WeightWatchers 2006 Annual Report Download - page 39

assets of our Fort Worth franchisee for a purchase price of $30.0 million. These acquisitions were financed
through cash from operations. The acquisitions were accounted for as purchases and, accordingly, earnings from
these franchises have been included in our consolidated operating results since the respective dates of the
acquisitions.
Acquisitions of The WW Group and Dallas/New Mexico. On March 30, 2003, we acquired certain assets of
eight of the fifteen franchises of The WW Group, Inc. and its affiliates, or The WW Group, for an aggregate
purchase price of $180.7 million. The acquisition was financed through cash and additional borrowings of
$85 million. On November 30, 2003, we acquired certain assets of our franchises in Dallas and New Mexico for
a total purchase price of $27.2 million. This acquisition was financed through cash from operations. The
acquisition was accounted for as a purchase and, accordingly, earnings from these franchises have been included
in our consolidated operating results since the date of acquisition.
Acquisitions of North Jersey, San Diego and Eastern North Carolina. On January 18, 2002, we acquired the
franchise territory and certain business assets of our franchise in North Jersey for an aggregate purchase price of
$46.5 million. The acquisition was financed through additional borrowings that were subsequently repaid by the
end of the second quarter of 2002. On July 2, 2002 and September 1, 2002, we acquired the assets of our
franchises in San Diego and eastern North Carolina for a total purchase price of $11.0 million and $10.6 million,
respectively. These acquisitions were financed through cash from operations. The acquisitions were accounted
for as purchases and, accordingly, earnings from these franchises have been included in our consolidated
operating results since the respective dates of the acquisitions.
Reversal of Tax Reserves
During the third quarter of fiscal 2004, we recorded a tax benefit by reversing a $5.5 million accrued but no
longer necessary tax liability resulting from the September 1999 recapitalization and stock repurchase transaction
with Heinz. In the fourth quarters of fiscal 2005 and fiscal 2004, we recorded a tax benefit by reversing a
$0.9 million and $2.8 million state tax reserve, respectively, with respect to accrued but no longer necessary state
tax liabilities. During the fourth quarter of fiscal 2004, WeightWatchers.com received a benefit of $5.5 million
from its deferred tax asset as a result of the utilization of net operating loss carryforwards. Also in the fourth
quarter of fiscal 2004, due to the then recent trend in profitability of WeightWatchers.com, it was concluded that
it was more likely than not that WeightWatchers.com would fully realize the benefit of its deferred tax assets. As
such, WeightWatchers.com reversed all of its remaining valuation allowance, except for $1.5 million relating to
its foreign operations. Also in the fourth quarter of fiscal 2005, due to the recent trend in profitability of certain
of WeightWatchers.com’s foreign operations, it was concluded that it was more likely than not that these foreign
operations would 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. During the
fourth quarter of fiscal 2006, we recorded a net tax benefit of $6.3 million by reversing tax reserves which due to
the resolution of certain tax matters were no longer necessary, partially offset by adjustments to our tax valuation
allowance for foreign tax net operating loss carryforwards.
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