WeightWatchers 2006 Annual Report Download - page 91

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WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
related to this commitment for the fiscal years ended December 30, 2006, December 31, 2005 and January 1,
2005 was $2,002, $1,050 and $947, respectively.
13. Cash Flow Information
December 30,
2006
December 31,
2005
January 1,
2005
Net cash paid during the year for:
Interest expense ............................... $44,317 $18,030 $13,564
Income taxes ................................. $91,886 $80,381 $53,102
Noncash investing and financing activities were as follows:
Fair value of net assets acquired in connection with the
acquisitions ................................ $ 3,741 $ — $ 811
Dividends declared but not yet paid at year-end .......... $17,062 $ — $ —
14. Commitments and Contingencies
Legal:
On February 18, 2005, WWI settled two lawsuits with CoolBrands International, Inc. (“CoolBrands”) one
filed by WWI to enforce the termination provisions of the CoolBrands ice cream and frozen novelty license and
the other filed by CoolBrands against WWI and Wells Dairy, Inc. alleging breach of the CoolBrands license.
CoolBrands will no longer manufacture, sell, market or distribute ice cream and frozen novelty products using
WWI’s trademarks.
In March 2006, the Company agreed to settle a litigation filed on behalf of a purported class of employees
under the California Labor Code and the Federal Fair Labor Standards Act for $2,300 plus other costs and
expenses. The settlement was accrued for in fiscal 2005 and is subject to final approval by the court.
On July 7, 2006, the Company filed an amended notice of appeal with the U.K. VAT and Duties Tribunal
appealing Her Majesty’s Revenue and Customs’ (“HMRC”) ruling 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 the Company’s view that this prior determination by HMRC should remain in
effect and the Company intends to vigorously pursue this appeal. During January 2007, a hearing before the UK
VAT and Duties Tribunal on this issue occurred and the Company awaits the U.K. VAT and Duties Tribunal’s
decision. In the event the Company’s 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 its activities, the Company is 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 the Company’s results of operations, financial condition
or cash flows.
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