WeightWatchers 2013 Annual Report Download - page 72

Selling, General and Administrative
Selling, general and administrative expenses were $229.3 million for fiscal 2012 versus $209.3 million for
fiscal 2011, an increase of $20.1 million, or 9.6%. Excluding the impact of foreign currency, which decreased
selling, general and administrative expenses for fiscal 2012 by $2.5 million, fiscal 2012 selling, general and
administrative expenses increased by 10.8% versus fiscal 2011. The increase in expenses was primarily related to
investments in growth initiatives, including NACO’s corporate business, technology for the development of our
mobile and customer relationship management platforms and additions to staff in support of these initiatives.
Lower bonus expense globally related to business performance partially offset this increase. Selling, general and
administrative expenses as a percentage of revenue for fiscal 2012 increased to 12.5% from 11.4% for fiscal
2011.
Operating Income Margin
Excluding the impact of the settlement of the UK self-employment matter, our operating income margin in
fiscal 2012 decreased to 27.0% from 29.8% in fiscal 2011. 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. Both marketing expenses and selling, general and administrative expenses increased as a percentage of
revenue in fiscal 2012 as compared to the prior year.
Interest Expense and Other
Interest expense was $90.5 million for fiscal 2012, an increase of $30.7 million, or 51.3%, from $59.9
million in fiscal 2011. Excluding the impact of the settlement of the UK self-employment matter noted in the
table above, interest expense was $83.4 million, an increase of $23.6 million or 39.4% versus the prior year. The
increase was primarily driven by an increase in our average debt outstanding and higher interest rates on our
debt. The effective interest rate on our debt increased by 0.76% to 2.91% in fiscal 2012 from 2.15% in fiscal
2011. Our average debt outstanding increased by $920.0 million to $2,102.9 million in fiscal 2012 from $1,182.9
million in fiscal 2011. The increase in average debt outstanding was driven by the additional borrowings under
the WWI Credit Facility (defined below) in connection with our repurchase of shares in the Tender Offer and the
related share repurchase from Artal Holdings (see “—Liquidity and Capital Resources—Stock
Transactions”). Interest expense was partially offset by a decrease in the notional value and interest rates of our
interest rate swaps, which resulted in a lower effective interest rate of 3.60% in fiscal 2012, as compared to
4.62% in fiscal 2011. In the first quarter of fiscal 2012, we wrote-off $1.3 million of fees in connection with the
refinancing of our debt, which we recorded as an early extinguishment of debt charge.
The Company incurred $2.0 million of other expense in fiscal 2012 as compared to $3.4 million of other
expense in the prior year, both years include the write-off associated with an investment and the impact of
foreign currency on intercompany transactions.
Tax
Our effective tax rate was 38.3% for fiscal 2012 as compared to 37.0% for fiscal 2011. For fiscal 2012, the
UK self-employment matter impacted our effective tax rate. Excluding the impact of the settlement of the UK
self-employment matter, our effective tax rate for fiscal 2012 would have been 38.1%. The difference in period-
over-period effective tax rates is primarily the result of a tax benefit recorded in fiscal 2012 associated with a
reduction in certain international tax rates. This was offset by tax benefits recorded in fiscal 2011 associated with
the closure of our Finland business and reversing certain tax reserves upon expiration of the applicable statutes of
limitations.
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