WeightWatchers 2009 Annual Report Download

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2009
ANNUAL
REPORT

Table of contents

  • Page 1
    2009 ANNUAL REPORT

  • Page 2

  • Page 3
    ...to make significant progress on the strategic initiatives designed to drive enrollments and attendance in the long term, attract Weight Watchers Online subscribers and enliven our brand - all while keeping costs carefully in check. For the year, revenues were down single digits at $1.4 billion with...

  • Page 4
    ...ability to conveniently customize the plan into one that works best for them. Our U.K. and Australian businesses launched similar programs in early 2009 while our Continental European businesses worked hard on an even bigger new program which was launched at the end of the year. Throughout 2009, we...

  • Page 5
    Apple and the Apple logo are trademarks of Apple Inc., registered in the U.S. and other countries. iPhone is a trademark of Apple Inc.

  • Page 6
    [ THIS PAGE ] Curried Beef Kebabs with Brown Basmati Rice recipe from Weight Watchers MomentumTM Cookbook [ OPPOSITE PAGE, LEFT TO RIGHT ] 2010 POINTS® Pedometer; Weight Watchers Baked Apple 'n Cinnamon Snack Bars

  • Page 7
    ... in software development for our internet offerings for both the benefit of our Weight Watchers Online subscribers as well as the benefit of meetings members using Monthly Pass. Our technology team continued to focus on improving our internet products' functionality to increase usage, mobility and...

  • Page 8
    ... and plans to make the Weight Watchers internet community even more robust with even new functionality, we can further promote adherence to the program for both meetings members and Online subscribers. Involvement and group participation are truly the key ingredients to successful weight loss. I am...

  • Page 9

  • Page 10
    ... and tools to achieve sustainable, long-term results. Our employees are working every day to increase recognition that a healthier lifestyle is a necessity, and all of our program enhancements and offerings make this goal even more attainable. Additionally, our "At Work" program helps employers save...

  • Page 11
    ... held by non-affiliates as of July 2, 2009 (based upon the average bid and asked price of $25.30 per share of common stock as of July 2, 2009, the last business day of the registrant's second fiscal quarter of 2009, as quoted on the New York Stock Exchange) was $851,488,704. For purposes of this...

  • Page 12

  • Page 13
    ...Executive Officers and Directors of the Company ... 1 13 19 19 19 21 22 Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities ...Item 6. Selected Financial Data ...Item 7. Management's Discussion and Analysis of Financial Condition and Results...

  • Page 14

  • Page 15
    ... executive offices in New York, New York. In this Annual Report on Form 10-K unless the context indicates otherwise: "we," "us," "our" and the "Company" refers to Weight Watchers International, Inc. and all of its businesses consolidated for purposes of its financial statements; "Weight Watchers...

  • Page 16
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 17
    ... us to attract new and returning members efficiently. Our customer acquisition costs are relatively low due to both word of mouth referrals and our efficient mass marketing programs. Through WeightWatchers.com, we offer Internet subscription weight management products to consumers and maintain an...

  • Page 18
    ... group support and education with a structured approach to food, activity and lifestyle modification developed by credentialed weight management experts. Our more than 16,000 leaders run our meetings and educate members on the Weight Watchers method of successful and sustained weight management...

  • Page 19
    ... can range from dealing with a holiday office party to making time to exercise. The leader encourages substantial participation and discusses supporting products and materials as appropriate. At the end of the meeting, new members are given special instruction in our current weight management plans...

  • Page 20
    ... of subscription websites in each new country facilitates our ability to launch Monthly Pass in that country. As of the end of fiscal 2009, WeightWatchers.com had approximately 763,000 active Weight Watchers Online subscribers. As Weight Watchers Online and Weight Watchers eTools reflect different...

  • Page 21
    ... subscription products help customers monitor their weight management efforts, encourage exercise and a more active lifestyle, and provide guidance toward healthier eating habits by offering the following interactive resources POINTS Tracker POINTS Calculators Filling Foods list Weight Tracker...

