WeightWatchers 2012 Annual Report Download

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ANNUAL REPORT

Table of contents

  • Page 1
    ANNUAL REPORT

  • Page 2
    Name: Amel Bent Occupation: Singer Country: France

  • Page 3
    ... in 2012, global engagement with the Weight Watchers® brand reached another high point, growing 2.3% measured by paid weeks. And importantly, we have never felt better about our long-term growth prospects. We generated revenue of $1.8 billion in 2012, which was essentially ï¬,at with 2011. Adjusted...

  • Page 4
    ...base, with retention unchanged at 8 months for our meetings business and 2 months for our Online business. M ! ) B 0 #B)#ABAA A )  continued to increase penetration on the heels of new technology, features, and benefits offered. We have seen high repeat activity...

  • Page 5
    Above: Weight Watchers Mobile. Left: Recipe from Weight Watchers Turn Up the Flavor cookbook, Good and Spicy Peanut-Sauced Noodles. Per serving (about 1 cup) PointsPlus® value: 5.

  • Page 6
    ... in the future. Fundamentally, our brand is strong: Our members are happy, they are losing weight, and we are changing lives. Science supports this; there is clinical backing for our behavior-modification program. We now have over 80 publications. Following last year's articles in The Lancet and...

  • Page 7
    We continue to build a foundation for B2B and healthcare.

  • Page 8
    ... in the growth drivers of our business, we will also focus on margins and cost control to fund our future growth. External surveys are also positive. We were once again, for the third year in a row, ranked #1 for Best Weight Loss Diet and Best Commercial Diet Plan by U.S. News and World Report.

  • Page 9
    Fundamentally, our brand is strong: Our members are happy, they are losing weight, and we are changing lives. Top: Meeting Room posters 2012. Above: Newly designed weigh-in stations. Below: Digital screens in use at the Downtown Manhattan store, NY.

  • Page 10
    ...of people lose weight and change their lives for the better- something we all take great pride in doing every day. Over the past 50 years our Program has evolved, we have successfully added mobile/digital, we have consolidated the vast majority of the North America network via franchise acquisitions...

  • Page 11
    ... stock as of June 29, 2012, the last business day of the registrant's second fiscal quarter of 2012, as quoted on the New York Stock Exchange) was $1,351,835,938. For purposes of this computation, it is assumed that shares of common stock held by our directors, executive officers and our controlling...

  • Page 12
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  • Page 13
    ... About Market Risk ...Financial Statements and Supplementary Data ...Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ...Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security...

  • Page 14
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  • 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
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 17
    ...attract new and returning members efficiently. Our 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, which include applications for mobile...

  • Page 18
    ... we offer services and products that are built upon our weight management program which is comprised of a range of nutritional, exercise and behavioral tools and approaches. Beginning towards the end of fiscal 2012, we launched globally an updated weight management plan, known as Weight Watchers 360...

  • Page 19
    ... office party to shopping for healthy foods. The leader encourages substantial participation and discusses supporting products and materials as appropriate. At the end of the meeting, new members are given special introductory instruction in our current weight management plans. Our leaders help set...

  • Page 20
    ... web-based weight management plans. As of the end of fiscal 2012, WeightWatchers.com had over 1.8 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
    ... management tools and resources are an important market opportunity for us. Our mobile phone applications, the iPhone® application, which launched in fiscal 2009, and the Android™ application, which launched in fiscal 2011, provide Monthly Pass purchasers and Weight Watchers Online subscribers...

  • Page 22
    ...excel at new product development and have strong marketing and sales expertise, manufacturing and distribution capabilities, financial strength, prior performance in previous licensing and endorsement deals and senior management committed to building the Weight Watchers brand. In connection with our...

  • Page 23
    ... revenues from subscription sales and third-party advertising, Weight Watchers Magazine also reinforces the value of our brand and serves as a powerful tool for marketing to both existing and potential customers. Marketing and Promotion Word of Mouth The word of mouth generated by our current...

  • Page 24
    ... public. Weight Watchers Magazine In addition to generating revenues from subscription sales and third-party advertising, Weight Watchers Magazine reinforces the value of our brand and serves as an important marketing tool to both existing and potential customers. We offer Weight Watchers magazines...

