WeightWatchers 2008 Annual Report Download - page 51

As noted above, net revenues for fiscal 2008 were $1,535.8 million, an increase of $68.6 million, or 4.7%,
from $1,467.2 million for fiscal 2007. Excluding the full net impact of the U.K. VAT ruling on current and prior
year periods, net revenues of $1,562.3 million in fiscal 2008 increased $95.1 million, or 6.5%, versus fiscal 2007.
The U.K. VAT ruling will negatively impact net revenues on an ongoing basis. Net revenues in fiscal 2008
include a $6.6 million, or 0.4%, benefit from the favorable effects of foreign currency exchange rates. The table
above shows that $7.8 million of the total net charge related to the U.K. VAT ruling pertained specifically to
fiscal 2008. Earned net revenues in fiscal 2008, reduced for this $7.8 million portion of the U.K. VAT charge,
were $1,554.5 million. The U.K. VAT ruling net impact for current and prior years lowered our gross margin and
operating income margins by 70 basis points and 120 basis points, respectively. Excluding this net impact, fiscal
2008 gross margin was 55.1% and operating income margin was 28.9%.
For fiscal 2008, reported global meeting fees were $908.1 million, an increase of $27.4 million, or 3.1%,
from the prior fiscal year. Excluding the aggregate net adjustment for the U.K. VAT ruling of $26.5 million,
global meeting fees totaled $934.6 million in fiscal 2008 versus $880.7 million in fiscal 2007, an increase of
$53.9 million, or 6.1%, including the favorable impact of foreign currency translation. Global attendance was
60.0 million in fiscal 2008 versus 62.7 million in fiscal 2007, a 2.7 million, or 4.3%, decline. The increase in
global meeting fees is attributable to Monthly Pass. We now have Monthly Pass outside the United States, in the
United Kingdom, Germany, and Australia, each of which launched in the third quarter of 2007, and in France,
which launched during the second quarter of 2008. Monthly Pass drove paid weeks in the global meetings
business to 91.3 million in fiscal 2008, a 7.9% increase versus fiscal 2007, and resulted in a 10.4% increase in the
average meeting fee per attendee on a constant currency basis versus the prior year period.
In NACO, meeting fees for fiscal 2008 were $625.3 million, up $21.6 million, or 3.6%, from $603.7 million
for fiscal 2007. Attendance declined 4.3% versus the prior year period to 36.5 million including the impact of
acquisitions, and declined 6.2% without the impact of acquisitions. This decline in attendance resulted from a
number of factors. Rising gasoline and other consumer prices, the worsening economic climate and reduced
credit availability adversely affected consumer spending. In fiscal 2008, paid weeks rose 4.5% versus the prior
year period as a result of the continued success of Monthly Pass outpacing attendance and thereby driving an
8.2% increase in the average meeting fee per attendee versus the prior year period. In the United States, the third
quarter of fiscal 2008 marked the second anniversary of the launch of Monthly Pass.
Our reported international meeting fees were $282.8 million for fiscal 2008, an increase of $5.8 million, or
2.1%, from fiscal 2007. Excluding the net adjustment for the U.K. VAT ruling, our international meeting fees
were $309.3 million for fiscal 2008, an increase of $32.3 million, or 11.7%, from $277.0 million for fiscal 2007.
On a local currency basis, these adjusted international meeting fees rose 10.4% compared to the prior fiscal year.
Total paid weeks in our international meetings business increased 15.4% versus the prior year period, with the
United Kingdom up 17.4% and Continental Europe up 16.5%. The introduction of Monthly Pass in the United
Kingdom and Germany in the third quarter of 2007, coupled with a concurrent price increase in the United
Kingdom, and the introduction of Monthly Pass in France in the second quarter of fiscal 2008 drove international
meeting fee revenue growth in fiscal 2008, despite a 4.4% decline in attendance versus the prior fiscal year.
Global product sales for fiscal 2008 were $339.8 million, up $2.1 million, or 0.6%, from $337.7 million for
fiscal 2007, driven by an increase in product sales per attendee across all of our markets. A regular strategy of
new product launches, rotation of product offerings, and updating our enrollment products resulted in a trend of
growth in product sales per attendee. The difficult trends in the economic environment, however, are now evident
in our meeting product sales performance. Global product sales per attendee, which had posted growth versus
prior year throughout most of fiscal 2008, were up only marginally in the fourth quarter of fiscal 2008.
Internationally, product sales increased 5.1%, or $7.9 million, from fiscal 2007 to $162.7 million for fiscal 2008.
In local currencies, international product sales rose 2.3%, as compared with the prior year period. In NACO,
product sales declined 3.2%, or $5.8 million, to $177.1 million in fiscal 2008, primarily due to lower attendance.
Internet revenues, which include subscription revenue from sales of Weight Watchers Online and Weight
Watchers eTools, as well as Internet advertising revenue, grew $34.2 million, or 22.6%, to $185.8 million for fiscal
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