WeightWatchers 2010 Annual Report Download

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2010 ANNUAL REPORT
OUR
SUCCESS
THROUGH
THEIR
SUCCESS

Table of contents

  • Page 1
    2010 ANNUAL REPORT OUR SUCCESS THROUGH THEIR SUCCESS

  • Page 2
    "Losing weight clicked for us when we realized we could do Weight Watchers together. It was easy, it was Ã...exible and it worked." JIM AND LAURA Jim | Lost: 109 lbs Laura | Lost: 53 lbs

  • Page 3
    .... With the number of overweight and obese people in the world steadily increasing over the past 20 years and estimated to reach approximately 3.0 billion by 2015, Weight Watchers is well positioned to help people make healthy lifestyle changes in their lives, especially now at a time when they need...

  • Page 4
    LEMONGRASS CHICKEN RECIPE Featured in July/August 2010 issue of Weight Watchers Magazine PRODUCTS AND LICENSING Dark Chocolate Raspberry Ice Cream Bars, Natural Light String Cheese, Chocolate Pretzel Blast Mini Bars, Green Giant Baby Vegetable Medley Green Giant is a ...

  • Page 5
    ... members and, even more encouraging, brand new customers who have never participated in a Weight Watchers program before. One ongoing area of focus was the revitalization of our meetings infrastructure. In 2010, we concentrated our efforts on stronger locations, time slots and service providers...

  • Page 6
    ... year has to offer. In April, our WeightWatchers.com business launched a new advertising campaign that highlights the experiences of successful subscribers, giving them a platform to talk about and share the positive impact Weight Watchers Online has had on their lives. WeightWatchers.com continues...

  • Page 7
    ... portfolio of subscription sites continues to grow worldwide. In 2010, Weight Watchers Online was launched in Belgium and Spain. SUBSCRIBER WEBSITE ENHANCEMENTS Our subscriber website was enhanced to customize each user's subscriber homepage and plan section to the user's stage of the program and...

  • Page 8
    ... to increase usage and enhance mobility among both our Weight Watchers Online subscribers and our meetings members using Weight Watchers eTools. To this end, we launched several new Internet product and website enhancements in 2010, including the upgrade of the Online product for the new ProPoints...

  • Page 9
    ...part of our annual Lose for Good campaign, Weight Watchers teamed up with Share Our Strength® to plant gardens at local schools and community centers in the hometowns of six Weight Watchers 2010 Role Model of the Year Änalists. From Atlanta to Los Angeles, Weight Watchers employees and Role Models...

  • Page 10
    .... We look forward to another great year ahead in 2011. "With the number of overweight and obese people in the world steadily increasing...Weight Watchers is well positioned to help people make healthy lifestyle changes in their lives, especially now at a time when they need it most." DAVID...

  • Page 11
    ... . WEIGHT WATCHERS INTERNATIONAL, INC. Virginia (State or other jurisdiction of incorporation or organization) (Address of principal executive offices) (Zip code) 11-6040273 (I.R.S. Employer Identification No.) 11 Madison Avenue, 17th Floor, New York, New York 10010 Registrant's telephone number...

  • Page 12

  • Page 13
    ... ...Executive Officers and Directors of the Company ...Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities ...Selected Financial Data ...Management's Discussion and Analysis of Financial Condition and Results of Operations ...Quantitative...

  • 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" refer to Weight Watchers International, Inc. and all of its businesses consolidated for purposes of its financial statements; "Weight Watchers...

  • Page 16
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  • Page 17
    ...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 interactive presence on the Internet for the Weight Watchers...

  • Page 18
    ... of an increasing willingness of employers and governments to promote and contribute towards the cost of weight management programs. Our Services and Products Our Weight Management Plans In each of our markets, we offer services and products that are built upon our weight management plans which are...

  • Page 19
    ... for Weight Watchers meetings members. More than half of our member attendances, and more than three quarters of our meeting paid weeks, were attributable to Monthly Pass in each of the markets where it has been offered for at least a year. As of the end of fiscal 2010, less than 17% of our total...

  • Page 20
    ... web-based weight management plans. As of the end of fiscal 2010, WeightWatchers.com had over a million active Weight Watchers Online subscribers. Weight Watchers eTools is an Internet weight management product available to consumers who are Weight Watchers meetings members. Weight Watchers eTools...

