WeightWatchers 2008 Annual Report Download - page 85

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The difference between the U.S. federal statutory tax rate and the Company’s consolidated effective tax rate
are as follows:
January 3,
2009
December 29,
2007
December 30,
2006
U.S. federal statutory rate ...................................... 35.0% 35.0% 35.0%
Federal and state tax reserve provision (reversal) .................... 0.4 0.3 (3.0)
States income taxes (net of federal benefit) ........................ 3.2 2.9 3.4
Increase in valuation allowance ................................. 1.2 1.0 1.2
Other ...................................................... (0.3) (0.8) (0.1)
Effective tax rate ......................................... 39.5% 38.4% 36.5%
The deferred tax assets (liabilities) recorded on the Company’s consolidated balance sheet are as follows:
January 3,
2009
December 29,
2007
Amortization ................................................. $ — $ 6,111
Provision for estimated expenses .................................. 18,947 9,554
Operating loss carryforwards ..................................... 21,008 13,170
Salaries and wages ............................................. 5,473 5,409
Share-based compensation ....................................... 8,927 5,033
Other comprehensive income .................................... 18,415 1,110
Other ........................................................ 2,809 4,112
Less: valuation allowance ....................................... (14,458) (10,917)
Total deferred tax assets ......................................... $61,121 $ 33,582
Depreciation .................................................. $ (3,571) $ (4,447)
Prepaid expenses .............................................. (1,166) (694)
Deferred income ............................................... (147) (206)
Amortization ................................................. (18,486) —
Total deferred tax liabilities ...................................... $(23,370) $ (5,347)
Net deferred tax assets .......................................... $37,751 $ 28,235
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 January 3, 2009 and
December 29, 2007, various foreign subsidiaries had net operating loss carryforwards of approximately $67,865
and $50,831, respectively, most of which can be carried forward indefinitely.
In fiscal 2005, due to the then recent trend in profitability of certain WeightWatchers.com’s foreign
operations, it was concluded that it was more likely than not that these foreign operations would fully realize the
benefit of their deferred tax assets. As such, WeightWatchers.com reversed all of its remaining $1,593 valuation
allowance associated with its foreign net operating loss carryforwards, except for a full valuation allowance of
$575 relating to certain foreign operations. This amount was subsequently reversed in fiscal 2006 due to the
utilization of the net operating loss carryforwards.
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