  • Page 25
    ...not comparable to us. 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
    ..., who all successfully lost weight through these efforts, formally launched our business in 1963. Weight Watchers International, Inc. was incorporated as a Virginia corporation in 1974 and succeeded to the business started in New York in 1963. Heinz acquired us in 1978. Artal Ownership In September...

  • Page 27
    ... we are exposed resulting from our international operations and foreign currency exchange rates is set forth in "Item 1A. Risk Factors" of this Annual Report on Form 10-K. Available Information Corporate information and our press releases, Annual Reports on Form 10-K, Quarterly Reports on Form 10...

  • Page 28
    ...under the headings "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." We have generally used the words "may," "will," "could," "expect," "anticipate," "believe," "estimate," "plan," "intend" and similar expressions in this Annual Report on Form 10...

  • Page 29
    ... wide range of providers of weight management services and products. Our competitors include: self-help weight management regimens and other self-help weight management products, services and publications, such as books, magazines and websites; commercial weight management programs; Internet, mobile...

  • Page 30
    ... operate their businesses under our brand. In addition, we license the Weight Watchers brand to third parties for the manufacture and sale in retail stores by such parties of a variety of goods, including food products. We also sell in our meeting rooms food and non-food products manufactured by...

  • Page 31
    ... to experience fluctuations in our quarterly results of operations. Our business is seasonal with revenues generally decreasing at year end and during the summer months. This seasonality could cause our share price to fluctuate as the results of an interim financial period may not be indicative...

  • Page 32
    ..., 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 our costs or harm our business. Any failure of our technology or systems to perform satisfactorily could result in an adverse impact on our...

  • Page 33
    .... The consent order requires us to comply with certain procedures and disclosures in connection with our advertisements of products and services. Since we operate our meetings business both in the United States and internationally, we are subject to many distinct employment, labor, benefits and tax...

  • Page 34
    ...markets and increase the cost of capital. Our credit facilities contain customary covenants, including covenants that in certain circumstances restrict our ability to incur additional indebtedness, pay dividends on and redeem capital stock, make other payments, including investments, sell our assets...

  • Page 35
    ... price that certain investors might be willing to pay in the 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...

  • Page 36
    ... million in the aggregate based on the exchange rates at the end of fiscal 2011. As of the beginning of the third quarter of fiscal 2011, we began employing our UK leaders and therefore have ceased recording any further reserves for this matter. In February 2012, we paid HMRC, on a without prejudice...

  • Page 37
    ... be predicted with certainty. Therefore, it is possible that our results of operations, financial condition or cash flows could be materially adversely affected in any particular period by the unfavorable resolutions of one or more legal actions. Item 4. Mine Safety Disclosures Not applicable. 21

  • Page 38
    ... Part I of this Annual Report on Form 10-K. Set forth below are the names, ages as of December 29, 2012 and current positions of our executive officers and directors. Directors are elected at the annual meeting of shareholders. Executive officers are appointed by, and hold office at, the discretion...

  • Page 39
    ... for WeightWatchers.com. Prior to joining WeightWatchers.com, Ms. Stubbing was Managing Director, Hedstrom, U.K. from August 1998 to October 2000, and from July 1989 to July 1998 she held various marketing positions at Mattel UK Ltd., including Group Marketing Director. Ms. Stubbing is a business...

  • Page 40
    ... & Gamble Company in financial management. He subsequently was Group 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 holds a B.S. in Business and Accounting from Northwestern...

  • Page 41
    ... is a director of a number of private companies of which Artal or Invus, L.P. are shareholders. Sacha Lainovic. Mr. Lainovic has been a director since our acquisition by Artal on September 29, 1999. Since 2007, Mr. Lainovic has been Managing Partner of Invus Financial Advisors, LLC, a New York-based...

  • Page 42
    ...to finance these repurchases. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Long-Term Debt". The repurchase of shares of common stock under the Tender Offer and from Artal Holdings pursuant to the Purchase Agreement...

