WeightWatchers 2012 Annual Report Download - page 60

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Consolidated Results
Revenues
Net revenues were $1,826.8 million in fiscal 2012, as compared to $1,819.2 million in fiscal 2011.
Excluding the impact of foreign currency, which negatively impacted our revenues for fiscal 2012 by $24.4
million, net revenues in fiscal 2012 grew 1.8% versus the 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 from new marketing strategies, also contributed to revenue growth on a
constant currency basis. This revenue growth in our Continental European meetings business was more than
offset by revenue declines in the NACO and UK meetings businesses as they cycled against the momentum of
their new program innovations and stronger and more effective marketing and public relations efforts in fiscal
2011. In addition, in fiscal 2012, meeting revenues were negatively impacted by the execution challenges
associated with introducing the Monthly Pass commitment plan to NACO’s small accounts portion of its
corporate business in the first half of fiscal 2012, as well as by macro-economic factors, particularly consumer
confidence, in NACO and the United Kingdom.
The combination of the above factors also led to a 5.4% decline in global meeting paid weeks in fiscal 2012
versus the prior year. However, with the benefits of starting the fiscal year with a higher active Online subscriber
base and effective marketing, WeightWatchers.com experienced growth of 26.7% in Online paid weeks, as well
as an 18.0% increase in end of period active Online subscribers, in fiscal 2012 versus the prior year. The increase
in Online paid weeks more than offset the decline in meeting paid weeks, which resulted in a 9.3% increase in
global paid weeks in fiscal 2012 versus the prior year. Global attendance in fiscal 2012 declined 11.0% in
comparison to fiscal 2011.
Gross Profit and Operating Income
Gross profit for fiscal 2012 of $1,082.8 million increased $35.6 million, or 3.4%, from $1,047.1 million in
fiscal 2011. Excluding the impact of the settlement of the UK self-employment matter noted in the above table,
and of foreign currency which negatively impacted gross profit for fiscal 2012 by $14.1 million, gross profit in
fiscal 2012 increased by $35.2 million, or 3.4%, versus the prior year. Operating income for fiscal 2012 was
$510.8 million, a decrease of $35.5 million, or 6.5%, from $546.3 million in fiscal 2011. Excluding the impact of
the settlement of the UK self-employment matter, and of foreign currency which negatively impacted operating
income for fiscal 2012 by $7.2 million, operating income in fiscal 2012 decreased by $42.9 million, or 7.9%,
versus the prior year. This decline was primarily the result of an increase in marketing investments and selling,
general and administrative expenses in fiscal 2012 versus the prior year. As adjusted for the settlement, our gross
margin in fiscal 2012 increased to 58.5% from 57.6% in fiscal 2011, but operating income margin in fiscal 2012
declined to 27.2% from 30.0% in fiscal 2011. See “—Components of Expenses and Margins” for additional
details.
Net Income and Earnings Per Share
Net income attributable to the Company in fiscal 2012 declined 15.6% from $304.9 million in fiscal 2011 to
$257.4 million. Excluding the impact of the settlement of the UK self-employment matter noted in the table
above, net income attributable to the Company would have been $253.3 million in fiscal 2012, a decline of
16.9%. In addition to the decline in operating income, higher interest expense resulting from our financing of our
repurchase of shares in the Tender Offer and related share repurchase from Artal Holdings and a higher tax rate
further reduced net income in fiscal 2012. See “—Components of Expenses and Margins—Tax” for additional
details on our higher tax rate in fiscal 2012.
Earnings per fully diluted share in fiscal 2012 were $4.23, an increase of $0.11 from $4.11 in fiscal 2011.
Excluding the impact of the UK self-employment matter noted in the table above, earnings per fully diluted share
would have been $4.16, an increase of $0.05 or 1.1%. Earnings per fully diluted share in fiscal 2012, except for
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