WeightWatchers 2007 Annual Report Download - page 39

operations. This acquisition has been accounted for as a purchase and earnings have been included in our
consolidated operating results since the date of acquisition.
Acquisitions of Indiana, Eastern Canada, Suffolk, Western Michigan, Greece and Italy. On July 27, 2006,
we acquired substantially all of the assets of our Indiana franchisee for a purchase price of approximately $25.0
million. On August 17, 2006, we acquired substantially all of the assets of our eastern Canadian franchisee and of
Vale Printing Limited for a net purchase price of approximately $51.2 million. On November 2, 2006, we
acquired substantially all of the assets of our Suffolk County, New York franchisee for a purchase price of
approximately $24.5 million. On December 11, 2006, we acquired substantially all of the assets of our western
Michigan franchisee for a net purchase price of $39.5 million, and reacquired our franchise rights in Greece and
Italy for approximately $4.3 million. These acquisitions were financed through cash from operations. These
acquisitions have been accounted for as purchases and earnings have been included in our consolidated operating
results since their respective dates of acquisition.
Acquisitions of Washington, D.C. and Fort Worth. On May 9, 2004, we acquired substantially all of the
assets of our Washington, D.C. area franchisee for a purchase price of $30.5 million. On August 22, 2004, we
acquired substantially all of the 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
$85.0 million. On November 30, 2003, we acquired certain assets of our franchisees in Dallas and New Mexico
for a total purchase price of $27.2 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 their respective dates of acquisition.
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 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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