  • Page 22
    ...Yogurt Chilled Meals Scales Yogurt and Desserts Breakfast Cereal and Bars We ask each of our licensees to include on their packaging information about our services and our products, such as our toll-free numbers and a URL for WeightWatchers.com. This marketing and promotional support reinforces the...

  • Page 23
    ... are timed to coincide with the start of our marketing campaigns and are intended to encourage former meeting members to re-enroll. WeightWatchers.com made a substantial investment in developing email targeting capabilities. Its email promotional vehicles and programs are an important customer...

  • Page 24
    ...as an important marketing tool to both existing and potential customers. We offer Weight Watchers magazines in most of our major markets. Seasonality Our business is seasonal, with revenues generally decreasing at year end and during the summer months. Our advertising schedule supports the three key...

  • Page 25
    ... the domain name dispute resolution system. History Early Development In 1961, Jean Nidetch, our founder, attended a New York City obesity clinic and took what she learned from her personal experience at the obesity clinic and began weight-loss meetings with a group of her overweight friends in the...

  • Page 26
    ... common stock held by Artal for a total price of approximately $304.8 million as provided in the redemption agreement. WeightWatchers.com used cash on hand and the proceeds of the WW.com Credit Facilities (as defined below in "Item 6. Selected Financial Data-Items Affecting Comparability-Long-Term...

  • Page 27
    ...in Note 15 of our consolidated financial statements, contained in Part IV, Item 15 of this Annual Report on Form 10-K. Information concerning some of the risks to which we are exposed resulting from our international operations and foreign currency exchange rates is set forth under the heading "Risk...

  • Page 28
    ... perceived weight management methods; our ability to continue to develop innovative new services and products and enhance our existing services and products, or the failure of our services and products to continue to appeal to the market; the effectiveness of our marketing and advertising programs...

  • Page 29
    ...brand image, marketing programs, cost and perception of the efficacy of the service and product offerings. Moreover, customers can, and frequently do, change weight management approaches easily and at little cost. For example, in fiscal 2003 and fiscal 2004, our revenue growth was adversely affected...

  • Page 30
    ... balance sheet date. Revenues and expenses are translated into U.S. dollars at the average exchange rate for the period. Translation adjustments arising from the use of differing exchange rates from period to period are recorded in shareholders' equity as accumulated other comprehensive income (loss...

  • Page 31
    ..., in turn, could reduce attendance at our meetings, product sales and Internet product subscriptions. The current global economic downturn has led to a decrease in discretionary spending by consumers and loss of consumer confidence, particularly in North America, our largest market. Any reduction in...

  • Page 32
    ... terms, develop alternatives or stop using the service, product, software, technology or content for any infringing aspects of our business, we may be forced to limit our service and product offerings. Any of these results could reduce our revenues and our ability to compete effectively, increase...

  • Page 33
    .... The consent order requires us to comply with certain procedures and disclosures in connection with our advertisements of products and services. Since we operate our meetings business both in the United States and internationally, we are subject to many distinct employment, labor, benefits and tax...

  • Page 34
    ... corporate governance requirements. Artal controls a majority of the voting power of our outstanding common stock. Under the New York Stock Exchange, or the NYSE, rules, a listed company of which more than 50% of the voting power for the election of directors is held by another person or group...

  • Page 35
    ... by our Board of Directors. These provisions could limit the price that certain investors might be willing to pay in the future for shares of our common stock. Item 1B. Unresolved Staff Comments None. Item 2. Properties We are currently headquartered in New York, New York in leased office space. We...

  • Page 36
    ... made any provision for losses in connection with it. Hanson-Kelly & Jackson v. Weight Watchers North America, Inc. and Weight Watchers International, Inc. In January 2010, a lawsuit was filed in the U.S. District Court for the Middle District of North Carolina by two leaders alleging violations of...

  • Page 37
    ... course of business. In the opinion of management, based in part upon advice of legal counsel, the disposition of any such matters is not expected to have a material effect on our results of operations, financial condition or cash flows. However, the results of legal actions cannot be predicted with...