  • Page 21
    ... men represent an important market opportunity for us and have a version of our Internet subscription products customized for men. Based on our internal research, we believe many men trust the Weight Watchers brand as a source of sensible weight management advice. We believe web-based offerings...

  • Page 22
    ... services and our products, such as our toll-free numbers and a URL for WeightWatchers.com. This marketing and promotional support reinforces the value of our brand. Our licensing and endorsement arrangements give us access to weight-conscious consumers through products sold at retail and increase...

  • Page 23
    ... former and potential new customers to join Weight Watchers meetings or subscribe to Weight Watchers Online. We have historically taken advantage of a range of traditional offline advertising vehicles such as television, radio and print. Further, WeightWatchers.com has developed a strong capability...

  • Page 24
    ... WeightWatchers.com website and increased efforts to share our consumer and program insights with leaders in the scientific and medical communities as well as the general public. Weight Watchers Magazine In addition to generating revenues from subscription sales and third-party advertising, Weight...

  • Page 25
    ... are not comparable. For example, many of these competitors' businesses are based on the sale of pre-packaged meals and meal replacements. Our meetings use group support, education and behavior modification to help our members change their eating habits, in conjunction with flexible food plans that...

  • Page 26
    ... for the purpose of engaging in the operation of weight management classes, the manufacture and sale of branded products in the meeting room, the publication of a weight management branded print magazine and the offer of weight management products and services over the Internet. In consideration for...

  • Page 27
    ... these are publicly accessible no later than the business day following the filing. We use our website at www.weightwatchersinternational.com as a channel of distribution of material Company information. Financial and other material information regarding Weight Watchers International is routinely...

  • Page 28
    ...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; the impact on the Weight Watchers brand of actions...

  • Page 29
    ...business, financial condition or results of operations. If we do not continue to develop innovative new services and products or if our services and products do not continue to appeal to the market, our business may suffer. The weight management industry is subject to changing customer demands based...

  • Page 30
    ... our reported international revenues and earnings will be reduced because the local currency will translate into fewer US dollars. In addition, the assets and liabilities of our non-US subsidiaries are translated into US dollars at the exchange rates in effect at the balance sheet date. Revenues and...

  • Page 31
    ... 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 consumer spending may...

  • 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
    ... existing customers regarding our use of such information or data collected on our websites or through our services and products, such as weight management information, financial data, email addresses and home addresses, could keep them from using our websites or purchasing our services or products...

  • Page 34
    ... flows provided by operating activities and by opportunistically using other means to repay or refinance our obligations as we determine appropriate. Our ability to pay our expenses and meet our debt service obligations depends on our future performance, which may be affected by financial, business...

  • Page 35
    ...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 with our US back-office and customer support operations located in leased office spaces elsewhere in the United States. Each...

  • Page 36
    ... with respect to our UK leaders consistent with this ruling on a quarterly basis. Accordingly, the aggregate reserve for the period from April 2001 through the end of the fourth quarter of fiscal 2010 is approximately $40.8 million. Sabatino v. Weight Watchers North America, Inc. In September 2009...

  • Page 37
    ...of the ordinary 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...

  • Page 38
    ... Chief Financial Officer President, North America 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...

  • Page 39
    ..., North America since April 2010. Prior to joining us, Mr. Burwick held several increasingly significant brand development and general management positions with PepsiCo, Inc., a global food and beverage company. Most recently, Mr. Burwick served as Senior Vice President and Chief Marketing Officer...

  • Page 40
    ... Vice President and Chief Financial Officer and a director of The Clorox Company and later President and a director of Tambrands, Inc., prior to joining Wrigley. Mr. Bard was previously a director of Sun-Times Media Group, Inc. He holds a B.S. in business and accounting from Northwestern University...

  • Page 41
    ... program, during the fourth quarter of fiscal 2010: Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs Total Number of Shares Purchased (1) Average Price Paid per Share...

  • Page 42
    ...) Fiscal 2010 (52 weeks) Fiscal 2009 (52 weeks) Fiscal 2008 (53 weeks) Fiscal 2007 (52 weeks) Fiscal 2006 (52 weeks) Revenues, net ...Net income attributable to the Company ...Working capital (deficit) ...Total assets ...Long-term debt ...Earnings per share: Basic ...Diluted ...Dividends declared...

  • Page 43
    ... agreement, Weight Watchers Asia and Danone Dairy Asia own 51% and 49%, respectively, of the joint venture entity. Because we have a direct, controlling financial interest in the joint venture entity, we began to consolidate this entity in the first quarter of fiscal 2008. Long-Term Debt On May...

