WeightWatchers 2007 Annual Report Download - page 40

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion in conjunction with the “Selected Financial Data” included in
Item 6 of this Annual Report on Form 10-K and our consolidated financial statements and related notes included
in Item 15 of this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve
risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary
statements discussed in “Cautionary Notice Regarding Forward-Looking Statements” and elsewhere in this
Annual Report on Form 10-K should be read as applying to all related forward-looking statements wherever they
appear in this Annual Report on Form 10-K. Our actual results could differ materially from those discussed here.
Factors that could cause or contribute to these differences include, without limitation, those discussed in “Risk
Factors” included in Item 1A of this Annual Report on Form 10-K.
Overview
We are a leading global branded consumer company and the leading global provider of weight management
services, with a presence in over 25 countries around the world. With over four decades of weight management
experience, expertise and know-how, we have established Weight Watchers as one of the most recognized and
trusted brand names among weight conscious consumers. In 2007, consumers spent over $4 billion on Weight
Watchers branded products and services, including meetings conducted by us and our franchisees, products sold
at meetings, Internet subscription products sold by WeightWatchers.com, licensed products sold in retail
channels and magazine subscriptions and other publications. On a consolidated basis, from fiscal 2003 through
fiscal 2007, our revenues and operating income have grown at a compound annual growth rate of 11.7% and
8.3%, respectively.
We currently have two operating segments: Weight Watchers International and WeightWatchers.com. Since
April 3, 2004, we have consolidated WeightWatchers.com, initially pursuant to FASB Interpretation No. 46R,
“Variable Interest Entities,” or, FIN 46R and beginning with the second quarter of fiscal 2005, pursuant to
Accounting Research Bulletin No. 51, “Consolidated Financial Statements”, as a result of increasing our
ownership interest in WeightWatchers.com to a controlling interest as of July 2, 2005 and to a 100% interest as
of December 16, 2005.
We derive our revenues principally from:
•Meeting fees. Members pay us fees to attend our weekly meetings.
•Product sales. We sell proprietary products that complement our weight management plans, such as
bars, snacks, cookbooks, POINTS value guides, Weight Watchers magazines and POINTS
calculators, primarily to members in our meetings and to our franchisees.
•Internet revenues. We generate revenue from our Internet subscription products and from the sale of
Internet advertising.
•Licensing, franchise royalties and other. We license the Weight Watchers brand and other intellectual
property for certain foods and other products. In addition, our franchisees typically pay us a royalty fee
of 10% of their meeting fee revenues. We also generate revenues from our magazines and third-party
advertising in our publications.
Other than Internet revenues, all of the foregoing sources of revenue are included in our Weight Watchers
International operating segment.
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