  • Page 43
    .... SELECTED FINANCIAL DATA (in millions, except per share amounts) Fiscal 2012 (52 weeks) Fiscal 2011 (52 weeks) Fiscal 2010 (52 weeks) Fiscal 2009 (52 weeks) Fiscal 2008 (53 weeks) Revenues, net ...Net income attributable to the Company ...Working capital (deficit) ...Total assets ...Long-term debt...

  • Page 44
    ... based on the exchange rates at the end of the fourth quarter of fiscal 2012. In January 2013, $6.8 million was paid to HMRC, representing the balance due over the approximately $30.0 million paid to HMRC in February 2012, and the balance of the reserve was used to pay associated costs. See "Item...

  • Page 45
    ... Debt" in Part II of this Annual Report on Form 10-K. Working Capital The changes in the working capital deficit are primarily the result of year-over-year increases related to payables in connection with operations, deferred revenue in connection with our business performance, the shift in timing...

  • Page 46
    ... Upstate New York, Weight Watchers of Syracuse, Inc. and Dieters of the Southern Tier, Inc., for a combined net purchase price of approximately $20.9 million. These acquisitions were financed through cash from operations. These acquisitions have been accounted for as purchases and financial results...

  • Page 47
    ... Internet advertising. In-meeting product sales. We sell a range of products that complement our weight management plans, such as bars, snacks, cookbooks, food and restaurant guides with PointsPlus values, Weight Watchers magazines, PointsPlus calculators and ActiveLink activity monitors, to members...

  • Page 48
    ... number of members attending meetings which drove a decline in our global product sales. Licensing revenues. Licensing revenues declined at a compound annual growth rate of 1.5% from fiscal 2008 through fiscal 2012. Despite our increased focus on expanding the number of Weight Watchers branded and...

  • Page 49
    ... in order to manage our business and assess the quality and potential variability of our cash flows and earnings. These key performance indicators include net revenues; paid weeks and attendance metrics; lecture income per paid week and in-meeting product sales per attendee; the number of end of...

  • Page 50
    ...of 4.1% on a compound annual growth rate basis. Our 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. WeightWatchers.com Metrics and...

  • Page 51
    ... growth in the first quarter of fiscal 2011. The decline in enrollments in the first quarter of fiscal 2012, caused in part by lack of new program news and execution challenges associated with introducing Monthly Pass in the small accounts portion of its corporate business, drove a paid weeks...

  • Page 52
    ... year and the benefit of higher enrollment growth from the launch of the updated version of ProPoints in late fiscal 2011 and early fiscal 2012, effective new marketing strategies and an increase in Monthly Pass penetration. For the first, second, third and fourth quarters of fiscal 2012, paid weeks...

  • Page 53
    ... a larger share of our revenue mix, our gross margin expanded. In addition, with its fixed cost business model, growth within the WeightWatchers.com business resulted in margin expansion in that business during the period. Conversely, in the meetings business, our meetings staff is usually paid on...

  • Page 54
    ... year. This decline in operating income margin was primarily driven by costs related to first time Online TV marketing campaigns in several of our international markets and our significant investment in marketing the Weight Watchers Online product to men in the United States, as well as, selling...

  • Page 55
    ... information compares results between periods as if exchange rates had remained constant period-overperiod. We use results on a constant currency basis as one measure to evaluate our performance. In this Annual Report on Form 10-K, we calculate constant currency by calculating current-year results...

  • Page 56
    ... agreements and selling advertising space in and copies of its magazines. Monthly Pass, prepaid meeting fees and magazine subscription revenue is recorded to deferred revenue and amortized into revenue over the period earned. Revenue from "payas-you-go" meeting fees, product sales, commissions...

  • Page 57
    ... factors such as maturity of the market in order to determine the utilized discount rate. The cost of debt is our average borrowing rate for the period. The discount rates used in our fiscal 2012 year-end impairment test and our fiscal 2011 year-end impairment test averaged approximately 9.2% and 11...

  • Page 58
    ...American and UK meetings and Weight Watchers.com businesses throughout the year. The momentum of our new program launches, PointsPlus in North America and ProPoints in our other English-speaking markets, and strong marketing and public relations efforts drove this accelerated growth and historically...

