WeightWatchers 2007 Annual Report Download - page 44

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• the development of more favorably perceived or more effective weight management methods,
including pharmaceuticals; and
• an impairment of the Weight Watchers brand and other intellectual property.
Acquisitions
Acquisition of WeightWatchers.com
On June 13, 2005, we entered into an agreement to acquire control of our licensee and affiliate,
WeightWatchers.com. On July 1 and 2, 2005, we increased our ownership interest in WeightWatchers.com from
approximately 20% to approximately 53% by (i) exercising warrants to purchase WeightWatchers.com common
stock for a total purchase price of approximately $45.7 million, (ii) acquiring shares of WeightWatchers.com
common stock owned by the employees of WeightWatchers.com and other parties not related to Artal through a
merger of a subsidiary of ours with WeightWatchers.com for a total purchase price of approximately
$28.4 million and (iii) acquiring additional shares of WeightWatchers.com common stock, representing
outstanding stock options then held by WeightWatchers.com employees, for a total purchase price of
approximately $62.3 million.
On June 13, 2005, WeightWatchers.com also entered into a redemption agreement with Artal to purchase all
of the shares of WeightWatchers.com owned by Artal at the same price per share as we paid in the merger.
Subsequently, on December 16, 2005, WeightWatchers.com redeemed all of its outstanding common stock held
by Artal for a total price of approximately $304.8 million as provided in the redemption agreement.
WeightWatchers.com used cash on hand and the proceeds of the WW.com Credit Facilities in the aggregate
amount of $215.0 million to finance this redemption, as well as pay related fees and expenses. As a result of this
redemption, we now own 100% of WeightWatchers.com.
The transactions described above relating to WeightWatchers.com were evaluated, negotiated and
recommended by a Special Committee of Weight Watchers International’s Board of Directors consisting of its
independent directors.
Franchise Acquisitions
From time to time, we repurchase franchise territories. Since the beginning of fiscal 2001, we have acquired
14 franchise operations for a total of approximately $586.9 million. These acquisitions are typically accretive to
our earnings per share. For fiscal 2007, the attendance of our remaining franchise operations accounted for less
than 18% of total worldwide attendance at Weight Watchers meetings.
Critical Accounting Policies
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based upon
our consolidated financial statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our
estimates and judgments, including those related to inventories, the impairment analysis for goodwill and other
indefinite-lived intangible assets, share-based compensation, income taxes, tax contingencies and litigation. We
base our estimates on historical experience and on various other factors and assumptions that we believe to be
reasonable under the circumstances, the results of which form the bases for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
We believe the following accounting policies are most important to the portrayal of our financial condition
and results of operations and require our most significant judgments and estimates.
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