WeightWatchers 2011 Annual Report Download - page 104

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The deferred tax assets and liabilities recorded on the Company’s consolidated balance sheets are as follows:
December 31,
2011
January 1,
2011
Provision for estimated expenses .................................. $ 7,514 $ 6,807
Operating loss carryforwards ..................................... 29,676 29,068
Salaries and wages ............................................. 7,663 4,104
Share-based compensation ....................................... 6,339 8,960
Other comprehensive income .................................... 0 2,811
Other ........................................................ 7,183 6,451
Less: valuation allowance ....................................... (25,781) (24,989)
Total deferred tax assets ......................................... $ 32,594 $ 33,212
Depreciation .................................................. $ (2,740) $ (165)
Other comprehensive income .................................... (3,659) 0
Amortization ................................................. (102,306) (76,054)
Total deferred tax liabilities ...................................... $(108,705) $(76,219)
Net deferred tax liabilities ....................................... $ (76,111) $(43,007)
Certain foreign operations of the Company 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 December 31, 2011 and
January 1, 2011, various foreign subsidiaries had net operating loss carryforwards of approximately $105,575
and $107,411, 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.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
December 31,
2011
January 1,
2011
January 2,
2010
Balance at beginning of year ........................... $15,794 $12,897 $11,086
Additions based on tax positions related to the current year . . . 1,537 2,115 1,811
Additions based on tax positions of prior years ............ 0 782 0
Reductions for tax positions of prior years ................ (11,901) 0 0
Settlements ........................................ (390) 0 0
Balance at end of year ................................ $ 5,040 $15,794 $12,897
At December 31, 2011, the total amount of unrecognized tax benefits that, if recognized, would affect our
effective tax rate is $4,129. As of December 31, 2011, 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.
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense.
The Company had $2,582 and $2,838 of accrued interest and penalties at December 31, 2011 and January 1,
2011, respectively. The Company recognized ($256), $780 and $403 in interest and penalties during the fiscal
years ended December 31, 2011, January 1, 2011 and January 2, 2010, respectively.
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