WeightWatchers 2009 Annual Report Download - page 44

Working Capital
The increase in the working capital deficit is primarily the result of year-over-year 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 subscription products.
Franchise Acquisitions
The following are our key acquisitions since January 1,2006:
Acquisitions of Palm Beach, Wichita and Syracuse. On January 31, 2008, we acquired substantially all of
the assets of our Palm Beach, Florida franchisee for a purchase price of approximately $12.9 million. On June 13,
2008, we acquired substantially all of the assets of our Wichita, Kansas franchisee for a purchase price of
approximately $5.7 million. On June 19, 2008, we acquired substantially all of the assets of two of our
franchisees, Weight Watchers of Syracuse, Inc. and Dieters of the Southern Tier, Inc. for a combined purchase
price of approximately $20.9 million. These acquisitions were financed through cash from operations. These
acquisitions have been accounted for as purchases and earnings have been included in our consolidated operating
results since their respective dates of acquisition.
Acquisition of British Columbia. On June 3, 2007, we acquired substantially all of the assets of our British
Columbia franchisee for a purchase price of approximately $15.8 million, which was financed through cash from
operations. This acquisition has been accounted for as a purchase and earnings have been included in our
consolidated operating results since the date of acquisition.
Acquisitions of Indiana, Eastern Canada, Suffolk, Western Michigan, Greece and Italy. On July 27, 2006,
we acquired substantially all of the assets of our Indiana franchisee for a purchase price of approximately $25.0
million. On August 17, 2006, we acquired substantially all of the assets of our eastern Canadian franchisee and of
Vale Printing Limited for a net purchase price of approximately $51.2 million. On November 2, 2006, we
acquired substantially all of the assets of our Suffolk County, New York franchisee for a purchase price of
approximately $24.5 million. On December 11, 2006, we acquired substantially all of the assets of our Western
Michigan franchisee for a net purchase price of $39.5 million, and reacquired our franchise rights in Greece and
Italy for approximately $4.3 million. These acquisitions were financed through cash from operations. These
acquisitions have been accounted for as purchases and earnings have been included in our consolidated operating
results since their respective dates of acquisition.
Reversal of Tax Reserves
In the fourth quarter of fiscal 2005, we recorded a tax benefit by reversing a $0.9 million state tax reserve
with respect to accrued but no longer necessary state tax liabilities. Also in the fourth quarter of fiscal 2005, due
to the recent trend in profitability of certain of 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 its deferred tax assets. As
such, WeightWatchers.com reversed all but $0.6 million of its remaining valuation allowance relating to its
foreign operations. This $0.6 million remaining amount was subsequently reversed in fiscal 2006 due to the
utilization of the net operating loss carryforwards. During the fourth quarter of fiscal 2006, we recorded a tax
benefit of $6.3 million by reversing tax reserves which due to the resolution of certain tax matters were no longer
necessary, partially offset by adjustments to our tax valuation allowance for foreign tax net operating loss
carryforwards.
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