  • Page 59
    ... Fiscal Increase/ 2012 2011 (Decrease) % Change Revenues ...Cost of revenues (as adjusted)(1) ...UK Self-employment settlement(1) ...Cost of revenues ...Gross Profit ...Gross Margin % ...Marketing expenses ...Selling, general & administrative expenses ...Operating income ...Operating Income Margin...

  • Page 60
    ... prior year. Revenue growth in fiscal 2012 was driven primarily by WeightWatchers.com which benefited from a higher active Online subscriber base at the start of fiscal 2012 as compared to fiscal 2011 and effective marketing in fiscal 2012. Our Continental European meetings business, which benefited...

  • Page 61
    ... execution challenges associated with introducing Monthly Pass to the small accounts portion of NACO's corporate business. However, the impact of enrollments on meeting paid weeks was minimized by the higher meeting membership base at the beginning of fiscal 2012 versus the beginning of fiscal 2011...

  • Page 62
    ... of a higher active Online subscriber base at the start of fiscal 2012, up 50.5%, versus the beginning of fiscal 2011, and effective marketing campaigns in North America and Continental Europe contributed to Online paid weeks growth of 26.7% in fiscal 2012 versus the prior year. Additionally, end of...

  • Page 63
    ...: first time Online TV marketing campaigns in several of our international markets and marketing the Weight Watchers Online product to men in the United States. In addition, we invested in TV advertising for Continental Europe's meetings business, which also contributed to the increase in marketing...

  • Page 64
    ... operating income margin was primarily driven by costs related to first time Online TV marketing campaigns in several of our international markets and our significant investment in marketing the Weight Watchers Online product to men in the United States. Both marketing expenses and selling, general...

  • Page 65
    ... Increase/ 2011 2010 (Decrease) % Change Revenues, net (as adjusted)(1) ...UK VAT ruling accrual reversal(1) ...Revenues, net of VAT ruling ...Cost of revenues ...Gross Profit ...Gross Margin % ...Marketing expenses ...Selling, general & administrative expenses ...Operating income ...Operating...

  • Page 66
    ... start of fiscal 2011 from the new program launches at the end of fiscal 2010 in our North American and UK meetings and WeightWatchers.com businesses, and further supported by effective marketing and public relations activities in these markets in the period. In fiscal 2011, global paid weeks grew...

  • Page 67
    ... with effective marketing and public relations throughout the period, were the key drivers of this growth during fiscal 2011. In addition, the number and proportion of our new and existing meeting members purchasing Monthly Pass increased in fiscal 2011 versus the prior year. Monthly Pass purchasers...

  • Page 68
    ..., primarily as a result of declines in the Continental European meetings business. The UK meetings business benefited from the impact of the ProPoints program, which launched in late fiscal 2010 and drove meeting fees and paid weeks growth in that market. UK meeting fees in fiscal 2011 grew by 23...

  • Page 69
    ... the last week of the year in support of our winter 2012 marketing campaigns. In addition, we opportunistically added marketing in the second quarter of fiscal 2011 to leverage positive public relations, such as our ranking as the number one weight-loss diet by U.S. News & World Report magazine. 53

  • Page 70
    ...from higher attendances per meeting and strong growth in our higher margin WeightWatchers.com business, where cost of revenues is largely fixed. Marketing expense increased as a percentage of revenues in fiscal 2011 as compared to the prior year, but was offset by the decline in selling, general and...

  • Page 71
    ...of the Company's balance sheet working capital for the fiscal years ended: December 29, 2012 December 31, 2011 (in millions) Increase/ (Decrease) Total current assets ...Total current liabilities ...Working capital deficit ...Cash and cash equivalents ...Current portion of long-term debt ...Working...

  • Page 72
    ... activities over net income arose primarily from changes in our working capital as described above (see "-Balance Sheet Working Capital"), non-cash expenses and differences between book and cash taxes. Fiscal 2011 Cash flows provided by operating activities of $404.8 million in fiscal 2011 increased...