  • Page 44
    ... quarter of fiscal 2010. 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 Form 10-K. Working Capital The increase...

  • Page 45
    ... 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 2006, we recorded a tax benefit of...

  • Page 46
    ... subscription products sold by WeightWatchers.com, licensed products sold in retail channels and magazine subscriptions and other 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...

  • Page 47
    ... resulted from successful new product and program launches. WeightWatchers.com. From fiscal 2006 through fiscal 2010, our Internet revenues have grown at a compound annual growth rate of 16.5%. The increase is primarily due to growth in the number of WeightWatchers.com end-of-period active Online...

  • Page 48
    ...meetings and WeightWatchers.com businesses for the past five fiscal years. The "paid week" metric 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 (e.g., Monthly Pass weeks) and total pay...

  • Page 49
    ... worldwide average meeting revenue per attendee, however, has increased over the same period, largely as a result of Monthly Pass' growing penetration in NACO and other markets, and growth in product sales per attendee. North America Meeting Metrics and Business Trends NACO meeting paid weeks grew...

  • Page 50
    ... Business Trends In the United Kingdom, Monthly Pass was introduced in the third quarter of 2007, resulting in paid weeks growth of 9.7% in 2007 to 12.8 million from 11.6 million in 2006. Meeting attendance began a declining trend in 2005 as a result of negative member and leader reaction to a new...

  • Page 51
    ... average growth rate of over 20%. End-of-period active Online subscribers totaled over 1 million at January 1, 2011. This success results from a combination of new subscribers in the United States and launches of WeightWatchers.com subscription products in new markets globally. Currently, Weight...

  • Page 52
    ... typically accretive to our earnings per share. For fiscal 2010, the attendance of our remaining franchise operations accounted for less than 17% of total worldwide attendance at Weight Watchers meetings. Non-GAAP Financial Measures To supplement our consolidated results presented in accordance with...

  • Page 53
    ... information session and materials we provide to new members in our meetings business. Revenue from these registration fees is recognized when the service and products are provided, which is generally at the same time payment is received from the customer. Revenue from meeting fees, product sales...

  • Page 54
    ... operating income growth rates for such country. We utilize operating income as the basis for measuring our potential growth because we believe it is the best indicator of the performance of our business. For fiscal 2010, the blended growth rates used in our discounted cash flow analysis ranged...

  • Page 55
    ... 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 56
    Statements of Income as Reported and Adjusted (In millions, except per share amounts) Fiscal Fiscal Increase/ 2010 2009 (Decrease) % Change Revenues, net (as adjusted)(1) ...UK VAT ruling accrual reversal(1) ...Revenues, net of VAT ruling ...Cost of revenues (as adjusted)(2) ...UK self-employment ...

  • Page 57
    ... fourth quarter of fiscal 2009 related to prior years, as a result of an adverse UK self-employment tax ruling related to the self-employment status of its UK leaders. As the table above shows, after adjusting fiscal 2009 for this charge, our cost of revenues in fiscal 2010 would have increased by...

  • Page 58
    ... ongoing weakness in the UK meetings business. A change in marketing strategy in the second quarter 2010 in the NACO meetings business and in the WeightWatchers.com business spurred an improvement in volume trends in NACO and robust growth in Weight Watchers Online sign-ups. The improving trend...

  • Page 59
    ... select markets, with a focus on a new look and feel for the meeting centers, and consolidating meetings toward stronger locations and better performing leaders. These new strategies coupled with the launch of the new PointsPlus program in late November resulted in a positive end to fiscal 2010 for...

  • Page 60
    ... versus the prior year period led by a highly successful marketing strategy in the United States. Business performance continued to improve with a 21.7% increase in Internet revenues in the third quarter of fiscal 2010 as compared to the prior year period. With the new program launch in our English...

  • Page 61
    ... year. After disappointing results from our first quarter marketing, we adopted a new marketing strategy focused on member experience in both the NACO meetings business, featuring Jennifer Hudson, and in the WeightWatchers.com business. As the success of this strategy became apparent, we increased...

  • Page 62
    ... which resulted in a change in the geographic mix of our taxable income toward higher taxing jurisdictions, notably the United States. Excluding the impact of the UK self-employment tax ruling, the effective tax rate was 38.7% in fiscal 2009. RESULTS OF OPERATIONS FOR FISCAL 2009 (52 weeks) COMPARED...