  • Page 38
    ...Financial Officer President, WeightWatchers.com and Chief Technology Officer President, International Executive Vice President, General Counsel and Secretary Chairman of the Board of Directors Director Director Director Director Director Director Director (1) Member of our Compensation and Benefits...

  • Page 39
    WeightWatchers.com, Inc. from January 2002 to April 2007 and our Executive Vice President, Global Technology and Operations, from May 2007 to March 2008. Prior to joining us, Mr. Basone was with Modem Media Inc., an interactive advertising and web site development agency, where he served as Managing...

  • Page 40
    ...Mr. Fajgenbaum has been a director since our acquisition by Artal on September 29, 1999. Mr. Fajgenbaum is a Managing Director of The Invus Group, LLC, which he joined in 1996. Prior to joining The Invus Group, LLC, Mr. Fajgenbaum was a consultant for McKinsey & Company in New York from 1994 to 1996...

  • Page 41
    ...be purchased from time to time in the open market or through privately negotiated transactions. No shares will be purchased from Artal under the program. This program currently has no expiration date. We repurchased no shares of our common stock during fiscal 2009. As of the end of fiscal 2009, $100...

  • Page 42
    ...years. SELECTED FINANCIAL DATA (in millions, except per share amounts) Fiscal 2009 (52 weeks) Fiscal 2008 (53 weeks) Fiscal 2007 (52 weeks) Fiscal 2006 (52 weeks) Fiscal 2005 (52 weeks) Revenues, net ...Net income attributable to the Company ...Working capital (deficit) ...Total assets ...Long-term...

  • Page 43
    ...we incurred fees of approximately $4.1 million during fiscal 2009. For additional details on the WWI Credit Facility, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Long-Term Debt" in Part II of this Annual Report on...

  • Page 44
    ... increases in the current portion of debt obligations, accruals for the U.K. adverse tax rulings related to U.K. VAT and self-employment matters, and year-over-year increases in deferred revenue given the introduction and success of commitment plans in our meetings business and growth in our online...

  • Page 45
    ... publications. 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...

  • Page 46
    ... the same period. Product sales growth resulted from successful new product launches. Consolidation of WeightWatchers.com. From fiscal 2005 to fiscal 2009, our Internet revenues have grown at a compound annual growth rate of 15.6%. The increase in Internet revenues during this time is primarily due...

  • Page 47
    ... This new metric, "paid weeks", reports total paid weeks by our customers in Company-owned operations for a given period. For meetings, paid weeks is the sum of total paid commitment plan weeks and total pay-as-you-go weeks for a given period. For Weight Watchers Online, paid weeks is the total paid...

  • Page 48
    ..., and paid weeks grew 36.5%, due largely to the success of our Monthly Pass recurring payment plan. In fiscal 2008, meeting attendance for the full year declined 4.3% and excluding the impact of acquisitions, meeting attendance for the full year declined 6.2%, resulting from a number of factors...

  • Page 49
    ... of new Weight Watchers Online subscribers in the United States as well as the launch of WeightWatchers.com subscription products in new markets globally. Gross Margin The Company has maintained an annual gross margin of 50% or more since fiscal 2001. Our staff is usually paid on a commission...

  • Page 50
    ... of operating results that exclude or adjust certain items. Net revenues, cost of revenues, global meeting fees, international meeting fees, gross profit and margin, operating income and operating income margin and effective tax rate, including components thereof, are discussed in this Annual Report...

  • Page 51
    ... time payment is received from the customer. Revenue from meeting fees, product sales, commissions and royalties is recognized when services are rendered, products are shipped to customers and title and risk of loss pass to the customer, and commissions and royalties are earned. Advertising revenue...

  • Page 52
    ... adjust the resulting combined rate to account for certain entity-specific factors such as maturity of the market in order to determine the utilized discount rate. The cost of debt is our average borrowing rate for the period. The discount rates used in our fiscal 2009 year-end impairment test...

  • Page 53
    ... of the expected term of the option, the expected volatility of the Company's stock price, the risk-free interest rate and the expected dividend yield. We recognize expense for all share-based awards based on the fair value of the number of awards we estimate will fully vest. A change in these...

