WeightWatchers 2011 Annual Report Download - page 70

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In-Meeting Product Sales
Global in-meeting product sales for fiscal 2010 were $260.5 million, an increase of $9.1 million, or 3.6%,
from $251.3 million in fiscal 2009. On a per attendee basis, global in-meeting product sales increased 10.3% in
fiscal 2010 versus the prior year period, or 10.2% on a constant currency basis. In-meeting product sales growth
was driven primarily by program innovations which drove strong sales per attendee in Continental Europe in the
first quarter and in the English-speaking countries in the fourth quarter. In NACO, fiscal 2010 full year
in-meeting product sales of $138.8 million increased by $12.1 million, or 9.5%, versus the prior year on the
strength of 16.2% per attendee sales growth. In the fourth quarter, NACO’s in-meeting product sales per attendee
rose 37% over the prior year fourth quarter, reflecting the impact of the new program launch. International
in-meeting product sales were $121.7 million in fiscal 2010, a decrease of 2.3%, or 2.0% on a constant currency
basis, versus the prior year. International in-meeting product sales per attendee increased 4.5% in fiscal 2010
versus the prior year, and increased 4.9% on a constant currency basis. UK in-meeting product sales per attendee
rose 46.6%, or 52.3% on a constant currency basis, in the fourth quarter 2010 versus the fourth quarter 2009, also
reflecting the impact of its new program launch.
Internet Revenues
Internet revenues, which include subscription revenues from sales of Weight Watchers Online and Weight
Watchers eTools as well as Internet advertising revenues, increased $42.8 million, or 21.8%, to $238.8 million
for fiscal 2010 from $196.0 million for fiscal 2009. The increase was driven by strong growth and an accelerating
trend in Online sign-ups throughout the year. Internet revenue growth accelerated in the second quarter of 2010
by 20.6% 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-speaking markets,
fourth quarter Internet revenues grew by 31.1% versus the prior year period. In addition, WeightWatchers.com
launched its two Internet subscription products in Sweden in the fourth quarter of fiscal 2009 and Belgium and
Spain in the fourth quarter of fiscal 2010. End-of-period active Online subscribers increased 38.2% from 763,000
at January 2, 2010 to 1,054,000 at January 1, 2011.
Other Revenues
Other revenues, comprised primarily of licensing revenues and revenues from our publications, were $121.0
million for both fiscal 2010 and fiscal 2009, but were flat in fiscal 2010 as compared to fiscal 2009 or down 0.6%
on a constant currency basis. Our global licensing revenues in fiscal 2010 decreased 5.0% versus the prior year
period. Licensing in the premium priced “better-for-you” category which encompasses our licensees continues to
be impacted negatively by changes in consumer discretionary spending which resulted from the economic
recession. NACO licensing revenues declined 3.7% in fiscal 2010 versus fiscal 2009, and International licensing
revenues declined by 6.2%, or 6.5% on a constant currency basis, in fiscal 2010 versus fiscal 2009.
Franchise royalties for fiscal 2010 were $7.8 million in the United States and $4.3 million internationally.
Total franchise royalties of $12.1 million were 7.2% lower in fiscal 2010 versus the prior year, and 7.8% lower
on a constant currency basis, underperforming as compared to the Company-owned meetings business. While
North American franchise royalties declined by 6.9% on a full year basis in fiscal 2010 versus fiscal 2009, the
new program introduction in November 2010 drove franchise royalties up 10.2% in the fourth quarter 2010
versus the comparable 2009 period.
Components of Expenses and Margins
Cost of Revenues and Gross Margin
For fiscal 2010, cost of revenues was $661.4 million, a decrease of $9.5 million, or 1.4%, from $671.0
million in the prior year. After adjusting fiscal 2009 cost of revenues for the $32.5 million charge associated with
the UK self-employment tax ruling as noted above, fiscal 2009 cost of revenues would have been $638.5 million,
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