  • Page 63
    Statements of Income as Reported and Adjusted (In millions, except per share amounts) Fiscal Fiscal Increase/ % 2009 2008 (Decrease) Change Revenues, net (as adjusted)(1) ...$1,398.9 $1,554.5 $(155.6) UK VAT ruling impact on prior years 2005-2007(1) ...- (18.7) 18.7 Revenues, net of VAT ruling ...

  • Page 64
    ... Fiscal Increase/ % 2009 2008 (Decrease) Change Revenues, net ...$1,398.9 Cost of revenues ...634.3 Gross Profit ...Gross Margin % ...Marketing expenses ...Selling, general and administrative expenses ...Operating Income ...Operating Income Margin % ...Weighted average diluted shares outstanding...

  • Page 65
    ...adjusted operating income margin of 28.5% remained unchanged from prior year, benefiting from lower marketing expenses and selling, general and administrative expense savings. The following table sets forth a reconciliation for fiscal 2009 and fiscal 2008 of certain selected financial data set forth...

  • Page 66
    ... 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 67
    ... higher Online sign-up growth in the prior year. Internationally, Online sign-up 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...

  • Page 68
    ... 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 69
    ... higher accrued operating expenses in fiscal 2010 resulted from marketing and core materials expense increases in connection with the new program launches in our English-speaking markets, a shift in the timing of salary payments, and higher accrued performance-based compensation. The working capital...

  • Page 70
    ...million. See "Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities" of this Annual Report on Form 10-K for more information regarding our stock repurchase program. Long-Term Debt Our credit facilities consist of a term loan facility and...

  • Page 71
    ... that accept our offer. Loan modification offers may be accompanied by increased pricing and/or fees payable to accepting lenders. This amendment also provides for up to an additional $200.0 million of incremental term loan financing through the creation of a new tranche of term loans, provided that...

  • Page 72
    ...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 currently plan to meet our long-term debt...

  • Page 73
    ... and October 21, 2010, our Board of Directors authorized adding $250.0 million to this program. Under this program, we will not purchase shares held by Artal. This program currently has no expiration date. As of fiscal year-end 2010, $240.5 million remains available to purchase shares of our common...

  • Page 74
    ...June 15, 2010 and is not expected to have a material impact on our financial position, results of operations or cash flows. In May 2009, new accounting guidance was issued which sets forth general standards of accounting for and disclosure of events that occur after the balance sheet date but before...

  • Page 75
    ... comprehensive income (loss). In addition, exchange rate fluctuations will cause the US dollar translated amounts to change in comparison to prior periods. Item 8. Financial Statements and Supplementary Data This information is incorporated by reference to our consolidated financial statements on...

  • Page 76
    ... 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 77
    ..., and Director Independence; Principal Accountant Fees and Services Information called for by Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K is incorporated by reference from our definitive Proxy Statement to be filed in connection with our 2011 Annual Meeting of...

  • Page 78
    executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions, and that relates to any element of the code of ethics definition enumerated in Item 406(b) of Regulation S-K of the Exchange Act, will be disclosed on our website at ...

  • Page 79
    PART IV Item 15. Exhibits 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 ...

  • Page 80
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  • Page 81
    ... REGISTERED PUBLIC ACCOUNTING FIRM Items 15(a) (1) & (2) Pages Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets at January 1, 2011 and January 2, 2010 ...Consolidated Statements of Income for the fiscal years ended January 1, 2011, January 2, 2010 and...

  • Page 82
    ... in all material respects, the financial position of Weight Watchers International, Inc. and its subsidiaries (the "Company") at January 1, 2011 and January 2, 2010, and the results of their operations and their cash flows for each of the three years in the period ended January 1, 2011 in conformity...

  • Page 83
    ...; 111,988 shares issued ...0 0 Treasury stock, at cost, 38,618 shares at January 1, 2011 and 34,947 shares at January 2, 2010 ...(1,794,066) (1,684,343) Retained earnings ...1,103,817 955,514 Accumulated other comprehensive loss ...(4,517) (7,683) TOTAL WEIGHT WATCHERS INTERNATIONAL, INC. DEFICIT...

  • Page 84
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE FISCAL YEARS ENDED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) January 1, 2011 (52 weeks) January 2, 2010 (52 weeks) January 3, 2009 (53 weeks) Meeting fees, net ...$ 819,646 Product sales and other, net ......