  • Page 54
    Statement of Operations as Reported and Adjusted (In millions, except per share amounts) Fiscal 2009 Fiscal 2008 Increase/ (Decrease) % Change Revenues, net (as adjusted)(1) ...U.K. VAT ruling impact on prior years 2005 - 2007(1) ...Revenues, net of VAT ruling ...Cost of revenues (as adjusted)(1) ...

  • Page 55
    ... Fiscal Increase/ 2009 2008 (Decrease) % Change Revenues, net ...Cost of revenues ...Gross Profit ...Gross Margin % ...Marketing expenses ...Selling, general & administrative expenses ...Operating income ...Operating Income Margin % ...Net income attributable to the Company ...Weighted average...

  • Page 56
    ... Measures" above for an explanation of our use of non-GAAP financial measures. Set forth below is a reconciliation of gross profit, operating income, net income attributable to Company and diluted earnings per share to the as reported amounts. Excluding the charges noted above associated with...

  • Page 57
    ... seasonal marketing campaigns for many years. This new promotion lowered our second half fiscal 2009 meeting fees by approximately 1.7%, but had an immediate, positive effect on our enrollment trends and on shifting members from the pay-as-you-go payment model into the more profitable Monthly Pass...

  • Page 58
    ... online signup growth in the prior year. Internationally, online signup growth was driven by successful marketing campaigns and promotions. End-of-period active Weight Watchers Online subscribers increased 12.4%, from 679,000 at January 3, 2009 to 763,000 at January 2, 2010. Other revenue, comprised...

  • Page 59
    ... at the end of fiscal 2008. We reported other income of $0.2 million in fiscal 2009 as compared to $2.0 million in the comparable prior year period. The change resulted primarily from the impact of foreign currency exchange rates on intercompany transactions. The Company's effective tax rate was 39...

  • Page 60
    ... attendances per meeting, ramp up costs for Monthly Pass in Continental Europe, and costs associated with program innovation launches in the United States and United Kingdom. Our operating income margin was similarly affected, declining from 29.7% in fiscal 2007 to 27.7% in fiscal 2008, as a result...

  • Page 61
    .... In fiscal 2008, paid weeks rose 4.5% versus the prior year 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. In the United States, the third quarter of fiscal 2008 marked...

  • Page 62
    ...margin was due to start-up costs for Monthly Pass in Continental Europe, lower meeting averages in some of the countries in which we operate, and lower product sales margins in NACO driven by change in product mix and higher supply chain costs. WeightWatchers.com, which carries a structurally higher...

  • Page 63
    ... equipment for meeting locations. Sources and Uses of Cash Fiscal 2009 At the end of fiscal 2009, cash and cash equivalents were $46.1 million, a decrease of $1.2 million from the end of fiscal 2008. Cash flows provided by operating activities were $265.5 million, exceeding fiscal 2009 net income of...

  • Page 64
    ...franchise acquisitions and $31.8 million for capital spending. Net cash used for financing activities totaled $269.2 million. This included the repurchase of approximately 19.1 million shares of our common stock for $1,033.6 million in connection with our Tender Offer and share repurchase from Artal...

  • Page 65
    ...Credit Facility agreements as a result of our achievement of certain financial ratios. The Term Loan B bears interest at an initial rate equal to LIBOR plus 1.5% per annum or, at our option, the alternate base rate (as defined in the WWI Credit Facility agreements). In addition to paying interest on...

  • Page 66
    ... costs. The provision for income tax contingencies included in other long-term liabilities on the consolidated balance sheet is not included in the table above due to the fact that the Company is unable to estimate the timing of payment for this liability. We expect to generate the cash necessary...

  • Page 67
    ...by Artal. This program currently has no expiration date. As of fiscal year-end 2008, $100.5 million remains available to purchase our shares under this program. From fiscal 2003 through fiscal 2008, we purchased 15.6 million shares of our common stock in the open market for a total purchase price of...