  • Page 73
    ... of the Tender Offer and the related Artal Holdings share repurchase. In addition, we paid $52.0 million of dividends to our shareholders and received $12.7 million in proceeds from stock options exercised in fiscal 2012. Fiscal 2011 Net cash used for financing activities totaled $352.0 million in...

  • Page 74
    ...applicable. In connection with this amendment, we incurred fees of approximately $26.2 million in the first quarter of fiscal 2012. On March 27, 2012, we borrowed an aggregate of $726.0 million under the Term E Loan and the Term F Loan to finance the purchase of shares in the Tender Offer and to pay...

  • Page 75
    ... issued a quarterly cash dividend of $0.175 per share of our common stock every quarter for the past several fiscal years. In the fourth quarter of fiscal 2012, our Board of Directors declared such a quarterly cash dividend and accelerated its payment to December 2012 instead of having it paid in...

  • Page 76
    ... 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 obligations by using cash flows provided by operating activities and opportunistically using other means to repay or refinance our obligations...

  • Page 77
    ... Offer and from Artal Holdings pursuant to the Purchase Agreement, as discussed further below, was not made pursuant to the repurchase program. During the twelve months ended December 31, 2011, the Company repurchased in its first quarter 0.8 million shares of its common stock in the open market...

  • Page 78
    ...of Monthly Pass in the meetings business has resulted in less seasonality with regard to our meeting fee revenues because its revenues are amortized over the related subscription period. While WeightWatchers.com experiences seasonality similar to the meetings business in terms of new subscriber sign...

  • Page 79
    ... rate debt would increase or decrease our annual interest expense by approximately $9.1 million. This change in market risk exposure from the end of fiscal 2011 was driven by the additional borrowings in connection with the repurchases of shares of common stock under the Tender Offer and from Artal...

  • Page 80
    ... effectiveness of our internal control over financial reporting as of December 29, 2012 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears on page F-2 to our consolidated financial statements. Changes in Internal...

  • Page 81
    ... under the Exchange Act, the date and nature of any substantive amendment of our Code of Business Conduct and Ethics or waiver thereof applicable to any of our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions...

  • Page 82
    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 83
    ... AND FINANCIAL STATEMENT SCHEDULE COVERED BY REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Items 15(a) (1) & (2) Pages Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets at December 29, 2012 and December 31, 2011 ...Consolidated Statements of Income for...

  • Page 84
    ... respects, the financial position of Weight Watchers International, Inc. and its subsidiaries (the "Company") at December 29, 2012 and December 31, 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 29, 2012 in conformity with...

  • Page 85
    ...Deferred financing costs, net ...Other noncurrent assets ...TOTAL ASSETS ...LIABILITIES AND TOTAL DEFICIT CURRENT LIABILITIES Portion of long-term debt due within one year ...Accounts payable ...Salaries and wages payable ...UK self-employment liability ...Derivative payable ...Accrued marketing and...

  • Page 86
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE FISCAL YEARS ENDED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) December 29, 2012 (52 weeks) December 31, 2011 (52 weeks) January 1, 2011 (52 weeks) Meeting fees, net ...Product sales and other, net ......

  • Page 87
    ... of: December 29, 2012 $(4,296), December 31, 2011 $(6,902) and January 1, 2011 $245 ...Total other comprehensive income ...Comprehensive income ...Comprehensive loss attributable to the noncontrolling interest ...Comprehensive income attributable to Weight Watchers International, Inc... $257,426...

  • Page 88
    ... accounted for as hedges, net of taxes of $(4,296) ...Issuance of treasury stock under stock plans ...Tax benefit of restricted stock units vested and stock options exercised ...Cash dividends declared ...Purchase of treasury stock ...Tender Offer fees ...Compensation expense on share-based...

  • Page 89
    ... costs ...Share-based compensation expense ...Deferred tax provision ...Allowance for doubtful accounts ...Reserve for inventory obsolescence, other ...Foreign currency exchange rate (gain)/loss ...Loss on disposal of assets ...Loss on investment ...Early extinguishment of debt ...Other items...

  • Page 90
    ...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, Inc. and all...

  • Page 91
    ...the cost and related depreciation are removed from the accounts and any related gains or losses are included in income. Impairment of Long Lived Assets: The Company reviews long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in business circumstances...