  • Page 85
    ... exercised ...Cash dividends declared ...Purchase of treasury stock ...Compensation expense on share-based awards ...Balance at January 3, 2009 ...Investment by the noncontrolling interest ...Comprehensive Income: Net income / (loss) ...Translation adjustment, net of taxes of ($4,891) ...Changes in...

  • Page 86
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED (IN THOUSANDS) January 1, 2011 (52 Weeks) January 2, 2010 (52 Weeks) January 3, 2009 (53 Weeks) Operating activities: Net income ...Adjustments to reconcile net income to cash ...

  • Page 87
    ... consolidated for purposes of its financial statements. The term "WWI" as used throughout these notes is used to indicate Weight Watchers International, Inc. and all of the Company's businesses other than WW.com. The term "WW.com" as used throughout these notes is used to indicate WeightWatchers.com...

  • Page 88
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Cash Equivalents: Cash and cash equivalents are defined as highly liquid investments with original maturities of three months or less. Cash balances may, at times,...

  • Page 89
    ... information session and materials it provides to new members in its meetings business. Revenue from these registration fees is recognized when the service and products are provided, which is generally at the same time payment is received from the customer. Revenue from meeting fees, product sales...

  • Page 90
    ... CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) advertisements are published. Revenue from magazine sales is recognized when the magazine is sent to the customer. Deferred revenue, consisting of prepaid meeting fees, such as Monthly Pass, and magazine subscription revenue...

  • Page 91
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) The fair value of the Company's interest rate swaps is reported in derivative payable and prepaid expenses and other current assets on its balance sheet. See Note ...

  • Page 92
    ...were not material to the Company's consolidated financial position, results of operations, or operating cash flows in any of the periods presented. 4. Joint Venture On February 5, 2008, Weight Watchers Asia Holdings Ltd. ("Weight Watchers Asia"), a direct, whollyowned subsidiary of the Company, and...

  • Page 93
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Estimated amortization expense of existing finite-lived intangible assets for the next five fiscal years is as follows: 2011 2012 2013 2014 2015 6...$13,820 $ 8,...

  • Page 94
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) "Additional Term A Loan"), a tranche B loan ("Term B Loan"), a tranche C loan ("Term C Loan"), and a tranche D loan ("Term D Loan"), in an aggregate original ...

  • Page 95
    ... 2010, the Company, at the direction of its Board of Directors, authorized and announced adding $250,000 to this program. The repurchase program allows for shares to be purchased from time to time in the open market or through privately negotiated transactions. No shares will be purchased from Artal...

  • Page 96
    ...These plans are designed to promote the long-term financial interests and growth of the Company by attracting, motivating and retaining employees with the ability to contribute to the success of the business and to align compensation for the Company's employees over a multi-year period directly with...

  • Page 97
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Under the 2004 Plan, grants may take the following forms at the Company's Board of Directors or its committee's sole discretion: non-qualified stock options, ...

  • Page 98
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) January 1, 2011 January 2, 2010 January 3, 2009 Dividend yield ...Volatility ...Risk-free interest rate ...Expected term (years) ... 1.8% 31.4% 2.0% - 3.4% 6.4 ...

  • Page 99
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) The weighted-average grant-date fair value of RSUs granted was $25.69, $19.86 and $43.84 for the years ended January 1, 2011, January 2, 2010 and January 3, 2009, ...

  • Page 100
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) The deferred tax assets (liabilities) recorded on the Company's consolidated balance sheets are as follows: January 1, 2011 January 2, 2010 Provision for ...

  • Page 101
    ... and Benefits Committee of the Company's Board of Directors. The account is valued at the end of each fiscal month, based on an annualized interest rate of prime plus 2%, with an annualized cap of 15%. Expense related to this commitment for the fiscal years ended January 1, 2011, January 2, 2010 and...

  • Page 102
    ... FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 14. Commitments and Contingencies UK VAT Matter In June 2008, the UK Court of Appeal issued a ruling that from April 1, 2005 Weight Watchers meeting fees in the United Kingdom were fully subject to 17.5% standard rated value added...

  • Page 103
    ... taxes with respect to its UK leaders consistent with this ruling on a quarterly basis. Accordingly, the aggregate reserve for the period from April 2001 through the end of the fourth quarter of fiscal 2010 is approximately $40,782. Sabatino v. Weight Watchers North America, Inc. In September 2009...

  • Page 104
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 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...

  • Page 105
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Information about the Company's reportable operating segments is as follows: Year Ended January 1, 2011 Intercompany WW.com Eliminations WWI Consolidated ...