  • Page 68
    ... impact on our financial position, results of operations or cash flows. Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are exposed to market risks relating to interest rate changes and foreign currency fluctuations. As of the end of fiscal 2009, other than as described...

  • Page 69
    ... report. Based upon that evaluation and subject to the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls are effective at the reasonable assurance level. Internal Control over Financial Reporting Management's Report...

  • Page 70
    ... public accounting firm, as stated in their report which appears on page F-2 to our consolidated financial statements. Changes in Internal Control Over Financial Reporting There was no change in our internal control over financial reporting that occurred during the most recent fiscal quarter...

  • Page 71
    ...Officers and Corporate Governance; Executive Compensation; Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters; Certain Relationships and Related Transactions, and Director Independence; Principal Accountant Fees and Services Information called for by Items...

  • Page 72
    ... and Financial Statement Schedules 1. Financial Statements The financial statements listed in the Index to Financial Statements and Financial Statement Schedule on page F-1 are filed as part of this Annual Report on Form 10-K. 2. Financial Statement Schedule The financial statement schedule listed...

  • Page 73
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE COVERED BY REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Items 15(a) (1) & (2) Pages Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets ...

  • Page 74
    ... in all material respects, the financial position of Weight Watchers International, Inc. and its subsidiaries (the "Company") at January 2, 2010 and January 3, 2009, and the results of their operations and their cash flows for each of the three years in the period ended January 2, 2010 in conformity...

  • Page 75
    ... and other intangible assets, net ...Deferred income taxes ...Deferred financing costs, net ...Other noncurrent assets ...TOTAL ASSETS ...LIABILITIES AND SHAREHOLDERS' DEFICIT CURRENT LIABILITIES Portion of long-term debt due within one year ...Accounts payable ...Dividend payable ...Salaries and...

  • Page 76
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE FISCAL YEARS ENDED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) January 2, 2010 (52 weeks) January 3, 2009 (53 weeks) December 29, 2007 (52 weeks) Meeting fees, net ...Product sales and other, net ......

  • Page 77
    ... CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL DEFICIT (IN THOUSANDS) Weight Watchers International, Inc. Accumulated Dividend Other to Artal Common Stock Treasury Stock Comprehensive Luxembourg Retained Noncontrolling Shares Amount Shares Amount Income (Loss) S.A. Earnings Interest Balance...

  • Page 78
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED (IN THOUSANDS) January 2, 2010 (52 Weeks) January 3, 2009 (53 Weeks) December 29, 2007 (52 Weeks) Operating activities: Net income ...Adjustments to reconcile net income to cash ...

  • Page 79
    ... operations are translated into U.S. dollars using the exchange rate in effect at the end of each reporting period. Income statement accounts are translated at the average rate of exchange prevailing during each reporting period. Translation adjustments arising from the use of differing exchange...

  • Page 80
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Foreign currency gains and losses arising from the translation of intercompany receivables with the Company's international subsidiaries are recorded ...

  • Page 81
    ... resulting combined rate to account for certain entity-specific factors such as maturity of the market in order to determine the utilized discount rate. The cost of debt is the Company's average borrowing rate for the period. The discount rates used in the Company's fiscal 2009 year-end impairment...

  • Page 82
    ... time payment is received from the customer. Revenue from meeting fees, product sales, commissions and royalties is recognized when services are rendered, products are shipped to customers and title and risk of loss pass to the customer, and commissions and royalties are earned. Advertising revenue...

  • Page 83
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Interest rate swaps are entered into to hedge a portion of the cash flow exposure associated with the Company's variable-rate borrowings. The Company ...

  • Page 84
    ... total purchase price has been allocated to franchise rights acquired ($20,948), fixed assets ($36), inventory ($56) and prepaid expenses ($59). The effects of these franchise acquisitions, individually or in the aggregate, were not material to the Company's consolidated financial position, results...

  • Page 85
    ..., franchise rights acquired increased due to foreign currency fluctuations. The Company's goodwill by reportable segment at the end of fiscal 2009 and fiscal 2008 was $25,173 and $25,096, respectively, related to the Weight Watchers International segment and $26,200 related to the WeightWatchers.com...