  • Page 92
    ... maturity of the market in order to determine the utilized discount rate. The cost of debt is the Company's average borrowing rate for the period. The discount rates used in the Company's fiscal 2012 year-end impairment test and fiscal 2011 year-end impairment test averaged approximately 9.2% and 11...

  • Page 93
    ... agreements and selling advertising space in and copies of its magazines. Monthly Pass, prepaid meeting fees and magazine subscription revenue is recorded to deferred revenue and amortized into revenue over the period earned. Revenue from "payas-you-go" meeting fees, product sales, commissions...

  • Page 94
    ... Costs: Deferred financing costs consist of fees paid by the Company as part of the establishment, exchange and/or modification of the Company's long-term debt. During the fiscal year ended December 29, 2012, the Company incurred deferred financing costs of $26,248 associated with the Tender Offer...

  • Page 95
    ...November 2, 2012, the Company acquired substantially all of the assets of its Adirondacks franchisee, Weight Watchers of the Adirondacks, Inc., for a purchase price of $3,400. The total purchase price has been preliminarily allocated to franchise rights acquired ($2,216), goodwill ($1,156), customer...

  • Page 96
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 4. Franchise Rights Acquired, Goodwill and Other Intangible Assets The Company performed its annual impairment review of goodwill and other indefinite-lived ...

  • Page 97
    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: 2013 2014 2015 2016 2017 5...$20,735 $17,...

  • Page 98
    ... as applicable. In connection with this amendment, the Company incurred fees of $26,248 during the first quarter of fiscal 2012. On March 27, 2012, the Company borrowed an aggregate of $726,000 under the Term E Loan and the Term F Loan to finance the purchase of shares in the Tender Offer and to pay...

  • Page 99
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) from time to time in effect. At December 29, 2012, the Term A-1 Loan bore interest at a rate equal to LIBO Rate (Reserve Adjusted) plus 1.25% per annum; the Term B...

  • Page 100
    ... years ended December 31, 2011 and January 1, 2011, the Company purchased 814 and 3,739 shares of its common stock, respectively, in the open market under the repurchase program for a total cost of $31,550 and $109,990, respectively. The repurchase of shares of common stock under the Tender Offer...

  • Page 101
    ... 2008 Plan, the "Stock Plans"). 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...

  • Page 102
    ... expenses. The total income tax benefit recognized in the income statement for all share-based compensation arrangements was $2,742, $2,895 and $2,662 for the years ended December 29, 2012, December 31, 2011 and January 1, 2011, respectively. The tax benefits realized from options exercised and RSUs...

  • Page 103
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) December 29, 2012 December 31, 2011 January 1, 2011 Dividend yield ...Volatility ...Risk-free interest rate ...Expected term (years) ... 1.6% 35.5% 1.0% - 1.4% ...

  • Page 104
    ...rate and the Company's consolidated effective tax rate are as follows: December 29, 2012 December 31, 2011 January 1, 2011 US federal statutory rate ...Federal and state tax reserve provision ...States income taxes (net of federal benefit) ...Foreign taxes ...Increase in valuation allowance ...Loss...

  • Page 105
    ... earnings of foreign subsidiaries. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: December 29, 2012 December 31, 2011 January 1, 2011 Balance at beginning of year ...Additions based on tax positions related to the current year ...Additions based...

  • Page 106
    ... 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 December 29, 2012, December 31, 2011...

  • Page 107
    WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 12. Cash Flow Information December 29, 2012 December 31, 2011 January 1, 2011 Net cash paid during the year for: Interest expense ...Income taxes ...Noncash ...

  • Page 108
    ... in the aggregate based on the exchange rates at the end of fiscal 2011. As of the beginning of the third quarter of fiscal 2011, the Company began employing its UK leaders and therefore has ceased recording any further reserves for this matter. In February 2012, the Company paid HMRC, on a without...

  • Page 109
    ...is as follows: Year Ended December 29, 2012 Intercompany WW.com Eliminations Consolidated WWI Total revenue ...Depreciation and amortization ...Operating income ...Interest expense ...Other expense, net ...Early extinguishment of debt ...Provision for taxes ...Net income ...Total assets ... $1,319...