  • Page 106
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Year Ended January 3, 2009 Intercompany WW.com Eliminations WWI Consolidated Revenues from external customers ...Intercompany revenue ...Total revenue ......

  • Page 107
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 16. Fair Value Measurements Accounting guidance on fair value measurements for certain financial assets and liabilities requires that assets and liabilities ...

  • Page 108
    ... income/(loss) at January 1, 2011, based on current market rates, will be reclassified into earnings within the next 12 months. 18. Quarterly Financial Information (Unaudited) The following is a summary of the unaudited quarterly consolidated results of operations for the fiscal years ended...

  • Page 109
    ... 15, 2010 and is not expected to have a material impact on the Company's financial position, results of operations or cash flows. In May 2009, new accounting guidance was issued which sets forth general standards of accounting for and disclosure of events that occur after the balance sheet date but...

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  • Page 111
    ... to Charged Costs and to Other Expenses Accounts Balance at End of Period Deductions(1) FISCAL YEAR ENDED JANUARY 1, 2011 Allowance for doubtful accounts ...Inventory and other reserves ...Tax valuation allowance ...FISCAL YEAR ENDED JANUARY 2, 2010 Allowance for doubtful accounts ...Inventory and...

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  • Page 113
    ... and Restated, of Weight Watchers International, Inc., to Create a New Series of Preferred Stock Designated as Series B Junior Participating Preferred Stock, adopted as of November 14, 2001 (filed as Exhibit 3.3 to the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 2001...

  • Page 114
    ... Statement on Form S-1 (File No. 333-69362) as filed on October 29, 2001, and incorporated herein by reference). 1999 Stock Purchase and Option Plan of Weight Watchers International, Inc. and Subsidiaries (filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the fiscal year ended...

  • Page 115
    ... Sharing Plan (filed as Exhibit 99.5 to the Company's Current Report on Form 8-K, as filed on December 15, 2006 (File No. 001-16769), and incorporated herein by reference). Stock Purchase Agreement, dated as of December 17, 2006, by and between Weight Watchers International, Inc. and Artal Holdings...

  • Page 116
    ...-16769), 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 December 29, 2007 (File No. 001-16769), and incorporated...

  • Page 117
    ... (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, as filed on April 9, 2010 (File No. 001-16769), and incorporated herein by reference). Subsidiaries of Weight Watchers International, Inc. Consent of Independent Registered Public Accounting Firm. Rule 13a-14(a) Certification by...

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  • Page 119
    ...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 2, 2011 By: /S/ DAVID P. KIRCHHOFF David P. Kirchhoff President, Chief Executive Officer and Director...

  • Page 120
    ..., Chief Executive Officer and Director (Principal Executive Officer) Date: March 2, 2011 By: /S/ ANN M. SARDINI Ann M. Sardini Chief Financial Officer (Principal Financial and Accounting Officer) Date: March 2, 2011 By: /S/ RAYMOND DEBBANE Raymond Debbane Director Date: March 2, 2011 By...

  • Page 121
    ... PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-123642, 333-74066, 333-156185 and 333-165637) of Weight Watchers International, Inc. of our report dated March 2, 2011 relating to the financial statements, financial...

  • Page 122

  • Page 123
    ... material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /S/ DAVID P. KIRCHHOFF Date: March 2, 2011 Signature: David P. Kirchhoff President, Chief Executive Officer and Director (Principal Executive Officer...

  • Page 124
    ..., whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /S/ ANN M. SARDINI Date: March 2, 2011 Signature: Ann M. Sardini Chief Financial Officer (Principal Financial and Accounting Officer)

  • Page 125
    ... information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /S/ DAVID P. KIRCHHOFF Date: March 2, 2011 Signature: David P. Kirchhoff President, Chief Executive Officer and Director (Principal Executive Officer...

  • Page 126
    ... 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 1, 2011, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Ann M. Sardini, certify, pursuant...

  • Page 127
    ... 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, 2010, the last trading day of the Company's Äscal year, as...

  • Page 128
    ... Shareholder Information The 2011 Annual Meeting of Shareholders of Weight Watchers International, Inc. Location The Helmsley Park Lane Hotel 36 Central Park South, New York, NY 10019 Date Tuesday, May 10, 2011 at 10:00 a.m. Eastern Time Corporate Headquarters 11 Madison Avenue, 17th Floor New York...