WeightWatchers 2006 Annual Report Download - page 27

Download and view the complete annual report

Please find page 27 of the 2006 WeightWatchers annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 112

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112

Our results of operations may decline as a result of a downturn in general economic conditions or
consumer confidence.
Our results of operations are highly dependent on meeting fees, product sales and Internet product
subscriptions. A downturn in general economic conditions or consumer confidence and spending in any of our
major markets, including as a result of a terrorist attack, could result in people curtailing their discretionary
spending, which, in turn, could reduce attendance at our meetings, product sales and Internet product
subscriptions. Any such reduction would adversely affect our results of operations. In addition, any event that
discourages people from gathering with others, including as a result of a health epidemic, could adversely affect
our business.
The seasonal nature of our business could cause our operating results to fluctuate.
We have experienced and expect to continue to experience fluctuations in our quarterly results of operations.
Our business is seasonal with revenues generally decreasing at year end and during the summer months. This
seasonality could cause our share price to fluctuate as the results of an interim financial period may not be indicative
of our full year results. Seasonality also impacts relative revenue and profitability of each quarter of the year, both
on a quarter-to-quarter and year-over-year basis. The timing of certain holidays, particularly Easter, which precedes
the spring diet season and occurs between March 22 and April 25, may affect our results of operations and the
year-to-year comparability of our results. For example, in fiscal 2006, Easter fell on April 16, which resulted in the
spring diet season beginning later than it did in fiscal 2005. This seasonality could cause our stock price to fluctuate
as the comparative change in our results for an interim financial period may not be indicative of our full year results.
In addition, our meeting operations 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 the impact of Hurricane Katrina and its aftermath, compounded by two subsequent hurricanes. The
inability of prospective members to join our meetings at the beginning of a diet season could adversely affect our
results of operations throughout the entire diet season.
Third parties may infringe on our brand name and other intellectual property rights, which may have an
adverse impact on our business.
We currently rely on a combination of trademark, copyright, trade secret, patent and other intellectual
property laws and confidentiality procedures to establish and protect our proprietary rights, including our brand
name. If we fail to successfully enforce our intellectual property rights, the value of our brand name, products
and services could be diminished and our business may suffer. Our precautions may not prevent misappropriation
of our intellectual property, particularly in foreign countries where laws or law enforcement practices may not
protect our proprietary rights as fully as in the United States. Any legal action that we may bring to protect our
brand name and other intellectual property could be unsuccessful and expensive and could divert management’s
attention from other business concerns. In addition, legal standards relating to the validity, enforceability and
scope of protection of intellectual property, especially in Internet-related businesses, are uncertain and evolving.
We cannot assure you that these evolving legal standards will sufficiently protect our intellectual property rights
in the future.
We may in the future be subject to intellectual property rights claims.
Third parties may in the future make claims against us alleging infringement of their intellectual property
rights. Any intellectual property claims, regardless of merit, could be time-consuming and expensive to litigate or
settle and could significantly divert management’s attention from other business concerns. In addition, if we were
unable to successfully defend against such claims, we may have to pay damages, stop selling the product or
service or stop using the software, technology or content found to be in violation of a third party’s rights, seek a
license for the infringing product, service, software, technology or content or develop alternative non-infringing
products, services, software, technology or content. If we cannot license, develop alternatives or stop using the
14