WeightWatchers 2010 Annual Report Download - page 3

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Dear Shareholders
2010 was a crucial year for Weight Watchers as we continued the implementation
of a comprehensive set of strategies to lay the foundation for future growth while
continuing to deal with difÄ cult economic conditions in many of our markets. In
2010, we continued the active transformation of our business by innovating and
reengineering our POINTS® weight loss system in all our geographic markets,
reinventing our meetings and retail presence, revitalizing our marketing and social
relevance, evolving our WeightWatchers.com business and taking an increasingly
active and vocal role in the preventative healthcare arena.
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 it most.
In the United States alone, almost 150 million adults are overweight or obese,
and obesity-related issues account for nearly 10% of the total healthcare
budget. Weight Watchers’ lifestyle approach plays a critical role in the solution
to this problem and Weight Watchers can be, and should be, a key player in
making the world healthier. At the same time, we are just starting to emerge
from one of the most challenging economic climates of our lifetime, which
placed a heavy burden on consumers and pressured discretionary spending
across categories, including weight loss.
Despite this environment, in 2010 we grew revenues 3.8% to $1.452 billion,
boosted paid weeks 7.8% to 140.4 million, had worldwide meeting attendance
greater than 51 million, and surpassed the 1.0 million active subscriber mark for
Weight Watchers Online. Recent improved trends in our business by the end of
2010 were even more encouraging. They not only indicate that the economy is
recovering, but also are a reÅ ection of our improved level of execution and that
our strategies to accelerate growth in our business are beginning to bear fruit.
Weight Watchers has always been a highly proÄ table business and 2010 was no
exception. For the year, we produced operating income of $390.3 million, net
income of $194.2 million, and cash Å ow from operations of $281.5 million. These
results demonstrate the attractiveness of our business model, characterized by
impressive margins, predictable expenses, low capital needs, favorable cash
Å ows, and strong returns on invested capital. These results are further supported
by our commitment to delivering returns to shareholders, illustrated by generating
earnings per fully diluted share of $2.56, paying $53.4 million in dividends over the
course of the year and repurchasing $106.6 million of our stock.
One of our biggest accomplishments during the year was the overhaul of our
original POINTS weight loss system with the innovation launches of the
ProPoints® program and the PointsPlus® program. These new programs
capitalized on more than 10 years of advancement in nutritional science while
building on the strong equity of the existing POINTS system. ProPoints was
Ä rst launched in Continental Europe in late 2009 and drove volume trend
improvements in 2010. The growth was spurred by a large inÅ ux of returning
members who were encouraged by the new beneÄ ts of ProPoints. We then