WeightWatchers 2007 Annual Report Download - page 51

of acquisitions, or 2.9% without the benefit of acquisitions. Meeting fee growth outpaced attendance growth in
the period, with the average meeting fee per attendee up 7.1% over the prior year. The increase in meeting fee per
attendee resulted from the positive impact of two new commitment plans, Season Pass, and Monthly Pass, and
from a one dollar price rise in approximately 40% of our markets. With Season Pass, a pricing plan which was
first launched throughout NACO for our 2006 winter marketing campaign and offered again in the spring,
members pay in advance, in full, for 17 consecutive weeks of meetings at a discounted price. Monthly Pass, first
introduced in our 2006 fall marketing campaign, is a recurring billing model whereby the member authorizes us
to charge her credit card on a monthly basis, at a discounted rate, until the member elects to cancel. The increase
in the average meeting fee arises because not all members who purchase Season Pass and Monthly Pass will
attend all the meetings for which they have paid.
International company-owned meeting fees were $251.3 million for fiscal 2006, a decrease of $12.8 million
or 4.8%, from $264.1 million for fiscal 2005. On a local currency basis, meeting fee revenues declined 4.7%
from the prior year. International meeting fees were negatively impacted by a 7.4% decline in U.K. attendance,
from 12.6 million in fiscal 2005 to 11.6 million in fiscal 2006, and a 4.4% decline in Continental Europe
attendance, from 11.6 million in fiscal 2005 to 11.1 million in fiscal 2006. In the first quarter of fiscal 2006, U.K.
attendances declined by 17.2%, but the trend improved to negative 11.6% in the second quarter, and returned to
growth in the third and fourth quarters, up 0.4% and 7.0%, respectively. In Continental Europe, attendances
increased 6.3% in the first quarter of fiscal 2006, but began a decline in the second quarter, down 7.2%, which
continued into the third and fourth quarters, down 7.8% and 10.6%, respectively. In Continental Europe, we
believe that most of the weakness was the result of ineffective marketing and the resultant lack of new
enrollments. In addition, up until fiscal 2006, Continental Europe saw attendance growth in every year since
fiscal 2000.
Worldwide product sales for fiscal 2006 were $293.3 million, up $7.9 million, or 2.8%, from $285.4 million
for fiscal 2005. NACO product sales posted strong growth, up 13.2% or $19.0 million to $163.3 million in fiscal
2006. This increase is the result of higher attendance volume coupled with improved penetration of our
in-meeting consumable product offerings. In addition, E-Commerce was launched in the U.S. in late fiscal 2005
and generated $4.8 million of sales in fiscal 2006. Internationally, product sales decreased 7.9% or $11.1 million,
to $130.0 million due primarily to the decline in attendance volume and the negative impact of foreign currency
exchange rates. On a local currency basis, international product sales declined 7.4%.
Internet revenues grew $19.7 million, or 18.0%, to $129.4 million for fiscal 2006 from $109.7 million for
fiscal 2005, the result of a 15.3% increase in end of period active Weight Watchers Online subscribers, from
399,000 at the end of fiscal 2005 to 460,000 at the end of fiscal 2006. In addition, online advertising revenues
grew $1.5 million or 74.2% to $3.6 million for fiscal 2006.
Other revenue, comprised primarily of licensing revenues and our publications, was $68.3 million for fiscal
2006, an increase of $12.7 million, or 22.8%, from $55.6 million for fiscal 2005. Licensing revenues increased
$10.5 million or 27.7% worldwide. The U.S. licensing business grew on the strength of increased distribution of
existing licenses, including ice cream and cakes, while international revenues grew on the strength of both
existing and new licenses. Advertising revenue increased $1.4 million.
Franchise royalties were $12.7 million in NACO and $6.5 million internationally for fiscal 2006. Total
franchise royalties of $19.2 million were down 1.0% from $19.4 million in the prior fiscal year. Excluding our
recently acquired franchises, franchise royalties in NACO rose 4.1% while international franchise royalties rose
8.2%.
Cost of revenues was $557.1 million for fiscal 2006, an increase of $36.4 million, or 7.0%, from $520.7
million for fiscal 2005. Gross profit margin of 54.8% of sales for fiscal 2006 remained consistent with the prior
year margin.
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