WeightWatchers 2010 Annual Report Download - page 69

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including
$
40.5 million of cash and cash equivalents and
$
197.5 million of current portion of long-term debt.
T
his compared to a working capital deficit at January 2, 2010 of
$
336.1 million, which included
$
46.1 million of
cash and cash equivalents and
$
215.0 million of current portion of long-term debt. Excluding the changes in cas
h
and cash equivalents and in the current portion of long-term debt from both periods, the working capital deficit a
t
January 1, 2011 was
$
191.7 million, an increase of
$
24.5 million versus
$
167.2 million at January 2, 2010
.
The
$
24.5 million growth in the working capital deficit in fiscal 2010 versus the fiscal 2009 level, excluding
the changes in cash and cash equivalents and the current portion of long-term debt, was comprised of increases in
o
perational and other accrued items in fiscal 2010, partially offset by significant payments in fiscal 2009 for a
charge associated with the adverse UK VAT ruling accrued in a prior period. The net increase in the workin
g
capital deficit in fiscal 2010 from operational items, including receivables, inventory, accrued expenses and
p
ayables was
$
47.4 million. This increase resulted primarily from the combination of higher accrued operating
expenses of
$
24.6 million, a shift in the timing of tax payments of
$
17.6 million, and a
$
5.2 million increase in
deferred revenue. The higher accrued operating expenses in fiscal 2010 resulted from marketing and cor
e
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
deficit also increased in fiscal 2010 as a result of the addition of accrued ex
p
ense of
$
6.5 million for the
settlement of the California labor litigation, and for the addition of
$
4.1 million to the liability related to the
p
reviously mentioned adverse UK self-employment tax ruling to cover the fiscal 2010 portion of that expense. In
f
iscal 2010, payments totaling
$
31.6 million were made in relation to the accrued liability associated with th
e
p
reviously mentioned adverse UK VAT ruling, thereby decreasing the working capital deficit in fiscal 2010
.
S
ources and Uses of Cas
h
F
i
s
cal 201
0
A
t the end of fiscal 2010, cash and cash e
q
uivalents were
$
40.5 million, a decrease of
$
5.6 million from the
end of fiscal 2009. Cash flows provided by operating activities increased by
$
15.9 million in fiscal 2010 to
$
281.4 million from
$
265.5 million in fiscal 2009, largely reflecting the increase in net income of
$
16.9 millio
n
in fiscal 2010, to
$
194.2 million from
$
177.3 million in fiscal 2009
.
The
$
281.4 million of cash flows provided by operating activities in fiscal 2010 exceeded fiscal 2010’s
$
194.2 million net income by
$
87.2 million. The excess of cash over net income arose primarily from differences
between book and cash taxes and other elements of the working capital deficit, as well as from typical non-cash
depreciation and amortization expenses. Net cash used for investing and financing activities combined totale
d
$
285.5 million in fiscal 2010. Investing activities, consisting primarily of capital spending, utilized
$
28.6 million.
Capital spending, which totaled
$
22.2 million in fiscal 2010, has averaged approximately
$
25.7 million annuall
y
o
ver the last three fiscal years and has consisted primarily of information system and website developmen
t
expenditures, leasehold improvements, furniture and equipment for meeting locations. Net cash used for
f
inancing activities totaled
$
256.9 million and consisted primarily of stock repurchases of
$
106.6 million and
dividend payments to our shareholders of
$
53.4 million, as well as long-term debt payments of
$
87.9 million
.
F
iscal 2009
A
t the end of fiscal 2009, cash and cash e
q
uivalents were
$
46.1 million, a decrease of
$
1.2 million from the
end of fiscal 2008. Cash flows provided by operating activities were
$
265.5 million, exceeding fiscal 2009 ne
t
income of
$
177.3 million by
$
88.2 million. The excess of cash over net income arose primarily from differences
between book and cash taxes and typical non-cash depreciation and amortization expenses. Net cash used for
investing and financing activities combined totaled
$
270.6 million. Investing activities, consisting primarily o
f
capital spending, utilized
$
23.6 million. Net cash used for financing activities totaled
$
247.0 million, includin
g
dividend payments of
$
54.1 million and long-term debt payments of
$
194.5 million.
5
3