  • Page 86
    ..."Artal") corporate group. In connection with the early extinguishment of the WW.com Credit Facilities, the Company recorded a charge of $3,021 in the first quarter of 2007 relating to the write-off of the deferred financing costs associated with the WW.com Credit Facilities. The Additional Term Loan...

  • Page 87
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) or reduce or eliminate the scheduled amortization. Any such loan modifications would be effective only with respect to such tranche of term loans or ...

  • Page 88
    ...be purchased from time to time in the open market or through privately negotiated transactions. No shares will be purchased from Artal under the program. On December 18, 2006, the Company commenced a tender offer in which it sought to acquire up to 8,300 shares of its common stock at a price between...

  • Page 89
    ...the following forms at the Company's Board of Directors or its committee's sole discretion: non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, RSUs, purchase stock, dividend equivalent rights, performance units, performance shares and other share-based...

  • Page 90
    ... administrative expenses. The total income tax benefit recognized in the income statement for all share-based compensation arrangements was $2,997, $4,029 and $4,588 for the years ended January 2, 2010, January 3, 2009 and December 29, 2007, respectively. No compensation costs were capitalized. As...

  • Page 91
    ... is determined using the closing market price of the Company's common stock on the date of grant. A summary of RSU activity under the Stock Plans for the year ended January 2, 2010 is presented below: Weighted-Average Grant-Date Fair Value Shares Outstanding at January 3, 2009 ...Granted ...Vested...

  • Page 92
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 11. Income Taxes The following tables summarize the Company's consolidated provision for U.S. federal, state and foreign taxes on income: January 2, ...

  • Page 93
    ... SHARE AMOUNTS) The deferred tax assets (liabilities) recorded on the Company's consolidated balance sheet are as follows: January 2, 2010 January 3, 2009 Provision for estimated expenses ...Operating loss carryforwards ...Salaries and wages ...Share-based compensation ...Other comprehensive income...

  • Page 94
    ... The Profit Sharing Plan has a discretionary supplemental employer contribution component that is determined annually by the Compensation and Benefits Committee of the Company's Board of Directors. Expense related to these contributions for the fiscal years ended January 2, 2010, January 3, 2009 and...

  • Page 95
    ... TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 13. Cash Flow Information January 2, 2010 January 3, 2009 December 29, 2007 Net cash paid during the year for: Interest expense ...Income taxes ...Noncash investing and financing activities were as follows...

  • Page 96
    ... and the Company has not made any provision for losses in connection with it. Hanson-Kelly & Jackson v. Weight Watchers North America, Inc. and Weight Watchers International, Inc. In January 2010, a lawsuit was filed in the U.S. District Court for the Middle District of North Carolina by two leaders...

  • Page 97
    ... of business. In the opinion of management, based in part upon advice of legal counsel, the disposition of any such matters is not expected to have a material effect on the Company's results of operations, financial condition or cash flows. However, the results of legal actions cannot be predicted...

  • Page 98
    ... Company's reportable operating segments is as follows: Year Ended January 2, 2010 Weight Watchers International Intercompany Eliminations WeightWatchers.com Consolidated Revenues from external customers ...Intercompany revenue ...Total revenue ...Depreciation and amortization ...Operating income...

  • Page 99
    ...) Year Ended December 29, 2007 Weight Watchers International Intercompany Eliminations WeightWatchers.com Consolidated Revenues from external customers ...Intercompany revenue ...Total revenue ...Depreciation and amortization ...Operating income ...Interest expense ...Other income, net ...Early...

  • Page 100
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) January 2, 2010 Long-Lived Assets January 3, December 29, 2009 2007 North America ...United Kingdom ...Continental Europe ...Australia, New Zealand ...

  • Page 101
    ... statement of operations since all hedges were considered qualifying and effective. 18. Quarterly Financial Information (Unaudited) The following is a summary of the unaudited quarterly consolidated results of operations for the fiscal years ended January 2, 2010 and January 3, 2009. April 4, 2009...

