WeightWatchers 2008 Annual Report Download - page 43

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 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 world’s leading provider of weight
management services, operating globally through a network of Company-owned and franchise operations . 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 2008,
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 2004 through fiscal 2008, our revenues and operating income
have grown at a compound annual growth rate of 10.6% and 8.6%, 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 a range of 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 our other
intellectual property for certain foods and other relevant consumer 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. Revenues from our Weight Watchers International operating segment, including
revenues from meetings and product sales, comprised 87.7% of our total revenues in fiscal 2008, 89.5% of our
total revenues in fiscal 2007 and 89.4% of our total revenues in fiscal 2006. Revenues from our
WeightWatchers.com operating segment contributed 12.3% of our total revenues in fiscal 2008, 10.5% of our
total revenues in fiscal 2007 and 10.6% of our total revenues in fiscal 2006.
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