F-1 are filed as part of this Annual Report on Form 10-K. 2. Financial Statement Schedule The financial statement schedule listed...

  • Page 64
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE COVERED BY REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Items 15(a) 1 & 2 Pages Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets at ...

  • Page 65
    ... integrated audits of Weight Watchers International, Inc.'s consolidated financial statements and of its internal control over financial reporting as of December 30, 2006, in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our...

  • Page 66
    ... reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or...

  • Page 67
    ... ...TOTAL ASSETS ...LIABILITIES AND SHAREHOLDERS' DEFICIT CURRENT LIABILITIES Portion of long-term debt due within one year ...Accounts payable ...Dividend payable ...Salaries and wages ...Other accrued liabilities ...Income taxes payable ...Deferred income taxes ...Deferred revenue ...TOTAL CURRENT...

  • Page 68
    ...2005 (52 Weeks) Meeting fees, net ...Product sales and other, net ...Online revenues ...Revenues, net ...Cost of meetings, products and other ...Cost of online subscriptions ...Cost of revenues ...Gross profit ...Marketing expenses ...Selling, general and administrative expenses ...Operating income...

  • Page 69
    ... ...Changes in fair value of derivatives accounted for as hedges, net of taxes of ($942) ...Total Comprehensive Income ...Issuance of treasury stock under employee stock plans ...Tax benefit of stock options exercised ...Exercise of WW.com warrants ...Dividend to Artal Luxembourg S.A...Purchase of...

  • Page 70
    ... offering fees ...Tax benefit of restricted stock units vested and stock options exercised ...Deferred financing costs ...Purchase of treasury stock ...Proceeds from stock options exercised ...Cash (used for)/provided by financing activities ...Effect of exchange rate changes on cash and cash...

  • Page 71
    ...document is used to indicate Weight Watchers International and its wholly-owned subsidiaries other than WeightWatchers.com. 2. Summary of Significant Accounting Policies Fiscal Year: The Company's fiscal year ends on the Saturday closest to December 31st and consists of either 52 or 53-week periods...

  • Page 72
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) On June 13, 2005, the Company entered into an agreement to acquire control of WeightWatchers.com. On July 1 and 2, 2005, the Company increased its ...

  • Page 73
    ... the Company applies AICPA Statement of Position No. 98-1 to account for web site development costs. In accordance with EITF 00-2, the Company expenses all costs incurred during the preliminary project stage and capitalizes all internal and external direct costs of materials and services consumed...

  • Page 74
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) shipped to customers and title and risk of loss pass to the customer, and commissions and royalties are earned. Advertising revenue is recognized when ...

  • Page 75
    ... Company uses the cost method to account for investments in which it holds 20% or less of the investee's voting stock and over which it does not have significant influence. Deferred Financing Costs: Deferred financing costs consist of fees paid by the Company as part of the establishment, exchange...

  • Page 76
    ...) The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 in each fiscal year: December 31, 2005 January 1, 2005 Net income, as reported ...Add: Total share-based employee compensation expense...

  • Page 77
    ... and other current assets ($136). On November 2, 2006, the Company acquired substantially all of the assets of its Suffolk County, New York franchisee, Weight Watchers of Suffolk, Inc., for a net purchase price of approximately $24,170, plus assumed liabilities of $330. The total purchase price has...

  • Page 78
    ... of Statement of Financial Accounting Standards No. 141, "Business Combinations," ("FAS 141"). The acquisition of these shares resulted in an increase to goodwill of $26,185 and an increase to finite-lived intangible assets of $1,161, primarily customer relations and information technology. These...

  • Page 79
    ... of WW.com. For the year ended December 30, 2006, the change in goodwill is due to foreign currency fluctuations. Franchise rights acquired are due mainly to acquisitions of the Company's franchised territories. For the year ended December 30, 2006, franchise rights acquired increased due to...

  • Page 80
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 6. Long-Term Debt The Company's components of long-term debt are as follows: December 30, 2006 Effective Balance rate December 31, 2005 Effective Balance...

