WeightWatchers 2006 Annual Report Download - page 48

of acquisitions, 2.9% without the benefit of acquisitions. Meeting fee growth outpaced attendance growth in the
period, with the average meeting fee per attendee up 7.1% over the prior 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 winter diet season and offered again in the spring, members pay in
advance, in full, for 17 consecutive weeks of meetings at a discounted price. Monthly Pass, first introduced in our
2006 fall diet season, is a recurring billing model whereby the member authorizes us to charge her credit card on
a monthly basis, at a discounted rate, until the member elects to cancel. The increase in the average meeting fee
arises because not all members who purchase Season Pass and Monthly Pass will attend all the meetings for
which they have paid.
International company-owned meeting fees were $251.3 million for fiscal 2006, a decrease of $12.8 million
or 4.8%, from $264.1 million for fiscal 2005. On a local currency basis, meeting fee revenues declined 4.7%
from the comparable prior year period. International meeting fees were negatively impacted by a 7.4% decline in
UK attendance, from 12.6 million in fiscal 2005 to 11.6 million in fiscal 2006, and a 4.4% decline in Continental
Europe attendance, from 11.6 million in fiscal 2005 to 11.1 million in fiscal 2006. In the first quarter of fiscal
2006, UK attendances declined by 17.2%, but the trend improved to negative 11.6% in the second quarter, and
returned to growth in the third and fourth quarters, up 0.4% and 7.0%, respectively. In Continental Europe,
attendances increased 6.3% in the first quarter of fiscal 2006 but began a decline in the second quarter, down
7.2%, which continued into the third and fourth quarters, down 7.8% and 10.6%, respectively. In Continental
Europe, we believe that most of the weakness has been the result of ineffective marketing and the resultant lack
of new enrollments for never members. In addition, up until fiscal 2006, Continental Europe saw attendance
growth in every year since fiscal 2000. We believe that the growth of the business outpaced the expertise of the
local management, and we are in the process of strengthening these teams.
Worldwide product sales for fiscal 2006 were $293.3 million, up $7.9 million or 2.8% from $285.4 million
for fiscal 2005. NACO product sales posted strong growth, up 13.2% or $19.0 million to $163.3 million in fiscal
2006. This increase is the result of higher attendance volume coupled with improved penetration of our
in-meeting consumable product offerings. In addition, E-Commerce was launched in the US in late fiscal 2005
and generated $4.8 million of sales in fiscal 2006. Internationally, product sales decreased 7.9% or $11.1 million,
to $130.0 million due primarily to the decline in attendance volume and the negative impact of foreign currency
exchange rates. On a local currency basis, international product sales declined 7.4%.
Online revenues grew $19.7 million or 18.0%, to $129.4 million for fiscal 2006 from $109.7 million for
fiscal 2005, the result of a 15.3% increase in end of period active Weight Watchers Online subscribers, from
399,000 at the end of fiscal 2005 to 460,000 at the end of fiscal 2006. In addition, online advertising revenues
grew $1.5 million or 74.2% to $3.6 million for fiscal 2006.
Other revenue, comprised primarily of licensing revenues and our publications, was $68.3 million for fiscal
2006, an increase of $12.7 million or 22.8%, from $55.6 million for fiscal 2005. Licensing revenues increased
$10.5 million or 27.7% worldwide. The US licensing business grew on the strength of increased distribution of
existing licenses, including ice cream and cakes, while international revenues grew on the strength of both
existing and new licenses. Advertising revenue increased $1.4 million.
Franchise royalties were $12.7 million domestically and $6.5 million internationally for fiscal 2006. Total
franchise royalties of $19.2 million were down 1.0% from $19.4 million in the prior fiscal year. Excluding our
recently acquired franchises, domestic franchise royalties rose 4.1% while international franchise royalties rose
8.2%.
Cost of revenues was $557.1 million for the fiscal 2006, an increase of $36.4 million or 7.0%, from $520.7
million for fiscal 2005. Gross profit margin of 54.8% of sales for fiscal 2006 remained consistent with the prior
year margin.
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