WeightWatchers 2009 Annual Report Download - page 95

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES 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 ............................................ $81,968 $ 96,556 $93,595
Income taxes .............................................. $86,081 $132,648 $89,536
Noncash investing and
financing activities were as follows:
Fair value of net assets/(liabilities) acquired in
connection with acquisitions ................................ $ — $ 345 $ (326)
Dividends declared but not yet paid at year-end ....................... $13,786 $ 13,876 $14,233
14. Commitments and Contingencies
U.K. VAT Matter
In June 2008, the U.K. Court of Appeal issued a ruling that that from April 1, 2005 Weight Watchers
meeting fees in the United Kingdom were fully subject to 17.5% standard rated value added tax (“VAT”) thus
reversing in its entirety an earlier 2007 decision of the U.K. VAT and Duties Tribunal (the “VAT Tribunal”) in
the Company’s favor. For over a decade prior to April 1, 2005, Her Majesty’s Revenue and Customs (“HMRC”)
had determined that Weight Watchers meeting fees in the United Kingdom were only partially subject to 17.5%
VAT. In light of the Court of Appeal’s ruling and in accordance with accounting guidance for contingencies, the
Company recorded a charge of approximately $32.5 million as an offset to revenue in the second quarter of fiscal
2008 for U.K. VAT liability (including interest) in excess of reserves previously recorded. Beginning in the third
quarter of fiscal 2008, in accordance with accounting guidance for contingencies, the Company has recorded as
an offset to revenue VAT charges associated with U.K. meeting fees as earned, consistent with the Court of
Appeal’s ruling.
However, with respect to U.K. VAT owed for the period prior to July 1, 2005, HMRC has failed to raise a
notice of assessment within the statutory three-year time period. In addition, although HMRC raised notices of
assessment against the Company with respect to U.K. VAT due for the periods July 1, 2005 to September 30,
2005 and October 1, 2005 to December 31, 2005, the Company has asserted that these notices of assessment are
invalid on the grounds that they had been raised outside the relevant statutory time limits. HMRC indicated in
November 2008 that it agreed with the Company’s assertion that the notice of assessment for the period July 1,
2005 to September 30, 2005 was invalid, and, in February 2009, confirmed that this notice had been formally
withdrawn. As a result of the expiration of the statutory time period with respect to U.K. VAT owed prior to
October 1, 2005, the Company recorded in the fourth quarter of fiscal 2008 as a benefit to revenue for the periods
prior to October 1, 2005 an amount of approximately $9.2 million as an offset against reserves previously
recorded including in part the charge recorded against revenue in the second quarter of fiscal 2008 for U.K. VAT
liability.
In March 2009, June 2009 and September 2009, HMRC raised notices of assessment against the Company
in respect of U.K. VAT due for the periods January 1, 2006 to March 31, 2006, April 1, 2006 to June 30, 2006,
and July 1, 2006 to September 30, 2006, respectively, which the Company similarly believes were raised outside
the relevant statutory time limits. The Company intends to vigorously challenge any amount of U.K. VAT that
HMRC claims to be owed by the Company for any period between October 1, 2005 and September 30, 2006.
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