  • Page 81
    ...321 in the second quarter of 2006 relating to the write-off of a portion of the deferred financing costs associated with its old debt. WWI's Term Loan A and the Revolver bear interest at an initial rate equal to LIBOR plus 0.875% per annum or, at WWI's option, the alternate base rate (as defined in...

  • Page 82
    ...,000 of the Company's outstanding common stock. On each of June 13, 2005 and May 25, 2006, the Company, at the direction of WWI's Board of Directors, authorized adding $250,000 to this program. The repurchase program allows for shares to be purchased from time to time in the open market or through...

  • Page 83
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) On December 18, 2006, the Company commenced a tender offer in which it sought to acquire up to 8,300 shares of its common stock at a price between $47.00...

  • Page 84
    ...in the income statement for all share-based compensation arrangements was $4,812 for the year ended December 30, 2006. No compensation costs were capitalized. As of December 30, 2006, there was $23,079 of total unrecognized compensation cost related to stock options and restricted stock units ("RSUs...

  • Page 85
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) exercisable based on the terms outlined in the agreement. The options vest over a period of three to five years and the expiration terms range from five ...

  • Page 86
    ..., the Board of Directors of WWI adopted the WeightWatchers.com Stock Incentive Plan of Weight Watchers International, Inc. and Subsidiaries, pursuant to which selected employees were granted options to purchase shares of common stock of WeightWatchers.com that are owned by WWI. The number of shares...

  • Page 87
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 10. Income Taxes Prior to December 16, 2005 WWI and WeightWatchers.com were separate tax paying entities. Effective with the completion of the Redemption...

  • Page 88
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) The deferred tax assets (liabilities) recorded on the Company's consolidated balance sheet are as follows: December 30, 2006 December 31, 2005 ...

  • Page 89
    ... monthly subscription weight loss plans on the Internet. WeightWatchers.com provides these weight management products to consumers through paid access to specified areas of its website. It also provides marketing services to WWI. Due to the adoption of FIN 46R, the Company's consolidated financial...

  • Page 90
    ...Code. The Company sponsors the Weight Watchers Profit Sharing Plan (the "Profit Sharing Plan") for all full-time salaried employees who are eligible to participate in the Savings Plan (except for certain senior management personnel). The Profit Sharing Plan provides for a guaranteed monthly employer...

  • Page 91
    ..., sell, market or distribute ice cream and frozen novelty products using WWI's trademarks. In March 2006, the Company agreed to settle a litigation filed on behalf of a purported class of employees under the California Labor Code and the Federal Fair Labor Standards Act for $2,300 plus other costs...

  • Page 92
    ... and managed separately and is reviewed regularly by the chief operating decision maker. All intercompany activity is eliminated in consolidation. Since FIN 46R was adopted as of the last day of the first quarter of 2004, WeightWatchers.com's results of operations for the three months ended April...

  • Page 93
    ... TO CONSOLIDATED FINANCIAL STATEMENTS-Continued (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Information about the Company's reportable operating segments is as follows: Weight Watchers International Year Ended December 30, 2006 Weight Watchers Intercompany .com Eliminations Consolidated Revenues from...

  • Page 94
    ... and no material amounts of United States export sales. Revenues for the Year Ended December 30, December 31, January 1, 2006 2005 2005 NACO meeting fees ...International company-owned meeting fees ...Product sales ...Franchise royalties ...Online revenues ...Other ... $ 471,751 251,337 293,286 19...

  • Page 95
    ... Value of Financial Instruments: The Company's significant financial instruments include cash and cash equivalents, short and long-term debt, and interest rate swap agreements. In evaluating the fair value of significant financial instruments, the Company generally uses quoted market prices of the...

  • Page 96
    ... not have an impact on the Consolidated Financial Statements. 19. Subsequent Events In January 2007, in connection with the Tender Offer (see Note 7), the Company increased its debt capacity by adding an Additional Term Loan A in the amount of $700,000 and a new Term Loan B in the amount of $500,000...

