WeightWatchers 2006 Annual Report Download - page 85

Download and view the complete annual report

Please find page 85 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

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 to ten years. Options outstanding at December 30, 2006 have an
exercise price between $2.13 and $56.21 per share.
The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing
model with the weighted average assumptions noted in the following table. Expected volatility is based on the
historical volatility of the Company’s stock with certain time periods excluded due to historical events which are
not expected to recur. Since the Company’s option exercise history is limited, it has estimated the expected term
of option grants to be the midpoint between the vesting period and the contractual term of each award, as is
permitted under Staff Accounting Bulletin No. 107, “Share-Based Payment” (“SAB 107”). The risk free interest
rate is based on the U.S. Treasury yield curve in effect on the date of grant which most closely corresponds to the
expected term of the option. The dividend yield is based on our historic average dividend yield.
December 30,
2006
December 31,
2005
January 1,
2005
Dividend yield .................................... 1.4% 0% 0%
Volatility ........................................ 27.1% 28.3% 32.4%
Risk-free interest rate .............................. 4.3%-5.2% 3.3%-4.5% 2.3%-4.4%
Expected term (years) .............................. 7.4 5.8 5.8
A summary of option activity under the plans for the year ended December 30, 2006 is presented below:
Shares
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life (Yrs.)
Aggregate
Intrinsic
Value
Outstanding at January 1, 2006 ................... 2,825 $28.14
Granted ................................. 426 45.37
Exercised ................................ (501) 11.54
Canceled ................................ (109) 41.36
Outstanding at December 30, 2006 ................ 2,641 $33.52 5.21 $50,436
Exercisable at December 30, 2006 ................ 1,332 $23.34 3.71 $38,931
The weighted-average grant-date fair value of options granted was $15.40, $16.63 and $14.40 for the years
ended December 30, 2006, December 31, 2005 and January 1, 2005, respectively. The total intrinsic value of
options exercised was $17,864, $80,994 and $27,045 for the years ended December 30, 2006, December 31,
2005 and January 1, 2005, respectively.
Cash received from options exercised during the year ended December 30, 2006 was $5,779. The tax
benefits realized from options exercised and RSUs vested resulting from tax deductions in excess of share-based
employee compensation expense recognized in the statement of operations totaled $6,234 for the year ended
December 30, 2006. With the adoption of SFAS 123(R), this amount is now shown as a cash inflow from
financing activities. Prior to the adoption of SFAS 123(R), this amount was shown as a cash inflow from
operating activities. Because the Company elected the modified prospective transition method of adoption, prior
period financial statements have not been restated.
F-22