WeightWatchers 2007 Annual Report Download - page 85

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WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The components of the Company’s consolidated income before income taxes consist of the following:
December 29,
2007
December 30,
2006
December 31,
2005
Domestic ...................................... $254,678 $260,130 $212,085
Foreign ....................................... 71,813 70,512 67,230
$326,491 $330,642 $279,315
The difference between the U.S. federal statutory tax rate and the Company’s consolidated effective tax rate
are as follows:
December 29,
2007
December 30,
2006
December 31,
2005
U.S. federal statutory rate ......................... 35.0% 35.0% 35.0%
Federal and state tax reserve provision (reversal) ....... 0.3 (3.0) (0.2)
States income taxes (net of federal benefit) ........... 2.9 3.4 2.8
Increase (reduction) in valuation allowance ........... 1.0 1.2 (0.3)
Other ......................................... (0.8) (0.1) 0.3
Effective tax rate ............................ 38.4% 36.5% 37.6%
The deferred tax assets (liabilities) recorded on the Company’s consolidated balance sheet are as follows:
December 29,
2007
December 30,
2006
Amortization ............................................... $ 6,111 $31,627
Provision for estimated expenses ................................ 9,554 5,789
Operating loss carryforwards ................................... 13,170 7,517
Salaries and wages ........................................... 5,409 —
Share-based compensation ..................................... 5,033 5,208
Other ..................................................... 5,222 5,621
Less: valuation allowance ..................................... (10,917) (7,517)
Total deferred tax assets ....................................... $33,582 $48,245
Depreciation/amortization ..................................... $ (4,447) $ (3,997)
Prepaid expenses ............................................ (694) (1,213)
Deferred income ............................................. (206) (362)
Other ..................................................... — (4,362)
Total deferred tax liabilities .................................... $ (5,347) $ (9,934)
Net deferred tax assets ........................................ $28,235 $38,311
Certain foreign operations of WWI have generated net operating loss carryforwards. If it has been
determined that it is more likely than not that the deferred tax assets associated with these net operating loss
carryforwards will not be utilized a valuation allowance has been recorded. As of December 29, 2007 and
December 30, 2006, various foreign subsidiaries had net operating loss carryforwards of approximately $50,831
and $30,547, respectively, most of which can be carried forward indefinitely.
F-23