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    ... areas and no material amounts of US export sales. Revenues for the Year Ended December 29, December 31, January 1, 2012 2011 2011 NACO meeting fees ...International Company-owned meeting fees ...Product sales ...Franchise royalties ...Internet revenues ...Other ... $ 653,396 281,537 294,758 12...

  • Page 111
    ...Company's significant financial instruments include long-term debt and interest rate swap agreements. The fair value of the Company's long-term debt is determined by utilizing average bid prices on or near the end of each fiscal quarter (Level 2 input). As of December 29, 2012, and December 31, 2011...

  • Page 112
    ... income (loss) at December 29, 2012, based on current market rates, will be reclassified into earnings within the next 12 months. 17. Quarterly Financial Information (Unaudited) The following is a summary of the unaudited quarterly consolidated results of operations for the fiscal years ended...

  • Page 113
    ...fiscal years beginning after December 15, 2011, with early adoption permitted. The Company adopted the provisions of this guidance in the first quarter of fiscal 2012. The adoption of this guidance did not have any affect on the consolidated financial position, results of operations or cash flows of...

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    ...Costs and to Other Expenses Accounts Balance at End of Period Deductions(1) FISCAL YEAR ENDED DECEMBER 29, 2012 Allowance for doubtful accounts ...Inventory and other reserves ...Tax valuation allowance ...FISCAL YEAR ENDED DECEMBER 31, 2011 Allowance for doubtful accounts..., where applicable. S-1

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    ....8 to the Company's Registration Statement on Form S-4 (File No. 333-92005) as filed on December 2, 1999, 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...

  • Page 118
    ...Continuity Agreement, between Weight Watchers International, Inc. and certain key executives (Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and General Counsel) (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 2, 2011...

  • Page 119
    ... Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011, as filed on February 28, 2012 (File No. 001-16769), and incorporated herein by reference. Stock Purchase Agreement, dated as of February 14, 2012, by and between Weight Watchers International, Inc. and Artal Holdings...

  • Page 120
    ... Basone. Subsidiaries of Weight Watchers International, Inc. Consent of Independent Registered Public Accounting Firm. Rule 13a-14(a) Certification by David P. Kirchhoff, Chief Executive Officer. Rule 13a-14(a) Certification by Nicholas P. Hotchkin, Chief Financial Officer. Certification pursuant to...

  • Page 121
    ... 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: February 27, 2013 By: /S/ DAVID P. KIRCHHOFF David P. Kirchhoff Chief Executive Officer and Director (Principal...

  • Page 122
    ... Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /S/ DAVID P. KIRCHHOFF Date: February 27, 2013 By: David P. Kirchhoff Chief Executive Officer and Director (Principal Executive Officer...

  • Page 123
    ...) of Weight Watchers International, Inc. of our report dated February 27, 2013 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP New York, New York...

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    ... or not 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: February 27, 2013 Signature: David P. Kirchhoff Chief Executive Officer and Director (Principal Executive Officer)

  • Page 126
    ... material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /S/ NICHOLAS P. HOTCHKIN Date: February 27, 2013 Signature: Nicholas P. Hotchkin Chief Financial Officer (Principal Financial and Accounting Officer)

  • Page 127
    ... 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 December 29, 2012, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David P. Kirchhoff, certify...

  • Page 128
    ... 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 December 29, 2012, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Nicholas P. Hotchkin, certify...

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  • Page 131
    Stock Performance Graph The following graph sets forth the cumulative return on Weight Watchers International common stock from December 28, 2007, the last trading day of the Company's 2007 fiscal year, through December 28, 2012, the last trading day of the Company's 2012 fiscal year, as compared ...

  • Page 132
    ... and Shareholder Information The 2013 Annual Meeting of Shareholders of Weight Watchers International, Inc. LOCATION The Carlton Hotel 88 Madison Avenue, New York, NY 10016 DATE Tuesday, May 7, 2013 at 10:00 a.m. Eastern Time CORPORATE HEADQUARTERS 11 Madison Avenue, 17th Floor New York, NY 10010...