  • Page 97
    SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (IN THOUSANDS) Balance at Beginning of Period Additions Charged to Costs Charged and to Other Expenses Accounts(2) Balance at End of Period Deductions (1) FISCAL YEAR ENDED DECEMBER 30, 2006 Allowance for doubtful accounts ...Inventory ...

  • Page 98
    ...INDEX Exhibit Number Description **2.1 Agreement and Plan of Merger, by and among Weight Watchers International, Inc., WeightWatchers.com, Inc. and SCW Merger Sub, Inc. dated as of June 13, 2005 (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July...

  • Page 99
    ...). Weight Watchers Executive Profit Sharing Plan, dated as of October 4, 1999 (filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K for the fiscal year ended April 29, 2000, and incorporated herein by reference). 1999 Stock Purchase and Option Plan of Weight Watchers International...

  • Page 100
    ...the Executive Profit Sharing Plan (filed as Exhibit 99.5 to the Company's Current Report on Form 8-K as filed on December 15, 2006, and incorporated herein by reference). Stock Purchase Agreement, dated as of December 17, 2006, by and between Weight Watchers International, Inc. and Artal Holdings Sp...

  • Page 101
    ... Company's Current Report on Form 8-K, as filed on January 26, 2007, and incorporate herein by reference). Subsidiaries of Weight Watchers International, Inc. Consent of Independent Registered Public Accounting Firm. Rule 13a-14(a) Certification by David P. Kirchhoff, President and Chief Executive...

  • Page 102
    ...Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. WEIGHT WATCHERS INTERNATIONAL, INC. Date: February 28, 2007 By: /S/ DAVID P. KIRCHHOFF David P. Kirchhoff President, Chief Executive Officer...

  • Page 103
    ... Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: February 28, 2007 By: /S/ DAVID P. KIRCHHOFF David P. Kirchhoff President, Chief Executive Officer and Director (Principal Executive...

  • Page 104
    ... incorporated in Netherlands Weight watchers international Pty. Ltd, incorporated in Australia Weight Watchers (Accessories & Publications) Limited, incorporated in United Kingdom Weight Watchers (Exercise) Limited, incorporated in United Kingdom Weight Watchers (Food Products) Limited, incorporated...

  • Page 105
    ...Great Day Holdings Limited, incorporated in Australia WeightWatchers.ca Limited, incorporated in Delaware WeightWatchers.co.uk Limited, incorporated in United Kingdom WeightWatchers.com.au Pty Ltd, incorporated in Australia WeightWatchers.de Limited, incorporated in United Kingdom Weight Watchers do...

  • Page 106
    ... Weight Watchers International, Inc. of our report dated February 28, 2007 relating to the financial statements, financial statement schedule, management's assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting...

  • Page 107
    ... control over financial reporting; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the Audit Committee of the registrant's Board of Directors (or persons performing...

  • Page 108
    ... control over financial reporting; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the Audit Committee of the registrant's Board of Directors (or persons performing...

  • Page 109
    ...-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of Weight Watchers International, Inc. (the "Company") for the fiscal year ending December 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David P. Kirchhoff, certify, pursuant to...

  • Page 110
    ...-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of Weight Watchers International, Inc. (the "Company") for the fiscal year ending December 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Ann M. Sardini, certify, pursuant to...

  • Page 111
    STOCK PERFORMANCE GRAPH The following graph sets forth the cumulative return on Weight Watchers International common stock from December 29, 2001 through December 30, 2006, as compared to the cumulative return of the Standard and Poor's 500 Index (the "S&P 500 Index") and the cumulative return of ...

  • Page 112
    ... and Shareholder Information The 2007 Annual Meeting of Shareholders of Weight Watchers International, Inc. Location The Carlton Hotel, 88 Madison Avenue, New York, NY 10016 Date Monday, May 7, 2007, at 10:00 a.m. Eastern Time Corporate Headquarters 11 Madison Avenue, 17th Floor, New York, NY...