WeightWatchers 2015 Annual Report Download - page 40

outbound shipping and related costs incurred in making our products available for sale or use. Costs to operate
our website includes salaries and related benefits, depreciation and amortization of website development, credit
card processing and other costs incurred in making our website available to our members.
Marketing Expenses
Marketing expenses primarily consist of costs to produce and advertise our brand and products on
television, on the Internet, on the radio and in print, costs paid to third-party agencies who help us develop our
marketing campaigns and strategy, expenses in support of market research, costs paid to our celebrity
spokespersons, as well as costs incurred in connection with local marketing and promotions.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of compensation, benefits and other related costs,
including stock-based compensation, third-party consulting, temp help, audit, legal and litigation expenses as
well as facility costs and depreciation and amortization of systems in support of the business infrastructure and
head offices globally. General and administrative expenses also include amortization expense of certain of our
intangible assets and certain one-time transaction expenses.
Gross Margin
The following table sets forth our gross profit and gross margin for the past three fiscal years, as adjusted to
exclude the impact of charges from our previously disclosed 2015 and 2014 restructuring plans:
(in millions) 2015 2014 2013
Gross Profit .............................................. $574.1 $802.6 $1,001.1
Gross Margin ........................................ 49.3% 54.3% 58.1%
Adjustments to Reported Amounts
Restructuring charges(1) ............................. 1.5 4.6 —
Gross Profit, as adjusted(1) .................................. $575.6 $807.2 $1,001.1
Gross Margin impact from above adjustments(1) ............. (0.1%) (0.3%) 0.0%
Gross Margin, as adjusted(1) ............................. 49.4% 54.6% 58.1%
Note: Totals may not sum due to rounding
(1) “As adjusted” is a non-GAAP financial measure that adjusts the consolidated statements of net income for fiscal 2015 and 2014 to
exclude the impact of the $1.5 million and $4.6 million of restructuring charges associated with our previously disclosed 2015 and 2014
restructuring plans, respectively. See “Non-GAAP Financial Measures” below for an explanation of our use of non-GAAP financial
measures.
From fiscal 2013 to fiscal 2015, our gross margin decline was primarily driven by declining revenues,
including declining licensing revenues. In addition, particularly in the US meetings business, the impact of the
cost associated with providing 24/7 Expert Chat and Personal Coaching and additional service provider
compensation changes in fiscal 2015, as well as technology and training costs associated with the December
2014 introduction of new product offerings negatively impacted margin. Online Subscription Revenues were
substantially flat as a percent of total revenues in fiscal 2015 as compared to both fiscal 2014 and fiscal 2013
and, as a result, we experienced little to no benefit of a mix shift to the higher margin business in fiscal 2015 and
fiscal 2014.
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