  • Page 102
    ... TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) March 31, 2008 For the Fiscal Quarters Ended June 30, September 27, January 3, 2008 2008 2009 Fiscal year ended January 3, 2009 Revenues, net ...Gross profit ...Operating income ...Net income attributable...

  • Page 103
    ... to Charged Costs and to Other Expenses Accounts Balance at End of Period Deductions(1) FISCAL YEAR ENDED JANUARY 2, 2010 Allowance for doubtful accounts ...Inventory and other reserves ...Tax valuation allowance ...FISCAL YEAR ENDED JANUARY 3, 2009 Allowance for doubtful accounts ...Inventory and...

  • Page 104
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  • Page 105
    ... Exhibit Number Description **2.1 Agreement and Plan of Merger, dated as of June 13, 2005, by and among Weight Watchers International, Inc., WeightWatchers.com, Inc. and SCW Merger Sub, Inc. (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July...

  • Page 106
    ...executives (certain executive officers) (filed as Exhibit 10.17 to the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 2009, and incorporated herein by reference). Principal Stockholders Agreement among Weight Watchers International, Inc., WeightWatchers.com, Inc. and Artal...

  • Page 107
    ... International, Inc. 2004 Stock Incentive Plan and the Weight Watchers International, Inc. 2008 Stock Incentive Plan (filed as Exhibit 10.34 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2005, and incorporated herein by reference). Form of Term Sheet for Employee...

  • Page 108
    ...Company's Current Report on Form 8-K, as filed on January 26, 2007, and incorporated herein by reference). Amended and Restated Weight Watchers Executive Profit Sharing Plan, effective as of January 1, 2005 (filed as Exhibit 10.33 to the Company's Annual Report on Form 10-K for the fiscal year ended...

  • Page 109
    Exhibit Number Description *32.2 * ** †Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith. Previously filed. Represents a management arrangement or compensatory plan.

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  • Page 111
    ...Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WEIGHT WATCHERS INTERNATIONAL, INC. Date: March 3, 2010 By: /S/ DAVID P. KIRCHHOFF David P. Kirchhoff President, Chief Executive Officer and Director...

  • Page 112
    ... Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /S/ DAVID P. KIRCHHOFF Date: March 3, 2010 By: David P. Kirchhoff President, Chief Executive Officer and Director (Principal Executive...

  • Page 113
    ...) of Weight Watchers International, Inc. of our report dated March 3, 2010 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP New York, New York March...

  • Page 114

  • Page 115
    ...material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 3, 2010 Signature: /S/ DAVID P. KIRCHHOFF David P. Kirchhoff President, Chief Executive Officer and Director (Principal Executive Officer)

  • Page 116
    ... M. Sardini, certify that: 1. I have reviewed this Annual Report on Form 10-K of Weight Watchers International, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the...

  • Page 117
    ... 18 U.S.C. SECTION 1350 In connection with the Annual Report on Form 10-K of Weight Watchers International, Inc. (the "Company") for the fiscal year ended January 2, 2010, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David P. Kirchhoff, certify, pursuant...

  • Page 118
    ... TO 18 U.S.C. SECTION 1350 In connection with the Annual Report on Form 10-K of Weight Watchers International, Inc. (the "Company") for the fiscal year ended January 2, 2010, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Ann M. Sardini, certify, pursuant...

  • Page 119
    ... The following graph sets forth the cumulative return on Weight Watchers International common stock from November 15, 2001, the date on which the Company's common stock commenced trading on the New York Stock Exchange, through December 31, 2009, the last trading day of the Company's fiscal year, as...

  • Page 120
    ... Annual Meeting of Shareholders of Weight Watchers International, Inc. Location The Carlton Hotel, 88 Madison Avenue, New York, NY 10016 Date Tuesday, May 11, 2010, at 10:00 a.m. Eastern Time Corporate Headquarters 11 Madison Avenue, 17th Floor, New York, NY 10010 www.weightwatchersinternational.com...