WeightWatchers 2007 Annual Report Download - page 53

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LIQUIDITY AND CAPITAL RESOURCES
Balance Sheet
Comparing the balance sheet at December 29, 2007 with that at December 30, 2006, our cash balance
increased by $2.3 million from $37.5 million to $39.8 million. Our working capital deficit at December 29, 2007
was $172.1 million, including $39.8 million of cash, as compared to $64.3 million, including $37.5 million of
cash, at December 30, 2006. Excluding the change in cash, the working capital deficit increased by
$110.1 million from December 30, 2006 to December 29, 2007. Of the $110.1 million increase in negative
working capital, approximately $68.2 million relates to operational items, $26.7 million reflects an increase in
the current portion of our long-term debt and $25.5 million relates to an increase in our derivative payable due to
changes in the interest rate yield curve. These are partially offset by a decrease in negative working capital of
$10.3 million arising from higher deferred taxes. The $68.2 million of operational items is largely the result of a
$16.0 million increase in deferred revenue for member prepayments primarily associated with Monthly Pass, a
$16.1 million increase in accrued interest and the remaining $36.1 million is primarily comprised of higher
payables due to timing and accrued expenses including the U.K. VAT reserve.
Capital spending has averaged approximately $27.4 million annually over the three fiscal years ended
December 29, 2007 and has consisted primarily of leasehold improvements, furniture and equipment for meeting
locations and information system and website development expenditures.
Sources and Uses of Cash
Fiscal 2007
At the end of fiscal 2007, cash and cash equivalents were $39.8 million, an increase of $2.3 million from the
end of fiscal 2006. Cash flows provided by operating activities were $318.5 million. The cash provided by
operations was driven by our net income of $201.2 million, changes in our working capital, as described above,
and differences between book and cash taxes. Investing activities utilized $48.8 million, including $16.8 million
for our fiscal 2007 franchise acquisitions and $31.8 million for capital spending. Net cash used for financing
activities totaled $269.2 million. This included the repurchase of 19.1 million shares of our common stock for
$1,033.6 million in connection with our Tender Offer and share repurchase from Artal (as further explained in
“Liquidity and Capital Resources – Stock Transactions”) and dividend payments of $58.5 million, financed
primarily by net proceeds from borrowings of $799.0 million.
Fiscal 2006
At the end of fiscal 2006, cash and cash equivalents were $37.5 million, an increase of $6.0 million from the
end of fiscal 2005. Cash flows provided by operating activities were $265.8 million, including $37.0 million
provided by WeightWatchers.com’s operating activities. The cash provided by operations was driven by our net
income of $209.8 million, changes in our working capital and differences between book and cash taxes. Investing
activities utilized $171.4 million, including $140.4 million for our fiscal 2006 franchise acquisitions and $31.0
million for capital spending. Net cash used for financing activities totaled $90.9 million, including $151.7 million
used to repurchase 3.6 million shares of our common stock pursuant to our stock repurchase plan and $51.8
million used to pay dividends, offset by net proceeds from borrowings of $103.0 million. See Part II, Item 5 of
this Annual Report on Form 10-K for more information regarding our stock repurchase plan.
Fiscal 2005
At the end of fiscal 2005, cash and cash equivalents were $31.5 million, a decrease of $3.7 million from the
end of the fiscal 2004. Cash flows provided by operating activities in fiscal 2005 were $296.8 million. Cash
provided by WeightWatchers.com’s operating activities was $46.2 million. The decrease in cash provided by
operating activities in fiscal 2006 from fiscal 2005 is partially due to a change in the classification of the tax
benefit for stock options and restricted stock units. In fiscal 2005, this benefit was included in cash provided by
operations, but with the adoption of FAS 123(R) in fiscal 2006, this benefit is included in cash provided by
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