WeightWatchers 2009 Annual Report Download - page 93

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(IN THOUSANDS, EXCEPT PER 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 .................................... 5,143 18,947
Operating loss carryforwards ....................................... 27,007 22,668
Salaries and wages ............................................... 3,870 5,473
Share-based compensation ......................................... 9,329 8,927
Other comprehensive income ....................................... 4,834 18,415
Other .......................................................... 3,429 2,809
Less: valuation allowance ......................................... (21,967) (16,118)
Total deferred tax assets ........................................... $31,645 $ 61,121
Depreciation .................................................... $ (2,529) $ (3,571)
Prepaid expenses ................................................ (187) (1,166)
Deferred income ................................................. (31) (147)
Amortization ................................................... (45,280) (18,486)
Total deferred tax liabilities ........................................ $(48,027) $(23,370)
Net deferred tax assets ............................................ $(16,382) $ 37,751
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 2, 2010 and January 3,
2009, various foreign subsidiaries had net operating loss carryforwards of approximately $95,808 and $74,503,
respectively, most of which can be carried forward indefinitely.
The Company’s undistributed earnings of foreign subsidiaries are not considered to be reinvested
permanently. Accordingly, the Company has recorded all taxes, after taking into account foreign tax credits, on
the undistributed earnings of foreign subsidiaries.
On December 31, 2006, the first day of its 2007 fiscal year, the Company adopted the provisions of new
accounting guidance governing uncertain tax positions. As a result of the adoption of this standard, the Company
recognized a $1,907 increase in the liability for unrecognized tax benefits, which was accounted for as a
reduction to the opening balance of retained earnings for fiscal 2007. A reconciliation of the beginning and
ending amount of unrecognized tax benefits is as follows:
January 2,
2010
January 3,
2009
Balance at beginning of year ....................................... $11,086 $ 9,455
Additions based on tax positions related to the current year ............... 1,811 2,169
Additions based on tax positions of prior years ......................... — 493
Reductions for tax positions of prior years ............................ — (361)
Settlements ..................................................... — (670)
Balance at end of year ............................................ $12,897 $11,086
At January 2, 2010, the total amount of unrecognized tax benefits that, if recognized, would affect our
effective tax rate is $5,335. As of January 2, 2010, given the nature of the Company’s uncertain tax positions, it
is reasonably possible that there will not be a significant change in the Company’s uncertain tax benefits within
the next twelve months.
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