WeightWatchers 2006 Annual Report Download - page 31

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generally less than five years). As of the end of fiscal 2006, there were approximately 4,400 North America
meeting locations, including approximately 3,700 third-party locations and 700 retail centers. In the United
Kingdom, there were approximately 5,900 meeting locations, with 100% in third-party locations. In Continental
Europe, there were approximately 5,600 meeting locations, with approximately 99% in third-party locations. In
Australia and New Zealand, there were approximately 1,000 meeting locations, with approximately 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 fully subject to 17.5% standard rated value added tax, or VAT. For over a decade prior
to April 1, 2005, HMRC had determined that Weight Watchers meetings fees in the U.K. were only partially
subject to 17.5% VAT. It is our view that this prior determination by HMRC should remain in effect and we
intend to vigorously pursue this appeal. In January 2007, a hearing before the U.K. VAT and Duties Tribunal on
this issue occurred and we await the Tribunal’s decision. In the event our appeal is unsuccessful, we may incur
monetary liability in excess of reserves previously recorded, and our U.K. results of operations may be adversely
affected in the future.
Due to the nature of our activities, we are also, at times, subject to pending and threatened legal actions that
arise out of the normal course of business. We have had and continue to have disputes with certain of our
franchisees. In the opinion of management, based in part upon advice of legal counsel, the disposition of all such
matters is not expected to have a material effect on our results of operations, financial condition or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of our shareholders during the last quarter of the fiscal year ended
December 30, 2006.
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